FHA lowers limits on loans

by Catherine Reagor - Nov. 19, 2008 12:00 AM
The Arizona Republic

There will be a new FHA loan limit for Maricopa County next year, and it's lower.

So if you were planning to buy a Valley home, now would be a great time to do it.

Starting in January, the maximum for the government-backed Federal Housing Administration loans in Maricopa County will be $271,050. Currently, the FHA limit in the Valley is $346,250.

The U.S. Department of Housing and Urban Development quietly announced the changes to FHA loans last week.

Last year, HUD raised its loan limits to try to help struggling homeowners who owed more than their house was worth and couldn't refinance anywhere else. The move also was designed to encourage more lenders and borrowers to use FHA loans in the tight credit market.

The FHA dropped its limit in Maricopa because it considers the Valley a "low-cost" area for housing. Metropolitan Phoenix's median existing-home price is now $175,000, according to the realty studies department at Arizona State University Polytechnic. That compares with $267,000 at the peak of the market in early 2006.

The FHA loan limit will fall to $271,050 in every Arizona county except Coconino, where it will be $333,500 because of Flagstaff's higher home prices.

Pricey home areas such as San Francisco will have a loan limit of $625,500, which is below the $729,750 that it was raised to last year.

Before Congress

ASU business Professor Anthony Sanders testified to Congress late last week about the Troubled Asset Relief Program. Unlike U.S. Treasury Secretary Henry Paulson, Sanders believes loan modifications for struggling homeowners are the best way to get the economy out of a free fall.

"While U.S. Treasury Secretary Henry Paulson has announced that TARP will not be used to purchase troubled loans from banks, it is still of tantamount importance to stabilize the housing and mortgage markets, and loan modification is one of the best tools available to the Treasury, even if they decide in the short run not to deploy it," said Sanders, who is also a former director and head of asset-backed and mortgage-backed securities research for Deutsche Bank in New York.

Jail for mortgage broker

Rick Thomas McCullough has been sentenced to 3 1/2 years in jail for running a residential mortgage scam in the Valley.

Arizona Attorney General Terry Goddard said the scam defrauded four senior citizens out of more than $400,000.

McCullough, 36, of Phoenix, was also ordered to pay $343,811 in restitution.

McCullough was the president of mortgage firm CactusCash. Earlier this year, regulator Arizona Department of Financial Institutions revoked his broker's license and barred him from the state's mortgage industry. Department of Financial Institutions Superintendent Felecia Rotellini said this case came out of a complaint to the state's Mortgage Fraud Task Force.