[Congressional Record Volume 140, Number 103 (Monday, August 1, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 1, 1994]


 
                        RAISING FHA LOAN LIMITS

  Mr. INOUYE. Mr. President, the U.S. Senate will shortly consider H.R. 
4624, the VA, HUD, and independent agencies appropriations bill, and S. 
2281, the Housing Choice and Community Investment Act. During 
consideration of these measures, I understand, attempts will be made to 
raise the Federal Housing Administration's (FHA) loan limits to 
$101,575 nationally and to $172,678 in high costs areas.
  I commend the sponsors of S. 2281 and H.R. 4624 for their efforts to 
expand the FHA mortgage loan limits. However, the expansion does not go 
far enough. I would like to inform my colleagues of Hawaii's situation 
and why the FHA program is not readily accessible to potential home 
buyers residing in my State. I was hoping to seek some relief in the 
form of an amendment to S. 2281 or H.R. 4624. However, it appears that 
the climate is not right.
  For the record, I have and will continue to support loan limit 
increases for the FHA program. In Honolulu, HI, where the median sales 
price of a single family home is over $350,000, the availability of FHA 
loans is extremely limited. A higher loan limit, in my view, would 
eliminate large gaps which exists between the median home price and the 
FHA loan limit.
  Opponents will argue that there is greater risk of default and 
foreclosure should the FHA mortgage loan ceiling amount be increased. 
Although Hawaii is considered one of the highest priced areas for 
single family homes, we have one of the lowest default and foreclosure 
rates in the Nation. Consequently, I believe raising the loan limit 
will help strengthen the FHA portfolio, and provide better 
accessibility to the program by residents of my State.
  It is extremely unfortunate that the FHA insured loan product in 
Hawaii is not meeting the needs of the individuals it was designed to 
help. The mortgage limits imposed by the FHA have limited the number of 
single family homes that can be insured and the down payment 
requirements under FHA guidelines effectively eliminate borrowers who 
can clearly make the monthly mortgage payment. Many individuals are 
paying rent in an amount that is equal to or above what their mortgage 
payments would be, but do not have the ability to accumulate the 
required down payment. Due to the high cost of housing in Hawaii, FHA 
borrowers must make a significant cash contribution to the transaction. 
This is a hardship not endured in other parts of the country.
  In 1992, under the Housing and Community Development Act of 1992, 
Public Law 102-550, the Congress amended the National Housing Act to 
increase the down payment requirements on the FHA program. Currently, 
the down payment requirements are 3 percent on the first $25,000 of the 
mortgage loan amount; 5 percent on the amount between $25,000 and 
$125,000; and 10 percent on amounts about $125,000. Unfortunately, the 
10 percent down payment requirement excludes many of Hawaii's potential 
home buyers from acquiring affordable housing.
  The provisions under the Housing Choice and Community Investment Act 
of 1994 which grants the Secretary of the Department of Housing and 
Urban Development to enter into risk-sharing arrangements with State 
and local agencies to insure single family mortgage on properties 
located in high cost areas will help Hawaii to address the higher loan 
limit requirements. However, it does nothing to provide relief towards 
the down payment requirements.
  I urge my colleagues on the Senate Banking Committee to review 
Hawaii's problem with the down payment requirements so that potential 
home buyers will have better accessibility to the FHA program.

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