WASHINGTON — In 1961, Jack Kemp, then quarterback of the San Diego Chargers and now secretary of Housing and Urban Development, bought his first home with a mortgage insured by the Federal Housing Administration.
Today, however, Kemp would be unable to buy that same starter home with an FHA-backed mortgage. The FHA's mortgage maximum loan amount has not kept pace with the median price of housing, which has soared in expensive markets such as Southern California.
Although the FHA ceiling was raised recently to $124,875, which will allow FHA to write substantially more mortgages in high-cost areas, it will still be far below the median cost in cities such as Los Angeles and San Francisco, and in San Diego, where the median price of a house is $175,600.
Affordable housing has become the newest chicken-in-every-pot issue, and there is considerable support for raising the ceiling again and allowing it to float with the median value in each city.
What seems most popular and most likely to make it into the National Affordable Housing Act is a bill sponsored by Sens. Alan Cranston (D-Calif.) and Alphonse D'Amato (R-N.Y.), which would set a new ceiling at 95% of the median value of housing within a particular metropolitan area. The ceiling could not exceed 90% of the state median.
Prices are so high in some markets, Cranston argued before the Senate voted to increase the limit last September, that the FHA was "simply knocked out of the market."
Interestingly, there is no historical precedent for keeping the FHA limit below the median value of housing in any particular area.
In fact, in the mid-1960s the loan limit was 70% above the median sales price of existing homes, providing FHA coverage for all but the most expensive homes. It wasn't until the mid-1980s that the ceiling dropped below the median. Even at 95%, the program will still be restricted to housing in the lower half.
All the players are taking sides on the issues of whether to raise the ceiling once more.
The realtors, home builders and mortgage bankers, backed by Cranston and other congressmen, lined up against the private mortgage insurance industry and the savings and loans, which are backed by Sens. Don Nickles (R-Okla.) and Jesse Helms (R-N.C.), who fought even the new $124,875-ceiling, calling it a "fat-cat provision."
Some consumer advocacy groups also have voiced concerns that raising the limit could contribute to the national housing affordability problem.
