Report Calls for Change in New FHA Loan Limits

Origination News says a report by George Washington University’s Center for Real Estate and Urban Analysis suggests changes in the Federal Housing Administration’s (FHA) loan limits proposal. The plan to reduce the high end of (FHA) loan limits will not do much for low-income, first time, and minority buyers. Co-author of the report and former chief economist for Freddie Mac, Robert Van Order says, “In the wake of significant declines in home prices, we believe FHA could reduce its loan limits by approximately 50% and still almost entirely satisfy its target market. That would reduce its current large market share, which is difficult for FHA to manage.” The report suggests the minimum loan limit be $200,000, not the current $271,050. It also says down payment assistance programs for borrowers with no savings for a down payment or home repairs is bad public policy. The changes are set to take effect in October.

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