The FHA Reverse Mortgage (Home Equity Conversion Mortgage or ‘HECM’) is now, just about, the only viable reverse mortgage program out there.
First, in April, it was Bank of America’s jumbo reverse mortgage to be suspended; then in June, Financial Freedom stopped funding their Cash Account program; in September Gold Reverse pulled their fixed rate jumbo program.
These developments leave only World Alliance Financial’s Equity Plus Advantage (EPA) as the last remaining jumbo program – albeit at a 5.0% margin on top of LIBOR and at dramatically reduced LTV’s in most high-cost areas. I’m trying to get one funded right now in Los Angeles, where they cut the appraisal by 45% (cutting the loan amount by the same). If you have heard of any other viable jumbo programs, please comment!
But, as any of these lender’s wholesale reps will be quick to tell you, the FHA reverse mortgage limit is being increased to $417,000, with a projected effective date of November 1st. This amount is up from $362,790 in high cost areas. The FHA limit, in the reverse mortgage world, is the amount of home value that the lender will recognize in calculating how much money is available to the borrower at closing. If the senior’s home is worth $450,000, the value above $417,000 is ignored. If senior’s home is worth $350,000, then the increase in the loan limit does not help them, because the old limit was high enough already.
While the increased limit is not panacea, it will help many seniors whose homes are worth between $400,000 and $600,000 who may have owed just a little too much on their home to qualify for a reverse mortgage. Run the numbers in a reverse mortgage calculator after November 1st to see how it would work for a particular scenario.
Luke
Reverse Mortgage Pro
Senior Lending Network, at least here on the East Coast
Luke, great post and timely information. Now that the loan limit has been set at $417,000, many reverse mortgage providers are finding an immediate need to increase sales and marketing efforts to get the word out. To secure the cash flow they need to accomplish this, some are benefiting from the services of eCommission. We offer a program that provides commission advances to providers of FHA reverse mortgages. We fund up to $10,000 per transaction, and can set total advance limits of up to $200,000 in certain cases. If anyone is interested, please contact me at 877-882-4368 ext. 866. Thank you.
Sincerely,
Sean Whaling
President
eCommission Financial Services, Inc.
John,
Senior Lending Network and World Alliance Financial (the company mentioned in my post) are the same company.
If there are any other lenders still doing jumbos, I’d love to hear it!
Luke
SLN (World Alliance) is the only game left. By lowering their LTV’s and drastically cutting appraisals they are trying to hold on as long as they can. They are currently the monopoly in a product that no one else wants to carry. We will see hold long this program remains.
I have read that the new Lending Limit is only being increased to the $417,000 amount instead of the $625,000 amount because they wanted to leave room to allow for lenders to offer a Jumbo products. Someone should have did a little more research and found that the Jumbo program pretty much died out months ago.
I just ran a scenario in which a 64 year old borrower with a home value of 1.3M qualified for $415,000 or so. This may be double of what the borrower would have qualified for under a traditional FHA Reverse mortgage but no where near Jumbo numbers that are necessary.
Generally if a borrower has a $2M property you would think that they would have least a 50% LTV currently. But reducing the appraisals and lowering the LTV’s of the Jumbo program by SLN really does not help many of the seniors in need.
I really feel sorry for many of the Seniors that were taken advantage of and given such high interest rates and given loans in which they could not afford. I tell everyone that any responsible loan originator would at least give a senior an option of the Reverse Mortgage along with any other programs that they would qualify for. Let the Senior turn down the Reverse Mortgage instead of not giving them the option at all.
The financial crisis has practically swept the entire world, affecting both large and small economies. The American economy has not been spared from the battering, and it has inevitably shown in the rising unemployment rate, and as a consequence, the number of people getting further buried in debt and losing their houses to foreclosure increases.
FHA Secure Loan.