Types of Reverse Mortgages - National Lending Limit of $625,500 Extended Through End of 2010!

UPDATE! On October 29, 2009 Congress extended the Reverse Mortgage lending limit of $625,500 through December 31, 2010 and President Obama signed the Congressional Resolution into law.

Stimulus Package 2009: The U.S. Department of Housing and Urban Development, HUD, raised the national FHA Reverse Mortgage lending limit to $625,500 through the end of 2010. Lobbying efforts by AARP and NRMLA, National Reverse Mortgage Lenders Association, were successful in persuading Congress to extend the limit thereby helping more borrowers obtain a Reverse Mortgage also called HECM.

Federally Insured Reverse Mortgages: The Federal Housing Administration (FHA), insures the FHA HECM product. Because of the increased lending limit to $625,500, the HECM can now accomodate homes in the jumbo category thereby giving relief to homeowners with sizeable mortgage balances. If there is enough equity in your home, current mortgage balances can be satisfied and transferred to your new Reverse Mortgage. (Note: If your home is worth over $625,500, the maximum Reverse Mortgage lending limit is still $625,500.) The loan is based on the age of the youngest borrower, rates, and home value. If your home is worth $250,000, your cash out proceeds would be lower than a home worth $550,000. However, the older you are the more proceeds you will receive. This is one time in life that the older you are the better it is!

Home Equity Conversion Mortgage options: There are two FHA HECM programs: the monthly adjustable which has the flexibility of a monthly check, a line of credit, cash out, or a combination, and the fixed rate Reverse Mortgage.

About Fixed Rates: With a fixed rate Reverse Mortgage you are required to take all the proceeds at closing. This means if your Net Principal Limit (the amount you can borrow) is $225,000, you are required to draw $225,000 at closing. Some borrowers choose the fixed rate product fearing increased interest rates on the adjustable in the future. And the fixed rate Reverse Mortgage does have an attractive interest rate. Most of my borrowers, however, have chosen the FHA adjustable HECM due to its flexibility and the fact that their needs required a check each and every month. It's all about what you're going to do with the money. In the final analysis, it all depends on your views and your personal preference.

FHA IN THE NEWS: The FHA Reverse Mortgage may be getting a face list. Changes are in the offing according to Meg Burns, FHA Director of the Office of Single Family Program Development. Meg spoke at the Mortgage Bankers Association conference in San Diego in early September. Proposed changes, though not yet official, will encompass some new products such as a HECM Mini. Up front mortgage premiums will not be charged, but will be charged annually instead, a welcome relief to borrowers.
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How many Reverse Mortgages? There were 114,692 Reverse Mortgages issued in 2009 and $50,758 in 2010 (through March) which shows the growing popularity of the HECM program. We expect the program to continue to be very popular. FHA HECM production chart 1990-2010 Click here.

Reverse Mortgage Counseling Required: Reverse Mortgages require federally mandated Reverse Mortgage counseling from an independent HUD approved counselor. Counseling is required prior to your appraisal and title being ordered.

When you make your appointment for Reverse Mortgage counseling you are making it with a qualified HUD approved counselor. Some counseling agencies also perform credit counseling which helps those who are seeking information about debt management. For more information and what to expect at HECM counseling, Click here.

We are here to help. Please give us a call to discuss your Reverse Mortage goals.

"The HECM Mini would enable a borrower to borrow against smaller amounts of their home equity to obtain the funds they need at a given period of time. The fees for the loan would be lower, so that it might well serve those with 1-3 years remaining in their home."
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• Free Reverse Mortgage information, call 1-888-843-9797