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Should the federal government back luxury mortgages?

Posted by Scott Van Voorhis July 6, 2011 06:00 AM

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No says a provocative new study out of George Washington University.

The Federal Housing Administration was formed to help first-time and low-to-moderate income buyers get mortgages.

But it now finds itself backing mortgages up to nearly $730,000 in some of the nation's costliest housing markets, the report notes.

It is a change that came about in the wake of the 2008 financial crisis - as recently as 2006 the FHA wouldn't back any mortgages above $362,790, the GWU study finds.

But with housing prices having been in free fall for the past few years, those higher limits now appear to be helping the comfortably well off move into their dream homes, or at least one could argue that after looking at the study.

The FHA could cut its loan limits in half - down to a top range of $363,000 - and still easily reach its core market of low and moderate income buyers, the GWU study recommends.

Instead, the current FHA loan limits appear to be propping up bubble era prices and are out of step with the downshifting real estate market.

This blog is not written or edited by or the Boston Globe.
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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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