New Reverse Mortgage Limit of $625,500 Is Out!

HUD has acted extremely quickly in putting out the new HECM reverse mortgage limits of $625,500 as established as a result of the passage of the American Recovery and Reinvestment Act of 2009 (ARRA).  This limit is effective for all loans which receive credit approval in the calendar year 2009 and remain in effect until December 31, 2009.

This means that borrowers who have loans currently in processing can also take advantage of the new limits, even if they started their processing prior to the issuance of the Mortgagee Letter, providing they did not receive their credit approval prior to January 1, 2009.

An important thing to note is that borrowers who do not want to utilize the new limits, but still have higher priced homes, must have had lenders received Case Numbers from HUD prior to February 24, 2009 and then the loan must close prior to April 30, 2009 to avoid having to pay the higher mortgage insurance premium. 

After April 30, lenders will no longer have the option and will always have to charge the borrower the mortgage insurance based on 2% of the lesser of the appraised value or the HUD lending limit (now at $625,500). 

This means that if a borrower owned a home worth $700,000 but did not want to use the entire HECM reverse mortgage proceeds and only wanted the $417,000 and the lower mortgage insurance premium associated with it instead of the higher premium associated with the new limit, they must have already received a case number assignment and must close that loan prior to April 30, 2009. 

But for all borrowers who did not have the opportunity to obtain a HECM but wanted to prior to this update either because they had a mortgage balance that was too high for the old limits or whatever their reasons, now is a perfect time for seniors with high valued homes to again look at the Home Equity Conversion Mortgage.

Many received their HECM because they could not wait but could really use additional proceeds and would benefit from a HECM to HECM refinance which can be done without having to pay a second time for that portion of the FHA Insurance which you have already paid, you would only have to pay for the difference between the old limit and the new limit.

Based on phone volume received in the past two weeks and calls since the news of HUD releasing this Mortgagee Letter, lenders may soon be receiving an influx of new loans at the higher limits.  This could create some processing and funding delays and therefore we are encouraging borrowers who have been waiting for this development to act quickly. 

The reverse mortgage limit is in effect until the end of 2009 but there’s no reason to wait and get lost in the shuffle, especially if this is the increase you have been waiting for or you never had the chance to utilize the mumbo programs before they disappeared.

With regards to ML 2009-07, HUD has clarified that:

• All areas of the continental United States, as well as Alaska, Hawaii, Guam and the Virgin Islands, will operate under a single HECM loan limit of $625,500;
• The $625,500 limit applies to both regular HECM transactions and the new HECM Reverse Mortgage for Home Purchase;
• The current fee structure remains unchanged. HUD will continue to collect a 2% MIP upfront and .5% annually and the maximum origination fee will remain $6,000. 

Can the $625,000 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 quote

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