December 21, 2008
Huge Impact – New Reverse Mortgage Lending Limit Increase
George Bush signed the Housing and Economic Recovery Act on July 30. It officially went into effect on October 1st. For seniors 62 and over the law officially raised the national reverse mortgage lending limit to four-hundred-seventeen thousand dollars.
Prior to the enactment of the new law, FHA reverse mortgage limits maxed out at roughly $200,000 for most parts of country. In November, lenders began to fund reverse mortgages with the new limits in mind.
The act primarily helps senior homeowners, who own homes valued in excess of $200,160. In fact these homeowners can borrow as much as twice the amount as before. As an added bonus the closing costs on the higher loan amounts have reduced as a percentage of the value of of the home.
The reverse mortgage lending limit increase has come at exactly the right time for homeowner and commercial flooring company owner Wilma Johnson. Mrs. Johnson’s flooring business is one of the casualties of a bad economy. Since the beginning of 2008 flooring jobs have trailed off to next to nil, and Mrs. Johnson must concern herself more and more with simple things like paying day to day bills. Her mortgage payment alone eats into her dwindling savings at a rate of $1,450 per month.
With many unknowns in the commercial marketplace, she is unsure when her income will return. With that in mind Mrs. Johnson exercised the option to completely eliminate the burden of her mortgage payment by refinancing her home with a reverse mortgage.
A perception exists in the marketplace that the typical reverse mortgage customer owns their home free and clear and gets a reverse mortgage to supplement income.
The truth is that well over sixty percent of senior candidates for a reverse mortgage are looking into it for the express purpose of paying off a current forward mortgage. They have the same issue as Mrs. Johnson. The mortgage payment is difficult to handle.
The newly enacted law has come not a moment too soon for many seniors with mortgages formerly untouchable by the old limits. With the new limits in place many cash strapped borrowers are free to pay off old mortgages with a new reverse mortgage to eliminate the monthly financial burden.
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