The House’s Proposal Concerning Reverse Mortgages

House appropriations committee
House appropriations committee

The House’s Proposal Concerning Reverse Mortgages

This month Congress will have to set up a committee to discuss the Bills, and come to some kind of a decision. The House’s version was passed in August. It decided that HUD would have to operate without any subsidy – even though a subsidy was not needed before. Earlier discussions had said it would be necessary to subsidize it at a cost of $798,000 because of the rise of housing prices and the economy. The House also reduced the principal limits by about 10% in order to compensate for the lack of subsidy.

A second issue was the lending limit which decided who would be eligible for a reverse mortgage. The current figure of $625,500 was set last year because of the economic problems. This was a raise from $417,000. The House wants to extend the current limits to the end of 2010.

The Senate’s Answer for Reverse Mortgages

The Senate’s version takes a different approach. Instead of making HUD operate within last year’s budget, it proposes that $288 million to given to help reduce the deficit. In addition, HUD will be required to reduce the principal limit by 5%. All new reverse mortgage loan commitments will have an additional Continue reading The House’s Proposal Concerning Reverse Mortgages

California Reverse Mortgage Information

The California Reverse Mortgage climate is continuing to grow strong.  After a record numbers and as credit becomes easier to obtain expect many more reverse mortgages to be completed this year.  With Los Angeles and Orange County leading the way rest assured that the impact of the economy has helped to erode much of the equity that was created during the boom years.

One fact that is easy to forget is that unlike much of the population seniors happen to have been fortunate enough to have owned their home outright before California real estate prices began to grow.

Federal Office
Location
HECM
Loans
Sep-2001
to
Feb-2009
FRESNO 7,866
LOS ANGELES 22,150
SACRAMENTO 12,706
SAN DIEGO 6,928
SAN FRANCISCO 11,932
SANTA ANA 19,835

While the Housing of Urban Development has yet to release complete totals for 2008, the numbers below show that demand is still high with strong numbers for 2009.

Calendar
Year
HECM
Loans
Sep-2001
to
Feb-2009
2001 452
2002 2,390
2003 4,272
2004 11,569
2005 14,719
2006 23,955
2007 18,599
2008 5,461

The California Reverse Mortgage is dominated by Wells Fargo Reverse Mortgage loan officers.  With competitive rates and aggressive agents combined with falling fees on reverse mortgages, Wells Fargo has found a good niche in the mortgage market.

Top California HECM Lenders HECM
Loans
Sep-2001
to
Feb-2009
WELLS FARGO BANK NA 19,569
FINANCIAL FREEDOM SENIOR FUNDI 6,575
SEATTLE MORTGAGE COMPANY 4,965
LIBERTY REVERSE MORTGAGE INC 4,850
WELLS FARGO HOME MORTGAGE INC 3,747
HOME CENTER MORTGAGE 1,951
SENIOR FUNDING ASSOCIATES 1,660
REVERSE MORTGAGES OF CA IN 1,459
PACIFIC REVERSE MORTGAGE INC 1,456
CALIFORNIA REVERSE MORTGAGE CO 1,426
NEW HORIZONS REVERSE MORTGAGE 1,417
LIBERTYSTREET FINANCIAL GROUP 1,194

2009 Reverse Mortgage & HECM Limits

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”