FHA Announces New Loan Limits for 2018, Blocks PACE Loans

The maximum conforming loan limits for mortgages the Federal Housing Administration will insure will increase in 2018, the agency said today. The limits will align with those employed by Fannie Mae and Freddie Mac.

The loan limit in lower-cost areas will be $294,515, or 65 percent of the national conforming loan limit of $453,100. In high-cost areas, the limit will be $679,650, the FHA said. FHA-insured reverse mortgages will be capped at $679,650. Approximately 82 percent of U.S. counties are considered lower-cost areas, with 2.3 percent at the ceiling and the rest somewhere in between.

In related news, as signaled earlier this year by HUD Secretary Ben Carson, FHA announced that it will no longer insure mortgages for properties backed by Property Assessed Clean Energy, or PACE, loans, a controversial financial product that allows homeowners to pay for energy-efficient retrofitting — such as solar panels and high-efficiency air conditioners — through their property tax assessments. The policy shift affects mortgages going forward from Jan. 6, 2018.

The American Bankers Association and other trade groups, as well as the Federal Housing Finance Agency and the housing GSEs, have long expressed concern about PACE loans — currently available in about 30 states — taking lien priority over the first mortgage lien. FHFA has prohibited Fannie Mae and Freddie Mac from purchasing loans with PACE liens which take precedence over the first mortgage, citing concerns about taxpayer risk.