New Lending Limit Makes Reverse Mortgage More Attractive

The new limit is nearly double that of the limit from before the last increase in 2008, which consisted of a jump from $362,790 to $417,000.

The new national lending limit increase arrives as part of the American Recovery and Reinvestment Act of 2009 (ARRA), and will be in effect until December 31, 2009. The new limit applies to loans which have already been approved in 2009 as well as loans that were pending in 2008 as long as they had not receive credit approval before the new year.

The new, higher lending limit will enable borrowers to obtain a greater benefit if their home value is higher than the previous HUD limit. Of course, not all reverse mortgage borrowers want to take out the full allowable amount, and an increase in limits means that the 2% mortgage insurance fee goes up.

With these changes under the American Recovery and Reinvestment Act of 2009, all areas of the continental United States, as well as Alaska, Hawaii, Guam and the Virgin Islands, will operate under a single HECM loan limit of $625,500 instead of a state-by-state and county limit based on local economies. The $625,500 limit applies not only to regular HECM transactions, but also the new HECM Reverse Mortgage for Home Purchase.

The regular reverse mortgage structure will still apply with the new limit, wherein HUD will collect at 2% upfront, .5% annually, and the maximum origination fee will remain $6,000.

Robert Griffin, President
Griffin Financial Mortgage, LLC