House Approves Increase in FHA Limits
The House of Representatives approved a bill to increase the FHA's lending limits and reduce payment restrictions. The bill, which will help low-income and first-time home buyers, was sponsored by Ohio Representative Bob Ney. It received almost unanimous support by the house with a 415-7 vote.
The factors in determining the maximum amount insurable by the FHA for single-family homes will be changed as an amendment to the National Housing Act, according to the new law. The bill allows the FHA flexibility in insuring mortgages up to the median home price in areas where home prices are extremely high. It will also provide for a maximum of 40-year mortgage terms.
The bill will eliminate all flat mortgage insurance premiums, instead instating a tiered premium system according to the property's loan-to-value ration, the borrower's credit history and debt-to-income ration and the FHA's experience with comparable borrowers. The current minimum down payment of 3% will be discarded. The limit on federally insured reverse mortgages will also be eliminated
The law will allow loans to be more easily made in high-cost areas. For years, low-income buyers have been pressured to take out high-cost private mortgages due to the substantial increases in house prices in metro areas. The FHA hopes that the new law will change this trend.
"Modernizing FHA will improve competition in the prime home loan mortgage industry and effectively assist the industry in combating abusive and discriminatory lending practices," said Ney.
"This bill helps further increase the country's home ownership rate, especially among low and moderate-income and minority families."
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