FHA to pull back on big mortgages

CNN reports:

The Federal Housing Administration has announced plans to reduce its stake in the market, an indication it sees some signs of strength in real estate.

The agency, which insures low down-payment mortgages, is reducing the upper limits of what it will backstop in areas where home prices are high. Starting in the new year, the biggest cap in these areas will drop to $625,500 from $729,750. Limits will be set lower in about 650 counties as a result, the agency said.

The FHA will maintain current limits in areas where home prices are lower and said the move will allow it to refocus on less wealthy homebuyers.

Imagine a world without the FHA. Imagine a world with lower home prices and greater equity.