Written By: Bonnie Wilt-Hild, Op-Ed Writer
Rumors and speculation have been rampant in the mortgage industry since March 2007. I will agree that we are all witness to a very troubled housing market, however, we have seen a turn very recently from examining the facts and how it effects how we conduct business to embracing the rumor mill as a way to stay abreast of the ever changing market.
Alright, enough already! I have spent the last several days fielding not only bizarre questions but outlandish faxes circulating within the mortgage industry stating that The U.S Department of Housing and Urban Development have increased the maximum statutory loan limits to between $750,000 and $800,000.00. I will say now that this is simply not true. I will agree that there is new legislation that might increase HUD’s Statutory Loan Limits but I seriously doubt that they will exceed both FNMA and FHLMC in terms of conforming loan limits and I would also like to mention, it has not been signed into law by our President, at this point.
Additionally, I would like to point out that since HUD sets both their floor and ceiling percentages with regard to median house price to FHLMC conforming loan limits, which by the way will remain unchanged, it is a little far fetched to assume such a substantial increase in HUD’s maximum Statutory Loan Limits.
On January 18, 2008 HUD issued Mortgagee Letter 2008-02, which clearly states, “As a result of FHLMC’s announcement that there is no change in their mortgage limits, FHA floor and ceiling loan limits will remain unchanged.” It further goes on to state:
“Thus in areas where 95% of the median house price is less than 48% of the Freddie Mac limit, the FHA limits are set at the 48% amount, i.e., the “floor,” as follows:
One-Unit $200,160
Two-Unit $256,248
Three-Unit $309,744
Four-Unit $384,936
Any area where the limits exceed the floor is known as a “high cost” area. In areas where 95% of the median house price exceeds the 87% figure, the mortgage limits are set at the 87% amount, i.e., the “ceiling,” as follows:
One-Unit $362,790
Two-Unit $464,449
Three-Unit $561,411
Four-Unit $697,696
Maximum mortgage limits can be check in FHA connection using the following link:
https://entp.hud.gov/idapp/html/hicostlook.cfm.
Additionally, there have been rumors on the other end stating that HUD will not decrease the borrowers minimum required investment as was suggested in the initial legislation provided by FHA Reform, but increase it instead as a way to deal with the declining market issues. I would also like to say that I have also heard no such thing come from the department. It has however been noted that the new legislation might provide for a provision that decreases the borrowers minimum required investment to 1.5% down from the current 3%, but again, this has not been signed into law. It might be worthwhile to mention that it has always been HUD’s position to conduct business in historically declining market areas and they have reiterated this position as recently as September 2007 with the roll out of FHASecure.
As we are all aware, FHA’s willingness to conduct business in these areas have proved a counter-cyclical force in helping to stabilize declining housing markets and no information has came from HUD to state that they intend to stop this activity. At this point HUD has informed Lenders to continue to insure that appraisers are providing accurate property valuations.
Lastly, I would like to address the current rumor that HUD will begin to issue pricing overlays for mortgage applications that have not been accepted by FHA Total Scorecard. Again, HUD does not set interest rates nor does it participate in the setting of interest within the mortgage market. This is also defined in the FHA disclosure Important Notice to the Homebuyer.
People, as mortgage professionals we need to calm down and work with the valid information that is being provided to us from the Department as well as other Agencies. That is not to say that once the new legislation has been signed into law that we will not see some changes in the way we conduct business but to issue statements that are clearly not validated can cause additional turmoil in a market that is turbulent at best. There is enough information circulating on the web to frighten not only the most seasoned mortgage professional but absolutely terrify American home purchasers, so lets not feed the monster, to do so will only create more turmoil in our already troubled housing market.
*Information contained in this article was obtained on The U.S. Department of Housing & Urban Developments website. Mortgagee Letter 2008-02 was cited.**
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie has held many mortgage underwriting positions, including Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans".
