Reverse Mortgage Information

A draft of the proposed Economic Recovery Bill has been released recently by the House of Representatives. It contains a provision to set the loan limit for HECM at a higher level than the current $417,000. This provision was inserted in the draft bill after a joint request made by the NRMLA (National Reverse Mortgage Lenders Association) and the AARP (American Association of Retired Persons). The national loan limit is likely to be set higher for the balance of the year 2009.

The draft bill has this section: SEC. 12004 - FHA REVERSE MORTGAGE LOAN LIMITS FOR 2009, in which it states that the benefits of insurance should not exceed 150 percent of the maximum dollar amount in effect, mentioned in section 305 (a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).

This would bring the high ceiling of reverse mortgages to 150% of the Freddie Mac limit. The final high limit of reverse mortgages would then be $625,500 with the current Freddie Mac limit. If the Freddie Mac limit changes, the HECM limit ceiling would also get changed automatically.

This change is offered on a temporary basis and valid only for the year 2009. This is part of a larger emergency economic stimulus package. To make the increased limit permanent, a separate change needs to be enacted through an appropriate Housing Bill.

This draft bill must still pass through many stages until it gets into effect. It must be marked-up in Committee, and then brought to the House floor for a debate and a vote. After that it needs to go through the Senate. So there is still a long way to go.

The Senate has a previous record of opposing higher HECM loan limits. But NRMLA has been lobbying to overcome this reluctance and hesitation. Reverse mortgage professionals can keep the current provision intact while the deliberation on this draft bill continues.

In any case, this is an important first step in getting the HECM loan limit raised. Barney Frank, the Chairman of the House Financial Services Committee, needs to be thanked for letting this HECM provision included in the economic stimulus draft bill.