Reverse Mortgage Loan Lending Limit May Soon Increase

2008 saw the increase of the reverse mortgage maximum lending limits to $417,000. The National Reverse Mortgage Lenders Association announced recently that the economic recovery bill which was released by the national House of Representatives contained a provision which may further increase the reverse mortgage lending limits from the present $417,000 for the rest of 2009 if passed into law. The provision is said to be in response to a plea from the AARP and NRMLA.

Excerpts of that provision in the bill can be found below.

For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, the second sentence of section 255(g) of the National Housing Act (12 U.S.C. 171520(g)) shall be considered to require that in no case may the benefits of insurance under such section 255 exceed 150 percent of the maximum dollar amount in effect under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).

According to the above context, HECM loan limit would be 150% of the Freddie Mac limit which is $625,500. If Freddie Mac limit thus rises, the HECM loan limit will also rise. This provision is only offered in 2009 as a temporary measure included as part of an emergency package being engineered to stimulate the economy. For the change to be permanent an appropriate housing bill will have to be enacted.

The recovery bill has however not yet been passed. It has to be marked-up in the relevant committee and then debated and voted upon in the floor of the House of Representatives. Then it must then survive the scrutiny of the senate. The bill thus has along way to go before it sees the light of day. However it promises better reverse mortgage loan benefits if it does see through and so NRMLA is calling for support of the bill.

With a further increase in the lending limit of reverse mortgage loans, borrowers can enjoy access to more funds. Presently, the amount that borrowers can get are determined based on the value of their home or the approved applicable lending limit in their area or the lower of the two.

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