While the Federal Housing Administration's credit limits have increased in line with the recently announced compliant limits, attitudes about whether or not they are too high have changed with the shift in administrations.
A year ago, then Federal Building Commissioner Dana Wade said the cap on high-cost areas had opened the state mortgage insurance program to serve a market better served by non-compliant lenders.
The Biden government leadership in the FHA is more supportive of the increase, which will come into effect in 2022.
"Raising credit limits in line with the rise in home prices will allow qualified individuals and families to continue accessing FHA-insured mortgages for affordable home finance," said Lopa Kolluri, assistant general secretary for housing and the FHA rolled into one Press release.
However, following Tuesday's announcement by the Federal Housing Finance Agency of increases to compliant credit limits, Acting Chairwoman Sandra Thompson, who also joined the Biden administration, appeared to admit that government support for more expensive homes could have a negative impact on the country Accessibility of affordable housing.
"FHFA actively evaluates the relationship between house price growth and compliant credit limits, particularly in relation to the creation of affordable and sustainable home ownership in all communities," said Thompson.
According to the law, the FHA floor, the limit that applies to areas of the country where 115% of the average home price is below this level, must be set at 65% of the corresponding amount. This puts the lower limit for the next year at $ 420,680. The compliant base limit for a unit in 2022 is $ 647,200.
Any area where the credit limit exceeds the lower limit is considered a high-cost area and corresponds to the corresponding high-cost upper limit of $ 970,800 for 2022. That amount is also now the limit for the home equity conversion mortgage program.
Forward mortgages in Alaska, Hawaii, Guam, and the U.S. Virgin Islands have special limits that are higher than government-sponsored corporate-eligible loans of $ 1.456 million for a unitary home.
The United States has 3,243 counties or equivalent jurisdictions in all of its states and territories. In 3,188 of these, the FHA limit will be raised, while in 45 it will remain unchanged, the agency said. According to the law, the median of the home price for a statistical metropolitan area is based on the district with the highest median of the home price.
Keefe, Bruyette & Woods analyst Bose George noted that since the FHA change is being made along with the Federal Housing Finance Agency's compliant limit change, the increase should keep the agency's stake in relation to the total mortgage market at the same level.
In a November 22nd report examining the mortgage insurance business, George found that the total amount insured between private companies and the government program increased 2.3% year over year at the end of the third quarter. But the PMI IIF grew 7.9% while the FHA contracted 3.6%. PMI companies, including those insured by companies in settlement, now have a 54% stake, while FHA's stake has decreased to 46%.
"The growth gap between PMI and FHA remains much larger than pre-COVID-19 levels," said George. "Ultimately, we expect this growth gap to return to a more normalized level."
It's likely that sometime in the first half of next year the Biden administration will finally act on the long-rumored FHA premium cut of 25 basis points, he said. But George also reiterated his earlier observation that the business would only marginally attribute the business to the FHA program. Reducing GSE price adjustments at the credit level would also prevent business from turning away from the PMI.