Industry News

Senate’s FHA modernization bill stingier than House version

Differences in loan limits, down payments must be resolved

Senate lawmakers don't want to take FHA modernization as quite as far as the House, passing legislation that would reduce but not eliminate down-payment requirements, allow for a smaller increase in the maximum-size mortgage eligible for FHA backing, and place a one-year moratorium on a plan to introduce risk-based pricing. SB 2338, which passed in the Senate Friday with only one dissenting vote, would allow the Federal Housing Administration to guarantee loans of $417,000 or more in high-cost areas, the conforming loan limit for loans eligible for repurchase by Fannie Mae and Freddie Mac. Legislation passed by the House in September, HR 1852, would allow FHA to insure loans up to 175 percent of the $417,000 conforming loan limit -- $729,750 -- or 125 percent of an area's median home price, whichever is less. The Bush administration supports the more modest increases in FHA loan limits put forward by the Senate, advocating raising limits from $362,000 in high-cost areas to $417,000, ...