President Signs Bill Extending FHA, VA Loan Limits, Hitting GSEs with Fee


President Barack Obama signed a bill Friday
that reinstates the recently expired higher loan limits that were in effect for
FHA and VA loans through December 31, 2013 but does not provide this extension
to Freddie Mac and Fannie Mae.  H.R. 2112
sponsored by Jack Kingston (R-GA) was approved by a House/Senate conference
committee vote of 298 to 121 in the House and 70 to 30 in the Senate on
Thursday and sent to the White House.  

Section 238 of the bill, The Agriculture Rural Development, Food and
Drug Administration and Related Agencies Appropriation Act of 2012
the limit on FHA loans to the multi-tiered arrangement that existed under the
Economic Stimulus Act of 2008, provisions for which expired on October 1.  Since that date the FHA and GSE maximum has
been at $625,500.   Under the restored
limits the highest FHA loan available in designated high cost areas will be
$729,750.  Loans written between October
1 and today’s effective date of the new legislation will not be eligible for
the new limits.  Limits on VA loans will
return to the levels established under the Veterans Benefits Improvement Act of
2008 which are, in some cases, higher than FHA limits.

The Senate had amended the House bill,
adding the same extensions for the GSEs as FHA, but the joint conference
committee rejected that change.  
Instead, limits for the two government sponsored enterprises (GSEs) will
be determined by the greater of the limitation in effect at the time the loan
was purchased or “the limitation that was prescribed for loans originated
during the period beginning on July 1, 2007 and ending on December 31, 2008,
pursuant to section 201 of the Economic Stimulus Act of 2008, thus keeping the
maximums on a range from $417,000 to $625,500 depending on local market

The new legislation also sets an annual
fee for loans guaranteed by Freddie Mac and Fannie Mae
.  This fee is in the amount of 15 basis points
on the outstanding principal balance of the loan and is “independent of any
guarantee fees upfront on ongoing, charged to the borrower, and the premium
loan fee shall not be affected by changes in guarantee fees.”  The fee, according to the bill, is expected to
achieve an annual income of $300 million in revenue which “shall be used to pay
for costs associated with maintaining loan limits established under this

The administration and many
congressional Democrats had opposed the higher limits for FHA because this
might increase FHA’s market share at the same time the government was trying to
encourage private lending.  Others were
opposed to excluding the GSEs from the increase, also because of the potential
impact on the FHA share.

The National Association of Home
Builders (NAHB) was quick to applaud the bill, issuing a press release from
Chairman Bob Nielsen that says in part, “We commend congressional leaders
in both parties and each chamber of Congress for taking this action to boost
overall mortgage liquidity in the marketplace, create jobs, and provide home
owners and home buyers with safe and affordable financing.  “Restoring the higher FHA loan limits
will help to stabilize home values, provide constancy while private investors
re-enter the market, and enable millions of creditworthy consumers to get home
loans with the best mortgage rates and lowest fees and downpayment

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