By Congressman Brad Sherman
In November Congress approved a provision that I have long championed that will help protect home values in the Valley and help our nation’s lagging economy. This new provision will raise the cap on FHA mortgages to $729,750 until December 31, 2013. That means that anyone trying to buy, sell, or refinance a home in the Valley of up to $729,750 will be eligible for an FHAinsured mortgage, which offers borrowers a much lower down payment, and a much lower interest rate. It also increases the likelihood that someone buying a home will get approved for a loan, and that those trying to sell their home will find an eligible buyer. This is especially true in high cost areas like the Valley. Without this FHA provision we would have seen another sudden decline in home prices, severely harming the Valley economy. In addition to keeping interests rates low, this provision also supports home values throughout the region and boosts the Valley economy.
All Valley residents will benefit by the simple fact that home owners in the region will have hundreds more dollars available each month to spend and reinvigorate the economy. Conversely, if home owners are otherwise saddled with high interest rates and deflated home values, everyone loses – no one would be spending any money, and the only local restaurant families could afford would have golden arches in the front. Most people are deeply invested in the value of their home, including senior citizens whose equity in their homes is critical to retirement plans. People who are invested in the housing market know that deflated home prices can have a domino effect. When one home in the neighborhood sells for less than it was bought, it can hurt the resale value of every other home nearby..
These increased loan limits are our best defense against another housing collapse in America’s ten biggest cities. Best of all, the loan limit extensions do not add to the deficit, nor do they require a dime of additional spending by the federal government. The FHA operates entirely from its self-generated income and costs the taxpayers nothing. I hope to make these limits permanent before the extension expires in 2013. Additionally, I have cosponsored the HOME Act which allows those with mortgages owned or guaranteed by Fannie Mae and Freddie Mac to refinance – even if they owe more than their home is currently worth. Mortgage rates are at historic lows and many homeowners want to refinance to reduce their monthly payments by hundreds or even thousands of dollars. But many homeowners do not have the 20 percent equity required to refinance, and some owe more than the current value of their home. This provision will help create jobs in the San Fernando Valley. Homeowners who save hundreds of dollars each month are good customers for local Valley businesses. Furthermore, it does not expose the federal government to additional risk because these mortgages are already guaranteed or owned by Fannie Mae or Freddie Mac. That is why I will continue to work with my colleagues and do everything in my power to permanently extend the FHA loan limit, and see that the HOME Act becomes law. We can’t afford another housing crisis.