WASHINGTON (10/24/11)--Legislation that would return the Federal Housing Administration's (FHA) insurance limit for single-family home loans to $729,750 was approved by the Senate in a 60-38 vote, and attached to a minibus spending bill, late last week.
The minibus spending bill was passed by the House earlier this year. A Senate vote on the spending bill is expected in the coming weeks.
The mortgage-related legislation, known as the Homeownership Affordability Act of 2011, was introduced earlier this year by Sens. Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.), and co-sponsored by Sen. Dianne Feinstein (D-Calif.). The legislation would allow the FHA, Fannie Mae, Freddie Mac, and the Veterans Administration (VA) to guarantee mortgages up to $729,750, or 125% of local median prices for single family homes, through Dec. 31, 2013.
The maximum conforming loan limit was previously set at $729,750, but fell to $625,500 on Oct. 1 when a loan limit extension could not be agreed to by Congress. The Housing and Economic Recovery Act (HERA) of 2008 requires that Congress set maximum conforming loan limits each year.
Menendez earlier this year said that allowing the loan limits to expire "would be bad medicine for our economy at a time when we need a booster shot," and Isakson added that he is "concerned that failing to extend these limits would make it even more difficult for the average homebuyer get a mortgage and buy a home when credit is already tight."