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Foreclosure relief bill debated on Senate floor

Increased FHA loan limits part of compromise plan

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A bipartisan foreclosure relief bill put forward for debate in the Senate Thursday would permanently increase the limits for Federal Housing Administration loan guarantee programs, but did not include an ambitious plan to allow the FHA to help refinance up to 2 million troubled loans when lenders agree to write down their value. The version of the Foreclosure Prevention Act of 2008 put forward for the Senate to debate would increase FHA loan limits from 95 percent to 110 percent of median home price, with a cap of 132 percent of the conforming loan limit ($550,000 under the current $417,000 conforming loan limit). The compromise bill would require 3.5 percent down payments for any FHA backed loan. Although Congress and the Bush administration have approved temporary increases in the conforming loan and FHA loan limits to $729,750 in high-cost markets, the limits will expire at the end of the year. The House and Senate had previously passed FHA modernization bills tha...