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FHA to drop single-family loan limit Oct. 1
WASHINGTON (8/26/11)--The Federal Housing Administration (FHA) this week announced that the insurance limit for single-family home loan limits in the highest cost areas of the country will be reduced starting on Oct. 1. Loan limits in most other parts of the nation will remain unchanged. The changes, which are required by the Housing and Economic Recovery Act of 2008 (HERA), will lower the “ceiling” for single-property loans in high-cost areas to $625,500 from $729,750. However, the maximum loan limits in Alaska, Hawaii, Guam and the Virgin Islands may stand at 150% of this ceiling “to account for higher costs of construction,” the FHA said. The current single-unit loan floor for areas where housing costs are relatively low will remain unchanged at $271,050, the FHA added. Two unit dwellings will have a floor of $347,000 and a ceiling of $800,775, while three unit dwellings will have a floor of $419,425 and a ceiling of $967,950. The FHA said that four unit dwellings will have a $521,250 floor and a $1,202,925 ceiling. The FHA said that “only a fraction of borrowers living in the nation’s highest cost areas will be impacted by the new loan limits.” The FHA noted that mortgage loan limit and maximum claim amount for FHA-insured reverse mortgages will remain unchanged, holding at $625,500. The loan limit changes are expected to impact borrowers and lenders in 669 counties throughout the nation. The Homeownership Affordability Act of 2011, which was introduced early this month by Sens. Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.), and co-sponsored by Sen. Dianne Feinstein (D-Calif.), would allow the FHA, Fannie Mae, Freddie Mac, and the Veterans Administration (VA) to guarantee mortgages up to $729,750, or 125% of local median prices for single family homes, through Dec. 31, 2013. Loan limits could be reduced by an average of more than $68,000 per county if the higher limit is not extended, the legislators noted. Menendez in a release said that "allowing these limits to expire would be bad medicine for our economy at a time when we need a booster shot," and Isakson added that he is "concerned that failing to extend these limits would make it even more difficult for the average homebuyer get a mortgage and buy a home when credit is already tight." For the FHA release, and more on the loan limit legislation, use the resource links.
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