Congress overcame Republican opposition to restore higher Federal Housing Administration mortgage loan limits last night, according to the Wall Street Journal, after the limit was lowered to pre-recession levels Oct. 1. The Senate and House each voted to pass the bill Thursday, even though Republicans have insisted that the government reduce its role in the housing market. Ceding to those wishes, the higher limits only apply to FHA-backed loans, and not those originated by federally owned Freddie Mac and Fannie Mae.

The FHA will once again allow buyers in expensive markets to take out loans of up to $729,750, while only requiring a down payment of 3.5 percent. [more]

As the Federal Housing Administration prepares to release its annual financial report next week, there’s growing concern that the agency could run out of money and seek a taxpayer bailout for the first time ever.

The Wall Street Journal cited a report by University of Pennsylvania professor Joseph Gyourko that estimated the agency stands to lose $50 billion in the coming years because of the larger role it has taken in mortgage loan originations since the housing bust. Gyourko said the FHA is underestimating the potential impact of prolonged high unemployment and fallout from the homebuyer’s tax credit in its internal calculations. Comments

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The U.S. Department of Housing and Urban Development is immediately suspending Michael Primeau, former president of the defunct Melville, L.I.-based Lend America, from doing any business with HUD, after he admitted engaging in a wide-scale mortgage fraud scheme, according to HUD.

He pleaded guilty to charges he directed employees of Lend America, a former Federal Housing Administration-approved lender, to divert mortgage funds intended to pay off borrowers’ first mortgages at refinance closings in order to pay company operating expenses, a press release from HUD said. Primeau could not immediately be reached for comment. – Miranda Neubauer [more]

Bank of America should face fraud claims because its Countrywide unit submitted faulty data in claims for reimbursement of federally insured mortgages, according to an audit by the Department of Housing and Urban Development, Bloomberg News reported.

“Countrywide did not properly verify, analyze, or support borrowers’ employment and income, source of funds to close, liabilities and credit information,” a HUD regional inspector general wrote in the audit. “This noncompliance occurred because Countrywide’s underwriters did not exercise due diligence in underwriting the loans.” HUD runs the Federal Housing Administration, which insures mortgages on loans to borrowers who can’t find traditional financing, such as those with low income.  Comments

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Already on life support, the housing market endured another body blow this weekend when the cap on mortgages eligible for federal loans was reduced. Only loans of $625,500 or less, compared to the previous limit of $729,750 for the country’s most expensive markets, will be eligible for the lower down payments and interest rates promised by government loans. Those jumbo loans that exceed the limit will become more expensive.

Just 2 to 4 percent of the market will be impacted by the change, according to CNN, or about $30 billion of the $600 billion worth of loans Fannie Mae and Freddie Mac acquired in 2010. [more]

From the August issue: In order to complete real estate transactions in New York’s still-tough lending climate, some lawyers are turning to creative loopholes that have them operating in an ethical gray area, industry insiders say.
Boilerplate contracts — once the norm in residential transactions — have been scarce for several years now as lawyers come up with deals “tailored” to the specific needs of buyers and sellers. But some lawyers are now going even further to avoid strict lending rules, adding contract riders that are not submitted to banks. Other buyers and sellers simply make private side agreements that are not mentioned in any of the closing documents.
“People often do this as a way to encourage lenders to lend more money than they ordinarily would have,” said Aaron Shmulewitz, an attorney at Belkin Burden Wenig & Goldman who has represented more than 250 cooperative and condominium boards in New York. “It gets close to bank fraud sometimes.” [more]

Mortgage Bankers Association President David Stevens switched positions today, advocating for a continuation of higher federal loan limits for another year, CNBC reported.

Earlier this month, the federal government laid out plans to slowly pull out of the mortgage market, by lowering the maximum loan that Fannie Mae, Freddie Mac and the FHA can issue. During the downturn the limit was lifted to $729,750 so that residents of the country’s most expensive housing markets, including New York, could continue to obtain financing even as private lenders were skittish. The government plans on decreasing the maximum to $625,500 Oct. 1. [more]

How big a deal is the upcoming cutback in mortgage limits for Fannie Mae, Freddie Mac and the Federal
Housing Administration? Will buyers and sellers who depend on jumbo-sized loans find themselves in a
financing squeeze after Oct. 1, when the limits plunge in key markets around the country?
Housing and realty lobbies are pushing hard on Capitol Hill for a continuation of the $729,750 high-cost
area maximum, but one industry is delighted by the prospect and is gearing up to fill the gap.
From small community banks to megabanks, the message is the same: Bring on the switch to lower
limits. [more]

The federal government is planning its first pullback from the mortgage market since the downturn, lowering the maximum loan amount that Fannie Mae, Freddie Mac and federal agencies can back from its elevated level of $729,750, according to the Wall Street Journal. That maximum was set by Congress three years ago in an attempt to ensure that borrowers could continue to obtain loans in particularly expensive housing markets during the credit crunch. In October, that amount is set to decline by varying amounts depending on the market; in prime real estate locations, like New York, Los Angeles and Washington, D.C., the limit will decline to $625,500. [more]

Two New York-based appraisers accused of mortgage fraud settled with the U.S. Department of Housing and Urban Development for a total of $100,000 and agreed not to perform appraisals in sales involving Federal Housing Authority-insured loans for a number of years, the U.S. Attorney’s Office announced today.

James Goldberg, founder of JGG Real Estate Appraisal Services, and Robert Micheline, of P&M Appraisals, allegedly conspired to inflate the value of 11 New York area homes, so that flip sellers — Buy A Home and Mitchell Cohen were two such sellers named in the report — could unload the properties on “inexperienced homebuyers” for profit. – Adam Fusfeld [more]