FHA announces 2018 limits, scraps insurance for PACE homes

The Federal Housing Administration (FHA) has announced the 2018 loan limits with most areas set for a rise – and says it will end a short-lived policy on PACE assessed homes

FHA announces 2018 limits, scraps insurance for PACE homes
The Federal Housing Administration (FHA) has announced the 2018 loan limits with most areas set for a rise – and says it will end a short-lived policy on PACE assessed homes.

The new loan limits come into force on January 1, 2018 and in high-cost areas of the country, FHA's loan limit ceiling will increase to $679,650 from $636,150. FHA will also increase its floor to $294,515 from $275,665.

The FHA is required to set Single Family forward loan limits at 115% of median house prices, subject to a floor and a ceiling on the limits.

The National Mortgage Limit for FHA-insured Home Equity Conversion Mortgages (HECMs), or reverse mortgages, will increase to $679,650 from $636,150 in 2018.

The rise in home prices and changes to the limits mean that the maximum loan limits for FHA forward mortgages will rise in 3,011 counties. In 223 counties, FHA's loan limits will remain unchanged.

The end of insurance for home with PACE assessments
The FHA has also announced that it is reversing a short-lived policy introduced in 2016 and will no longer insure new mortgages on properties that include Property Assessed Clean Energy (PACE) assessments.

"FHA can no longer tolerate putting taxpayers at risk by allowing obligations like these to be placed ahead of the mortgage itself in the event of a default," said U.S. Housing and Urban Development (HUD) Secretary Ben Carson.
"Assessments such as these are potentially dangerous for our Mutual Mortgage Insurance Fund and may have serious consequences on a consumer's ability to repay, or when they attempt to refinance their mortgage or sell their home."

FHA's decision is part of a larger effort to protect the health of its Single Family Mutual Mortgage Insurance Fund (MMIF) and the borrowers who rely on it.