Housing and Economic Recovery Act of 2008 (HERA) Remain Unchanged

HERA provisions set loan
limits as a function of local area median home values.  Consistent with FHFA’s prior practice, in
determining the 2011 HERA limits, FHFA used median home values estimated by the
Federal Housing Administration (FHA) of the Department of Housing and Urban
Development (HUD).  FHA has calculated
those median values for the purpose of determining its own lending limits.  FHA will allow a 30-day appeals period for
appellants to submit data suggesting a potentially higher median home value for
a given area.

The HERA-calculated maximum
loan limit for one-unit properties in most of the contiguous United States has
been left unchanged at $417,000 for 2011.
Corresponding loan limits for two-, three-, and four-unit properties
will also generally remain at earlier levels: $533,850, $645,300, and $801,950
respectively for homes in the contiguous U.S.
Loan limits are higher in certain high cost areas, where median home
prices are high, and in certain statutorily designated locations, including
Alaska, Hawaii, Guam and the U.S. Virgin Islands.  In addition
to  being necessary components of
the calculation of maximum loan limits for FY2011-originated loans, these 2011
HERA limits are significant in that they apply to Fannie Mae and Freddie Mac’s
2011 acquisitions of certain seasoned loans and to mortgages originated after
September 30, 2011.

The national limit for 2011
was left unchanged based on prior declines in FHFA’s monthly and quarterly
house price indexes over the past three years.    HERA requires that the national loan limit
be adjusted each year to reflect changes in the national average home price,
but does not permit declines in the national loan limit.  In
November  2008  and
November  2009,  when
setting  loan  limits
under  the  terms
of  HERA, FHFA found that the
national average home price had declined over the prior years.  As a result, the national loan limit was left
unchanged.   This year, the monthly and
quarterly house price index (HPI) series produced by FHFA show further national
price declines and thus the loan limit is again unchanged.

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