2009 Reverse Mortgages Limits Raise to $625,500

The National Reverse Mortgage Lenders Association (NRMLA) has announced that they have verified that the temporary increase in the HUD Reverse Mortgage program is included in the Stimulus Bill which was approved by the House-Senate Conference Committee yesterday.  The language contained in the NRMLA announcement states that the limit shall be raised on a temporary basis to 150% of the Freddie Mac Limit for the remainder of 2009 which would put it at $625,500. 

HUD normally has different limits for different areas, except in the case of the Home Equity Conversion Mortgage (HECM or “Heck-um”) program which was just changed last year to a national limit of $417,000.  This is important because that would seem to indicate that there will be no differences in high cost areas versus areas not considered high cost, that the limit will be $625,500 nationally.

This is very important to senior homeowners who have properties with higher values, especially those who previously had existing mortgages with balances that the traditional reverse mortgage program could not pay off.  With the disappearance of proprietary or jumbo reverse mortgage products, these senior homeowners had nowhere to turn.  With the passage of this program, senior borrowers with high valued homes may now be able to receive much more money to use for whatever need they may have, including retiring higher existing debt.

Taking a look at the chart below, you can see how much more a borrower can expect to receive under the new limit.  This chart is only an estimate and you must use the Reverse Mortgage Calculator to get your exact figures for your area, but if you take the youngest borrowers age and look at the figures on the chart, it will give you an estimate of the comparison of approximately what the borrower would receive at the existing limit of $417,000 and how much more he/she/they will receive at the new proposed limit of $625,500. 

If you have been waiting because your benefit amount would not pay off enough of your existing debt; if you had already received a reverse mortgage but were limited in the amount of funds you could receive even though your property was worth considerably more than the current HUD limit; or if you find that with the current economic circumstances you must do something to protect your way of life, it might be time for you to look into or relook at a reverse mortgage under the new limits.

The Bill will only make the limits available until the end of 2009 and then it would be up to Congress to vote to extend that loan amount further.  Also, the Bill must still be signed into law by the President and then implemented by HUD before a single loan can be done at the new limit.  But if this is something that will help you or your loved ones, if might be something you want to start thinking about now. 

No one knows what the effect on the volumes of the reverse mortgage lenders will be yet (this change coupled with the purchase reverse mortgages when the final clarifications are finally released by HUD are both coming out about the same time).  There is a backlog in underwriting and closing on the forward loan side with FHA loans now, and there is a possibility that lenders may become bogged down on the reverse side as well if these programs trigger a flood of new applications. Margins and rates fluctuate with reverse mortgages now more than ever in the past. 

Keep these things in mind as you and your loved ones consider the new higher limits and don’t wait until the last minute to start the process if this is what you plan to do.  If you have questions, seek the help and guidance of a qualified reverse mortgage specialist in conjunction with your trusted family financial advisor.  We look for this to be a very good opportunity for those who need it and can really use it.