The Department of Housing and Urban Development (HUD) released Mortgagee Letter 13-43 on Friday, which contains the maximum loan amounts eligible for FHA mortgages in 2014. The standard FHA loan limit for areas considered to have low housing costs will remain at the current $271,050, but 650 areas deemed higher cost will now have their maximum loan sizes reduced due to FHA reducing the maximum loan limit for high-cost areas from $729,750 to $625,500. That means that if your county is one of those 650, your consumer will need a lower loan amount to qualify for FHA financing.

 Which counties are affected?

Here are two links to HUD’s own documents showing counties at and above the FHA national loan limit ceiling, as well ascounties with FHA loan limits between the national floor and ceiling. If you do not see your county on either of these lists, reach out to the Mortgage Loan Professional that sent you this report for more information on your local area.

How were these numbers calculated?
Leave it to the Federal Government to create a complex formula for calculating maximum loan amounts. This year is the first year that calculations will be fully implemented that were created by the Housing and Economic Recovery Act (HERA). The actual formula can be referenced directly in HUD’s Mortgagee Letter 13-43 on the 3rd page.

What should you do?
Make sure that if you have a borrower that needs the higher loan amount that they work with your favorite Mortgaged Loan Professional that sent you this report to obtain an FHA case number BEFORE the end of the year to be eligible for the current loan amounts.

 

Last Week’s Mortgage Rate Recap 
Mortgage Rates Currently Trending: HIGHER 
Last week saw rates worsen as every day but Friday MBS (Mortgage Backed Securities) sold off. The reason for the sell off was the economic data that was being released was continuing to point to economic recovery, which has traders speculating for the Fed to begin tapering bond purchases that are part of QE3 much sooner than anticipated. All of the talk of the government shutdown slowing the economic recovery has all but disappeared. We broke through the support level of 100.86, and even broke through the next support level of 100.00, but have since recovered to be above the 100.00 mark. For the week we saw rates worsen an average of .250%, but that can vary from lender to lender.

 

This Week’s Mortgage Rate Forecast

Mortgage Rates Forecast: IMPROVING, but for how long?
This week we are seeing the bounce that occurs after a continuous sell off in MBS like we saw since November 27th. Improvements from Friday morning interest rates should already be an average of .125% interest rate improvement, or some lenders only improving rebate pricing (the cost to obtain a rate or the credit your lender gives you towards your closing costs based on the rate selected). The technical and fundamental indicators however show that we will see this rally to be short lived, and that the longer term trend is for higher interest rates.

BOTTOM LINE: It is very important this week to stay in contact with me to watch for the end of the current MBS rally. We will see rates and/or rebate pricing improve for as long as we see the MBS rally, but we should be ready to lock in with any sign that the rally has stalled.  Be prepared for volatility later this week.