FHA raises area loan cap a mere $638 Realty agents expected rise of about $27,000 in metropolitan area

Huge increase for metro D.C.

Low Baltimore prices reportedly hold down region's mortgage limit

November 15, 1998|By Robert Nusgart | Robert Nusgart,SUN REAL ESTATE EDITOR

When the new and higher Federal Housing Administration insured mortgage limits were announced last month, the bump that many thought the Baltimore metropolitan area would get didn't materialize.

Nationally, the maximum FHA-insured mortgage -- used by many first-time homebuyers -- grew from $170,362 to $197,621.

Over the next five years, the increase is expected to provide homeownership opportunities for up to 175,000 families that would not have qualified under the previous limits.

Yet the ceiling was raised a mere $638 to $171,000 in metropolitan Baltimore.

"I'm surprised and I am disappointed that we didn't get a higher increase," said Gilbert D. Marsiglia, former president of the Greater Baltimore Board of Realtors. "I thought we were going to get around that $190,000 figure."

In contrast, Frederick County saw its FHA ceiling increase to $194,750. Charles and Calvert counties received a similar increase, as did other subdivisions in the Washington metropolitan statistical area.

So how is it that homebuyers in generally rural Frederick County can apply for a higher loan than those in Howard or Anne Arundel counties?

James Kelly, spokesman for the Baltimore office of the Department of Housing and Urban Development, says the increase is awarded to a metropolitan statistical area (MSA), even though it may include areas with relatively cheap housing.

"It's a substantial increase for some of the low-cost areas and rural areas," Kelly said. "It's some benefit for D.C. It doesn't benefit the Baltimore metropolitan area very much at all."

The FHA mortgage limit is calculated by taking a percentage of the maximum Fannie Mae and Freddie Mac conventional loan limit, which is $227,150.

Earlier this year, the Greater Baltimore Board of Realtors as well as other housing and mortgage institutions lobbied to get the FHA loan limits on a par with Fannie Mae and Freddie Mac. However, Congress disregarded that plea and, instead, increased the percentage used to calculate FHA loans from 75 percent to 87 percent.

HUD then takes the median sales price of all homes sold in an MSA and multiplies that by 95 percent. Before the new legislation took effect, the Baltimore MSA median barely rose above the $170,362 cap.

Conversely, the Washington suburbs, which include the high-priced homes of Northern Virginia and Montgomery County, were substantially held down by the cap.

And when the new formula went into effect, the change for suburban Washington was dramatic. For Baltimore, it was anti-climatic.

"What happened was that Baltimore just barely qualified for the maximum under the old rules, so when they raised the maximum, Baltimore's limit didn't change very much," Kelly said. "The median house price [in Frederick] would probably not be as high as their limit, but they are riding the coattails of [the] Washington" MSA, he added.

"One of the problems that you always have in the Baltimore metropolitan statistical area is that Baltimore City prices are generally lower and that keeps the average down," said Theodore E. "Chip" Reichhart, president of MNC Mortgage Corp.

Excluding new-home sales, the median sales price for an existing home in Baltimore was $64,605 in 1997, according to statistics from the Maryland Association of Realtors. In Montgomery County it was $174,233, while Frederick was $136,470. Both are in the Washington metropolitan statistical area.

Homes in Howard County had a median sales price of $164,618 and Anne Arundel it was $143,418. The counties are in the Baltimore MSA.

Kelly says the new FHA loan limits can be appealed to HUD.

"If they could establish that a county had a higher median sales price than the $171,000, then they could apply for an exception based on the data for that county," Kelly said. "If Howard County could show that it was being adversely affected, there is a route to appeal to see if a higher mortgage limit can be justified."

Pub Date: 11/15/98

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