HUD No. 08-030
March 6, 2008
PRESIDENT'S ECONOMIC GROWTH PACKAGE TO MAKE NEARLY A QUARTER OF A MILLION FAMILIES ELIGIBLE FOR FHA-INSURED MORTGAGES
FHA implements temporary higher loan limits to help families keep their homes
WASHINGTON�- Nearly a quarter of a million more families could be eligible this year to purchase or refinance their homes using affordable, FHA-insured mortgages, thanks to the economic growth package signed into law by President Bush last month. The Economic Stimulus Act of 2008 will allow HUD's Federal Housing Administration (FHA) to temporarily increase its loan limits and insure larger mortgages at a more affordable price in high cost areas of the country.
"The stimulus is providing immediate relief to homeowners," said HUD Secretary Alphonso Jackson at a Greater Las Vegas Association of Realtors keynote speech. "It raises the Federal Housing Administration's loan limits, enabling more families to qualify for a safe, affordable FHA mortgage. This is important. Families in high-cost states have been priced out of FHA-backed loans. This has created a vacuum, filled by exotic subprime loans. Families with home loans up to $729,750 will now qualify for an FHA loan, depending on where they live."
Beginning today, HUD will offer temporary FHA loan limits that will range from $271,050 to $729,750. Overall, the change in loan limits will help provide economic stability to America's communities and give nearly 240,000 additional homeowners and homebuyers a safer, more affordable mortgage alternative. The maximum amount of $729,750 will only be applicable to extremely high-cost metropolitan areas such as: New York, Los Angeles, San Francisco and Washington, D.C.� HUD also calculated new limits for loans to be purchased by Government-Sponsored Enterprises (GSE) Fannie Mae and Freddie Mac.
"Many families all over the U.S. will benefit from this access to credit, and increasing these loan limits will inject much-needed liquidity into the housing market," said FHA Commissioner/Assistant Secretary for Housing Brian Montgomery. "Even moderate-cost�areas like those in the South and Southwest such as Dallas, Houston, Augusta and Tallahassee will be helped, with most loan limits there rising to $271,050."
There are 75 areas in the U.S., out of a total of approximately 3200, that will be eligible for the highest loan limit of $729,750. Previously, FHA's loan limits in these very high-cost areas were capped at $362,790.
The Economic Stimulus Act of 2008 permits FHA to insure loans on amounts up to 125 percent of the area median house price, when that amount is between the national minimum ($271,050) and maximum ($729,750). The new minimum and maximum loan limits are based on 65 percent and 175 percent of the conforming loan limits for Government-Sponsored Enterprises in 2008, which is $417,000. The FHA used a combination of existing government data sets and available commercial information to determine the median sales price for each area, and released the data approximately two weeks after the President signed the stimulus bill. The change in loan limits are applicable to all FHA-insured mortgage loans endorsed after HUD publishes the increased loan limits today, and it lasts until December 31, 2008.
By increasing loan limits nationwide, FHA will provide much needed liquidity and stability to housing markets across the country. Already, as conventional sources of mortgage credit have been contracting, FHA has been filling the void. From September to December 2007, FHA facilitated more than $38 billion of much-needed mortgage activity in the housing market, more than $15 billion of which was through FHASecure, FHA's refinancing product. By focusing on 30-year fixed rate mortgages, FHA helps homeowners avoid and escape the risks associated exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.
In January 2009, FHA's maximum loan limit will return to $362,790, unless the U.S. Congress approves bipartisan legislation to permanently increase loan limits as part of the FHA Modernization bill, which is still awaiting final approval on Capitol Hill.
"In January 2009 the loan limits will return to their previous setting," Jackson said. "We need a more permanent solution. So our next step must be to modernize the 74-year-old FHA. Two years ago, before the downturn, we introduced an FHA modernization bill to Congress. Our plan offers flexible down payment requirements and higher loan limits. It would also enable the FHA to fairly price premiums, taking risk into account so the market makes rational decisions. We don't want anyone caught by surprise again. FHA modernization could help a quarter of a million families this year alone. It passed the House and Senate in overwhelmingly bipartisan fashion. But a final bill has yet to reach the President. Congress must act-now!"
Jackson noted that the Administration could not wait for Congress to act. "Last August, the President and I introduced FHASecure. It helps responsible families who, having paid their bills on-time under the original interest rate, find themselves falling behind under the reset rate. For the first time, these delinquent families would be able to qualify for an FHA loan. 'Underwater' borrowers and those in the process of foreclosure may also qualify." Since August, FHA has helped 110,000 homeowners who were current or past due on their loans refinance with an additional 200,000 expected by year's end.
Jackson also discussed the Administration's efforts with the Hope Now Alliance, and industry-led effort that has been reaching out to borrowers in trouble. Hope Now members have contacted over a half million homeowners. Their hotline now receives more than 4,500 calls a day. Industry has modified 1 million loans since the second half of last year, keeping homeowners in their homes.
"We can create the conditions for recovery," Jackson said. "We can make the boom-bust cycle shorter and shallower. We can replace gimmicks and shortcuts with transparency and honesty. And we can take the necessary steps to prevent foreclosure. That's right, foreclosure is not inevitable, it's preventable. And we have the tools to prevent it."
Discussing recent efforts in Congress to bail out lenders, which the Administration opposes, Jackson said" Americans are a fair people. They want to help. But they understand that the answer to an economic challenge must ultimately come from the people who drive the economy. They want the tools of recovery in their own hands. And they do not want to kill the spirit of opportunity that made this country great."
FHA loan limits are based on the county in which the property is located. However, for properties located in metropolitan or micropolitan statistical areas, the limit is set at that of the county with the highest limit within the metropolitan or micropolitan area.
The new temporary FHA loan limits are posted on the HUD website: https://entp.hud.gov/idapp/html/hicostlook.cfm and www.fha.gov. Read the loan limits mortgagee letter for additional details.
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development, and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet and espanol.hud.gov. For more information about FHA products, please visit www.fha.gov.