FHA Officially Raises HECM Loan Limit
February 25, 2009
The U.S. Department of Housing and Urban Development published Mortgagee Letter 2009-07, which officially raises the national limit for Home Equity Conversion Mortgages from $417,000 to $625,500 for the remainder of 2009.
The new limit took effect yesterday, 2/24/2009, the date of the Mortgagee Letter.
Industry News and Updates
February 19, 2009
Artilce from NRMLA (National Reverse Mortgage Lenders Association)
Implementing the New $625,500 HECM Loan Limit
As most NRMLA members know, the economic stimulus bill signed into law by President Obama today raises the single national loan limit for HECMs to 150% of the Freddie Mac loan limit. Currently, that would create a HECM limit of $625,500. This is the direct result of a successful joint effort by NRMLA and AARP to obtain this higher loan limit. Under this new law, the higher limit is only applicable for loans made during the balance of 2009. We must go back to Congress to get the higher loan limit extended beyond this year.
Please understand that HUD must first issue a Mortgagee Letter implementing the new loan limit before it becomes operational. We have been discussing the timing for issuing this Mortgagee Letter with the Department and it is still unclear how long it will take to get it out, due to a few considerations.
First of all, a higher loan limit means that there are more loans that do not have the “cushion” of additional value beyond the maximum claim amount. For example, if a home is valued at $630,000 and the loan limit is $417,000, FHA has the benefit of $213,000 in additional value that could help prevent it from incurring any loss if a claim is paid on the loan. With the new higher limit of $625,500, the “cushion” on that loan would only be $4,500. Under the prior administration, the Office of Management & Budget, which is part of the White House, would have required a “risk review” and perhaps an upward adjustment in the MIP, to compensate for the higher degree of risk in the program. It is unclear yet whether the new administration will require a similar risk review and MIP adjustment.
Secondly, there is some concern about HECM borrowers who recently refinanced into a loan with the $417,000 limit, being “churned” into a refinance under the new limit and incurring the costs all over again. While the “streamlined refi,” option could be utilized to lower the upfront MIP, there is some concern about making a home owner who has just paid an origination fee of $6,000 within the past few months to refinance at $417,000, incur that same cost all over again. It is unclear, from both a legal and practical standpoint, whether or not HUD can place further origination fee limitations on HECM transactions, but it is a topic of discussion.
As always, NRMLA stays in close contact with our colleagues at HUD and will keep you apprised of developments regarding implementation of the new law as we receive information.
Peter H. Bell
President
February 16th, 2009
President Obama’s 2009 stimulus package addresses the reverse mortgage limits by increasing the limit further to match the Fannie/Freddie limit of $625,500.
In section 1204 of the Senate’s (page 30-31 of Conference Report on H.R. 1, American Recovery and Reinvestment Act of 2009) the Reverse Mortgage made the cut. From the White House website link you can find this information.
President Obama has been expected to sign this bill on Tuesday February 17th. The 150% equates to $625,500. That could be the new nationwide lending limit for 2009, a large percentage jump from the current $417,000 and one that will bring relief to a large amount of Americans that have larger mortgages and more expensive homes than previously allowed. When HUD gets around to writing the mortgagee letter for this change still remains to be discussed.
If for example, a 70 year borrower today considered a reverse mortgage on a $700,000 home, their equity access would be based on the lesser of the home’s value or the lending limit so it would be roughly 62% of the current lending limit of $417,000 at $259,000. When the new lending limit of $625,500 goes into place, that same borrower could access roughly $387,000 in equity or 62% of $625,500. The percentage is a rough estimate based on a margin of 2.50 on the LIBOR currently based on expected rate of 5.60%. That percent changes for different ages and expected rates so consult your favorite reverse mortgage calculator once the plan goes into place or contact us in the upper left hand corner for a better representation based on your particular circumstances.
