Washington, DC, Sept. 19, 2007 — Senator Johnson joined his colleagues on the Senate Committee on Banking, Housing and Urban Affairs to markup three pieces of legislation, including the FHA Modernization Act of 2007. All three pieces of legislation work to ensure that Americans have continued access to stable housing.
“South Dakota, fortunately, is not feeling a direct hit from the current housing crisis. However, there are concerns that the turmoil in the subprime mortgage markets will have repercussions on our national economy. There are thousands of families trying to avoid foreclosure. There are also investors of all stripes that, knowingly or unknowingly, that have been affected by the tightening of credit and falling stock prices and have seen their pension plan, 401(k), or mutual funds facing difficulties,” Johnson said. “While problems in the market certainly will not be ironed out overnight, the Banking Committee’s passage of the FHA Modernization Act of 2007 is one step in the right direction.”
Federal Housing Administration (FHA) Modernization Act –The bill would:
- Increase the FHA loan limit to 100% of the median home price or the GSE conforming loan limit, whichever is lower;
- Lower the down payment amount from 3% to 1.5% and caps a loan at 100% of the appraised value of the home;
- Set one national loan limit equal to the GSE conforming loan limit (currently $417,000) and lowers the origination fee from 2% to 1.5%, a cut of 25% for Home Equity Conversion Mortgages (HECMs) — reverse mortgages that are utilized by seniors The bill does not establish a cap on the number of reverse mortgages;
- Include manufactured housing and condominium units and allow manufactured units to be financed even though they are not taxed as real property;
- Increase the cap on the value of energy efficient improvements that can be made to up to $8,000.
“Again, South Dakota seems to have ducked this blow to the housing market, but the ripple effect across the economy is cause for concern. It is the Committee’s hope that this change to FHA loans will help cushion the blow and help with the long-term recovery of the housing market. I look forward to continued work on the Committee to find other solutions to the current problem,” Johnson concluded.
