The Houses passing of the housing reauthorization bill will provide mortgage lenders several benefits, most visibly an increase in the number of loans available because of the higher FHA limits. But the bill wasn't just about loan limits. Simplified down payment calculations, as well as new regulatory authority for HUD were also parts of the legislation.
Specifically, the bill would:
Increase the FHA single-family programs maximum mortgage amount to 85% of the conventional loan limit, or $172,675, up from the current limit of $151,725. The bill also increases the FHA floor amountor the lowest amount insurable to 50% of the conventional floor, or $101,000, up from the current base of $67,500. Both percentages would be indexed annually to reflect increases;
Authorize HUD to impose civil money penalties on nonsupervised lenders i.e., mortgage bankers to enforce compliance with Home Mortgage Disclosure Act reporting rules;
Permit a simplified down payment calculation for FHA single-family homes, primarily first-time home buyers purchasing low- and median- priced homes. For properties up to $50,000, 98.75% of the appraised value could be financed; for properties in the range of $50,000 to $125,000, the limit would be 97.65%. For properties over $125,000, the limit is 97.15%. In areas deemed high closing cost states, the maximum loan amount could be 97.75%. The provision is intended to mirror current law, which allows higher loan amounts to be financed in high closing cost transactions;
Authorize HUD to refinance HUD-held mortgages in high-cost areas through risk sharing arrangements with state or local agencies; Extend authorization of multifamily risk sharing demonstrations with Fannie Mae and Freddie Mac and other financial institutions for fiscal years 1995 and 1996. It also would extend authorization for risk-sharing demonstrations with state housing finance agencies for fiscal years 1995 through 1997;
Require HUD, through the federal housing commissioner, to review the report issued by the Urban Institute, Performance of HUD Subsidized Loans: Does Cooperative Housing Matter? and study the patterns of lending and insurance activity of private mortgage lenders and insurers; and
Extend the date of termination to Sept. 30, 2000, for home equity conversion mortgage demonstration program, and increase the number of mortgages insured under the program to 50,000.