10/02/2008 -
"This morning, FHA Commissioner Brian Montgomery announced that the new
HECM nationwide loan limit (maximum claim amount) will be $417,000. The target effective date is November 1"
This
is a target date right now, not a set deadline. We still expect FHA to
increase the “floor” on the origination
fee from $2,000 to $2,500. A mortgagee letter will be published shortly
that provides additional details.
There
was some debate within HUD to consider area limits at 115% of area
median home value, with a floor of $417,000 and a cap of $625,500.
Ultimately, the interpretation was determined that the new legislation
will be a $417,000 loan limit. As many of you recall, this was the
original limit embraced by the industry.
As
NRMLA requested a more liberal interpretation to $625,500 in high cost
areas, the complexity of the bill’s language created
much debate and ultimately this final decision. Nonetheless, we are
pleased with this major milestone for the industry.
A
majority of U.S. counties have lending limits at the existing floor
(currently $200,162), which has drastically reduced the amount of
equity that seniors living in higher-valued homes could access. We
believe these new limits will have a significant impact on the quality
of life and provide more relief to those seniors who need the help
especially in today’s turbulent economic environment.
These
are all positive developments for the reverse mortgage industry and the
clients we serve. And as HUD moves toward the implementation of many
other important aspects of the housing bill including the new purchase
product and co-op lending, we look forward to continuing to report on
additional developments in these areas in the near future."
Announcement comes from NRMLA (National reverse Mortgage Lenders Association) 10/02/2008
10/03/2008 - HUD Approves Single National Loan Limit of $417,000 for Reverse Mortgage Program
NRMLA NEWS RELEASE
October 3, 2008
WASHINGTON, DC – The National Reverse Mortgage
Lenders Association announcedthat the Department of Housing and
Urban Development (HUD) approved a single national loan limit of
$417,000 for federally insured Home Equity Conversion Mortgages (HECM).
The new, higher lending limit will enable borrowers to obtain a
substantially greater benefit from their homes, if the value is higher
than the previous HUD limit. Previously, the HECM program assigned
different lending limits by county ranging from $200,160 in rural areas
to $362,790 in the highest home value areas.
Similarly, existing borrowers whose home value is greater than the new
HUD limit may be able to increase their benefit by refinancing their
reverse mortgage and are encouraged to contact their lenders.
To identify a reputable lender, Consumer Reports,
in its October 2008 Money issue, recommends that seniors contact NRMLA
members, who are required to sign a code of conduct and follow best
practices for the treatment and counseling of seniors.
NRMLA’s consumer site at www.reversemortgage.orgprovides
users with a searchable database of NRMLA lenders in their local area.
“HUD should be applauded for its expedient
implementation of the single national loan limit for the HECM program,
especially during such a tumultuous period,” said Peter
Bell, president of NRMLA. “The higher single
national loan limit and other provisions expected to be implemented in
the coming months make reverse mortgages a more viable retirement
financial option for a broader audience who can receive higher benefits
at lower origination fees than ever before.”
HUD
is aiming for an effective date of November 1st, however the exact date
will not be finalized until HUD issues a mortgagee letter on the new
loan limit. A reverse mortgage is a unique loan that enables senior
homeowners to convert part of the equity in their homes into tax-free
income without having to sell the home, give up title, or take on a new
monthly mortgage payment. Reverse mortgages are available to
individuals 62 or older who own their home. Funds obtained from the
reverse mortgage are tax-free. Borrowers can choose to receive the
reverse mortgage funds as a lump sum, monthly income (for up to life),
or line of credit, or as a combination of monthly income and line of
credit. No mortgage payments are due during the life of the loan.
Borrowers
can use the funds anyway they wish – for home
repairs and improvements, medical costs, in-home care, education, and
supplemental retirement income. Borrowers make no monthly payments on a
reverse mortgage during its term. The loan becomes repayable when the
borrower sells the home or permanently moves out. In addition, the
repayment amount can't exceed the value of the home.
Reverse
mortgages are originated largely by private lenders. The most popular
is the Home Equity Conversion Mortgage (HECM), which is insured by the
Federal Housing Administration, an arm of the U.S. Department of
Housing and Urban Development (HUD). More than 450,000 HECMs have been
made since 1989.
