FEDERAL LEGISLATION
ISSUE
The goal is to raise FHA mortgage limits, particularly in high cost areas. The current FHA loan limit for a single family house is capped at either 87 percent of the Freddie Mac limit in high costs areas or with a floor of 48 percent of the Freddie Mac limit in all other areas. The cap is the lesser of the 87 percent limitation or 95 percent of the local median single-family house price. Alaska, Guam, Hawaii and the Virgin Islands are permitted to have limits up to 150 percent of the FHA limit if justified by the local median housing price. Proposed changes to the law would result in the following:
Removal of the statutory limit that caps the FHA loan amount regardless of the local median housing price.
In all areas of the country, the one family limit no longer would be determined by using 95 percent of the area median, but rather 100 percent of the area median.
The statutory “floor” limit of 48 percent of the conforming limit would remain intact.
As it is now, nearly 90 percent of all U.S. counties are at the “floor” and would not benefit from this legislation. The effect of removing the cap would be to dramatically increase the mortgage limits in certain extreme high-cost areas with more modest increases elsewhere. For example, if the legislation were enacted, the limit in San Francisco would rise to $568,200; in New York the limit would rise to $374,400; and in Boston the limit would rise to $432,700.
STATUS/OUTLOOK<\b><\u>
In the 108th Congress, H.R. 4110 was introduced increasing the FHA load limits in high-cost areas. DFWAMB believes a proposal similar to H.R. 4110 will be introduced in the 109th Congress.
In the 109th Congress, Congressmen Gary Miller (R-CA) and Barnet Frank (D-MA) introduced H.R. 176 on January 4, 2005.
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