The U.S. Department of Housing and Urban Development (HUD) has announced that the temporary loan limits it established as part of the Housing and Economic Recovery Act of 2008 will expire Dec. 31, 2013. The loan limits for FHA-insured loans in high-cost areas, which were temporarily raised to $729,750, will be reduced to the FHA permanent limit of $625,500 beginning Jan. 1, 2014.
REALTORS® have lobbied aggressively to make the increase permanent. Despite efforts by local REALTOR® associations like the Silicon Valley Association of REALTORS®, the California Association of REALTORS® at the state level, and the National Association of REALTORS®, Congress failed to extend the temporary loan limits. REALTORS® were successful in convincing legislators in 2008 to permanently raise the FHA loan limits from $362,790 to $625,500.
"As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play," said FHA Commissioner Carol Galante. "Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still underserved."
According to information released last week by HUD, the current standard loan limit for areas where housing costs are relatively low will remain unchanged at $271,050. The new national-ceiling loan limit for the very highest cost areas will be reduced from $729,750 to $625,500, in high-cost areas like San Mateo and Santa Clara counties.
Borrowers with existing FHA-insured mortgages may continue to utilize FHA's Streamline refinance program regardless of their loan balance. The changes are effective for case number assignments between January 1 and December 31, 2014.
The mortgage loan limits for FHA-insured reverse mortgages will remain unchanged. The FHA reverse-mortgage product, known as the Home Equity Conversion Mortgage (HECM), will continue to have a maximum claim amount of $625,500, with actual loan limits based on property value, borrower age, and current interest rates.
"It's clear that the economy and the housing market are on the road to recovery, but our legislators need to realize we are not there yet. We need to be at a sustainable recovery. Not extending loan limits for high-cost areas could discourage many creditworthy buyers and only serve to stall what can be a healthy and sustainable housing market recovery," said Carolyn Miller, president of the Silicon Valley Association of REALTORS®.
Visit the HUD website at www.hud.gov for additional information and loan limit adjustments for two-, three-, and four-unit properties. FHA's mortgagee letter listing counties eligible for loan limits above the national standard may also be found here.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.