FHA Lowers Loan Limits for 650 High Cost Areas

The Department of Housing and UrbanrnDevelopment (HUD) announced late Friday that the maximum loan eligible for a FederalrnHousing Administration (FHA) guarantee will be reduced from 2013 levels in arnnumber of areas of the country starting January 1.  While the standard FHA loan limit for areas consideredrnto have low housing costs will remain at the current $271,050 level, 650 of thernareas deemed higher cost will have their maximum loan sizes reduced.  </p

FHA loan limits are calculated accordingrnto a formula prescribed by the Housing and Economic Recovery Act (HERA) basedrnon median home prices.  Most of thernlimits apply on a county by county basis. rnThe new maximum loan limit for high-cost areas will drop on January 1rnfrom $729,750 to $625,500.  Loan limitsrnthat fall between the standard limit and the high-cost limit will also bernaffected.</p

“Asrnthe housing market continues its recovery, it is important for FHA to evaluaternthe role we need to play,” said FHA Commissioner Carol Galante. “Implementingrnlower loan limits is an important and appropriate step as private capitalrnreturns to portions of the market and enables FHA to concentrate on thosernborrowers that are still underserved.”</p

This will be the first time calculationsrnauthorized by HERA will be fully implemented. rnThe higher limits that have been in place for the last six years werernauthorized by the Economic Stimulus Act of 2008 as an emergency measure.  Congress had extended the higher limits inrnsubsequent years.    </p

Eighty-one areas are at the new upperrnlimit and four, all in Hawaii, have dispensation to exceed the limit with loansrnin Urban Honolulu limited at $721,050. rnEleven of the highest cost areas are in California with most of thernremainder in the greater New York/New Jersey area or in counties in Marylandrnand Virginia surrounding the nation’s capital. rnThere are also a smattering of counties with limits at the $625,500rnlevel in Idaho, Wyoming, Colorado, and North Carolina, mostly in popularrnoutdoor recreation areas.  </p

The mortgage loan limits forrnFHA-insured Home Equity Conversion Mortgages (HECM) popularly known as reversernmortgages will remain unchanged at a maximum of $625,500 however actual loanrnlimits will be calculated on an individual basis in accordance with thernproperty value, the borrower’s age, and current interest rates. Borrowers withrnexisting FHA insured mortgages may continue to utilize FHA’s Streamlinernrefinance program regardless of their loan balance. rn</p

The Federal Housing Finance Agencyrnannounced on November 26 that limits for loans eligible for purchase orrnguarantee by Freddie Mac or Fannie Mae would remain at 2013 limits forrn2014.  The standard limit is $417,000;rnlimits in high cost areas range up to $625,000.

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