The 2023 HECM Limit is likely to exceed $1 million! Here’s why…
Continue readingA 1-million dollar HECM limit?!
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Continue readingLending Limit Increase Cheered & Criticized
Many cheer & some criticize the latest FHA loan limit increase
Mortgagee Letter 2020-42 announced new loan limits for 2021 and once again, the federally-insured reverse mortgage will see its maximum claim amount significantly increased. HECMs with a case number assigned on or after January 1st are eligible for the new national lending limit of $822,375. But wait, you may say- didn’t HUD echo the Trump Administration’s call for Congress to abandon a national lending limit in favor of local or county-limits? Yes, they did. But remember the key word is Congress. Neither FHA nor HUD can unilaterally change the present loan limit scheme, rather legislative approval by Congress is required.
Today we are going to examine three questions: who stands to benefit the most, what role could the geographic concentration of HECM loans play in the future, and will jumbo and proprietary loans suffer as a result?
New Loan Limit… It’s here!
Under ARRA, the national FHA loan limit for HECM will increase from $417,000 to $625,500 (from 100 percent to 150 percent of the conforming limit). HECM loan mortgagors do not undergo the same procedures for credit approval as do mortgagors for forward mortgages. FHA does not deem the credit approval process to be complete until the HECM loan is closed. Therefore, HECM loans closed on or after the date of this Mortgagee Letter are subject to the higher maximum dollar amounts.
In those areas, the maximum claim payable by FHA is 150 percent of the Freddie Mac conforming limits. To avoid potential cases where a claim could be less than the national limit, as adjusted for the special exception areas, HUD had decided not to make the adjustment. Therefore, these few special exception areas will have the same $625,500 limit as all other areas.
FHA will, for a limited time, allow HECM loans that received case number assignments but did not close prior to the effective date of this mortgagee letter to be closed using either the old limit that was used to originally calculate the loan, or the new limits as prescribed herein. An option will be made available in FHA Connection for the lender to choose which rate to use. This option will be available until April 30, 2009.
