With the Sept. 30, 2011, expiration of the current high-cost loan limits fast approaching, the Department of Housing and Urban Development (HUD), which regulates and oversees the FHA home loan program, has issued Mortgagee Letter 11-29 (ML). This ML clearly lays out how and when lenders are to implement the new loan limits that take effect on Oct. 1, 2011. According to the ML, as long as FHA home buyers have case numbers and credit approval (as defined in the ML attached below) on or before Sept. 30, they are eligible for the higher loan limits, even if the loan closes on or after Oct. 1.
While C.A.R. will continue to try to extend the current loan limits, absent Congressional action, we welcome this announcement as providing a clear and smooth transition to the lower loan limits, which is in stark contrast to the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac. FHFA has allowed lenders to implement the new loan limits on their loans whenever and however they see fit. Home buyers have been forced to shop for a lender who still will offer the higher loan limits since many lenders, including Bank of America and Wells Fargo, already have lowered their Fannie and Freddie loan limits
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