The purpose of the Federal Housing Administration, or FHA, is being debated as Congress wrangles over whether to restore higher mortgage limits for federally insured loans. In 2008, limits were raised from $417,000 to as high as $729,750 in expensive areas of the country in order to reflect higher home values. That limit dropped to $625,500 after Oct. 1. The Senate has already approved the proposal to raise the limit again.
Some lawmakers are concerned that if they further withdraw support by not restoring the higher limits, the housing market will continue its slide. Opponents maintain that the FHA was created to help ordinary Americans afford a home, not to aid wealthy homebuyers who can afford larger, so-called jumbo mortgages that are beyond the government-insured limit and come with higher interest rates.
A coalition of professional organizations, including the Mortgage Bankers Association and the National Association of Realtors, has urged Congress to restore higher limits. "Do not precipitate more turmoil in local markets," the coalition wrote in a letter to lawmakers. They argue that the higher limits are still needed in high-cost parts of states like California and Florida.
The American Bankers Association and mortgage insurers have come together in opposition of higher limits, saying that the government should be out of the mortgage business entirely.
The proposal is included in a $182 billion spending bill that House and Senate appropriators will consider this week.
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