For Immediate Release:                   
Contact: Steve Adamske (202) 225-7141  
or Heather Wong (202) 226-3314                                               

January 30, 2008

House Passes Housing Provisions to Help Massachusetts Homeowners

Washington, DC—The House of Representatives passed this week important housing provisions as part of the economic stimulus plan that will help Massachusetts consumers take advantage of increased mortgage market credit, stabilize the housing market and help homeowners refinance out of bad loans.  The legislation will allow the Federal Housing Administration (FHA) and the Government Sponsored Enterprises (GSE) of Fannie Mae and Freddie Mac to temporarily increase their loan limits to help homeowners and future homeowners.  By making these changes to the FHA and GSE programs, Congress will make more financing available to a larger number of moderately priced homes in many communities across the country.  In addition, the bill raises artificial caps, which effectively prohibit the use of FHA and GSE loans in higher priced markets such as Massachusetts, California and New York.

“This change in loan limits means that more first-time home buyers and existing homeowners who need to refinance will have greater access to an affordable multi-family home mortgage. Massachusetts has a great deal of multi-family housing stock and increasing the FHA loan limits for two, three and four unit residences will help ease the difficulties that some homeowners are experiencing,” stated Congressman Mike Capuano. 

"The higher loan limits included in the House Economic Stimulus Plan are absolutely critical to markets like Boston and its surrounding suburbs where the current cap on the maximum loan amounts exclude a vast segment of the middle market for single family home purchases and refinancings.  The current mortgage crisis has created exactly the sort of vacuum that FHA has historically been charged with filling and this will allow the Agency to step into the gap, including providing financing opportunities for subprime borrowers and borrowers caught in the vise of loan resets in the Boston area.  Essentially, this package puts FHA back in the business of making housing loans in our area."  Rep. Capuano was responsible for including 2, 3 and 4 unit dwellings found commonly in the Boston area.

“The changes we are making in the stimulus package are only temporary, and I intend to work this year to make these changes permanent.  There is no public policy reason to exclude parts of the country when we are assisting homeowners and future homeowners,” said Rep. Barney Frank.

Following are estimates of the impact of the stimulus bill for 2008 (prepared by the housing policy staff of the House Financial Services Committee):

Estimated Impact of FHA and GSE Loan Limit Increases on Impact on Massachusetts: 

Boston-Quincy, Cambridge-Newton-Framingham, and Essex County MSAs

Due to Rep. Capuano’s amendment, the bill would also increase FHA 2-family, 3-family, and 4-family limits as follows:

* The 2-family FHA limit would be increased from $461,113 to $689,631                                           

* The 3-family FHA limit would be increased from $560,230 to $833,602                                           

* The 4-family FHA limit would be increased from $646,421 to $1,035,963                

Providence-New Bedford and Fall River MSA                               

The bill would also increase FHA 2-family, 3-family, and 4-family limits as follows:                                                                               

* The 2-family FHA limit would be increased from $359,397 to $532,890                                           

* The 3-family FHA limit would be increased from $434,391 to $644,139                                           

* The 4-family FHA limit would be increased from $539,835 to $800,508                                                                               

Other Areas of Massachusetts                                                                                

The single family FHA loan limit would be increase in other areas as follows:                                                                             

Nantucket & Dukes Cos.         From $362,790 to $542,580 [and the GSE limit would increase from $417,000 to the same amount]                                                           

Worcester MSA:                      From $292,600 to $385,000

Springfield MSA:                      From $207,860 to $271,050

Pittsfield MSA:             From $204,535 to $271,050

***Note: These are only estimates, and are based on current FHA loan limits               

Economic Stimulus Provisions:

A major cause of the credit crunch and the economic slowdown has been, and continues to be, losses by lenders in the subprime mortgage markets and declining property values.  These losses caused a substantial tightening in the general mortgage markets, leaving borrowers seeking to refinance or purchase new homes – and lenders seeking financing to make new loans – with few options.  Specifically, the changes passed in the stimulus plan will provide:

• One-year Increase in FHA’s Ability to Guarantee More Loans.  Currently borrowers in many parts of the country are cut off from FHA financing.  This revision would boost FHA loan limits to 125% of an area’s median home price (but not to exceed $729,750) for 2008.  This will provide needed mortgage financing to borrowers in markets where such funds are currently unavailable or limited. According to a 2007 GAO report, during the recent housing boom (where the number of nationwide loans rose), the total number of FHA loans fell from 763,584 in 2001 to 286,470 in 2005.  “FHA’s market share in terms of numbers of loans fell from 19 percent in 1996 to 6 percent in 2005, with almost all of the decline occurring since 2001.”  This will help FHA return to its traditional role in housing finance.

• Temporary Increase in GSE Conforming Loan Limits.  Similarly, the stimulus package will provide for a temporary increase for the GSEs conforming loan limits to match the new levels established for the FHA.  Currently Fannie Mae and Freddie Mac are only able to purchase loans under $417,000.  Loans with balances above that limit have fewer buyers and are significantly more expensive and more difficult to finance.  Even when financial institutions are willing to make these loans, because there is no secondary market for them, they cannot sell the loans and fund new ones.  By permitting the GSEs to buy these loans, this change would provide vital liquidity to mortgage markets where funds are currently unavailable or limited.

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