WASHINGTON (3/13/12)--The Credit Union National Association (CUNA) has suggested the Department of Housing and Urban Development (HUD) give greater consideration to its proposal to eliminate the process for requesting alternative Federal Housing Administration (FHA) maximum mortgage amounts before it moves forward.
HUD currently limits the maximum principal obligation on FHA-insured single-family mortgages to either 115% of the median house price for a single-family home in a surrounding metropolitan area, or 65% of the national conforming limit. However, HUD allows this cap to be challenged through an appeals process if any party involved in the mortgage "believes that a mortgage limit established by the [HUD Secretary] does not accurately reflect the median house prices in the area."
HUD recently said this appeals process was outdated and creates unneeded costs, and said removing the appeals regulation would not have any impact on the calculation of area loan limits.
HUD in 2008 began collecting home price data through data collection firm CoreLogic, and the accurate data gathered in these collections has resulted in fewer appeals. Under current HUD rules, appeals can only be made in ten of the 3,234 counties in the U.S. and related territories, and HUD saw appeals decline to zero in 2010. However, CUNA suggested in its comment letter that the FHFA monitor the number of appeals lodged over a longer period of time to determine whether the appeals process should be abandoned.
"We do not believe one year is enough time to conclude with certainty that the appeals process is altogether obsolete--especially given the lackluster state of the current mortgage market," CUNA said.
CUNA pointed out that eliminating the appeals process altogether would penalize the ten counties for which HUD does not have sufficient direct or indirect data to accurately determine a loan limit.
CUNA said HUD should maintain an adequate process by which parties in these counties may request alternative loan limits, at least until HUD has sufficient direct or indirect data to accurately calculate an appropriate loan limit for those counties.
For the full comment letter, use the resource link.