Reverse Mortgage News

Why Not Raise Reverse Mortgage Limits?

May 1 , 2008

By Tom Kelly, West Side Leader

While loan limits for conventional mortgages recently were raised with the passage of the Economic Stimulus Act of 2008, those seniors hoping to tap into additional home equity via the nation’s most popular reverse mortgage are stuck with the same loan ceilings — at least for now.

The Federal Housing Administration (FHA), a branch of the U.S. Department of Housing and Urban Development, insures the Home Equity Conversion Mortgage program, which accounts for nearly 85 percent of the reverse market. The program has insured more than 240,000 reverse mortgages since 1990, while private jumbo reverse plans also have been available.

While FHA announced a temporary increase in loan limits for all “forward” mortgages as a result of the new legislation, Home Equity Conversion Mortgages (HECMs) were not included in the Economic Stimulus Act. FHA’s loan limits for HECMs will retain the existing “floor” of 48 percent of the conforming loan limit or $200,160, as well as the “ceiling” of 87 percent or $362,790. Those areas in between are limited to 95 percent of the local median home value.

“This is very disappointing,’’ said Lee McCutcheon, a reverse mortgage specialist. “There are many seniors who have been waiting for the higher figures to be in place so that they could obtain a reverse mortgage or refinance an existing reverse mortgage. The increased limits would really help, and hopefully they will be adopted soon.”

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