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

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

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.

All Reverse Mortgage Company is taking applications now. Our team consists of some of the most dedicated and talented professionals within our industry assuring you a truly no-hassle & timely close (Typical closing time Just 2-3 Weeks)

Toll Free (888) 801.2762 Ext 1

 

---

 

As most NRMLA members know, the economic stimulus bill signed into law by President Obama today raises the single national loan limit for HECMs to 150% of the Freddie Mac loan limit. Currently, that would create a HECM limit of $625,500. This is the direct result of a successful joint effort by NRMLA and AARP to obtain this higher loan limit. Under this new law, the higher limit is only applicable for loans made during the balance of 2009. We must go back to Congress to get the higher loan limit extended beyond this year.

Please understand that HUD must first issue a Mortgagee Letter implementing the new loan limit before it becomes operational. We have been discussing the timing for issuing this Mortgagee Letter with the Department and it is still unclear how long it will take to get it out, due to a few considerations.

First of all, a higher loan limit means that there are more loans that do not have the "cushion" of additional value beyond the maximum claim amount. For example, if a home is valued at $630,000 and the loan limit is $417,000, FHA has the benefit of $213,000 in additional value that could help prevent it from incurring any loss if a claim is paid on the loan. With the new higher limit of $625,500, the "cushion" on that loan would only be $4,500. Under the prior administration, the Office of Management & Budget, which is part of the White House, would have required a "risk review" and perhaps an upward adjustment in the MIP, to compensate for the higher degree of risk in the program. It is unclear yet whether the new administration will require a similar risk review and MIP adjustment.

Secondly, there is some concern about HECM borrowers who recently refinanced into a loan with the $417,000 limit, being "churned" into a refinance under the new limit and incurring the costs all over again. While the "streamlined refi," option could be utilized to lower the upfront MIP, there is some concern about making a home owner who has just paid an origination fee of $6,000 within the past few months to refinance at $417,000, incur that same cost all over again.

It 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.
As always, NRMLA stays in close contact with our colleagues at HUD and will keep you apprised of developments regarding implementation of the new law as we receive information.

Peter H. Bell
President (reversemortgage.org)

---

02/12/2009 - Stimulus Bill Compromise includes $625,500 HECM 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

---

Jan 29th, 2009

House Passes Stimulus Bill with Loan Limit Increase!

We are pleased to report that the economic recovery bill passed by the U.S. House of Representatives last night includes the provision we reported to you last week that would set the single national loan limit for the HECM program at 150% of the Freddie Mac loan limit. Currently, the Freddie Mac limit is $417,000, so this bill would establish the Reverse Mortgage limit at $625,500.

The Senate is expected to bring its version of an economic recovery bill up for floor debate and a vote early next week. We do not expect a similar HECM provision to be included in the Senate bill.

That will leave us with the challenge of trying to protect this item from being stripped out of the bill during the negotiations to come to work out the differences between the House and Senate bills.

The goal right now is to conclude passage of this bill and present it to President Obama by February 16th.

---

January 16th, 2009

HECM Loan Limit Increase Included in Stimulus Plan

We are pleased to announce that the draft of the economic recovery bill released by the House of Representatives late yesterday contains a provision, inserted in response to a request that came jointly from NRMLA and AARP, that would set the single national loan limit for HECM at a higher level than $417,000--for the balance of 2009.

The language in the bill is as follows:
SEC. 12004. FHA REVERSE MORTGAGE LOAN LIMITS FOR2009.

For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, the second sentence of section 255(g) of the National Housing Act (12 U.S.C. 171520(g)) shall be considered to require that in no case may the benefits of insurance under such section 255 exceed 150 percent of the maximum dollar amount in effect under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).

This would bring our loan limit to 150% of the Freddie Mac limit, or $625,500. If the Freddie Mac limit changes, the HECM limit would change commensurately.

This change is being offered as a temporary measure, thru 2009 only, because it is part of an emergency economic stimulus package. A permanent change would have to be enacted through a more appropriate housing bill.

This bill must still be marked-up in Committee, then brought to the House floor for debate and a vote. After that, it must go through the Senate, so it still has a way to go.

In the Senate, we have previously faced some opposition to higher HECM loan limits. We are working to try to overcome this reluctance, so we can keep our provision intact as deliberation on this bill continues.

In any case, this is an important first step in the process. We thank House Financial Services Committee Chairman Barney Frank and his staff for their assistance in seeing this HECM provision included in the stimulus bill.

Peter H Bell, President

---

January 14th, 2009 - Release from NRMLA

(National Reverse Mortgage Lenders Association)

Back in early December, NRMLA President Peter Bell, submitted a Reverse Mortgage issues paper to key officials from the Presidential Transition Team working on HUD matters and then was invited to provide a briefing two weeks later.

Bell briefed the research team, which is charged with developing briefing materials and issuing background documents, priorities and policy recommendations for presentation to the incoming Secretary and his team, on a few areas on which NRMLA believes HUD should focus. These include:

• Reviewing the earlier decision to implement the single national loan limit at $417,000, rather than at $625,500. Bell believes that HUD might have the "authority" so re-interpret the statute, without further action by Congress.

• Seeking greater funding for Reverse Mortgage counseling to eliminate the need for some counseling agencies to collect the fee from borrowers upfront.

