FHA Eases Lien Amount Limitations for Purchases and Refinances

""HUD"":http://www.hud.gov has issued new guidelines which ease the requirements for loan amounts the ""Federal Housing Administration"":http://www.fha.gov (FHA) can insure.

The federal agency's previous policy was that the total of all liens against a subject property, including the FHA-insured first mortgage and any subordinate liens, could not exceed the maximum amount insurable based on geographic location.
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""Mortgagee Letter 10-36"":http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-36ml.pdf released late last month eliminates that requirement for both purchase and refinance transactions.

""[O]nly the FHA-insured first lien is subject to FHA's geographical maximum mortgage limits,"" the agency stated.

The revised loan amount requirements apply to case numbers dated on or after September 7, 2010.

The agency still requires that the combined loan amount of the FHA-insured first mortgage and any subordinate liens not exceed FHA's applicable maximum loan-to-value (LTV) ratio (which may vary depending on the refinance program utilized).

Existing or modified subordinate liens may remain outstanding, and new subordinate liens may be offered to facilitate a refinance transaction, provided that the new FHA-insured first mortgage meets the eligibility criteria for mortgages with secondary financing from private individuals, other organizations, or nonprofit non-government agencies.