HECM: THE ONLY GAME IN TOWN??

HECM Reverse Mortgages Are Almost The Only Choice Left
Monday, June 22, 2009 by Admin. at Let Your Home Pay You

Reverse mortgages have been in existence for more than twenty years. During that time there have been quite a few incarnations of this equity release mortgage designed for senior homeowners as a way to supplement retirement incomes and lifestyle.

There have been reverse mortgages offered by individual financial institutions and insurance companies, usually referred to as proprietary loans because the institutions would custom design them and usually retain them for their own investment portfolios.

There have been "single purpose" reverse mortgage home loans, usually offered through communities or non-profits. FNMA had a reverse mortgage called "The Home Keeper,"but discontinued offering it last year. There were equity share products, like Equity Key and Rex, which participated in future home appreciation at the end of the loan term.

Now The Only Game In Town

However, since the meltdown on Wall Street and the frozen credit markets, there are virtually no reverse mortgage loan products currently being offered other than HECM* reverse mortgages, which are insured by FHA and backed by HUD. HECM reverse mortgages historically captured the lion's share of this market anyway, but now it is almost the only viable choice left standing during this economic crisis.

Fortunately, enhancements to the government reverse mortgage were included as part of President Obama's Economic Stimulus Plan back in February. The lending limit was increased from a national loan limit of $417,000. to $625,500. This increase offers senior homeowners with higher value homes the opportunity to access a much larger portion of home equity than they would have been able to with the lower limit.

The one caveat to this enhancement is that it is temporary and will only be available through the end of this year, unless Congress decides to extend it. With property values declining throughout the country, it might be a wise decision for those folks with property values greater than $400,000. to take a serious look at HECM reverse mortgages BEFORE the end of the year.

If you (have a higher value home and) do not do it before the end of 2009 and Congress does not extend the higher loan limit, you could find yourself shut out of a government reverse mortgage all together. And who knows, if and when, alternative products will be available again.

*HECM stands for Home Equity Conversion Mortgage