www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 April 6, 1994 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 94-15 TO: ALL APPROVED MORTGAGEES SUBJECT: Single Family Production--Requests to Increase the Single Family Maximum Mortgage Limits Since the publication of Mortgagee Letter 93-42, we have received a number of calls concerning an error in paragraph two, referencing maximum mortgage amounts under the National Housing Act, as amended. This Mortgagee Letter supersedes Mortgagee Letter 93-42. Section 503 (a) of the Housing and Community Development Act of 1992 amended Section 203(b)(2) of the National Housing Act (12 U.S.C. 1709(b)(2)) by eliminating its then-current dollar limits on maximum mortgage amounts. This Mortgagee Letter incorporates the applicable provisions of the 1992 Act and sets forth the procedures for submitting requests to increase the single family maximum mortgage limits. The maximum mortgage that may be insured by FHA based on the 1992 amendment is the lesser of: (A) 95 percent of the median one-family house sales price in the area or (B) 75 percent of the dollar amount limitation for the Federal Home Loan Mortgage Corporation (FHLMC) in effect on September 30, 1992; except that the maximum mortgage limit in any area may not be reduced below the amount in effect on May 12, 1992. On May 12, 1992, the maximum mortgage limit for a single family house in any area which was not designated a high cost area was $67,500. In high cost areas, where sales price data justify higher limits, the Department may now raise the one-family maximum mortgage limit up to a ceiling of $151,725 ($151,700 for condominiums). The two-, three-, and four-family limits for these areas are $194,100, $234,600, and $291,000, respectively. Any interested party may submit a request to HUD for the mortgage limits to be increased in a particular area. Any request for an increase must be accompanied by sufficient housing _____________________________________________________________________ 2 sales price data to justify higher limits. This data should be in the form of a listing of all, or nearly all, the one-family properties sold in the area for a period of time that will vary, depending on the volume of sales, as follows: Sales Volume Revised Data Period 500 per month 1 month 250 to 499 per month 2 months less than 250 per month 3 months Where the volume of sales for one month is less than 250, but the average for a two month period is 250 or more, sales data for the two month period is sufficient. This listing should include: (1) a brief address of the property, including county location; (2) month and year of sale; (3) sales price; and (4) whether the property was new or existing. These sales should be listed in order from the lowest sales price to the highest sales price. Using this data, we will establish the median sales price. Only arms length transactions should be listed. Paper transactions, distressed sales, foreclosure sales, lot sales, and refinancings should be omitted. The Department recognizes that in certain instances, the application of this approach may not reasonably reflect the sales price of newly constructed homes because of an existing stock whose value is static or declining. Therefore, greater weight may be given to the sales prices of new homes in determining the median house price in such areas. Where new sales constitute 25 percent or less of an area's total sales, and the parties requesting an increase provide evidence that the value of the existing stock is static or declining, the Department may consider an increase based on 95 percent of the average of the median sales price for new homes and the median sales price for existing homes. Separate median sales prices for both new and existing homes in these areas may be submitted with the other required documentation. _____________________________________________________________________ 3 Pursuant to statutorily established criteria, HUD will consider mortgage limit appeals for Metropolitan Statistical Areas (MSAs) or individual counties, including counties within MSAs. HUD will not consider appeals for areas smaller than a county. A request for increased limits, along with the accompanying sales data, must be sent to the HUD Field Office serving that jurisdiction. A copy of the request may also be sent directly to the Office of Insured Single Family Housing, HUD Headquarters. These packages should be sent to the attention of the Single Family Development Division, Room 9272, 451 Seventh Street, SW, Washington, DC 20410. The cognizant Field Office will verify the housing sales data and review the request for compliance with Departmental requirements. The Field Office will forward complying requests and its recommendations to HUD Headquarters. If the request for a mortgage limit increase is approved, the new limits will become effective on the date designated by the Assistant Secretary for Housing/Federal Housing Commissioner when approval of the increase is announced. Announcements of approved increases will occur approximately 60 days after receipt of the Field Office's recommendations by Headquarters. If you have any questions concerning HUD single family mortgage limits, please contact the Programs and Procedures Branch at (202) 708-2676. Very sincerely yours, Nicolas P. Retsinas Assistant Secretary for Housing - Federal Housing Commissioner