Washington, DC – U.S. Senator Barbara Boxer (D-CA) today sent a letter to Federal Housing Administration (FHA) Commissioner Brian Montgomery, urging him to reconsider his recommendation that Congress reduce FHA loan limits from $729,750 to $550,000.  Boxer pointed out that the lower loan limits would reduce access to affordable loans to residents of 99 high cost counties across 18 states and the District of Columbia, including 23 counties in California alone.

The text of the letter follows:

June 12, 2008

The Honorable Brian Montgomery

Commissioner

Federal Housing Administration

Department of Housing and Urban Development
451 7th Street, S.W.
Washington, DC 20410

Dear Commissioner Montgomery:

I was very concerned to hear of your recommendation of June 9th that legislation currently pending before Congress reduce the loan limit for the Federal Housing Administration (FHA) from its current level of $729,750 down to $550,000.  The higher loan limits have been an essential part of providing relief and a path to recovery for some of the areas hardest hit by the foreclosure crisis, and I urge you to reconsider your position.

In your own remarks, you noted the importance of making FHA “relevant in all markets,” including “high-priced markets like Nevada, California, New York, Washington, D.C., and Florida.”  However, while setting the FHA loan limit at $550,000 would be an improvement over the previous limit, it still would limit access to affordable mortgages for many struggling homeowners in 99 high cost counties across 18 states and the District of Columbia able to participate in the program under the current limits.

While it may seem that the number of counties able to access the higher limits is small, it is important to remember that almost 61 million Americans live in these areas.  In California, 14 of the 23 counties where the FHA loan limit exceeds $550,000 have qualified for the current maximum loan limit of $729,750.  These 14 counties alone have a population of 21 million people – greater than the population of every other state except for Texas. 

As you know, no single issue is affecting California’s economy more than that of fair access to housing capital.  Imposing a lower loan limit would greatly impact these economies by restricting the availability of credit, the availability of affordable home loans, and the availability of assistance to the middle income families in these communities who are struggling to stay in their homes.  I am concerned that without access to FHA assistance to secure more affordable loans, borrowers in high cost areas may be forced back into the nontraditional and frequently abusive loans that got us into the current mess in the first place. 

Again, I urge you to reconsider your position.

                                                   Sincerely,

                                                   Barbara Boxer

                                                   United States Senator

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