FHA crunches numbers for new loan ceiling

The Federal Housing Administration says it will publish new ceilings for the Fannie Mae and Freddie Mac mortgages it insures in mid-March. Its current cap on loans is $417,000. The elevated ceilings, which are to remain in effect for one year, will vary across the nation, based on each area's median home price.
For five years, housing industry groups argued that the loan ceilings for such mortgages were too low in markets with skyrocketing home prices such as the Inland area. Then, home values tumbled.
Now that private mortgage investors have fled, scared by rising defaults and foreclosures, legislation enacted earlier this month will permit Fannie Mae and Freddie Mac, both government-sponsored purchasers of mortgages, and FHA to play a bigger role.
Mortgage lenders are hoping that Fannie Mae and Freddie Mac will provide an alternative to the borrowers with so-called "jumbo mortgages." Since last summer, they have had to pay very high interest rates -- about 1.5 percentage points higher than those on smaller loans.