Draft bill would hike FHA loan down payments to 5%, slash loan limits | Inman News for Armonk NY real estate buyers

Draft bill would hike FHA loan down payments to 5%, slash loan limits

Legislation will likely draw fire from industry groups, Senate Democrats

By Ken Harney, Monday, May 23, 2011.

Inman News™

Republicans on the House Financial Services Committee have drafted legislation that would raise the minimum down payment for FHA mortgages to 5 percent, cut FHA loan limits in most markets, and move the Agriculture Department’s rural housing program to FHA’s parent agency, HUD.

Though the draft bill has not been introduced, titled or assigned a number, it is expected to be the main subject of a hearing Wednesday before the Subcommittee on Insurance, Housing and Community Opportunity, chaired by Rep. Judy Biggert, R-Ill. After that, the bill is likely to be formally introduced and sped through subcommittee and committee votes and head for action by the full House.

The text of the draft bill appears to be a partial answer from House Republicans to the Obama administration’s call earlier this year for a smaller federal government footprint in housing.

By lowering maximum FHA loan limits in large numbers of local areas — well below even the limits that are already scheduled to kick in Oct. 1 — the bill would squeeze down FHA loan volume across the country, cutting a resource for some home purchasers who can’t obtain a conventional mortgage.

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