Lawmakers vote to restore higher FHA loan limits

U.S. lawmakers moved to increase the maximum size of loans that can be guaranteed by the Federal Housing Administration, the Wall Street Journal reported.

A spending bill passed by Congress increases to $729,750 the maximum size of a mortgage that can be backed by the FHA, which guarantees loans to buyers with down payments as low as 3.5 percent.

Some Republicans in the House and Senate were upset by the move, arguing that it contradicts a goal of both parties to reduce the U.S. government’s role in propping up the housing market.

“I am just absolutely so discouraged at Congress in lacking the courage to deal with this issue,” said Sen. Bob Corker (R., Tenn.).

An earlier version of the legislation in the Senate would have increased loan limits for mortgage finance companies Fannie Mae and Freddie Mac as well, but that was stripped out due to opposition from House Republicans.

The loan limit fell to $625,500 on October 1 in expensive markets like New York, San Francisco and Washington. They declined in around 250 counties for Fannie and Freddie, and around 600 counties saw FHA limits drop. In some cases, the FHA loan limits fell below those of Fannie and Freddie.