The Federal Housing Administration (FHA), an agency established during the Great Depression, was designed to help lower income borrowers and first-time homebuyers purchase homes.
FHA loan limits were increased in 2008, as a result of the nation’s credit crunch, when foreclosures were driving the price of homes into the ground all over the country. Home loan lenders became reluctant to lend mortgages, so lawmakers increased the FHA’s, Fannie Mae’s, and Freddie Mac’s limits to guarantee loans and give lenders security to provide home loans. Combined, the three government organizations now back more than 90% of all home mortgages in the United States. The higher loan limits expired on October 1st, and Congress is debating whether or not to restore them. The Senate has already adopted the higher limits, allowing FHA, Fannie Mae, and Freddie Mac to insure single-family home loans for up to $729,750 in high-cost areas of the country, an increase of $104,250.
Republican representative Scott Garrett of New Jersey, is opposed to higher FHA loan limits. He says the FHA was meant to help average Americans’ purchase average homes, not to help wealthy people buy mansions.
Support for Higher FHA Loan Limits
Lawmakers in support of the higher FHA limits feel withdrawing federal support in a struggling housing market will cause more economic problems. The House and Senate are meeting later this week to discuss the mortgage provision as part of a $182 billion spending bill.
Against Higher FHA Loan Limits
The National Community Reinvestment Coalition (NCRC) and the American Bankers Association feel it’s time for our government to remove themselves from the mortgage business entirely. John Taylor, NCRS president, referenced a Congressional Budget Office study to support his position, indicating higher FHA loan limits benefit only the top 5% wealthiest United States households.