Lending Limit Increase Cheered & Criticized

reverse mortgage lending limit increase

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?

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1 comment

Brien J. Brandenburg December 15, 2020 at 1:17 pm

Curious as to what FHA thinks is “low to moderate” income? In my 22+ years as a HECM lender I’ve seen many seniors in higher valued homes with what I would consider “moderate” income. Why does FHA or anyone for that matter assume that if your home is worth $822,375 or thereabouts, that your income is high or something other than “low to moderate”?

It’s my understanding that the HECM was designed and instituted to assist seniors in retirement by giving them access to their home equity without the obligation of a monthly mortgage repayment, at least that’s what one of the industry pioneers told me when I first got into the business. Would be a shame if all of a sudden FHA picked winners and losers of this opportunity based solely on the value of one’s home and not take a look at the entire financial position of the senior.


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