04/02/2008 GAAS:155:08 FOR IMMEDIATE RELEASE Print Version | Email / Share
Gov. Schwarzenegger Continues Push for Congressional Leaders to Permanently Raise Federal Home Loan Limits
Governor Arnold Schwarzenegger today sent a letter to key Congressional leaders urging the permanent increase of federal loan limits, which can help reduce home foreclosures and give more Californians the opportunity to experience homeownership. A Conference Committee comprised of members of the Senate Committee on Banking, Housing and Urban Affairs and House Committee on Financial Services continues to negotiate a final conference report on the Federal Housing Administration Modernization Act.
To help those hit hard by the mortgage crisis, the Governor has:
- Led efforts urging Congress and the Bush Administration to raise federal loan limits. Last fall, the Governor sent a letter calling on Congress to increase those limits and sent a similar letter again earlier this year. After Congress and the President approved a temporary increase, the Governor asked them to make the increase permanent. In February, the Governor met with U.S. Department of Housing and Urban Development Secretary Alphonso Jackson in Washington D.C. to reiterate the importance of a permanent loan limit increase.
- Announced $69.5 million in permanent low-interest loans from the Proposition 1C housing bonds to jumpstart 14 affordable multi-family projects up and down the state, helping more than 1,000 California families and individuals realize the dream of an affordable rental home.
- Announced more than $72 million in federal HOME Investment Partnerships Program funds to provide assistance to first-time homebuyers, reduce the number of bank owned homes and increase the number of rental properties.
- Joined the OneCalifornia Foundation to announce a bridge loan fund for homeowners facing foreclosure in Oakland.
- Launched a $1.2 million public awareness campaign to help educate homeowners about options that can help them avoid losing their homes to foreclosures.
- Announced an agreement with major loan servicers to streamline the loan modification process for subprime borrowers living in their homes.
- Signed legislation to increase protections for Californians who own or plan to purchase homes and to expand affordable housing opportunities.
- Issued new regulations to protect borrowers, which requires lenders to consider a borrower’s ability to repay at the higher reset interest rate and mandates closer scrutiny of risk features such as interest only payments, reduced documentation and simultaneous second liens.
- Established the Interdepartmental Task Force on Non-traditional Mortgages to ensure a comprehensive and coordinated approach to the issues raised by subprime loans.
Text of the letter to Senate Banking Committee leaders follows. A similar letter was sent to House Committee on Financial Services leaders.
April 2, 2008
The Honorable Christopher J.
Dodd
Chairman
Committee on Banking, Housing and Urban
Affairs
United
States Senate
Washington, DC 20510
The Honorable Richard C.
Shelby
Ranking Member
Committee on Banking, Housing and Urban
Affairs
United
States Senate
Washington, DC 20510
Dear Chairman Dodd and Senator Shelby,
In Los Angeles, home to millions of Americans and one of the largest cities in the United States, the average home costs more than $589,000. Many homes selling for more than $730,000 last year featured fewer than three bedrooms and about 1,300 square feet. These are modest homes, purchased by middle-class, hardworking Californian families – at prices far higher than their equivalents across the nation. That is why I am offering my thanks for your leadership in temporarily raising the loan limits eligible for Federal Housing Administration (FHA) insurance in the economic stimulus package recently enacted.
I urge you to make this increase from $362,790 to $729,750 permanent so that FHA can re-establish itself as an integral part of California’s mortgage market. The huge disparity in housing costs across the nation made FHA virtually irrelevant in California until the loan limits were temporarily raised. Now, 47 of California’s 58 counties qualify for loans, and 14 qualify for the new FHA maximum loan limit of $729,750. More than 21 million people, the majority of California’s entire population, live in these 14 counties alone – a number greater than the entire population of nearly every other individual state in the nation.
These worthy, yet temporary, FHA programs will have a dramatic impact in California this year by helping families find sound financing for homes that they may not otherwise be able to buy. However, FHA will slip back into relative obscurity in California on January 1, 2009, if the loan limits are not permanently increased, along with the limits for Fannie Mae and Freddie Mac.
In just the short time since the loan limit was temporarily increased, there has been a dramatic surge in activity in FHA programs that were previously out of reach for most Californians. FHA Secure, FHA’s high loan-to-value programs and its attention to borrowers with imperfect credit are all welcome additions to California’s above-$362,790 marketplace. Also, the availability of FHA’s 203(k) rehab program in this price range will be a tremendous help in reintroducing distressed Real Estate Owned (REO) properties back into the hands of California families.
Under the prior loan limits, FHA saw its California loan volume decline by a staggering 98 percent from FY 2001 to FY 2006, dropping to a mere 2,599 loans written in the entire state. This represented a loss of $13.6 billion in much-needed mortgage liquidity for California homebuyers, helping to fuel demand for non-traditional loan products.
This is a difficult time for potential and existing homeowners here and across the country, and I appreciate what you have done thus far. These temporary loan limit increases have already done some good for California’s working-class families. Permanent increases stand to do much more.
Sincerely,
Arnold Schwarzenegger
