**January 3, 2007**

**MORTGAGEE LETTER** **2007-01**

TO: ALL APPROVED MORTGAGEES

SUBJECT: 2007 FHA Maximum Mortgage Limits

This mortgagee letter provides the 2007 comprehensive update to the
Federal Housing Administration\'s (FHA) single-family mortgage limits.
The mortgage limits described in this mortgagee letter are effective for
those loans endorsed for insurance on or after January 1, 2007, and
apply to mortgages insured under the following sections of the National
Housing Act (NHA): Sections 203(b)(FHA\'s basic one to four family
mortgage insurance program), 203(h)(mortgages for disaster victims),
203(k)(rehabilitation mortgage insurance), 223(e)(properties in
declining areas), and 234(c)(condominium units).

In addition, this mortgagee letter revises and updates the procedures
for revising local mortgage limits. Mortgagee Letter 1995-27 is hereby
rescinded.

[2007 FHA Mortgage Limits]{.underline}

The National Housing Act provides that the mortgage limit for any given
area shall be set at 95 percent of the median house price in that area,
as determined by the Department of Housing and Urban Development, except
that the FHA mortgage limit in any given area cannot exceed 87 percent
of the Freddie Mac loan limit (\$417,000) for a one unit, (\$533,850)
for a two unit, (\$645,300) for a three unit, or (\$801,950) for a four
unit, nor be lower than 48 percent of the Freddie Mac loan limit for a
residence of applicable size. Neither the ceiling nor the floor for 2007
were changed from 2006.

Thus, in areas where 95 percent of the median house price is less than
48 percent of the Freddie Mac limit, the FHA limits are set at the 48
percent amount, i.e., the \"floor," as follows:

One-Unit \$200,160

Two-Unit \$256,248

Three-Unit \$309,744

Four-Unit \$384,936

Any area where the limits exceed the floor is known as a \"high cost\"
area. In areas where 95 percent of the median house price exceeds the 87
percent figure, the mortgage limits are set at the 87 percent amount,
i.e., the \"ceiling,\" as follows:

One-Unit \$362,790

Two-Unit \$464,449

Three-Unit \$561,411

Four-Unit \$697,696

For all other areas, i.e., those where 95 percent of the median home
price for the area is in between the floor and the ceiling, the limit
shall be at 95 percent of the median housing price for the county.

The list of areas where the FHA mortgage limits are above the floor is
provided in the attachment to this letter. The areas not listed in the
attachment are at the floor.

The National Housing Act also permits mortgage limits for Alaska, Guam,
Hawaii and the Virgin Islands to be adjusted up to 150 percent of the
above ceilings, to account for higher costs of construction. Thus, these
four areas have a potential higher ceiling of \$544,185, \$696,673,
\$842,116 and \$1,046,544 for 1-, 2-, 3-, and 4-unit-dwellings,
respectively. Some of the limits for these areas have reached the full
150 percent ceiling, but several are between the normal FHA statutory
ceiling and the higher 150 percent ceiling provided for in those areas.
These areas and limits are also identified in the attachment.

A complete schedule of FHA mortgage limits for all areas is available on
HUD's website at: <https://entp.hud.gov/idapp/html/hicostlook.cfm>**.**

The limits are determined by the county in which the property is
located, except that for properties located in metropolitan or
micropolitan statistical areas, as determined by the Office of
Management and Budget, the limit is set at that of the county with the
highest limit within the metropolitan or micropolitan area. If you are
unsure if a county is within one of the metropolitan or micropolitan
areas listed on the attachment, you should check the Internet site
before closing the mortgage at the revised limit. For a complete list of
all metropolitan counties in the country by MSA, please visit:
<http://www.whitehouse.gov/omb/bulletins/index.html>.