SEC. 1204. FHA REVERSE MORTGAGE LOAN
LIMITS FOR 2009. For mortgages for which the
mortgagee issues credit approval for the borrower
during calendar year 2009, the second
sentence of section 255(g) of the National Housing
Act (12 U.S.C. 1715z–20(g)) shall be considered
to require that in no case may the benefits
of insurance under such section 255 exceed 150
percent of the maximum dollar amount in effect
under the sixth sentence of section 305(a)(2) of
the Federal Home Loan Mortgage Corporation
Act (12 U.S.C. 1454(a)(2)).
The National Reverse Mortgage Lender’s Association announced the following:
NRMLA is pleased to report that the compromise package approved by the House-Senate conference committee yesterday does indeed set the HECM loan limit at 150% of the Freddie Mac limit, which would put it at $625,500 — for *the balance of 2009.
The House of Representatives approved the plan this afternoon and the Senate is expected to follow suit this evening.
Please remember that after President Obama signs the bill, HUD still must issue a Mortgagee Letter to implement the change. From our previous experience, we have learned that there is no telling exactly how long it will take for them to get this done, but with the temporary nature of this provision, we hope that they will act expeditiously.
*Please note this is for the year 2009 only and is not a permanent limit at this time.
February 12, 2009
When the Senate passed its version of the economic stimulus bill earlier this week, people in the industry were concerned because it didn’t include a provision to raise the HECM loan limit. Yesterday, members of the U.S. House and Senate participated in a conference committee to work out the compromise for the stimulus package.
According to Peter Bell, President of NRMLA, the committee saw fit to retain the House language which adjusts the maximum claim limit for HECMs to "150% of the Freddie Mac limit," currently that would be $625,500, for the balance of this year.
Over the next few days the conference report must be accepted by votes in both the House and Senate. Then, the bill can be sent to President Obama for his signature.
There are many questions about how this will be implemented; the most asked one, of course, being, "when?" There are no answers to this yet. A lot has to be done to implement this new law. It is several hundred pages and affects every aspect of our economy, including many areas, besides HECM, that HUD will have to implement.
February 10th, 2009
New Stimulus Bill To Increase HECM Loan Limit Passed By House
Posted on February 10, 2009
The House of Representatives recently passed an economic stimulus bill aimed at injecting new momentum into the economy. Among the provisions of the new bill is a provision that would see an increase the national loan limits for reverse mortgages. The bill sets the increase at 150% of the Freddie Mac loan limit which currently stands at $417,000. Thus the new limit for HECM loans would now be set at $625,500.
The Senate is also set to present their own version of an economic recovery bill for floor debate and the votes would be cast very soon. It is not sure that the provision for increasing the reverse mortgage loan limit will be included in the Senate bill.
The challenge is then to try to protect this provision of HECM Loan limit increase from being removed during the reconciliation negotiations between the Senate bill and the House of Representatives Bill. After the reconciliation of both bills the final bill is expected to be passed and presented to President Obama, February 16th.
January 30, 2009
Yesterday the House of Representatives approved President Obama’s economic recovery plan with vote of 244-188.
The text of the bill does include the reverse mortgage provision which was added in response to a request that came jointly from AARP and the National Reverse Mortgage Lenders Association. The provision would set the single national loan limit for HECMs at a higher level than $417,000–for the balance of 2009. We will update as new information becomes available. As of the date of this posting the approval has not been implemented.
SEC. 12004. FHA REVERSE MORTGAGE LOAN LIMITS FOR 2009.
For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, the second sentence of section 255(g) of the National Housing Act (12 U.S.C. 171520(g)) shall be considered to require that in no case may the benefits of insurance under such section 255 exceed 150 percent of the maximum dollar amount in effect under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).
________________________________________________________________________
Januray 20, 2009
Last week the National reverse Mortgage Lenders Association announced that the draft of the economic recovery bill released by the House of Representatives contains a provision, which was inserted in response to a request that came jointly from NRMLA and AARP, that would set the single national loan limit for HECM at a higher level than $417,000–for the balance of 2009.
SEC. 12004. FHA REVERSE MORTGAGE LOAN LIMITS FOR2009.
