The Federal Housing Administration (FHA) will implement new single-family loan limits as specified by the Housing and Economic Recovery Act of 2008 (HERA) as of Oct. 1, 2011. According to Mortgagee Letter 11-29, FHA will reduce loan limits in the highest cost metropolitan areas of the country, while limits would remain unchanged in most other parts of the nation.
These new loan limits were scheduled to take effect in January of 2009, but continuing strains in credit markets led the Congress to delay implementation. The result has been nearly three years of higher loan limits for some areas based on the Economic Stimulus Act of 2008 (ESA).
Barring any new action by the Congress, many affected areas will have lower FHA loan limits come Oct. 1. The current standard (floor) loan limit for areas where housing costs are relatively low will remain unchanged at $271,050 for one-unit properties. The new “ceiling” loan limit for higher cost areas will be reduced from $729,750 to $625,500 for one-unit properties. FHA loan limits vary based on area median home price, but all will fall within the range of $271,050 and $625,500 for one-unit properties. Additional information and loan limits for two-, three- and four-unit properties are noted in FHA’s Mortgagee Letter 11-29. As in previous years, Alaska, Hawaii, Guam, and the Virgin Islands may have higher loan limits.
FHA estimates that only a fraction of borrowers living in the nation’s highest cost areas will be impacted by the new loan limits announced today. For example, last year only three percent of FHA-insured borrowers lived in these high-cost areas. The change in FHA loan limits will affect 669 counties across the country, out of a total of 3,234 jurisdictions in which FHA insures home loans. Most loan applications with an FHA case number assigned on or after October 1, 2011, will be subject to the new limits. However, there are some exceptions for FHA-insured to FHA-insured refinances that are noted in HUD’s Mortgagee Letter. In addition, there are exceptions for loans that were issued case numbers on or before Sept. 30, 2011 and meet all of the credit approval criteria detailed in Mortgagee Letter 2011-29.
The mortgage loan limit and maximum claim amount for FHA-insured reverse mortgages will remain unchanged. FHA's Home Equity Conversion Mortgage (HECM) will continue to have a maximum claim amount of $625,500.