The House of Representatives passed the Expansion of the American Home Ownership Act of 2007 and most likely the Senate will pass it and the President will sign it after some minor adjustments. This is the largest change to the FHA that has occurred since its inception. If the House has its way, this would actually change the initial purpose of the FHA from an agency formed to help low-income households to an agency that helps nearly all Americans own and keep their homes.

Increased FHA loan limits

Why do I say this? The FHA has always been focused on helping poor, low-income areas afford homes. The new bill now before the Senate proposes increasing loan limits from $ 200,000 to $ 350,000 up to a maximum of $ 700,000 in areas with high median home prices. Personally, I do not know low-income people who own $ 700k homes, except for those people who lied on their loan applications and “declared” that they made $ 10,000 per month as a janitor at Wal Mart and actually got the loan. Fortunately, Bush has stated that he will not allow this to happen. It is intended to keep the purpose of the FHA intact. I think the Senate will do the same. Bush plans to keep the FHA loan limit at $ 417,000 or less. We should see each other very soon.

Removal of audited finance requirement for brokers

This is the second largest change to FHA. If the House passes this, it would open the door to approximately 90% of the nation’s mortgage brokers who were previously restricted from becoming FHA (loan correspondent) approved brokers due to the cost barrier. . Most people don’t realize it, but audited finances can cost anywhere from $ 2,000 to $ 20,000 for an average little broker to obtain. Audited finances required by the FHA must be completed by a CPA who has undergone a peer review and the minimum net worth must be $ 50,000 in accordance with the strict FHA net worth calculation guidelines. Now 90% of brokers who did not have the time, money, and resources to prepare audited finances can post a bond in lieu of audited finances. A surety bond is obtained through insurance companies and covers the consumer or third party in a transaction and is payable by the mortgage company if the state uses it to pay a consumer or third party. The new bill proposes a bond of between $ 50,000 and $ 100,000. Most analysts would agree that something similar to this will be in the amended bill when it passes the Senate.

What will be the effect of this bill?

Whether the FHA loan limit is raised to $ 700,000 in some areas or $ 417,000, the bill will drastically change the purpose of the FHA. Many people will look to the FHA as a place to obtain a loan that conventional lenders cannot provide. This is possible through FHA advance mortgage insurance that can reduce the risk of higher debt-to-income and loan-to-value ratios. We will also see a huge increase in FHA publicity when most mortgage brokers have access to be FHA approved brokers. Unfortunately, the House tends to think that this will be the solution to current market problems. This is a great start, but I think it will take a lot more than this to make an adjustment to all the lies and deception that have occurred in the last 5 years in the mortgage industry.