2009 Reverse Mortgage & HECM Limits

Posted by Charles D

February 11, 2009

While reverse mortgage loan limits recently increased nearly $60,000 homeowner’s equity could not fall any faster if it tried. It seems that as a mortgage broker, those of us with insights to understand that the good times of easy financinig would not last and were smart enough to seek alternate revenue streams like the reverse mortgage have been able to weather the storm.

You would be amazed at the vast amounts of new mortgage brokers that came online in the last four years. I’d venture to say that I have seen about 65% of those money chasers leave, even while mortgage rates have fallen and reverse mortgage rates have increased.

A review, reverse mortgage allows homeowners 62 or older to borrow up to $417,000 of their home’s equity to use any way they wish; the old limit was $352,790. They don’t have to repay it as long as they stay in the home. The new limit of course benefits seniors that were in strong positions before the boom and after the crash.

Reverse mortgages have been growing in popularity for some years now, with more than 100,000 homeowners nationally taking them out so far this year. They’ve been offered by private lenders, by quasi-governmental mortgage backer Fannie Mae and by the Federal Housing Administration. According to HUD the new stimulus package will increase rates again,

The Act also pegs the national mortgage limit for FHA-insured reverse mortgages to the national conforming loan limit. The FHA product known as the Home Equity Conversion Mortgage (HECM) will therefore have a national mortgage limit of $417,000. Unlike the new forward mortgage loan limits, the new HECM loans limits are effective on loans insured or after November 6, 2008. This is the first time that a single limit applies to these mortgages nationwide. As in previous years, the special exception areas of Alaska, Hawaii, Guam, and the Virgin Islands may have higher loan limits. Starting in January 2009 counties in those areas may have loan limits of 115 percent of area median prices, where that amount is above $417,000, up to a ceiling of $625,500.

Additionally traditional mortgages will change, beginning January 1, 2009, FHA will insure single-family home mortgages up to $271,050 in low cost areas and up to a maximum of $625,500 in high cost areas. The February 2008 Stimulus Package temporarily raised the FHA maximum to $729,750 through December 31, 2008. The new $625,500 maximum, however, represents a significant increase over the $362,790 limit that was in effect prior to the Stimulus Package.

“In today’s environment where access to credit is being restricted, we need to make mortgage loans readily available to households throughout the country, and especially in high-cost areas,” said Preston. “These new loan limits will ensure FHA can to continue help struggling homeowners refinance into safe, affordable government-insured loans, and allow many first-time buyers take advantage of today’s buyers market”