Higher Loan Limits Versus Falling Equity

July 11th, 2008 | Category: Reverse Mortgage

Ray Denton writes and says “my peers and I have a file of homeowners waiting for the FHA Modernization bill to pass, and approximately 50% of all Reverse Mortgage candidates I’ve talked to are waiting for it. Expect the number of HECM originations to skyrocket after the bill has passed. They’ll be a backlog with Counseling facilities and Underwriting for quite a while.”

I suspect that is right.

I additionally suspect that while reverse mortgage originations are being held as citizens wait for the authorization of larger loan amounts in Washington, home values in many areas are falling.

The clash is obvious and overt.

National organization of Realtors reports that “the median existing single-family home

price was $206,700 in May, which is 6.8 percent below a year ago.”

In other words, whether you raise reverse mortgage lending limits and at the same instance home values fall soon after many borrowers will not be ahead. Less home value means less equity and less equity means smaller reverse mortgages for many borrowers.

The aftereffect is rather than wait, owners with moderately-priced and less expensive homes who feel that value declines will continue may want to consider getting a reverse mortgage now. Those with homes in the upper brackets can still wait considering they will have sufficient equity to maximize reverse mortgage options whether loan limits are raised.

Orginal post by Peter G. Miller

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