Several housing industry trade associations have written a letter seeking a one-year extension of current FHA mortgage loan limits, and National Reverse Mortgage Lenders Association has signed onto the letter, calling the extension “critical” to preserving home values.
The letter, jointly signed by 11 organizations including the Mortgage Bankers of America, the National Association of Home Builders, and the National Association of Realtors, points out the still-weak economy and the fragile housing markets they say “cannot handle a mortgage disruption like lower loan limits.”
The limits are not set to expire until Sept. 30 of this year, but the letter calls for immediate action as it takes time for lenders to adjust underwriting systems to reflect loan limit modifications.
“While we concur with HUD that it possesses the legal authority to set loan limits for HECM after September 30, we believe extending the higher loan limits for FHA forward mortgages is critical for preserving housing values across the board,” says NRMLA President Peter Bell.
Some lenders have already stopped taking applications at the current limits, the letter reads, fearing the loans won’t close prior to expectation; as a result, home sales have already been disrupted.
The housing inventory will expand if families can’t sell their homes, and other families can’t buy, and this would lead to depressing housing prices even further, the letter continues. And, in chain reaction fashion, this ultimately means a longer time until the housing recovery.
Read the full letter here.
Written by Alyssa Gerace