• Seeking funding and contracting authority to replace the terribly antiquated management information systems that FHA uses for loan reporting, managing and analyzing the Reverse Mortgage program.

• Analyzing the Reverse mortgage insurance premium structure (MIP) to see if it could be "re-engineered" to allow options with lower upfront cost.

The Transition Team thanked NRMLA for being concise, specific and targeted in our briefing and appeared to agree to including our agenda in their final report. The briefing paper is available for viewing by NRMLA Members on our industry website

---

Confirmation Hearing Held for HUD Secretary Nominee
The Senate Banking, Housing and Urban Affairs Committee held a confirmation hearing for Shaun Donovan, President-elect Barack Obama’s choice for Secretary of Housing and Urban Development. To view a video of the confirmation hearing, please click here.

Mr. Donovan currently holds the position of New York City’s housing commissioner and previously held positions at HUD and in the private sector.  He was introduced by the Banking Chairman Christopher J. Dodd (D-Conn.) as one of the most experienced persons nominated to the position in memory.

The Committee emphasized during questioning their desire that HUD play a more active role in the nation’s economic recovery. The hearing focused primarily on HUD’s role in stemming foreclosures, the housing crisis, economic stimulus and discrimination and segregation in housing. 

Mr. Donovan’s testimony emphasized a number of issues, including:

---

Budgetary issues regarding the renewal of expiring Section 8 rental subsidies

Strengthening HUD to foster a culture of excellence and innovation

Oversight of TARP and the Government-Sponsored Enterprises

"Greening" the HUD portfolio and encouraging sustainable development

Chairman Dodd indicated the committee could vote on recommending Mr. Donovan as soon as the end of this week.  There is not expected to be opposition to his nomination. 

"I'm so happy to see a smart, experienced housing professional, like Shaun, who has had previous experience at HUD, step into the leadership role at HUD. I don't think President-elect Obama could have made a better choice for this cabinet position," says NRMLA President Peter Bell.

---

Legislative Fix Pending in Washington State
NRMLA has made significant progress toward resolving the licensing issue in Washington state that is preventing some companies from offering reverse mortgages.

As a result of legislation passed last year, all non-exempt lenders doing business in Washington must now be licensed by the Department of Financial Institutions (DFI). Shifting the lending requirements from the purview of the Mortgage Brokers Practices Act to the Consumer Loan Act (CLA) has created significant consequences to certain lenders that wish to originate reverse mortgage loans.

To calculate interest, the CLA requires licensees to use the “simple interest” method and expressly prohibits the compounding of interest, or negative amortization.

This conflicts with the FHA’s Home Equity Conversion Mortgage program, where interest that accrues during the life of a Reverse Mortgage is not paid as it accrues, but instead compounds over the life of the loan until repayment occurs. 

Initially, we thought the DFI was going to draft a simple legislative fix. However, state officials chose instead to craft a more comprehensive consumer protection bill. NRMLA has been actively involved in providing feedback and suggestions throughout the process. A bill could be formally introduced in the coming weeks.

---

NRMLA Meets With GAO Again

NRMLA met with officials from the Government Accountability Office (GAO)—the watchdog arm of Congress—as it completes work on a  Congressionally-mandated report on the status of the federal Home Equity Conversion Mortgage program.

In response to a provision calling for a study of consumer protections in the Reverse Mortgage program that was enacted as part of the Housing and Economic Recovery Act (HERA) in July, GAO has three broad questions to address:  

• What steps have the Federal Housing Administration and regulators taken to ensure consumers receive accurate and complete information regarding the loan process ? 
• What steps do the FHA and regulators take to protect consumers from using financial products with reverse mortgage proceeds?
• How does FHA monitor and enforce lender compliance with Reverse Mortgage program requirements?  

NRMLA’s Board of Directors met with same group from GAO in June while in Washington, DC, to answer questions on these issues. We expect the final report to be published later this year. 

In a separate meeting, NRMLA President Peter Bell met with GAO researchers to review several samples of advertising, direct mail solicitations and web sites that concerned the study team. GAO was seeking Bell's input on whether or not some of the ads were compliant. Several of the pieces were designed to look and feel like they were "official" notices from a government entity or appear to be agency websites.  Others touted "a government benefit" that Congress created for seniors or "no repayment" requirements. 

"Unfortunately, a large majority of the advertising examples that GAO presented to me were, in my opinion, inappropriate and threaten the credibility of the reverse mortgage industry," Bell said. "I don't know why some lenders can't just be a bit more straightforward and honest in their advertising. Their actions harm the reputation of all lenders who are doing the right thing."

---

Compliance Committee Working on Best Practices

With the adoption of new higher loan limits and the Reverse Mortgage for Purchase program, NRMLA’s Compliance Committee has been busy developing new Best Practices focusing on appropriate refinance and appraisal practices.

The Best Practices will further enhance NRMLA’s Code of Ethics & Professional Responsibility by clarifying appropriate behavior during the appraisal process and when assisting a client in a refinance transaction. The Best Practices will be made available to members in the coming weeks.

---

 

 

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

Previous Related Posts:

• $625,500 Reverse Mortgage Calculator - HECM Limits Compared
• Economic Stimulus Help Seniors with Reverse Mortgages
• Reverse Mortgage Limits and New Hopes for All