U.S. Congress is expected to allow FHA loan limits to drop starting on October 1, 2011.
When those FHA loan limits are dropped, the government lending system will revert to 2008 levels and injure the struggling real estate industry.
Current loan limits expire on September 30 and will drop from 125 percent of the area median home sold price (and a top limit of $729,750 at Orange County, CA) to 115 percent of area home price and a top limit of $625,500. 
This drop of loan limits will hurt real estate, and leaders are looking for another opportunity to get them back up.
It's been incorrectly reported that current loan limits are helping only higher-cost housing. Truth is that this drop in limits will be hard on middle-class buyers and sellers, because maximum conforming loan limits will drop in markets throughout the country (at all price points in almost 650 markets in 42 states).
Government should do no harm to the ailing housing markets. We need to replace current housing financing system, which is anchored by Fannie Mae and Freddie Mac.
I like the Congressman John Campbell "Housing Finance Reform Bill (H.R. 1859)", which should be moved forward.
In the meantime, government should do no harm to current system and allow FHA loan limits to stand.
The limits on "conforming loans" (loans guaranteed by U.S. government agencies) are scheduled to drop on October 1st, which means that houses priced as low as $250,000 will no longer be eligible for FHA loans (FHA is now financing 22% of all home loans in the U.S.)
When these loan limits drop on October 1, people selling their houses should expect that prospective buyers will have fewer financing options, need more down payment, better credit, or accept higher payments on a shorter-term and variable rate loan. Fewer people will be able to buy houses, and buyers will need more out of pocket money.
Congress should restore FHA loan limits, encourage consumer confidence, stability of the banking system, and get a better system of housing finance established to protect home owners and taxpayers.
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Harrison K. Long - solutions for real estate and business - REALTOR® and broker associate, GRI - Coldwell Banker Residential Brokerage - 949-854-7747 (phone) - ExploreProperties@gmail.com (email) - CA DRE 01410855 - SFR short sale and foreclosure resource certified by the National Association of REALTORs® - also now serving as an appointed director at the California Association of REALTORs®.
Sources of information are the National Association of REALTORS® and John Campbell, U.S. Congressman from Orange County, CA.
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