02/25/2009 - Official $625,000 Reverse Mortgage Loan Limit

Mortgagee Letter 2009-07 Raises Limits to $625,500

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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.) 

The conference report must still be voted on separately by the House and the Senate, so it is not yet entirely final. The House adopted a non-binding motion on Tuesday that directs the conference report be posted on the Internet for 48 hours before the House votes. That would put the House floor vote the evening of Feb. 14, at the earliest, if the conference report is posted today.

Once 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

Depending on your political persuasion, you may be expecting this Bill to be one of the best things to come along since sliced bread or one of the worst possible disasters since the dropping of the atomic bomb.  Americans are split deeply about this legislation and as one might expect, much of the split does run along party lines, but also along the lines of those who support big government spending and those who believe that unchecked government spending is exactly what got us to the deficit and mess in which we find ourselves today. There is no doubt about the severity of the stake riding on the outcome of this Bill which passed the House of Representatives and now has a version in the Senate.

With one of the worst economic recessions since the Great Depression upon us, with unemployment rising weekly along with record home foreclosures, Congress has set about to make a plan which has been billed a “stimulus package”, designed to stimulate the economy and create jobs.  Proponents of the package claim that it is needed and needed now to start projects to put Americans to work. 

Opponents are quick to point out that most of the projects don’t have an immediate impact and question just how many will receive employment as a result of many of the provisions contained in the Bill, calling them “pork” or pet projects.  Critics say they will serve only one purpose, spending money or paying back political backers and contributors but will not create massive jobs.  The package was originally sold as infrastructure improvement (roads, bridges, energy, etc) putting millions of Americans to work on much needed projects which would not only stimulate the economy but also improve the nation. 

But when reading over the Bills crafted at both the House and Senate, one can find tax dollars going to programs such as $50 Million for the promotion of the arts; $335 Million for education about sexually transmitted diseases; $600 Million for new “green friendly” cars for government workers (even though the infrastructure of gas pumps to run these cars is not currently in place); $600 Million for grants for diesel emission reduction; $650 Million for “alternative energy technologies, energy efficiency enhancements, and deferred maintenance at Federal Facilities; $1.5 Billion for construction of “green schools”; $800 Million to clean up Superfund sites; $400 Million for NASA scientists to study climate change; $1 Billion to the controversial union Community Oriented Policing Services Hiring Program; $2.75 Billion in stem cell research; $83 Billion for an earned income credit for those who do not pay taxes; $4.19 Billion to groups like ACORN and other larger dollar amounts for plug in car stations, $246 Million for Hollywood, $75 Million for smoking cessation programs, bike and walking trails and even ATV trails (those All Terrain Vehicles that you see people enthusiastically riding with the three or four wheels). 

In fact, only a little over 3% appears to be going to tangible road and bridge construction.  There are projects for many federal agencies.  Billions of dollars are slated to go to federal programs overseen by the Office of Management and Budget or the Government Accountability Office ($54 Billion), repairs to the Smithsonian Institution Facilities; for agricultural research.  How about $1 Billion for the follow up to the 2010 Census (just try to figure how that will stimulate the January 2009 economy)?  And then there is the ever-popular $227 Million for over-sight of pork barrel spending…we have pork to over-see the pork!

When looking at all these billions of dollars, surely it will mean some jobs, but in the grand scheme of things, not many Americans will go to work based on the list above.  So what are some of the things coming from this Bill that WILL help Americans?  Right off the top is a proposed limit increase to the Home Equity Conversion Mortgage (Reverse Mortgage or “Heck-um”)  to $625,500. 

The limit was just increased to a national limit of $417,000 in 2008 which did help many areas where the old limits were considerably lower but didn’t do much for the higher cost areas which already had a limit of $362,790.  This proposed increase will help senior borrowers with higher valued homes, especially those who have mortgages to retire when the old limits just didn’t get them enough cash to pay off their existing mortgage.

Realtors are currently urging congress to increase FHA funding.  FHA’s market share has increased from 2% in 2006 to what many believe will be 30% in 2009.  Many are concerned that FHA does not become the new sub-prime, but FHA does play a vital role in serving customers such as first-time homebuyers, borrowers with little to put down and those with less than perfect credit.  But FHA will really have to grow to accommodate the new demand.

As people still scratch their heads and wonder where the first $350 Billion of TARP funds were spent (since it seems that all the banks are still plagued by the troubled assets and there was no relief), we can only hope that this new stimulus bill actually does put American workers back to work and helps American Homeowners. 

If the government is going to put the money into programs that don’t really put people to work but will hopefully have an ancillary benefit to the economy, we would love to see it going to reduce Up Front Mortgage Insurance Premiums for Senior Reverse Mortgage borrowers and FHA borrowers alike; release the Reverse Mortgage for purchase program as they announced in their 2008-33 Mortgagee Letter where they were going to determine eligibility based on appraised value (not the lower of appraised value or sales price which the latest indications from HUD are that they will soon issue the clarification to include); and that HUD would bring back the DPA (down Payment Assistance) programs. 

There are good and bad things that can be said about each of these things as well but hey, by the time they include interest we’re talking about a $1.1 Trillion Package so there has to be a little room for home owners and home purchasers!