Recent downward adjustments in Federal Housing Administration loan limits in certain metropolitan statistical areas will have a significant affect on minority borrowers, according to a new Urban Institute research paper.
“Overall, the impact of the change in the loan limits is small, but certain communities will be greatly affected,” according to the authors Laurie Goodman, Ellen Seidman and Jun Zhu.
The authors identified 30 census tracks in seven MSAs (Riverside, Fresno, Stockton, Bakersfield, Las Vegas, Salt Lake City and Phoenix) with a high percentage of minority FHA borrowers.
They note that the loan limits in those census tracks have dropped more than FHA's formula would suggest. And many borrowers who qualified for a FHA loan in 2012 and 2013 might not be eligible in 2014.
“We urge the FHA to take another look at all areas in which the drop in loan limits exceeds 20% and determine whether corrective action is necessary,” the Urban Institute paper says.