NRMLA is a nonprofit trade association,
based in Washington, DC, whose mission is to support the continued
evolution of reverse mortgages as an important financial option for
senior homeowners while educating both its members and consumers about
the varied applications of this unique loan. Members sign a Code of
Conduct pledging to abide by guidelines that assure fair, ethical, and
respectful practices in offering and making reverse mortgages to
seniors. Details on NRMLA, reverse mortgages, and a list of reverse
mortgage lenders in each state are available on
NRMLA’s Web site
10/07/2008 - Reverse Mortgage Loan Limit Updates
As
NRMLA has previously reported, last week FHA Commissioner Brian
Montgomery announced the new single national loan limit for HECMs will
be $417,000. We are continually getting more insight into
implementation of this change and will report to you as information
becomes available.
Here are a few things we've learned so far.
The
Office of Single Family Housing hopes to complete drafting the
Mortgagee Letters (one for loan limits and one for origination fee
caps) and place them into the "departmental clearance" process this
week, with a "goal" of getting them out in time for a November 1
effective date -- or perhaps even a slightly earlier effective date.
The
150% multiplier used to calculate loan limits in Alaska, Hawaii, Guam
and the U.S. Virgin Islands still applies. The Mortgagee Letter should
provide that info.
Borrowers
in the pipeline will be able to take advantage of the new loan limits,
but the paperwork on their loans will have to be redone and a new
application taken, dated after the effective date of the Mortgagee
Letter.
Loans
to borrowers in the pipeline for which new applications will be taken
to utilize the new loan limits will, of course, be subject to the new
origination fee limitations.
10/10/2008 - HUD Provides Some Clarification on Implementation of New Loan Limits
NRMLA Release (reversemortgage.org)
In
response to the email we sent out the other day regarding the
forthcoming implementation of the new HECM loan limits, we received a
number of questions and forwarded them to HUD. The following four
bullet points are “verbatim” answers we
received from Meg Burns in an email message that she sent out to the
various trade associations interested in this topic:
1) The new mortgagee letters will be issued as quickly as possible. We
are trying for a date no later than November 1, but cannot guarantee
that date.
2)
In the interim, we will permit lenders to begin to take apps that
reflect the new $417,000 loan limit, but lenders must also use the new
origination fee calculation for these loans. These loans may not and
cannot be insured until the ML comes out announcing the new limits.
3)
Loans for which you have already taken apps, but not yet closed, can be
reworked; all final docs must reflect new max claim and principal
limit. The new origination fee calculation must be used for these deals
as well. And, again, these transactions cannot be insured prior to
issuance of the mortgagee letter.
4)
Finally, new loans, for which apps are taken after the issuance of the
ML must be in accordance with the new loan limit and new origination
fee calculation (of course). Meg has also asked us to urge our
members not to call or email her directly with your questions. As you
can well imagine, she and her staff have their hands full with all the
work that has to be done to implement the various provisions of the
Housing & Economic Recovery Act
So,
How much difference will the $417,000 limit bring to senior homeowners
in high-cost areas? We're the first to show you. The table below
illustrates the net principle lending limits based on a national
$417,000 lending limit.
