**November 7, 2008**

> **MORTGAGEE LETTER 2008-36**

**TO: ALL APPROVED MORTGAGEES**

**SUBJECT: 2009 FHA Maximum Mortgage Limits**

This Mortgagee Letter provides notice of the 2009 comprehensive update
to the Federal Housing Administration's (FHA) single-family mortgage
limits as a result of the enactment of the Housing and Economic Recovery
Act of 2008 (HERA). The mortgage limits described in this Mortgagee
Letter are effective for those loans which have credit approval on or
after

January 1, 2009, and apply to 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). Instructions for FHA's Home Equity Conversion
Mortgages (HECM) under Section 255 are set forth below.

Under the Housing and Economic Recovery Act (HERA) of 2008 passed in
July 2008 (Section 1124), the Federal Housing Finance Agency (FHFA) was
established and directed to set conforming loan limits each year for the
nation as a whole, as well as for high-cost areas. The rules governing
how the loan limits are established differ from the rules set forth in
the Economic Stimulus Act of 2008 (ESA), which applies to loans
originated in 2008. For example, under ESA, loan limits for high-cost
areas were set at 125 percent of local house price medians and the
maximum high-cost limit was 175 percent of the national conforming limit
(\$729,750 in the continental U.S.). See Mortgagee Letter 2008-06, dated
March 6, 2008.

HERA stipulates that the national loan limit for one-unit homes in the
continental United States shall be pegged to a house price index chosen
by the FHFA. The national loan limit for 2009 will remain at \$417,000.
HERA provides that the mortgage limit for any given area shall be set at
115 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 150 percent of the
Freddie Mac national loan limit, nor be lower than 65 percent of the
Freddie Mac national loan limit for a residence of applicable size.
Section 2112 of HERA further amends Section 203(b) of the National
Housing Act to stipulate that the maximum principal loan obligation
cannot exceed 100 percent of the appraised value of the property.

FHA's floor and ceiling loan limits for 2009 are set forth below based
on the limits set forth in HERA. Interested parties may view FHFA's
press release regarding 2009 loan limits for Freddie Mac and Fannie Mae
at <http://www.ofheo.gov/newsroom.aspx>.

In areas where 115 percent of the median house price is less than 65
percent of the Freddie Mac limit, the FHA limits are set at the 65
percent amount, i.e., the "floor," as follows:

One-Unit \$271,050

Two-Unit \$347,000

Three-Unit \$419,400

> Four-Unit \$521,250

Any area where the limits exceed the floor is known as a "high cost"
area. In areas where 115 percent of the median house price exceeds the
150 percent figure, the mortgage limits are set at the 150 percent
amount, i.e., the "ceiling," as follows:

One-Unit \$625,500

Two-Unit \$800,775

Three-Unit \$967,950

Four-Unit \$1,202,925

For all other areas, i.e., those where 115 percent of the median home
price for the area is in between the floor and the ceiling, the limit
shall be at 115 percent 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.

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

Section 214 of 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 potential higher ceilings of \$938,250,
\$1,201,150, \$1,451,925 and \$1,804,375 for 1-, 2-, 3-, and 4-unit
dwellings, respectively. These areas and limits are also identified in
Attachment I.

**[Home Equity Conversion Mortgages]{.underline}**:

Under the authority contained in HERA, the national mortgage limit for
all Home Equity Conversion Mortgages (HECMs) insured under Section 255
of the National Housing Act, will be set in conformance with Section
305(a)(2) of the Federal Housing Loan Corporation Act (12 U.S.C.
1454(a)(2)). For all HECMs insured on or after November 6, 2008, the
national mortgage dollar amount limit will be the national conforming
limit for Freddie Mac of \$417,000.

The national mortgage dollar amount for HECMs, including the new
purchase money mortgage HECMs, also may be increased in Alaska, Hawaii,
Guam and the Virgin Islands. The loan limits in those jurisdictions may
exceed the national mortgage dollar limit of \$417,000 up to 115 percent
of the area median price, or \$625,500, whichever is less.

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

A complete schedule of FHA mortgage limits for all high-cost counties is
provided in the attachments to this Mortgagee Letter. In addition,
downloadable files with complete listings of all counties, their loan
limits, and the median prices used to determine those limits, are
available at http://www.hud.gov/pub/chums/file_layouts.html. That web
site has loan-limit files for FHA forward loans, FHA HECM, and Fannie
Mae and Freddie Mac purchases, with individual records at the county
level. Loan limits are determined by the county in which a property is
located, except that, for properties located in metropolitan statistical
areas, as determined by the Office of Management and Budget, the limits
are set using the county with the highest median price within the
metropolitan area. If you are unsure if a county is within one of the
metropolitan (or micropolitan) areas listed in the attachments, you
should check the FHA mortgage limits internet site before closing the
mortgage at a revised limit
(https://entp.hud.gov/idapp/html/hicostlook.cfm). For a complete list of
all metropolitan counties in the country by MSA, view the most recent
OMB bulletin updating statistical area 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 Housing and Economic Recovery Act of 2008 must be made
within 30 days of this mortgagee letter. Due to the need to provide
continuity in the abilities of lenders to take loan applications for
future originations, the standard procedures for appeals stated in
Mortgagee Letter 2007-01
(<http://portal.hud.gov/fha/reference/ml2007/07-01ml.doc>) are once
again suspended.  Each request for appeals must contain sufficient
housing sales price data, listing one-family properties sold in an area,
to represent home prices in the look-back period used by HUD for
determining loan limits for 2009. That look-back period is January --
August 2008. Appeals should differentiate between single-family
residential and condominium and coop unit sales. All 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>)

**[Information Collection Requirements]{.underline}**

The information collection requirements contained in this Mortgagee
Letter were approved by the Office of Management and Budget (OMB) in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3520).  Approval of HECM Program is covered by OMB control number
2502-0302, with disclosures requirements being covered by OMB control
numbers 2502-0265 and 2502-0059. An agency may not conduct or sponsor,
and a person is not required to respond to, a collection of information
unless the collection displays a valid control number.

If you have questions regarding this Mortgagee Letter, please call FHA's
Resource Center at

1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech
impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD
(1-877-833-2483).

> Sincerely,

Brian D. Montgomery

Assistant Secretary for Housing-

Federal Housing Commissioner

Attachments