Limits for Reverse Mortgage Pushed to $625M by
Stimulus Bill Making More Seniors Eligible
Reverse Mortgages may boom with clarification of
the new provision allowing new home purchases
Feb. 19, 2009 – Many more senior citizens became
eligible to take advantage of the government’s reverse mortgage program
this week as the loan limit was raised to $625,500 for the rest of 2009,
from the former limit of $417,000. The temporary increase in the HUD
Reverse Mortgage program is included in the Stimulus Bill, signed by
President Barack Obama, according to the National Reverse Mortgage
Lenders Association (NRMLA).
The NRMLA says the limit will be raised on a
temporary basis to 150% of the Freddie Mac Limit for the remainder of
2009, which would put it at $625,500.
Purchase Reverse Mortgage Program allows seniors to
purchase a new home, never make a mortgage payment for as long as they
live in the home, may require sizable down payment
HUD normally has different limits for different
areas of the country, except in the case of the Home Equity Conversion
Mortgage (HECM or “Heck-um”) program which was just changed last year to
a national limit of $417,000, according to Cliff Auerswald of the All
Reverse Mortgage Company.
Auerswald says this is important because that would
seem to indicate that there will be no differences in high cost areas
versus areas not considered high cost, that the limit will be $625,500
nationally.
This is very important to senior homeowners who
have properties with higher values, especially those who previously had
existing mortgages with balances that the traditional reverse mortgage
program could not pay off.
With the disappearance of proprietary or jumbo
reverse mortgage products, these senior homeowners had nowhere to turn.
“With the passage of this program, senior borrowers
with high valued homes may now be able to receive much more money to use
for whatever need they may have, including retiring higher existing
debt,” according to Auerswald.
The chart on the right of this page – provided by All Reverse
Mortgage Company - shows how much more a borrower can expect to receive
under the new limit.
Auerswald says this chart is only an estimate and
seniors must use the Reverse Mortgage Calculator to get the exact
figures for their area.
“But,” he adds, “if you take the youngest borrowers
age and look at the figures on the chart, it will give you an estimate
of the comparison of approximately what the borrower would receive at
the existing limit of $417,000 and how much more the senior will receive
at the new proposed limit of $625,500.”
He suggests the following may describe seniors who
will be interested in the new higher limits:
● If you have been waiting because your benefit
amount would not pay off enough of your existing debt;
● if you had already received a reverse mortgage
but were limited in the amount of funds you could receive even though
your property was worth considerably more than the current HUD limit; or
● if you find that with the current economic
circumstances you must do something to protect your way of life.
Reverse Mortgage Only for
Those Age 62 and Older
Reverse mortgages allow
older homeowners to convert part of the equity in their homes
into cash without having to sell their homes or take on
additional monthly bills.
In a “regular” mortgage, you
make monthly payments to the lender. But in a “reverse”
mortgage, you receive money from the lender and generally don’t
have to pay it back for as long as you live in your home.
Instead, the loan must be repaid when you die, sell your home,
or no longer live there as your principal residence. Reverse
mortgages can help homeowners who are house-rich but cash-poor
stay in their homes and still meet their financial obligations.
To qualify for most reverse
mortgages, you must be at least 62 and live in your home. The
proceeds of a reverse mortgage (without other features, like an
annuity) are generally tax-free, and many reverse mortgages have
no income restrictions.
The legislation will only make the limits available
until the end of 2009 and then it will be up to Congress to vote to
extend that loan amount further.
The new expanded loan limit may create a boom in
reverse mortgage activities for senior citizens, and there will most
certainly be a boom when, and if, the Department of Housing and Urban
Development clears up the rules and procedures for another change
approved for 2009 that will allow older Americans to us reverse
mortgages to buy new homes. (See sidebar story)
Auerswald says there is already “a backlog” of
applicants waiting for the home purchase program. He says, too that
margins and rates fluctuate with reverse mortgages now more than ever in
the past.
Editor's Note: All Reverse Mortgage is an
advertising client of SeniorJournal.com, but contributions to this article
are a
news department contribution.
Feb. 19, 2009 – Many more senior citizens became
eligible to take advantage of the government’s reverse mortgage program
this week as the loan limit was raised to $625,500 for the rest of 2009,
from the former limit of $417,000. The temporary increase in the HUD
Reverse Mortgage program is included in the Stimulus Bill, signed by
President Barack Obama, according to the National Reverse Mortgage
Lenders Association (NRMLA).
With the disappearance of proprietary or jumbo
reverse mortgage products, these senior homeowners had nowhere to turn.