FHA increases multifamily threshold for first time since 2014

A key Federal Housing Administration limit that determines which apartment building loans can use a standard underwriting process has been raised for the first time in nearly a decade.

The large loan limit, which has been $75 million since 2014, has increased to $120 million, according to a press release issued Wednesday.

FHA also plans to review and possibly adjust the limit annually going forward, with increases in increments of $5 million per year when justified by construction expenses and other factors.

"We know that borrowers are contending with the dual challenges of increased development costs and meeting the nation's dire need for more rental housing," said Commissioner Julia Gordon. "Anything we can do to prudently alleviate extra steps in obtaining FHA insurance will help all of us meet the housing supply challenges before us."

The FHA, an arm of the Department of Housing and Urban Development, insures single- and multifamily mortgages that are generally aimed at increasing the supply of affordable homes.

The catalyst for the change was in part the inventory shortage, but also consensus in input from industry stakeholders and an internal review in which both agreed the limit was overdue for change and not in-step with current loan sizes and collateral valuations.

Bob Broeksmit, president of the Mortgage Bankers Association, said his group has been pressing for an increase for some time to address inventory shortages and rising building expenditures and welcomed the FHA decision to finally act.

"MBA has long advocated for this move, citing labor and supply shortages, higher construction costs, and the importance of having loan limits that are consistent with economic conditions," he said.