Pending Legislation Could Enhance HECM Reverse Mortgages

7/19/2007

posted by N. Sioris

Stumble It!

The most widely used reverse mortgage, the Home Equity Conversion Mortgage - HECM- may soon have enhancements made to it that will allow even more senior homeowners to benefit from FHA-backed HECM reverse mortgages.

The Expanding American Homeownership Act of 2007 is currently pending before Congress. This legislation, if passed, will allow more seniors to access a greater portion of their home equity through the use of HECM reverse mortgages. Enacting this legislation will make reverse mortgages available to an estimated additional two million seniors because it would remove the statutory limitation on the number of HECM loans that could be guaranteed by FHA and it would set a single nationwide loan limit amount. Currently, the maximum loan amount varies by geographical area of the country and is capped at a maximum loan amount of $362,790. In high cost areas, such as the Northeast and West, home values far exceed the current maximum loan amount, thereby leaving many seniors in those locations without access to a large portion of their home equity. Increasing the loan limit and standardizing the loan amount maximum on a national basis rather than regionally, will allow many more seniors access to the advantages of HECM reverse mortgages.

The volume of HECM reverse mortgages insured by FHA has increased ten-fold over the past six years. This legislation will undoubtedly increase that number even more and allow more senior homeowners access to a greater portion of their built-up home equity without having to move, sell their homes, or take on monthly mortgage debt.