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The Federal Housing Administration (FHA) has increased the threshold for large multifamily loans from $75 million to $120 million. The move was taken to enable a greater number of transactions to use standard underwriting processes when submitted for FHA multifamily insurance.

This is the first increase to the large loan limit threshold in nearly a decade. FHA also announced that it will review the threshold on an annual basis, with the possibility of future increases in $5 million increments, if warranted. These changes are designed to simplify multifamily underwriting without adding undue risk to the FHA as well as provide for regular threshold adjustments so not to lag market changes.

“We know that borrowers are contending with the dual challenges of increased development costs and meeting the nation’s dire need for more rental housing,” says Julia Gordon, FHA commissioner and assistant secretary for housing at the Department of Housing and Urban Development (HUD). “Anything we can do to prudently alleviate extra steps in obtaining FHA insurance will help all of us meet the housing supply challenges before us.”

The Mortgage Bankers Association (MBA) applauded the news.

“HUD’s increase to the large loan limit threshold—the first adjustment since 2014—will help facilitate the production of more market and affordable rental housing units at a time when supply is desperately needed in markets across the country,” said MBA president and CEO Bob Broeksmit. “MBA has long advocated for this move, citing labor and supply shortages, higher construction costs, and the importance of having loan limits that are consistent with economic conditions. The increase to the threshold—along with a new method to review it on an annual basis—will help ensure that HUD multifamily financing is a viable option at all times during the lending cycle.”