Making the current FHA loan limits permanent would ensure liquidity in the Lehi housing market and make mortgages more affordable for qualified buyers at a time when the market is showing signs of a weak recovery.
Current FHA loan limits in Lehi are at $323,750, single family, and are set to expire at the end of 2009 and revert to lower amounts, greatly hindering the housing recovery process.
The National Association of Realtors (NAR) strongly supports making FHA loan limits permanent, and has urged the subcommittee to quickly consider legislation that would do that—H.R. 2483 introduced by committee members U.S. Reps. Brad Sherman (D-Calif.) and Gary Miller (R-Calif.).
The FHA plays an important role with homebuyers in Lehi and for that matter as well as markets across the country. In the wake of the collapsing private mortgage market, FHA has been a key player in removing inventory from the market and helped stabilize home prices. Present FHA housing market share, nationwide, is approaching 25 percent, significantly up from 3 percent two years ago.
NAR said that FHA has performed remarkably well through the housing crisis locally in Lehi and the rest of the country, compared to Fannie and Freddie, because FHA has never strayed from the sound underwriting and appropriate appraisals that have traditionally backed up their loans.
The recent talk of the FHA capital reserve ratio falling below 2 percent has nothing to do with FHA’s current business activities. It is simply a reflection of falling housing values in their portfolio. The FHA recently announced that a 2009 audit will show that even if FHA does nothing, the cap reserves are expected to rise back to the required level within a few years. FHA total reserves are not in as dire straits as some have reported, FHA said, because the cap reserve fund is not its reserve fund – FHA also has a separate cash reserve that is higher than it has ever been – and the combined assets total $30.4 billion.
FHA is taking timely steps to protect taxpayers: implementing credit policy changes to enhance risk management; hiring a chief risk officer for the first time in the agency’s history; and shifting responsibility for mortgage brokers away from taxpayers to the lenders who use mortgage brokers.