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FHA/HECM Reverse Mortgage Loan Limit still at $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.

The limit was raised again to $625,500 which allowed access to even more equity on higher valued homes. 

I find this ironic in a time when most homeowners' values have fallen. However, for those seniors with higher valued homes, the increase fills the void left when jumbo reverse mortgages went away.  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. 

It is a shame, though, that some seniors either refinanced their existing reverse mortgages or took out a reverse for the first time when the limit increased to $417,000.  Now, those with even more equity in their homes, may want to refinance to take advantage of the latest increase.  They will do it at a price, however, because they will be hit with closing fees once again.  They do get a break on the MIP (Mortgage Insurance Premium) when they refinance an existing reverse mortgage.  But, again, what a shame that our politicians and HUD were so short-sighted back in July of '08 when they limited the increase to $417,000.

The higher limit was supposed to be temporary  and for the balance of 2009 only. However, as of this update - March, 2010 - the limit is s till in effect.