The Department of Housing and Urban
Development (HUD) announced late Friday that the maximum loan eligible for a Federal
Housing Administration (FHA) guarantee will be reduced from 2013 levels in a
number of areas of the country starting January 1. While the standard FHA loan limit for areas considered
to have low housing costs will remain at the current $271,050 level, 650 of the
areas deemed higher cost will have their maximum loan sizes reduced.
FHA loan limits are calculated according
to a formula prescribed by the Housing and Economic Recovery Act (HERA) based
on median home prices. Most of the
limits apply on a county by county basis.
The new maximum loan limit for high-cost areas will drop on January 1
from $729,750 to $625,500. Loan limits
that fall between the standard limit and the high-cost limit will also be
the housing market continues its recovery, it is important for FHA to evaluate
the role we need to play," said FHA Commissioner Carol Galante. "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."
This will be the first time calculations
authorized by HERA will be fully implemented.
The higher limits that have been in place for the last six years were
authorized by the Economic Stimulus Act of 2008 as an emergency measure. Congress had extended the higher limits in
Eighty-one areas are at the new upper
limit and four, all in Hawaii, have dispensation to exceed the limit with loans
in Urban Honolulu limited at $721,050.
Eleven of the highest cost areas are in California with most of the
remainder in the greater New York/New Jersey area or in counties in Maryland
and Virginia surrounding the nation's capital.
There are also a smattering of counties with limits at the $625,500
level in Idaho, Wyoming, Colorado, and North Carolina, mostly in popular
outdoor recreation areas.
The mortgage loan limits for
FHA-insured Home Equity Conversion Mortgages (HECM) popularly known as reverse
mortgages will remain unchanged at a maximum of $625,500 however actual loan
limits will be calculated on an individual basis in accordance with the
property value, the borrower's age, and current interest rates. Borrowers with
existing FHA insured mortgages may continue to utilize FHA's Streamline
refinance program regardless of their loan balance.
The Federal Housing Finance Agency
announced on November 26 that limits for loans eligible for purchase or
guarantee by Freddie Mac or Fannie Mae would remain at 2013 limits for
2014. The standard limit is $417,000;
limits in high cost areas range up to $625,000.