HUD has decided to extend the current lending limit of $625,250 for Reverse mortgages into the next fiscal year and that is very good news for everyone. There has been a debate about reducing the limit to the previous figure which was at $417,000 due to declining market conditions and if that had happened it would have had serious consequences for seniors and the Reverse loan industry.
If this had indeed occurred it would have been a serious blow to the senior community making it impossible for some to take advantage of the federal loan program because of the lower cap. Appraised values would have been capped at $417,000 instead of the current lending limit and if a senior has a large mortgage that needs to be paid off and depending on how much they could qualify for from a Reverse loan, they may not be able to do it and that would mean they would have to continue making mortgage payments that they may not be able to afford and put them at risk for foreclosure.
It is with a huge sigh of relief, to know that for at least another year we have the ability to continue to originate loans for seniors who need the higher lending limit to pay off large mortgages they may have on their property and eliminate their loan payment. And for the time being the higher limits will remain available but this could change next year and that’s why it’s important for seniors to explore this option now and not continue to wait and see what happens.
Following is an article that discusses this good news:
HUD Extends $625,250 HECM Loan Limit Through 2011
“The mortgage loan limit and max claim amount for for HECM loans will remain unchanged through December 31, according to a mortgagee letter issued today by the Department of Housing and Urban Development. ML 2011-29 specifies that the HECM loan limit of $625,500 will remain for all areas, including high-cost areas such as Alaska, Guam and the U.S. Virgin Islands.
“We’re glad to see FHA take this interim step. It eliminates uncertainty for loan applicants who might have been concerned about not getting their loans before the limits possibly dropped,” Peter Bell, National Reverse Mortgage Lenders Association president told RMD in an email. “Now, we need to focus on persuading HUD and/or Congress to retain this limit beyond calendar 2011.”
For forward mortgages, HUD states that the Federal Housing Administration will implement new single-family loan limits on October 1, which will reduce forward loan limits in the highest cost areas in the U.S., and will maintain current loan limits in most parts of the country.”
Part II on 8/27/11