HUD Sets FHA Loan Limits


The U.S. Department of Housing and Urban Development (HUD), which sets Federal Housing Administration (FHA) single-family loan limits, has reduced the national-ceiling loan limit for ‘high cost’ areas from $729,750 to $625,500, effective Jan. 1.

The change affects 650 areas deemed ‘high cost.’ Meanwhile, the standard FHA loan limit for areas considered ‘low cost’ would remain at the current $271,050.

‘As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play,’ Carol Galante, commissioner of the FHA, says in a mortgagee letter detailing the agency's new loan limits, released late Friday. ‘Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still underserved.’

FHA loan limits are calculated according to a formula prescribed by the Housing and Economic Recovery Act (HERA), based on median home prices.

Borrowers with existing FHA-insured mortgages can continue to use FHA's Streamline refinance program regardless of their loan balance.

The higher loan limits have been in place for six years and were established by the Economic Stimulus Act of 2008 to ensure that mortgage credit was widely available during a time when private lending options were severely constrained.

The lower loan limits under HERA were originally scheduled to take effect in January 2009; however, due to continuing strains in credit markets, Congress delayed implementation several times, HUD's mortgagee letter notes.

The mortgage loan limits for FHA-insured reverse mortgages will remain unchanged. The FHA's Home Equity Conversion Mortgage program will continue to have a maximum claim amount of $625,500, with actual loan limits based on property value, borrower age and current interest rates.

The setting of the new loan limits marks the first time calculations authorized by HERA will be fully implemented.

Last month, the Federal Housing Finance Administration announced that the maximum conforming loan limits for mortgages acquired or guaranteed by government-sponsored enterprises Fannie Mae and Freddie Mac would remain at $417,000 for single-unit properties. In addition, the special maximum loan limit for ‘higher-cost’ areas of the country would remain at $625,000, the agency announced.

To view HUD's mortgagee letter and list of county loan limits, click here.

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