The Sky’s the (Loan) Limit

By Gary Thomas, 2012 President-Elect, National Association of REALTORS®

I have some great news to share with everyone! Last night Congress voted to restore loan limits and the maximum cap for Federal Housing Administration loans. Their action reinstates the loan limit at 125 percent of area median price up to $729,750 for two years and extends the National Flood Insurance Program until December 16th, with no lapse.

This is good news! Higher loan limits will make mortgages more accessible for hard-working middle-class families throughout the country. In fact, nearly two-thirds of buyers who will be helped by the loan limits extension have incomes below $100,000. On flood insurance, the extension until December 16th ensures no lapse, but we still need to push for Congress to pass the five-year reauthorization.  Contact your representative to reauthorize NFIP for five more years.

Opponents of higher loan limits mistakenly argue that only wealthy borrowers benefit from the maximum cost limits. But in 2010, the FHA was used by 56 percent of all first-time homebuyers, and 85 percent of borrowers obtaining homes at the higher loan limits had incomes below $150,000. In addition, 60 percent of all African-American and Hispanic homebuyers used FHA.

The truth is that it actually depends a lot on where in the country the borrower lives. Geography often dictates what the price of “affordable housing” is. Last month’s reset to 115 percent impacted 669 counties in 42 states and territories, with an average loan limit reduction of more than $68,000. We support giving middle-class borrowers the same access to affordable mortgage financing, no matter where they make their home.

For example, many people think of California as a high cost state, and there are many areas where it is. San Francisco will benefit because many middle class homes bump up against the $729,750 limit. What many people don’t know is there are many counties in California that are not considered high cost and will benefit. Take Fresno County, for example, prices will go from $281,750 to $311,250 to qualify. As you can see, this really benefits consumers no matter where they live.

For a great analysis, see the video below.

Statistics for last year show a decline in mortgages for higher priced homes, in spite of historically low interest rates. This suggests that sales in the higher-priced portion of the markets were stymied relative to the lower price ranges during the period leading up to the change in the conforming loan limits. This negatively impacted our businesses at the very worst time.

Yet, not long ago, the effort to reinstate the loan limits was dead in the water. Several members of Congress let us know it would never happen. But we didn’t give up. We showed Congress what REALTORS® are made of—strength and grit! We sent out a Call for Action on both these matters, and we had an impressive response from members. And you know what? Congress listened! That’s why these Calls for Action are so important, and I thank you for your overwhelming response.

Those of you who answered the call helped make a difference, and I urge you to keep up the good work by continuing to respond when asked. And be sure to answer the call for action to reauthorize NFIP, if you haven’t already. Again, thanks for your help!

  1. The increase in the FHA loan amount is actually going to ensure I will have another sale this week! Without the increase the borrower would not have been able to get financing.

  2. Barry Jones

    Thank you for this information and update. I have been told by local lenders that while Congress has approved these changes, the Obama admisnistration may not sign the bill into law because of the financial condition of FHA.

    Can you provide any further information/update on the status of this matter?


    Barry Jones
    Dilbeck Real Estate
    La Canada Flintridge, CA 91011

  3. Dave Killian

    Huge congratulations to NAR on this one. You folks just did a world of good for your members, for millions of home buyers and sellers, and for the national and world economies.

    This was GREAT work!!!

  4. LB

    Thats great news..Great Job!
    Now how about helping people with condos whow want to refinance or sell; I have a condo with over 50% equity and almost perfect credit, but because my complex is not FHA approved I can’t refinance(or sell it if God Forbid I needed to!).
    But the government is more than happy to refinance an underwater homeowner…What’s wrong with this picture? Thanks Barney Frank!!

  5. Kenneth O

    Thats a very welcome news. Please forward the approved loan limits for San Bernardino County, CA. Regards.

  6. I support the move of trying to get Congress to see things that will help give our ecomony those seeking and wanting to buy a new home excited

  7. Thomas N. Bates

    I am concerned that the FHA will go the way of Fanny & Freddie!
    Any thing that Barney Franks touches turns bad. He stated just after the first problems of Freddie and Fanney to a memeber of( “LA RAZA:” a radical Mexican Immigration group) when she complained that her members who had no credit could not buy homes! He told her that this would be handled with FHA. Source C-span taped news conference!

  8. Adam Fedeli

    Great job! Many in our area of Northern California use FHA to buy, so this is great news. Thanks for pushing congress to do the right thing.

    Adam Fedeli, President, Chico Association of Realtors

  9. Brian Baker

    I think we should require a minimum of 10% down to encourage responsible home ownership.

  10. WOW! That is great news indeed. I am just so happy to know this. And since I’m the first to comment, so here’s a big CHEERS to Congress for that decision.

  11. Would love to see an update to this very good post as FHA limits have changed.