Will the Government Raise Loan Limits on FHA, Fannie and Freddie?

Many members in the House and the Senate appear to be leaning towards raising FHA loan limits just a month after passing a bill to lower the mortgage limits for Fannie Mae, Freddie Mac and FHA. The Obama administration appears to be all over the map regarding the reduction of FHA limits. After expressing support to extend the higher FHA loan amounts going forward into 2012, the Administration is now saying that they back HUD’s decision to lower the FHA limits in 2012.

Are Stated Income Mortgages Still Available Today? Yes, the FHA streamline is often considered a no income refinance program because income documentation like W2′s and pay-stubs are typically waived for existing FHA customers.

Reuters reported that the Obama administration believes that letting the FHA limits expire will encourage the process of winding down the government’s involvement in the mortgage market and enable new investments with private money driving the mortgage market once again. It’s no secret that FHA reserves sit at all-time lows, so many executives in the mortgage environment have been voicing their concerns about the future role of government mortgage financing.

Will the HARP Rules and Expanded Refinancing Guidelines Help Stem the Foreclosure Crisis?

Many industry managers believe that the Home Affordable Refinance Program could fill the void for many distressed homeowners who needed the FHA loan programs because they are less strict when it comes to equity and loan to value requirements. The new HARP mortgage guidelines have eliminated all loan to value restrictions, so that equity will no longer be an issue for eligible homeowners seeking affordable home refinancing.

The Acting Commissioner at the Federal Housing Administration, Carole Galante reiterated Tuesday the agency’s position that the expired FHA limits would have little impact. These account for only 5% to 6% of the FHA portfolio. She also said re installing them wouldn’t necessarily be a negative jumbo loans either since these are usually higher-credit borrowers.  However, the consequence of expanding the limits for FHA but not Fannie and Freddie is simply unknown, she said. Galante continued, “This is a situation that has never occurred before, where FHA would have the higher loan limits and Fannie and Freddie would not. It’s hard for us to make any kind of prediction for how much of that business would come to the FHA without finding any other sort of alternatives.”