The Government Tries To Replace Sub-Prime Lending
A bill has been introduced in the US House to revitalize the Federal Housing Administration (FHA), a provider of mortgage insurance to low and moderate income families.
The bill’s purpose is to provide home loans to borrowers who, until recently, relied on the sub-prime mortgage market.
Dubbed the “Expanding Homeownership Act of 2007,” the proposed bill includes verbiage approving zero down home loans for FHA mortgage customers.
This is in an attempt to make FHA more similar to private sector loans so that FHA can recapture lost market share.
Another provision would be to allow larger loans than the FHA currently allows in areas with higher housing costs, such as California, New York, and Massachusetts.
The current 2007 loan limit is $362,790, meaning FHA customers need to bring the difference between a home’s purchase price and the loan limit to the closing table (before closing costs).
By filling the void created by the collective exit of sub-prime mortgage lenders, FHA hopes to be the source for first-time financing and other mortgage programs to borrowers who no longer can find financing through private sector lenders.
