Lowering the Federal Housing Administration’s current loan limits will not prevent the agency from helping to provide home financing to first-time and low- to moderate-income borrowers, according to a study just released by George Washington University.
The report finds that the Obama administration’s proposal to reduce the higher end of the FHA’s loan limits would have little impact on the FHA’s market share and larger changes are needed as the FHA phases out as the lender of last resort, a role it was forced to assume during the credit crunch of recent years, according to the George Washington University School of Business.
“FHA’s expansion played a major role in keeping the housing market afloat during the economic collapse of 2008 and 2009,” said Robert Van Order, co-author of the report, in a prepared statement. “However, we now are left with large loan limits that were set when home prices were at the top of the bubble. They don’t reflect current market conditions and are unlikely to assist the FHA in reaching its historical constituencies — first time, minority and low income homebuyers.”