10/10/2008

Many senior homeowners have been anxiously waiting for HUD to issue the Mortgagee Letters so that lenders could implement the changes in the Home Equity Conversion Mortgage (HECM or “Heck-um”)program that came about as a result of H.R 3221.  This legislation was passed on July 30, 2008 but due to the sweeping changes made to so many of HUD’s programs and the ambiguity of some of those changes, it has taken the attorney’s at HUD a while to determine exactly what H.R. 3221 established.

HUD finally did release some clarifications with regard to maximum loan amounts and timing.  The HECM program will now have a national limit of $417,000 (with the exception of the high cost areas such as Alaska, Hawaii, Guam and the U.S. Virgin Islands which will be 150% of this amount), rather than the separate area limits that were previously established by metropolitan statistical area which were as low as $200,160 in some parts of the United States, and went to a maximum of $362,790 under the old limits. 

The National Reverse Mortgage Lenders Association (NRMLA) has always maintained constant contact with HUD with regard to the reverse mortgage program and they issued some additional clarification that they received from Meg Burns, Director of the Office of Single Family Program Development at HUD.

According to Ms. Burns, HUD hopes to have the official notification out which will allow lenders to begin insuring reverse mortgages at the new limits effective November 1, 2008.  Ms. Burns says that although that is not a firm date, lenders can begin originating loans at the new limits effective immediately as long as the lenders take into effect the other provisions of H.R. 3221 - specifically the origination fee restrictions and calculations (under H.R. 3221, there is a lower maximum origination fee lenders can charge and the fee is calculated differently than it has been in the past). 

NRMLA admits that they still have questions with this communiqué, however, the end result for senior homeowners appears to be extremely positive at this time.  Homeowners can now take advantage of the higher limits and lower origination fees, even before HUD issues the Mortgagee Letter that will make the changes official and binding.  There are other provisions in H.R. 3221 which will also help senior homeowners desiring to utilize reverse mortgages to downsize, or those living in cooperative projects but those changes must be implemented after the Mortgagee Letter has been issued by HUD explaining their regulations. 

However, senior borrowers can begin the application process for a HUD reverse mortgage at the higher limits TODAY!  If you or a loved one were told that you would be short to close on the old HECM limits or if you wanted to wait to be able to take advantage of the higher loan limits, it might benefit you to contact a senior lending specialist today.