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 How are loan limits set in high-cost areas?

HERA provisions set loan limits as a function of local-area median home values. The CLL is required to be increased in areas where 115 percent of the median home value exceeds the baseline CLL, not to exceed an amount that is 150 percent of the baseline CLL. To perform calculations, counties are grouped by core-based statistical areas (CBSAs) as delineated by the Office of Management and Budget. FHFA coordinates with the U.S. Department of Housing and Urban Development to calculate CBSA-wide median home values equal to the median price for the highest-cost component county in each CBSA. Each county in the CBSA receives the same value and a high-cost loan limit is assigned as described above if the multiple exceeds the baseline CLL. For example, Sacramento-Roseville-Folsom, CA is delineated by four counties. As of 2021Q3, the highest county median home value was $587,000 which when multiplied by 115 percent gave a loan 4 limit of $675,050 that was above the baseline loan limit. This value was applied similarly to all counties in that CBSA. Some areas are extremely expensive, but their loan limits are still capped. In 2021Q3, the nation’s capital (Washington-Arlington-Alexandria, DC-VA-MD-WV) had a median home value of $975,000 which exceed the high-cost area ceiling of $970,800. In these instances, all counties within the CBSA receive the high-cost ceiling as their loan limit value. Finally, not all CBSAs qualify as being high-cost areas. The capital of Florida, Tallahassee, is a CBSA with four counties but their highest county median home value was only $214,000 which means the local area is not expensive enough to receive an adjustment. As a result, the baseline loan limit applies to all counties in that local area.

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