> **MORTGAGEE LETTER 2008-06**

**March 6, 2008**

**TO: ALL APPROVED MORTGAGEES**

**SUBJECT: Temporary Loan Limit Increase for FHA**

This Mortgagee Letter provides information on Federal Housing
Administration single family mortgage limits as a result of enactment of
the Economic Stimulus Act of 2008 ("the Act"). These limits are
effective for mortgages endorsed for insurance on or after the date of
this mortgagee letter and remain in effect for those mortgages for which
the mortgagee has issued credit approval for the borrower on or before
December 31, 2008.

**[FHA Single Family Programs Affected]{.underline}**:

The mortgage limits described in this Mortgagee Letter are effective for
those mortgages insured under the following Sections of the National
Housing Act: Sections 203(b)(FHA's basic 1-4 family mortgage insurance
program), 203(h)(mortgages for disaster victims), 203(k)(rehabilitation
mortgage insurance), and 234(c)(condominium units). *These limits do
[not]{.underline} apply to Section 255, Home Equity Conversion Mortgages
(HECM).*

**[Revisions to the Lowest Local Limits]{.underline}:**

The Act provides that the mortgage limit for any given area shall be set
at 125% 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 175% of the 2008 Freddie
Mac conforming loan limit of \$417,000, nor be lower than 65% of the
same 2008 Freddie Mac conforming loan limit for a residence of
applicable size.

Thus, in areas where 125% of the median house price is less than 65% of
the Freddie Mac limit, the FHA limits are set at the 65% limit, i.e.,
the "floor," as follows:

One-Unit \$271,050

Two-Unit \$347,000

Three-Unit \$419,400

Four-Unit \$521,250

**["High-Cost" Local Limits]{.underline}:**

Any area where the limits exceed the floor is known as a "high cost"
area. In areas where 125% of the median house price exceeds the 175%
limit of \$729,750 for a 1-unit property, the mortgage limits are set at
the 175% amount, i.e., the "ceiling," as follows:

One-Unit \$729,750

Two-Unit \$934,200

Three-Unit \$1,129,250

Four-Unit \$1,403,400

For all other areas, i.e., those where 125% of the median home price for
the area is in between the floor and the ceiling, the limit shall be at
125% of the median home price.

The list of areas where the FHA mortgage limits are at the ceiling is
provided in Attachment I. The list of areas where the FHA mortgage
limits are in between the ceiling and the floor is provided in
Attachment II. For any areas not listed in either Attachment I or II,
the FHA mortgage limits are at the floor; this includes the vast
majority of those areas (i.e., counties, parishes, boroughs, and
independent cities) for which FHA has published loan limits.

**[Special Exceptions for Alaska, Hawaii, Guam, and Virgin
Islands]{.underline}**:

In addition, the National Housing Act permits mortgage limits for
Alaska, Guam, Hawaii and the Virgin Islands to be adjusted up to 150% of
the above ceilings, to account for higher costs of construction. Thus,
these four areas have a potential higher ceiling of \$1,094,625
(1-unit), \$1,401,300 (2-unit) \$1,693,875 (3-unit); and \$2,105,100
(4-unit). None of the limits for these areas has reached the full 150%
ceiling, but several are between the temporary FHA statutory ceiling and
the higher 150% ceiling provided for in those areas. These areas and
limits are also identified in Attachment I.

**[Home Equity Conversion Mortgages Excluded from the
Act]{.underline}**:

As a reminder, HECMs were not included in the Economic Stimulus Act.
Therefore, FHA's loan limits for HECMs will retain the existing "floor"
of 48% of the conforming limit or \$200,160, as well as the "ceiling" of
87%, or \$362,790. Those areas in between are limited to 95 percent of
the local median. Lenders are also reminded that while 2-, 3-, and
4-unit properties are eligible under the HECM program, the maximum claim
amount is based on the 1-unit local limit.

**[Where to find comprehensive listing of FHA local
limits]{.underline}:**

A complete schedule of FHA mortgage limits for all areas is available
through the internet at
<https://entp.hud.gov/idapp/html/hicostlook.cfm>**.** In addition, our
comprehensive listing will include separate tables for FHA's HECM as
well as the local mortgage limits for loans that may be sold to Fannie
Mae and Freddie Mac. 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 attachments 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, view
the most recent bulletin updating statistical areas of definitions and
guidance at <http://www.whitehouse.gov/omb/bulletins/index.html>.

**[Requests for Local Increases]{.underline}:**

Appeals to local area loan limits determined by HUD for implementing
provisions of the Economic Stimulus Act of 2008 must be made within 30
days of this mortgagee letter; this includes appeals for loan limits for
HECMs. Due to the limited time the new loan limits are authorized by
Congress, and the need to have stability in the mortgage market, the
standard procedures for appeals stated in Mortgagee Letter 2007-01
(<http://portal.hud.gov/fha/reference/ml2007/07-01ml.doc>) are
suspended.  Each request for appeals must contain sufficient housing
sales price data, listing one-family properties sold in an area, to
represent home prices across 2007. HUD is using an entire year for the
basis of its decisions because of disruptions in the mortgage market
that have affected home prices in recent months. All such requests will
be handled exclusively by FHA's Santa Ana Homeownership Center. That
address is:

U.S. Department of Housing and Urban Development\
Santa Ana Homeownership Center\
Santa Ana Federal Building\
34 Civic Center Plaza, Room 7015\
Santa Ana, CA 92701-4003\
Attn: Program Support/Loan Limits

**[Seller Concessions and Verification of Sales]{.underline}**

Given the "softness" in a number of housing markets, FHA believes it
imperative to remind lenders and appraisers of FHA's policy regarding
reporting seller concessions and the verification of sales data. This
guidance was most recently expressed in mortgagee letter 2005-02.
(<http://portal.hud.gov/fha/reference/ml2005/05-2ml.doc>)

If you have any questions regarding this mortgagee letter, please
contact the FHA Resource Center at 1-800-CALL-FHA (1-800-225-5342).

> Sincerely,

Brian D. Montgomery

Assistant Secretary for Housing-

Federal Housing Commissioner

Attachments