www.hudclips.org 


U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000

May 17, 1988
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 88-14
TO:       ALL APPROVED MORTGAGEES
SUBJECT:  Single Family Production--Requests to Increase the
            Single Family Maximum Mortgage Limits
 
     This Mortgagee Letter revises the procedure for submitting
requests to increase the single family maximum mortgage limits and
incorporates the applicable provisions of the Housing and Community
Development Act of 1987.  This procedure supersedes the procedure set
forth in Mortgagee Letter 86-16.
 
     The National Housing Act specifies that the maximum mortgage
amount for a one-family house shall be $67,500 except in high-cost
areas.  The Housing and Community Development Act of 1987 amended the
National Housing Act permitting HUD to increase the maximum mortgage
amount in high-cost areas up to $101,250 or 95 percent of the median
one-family house in the area, whichever is less.
 
     Interested industry members may submit a request for the
mortgage limits to be increased in a particular area.  Any request
for an increase must be accompanied by sufficient housing 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
refinancing 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.
 
     HUD will consider appeals for Metropolitan Statistical Area
(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, may 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.  However, simultaneously
a copy of the request must be sent to the local HUD Office serving
that jurisdiction.  If the request is approved, the new limits will
not be effective until published in the Federal Register, which
usually takes approximately 60 days after receipt of the request by
Headquarters.
 
     If you have any questions concerning HUD single family mortgage
limits, please contact the Programs and Procedures Branch at (202)
426-7212.
 
                         Sincerely yours,
                         Thomas T. Demery
                         Assistant Secretary