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Higher FHA Loan Limits Dropped From Stimulus Bill

by Peter G. Miller
February 11th, 2009

It’s called H.R. 1 and now it’s a done deal. The American Recovery and Reinvestment Act of 2009 has passed the Congress, a $787 billion measure that will be instantly signed by President Obama.

What makes this bill interesting from an FHA perspective is what’s missing. Efforts to increase FHA loan limits magically fell out of the bill at the last moment.

For example: A look at the public print version shows us what happened — and what it means:

[Struck out->] SEC. 12002. FHA LOAN LIMITS FOR 2009. [<-Struck out]

[Struck out->] (a) Loan Limit Floor Based on 2008 Levels- For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, if the dollar amount limitation on the principal obligation of a mortgage determined under section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)) for any size residence for any area is less than such dollar amount limitation that was in effect for such size residence for such area for 2008 pursuant to section 202 of the Economic Stimulus Act of 2008 (Public Law 110-185; 122 Stat. 620), notwithstanding any other provision of law, the maximum dollar amount limitation on the principal obligation of a mortgage for such size residence for such area for purposes of such section 203(b)(2) shall be considered (except for purposes of section 255(g) of such Act (12 U.S.C. 1715z-20(g))) to be such dollar amount limitation in effect for such size residence for such area for 2008. [<-Struck out]

Translation: The FHA loan limits would have reverted back to the higher levels we had in 2008.

[Struck out->] (b) Discretionary Authority for Sub-Areas- Notwithstanding any other provision of law, if the Secretary of Housing and Urban Development determines, for any geographic area that is smaller than an area for which dollar amount limitations on the principal obligation of a mortgage are determined under section 203(b)(2) of the National Housing Act, that a higher such maximum dollar amount limitation is warranted for any particular size or sizes of residences in such sub-area by higher median home prices in such sub-area, the Secretary may, for mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, increase the maximum dollar amount limitation for such size or sizes of residences for such sub-area that is otherwise in effect (including pursuant to subsection (a) of this section), but in no case to an amount that exceeds the amount specified in section 202(a)(2) of the Economic Stimulus Act of 2008. [<-Struck out]

Translation: HUD could have raised the FHA loan limit for selected areas had this section been included.

While home builders and real estate brokers favor higher loan limits, the marketplace has had little appetite for larger loans. Even if the two sections cited here had passed, investor demand for jumbo loans would have meant that such financing was only available at a premium rate, something which would do little to help struggling homeowners.

Lastly, the bill also had a section that would have raised FHA reverse mortgage loan limits. Yup, it too got axed.

[Struck out->] SEC. 12004. FHA REVERSE MORTGAGE LOAN LIMITS FOR 2009. [<-Struck out]

[Struck out->] For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, the second sentence of section 255(g) of the National Housing Act (12 U.S.C. 171520(g)) shall be considered to require that in no case may the benefits of insurance under such section 255 exceed 150 percent of the maximum dollar amount in effect under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)). [<-Struck out]

Translation: Nope, there will not be higher loan limits for FHA reverse mortgages, or as HUD likes to call them, Home Equity Conversion Mortgages (HECMs).

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This entry was posted on Wednesday, February 11th, 2009 at 2:45 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

3 Responses to “Higher FHA Loan Limits Dropped From Stimulus Bill”

  1. John Says:

    Peter,

    The higher reverse mortgage limits were included, see the link below

    http://thomas.loc.gov/home/h1/Recovery_Bill_Div_A.pdf

  2. Kate Says:

    so what are the loan limits? back to 417,000? I am asking from Orange County California??? I have a loan of 575,000 is it now considered “jumbo?”

  3. al.townsend Says:

    is the FHA VETERANS LOAN STILL AVAILABLE 203b2 IF SO IS THERE A MAX LOAN LIMIT…WHERE IN A MANUAL CAN I FIND THIS LOAN…I CAN NOT SEEM TO FIND IT IN THE 4155 PLEASE ADVISE ASAP THANKS AL TOWNSEND

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