Real Estate Loans, Limits and Legislation

H. R. 2112 passed both houses of congress and was signed by the president on November 18th. This bill restores the FHA loan limits that were increased as part of the Housing and Economic Recovery Act of 2008. These limits expired on September 30, 2011 and reverted to pre-2008 levels.

H. R. 2122 became effective on the date it was signed (FHA loans with case numbers ordered between October 1st and November 17th are stuck at the lower amounts). The base limit remains at $271,050, but can be increased to $729,750 in high cost areas. This loan limit authority extends until December 31, 2013.

Unfortunately this legislation did not restore the higher limits for Fannie Mae and Freddie Mac. The base loan limit remains at $417,000 but the limit for high cost areas, except for four counties in Hawaii, was reduced to $625,500. This means that in many parts of the country, it is possible to get a bigger FHA loan than a Fannie Mae loan.

The roller coaster ride for VA funding fees appears to be over. The funding fee for a no down payment loan for a Veteran's first use had been 2.15% of the loan. The Veterans Health Facilities Capital Improvement Act of 2011 reduced this fee to 1.4% effective on October 1st, 2011.  H. R. 2646 restored the 2.15% funding fee effective on October 6th. This was rescinded on November 18th, so the funding decreased to 1.4%. H. R. 674, which was just signed on November 21st, restores the fee to 2.15%.

To summarize, the funding fee was 2.15% until September 30th, 2011. It was 1.4% between October 1st and October 5th, 2.15% between October 6th and November 17th, 1.4% between November 18th and November 20th, and as of November 21st it's 2.15%. Unless there is more tinkering, the 2.15% fee is set until September 30th, 2016.  

Because funding fees are based on closing date (unlike FHA where MIP is based on assignment date), it was almost impossible for lenders to comply with the three day disclosure requiement  under the Truth in Lending laws for VA loans closed October or November. It is interesting that congress could vote a tax increase for veterans without so much as a peep. Yes, they really do support our troops.

Guest Author Randy Kelly is a Mortgage Banker and Finance Author with Peoples Mortgage. You can find all of his posts online at

Written and Published by: VanEd

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