Earlier this year, congress enacted the Economic Stimulus Act of 2008, in an effort by the Bush Administration to stimulate business investment and attempt to avert impending crisis and recession. It goes without saying that their efforts have been rewarded with little in the way of success. What you're likely to remember about the act is that you received a $300-$600 rebate check after filing your taxes this year, but what you may not know is that the act also affected the ceiling for FHA loans.

As of March 6, 2008, $362,790 is not the limit for FHA loans. This means that the FHA can now insure loans above that cost. It was all part of the economic stimulus package, in which congress authorized the Federal Housing Administration (FHA) to increase their maximum loan limits to between $271,050 and $729,750, depending on size and location. For instance, the FHA can now insure mortgages on single-family homes in Denver as high as $406,250, and the loan limits for the most populous areas, and the areas with the highest costs of living such as New York City and Los Angeles have increased to $729,750.

Due to rising availability of private mortgage insurance and other options increased early this decade, FHA loans had lost much of their popularity, but the past several months have seen a resurgence for FHA loans. With various sub-prime banks and lenders recently teetering on the brink of default, banks have shown increasing hesitance to offer 100% mortgage loans, and the FHA loan has become a fairly common alternative for consumers who otherwise may be unable to receive financing for new homes.

The FHA was created as part of the National Housing Act of 1934 (shortly after the New Deal created the Securities and Exchange Commission), as a reaction to the failing banking system in the 1930's, in order to counteract the vast decline in homeownership during the great depression. It's not particularly surprising then that consumers are returning to the FHA for assistance now, as we enter what seems to be considered for the most part the greatest economic threat the U.S. has faced in almost eighty years.

It's quite important to make the distinction that the Federal Housing Administration cannot in fact originate loans, but rather just insures lenders against loss, in the event that a borrower fails to meet the terms of their loan. seeing as that's the case, all FHA loans are not equal. Lenders offer a variety of terms and incentives, and for that reason consumers should consider consulting with a Certified Mortgage Planner (not the same as a broker) for help comparing offers from the FHA lenders who will make such a loan.

Seeing as the latest polls are showing continuous increase in pessimism regarding the economy, and decrease in consumer confidence, it isn't a surprise that we're looking again to some of the same institutions that helped us during the Great Depression. No one knowns for sure what will happen over the next several years, but at least the American people can take comfort in something this time that we couldn't last time: we've seen it all before.