House Passes Bill to Modernize FHA
By a vote of 415 to seven (10 votes not cast) the U.S. House of Representatives passed The Expanding American Homeownership Act (H.R. 5121) on July 26, which will modernize and update the National Housing Act, and let the Federal Housing Administration (FHA) use new pricing structures to more effectively reach underserved borrowers. The bill now moves to the Senate.
The Act would:
Eliminate the current statutory 3% minimum down payment on FHA loans, reducing a significant barrier to homeownership. FHA’s existing down payment requirement does not meet the demands of today’s marketplace, where most first-time homebuyers put down 2% or less. FHA would also offer a variety of down payment options.
Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower. FHA would have the flexibility to charge a lower premium for low-risk borrowers.
Increase and simplify FHA’s loan limits. FHA’s loan limit in high-cost areas would rise from 87% to 100% of the Government Sponsored Entity conforming loan limit. In lower-cost areas from 48% to 65% of the conforming loan limit.
In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets.