Will Loan Limits be Raised?

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Many seniors looking to tap home equity still falling short.

Tom Kelly
Inman News

While loan limits for conventional mortgages recently were raised with the passage of the Economic Stimulus Act of 2008, those seniors hoping to tap into additional home equity via the nation’s most popular reverse mortgage are stuck with the same loan ceilings — at least for now.

The Federal Housing Administration, a branch of the U.S. Department of Housing and Urban Development, insures the Home Equity Conversion Mortgage (HECM), which accounts for nearly 85 percent of the reverse market. The HECM program has insured more than 240,000 reverse mortgages since 1990, while private jumbo reverse plans also have been available.

While FHA announced a temporary increase in loan limits for all “forward” mortgages as a result of the new legislation, HECMs were not included in the Economic Stimulus Act. FHA’s loan limits for HECMs will retain the existing “floor” of 48 percent of the conforming loan limit or $200,160, as well as the “ceiling” of 87 percent, or $362,790. Those areas in between are limited to 95 percent of the local median home value.

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