Exciting news in the world of FHA lending today as a hearing is being at the House Financial Services Committee to discuss the Expanding Homeownership Act of 2007.  This of course comes in the wake of the recent subprime fallout and grim forecasts for foreclosures across the country, and is a caveat of the bill that passed through the House last year that was designed to “modernize” the FHA lending program.

The amended 2007 version of the Act includes language that would raise the limits on FHA loans in high cost areas such as California and New York, as well as installing numerous protective measures to insure stability for those that use no downpayment FHA options.  The past decade or so has seen a real drop in the number of FHA mortgages that have been originated because of rising costs of real estate and the 3% downpayment requirement, and these are in direct response to that.

Many low to middle-income families will benefit from the re-introduction of FHA loans to the market.  Smarter financial decisions will still need to made between consumer and lender, but it does look like the market and the legislators have learned from their mistakes over the past few years.

FHA refinances are also likely to become a hot commodity with the passing of the Act as many homeowners stuck in adjustable rate mortgages (ARMs) or similar situationst that have left them with higher monthly mortgage payments than they can afford will be transferred into longer-term loans through the FHA.