On Nov. 1, the limit on FHA-backed reverse mortgages, dubbed Home Equity Conversion Mortgages (HECMs), rises to $417,000 nationwide. The new rules will institute a 2-percent cap on origination fees for the first $200,000 of the loan amount or a 1-percent ceiling for higher amounts, with a $6,000 inflation-adjustable limit. Additionally, seniors will be allowed to use such loans to purchase a new property and extract equity from co-operative properties, and lenders will no longer be allowed to sell annuities and other financial products along with the mortgage.
Anonymous
Don, I don't know if you agree with these new regulations but I think it was a very costly mistake for the seniors NOT a savings. 1st of all the increase in the lending limit is one of the benefits. The cap placed on origination is foolish. This cap will force lenders to offer higher margin loans so that the lender can afford to continue to offer reverse mortgages. In the long run the senior will end up paying a high price due to higher rates on these loans. The cap makes no sense. It would be the same as placing a cap on a realtors fee just because you are dealing with a senior, or a Doctor who must charge less for surgery just because his/her patient is a senior. As for not allowing the sale of LTC or life insurance, again a bad move and one which the industry can easily get around. Just ask yourself, if I were to be the beneficiary of my parents home would I want to receive the home with a mortgage payment due every month until I can (hopfully) sell it (most likely at a deep discount in todays market). Or, would I be greatful that mom and dad planned ahead by working with a Financial Advisor who was knowledgeable about BOTH Reverse Mortgages and Life Insurance and now I get the tax free proceeds from the life insurance and would have NO mortgage payment to worry about (since it was reversed) and can take up to 12 months to sell the house without all the pressure and maybee avoid being forced to discount it. There are many good things that came out of the HR-3221 but some things were just not thought through.
Nov 09, 2008 12:53 AM
#1
Lubeck Realty Group - Jupiter, FL
P.A. Realtor ABR RSPS North Palm Beach County
Steve, great points as we know when the government passes such laws there is always points that are not thought out fully. You have made some outstanding comments and points well taken.
Nov 09, 2008 10:23 AM
Lubeck Realty Group - Jupiter, FL
P.A. Realtor ABR RSPS North Palm Beach County
True, lenders are out of the picture on the annuities and insurance business relating to the reverse mortgages. Some additional news. The Housing and Economic Recovery Act also pegs the national mortgage limit for FHA-insured reverse mortgages to the national conforming loan limit. The FHA product known as the Home Equity Conversion Mortgage (HECM) will therefore have a national mortgage limit of $417,000. Unlike the new forward mortgage loan limits, the new HECM loan limits are effective on loans insured or after Nov. 6, 2008. This is the first time that a single limit applies to these mortgages nationwide. As in previous years, the special exception areas are Alaska, Hawaii, Guam and the Virgin Islands, which may have higher loan limits. Starting in January 2009, counties in those areas may have loan limits of 115 percent of area median prices, where that amount is above $417,000, up to a ceiling of $625,500.
Reverse mortgages allow homeowners age 62 and older to borrow against the value of their homes without selling them. Homeowners can select a lump-sum payment, monthly payments or tap into a line of credit. No repayment is required as long as a homeowner lives in a home with a reverse mortgage. The reverse mortgage is repaid, with interest, when a homeowner sells the home or dies.
HUD will inform mortgage lenders and brokers of the new limits through a mortgagee letter posted on www.hud.gov and www.fha.gov.
HUD has a comprehensive listing of the new loan limits in all counties throughout the country. For more info, go to HUD's Web site at: http://www.hud.gov/pub/chums/file_layouts.html.
Nov 13, 2008 10:56 AM
Rainmaker
1,325,299
1,325,299
Donald Urschalitz
P.A. Realtor ABR RSPS North Palm Beach County
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