High FHA loan limits could mean help on the way for homeowners - Business

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Mar. 07, 2008
Copyright © Las Vegas Review-Journal

High FHA loan limits could mean help on the way for homeowners

By HUBBLE SMITH
REVIEW-JOURNAL

Federal Housing Administration loan limits have been raised to $400,000 in Clark County as part of an economic stimulus plan that will enable more families to qualify for a safe, affordable mortgage, Housing and Urban Development Secretary Alphonso Jackson said Thursday.

He said the change will help an estimated 250,000 U.S. homeowners, many who are facing foreclosure.

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Families in high-cost states have been priced out of FHA-backed loans, which created a vacuum that was filled by exotic subprime loans, Jackson said.

"This is going to be a substantial boost to the economy because they (lenders) will be able to make loans they couldn't make before," he said at the Greater Las Vegas Association of Realtors luncheon at Bally's. "Many people will receive help. That's the good news. Unfortunately, the new FHA loan limits expire at the end of the year."

That's why it's extremely critical to pass the FHA "modernization" bill that would take the ceiling to $413,000 in Nevada and make it permanent, Jackson said.

About one out of 10 homeowners nationwide is "under water," owing more than the house is worth, he said.

Foreclosures are a real problem and have hit Nevada particularly hard, the nation's top-ranking housing official said. In Clark County, one in 277 households was in foreclosure at the end of last year, about four times the national average, Jackson said.

The most important step to avoiding foreclosure may be to contact a housing counselor, he said.

There are more than 2,300 HUD-approved counseling agencies in the country, including 13 in Las Vegas, that provide free counseling, he said. In 2007, 96 percent of people who saw a housing counselor and completed the program avoided foreclosure.

"We found it's the key for them to stay in the house because they'll find what's affordable for them and what's not," Jackson said.

HUD has increased funding for housing counseling by 150 percent since 2001, when it was about $10 million. President Bush has allocated $65 million in his new budget proposal.

The budget contains an additional $180 million for HUD's nonprofit partner NeighborWorks.

"It's money well spent," Jackson said. "Studies show that homeowners respond more quickly to community and nonprofit groups than to lenders and banks."

Some people enter a state of denial about their financial problems. Instead of communicating with their mortgage company, they withdraw.

"Fifty percent of people facing foreclosure will not talk to their lenders because they're ashamed or they're scared," Jackson said. "Often, it's hard to know who to call with so many mortgages chopped up, sold or resold."

Last year, Jackson and U.S. Treasury Secretary Henry Paulson worked with the mortgage industry to create a private-sector alliance called Hope Now. It's designed to help subprime borrowers who are able to afford the current starter rate on a subprime loan, but will not be able to make higher payments when the interest rate goes up.

The hot line (888) 995-4673 receives more than 4,500 calls a day and the response rate has gone from 2 percent to 26 percent, Jackson said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or (702) 383-0491.

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Please enter your name Name: Please enter your email Email: Please enter a comment COMMENTS : (word count limit is 300) You have reached the maximum number of words allowed Current Word Count: Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background. Reality wrote on March 07, 2008 11:14 PM: CommonSense. You must be living in a cave if you think the "fundamentals havent changed". Try getting a loan today if you havent got a 700 plus Fica score. Or a 30 yr fixed mortgage for 5.75 APR without paying 3 points discount fee to buy the rate down or finally, the fact that your little abode bought in 2003 has dropped in value at least 20% with more downside to go! CommonSense wrote on March 07, 2008 12:16 PM: What I don't understand is the fundamentals have not changed since we bought our house in January 2003. We paid 5.75% for a 30 year fixed then and that is more or less where it is today. Other than some rare exceptions why is the sky falling now? Unemployment hasn't shot way up, general economics haven't drastically changed. Or was the problem that you bought a $600K home but could afford only a $200K home? You were so happy they found an exotic loan so you could close (barely) on a house way out of your reach and now you want everyone else to feel sorry for you? Jerry Wayne wrote on March 07, 2008 11:13 AM: Does anybody know if the FHA streamlined refinance is only for primary residences? This raise in the limit should only apply to first time home buyers, purchase of a primary residence, or the refinance of a primary residence. Big Money in Non-Profit wrote on March 07, 2008 09:55 AM: "$180 million for HUD's nonprofit partner NeighborWorks." That's a lot to tell somewhat what they should know: how much money they make and what the monthly payment will be for mortgage. DUH. Where do I sigh up to be a "counselor"? What? wrote on March 07, 2008 08:19 AM: Our solution to the housing problem is to increase FHA limits so that people can buy or re-fi $400k homes when they can't afford to pay for $200K homes? bt wrote on March 07, 2008 07:17 AM: Common Sense, If being an idiot was illegal you and most all of us would already be in jail. Just what is your solution to this temporary problem anyway? Not all of these 'idiots' as you have proclaimed are not flippers. Some of us are hard working people with good credit and lost our income due to 'corporate downsizing', or a catastrophic tragedy - our only child suffereing from cancer - or death of a spouse who was the bread winner. And some of us who actually knew better at the time DID NOT refinance!! What category do you put us in? Just at what percent of this problem can you actually blame on the speculators and flippers? Get real Common Sense! Common Sense wrote on March 07, 2008 05:48 AM: I hope everyone sees this for what it is: a back-door bailout of real estate speculators. By "raising the limits" on FHA loans, they're making ALL such loans more expensive. Anyone buying a house from now on will be paying money to cover the greedy flippers who got caught in the market correction. That's right -- they're not "victims" of a credit crunch, or predatory lending. They're simply idiots who paid any price for a house, hoping to find a bigger idiot later who would pay them more. They got stuck, and now they're claiming "victim" status because it doesn't cost them anything, and it might help them. And it has, thanks to the socialists in government. Now the idiots can re-fi their $400K homes, while the rest of us pay for it in higher interest rates and fees.