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FHA Reform Passes Through U.S. House

On September 18, the U.S. House of Representatives passed H.R. 1852, commonly known as the ³Expanding American Homeownership Act of 2007.² This bill is the FHA reform many have been demanding of their representatives, and it will make getting an FHA Loane viable option for low to moderate income potential home
buyers.

Chairman of the Financial Services Committee, Barney Frank (D MA), was relieved that the bill was finally passed. ³A revitalized FHA program will help future homeowners realize the dream of homeownership, and will prevent many first-time and inexperienced home buyers from being pushed into loans that are unaffordable or difficult to understand. The bill we passed today will help people across America because we have enacted provisions to allow the FHA to insure loans in high cost areas.²

The bill adopts a number of measures to make FHA loans more readily available including the following:

Rather than having excess profits from FHA loans return to the General Treasury, up to $300 million/year will be put towards affordable housing.

The bill substantially improves on the reverse mortgage loan program by removing the loan cap to avoid shutdowns, raising the FHA loan limits, and reducing the maximum fee lenders can charge for the loan.

The FHA is now authorized to allow zero or lower downpayment loans, eliminating the previously required 3%.

The bill also forces the FHA to provide mortgages to higher risk borrowers. These borrowers must still be qualified for a FHA loan but they won¹t be with charged unnecessary fee hikes.

An amendment was attached to this bill that raises the loan limits on single family FHA loans. Previous to the bill loans above 95% of the median home price in a local area were not allowed. The amendment raises that limit to the lower of (1) 175% of the national GSE conforming loan limit, or (2) 125% of the local area median home price.