New Reverse Mortgage Calculations (*disclaimer below)
Age of youngest borrower
OLD LIMITS
$362,790.00 + VALUE
NEW LIMITS
$417,000.00 + VALUE
62
$197,919.25
$228,764.74
63
$201,230.45
$232,563.83
64
$204,907.05
$236,782.53
65
$207,135.23
$239,335.97
66
$210,091.90
$242,726.32
67
$213,414.42
$246,536.73
68
$216,377.39
$249,933.38
69
$219,706.57
$253,750.45
70
$222,676.57
$257,154.13
71
$226,013.18
$260,978.63
72
$229,353.83
$264,807.17
73
$232,698.73
$268,639.96
74
$236,048.14
$272,477.26
75
$239,402.30
$276,319.31
76
$242,761.49
$280,166.39
77
$246,488.77
$284,435.77
78
$249,858.87
$288,293.76
79
$253,234.89
$292,157.67
80
$256,617.16
$296,027.83
81
$260,368.84
$300,321.61
82
$263,764.70
$304,205.36
83
$267,167.95
$308,096.50
84
$270,578.98
$311,995.42
85
$273,635.46
$315,485.58
86
$277,063.42
$319,401.43
87
$280,137.77
$322,909.46
88
$283,584.63
$326,844.21
89
$286,678.94
$330,372.20
90
$289,784.08
$333,911.02
91
$293,263.46
$337,878.29
92
$296,392.13
$341,440.64
93
$299,533.57
$345,015.76
94
$302,688.49
$348,604.36
95
$306,220.46
$352,624.22
96
$306,502.36
$352,906.12
97
$306,502.36
$352,906.12
98
$306,502.36
$352,906.12
99
$306,502.36
$352,906.12
*****shown
for illustration purposes only - calculated with expected rate of 6.15%
- This is in no way a commitment to lend - assumes limit of 417k not
guaranteed until official mortgagee letter is released from HUD*****
If
you, family, or client are following this bill because you have
previously been short to close on a reverse mortgage with today's
lending limits, have waited for improved loan terms, or would like to
purchase a home utilizing the HECM (Home Equity Conversion Mortgage)
call today and we will provide you a formal proposal package.
All Reverse Mortgage Company - Toll Free (888) 801-2762 ext 1
11 Comment(s)
Jin Chen
10/2/08 11:47am
Thank you. This information is very helpful and educational. I like the "big" letter size :-)
Jin Chen
Coldwell Banker Palo Alto Downtown Office
Bobby B
10/2/08 12:04pm
Why would anyone with a house worth over 1 million want to get that kind of reverse mortgage???
Justine Howard
10/2/08 2:08pm
I'm curious. Does FHA only loan reverse mortgages on primary residences or can they be income property?
Brad Golding
10/2/08 9:31pm
Not that many houses worth over a million except on the coasts. You can still find non FHA reverse mortgages or similar products for people who don't need them.
No income properties allowed, only primary's.
This example shows an old limit of $362,790 but for many, dare I say most, people now have a county lending limit closer to $202,000. The new limit of $417,000 will be a huge benefit for them.
Karen B
10/8/08 5:10pm
This info is just what I have been waiting for. Thanks.
Lori K
10/9/08 1:59am
I live in Southern California however; I know Palo Alto since I was raised there. Palo Alto, Ca is not coastal property however; most of the homes there are around the million dollar range..I've done refinances and purchases in the area. This was quite surprising to me since Palo Alto is old money...where Stanford University is and the area is not a new town or incorporated like some in So Cal. (Im in the mtg business many years). I've never heard of non FHA reverse mortgages...however; the reverse mortgage is based on age and what the loan to value allowed..usually the older the borrower is the loan to value is higher..the younger in age...a lower LTV...The whole purpose is for them to retire on their equity until they decide to sell or refinance out of the loan. Its is haveing the option to living in your own home without moving to a retirement community and living on your equity until you die.
GaelH
10/21/08 12:28pm
I see no advantage for those of us who already paid ridiculous amounts for a reverse mortgage...why did they not consider those of us in that situation and find a way to allow us to take more out of the value of our homes without sticking us for another $10,000 in fees and set-asides?
Barbara
10/24/08 10:14pm
Hi,
I live in the VI, anyone know if this from 10/7/08 update still applys?
* The 150% multiplier used to calculate loan limits in Alaska, Hawaii, Guam and the U.S. Virgin Islands still applies. I can't find any confirming info since then?
Barbara
10/24/08 10:43pm
Hi,
I live in the VI, anyone know if this from 10/7/08 update still applys?
* The 150% multiplier used to calculate loan limits in Alaska, Hawaii, Guam and the U.S. Virgin Islands still applies. I can't find any confirming info since then?
Smita
11/12/08 11:38pm
Hi, What about the "The 150% multiplier used to calculate loan limits in Alaska, Hawaii, Guam and the U.S. Virgin Islands still applies. The Mortgagee Letter should provide that info" or will it be single limit of 417K for all the states???
Mortgage Loan Modification
8/10/09 4:06am
Good info post you shared with us. This what we expect from Mortgage blog. Thanks for sharing this post.
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