Reverse Mortgage Loan Blog

The National Reverse Mortgage Lenders Association reported that the U.S. Department of Housing and Urban Development (HUD) formally adopted a new single national loan limit of $417,000 for federally insured reverse mortgages and lowered the fees that lenders can charge. These critical reforms to the Federal Housing Administration-insured Home Equity Conversion Mortgage (HECM) program were approved this past summer as part of the Housing & Economic Recovery Act of 2008.

“By implementing these new provisions, HUD has improved financial options for senior homeowners during a critical time,” said Peter Bell, President of National Reverse Mortgage Lenders Association. “The new loan limit and other provisions will allow seniors to receive more benefit at lower origination cost to meet their retirement needs.”

According to the association, the new higher lending limit will enable borrowers to obtain a greater benefit if their home value is higher than the previous HUD limit. Previously, the HECM program assigned different lending limits by county ranging from $200,160 in rural areas to $362,790 in the highest home value areas.

Similarly, existing borrowers whose home value is greater than the new HUD limit may be able to increase their benefit by refinancing their reverse mortgage and are encouraged to contact their lenders. On the fee issue, HUD reduced origination fees to 2% on the initial $200,000 of maximum claim amount (lesser of the home value or county lending limit) and 1% on the balance thereafter with a cap of $6,000.

“As far back as 2001, we began to question whether utilizing HUD’s area-by-area loan limits made sense for the HECM program,” explained Bell. “This change is the culmination of a seven-year legislative effort by NRMLA to enhance the HECM program.”

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