Hud lending limit
In the last several days I have received quite a few panicky phone calls from people who are disparate to complete the counseling that is required by HUD prior to applying for a Reverse mortgage. And the counseling agencies are slammed with requests for appointments and will not be able to provide everyone an appointment immediately when they request one.
And the reason for the panic is due to the pending changes to the HECM program offered through FHA that will take effect on October 2nd.
The changes will be a reduction in the amount of funds to a borrower (Referred to as the Principal Limit) and will fall between 20% to 11% depending upon on the age of the youngest borrower.
And the Mortgage Insurance Premium (MIP) that is paid to FHA to insurance the loan will increase from .50% if the client is utilizing 60% or less of the money from the Reverse loan, to 2.00%
The reason behind these changes is to make sure that the Reverse loan HECM will continue to be an viable option for seniors and to be certain that the MIP pool of insurance will be well funded to cover any loans in the future in the event there is no equity left in the property at the time the loan becomes “due” at the death of the borrower(s).
The Mortgage Insurance Premium Fund will cover the “short” fall and it will not be the responsibility of the Estate to pay the entire balance in full if the property does not have enough equity to do so. And that is the main benefit of paying the MIP.
As of this writing and if you live in California, the latest you can complete your telephone counseling appointment would be tomorrow September 20th. because California requires a 7 day “cooling off” period before you can start the loan process.
I can take your application during this time, but I cannot start the loan process. We have to wait and then we would order a HUD Case # for the borrower and hopefully get it into the system no later than September 30th.
The calls that I have been getting are from people who procrastinated about whether or not to do a Reverse loan and they had months to think about it and now it’s frankly too late to start one.
I will have the new calculations for the pending changes, most likely by the end of the month if anyone wants to contact me about how much money they could receive after October 2nd. 2017.
Like “death and taxes” are a certainty and no one can avoid, you can be certain the HUD will always be “tweaking” the Reverse loan program and this will not be the last time that they will do it.
Just don’t procrastinate.
Here is the remaining part of the article that discusses the continuation of the current HUD Lending Limits and their extension through 2012. This is certainly very good news for the Real Estate market and any first time home buyers who would like to apply for an FHA loan. Plus it is HUD Kespecially good news for seniors who will be able to take advantage of the higher limits when apply for a Reverse mortgage.
“The loan limits for the HECM program were raised from $417,000 to $625,500 in February 2009 and were extended last year. They were previously scheduled to expire on October 1.
Many in the reverse mortgage industry have speculated as to the negative impact a return to the previous, lower loan limit would have in areas with high-valued homes.
The loan limits could still change at the end of the calendar year 2011. Prior to the emergency loan limits, HUD would routinely adjust loan limits on a calendar basis.
“The only reason we adjusted our loan limits [last week] is because of a statutory expiration date at the end of the fiscal year,” said Brian Sullivan, HUD spokesperson in an email to RMD.””
View ML 2011-29.
Written by Elizabeth Ecker
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
At this time, the clock is ticking on reducing the Lending Limits on the federally insured Reverse loan program that is for senors age 62 or older. Currently the limit is set at $625,250 but it has been less in the past. The most recent amount was at $417,000 but due to the difficulties in the real estate sector and home values continuing to fall, the possibility of reducing the Lending Limit back to $417,000 is looming within the next several weeks.
At a time when seniors need more assistance than ever due to budget cutbacks on government sponsored programs and the potential for cutbacks on Medicare and Social Security, using funds from a Reverse loan are the only remaining option for financial relief. Hopefully, the current amount will remain in place and not reduced, eliminating the opportunity for a borrower to receive as much money as they can from a Reverse mortgage for their medical and cost of living expenses.
There is a pending bill, H.R. 2508 that has been introduced as of Friday, July 15th., requesting that the current Lending Limits remain in place for FHA loans but it’s not known if it will be passed or not. This would also include the “Forward” site of the loan program that has made home ownership possible for millions of Americans and it would keep that Lending Limit at the current amount of $729,750.
All we can do is wait for the House Committee on Financial services to review this important issue and there should be a hearing on it prior to October when the reduction would be taking place.
Let’s hope that that make the best decision for seniors, First Time home-buyers, the housing market and not wound it any further, just when everyone else is struggling in these difficult times and needs the resources to buy a home or stay in the one they currently own.
In an effort to catch up on the latest news in the Reverse mortgage industry, I just found out that Wells Fargo is exiting it. Long considered to be the leading lender for the FHA/HUD product, I was very surprised to hear this news. Along with Bank of America who earlier stepped away from offering the loan, we see two very big players disappearing from the Reverse loan industry, along with Financial Freedom who left in March of this year.
With the continued uncertainty due to the wobbly economy and the housing market, they apparently feel that they would rather not risk originating loans when property values continue to decline, even though there is a greater need for it them now then in previous years. With the economic uncertainty, concerns about Medicare and Social Security, more senors could be utilizing the funds from a Reverse loan to pay their monthly obligations and particularly any medical expenses.
The economy future is murky and my personal feelings are that we are a long ways from any recovery. And as the need for the Reverse loan grows ( And it will), the amount of funds that a senior could receive will shrink. The continual slide of the housing sector is directly affecting future of the government program and the financial security of seniors financial safety net.
The housing crisis and it’s inability to recover is mainly due to the continual foreclosure activity and is having a direct effect on Reverse mortgages. Currently the HUD lending limit it set at $625,500 but as of this writing, they are considering reducing it back to a previous limit of $417,000 this coming October.
The immediate effect of the reduction will mean less money will be available to the senior homeowner and if anyone is “thinking” about using the loan, it’s imperative that they do so before the change in October.
The first step is to complete the counseling that is required by HUD and then meet with a Reverse Loan Consultant for further information. Once this has been done, those who are considering the option of a Reverse mortgage will be able to make an informed decision as to whether or not to move forward on an application.
Fear, hesitancy, inertia or not making an effort to be informed only hurts ourselves. Life will move on and it’s up to us whether or not we do too.