FHA Modernization Bill Update/ Economic Stimulus Act Excludes Reverse Mortgages

The Office of Federal Housing Enterprise Oversight (OFHEO) announced a temporary increase in the GSE (Fannie Mae/Freddie Mac) conforming loan limit as a result of the Economic Stimulus Act of 2008. We want to alert members that this increase does not apply to the Fannie Mae HomeKeeper reverse mortgage product. The HomeKeeper loan limit will remain at $417,000.

FHA announced on March 6, 2008 a temporary increase in loan limits for all forward mortgages as a result of the Economic Stimulus Act of 2008. This guidance is outlined in Mortgagee Letter 2008-06 “Temporary Loan Limit Increase for FHA”. We want to remind all members that HECMs were not included in the Economic Stimulus Act. FHA’s loan limits for HECMs will retain the existing “floor” of 48% of the conforming loan limit or $200,160 as well as the “ceiling” of 87% or $362,790. Those areas in between are limited to 95 percent of the local median home value and will not change as a result of this action.

At one point we thought there could be some regional HECM loan limit increases as a result of the Department’s recalculation using Standard Metropolitan Statistical Areas (SMSA) in lieu of county by county home values. However, more recently, the Department came to the conclusion that HECMs are not included the Stimulus Act and therefore all guidance and loan limit increases as outlined in the Mortgagee Letter do not include HECMs.

In the meantime, we continue to work with key stakeholders and Congressional staff on the FHA Modernization Bill which will increase the loan limit for HECMS to a single national limit ($417,000).

If you would like to check current HECM loan limits in your area, this link will take you to the FHA look up table at https://entp.hud.gov/idapp/html/hicostlook.cfm

(Make sure you click HECMs as you look up the loan limit).

Lawmakers have been negotiating a final version of the FHA Modernization bill (H.R. 1852, S. 2388) that retains many important reverse mortgage reforms. However, it is our understanding that a provision to eliminate the HECM cap will be excluded. Currently, FHA cannot insure more than 275,000 Home Equity Conversion Mortgages (HECMs). That cap has been under suspension for over a year to keep the program operating. The compromise would extend the suspension.

One of the sticking points in the negotiations is the creation of an affordable housing trust fund financed with excess mortgage insurance premiums generated from FHA loans, mostly from the HECM program. A Congressional Budget Office (CBO) analysis of the House bill estimated that the HECM cap removal and other changes to the reverse mortgage program would raise $2.1 billion over five years. Under the compromise, the cap will be raised on an annual basis, rather than eliminated, thus allowing trust fund backers to try again in future years.

Once a bill is formally adopted by the Conference Committee, it will be sent to both chambers of Congress for approval before it is sent to the President for his signature. We have been assured that the compromise bill retains the following HECM provisions:

• A single national loan limit at the conventional limit
(currently $417,000);

• HECM for home purchase;

• HECM for coops;

• A limitation on HECM origination fees at 1½ % of the maximum claim
amount;

• Broader provisions regarding manufactured homes, that would, in
essence, allow HECMs on manufactured homes where the lots are held as condominiums.

To learn more about Reverse Mortgages call Angella 866-949-7030; www.reverse-your-mortgage.com

Comments

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Johnny
http://www.perfectmortgagelender.com/