By Karen Epper Hoffman, NRMLA
The recent increase of the national loan limit for Home Equity Conversion Mortgages (HECMs) is barely a month old and already lenders see it as a game-changer.
The federally insured HECM limit climbed to $625,500 from $417,000 on Feb. 17, when President Obama signed the American Recovery and Reinvestment Act of 2009 into law. The higher loan limit, which stays in effect until yearend, follows by less than four months an increase of the loan limit to $417,000; previously, the loan limit varied by county and maxed out at $362,790.
The financial crisis has accentuated the value of the higher limit. With so many seniors reeling from diminishing investments, weakened home values, and scant availability of consumer credit, many reverse mortgage originators say the HECM increase offers a valuable option to cash-strapped seniors.
"This increase is going to help a lot of people after that triple whammy," said Michael Branson, chief executive of All-Reverse Mortgage Co., Garden Grove, Calif. "Many people come to use saying 'if I sell right now I'll lose my shirt.' A reverse mortgage can be the only alternative to a fire sale of the property."
The interest in higher-limit HECMS is coming from the more affluent end of the marketplace, lenders said. Many wealthy consumers are finding their investment portfolios depleted, making them cash-poor, yet still house-rich. This is especially true for seniors living in coastal states, like California, Massachusetts, New York, or Washington, where housing prices are historically higher.
"There's a lot more interest in [HECM] coming from people with homes in the million-dollar range," said Maggie O'Connell, broker for Reverse Mortgage Store of Livermore, Calif.
Michael Odden, vice president and reverse mortgage product manager for M&I Bank in Milwaukee, Wisc., said the old HECM loan limits below $370,000 hamstrung the affluent market.
"A lot of people around here retire to their lake house, which can be worth $500,000 or more," Odden said. "The new limit really opens this market up."
In fact, the higher loan limit is filling an even more pronounced void, and that is the one left by the evaporation of proprietary and jumbo products. With the capital markets still in shambles, most originators sell almost nothing but HECMs. Odden said M&I Bank's reverse mortgage business is "north of 95% in HECMs."
If you need help with a reverse mortgage in the Portland Oregon area, visit www.pdx-mortgage.com.
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