625,500 Reverse Mortgage Calculator - HECM Limits Compared
2/25/2009 - Official $625,000 Reverse Mortgage Loan Limit
The U.S. Department of Housing and Urban Development published Mortgagee Letter 2009-07, which officially raises the national limit for Home Equity Conversion Mortgages from $417,000 to $625,500 for the balance of 2009.
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Implementing the New $625,500 HECM Loan Limit
is unclear, from both a legal and practical standpoint, whether or
not HUD can place further origination fee limitations on HECM
transactions, but it is a topic of discussion.
NEWS! 02/12/2009 - Stimulus Bill Compromise Includes Higher HECM Loan Limit
NRMLA is pleased to announce that we have learned that the compromise package emerging from the House-Senate conference committee includes the House language setting the HECM loan limit at 150% of the Freddie Mac limit, which would put it at $625,500 -- for the balance of 2009 only. (Congress would have to act on it again before this year is out to extend it beyond '09.)
both houses of Congress approve the conference report, it will be sent
to President Obama for his signature. After the President signs the
bill, HUD will have to issue a Mortgagee Letter to implement the
change. From our previous experience, we have learned that there is no
telling exactly how long it will take for them to get this done, but
with the temporary nature of this provision, I hope that they will
act expeditiously. We are still waiting to verify that this is correct
by seeing the actual conference report.
-Peter H. Bell, President
What does the Reverse Mortgage increase do for you?
What’s in a Number? That really depends on what that number stands for. When you talk about Economic Stimulus Plans, a Million Dollars is a mere pittance, a Billion Dollars is a very poor start, and a Trillion Dollars is not even going to cover where it looks like we’re headed after you add the interest on to the current House or Senate Bills.
However, there is a provision in the House Bill, H. R. 1, the American Recovery and Reinvestment Act of 2009, to raise the government reverse mortgage limit on the Home Equity Conversion Mortgage (HECM or “Heck-um”). The limits were just increased from county to county limits in July of 2008 to a nationwide limit of $417,000, but that increase did not even take effect until Mortgagee Letter 2008-35 came out on November 6, 2008.
Prior to that time, the limit in all but a few exception counties in places like Hawaii and Alaska had limits of $362,790 or less. The national limit of $417,000 helped many senior homeowners, especially those in counties where limits were lower than $362,790 and the value of the property exceeded the old HUD Lending Limit for their area.
If passed without exception to the proposed HECM limit, the 2009 Bill that was passed in the House of Representatives would raise the HECM limit to $625,500. It is interesting to note that some Senators thought this is what they did in the 2008 Legislation. Barbara Boxer and Diane Feinstein, the two Senators from California, both sent out correspondence with different limits after the 2008 Bill passed, Ms. Boxer stating that the new limit then was $625,500 and Ms. Feinstein correctly stating the new HUD limit of $417,000. The move to $417,000 meant quite a bit to senior homeowners with properties worth $417,000 or more.
The table below shows a comparison of the amount a single borrower would receive, after normal closing costs for a state like California, at various ages for homes valued at the maximum lending limit (these numbers are also accurate for homes exceeding the appraised value shown but does not include the additional costs some states like Florida would encounter based on county and state mortgage taxes). These are estimates, exact quotes require birthdates of borrowers.
Please note that the difference for what the borrower receives at the HUD limit of $362,790 to $417,000 in some cases is only a little over $30,000 going up to just over $46,000 with the limit increase of 2008. This of course assumes the borrower was already eligible for the maximum limit of $362,790, if the borrower was in the lower limits then the move to $417,000 made a much bigger impact for that borrower.
But now if you go over to the $625,500 limit, a 62 year old borrower will receive another $121,000 over the $417,000 limit, a 74 year old borrower would receive another $140,000 and at the top of the table, there is a difference of more than $142,000.
Where this would be especially beneficial would be with senior borrowers with existing mortgages that needed to be paid off. We have seen so many borrowers with mortgage balances that were just too high to pay off with a reverse mortgage, even when they had a property with a high enough value to support the reverse mortgage based on the lower loan to values reverse mortgages typically require. For those senior borrowers, the increases being discussed now could be a life line. Many have seen their retirement funds shrink or disappear.
They have mortgages with monthly payments they can no longer make. The jumbo reverse mortgages vanished with the credit crunch in the second half of 2008 and for many of these senior borrowers, the HUD HECM has never even been an option…until possibly now. Although it can be a long way from the House of Representatives to being signed by the President, this is one provision which could help many senior homeowners of higher valued properties stay in their homes.
By granting them access to the equity they have via a government-insured HECM, Congress may give a greater number of seniors the added ability to stay at home and age in dignity during these tough times.
Can the $625,500 Reverse Mortgage Limit help you?
If you would like a complete, no-obligation personal analysis including amortization schedules and costs associated please call Toll Free (888) 801-2762 Ext. 1 or request reverse mortgage analysis
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