Higher HECM Loans Now Available

November 07th, 2008 | Category: Reverse Mortgage

The long-awaited higher loan limits for FHA-insured reverse mortgages are here.

HUD says “the Housing and Economic Recovery Act of 2008 (HERA) established a national mortgage limit for all Home Equity Conversion Mortgages (HECM), insured under Section 255 of the National Housing Act, to be set in conformance with section 305(a)(2) of the Federal Housing Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)). Effective for all HECMs insured on or after the day of that Mortgagee Letter, the national mortgage limit is $417,000.”

Translation: Starting November 6, 2008, the new FHA reverse mortgage limit for single-family homes is now $417,000 nationwide.

The new law allows HUD to set higher loan limits for Alaska, Guam, Hawaii and the Virgin Islands. These limits can exceed the general FHA mortgage standard by up to 150%. HUD, however, has only raised the HECM limit in one state, Hawaii.

Hawaii

The new HECM loan limit would actually reduce FHA financing now available in Hawaii — thus four areas within the state have higher one-family loan limits for reverse mortgage borrowers:

___Hilo, Hawaii — $470,250

___Honolulu, Hawaii — $544,185

___Kappa, Hawaii — $544,185

___Kahului-Wailuku, Hawaii — $544,185

The new loan

limits for Hawaii should be seen as temporary. “The rates shown for these areas,” says HUD, “are based on current mortgage limits and are subject to change upon publication of newly calculated mortgage limits which will be published in a new mortgagee letter in the near future.”

Re-calculation

HUD says that “lenders must use the national mortgage limit and calculate the loan origination fee using limitations established by HERA, and new policy guidance issued by FHA, when re-calculating HECM loans that did not close prior to October 13, 2008.”

Maximum Claim Amount

The usual standard in lending is that a loan will be based on the appraised value of the property or the sale price, whichever is less. With HECMs, HUD says that the “the maximum claim amount will be the lesser of the appraised value or the national mortgage limit for a one family residence. that applies to all one-to-four unit properties. Neither the estimate of closing costs nor the initial mortgage insurance premium is used in the calculation of the maximum claim amount.”

For details, speak with FHA reverse mortgage lenders and see Mortgagee Letter 2008-35

Orginal post by Peter G. Miller

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