Real Estate Articles

Home : Publications : Real Estate Articles

REALTOR®: Realtors Hail Passage of FHA Modernization Bill

Monday, December 17, 2007

In a significant victory for REALTORS® and homeowners across the country, the U.S. Senate on Dec. 14 approved legislation designed to modernize the Federal Housing Administration’s (FHA) mortgage insurance program by increasing loan limits and helping troubled borrowers with subprime loans refinance into federally insured mortgages.

The FHA Modernization Act of 2007 will help protect the interest of America’s current and future homeowners by giving borrowers a safer alternative to riskier mortgage products while also helping many homeowners who may be facing foreclosure.

The Senate’s approval followed an aggressive call to action by the California Association of REALTORS® urging Realtors to contact Sen. Barbara Boxer seeking her support in passage of the bill.

The FHA Modernization Act, approved in a 93-1 vote, would increase loan limits for FHA-insured loans from $362,790 to $417,000, to mirror current conforming loan limits Fannie Mae and Freddie Mac may purchase. In addition, the Senate bill would allow the FHA to insure refinanced loans for borrowers who are delinquent on their mortgages due to ballooning payments on subprime loans.

“This is a tremendous victory for REALTORS® and C.A.R., and I want to thank REALTORS® who responded to our ‘Calls to Action’ and urged their elected officials to pass this bill,” said C.A.R. President William E. Brown. “The Senate’s action is a milestone in our efforts to provide safe alternatives for financing a home mortgage, not only for those borrowers who are facing foreclosure today, but for future homeowners as well.”

The bill, which has the support of the Bush administration, also would reduce the required minimum down payment for an FHA-insured loan from 3 percent to a flat 1.5 percent of the appraised value of a home.

The House passed a separate FHA overhaul measure in September, but there are several differences between it and the one passed by the Senate. The House bill, for example, would increase the FHA loan limit to $729,750, or 175 percent of the Conforming Loan Limit. The House bill also is pushing for a 0 percent minimum down payment, compared with the Senate’s 1.5 percent. The house bill would allow risk-based pricing for FHA mortgage insurance premiums, while the Senate version opposes it. Both bills would categorize all condo units as single-family units.

Both the House and Senate measures will now be carefully scrutinized by a conference committee for comparisons and reconciliation of their differences. Once a final bill can be crafted, it will be sent to the President for signature.

Meanwhile, C.A.R. will continue its efforts to work with California’s congressional delegation to ensure the final version of FHA reform passed out of conference committee has as high of a loan limit as possible.

While he hails the passage of the FHA Modernization Act of 2007, as far as San Mateo County properties are concerned, San Mateo County Association of REALTORS® 2007 President Geoffrey Craighead said, “The bill won’t help much because San Mateo County properties are priced too high.”

Craighead said San Mateo County properties have an ideal location being close to San Francisco and the demand for housing is greater than the supply, which makes housing in the area a premium. DataQuick reports the median price for a San Mateo County home in November 2007 was $780,000, up 4.1 percent from the prior year.

Craighead said the best way to help homebuyers afford homes in the area and in the state of California is to raise the conforming loan limits.

“The cost of financing a home remains out of reach for many households in California because of the low loan limit. For properties in the high cost areas of Alaska, Hawaii, Guam and the U.S. Virgin Islands, the loan limits are 50 percent higher,” said Craighead.

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

» Back to Real Estate Articles