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A recent announcement from the Federal Housing Administration may signal that the housing market is recovering from the 2008 economic downswing. The government agency plans to make major changes to their loan offerings in the hopes of returning order to their own balance sheets.

The FHA is known for insyring mortgages that require a low down payment. During the height of the housing crisis, the FHA increased the upper limit of the loan amount that they were willing to insure. By doing so, the agency propped up the housing market during one of the nation’s most difficult financial crises. This week, that limit will be decreased from $729,750 to $625,500. However, in parts of the country where home prices are still very low, the FHA will maintain their high mortgage limit to continue to stimulate those markets. The agency hopes to refocus its efforts on less wealthy homebuyers.

The FHA has lost a lot of money during the housing crisis. When the agency increased their mortgage limit they also increased their activity. As a result the program also suffered from significant financial losses from mortgage defaults. In late September, the agency requested $1.7 billion to stay afloat. In addition, loan premiums have also been increased to raise revenue.

Because a house is often the largest investment a person makes, it is mortgage payments that many times are the source of financial stress. For Kansas homeowners now facing foreclosure, there may be another option. In some cases bankruptcy may be able to stop foreclosure. Chapter 13 bankruptcy may be able to provide a fresh financial start. A bankruptcy attorney can evaluate your case to determine your legal options.

Source:, “FHA to pull back on big mortgage,” Gregory Wallace, December , 2013.