Reverse Mortgage's To Benefit From Loan Limit Increase.

Reverse Mortgage business is expected to benefit from an additional increase to the U.S. Government insured Home Equity Conversion Mortgage (HECM) loan limit signed by by President Barack Obama on February 17 as part of the $787 billion American Recovery and Reinvestment Act. This is the second limit increase to the Federal Housing Administration's HECM product in the last four months.

In 2008 the U.S. Government insured HECM products represented the vast majority of reverse mortgages funded in the United States.


The provision signed by the President and enacted by the U.S. Department of Housing and Urban Development (HUD) raises the HECM loan limit to $625,500 for the remainder of the calendar year 2009. The new limit took effect on February 24. However, HUD will allow any loan with a case number assigned prior to this date to close at either the previous limit ($417,000) or the new limit of $625,500 until April 30.

The previous single, national HECM lending limit of $417,000 was set in October 2008, raising the relatively low, country based loan limits, which topped out at $200,160 for the majority of counties and $362,790 for higher costs areas.

These limit changes enable existing reverse mortgage borrowers with higher home values to refinance and access a greater amount of equity in their homes. In addition, seniors who have not obtained a reverse mortgage now have the opportunity to receive more money than previously allowed. This will be especially helpful to seniors living in high cost housing area, such as California and the northeast.


Statics show that more seniors have already benefited from the October 2008 increase. Revers mortgage loan volume has increased substantially in the last 6 months. Bank of America Reverse Mortgage has experienced a 41 percent increase in new loan closings. Additionally 43 percent of Bank of America reverse mortgage loans closed over the last couple of months had values in excess of $300,000.

In this economic environment, more seniors are considering a reverse mortgage to help them with the costs of retirement. This additional increase will go a long way to help seniors access the funds they need to age in place.