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
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