FHA Loans Get Backing of House, Move to Senate
A major overhaul of the Federal Housing Administration moved a step closer to fruition this week after a U.S. Senate committee approved the FHA Modernization Act of 2007. Now headed to the full Senate for a vote, the legislation would revamp the short-handed agency by increasing loan limits, cutting down on down payments and giving homeowners a clearer path to reverse mortgages.
Subprime Fallout Getting Relief
Experts also see the modernization push as an avenue of relief for homeowners caught up in the subprime market whirlpool.
"We need to make sure that credit is available, including for subprime borrowers, on fair terms so that the people of this country have an opportunity to build wealth for the future," Committee Chairman Christopher J. Dodd, D-Conn., told the Hartford Courant. "A revitalized, strengthened, and modernized FHA can be – and, under this legislation, will be – a source of this constructive, wealth-building credit, both for new homeowners and for people who are seeking a way out of the abusive loans in which they are currently trapped."
8 in 10 Americans Support Reform of FHA Loans
A study released in June by one of the country's biggest lenders indicated that that about eight in 10 Americans supported new laws to safeguard home loans and mortgages by modernizing and revamping the Federal Housing Administration. Forclosure or failed mortgages will strike more than 2 million American homeowners in the subprime market by the year's end, according to the Center for Responsible Lending, a nonprofit advocacy group. The cost in lost equity will near $164 billion.
A modernization of the FHA would allow the agency to increase loans to 100 percent of an area's median home price, 0r $417,000, whichever is lower, as well as cut down payments to 1.5 percent from their current rate around 3 percent.
The Senate Banking Committee vote came a day after the full U.S. House of Representatives approved the legislation by a vote of 348 to 72. Currently, there's no set date for the full Senate to debate the measure, although we'll keep you posted on all things FHA here at FHA Research Center.