For mortgages for which the mortgagee issues credit approval for the borrower during calendar year 2009, the second sentence of section 255(g) of the National Housing Act (12 U.S.C. 171520(g)) shall be considered to require that in no case may the benefits of insurance under such section 255 exceed 150 percent of the maximum dollar amount in effect under the sixth sentence of section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1454(a)(2)).
According to the email, it would bring the HECM loan limit to 150% of the Freddie Mac limit, or $625,500. If the Freddie Mac limit changes, the HECM limit would change commensurately. This change is being offered as a temporary measure, thru 2009 only, because it is part of an emergency economic stimulus package. A permanent change would have to be enacted through a more appropriate housing bill.
One Year T-bill Index History
|
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
2008 |
2.71 |
2.05 |
1.54 |
1.74 |
2.05 |
2.42 |
2.28 |
2.18 |
1.91 |
1.42 |
1.07 |
0.49 |
2007 |
5.06 |
5.05 |
4.92 |
4.93 |
4.91 |
4.96 |
4.96 |
4.47 |
4.14 |
4.10 |
3.50 |
3.26 |
2006 |
4.45 |
4.68 |
4.77 |
4.90 |
5.00 |
5.16 |
5.22 |
5.08 |
4.97 |
5.01 |
5.01 |
4.94 |
2005 |
2.86 |
3.03 |
3.30 |
3.32 |
3.33 |
3.36 |
3.64 |
3.87 |
3.85 |
4.18 |
4.33 |
4.35 |
2004 |
1.24 |
1.24 |
1.19 |
1.43 |
1.78 |
2.12 |
2.10 |
2.02 |
2.12 |
2.23 |
2.50 |
2.67 |
2003 |
1.36 |
1.30 |
1.24 |
1.27 |
1.18 |
1.01 |
1.12 |
1.31 |
1.24 |
1.25 |
1.34 |
1.31 |
2002 |
2.16 |
2.23 |
2.57 |
2.48 |
2.35 |
2.20 |
1.96 |
1.76 |
1.72 |
1.65 |
1.49 |
1.45 |
2001 |
4.81 |
4.68 |
4.30 |
3.98 |
3.78 |
3.58 |
3.62 |
3.47 |
2.82 |
2.33 |
2.18 |
2.22 |
2000 |
6.12 |
6.22 |
6.22 |
6.15 |
6.33 |
6.17 |
6.08 |
6.18 |
6.13 |
6.01 |
6.09 |
5.60 |
1999 |
4.51 |
4.70 |
4.78 |
4.69 |
4.85 |
5.10 |
5.03 |
5.19 |
5.25 |
5.43 |
5.55 |
5.84 |
1998 |
5.24 |
5.31 |
5.39 |
5.38 |
5.44 |
5.41 |
5.36 |
5.21 |
4.71 |
4.12 |
4.53 |
4.52 |
1997 |
5.61 |
5.53 |
5.80 |
5.99 |
5.87 |
5.69 |
5.54 |
5.56 |
5.52 |
5.46 |
5.46 |
5.53 |
1996 |
5.09 |
4.94 |
5.34 |
5.54 |
5.64 |
5.81 |
5.85 |
5.85 |
5.83 |
5.55 |
5.42 |
5.47 |
1995 |
7.05 |
6.70 |
6.43 |
6.27 |
6 |
5.64 |
5.59 |
5.75 |
5.62 |
5.59 |
5.43 |
5.31 |
1994 |
3.54 |
3.87 |
4.32 |
4.82 |
5.31 |
5.27 |
5.48 |
5.56 |
5.76 |
6.11 |
6.54 |
7.14 |
1993 |
3.50 |
3.39 |
3.33 |
3.24 |
