On February 24th, 2009 HUD issued Mortgagee Letter 2009-07, making the higher limits applicable to HECM reverse mortgage loans. With the loss of proprietary programs, these higher limits will help. The real benefit will be felt in communities where the value of homes remain at or slightly above $625,500. Communities that have home values above the old limit of $417,000 will also see higher benefit amounts.
It is important to remember that these numbers refer to how much of the home's value is counted toward determining how much money one can get. It does not mean one can automatically receive $417,000 or $625,500. Pursuant to the American Recovery & Reinvestment Act of 2009 (aka Stimulus Package) the higher limit is good until the end of this year.
Dennis,
Many of us were surprised by the speed that HUD incorporated the higher limit into the Mortgagee Letter. With such a short period in which to help so many seniors, this was a very big help. Observing the difficulty HUD has had dealing with HERA in the middle of one of the worst home crisis in American history and a major shift in policy due to the change in Administrations, the staff at HUD has performed a great service to our senior community. I think we owe those who pushed this change through, our gratitude and thanks.
First, NRMLA went to bat and initiated this increase at the right time into the right bill. Then AARP quickly and openly supported this change. The House Financial Services Committee promptly got it added into the bill. The House passed it and despite its non inclusion in the first Senate bill, some in conference made sure it was in the final compromise. Then HUD acted with unbelievable speed to issue the Mortgagee letter within days of enactment giving seniors an appropriate period to digest the change and act. This is an excellent example of the wheels of government working together to help our senior population.
To all those who made this happen, a big “Thank you!!!”
To show its need and how beneficial it is, let me describe what it meant to Bob and Betty (not their real names). Bob and Betty are in their 80’s and own a home in Southern California with a value near the lending limit. The loan-to-value ratio on their mortgage is quite high. Their interest reset a few months ago resulting in a startlingly increase in their monthly mortgage payment. A disabled adult child lives with them.
Fortunately Bob has a significant pool of cash available. They knew that if they were going to live much longer and save much of their cash reserve they needed to do something now. They went to a loan modification attorney who told them to stop paying their monthly mortgage payments and now they are two months behind.
On Wednesday, I called Bob and told him about the availability of the $625,500 limit and he sighed with relief. On Thursday they had signed their origination documents, on Saturday they got their counseling, and by tomorrow they will have their counseling certificate per the counselor. The appraiser is ready to go and we will push it through as soon as possible.
Bob and Betty had had problems sleeping for days. They have called the attorney and he is reviewing all of the documents. Bob realizes his appraisal will either enhance or limit their financial situation. Bob and Betty have slept and are much more at rest. Like me, Bob and Betty are extremely grateful for how much so many did in such a short period of time to help them and other seniors like them.
Posted by: James E. Veale, CPA, MBT | March 01, 2009 at 07:41 PM