[Requests to Increase FHA's Mortgage Limits]{.underline}

Any interested party may submit a request to HUD for the mortgage limits
to be increased in a particular county. HUD will not consider requests
for geographical areas smaller than a county. The local FHA
Homeownership Center will verify the housing sales data, review the
request for compliance with Departmental requirements, and revise the
limits, as appropriate. A listing of FHA Homeownership Center addresses
and the states they serve can be found at:
http://www.hud.gov/offices/hsg/sfh/hoc/hsghocs.cfm

Any request for an increase must be accompanied by sufficient housing
price data to justify higher limits. This data should be in the form of
a listing of all, or nearly all, the one-family properties sold in the
county for a period of time that will vary, depending on the volume of
closed sales, as follows:

  ------------------------------------ ----------------------------------
  Sales Volume                         Data Period

  500 per month                        1 month

  250 to 499 per month                 2 months

  Less than 250 per month              3 months
  ------------------------------------ ----------------------------------

Where the volume of closed sales for one month is less than 250, but the
average for a two-month period is 250 or more, sales data for the
two-month period is sufficient. This data should include:

\(1\) A brief address of the property, including county location (city,
town, etc.);

\(2\) Month and year of sale;

\(3\) Sales price; and

\(4\) Whether the property was new or existing.

These sales should be arranged in order from the lowest sales price to
the highest sales price. Using this data, HUD will establish the median
sales price. Paper or electronic submissions will be accepted. Please
contact your local FHA Homeownership Center for information on
acceptable electronic software formats.

Only arms length, "full value" one-unit, closed transactions should be
listed. Paper transactions, distressed sales, foreclosure sales, lot
sales, and refinancings should be omitted. Additional information on
increasing FHA mortgage limits can be found on-line at:
http://www.hud.gov/offices/hsg/sfh/lender/sfhmolin.cfm

[Optional Procedure for New Construction Sales Data]{.underline}

The Department recognizes that in certain instances, the application of
this approach may not reasonably reflect the sales price of newly
constructed homes because of an existing stock whose value is static or
declining. Therefore, greater weight may be given to the sales prices of
new homes in determining the median house price in such areas.

Where new home sales constitute 25 percent or less of an area\'s total
sales, and the parties requesting an increase provide evidence that the
value of the existing stock is static or declining, the Department may
consider an increase based on 95 percent of the average of the median
sales price for new homes and the median sales price for existing homes.
Separate median sales prices for both new and existing homes in these
areas may be submitted with the other required documentation.

[New Procedure for Non-Disclosure States]{.underline}

In some jurisdictions, sales data is not available from government
sources. In those jurisdictions, HUD will accept a statement of local
median housing price from an established local source such as a Board of
Real Estate, Title Company, Appraisal or Mortgage Banker Association.
The median housing price estimate must be for the entire county for
which the increase is being requested, and must include the number of
single family property sales that the estimate represents. The FHA
Homeownership Center will verify all information before processing any
increase.

[Announcements of Revisions to Local Mortgage Limits]{.underline}

HUD utilizes a listserv email service to announce revisions to local
mortgage limits. Interested parties can sign up for listserv email
announcements at:

<http://www.hud.gov/offices/hsg/sfh/ref/hsgregst.cfm>

Revised mortgage limits will become effective on the date designated by
the approving official when the increase is announced. HUD will provide
at least ten (10) days notice by listserv email of the revised limit in
advance of the effective date. The revised mortgage limit can be viewed
on-line, on its effective date, on HUD's website at:

<https://entp.hud.gov/idapp/html/hicostlook.cfm>

[Information collection requirements]{.underline}

The information collection requirements contained in this mortgagee
letter have been approved by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and
assigned OMB control number 2502-0302. In accordance with the Paperwork
Reduction Act, HUD may not conduct or sponsor, and a person is not

required to respond to, a collection of information unless the
collection displays a currently valid OMB control number.

Any questions regarding this mortgagee letter or the mortgage limits in
a particular area should be addressed to the FHA Resource Center.

Please contact the FHA Resource Center online at:
[http://answers.hud.gov](http://answers.hud.gov/).

Users can also get FHA technical support by email at: hud@custhelp.com
or phone FHA

toll-free between 8:00 a.m. and 8:00 p.m. ET (5:00 a.m. to 5:00 p.m. PT)
at: 1-800 CALLFHA or 1-800 225-5342. Call FHA TDD at: 1-877 TDD-2HUD or
1-877 833-2483).

Sincerely,

Brian D. Montgomery

Assistant Secretary for Housing-

Federal Housing Commissioner

Attachment