Parts of Jefferson County, WV, are considered a high cost area under the new loan limits issued just before Christmas for mortgages insured by the Federal Housing Administration.

As part of the Washington, D.C., metropolitan statistical area, Jefferson is one of 80 jurisdictions where the FHA can now insure loans of up to $312,895, the Department of Housing Urban Development said.

Effective Jan. 1, the new FHA "ceiling" in high cost areas is 87 percent of the limit on loans which can be purchased by Freddie Mac. The Freddie Mac/Fannie Mae conventional loan limit rose to $359,650, also on Jan. 1. In most of the nation's 3,300 other jurisdictions, the FHA "floor" is $172,632. But in about 530 places, the FHA maximum is somewhere in between $172,632 and $359,650.

The new limits already are the subject of controversy. For example, some Chicago area lenders already are grumbling that Jefferson County, a distant Washington area jurisdiction at best, is considered a high-cost area but Cook County, Ill., is not.

But HUD sets the FHA ceilings based on the National Housing Act, which says the maximum should be 95 percent of the median house price for a given area.

The law also allows for exceptions. For example, it says the limit cannot exceed 87 percent of the Freddie Mac ceiling, nor can it be lower than 48 percent of the Freddie maximum.

Consequently, areas where 95 percent of the median is less than 48 percent of the Freddie limit use the floor, or $172,632, as their maximum, and areas where 95 percent of median exceeds 87 percent use the ceiling, or $312,895, as their maximum.

Areas where 95 percent of median is between the floor and the ceiling -- such as Cook County -- use the 95 percent figure.

The FHA insures lenders against default on low-downpayment mortgages made to borrowers whose credit profiles don't quite measure up to the standards set down by Fannie and Freddie, the two secondary market institutions created by Congress to bring liquidity to the housing finance sector.

Perhaps would-be borrowers have been late on their credit card payments on too many occasions over the last year or two. Maybe they have too much credit, or perhaps the don't earn enough to qualify for the conventional mortgages that Fannie and Freddie are willing to buy from local lenders.

Whatever the reason, lenders consider FHA loans to be somewhat more risky, a fact borne out by the most recent delinquency statistics published by the Mortgage Bankers Association.

In the third quarter, the MBA said, 12.2 percent of all FHA borrowers were at least one month behind on their payments while just 2.3 percent of all conventional borrowers were late.

Also, while the year-over-year foreclosure rate declined for conventional loans in the third quarter, it was up for FHA loans.

Because of the greater risk, lenders charge slightly more for FHA-insured loans than conventional low-downpayment mortgages backed by private insurers. According to HSH Associates, a Pompton Plains, N.J., financial publisher, the current difference is about 0.10 percentage points.

However, fees on FHA loans also are somewhat higher, including insurance premiums, which must be paid up front at closing rather than on a monthly basis, as private insurers allow.

The new FHA limits cover not only the government's basic 203(b) one-to-four family loan program but also several other key initiatives, including mortgages for disaster victims, rehabilitation loans, loans on properties in declining areas, condominium mortgages and home equity conversion mortgages.

Loan limits for two-family properties now range from $220,992 to $400,548. On three-unit buildings, the ceiling ranges from $267,120 to $484,155, and on four-unit properties, the maximum runs from $331,968 to $601,692.