www.hudclips.org 


U. S. Department of Housing and Urban Development
Washington, D.C. 20410-8000

December 27, 1993
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 93-42
     TO:  ALL APPROVED MORTGAGEES
     SUBJECT:  Single Family Production--Requests to Increase the
                 Single Family Maximum Mortgage Limits
 
          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.  Mortgagee Letter 88-14 of
     May 17, 1988 is hereby superseded.
 
          The National Housing Act, as amended, provides direction
     under which the maximum mortgage amount for a one-family house
     shall not be less than $67,500, except in high-cost areas.  It
     further provides that a mortgage may be insured by FHA in an
     amount not to exceed the lesser of 95 percent of the median one
     family house sales price in the area or 75 percent of the dollar
     amount limitation for the Federal Home Loan Mortgage Corporation
     (FHLMC) in effect on September 30, 1992.  This results in a
     one-family maximum mortgage limit ceiling of $151,725 ($151,700 for
     condominiums) in high cost areas.  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
     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
 
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     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, HUD 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.
 
     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.
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
 
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recommendations to 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.
 
     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 HUD Headquarters.
 
     If you have any questions concerning HUD single family
mortgage limits, please contact the Programs and Procedures
Branch at (202) 708-2676.
 
Sincerely yours,
 

Nicolas P. Retsinas
Assistant Secretary for Housing
- Federal Housing Commissioner