There is some confusion regarding the status of the county lending limit increases for HECMs (Home Equity Conversion Mortgages), also know as reverse mortgages.

The recent FHA temporary loan limit increases are NOT applicable to HECM's.  The Economic Stimulus bill only created temporary higher limits through the end of this year for "forward" mortgages, not reverse mortgages.  The Economic Stimulus package specifically excluded HECM from all of its provisions

The House of Representatives passed its version of the FHA Modernization bill in July 2007 and the Senate passed its version in December. The two versions differ in a few areas (other than HECM issues) and the differences must be resolved in a House-Senate "conference committee." Once a bill is formally adopted by the Conference Committee, it will be sent to both chambers of Congress for approval before it is sent to the President for his signature.  The bill includes these provisions:

1. A single national loan limit at the conventional limit (currently $417,000); 
2. HECM for home purchase;
3. HECM for coops;
4. A limitation on HECM origination fees at 1.5% of the maximum claim amount;
5. Broader provisions regarding manufactured homes, that would, in essence, allow HECMs on manufactured homes where the lots are held as condominiums.

Increasing the national limit will allow many reverse mortgage borrowers the ability to access more of their equity.  Currently the highest national lending limit for HECMs is $362,790.  When I am speaking to a prospective borrower who has a home value above the county lending limit, I inform them that if they wait a while longer, they may be able to access more equity. 

Until the FHA Modernization bill is finalized, it is very misleading for lenders to send out marketing letters telling consumers that Congress has raised the HECM loan limits to $417,000 and promoting refinancing of existing loans. Congress has not yet enacted the higher limit. It is false and misleading to state the higher limits as something that has been done.  I have seen a couple of marketing pieces that are touting the higher limits as if they are already in place.  That simply is not true.

No one knows for sure exactly when Congress will complete this bill -- and what the final version will actually include.  It could be next week, next month or three months from now.  Stay tuned....