REVESE MORTGAGE LIMIT RAISED TO $625,500

$625M by Stimulus Bill
Making More Seniors Eligible

Reverse Mortgages may boom with clarification of the new provision allowing new home purchases

Feb. 19, 2009 – Many more senior citizens became eligible to take advantage of the government’s reverse mortgage program this week as the loan limit was raised to $625,500 for the rest of 2009, from the former limit of $417,000.

The temporary increase in the HUD Reverse Mortgage program is included in the Stimulus Bill, signed by President Barack Obama, according to the National Reverse Mortgage Lenders Association (NRMLA).

The NRMLA says the limit will 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 of the country, 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, according to Cliff Auerswald of the All Reverse Mortgage Company.

Auerswald says 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,” according to Auerswald...

...He suggests the following may describe seniors who will be interested in the new higher limits:

● 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.

Reverse Mortgage Only for Those Age 62 and Older

Reverse mortgages allow older homeowners to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.

In a “regular” mortgage, you make monthly payments to the lender. But in a “reverse” mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.

To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no income restrictions.

The legislation will only make the limits available until the end of 2009 and then it will be up to Congress to vote to extend that loan amount further.

The new expanded loan limit may create a boom in reverse mortgage activities for senior citizens, and there will most certainly be a boom...(in reverse mortgages that now) allows older Americans to us reverse mortgages to buy new homes.

Auerswald says there is already “a backlog” of applicants waiting for the home purchase program. He says, too that margins and rates fluctuate with reverse mortgages now more than ever in the past.