Housing Secretary Shaun Donovan is "open to suggestions" on how his department can establish higher FHA loan limits for high-cost submarkets.

Congress gave HUD discretionary authority under the American Recovery & Reinvestment Act to establish separate loan limits for submarkets in places where prices are "significantly higher" than the median for the county or MSA within which they are located. But in response to a question after his talk at the National Association of Home Builders' (NAHB) spring board meeting in Washington, Donovan said setting a ceiling for more than 3,300 separate jurisdictions is "already complex enough" without introducing submarkets into the equation.

"It's a brain twister at this point," he said. At the same time, though, the secretary said he understood the need for more flexibility in setting the limits and welcomed input on how to implement "a very, very complex" challenge.

Past NAHB President Mark Tipton, a builder in Raleigh, N.C., said there are numerous places throughout the country where buyers in high-cost communities don't have access to FHA financing because the houses they want to purchase are located within larger jurisdictions where the overall median is much lower or even depressed because of a large concentration of older or foreclosed properties.

The NAHB favors the removal of the high-cost designation altogether and bumping the limit higher for the entire country. But Sec. Donovan said that "could be putting the FHA risk."

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