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FHA high-cost area limits in certain regions are subject to a ceiling that is calculated based on a percentage of the FREDDI MAC loan limits. Can you explain the relationship between these FHA high-cost area limits and the FREDDI MAC loan limits?

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Final answer:

The FHA high-cost area limits are adjusted to reflect high real estate prices in certain areas and are calculated based on a percentage of the FREDDIE MAC loan limits. These limits ensure that FHA loans remain accessible in more expensive housing markets.

Step-by-step explanation:

The FHA high-cost area limits are designed in relation to the FREDDIE MAC loan limits to ensure that federally insured loans reflect the varying real estate prices in different areas. The FHA limits are a percentage of the FREDDIE MAC limits, adjusted accordingly.

Both these types of loan limits are in place to facilitate accessible loans in areas where real estate prices are significantly higher than average. This system helps ensure that FHA loans are available to more people, even in pricier housing markets. However, these limits also demonstrate principles similar to those in usury laws, which set upper limits on interest rates.

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