By Chris Moles
Brokerage Counsel
Intero Real Estate, Inc.
In October of this year, the limits for FHA loans dropped from $729,750 to $625,500. As a result, the National Association of Homebuilders and the National Association of Realtors® have estimated that 5.3 million homes lost their eligibility for conforming loans and nearly 670 counties saw their loan limits decline.
In a victory for the real estate industry, Congress has voted to restore the former limits. The bill was signed by President Obama on November 22nd.
The Politics
A number of interest groups have pushed for more free-market policies and against government support to the housing market. Those groups, which include the Club for Growth and Heritage Action for America, play a large role in the House Republican conference and can influence campaign funding. As a result, 101 House Republicans voted against restoring the limits. 20 House Democrats opposed the measure as well.
Those members of Congress who opposed the provision seized on the FHA’s annual actuarial report released earlier this week, which said the agency has a 50 percent chance of needing to seek taxpayer aid to bolster its insurance fund. Many fear that federally backed loans are a root cause of the current housing crises. They claim these loans allow buyers to purchase more house than they can realistically afford and they claim the loans force taxpayers to take risks that private lenders avoid.
As a result, many in Congress want to restrict the role of government in housing by reducing the limits that the government will insure mortgages.
The Result
This legislation restores the federal loan limits to their pre-October levels and extends the threshold through 2012.
