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Obama, Congress Raise Conforming Loan Limits for FHA

After several weeks of intense deliberation, with backers and supporters on both sides, Congress again raised limits for ""Federal Housing Administration"":http://portal.hud.gov/hudportal/HUD?src=/federal_housing_administration (FHA) conforming loans to $729,750, which ""President Barack Obama"":http://www.whitehouse.gov/administration/president-obama/ signed off on Friday.

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House lawmakers included an amendment to raise the limits in a stopgap spending measure cobbled together by both houses to keep the government running through December this year. The House voted for the bill by a 298-121 margin, which the Senate followed with 70 yeas and 30 nays.

The limits previously fell back to $625,500 in October for ""Fannie Mae"":http://fanniemae.com/portal/index.html, ""Freddie Mac"":http://www.freddiemac.com/, and the FHA. Lawmakers purposefully excluded the GSEs from a hike in their conforming loans, with House members citing ""questionable business practices"" and widely criticized multibillion-dollar bonuses for 10 senior-level executives with the companies.

All manner of trade groups ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô previously critical of Congress for allowing the limits to expire in October ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô rushed to extol the raised threshold in statements.

""[W]e applaud members of Congress for restoring FHA's previous loan limits, which will help reduce consumer cost burdens, stabilize local housing markets and allow

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qualified, creditworthy borrowers to access affordable mortgage financing,"" ""Moe Veissi"":http://www.realtor.org/about_nar/fullbio_veissi, president of the ""National Association of Realtors"":http://www.realtor.org/, said in a ""statement"":http://www.realtor.org/press_room/news_releases/2011/11/congress_reinstates_fha_loan_limits.

Said Bob Nielsen, chairman of the ""National Association of Home Builders"":http://www.nahb.org/, in a ""separate statement"":http://www.nahb.org/news_details.aspx?newsID=14032: ""Restoring the higher FHA loan limits will help to stabilize home values, provide constancy while private investors re-enter the market, and enable millions of creditworthy consumers to get home loans with the best mortgage rates and lowest fees and down payment requirements.""

Others stanched their praise, with ""LeFrancis Arnold"":http://www.car.org/aboutus/carleadership/lefrancisarnold/?version=2, president of the ""California Association of Realtors"":http://www.car.org/, saying in a ""statement"":http://www.car.org/newsstand/newsreleases/2011newsreleases/fhaloanlimits/ that the trade group felt ""disappointed that the Senate and House could not agree on increasing the loan limits for Fannie Mae- and Freddie Mac-insured loans.""

He cited a provision in the Senate bill that failed to make it, describing it as one with ""a premium on high-cost loans that protected U.S. taxpayers from footing the costs.""

Largely absent in the cascade of praise from trade groups: discussion of the FHA's reportedly precarious capital position, which some say may require a $50-billion bailout at some time in the next few years.

The FHA recently came under scrutiny over reports that it continues to fall below the 2-percent capital reserve required by federal law, with only $2.6 billion in cash reserves available to meet $1.1 trillion in loan guarantees.

An actuarial annual report by the FHA posted a 50-50 chance that it could require a cash infusion from the ""Treasury Department"":http://www.treasury.gov/Pages/default.aspx in the billions.

Carol Galante, FHA acting commissioner, now the nominee for commissioner, defended her agency by claiming that it estimates that it will have enough on hand to survive any continuing drag in home prices.

The newly returned threshold for conforming loan limits will hold for the FHA through 2013.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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