The Federal Housing Administration (FHA) announced the agency’s new loan limit schedule for the 2021 calendar year for its Single Family Title II and Home Equity Conversion (reverse) term mortgage insurance programs. Loan limits for most of the country will increase over the coming year due to the sharp appreciation in house prices, which is factored into the statutorily mandated calculations that the FHA uses as part of its methodology for determining the limits each year. The new loan limits take effect for FHA file numbers assigned on or after January 1, 2021.
The FHA is required by the National Housing Act, as amended by the Housing and Economic Recovery Act 2008 (HERA), to set the limits on term loans for a single family at 115% of the median price of housing. dwellings, subject to a floor and a ceiling on the limits. . The FHA calculates term mortgage limits by metropolitan statistical area and by county.
“The FHA has seen steady increases in loan limits over the past few years, which puts it in a position to serve a segment of borrowers that may be better served by the conventional market. The mission of the FHA is to support low to moderate income borrowers, so why does the law allow the FHA to insure mortgages up to $ 822,375? This is a question that Congress and taxpayers who support the FHA must answer, ”said Assistant Housing Secretary and Federal Housing Commissioner Dana Wade.
In high-cost areas of the country, the FHA loan limit cap will drop from $ 765,600 to $ 822,375. The FHA will also raise its floor to $ 356,362 from $ 331,760. In addition, the maximum claim amount (HECM limits) of the FHA insured home equity conversion mortgage (HECM limits) for reverse mortgages will be increased from $ 765,600 to $ 822,375. Current FHA HECM regulations do not allow the HECM limit to vary by MSA or county; instead, the single HECM limit applies to all HECMs, regardless of the location of the property.
In its November 13, 2020 annual report to Congress covering the financial position of the FHA Mutual Mortgage Insurance Fund for fiscal 2020, the FHA provides recommendations for addressing risks and defaults in current loan limit calculations of the FHA. Due to the statutory nature of these provisions, the HUD cannot fully address concerns without Congressional action.
Due to large increases in median house prices and required changes to the FHA floor and ceiling limits, which are tied to the Federal Housing Finance Agency (FHFA) increase in the conventional mortgage limit for 2021, Maximum loan limits for FHA term mortgages will increase in 3,108 counties. In 125 counties, the FHA loan limits will remain unchanged. By law, the median house price for a metropolitan statistical area (MSA) is based on the county in the MSA with the highest median price. It has long been a practice of HUD to use the highest median price for a year since the enactment of the Housing and Economic Recovery Act (HERA).
The National Housing Act, as amended by HERA, requires the FHA to set its floor and ceiling loan limits based on the loan limit set by the FHFA for conventional mortgages held or guaranteed by Fannie Mae and Freddie Mac . The national compliant loan limit for 2021 is $ 548,250. The FHA’s 2021 national minimum loan limit of $ 356,362 is set at 65% of the national compliant loan limit. This “floor” applies to areas where 115% of the median home price is below the “floor” limit.
Any area where the loan limit exceeds this “floor” is considered a high cost area, and HERA requires the FHA to set its maximum loan limit “cap” for high cost areas at $ 356,362, which is equivalent to $ 356,362. 150% of the national compliant loan limit. .
To find a complete list of FHA loan limits, FHA ceiling zones, floor-to-ceiling zones, as well as a list of zones with loan limit increases, visit the Limits page. loan from FHA.