FHA Running Out of Loan Authority; Bill Raising Limit Now in Congress.

H.R. 3357 is a bill that increases funding for the Highway Trust fund and ALSO includes a provision that would increase the authority of FHA to make guaranteed loans for the fiscal year ending Sept.30th.

More from this AP story HERE:

"The bill would also raise the Federal Housing Administration's Mutual Mortgage Insurance fund limit from $315 billion to $400 billion.

The FHA became the main source of home loans to borrowers with poor credit and low down payments after the subprime lending market's collapse. The agency lets borrowers take out home loans with a down payments as low as 3.5 percent, compared with 20 percent for a typical loan that doesn't require mortgage insurance. The FHA currently backs around a third of new home loans, up from about 3 percent in 2006.

Monthly volume has averaged almost $33 billion a month over the last three months, and with only $59 billion left in the fund for the fiscal year ending in September, it appears likely that the remaining authority will be exhausted in August. Because the program has a mechanism for repayment of the loans, the action has no immediate effect on the budget.

The suspension of FHA loan backing could have repercussions on the mortgage markets and the government's efforts to ease the foreclosure crisis.

The Senate is also expected to take up the package before its planned Aug. 7 departure for the summer break. The House is scheduled to recess at the end of this week."

Originally created and posted on the Oregon Housing Blog.