Reverse Mortgage Eligibility

  • All reverse mortgage borrowers must be 62 and older
  • Must own property and occupy as primary residence
  • Participate in an information counseling session
  • Must have sufficient equity in the property
  • Property must meet FHA property standards
  • Must maintain home with needed repairs, property taxes and insurance

Loan Amount Based On

  • Age of youngest borrower
  • Current interest rate
  • Lesser of appraised value or the FHA insurance limit
  • An Image Slideshow - Reverse Mortgage Educator
  • An Image Slideshow - Reverse Mortgage Educator
  • An Image Slideshow - Reverse Mortgage Educator

HECM Loan Limit Extended Through Calendar Year 2011

On August 19, 2011, HUD (the Department of Housing and Urban Development) published Mortgagee Letter 11-29, which states that the loan limit for reverse mortgages (HECMs) will remain at $625,500 for the remainder of 2011 (for a one-unit home). That limit of $625,500 was a "temporary" limit, lifted from $417,000 in February 2009 as part of the government's efforts to combat the effects of economic recession. It had been scheduled to revert back to $417,000 on October 1, 2011.

 

This is important and very good news for anyone thinking about getting a reverse mortgage, especially if they live in areas where home values are relatively high. Let's take the situation of San Diego, California, as an example of how vital this loan limit is. In January 2009 the median home value in San Diego was $300,000, meaning half the homes sold for more and half for less. This was down from the all-time high of $517,500 set in November 2005. During most of the time prior to February 2009 the loan limit for HECMs was even less than $417,000. In 2006 and 2007 the loan limit was $362,790 (for San Diego County, it varied by county) and was increased to $417,000 on November 1, 2008. This means that in 2006 when half the home values in that county were over $500,000, the highest value HUD would recognize for purposes of a reverse mortgage was $362,790. No wonder reverses were not very popular in San Diego or other high value areas.

 

When the HECM loan limit was increased in February 2009 from $417,000 to $625,500, suddenly many more people were eligible, and the popularity of reverses rose dramatically. It became a huge boost to the lifestyle of so many households, exactly what the government was hoping for. The scheduled reversion back to $417,000 on October 1, 2011 was a big concern for many people who were not yet eligible, as they might not be able to take advantage of the program. With the extension through the year 2011, another window opens up for participation of homeowners with higher mortgage balances and higher value homes.

 

Because the economy is still in trouble, the lobbying efforts of many are now geared towards extending this loan limit beyond the calendar year 2011. The same reasons for increasing the limit in the first place are still valid, and industry groups such as the National Reverse Mortgage Lenders Association (NRMLA) and citizens groups as well are pressing Congress and HUD to continue this extension.
 
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