Reverse Mortgage Loan Blog

U.S. reverse mortgage loan creation rose 4.2 percent to a record level in fiscal 2008 and growth is expected to accelerate next year due to an impending increase in the federally insured loan limit, a trade group said on Tuesday.

Growth slowed this year as home prices sank, eroding home equity.

In a reverse mortgage, home owners aged 62 or older can tap into their home equity by getting cash in a lump sum, monthly income, a line of credit, or a combination, without having to sell or give up title to their houses.

Money received is tax free, and repayment is made only when the owner permanently moves or passes away. Typically, reverse mortgages are taken by owners looking for more cash without selling their homes.

The industry closed 112,100 Home Equity Conversion Mortgages (HECMs) in fiscal 2008, which ended Sept. 30, surpassing the prior record of 107,558 loans in 2007, based on data from the U.S. Department of Housing and Urban Development data, the National Reverse Mortgage Lenders Association said on Tuesday.

HECM reverse mortgages are insured by the Federal Housing Administration, an arm of HUD.

Reverse mortgages had jumped 40.9 percent in 2007 to 107,558 loans from 76,351 in 2006. In 2005 there were 43,131 reverse mortgages created.

As part of the Homeownership and Economic Recovery Act of 2008, HUD approved a single national loan limit of $417,000 for federally insured HECM reverse mortgages that is expected to be effective around Nov. 1.

Previously, the program assigned different lending limits by county ranging from $200,160 in rural areas to $362,790 in the highest home value areas.

Existing borrowers whose home value exceeds the new HUD limit may be able to raise their benefit by refinancing their reverse mortgage.

About 30 percent more seniors can qualify or borrow more through a reverse mortgage because of the higher loan limit, Senior Lending Network, a lender based in Melville, New York, said in a separate release on Tuesday.

For many seniors, “retirement funds are worth less, they are living longer and declining home values continue to take their toll,” David Peskin, CEO of Senior Lending Network, said in the statement. “It is one way for seniors to buffer the impact of a worsening economy and declining home values.”

Found here.

Bookmark It