www.hudclips.org 


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

June 2, 1995
 
Mortgagee Letter 95-27
 
TO:  ALL APPROVED MORTGAGEES
 
SUBJECT:  Single Family Production--Revised Procedures for
            Requesting Increases in the FHA Single Family Maximum
            Mortgage Limits
 
     This Mortgagee Letter reflects several recent changes
related to processing and establishing maximum mortgage amounts
under the National Housing Act, as amended, including the
redelegation of the authority to increase maximum mortgage limits
to local HUD offices.  Mortgagee Letter 94-15  is hereby
superseded.
 
     Public Law 103-327, signed by the President on September 28,
1994, amended Section 203(b)(2) of the National Housing Act
 
[12 U.S.C. 1709(b)(2)] by indexing the FHA mortgage limits to the
Fannie Mae/Freddie Mac loan limits.  This legislation established
the maximum limit for non-high cost areas as 38 percent of the
Fannie Mae/Freddie Mac loan limits.  The maximum mortgage limit
for high cost areas was established as 75 percent of the Fannie
Mae/Freddie Mac loan limits.  HUD's new basic nationwide mortgage
limits are $77,197, $98,700, $119,350, and $148,300 for one-,
two-, three-, and four-family dwellings, respectively.  The new
ceilings in most high cost areas for one- two-, three- and four-
family dwellings are: $152,362, $194,850, $235,550, and $292,800,
respectively.
 
     Increases in an area's maximum mortgage limits will be based
on the lesser of:  (A) 95 percent of the median one-family house
sales price in the area, or (B) the ceiling for high cost areas.
Pursuant to statutorily established criteria, HUD will consider
mortgage limit appeals for Metropolitan Statistical Ares (MSAs)
or individual counties, including counties within MSAs.  HUD will
not consider appeals for areas smaller than a county.
 
     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
 
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sales price data to justify higher limits.  These 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 (city, town, etc.);
          (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 these data, we will
establish the median sales price.
 
     Only arm 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 home 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.
 
     The authority to determine median area house prices and the
resulting maximum mortgage amounts is redelegated to specific
officials in the local HUD Offices.  Effective April 27, 1995,
requests for increased limits, along with the accompanying sales
data, should be sent to the local HUD Office serving that
jurisdiction.  A copy should not be sent to HUD Headquarters.
 
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The cognizant local HUD Office will verify the housing sales
data, review the request for compliance with Departmental
requirements, and revise the limits, as appropriate.
 
     Approved increases in mortgage limits will become effective
on the date designated by the approving official when the
increase is announced.  The local HUD Offices are to ensure the
widest possible dissemination when announcing increases.
 
     If a request for an increase is denied by the local HUD
Office, the submitting party may appeal the decision to the
Federal Housing Commissioner or his designee.  The appeal must be
in writing and must set forth the basis for the appeal.  It must
be forwarded through the local HUD Office.
 
     Questions concerning HUD single family mortgage limits
should be directed to the local HUD Office.
 
Sincerely yours,
 

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