The head of the Federal Housing Administration is questioning the size of the increases in its loan limits, declaring that some of the consumers whose mortgages it insures should be in the non-government market.
The 2021 FHA low-cost area forward loan limit for a single-unit property will increase to $356,362, or 65% of the
But in high-cost areas, the new FHA limit is $822,375 for a single-unit home, or 150% of the 2021 conforming loan limit of $548,250. For conforming mortgages in high-cost areas, the loan limit is also $822,375.
The
The new limits have Federal Housing Commissioner Dana Wade concerned.
"FHA has seen consistent increases in loan limits during the past few years, putting it in a position to serve a segment of borrowers that may be better-served by the conventional market," Wade said in a press release. "FHA's mission is to support low-to-moderate income borrowers, so why does the law permit FHA to insure mortgages up to $822,375? This is a question for Congress and the taxpayers who stand behind FHA to answer."
The calculation of the minimum amount, known as the floor, and the maximum amount or the ceiling, are set by federal statute. The floor applies to counties where 115% of the median home price is less than 65% of the conforming loan limit. If prices are above that level, the FHA limit can go up to the ceiling amount.
As a result, there are counties where the new limit is between the ceiling and floor. In addition, the FHA said there are 125 counties where the loan limits are not changing from 2020 due to local fluctuations in home values. And unlike in 2019, no county will have a decrease in the loan limit.
These limits do not apply to mortgages that the FHA provides insurance for in two states, Alaska and Hawaii, as well as in Guam and the U.S. Virgin Islands. Because of construction costs in those areas, the new limit for a single unit property is over $1.23 million.
The FHA also announced the new loan limit for its reverse mortgage program.
Because the FHA's regulations for the Home Equity Conversion Mortgage do not allow the limit to vary, unlike for the forward product, the single nationwide maximum claim limit is the same as the forward mortgage ceiling, or $822,375.
