HUD Increases Loan Limit for Reverse Mortgages and Lowers Lender Fees

Washington, DC – (November 7, 2008 ) – National Reverse Mortgage Lenders Association announced that the U.S. Department of Housing and Urban Development (HUD) formally adopted a new single national loan limit of $417,000 for federally insured reverse mortgages and lowered the fees that lenders can charge yesterday. These critical reforms to the Federal Housing Administration-insured Home Equity Conversion Mortgage (HECM) program were approved this past summer as part of the Housing & Economic Recovery Act of 2008

“By implementing these new provisions, HUD has improved financial options for senior homeowners during a critical time,” said Peter Bell, President of National Reverse Mortgage Lenders Association. “The new loan limit and other provisions will allow seniors to receive more benefit at lower origination cost to meet their retirement needs.”

The new, higher lending limit will enable borrowers to obtain a greater benefit if their home 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. On the fee issue, HUD reduced origination fees to 2% on the initial $200,000 of maximum claim amount (lesser of the home value or county lending limit) and 1% on the balance thereafter with a cap of $6,000.

“As far back as 2001, we began to question whether utilizing HUD’s area-by-area loan limits made sense for the HECM program,” explained Bell. “This change is the culmination of a seven-year legislative effort by NRMLA to enhance the HECM program.”

About Reverse Mortgages
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.

Charlie O. Vieni
Reverse Mortgage
Specialist

Mortgage Development
Officer
Sovereign Bank
Northern, NJ 

 Equal Housing Lender - Member FDIC

E-mail Me

Cell: 201 615-6343 

Just for Seniors