MORTGAGEE LETTER: 2026-05

DATE: May 20, 2026

Subject

Annual Revisions to Base City High Cost Percentage and High Cost Areas Annual Indexing of MAP Guide’s Substantial Rehabilitation and Large Loan Risk Mitigation Thresholds

Purpose

Maximum mortgage amounts were revised by the Consolidated Appropriations Act, 2008 (Public Law 110-161, approved December 26, 2007) (FY 2008 Appropriations Act). Section 221 of the General Provisions of Title II of Division K of the FY 2008 Appropriations Act revised the statutory exceptions to maximum mortgage amounts for the FHA Multifamily Housing Programs, listed in Section 221 of the FY 2008 Appropriations Act, by:

(1) up to 170 percent, (equivalent to a 270 percent multiplier) in geographical areas where cost levels so require or (2) up to 215 percent in High Cost Areas, (equivalent to a 315 percent multiplier) where necessary on a project-by-project basis.

The law does not determine which areas are to be considered “High Cost Areas.” Accordingly, the Office of Multifamily Production has developed a list of High Cost Percentages (HCP) and High Cost Areas for 2026. The threshold for determining a High Cost Area (Special Limit Areas excepted) is a calculated, uncapped HCP that is greater than either 1) the United States average HCP, or 2) 270 percent.

For the geographic areas shown in Table 1, the maximum mortgage amount may be increased by its listed HCP. For the eligible High Cost Areas (Special Limit Areas excepted), the maximum mortgage amount may be increased by up to 215 percent, (equivalent to a 315 percent multiplier), where necessary on a project-by-project basis.

If only one geographic area is named in a given state, that area’s HCP is to be used for all localities within the state. If multiple geographic areas are named in a given state, the applicable HCP is the listed area closest to the project’s location.

The designated Annual Base City High Cost Percentages and High Cost Areas are effective January 1, 2026, for FHA multifamily mortgage insurance Firm Commitment applications and for amendments which have not been initially endorsed.

Special Limit Areas

Guam, the U.S. Virgin Islands, and the states of Alaska and Hawaii are Special Limit areas. The HCP for Special Limit Areas is 405 percent.

Per Unit Limit for Substantial Rehabilitation for Calendar Year 2026

The 2016 Multifamily Accelerated Processing (MAP) Guide established a base amount of $15,000 per unit to define substantial rehabilitation for FHA insured loan programs. Section 5.1.2.A.2.b of the 2020 MAP Guide requires that this base amount be annually adjusted for inflation based on the percentage change published by the Bureau of Labor Statistics of the Department of Labor or other inflation cost index. Accordingly, the 2026 base amount per dwelling unit to determine substantial rehabilitation for FHA insured loan programs is $20,406 and was calculated using the CPI-U cost index increase of 2.3 percent as applied to the previous year’s base amount.

Large Loan Risk Mitigation Threshold for Calendar Year 2026

Mortgagee Letter 2023-14 established a base loan amount of $120 million to define the large loan risk mitigation threshold for applicable FHA insured loan programs. This Mortgagee Letter amended Section 3.10.1.C of the MAP Guide requiring HUD to annually review the threshold amount for an inflation adjustment, in $5 million increments, based on the percentage change published by the Bureau of Labor Statistics of the Department of Labor or other inflation cost index. Applying the CPI-U cost index increase of 2.3 percent to the previous year’s adjusted amount, the resulting value does not achieve the $5 million increment requirement, and thus the 2026 large loan threshold is unchanged and remains at $130 million.

This threshold may be applied to FHA multifamily mortgage insurance applications submitted or amended on or after January 1, 2026, so long as the loan has not been initially endorsed.

TABLE 1 FHA MULTIFAMILY STATUTORY MORTGAGE PROGRAMS BASE PERCENTAGES FOR HIGH COST AREAS – EFFECTIVE JANUARY 2026

Footnotes:

1. Special Limit Area.