The HECM Limit Increase Will Increase Number of Reverse Mortgages Originating in 2009
The US Senate passed the economic stimulus bill recently. In it has been included a limit increase in the HECM program. HECM is short for the Home Equity Conversion Mortgage Program, which is how the federal Government terms the reverse mortgage program which is quite well known.
The economic stimulus plan raises the maximum limit for HECM loans to “150% of the Freddie Mac limit” - currently the figure works out to $625,500 for the balance of the year 2009. The higher HECM/reverse mortgage loan limit is applicable for the loans taken during the remainder of the year 2009. The higher loan limit will not be available for loans taken after the current year 2009. To get the limit extended beyond the year 2009, US Congress will be needed to prepare a new bill for the same.
In any case, this higher loan limit increase is a very welcome increase, and is one that senior home owners have been looking forward to, for a long time. This will enable the seniors who are considering taking reverse mortgages on their homes, to go for it, and get the additional cash needed to successfully maintain and enhance their existing lifestyles. This welcome change has been made in the American Recovery and Reinvestment Act of 2009 (ARRA).
For the time between when the bill came into effect and April 30th, if your home was worth more than the previous loan limit of $417,000 you can choose to use the lower limit versus the higher limit. The difference will be managed by the MIP (Mortgage Insurance Premium). For example, if your property is worth $550,000 the MIP would be $11,500 under the new plan but $8300 under the previous plan.
With the new increased limit in place for HECM reverse mortgages, a senior home owner aged 75 and above with a home worth more than $625,500 can get around $420,000, but they could get only $280,000 before the loan limit increase.
This can be very important for senior home owners who have properties with high values and existing mortgages with balances where the traditional reverse mortgage was not enough.
The increased limit is applicable for all areas with no differences between high-cost or low cost areas. The limit increase is applicable nationally. The changes are expected to flood the reverse mortgage companies with lots of new applications.
For any questions concerning the federally-insured reverse mortgage or HECM loan program, you are advised to contact a qualified reverse mortgage specialist at the earliest. This can be a very good opportunity for getting the cash you need and deserve, after leading a long and tiring working life.
