Congress Puts Housing Market in Peril with Lower FHA Loan Limits

Here is a very timely topic by Gavin Mathis.  With real estate being “sluggish” in many areas through out the country, this is not the time for congress to waffle on such important legislation.  Many home buyers use this program and if the limits are lowered, this will also effect home prices and sellers.

Please read further:

By: Gavin Mathis

Published: September 21, 2011

Without Congressional action before the end of the month, FHA loan limits are set to fall to the same levels they were at before the housing meltdown, which could send another jolt through an already ailing housing market just when the recovery can least afford it.

Without Congressional action before the end of the month, FHA loan limits are set to fall to the same levels they were at before the housing meltdown, which could send another jolt through an already ailing housing market just when the recovery can least afford it.

For more than 75 years, the FHA has made home ownership a reality for millions of creditworthy Americans who don’t make the cut for a traditional bank loan. For example, FHA offers qualified home buyers financing with as little as a 3.5% down payment and a credit score as low as 580, allowing borrowers who take an FHA-backed mortgage to pay a premium of roughly 1% annually. Borrowers with nontraditional credit histories may also be eligible for maximum financing.

Since the collapse of the subprime mortgage bubble, the program has played a substantial role stabilizing the housing market. In an effort to boost liquidity in the market, Congress wisely raised the FHA loan-limit caps to $729,750.

Allowing the loan limits to now drop to $625,500 from $729,750 in certain areas will squeeze qualified home owners out of the market. Loan limits vary based on the median home price in an area, which is also going to drop from 125% of median to 115%. This reduction will affect people taking out much smaller loans as well. In fact, the new limits will affect 669 U.S. counties in 42 states.

Leading housing groups have already noticed the potential impact if Congress does nothing. Applications for mortgages between $625,500 and $729,750 fell 34% in August, says the Mortgage Bankers Association. In 2010 alone, lenders originated $30 billion in loans for properties in this bracket. This represents a sizeable chunk of the market that needs to remain intact. We’re more than three years into the housing slump and home sales remain weak, and yet Congress is putting the housing market in further peril.

During a Senate Banking Committee hearing, housing experts warned against reducing the limits until the market bounces back. Even Mark Zandi, chief economist for Moody’s Analytics, who originally supported allowing the limits to expire, told The Wall Street Journal this isn’t a good time for the government to stop helping home owners. “Given what’s happening in the housing market and the economy, I think that’s an error,” Zandi said.

Fortunately, a bipartisan group of representatives, led by Rep. Gary Ackerman (D-NY), has proposed a short-term extension of the limits. “Without the current limits, fewer mortgages would be eligible for the guarantees provided by Fannie Mae, Freddie Mac, and the Federal Housing Administration,” Ackerman wrote.

Urging the House Appropriations Committee to attach the measure to a stop-gap funding bill, the group hopes the provision passes before the end of the month. If the short-term extension is passed, Congress can see if the housing market improves. It would be preferable for Congress to extend the current limits for two years, but this short-term measure would bring some stability to the market.

If the extension isn’t passed, there’s no reason to believe that the private sector is going to step up and provide reasonably priced, long-term, fixed-rate mortgages. The nation has been waiting for banks to start making loans for more than two years now. Without a free market alternative prepared to step up, this is an incredibly risky time for the government to step out of the housing market.

What do you think about the FHA loan limits potentially lapsing while home sales are struggling?

President Declares Disaster For Pennsylvania

En Español

Per FEMA (Federal Emergency Management Agency),  federal aid has been made available to the Commonwealth of Pennsylvania and ordered federal aid to supplement commonwealth and local recovery efforts in the area affected by Tropical Storm Lee beginning on September 3, 2011.

The President’s action makes federal funding available to affected individuals in the counties of Adams, Bradford, Columbia, Cumberland, Dauphin, Lancaster, Lebanon, Luzerne, Lycoming, Montour, Northumberland, Perry, Schuylkill, Snyder, Sullivan, Susquehanna, Union, Wyoming, and York.

Assistance can include grants for temporary housing and home repairs, low-cost loans to cover uninsured or underinsured property losses, and other programs to help individuals and business owners recover from the effects of the disaster.

Individuals and business owners who sustained losses in the designated counties can begin applying for assistance by registering online at http://www.disasterassistance.gov, by web enabled mobile device at m.fema.gov or by calling 1-800-621-FEMA (3362). Disaster assistance applicants, who have a speech disability or hearing loss and use TTY, should call 1-800-462-7585 directly; for those who use 711 or Video Relay Service (VRS), call 1-800-621-3362.  The toll-free telephone numbers will operate from 7 a.m. to 10 p.m. (local time) seven days a week until further notice.

Central PA Flooding

We wanted to re-post our information about flooding that we posted a week or so ago.   Now is the time to prepare or evacuate. 

The National Weather Service is now predicting a crest of 27.4 feet in Milton, but is subject to more rain to our north and west.  The downtown of Milton has been closed to outside traffic, so please do not try to come down Broadway to “view the river”, as businesses are evacuating.  Route 405 is closed (north) and the river bridge is scheduled to close at 1:00 pm.

Stay informed by watching the Weather Channel, local TV or listening to the radio for alerts.

Here are a few hints and reminders:

  1. Move loose objects such as toys, garbage cans, and lawn furniture to the house or garage
  2. If your camper is still open for the summer, secure it and roll up the awnings
  3. Make sure you have a battery operated radio and plenty of batteries.
  4. Get your prescriptions filled
  5. Fill your car with gas (no electricity, no pumps)
  6. Get some extra cash
  7. Keep your cell phone fully charged
  8. Know how to safely shut off electric and gas supply lines in the event of flooding
  9. Have a safe place to park your car and/or store your watercraft
  10. If you need to drive, avoid washed out and wet roads. There could be downed electric lines that are hidden as well as strong currents that could sweep your car away.
  11. Stay informed

 

BUSINESS OWNERS:

  1.  Inspect your property as soon as it is safe to do so. Especially look for leaks and structural damage.
  2. Monitor any boilers that must remain on line.
  3. Know how to safely shut off electric and gas supply lines in the event of flooding
  4. If the power goes off, make sure to turn off electrical switches so that when the power comes back on the surge does not damage your equipment. 

IMPORTANT FOR ALL: 

Always do whatever you can to protect your property from further damage.  Do NOT wait for an adjuster to view the property.  Take pictures or save the damaged items, but do what you can to avoid further damage.  Start the clean up and drying out process as soon as possible.

If you have a flood claim, you may contact Selective Insurance directly to report it, 877-348-0552, or we are in the office today and you can call us at 742-8736.  You may also contact Selective in the following way:

www.MySelectiveFlood.com (for customers)
You will need to validate the security key in order to access policy information. If the security key has not been validated, you will need to:

  • Locate the Security Key information on your latest Flood renewal bill
  • Log onto www.MySelectiveFlood.com
  • Click on the First Time Here? button
  • Input the Security Key information

You can also email the claim directly to Selective at: Floodclaims@selective.com