3.36 |
3.54 |
3.47 |
3.44 |
3.36 |
3.39 |
3.58 |
3.61 |
1992 |
4.15 |
4.29 |
4.63 |
4.30 |
4.19 |
4.17 |
3.6 |
3.47 |
3.18 |
3.30 |
3.68 |
3.71 |
1991 |
6.64 |
6.27 |
6.40 |
6.24 |
6.13 |
6.36 |
6.31 |
5.78 |
5.57 |
5.53 |
4.89 |
4.38 |
1990 |
7.92 |
8.11 |
8.35 |
8.40 |
8.32 |
8.10 |
7.94 |
7.78 |
7.76 |
7.55 |
7.31 |
7.05 |
1989 |
9.05 |
9.25 |
9.57 |
9.36 |
8.98 |
8.44 |
7.89 |
8.18 |
8.22 |
7.99 |
7.77 |
7.72 |
1 Year LIBOR History of Rates
| |
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
| 2009 |
2.004 |
|
|
|
|
|
|
|
|
|
|
|
| 2008 |
4.224 |
2.849 |
2.709 |
2.486 |
3.079 |
3.164 |
3.311 |
3.253 |
3.207 |
3.963 |
3.174 |
2.766 |
| 2007 |
5.441 |
5.333 |
5.201 |
5.297 |
5.389 |
5.405 |
5.426 |
5.245 |
5.275 |
4.901 |
4.638 |
4.458 |
| 2006 |
4.941 |
5.153 |
5.248 |
5.422 |
5.414 |
5.766 |
5.591 |
5.450 |
5.299 |
5.335 |
5.244 |
5.314 |
| 2005 |
3.271 |
3.511 |
3.842 |
3.710 |
3.779 |
3.863 |
4.175 |
4.312 |
4.407 |
4.677 |
4.738 |
4.823 |
| 2004 |
1.461 |
1.365 |
1.340 |
1.808 |
2.076 |
2.468 |
2.463 |
2.300 |
2.445 |
2.529 |
2.961 |
3.100 |
| 2003 |
1.477 |
1.368 |
1.340 |
1.362 |
1.221 |
1.201 |
1.279 |
1.471 |
1.286 |
1.455 |
1.487 |
1.458 |
| 2002 |
2.420 |
2.496 |
3.006 |
2.613 |
2.634 |
2.251 |
2.070 |
1.943 |
1.813 |
1.664 |
1.705 |
1.447 |
| 2001 |
5.284 |
4.925 |
4.670 |
4.330 |
4.259 |
4.055 |
3.835 |
3.600 |
2.650 |
2.311 |
2.492 |
2.445 |
| 2000 |
6.659 |
6.760 |
6.970 |
6.964 |
7.453 |
7.214 |
7.047 |
6.978 |
6.811 |
6.725 |
6.618 |
5.997 |
| 1999 |
5.108 |
5.405 |
5.307 |
5.303 |
5.303 |
5.803 |
5.836 |
6.023 |
6.053 |
6.313 |
6.261 |
6.508 |
| 1998 |
5.774 |
5.836 |
5.914 |
6.024 |
5.930 |
5.940 |
5.897 |
5.648 |
5.186 |
4.865 |
5.244 |
5.213 |
| 1997 |
5.954 |
5.954 |
6.282 |
6.454 |
6.289 |
6.141 |
5.977 |
6.079 |
6.008 |
5.922 |
6.110 |
5.669 |
| 1996 |
5.196 |
5.274 |
5.704 |
5.829 |
5.977 |
6.172 |
6.243 |
6.055 |
5.985 |
5.719 |
5.696 |
5.789 |
| 1995 |
7.250 |
6.750 |
6.750 |
6.563 |
6.055 |
5.766 |
5.875 |
5.954 |
5.969 |
5.883 |
5.672 |
5.454 |
| 1994 |
3.703 |
4.344 |
4.750 |
5.250 |
5.516 |
5.828 |
5.828 |
5.813 |
6.188 |
6.563 |
7.078 |
7.750 |
| 1993 |
3.750 |
3.578 |
3.625 |
3.563 |
3.750 |
3.781 |
3.781 |
3.563 |
3.531 |
3.688 |
3.781 |
3.813 |
| 1992 |
4.625 |
4.750 |
5.063 |
4.703 |
4.750 |
4.375 |
3.750 |
3.750 |
3.375 |
3.938 |
4.141 |
4.078 |
|
