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Here we go again! HECM (reverse mortgage) limits will probably increase to $625,500!

By
Mortgage and Lending with Reverse Mortgage Consultant

It wasn't too long ago that the lending limit on the reverse mortgage (HECM) was increased to one national limit of $417,000 instead of lower limits that varied by county.  The increase was part of HR3221, the FHA Modernization Act, passed in July, 2008.  It wasn't until November, 2008, that HUD allowed implementation of the new limit. 

The increase allowed seniors (over 62) with home values above the old county lending limit to access more of their equity.  Raising the limit even higher, to $625,500 will allow access to even more equity on higher valued homes.  Since the Jumbo reverse mortgage is not available in these current market conditions, the higher limit HECM essentially steps in for the defunct jumbo, but at much better interest rates and with the FHA insurance.

If the new limit takes effect, it will be temporary and for the balance of 2009 only. Congress would have to act on it again before this year is out to extend it beyond '09.  The increase in the limit must still be voted on separately by the House and the Senate, so it is not yet entirely final.

Once both houses of Congress approve it, President Obama has to sign.  After the President signs the bill, HUD will have to issue a Mortgagee Letter to implement the change.

The last time the limit was raised, it took HUD nearly 5 months to interpret the bill and issue the Mortgagee Letter.   This puts seniors into another "lending limit limbo".  Let's hope they move faster this time!