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Wednesday, November 9, 2011

New Loan Limits Could Impact Housing Recovery

By E. Alice Miranda, BNAR President

On October 1, Congress allowed conforming loan limits to revert from 125 percent of the local area median home price to 115 percent of the local median home price. That has effectively reduced the size of conforming loans for many home buyers across the country. According to the Buffalo Niagara Association of Realtors®, these new loan limits will have a big impact on our nation’s housing market. 

The new loan limits mean fewer people will have access to affordable mortgage loans, and the loans that are available will be more expensive. The National Association of Realtors® predicts that five to 10 percent of consumers will face higher mortgage rates as a result of this change, at a time when housing is still in recovery.

The lower loan limits will impact 669 counties in 42 states and the District of Columbia, with an average Federal Housing Administration loan limit reduction of more than $68,000.

The fight isn’t over. Realtors® are continuing to work closely with members of Congress and a coalition of industry partners to reinstate the higher loan limits as soon as possible, because we want to make sure that homeownership is more affordable and accessible for hard-working families across America.

The BNAR points out that home buyers aren’t the only ones who will feel the effects of the new loan limits. The lower loan limits will reduce the number of qualified buyers, which means homeowners would have a hard time selling their homes.

The FHA mortgage loan limits are critical to providing liquidity in today’s housing market, especially since the private market has yet to return. The FHA mortgage programs have played an important and vital role in the housing market’s recovery and we cannot do anything to jeopardize that process. Our nation’s economy and well-being rely on the full recovery of the housing market.

For decades, many first-time home buyers have relied on FHA-insured loans to purchase a home, especially since in many cases only a 3.5 percent down payment is required. The BNAR estimates that one-third of recent buyers purchased their homes with an FHA-insured mortgage.

As the leading advocate for homeownership, Realtors® are working hard to make sure anyone who is able and willing to assume the responsibilities of owning a home will have the opportunity to pursue that dream. Mortgage availability remains a top concern and we are determined to reinstate the higher loan limits as quickly as possible.

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