FHA Increases Loan Limits for 2017

The Federal Housing Administration will increase loan limits across most areas in the United States in 2017 to reflect rising home prices, the agency announced Thursday.

FHA will increase its national loan limit "floor" to $275,665 in 2017 from $271,050. This limit is set at 65% of the national conforming loan limit, which the Federal Housing Finance Agency said last week would expand to $424,100.

The agency also said that its loan limit "ceiling" in high-cost areas would rise to $636,150 from $625,500. The ceiling figure is 150% of the national conforming loan limit.

The loan limit "floor" applies to areas where 115% of the median home price is less than 65% of the national conforming loan limit. Wherever the loan limit is higher than this floor is considered a high-cost area.

FHA determines its loan limits for forward mortgages based on median home prices. Limits are set by metropolitan statistical area and county. FHA said that maximum loan limits for forward mortgages increased in 2,948 counties and remained the same in 286 counties. The loan limits did not decrease in any part of the country, according to the announcement.

Additionally, the new maximum claim amount for FHA-insured Home Equity Conversion Mortgages, also known as reverse mortgages, will be $636,150. This loan limit does not vary by MSA or county.

Industry observers suggested that higher loan limits could result in higher mortgage volume following the FHFA's announcement last week that it would increase conforming loan limits for the first time in a decade. An earlier report from Black Knight Financial Services determined that a $10,000 increase to the conforming loan limit could lead to 40,000 additional originations with $20 billion in loan balances.

"It's marginal at a macro level in a $1.4 trillion run-rate market," Mortgage Bankers Association CEO David Stevens told National Mortgage News last week. "But it is impactful on the margin to those individuals who are now in the range."