Can somebody get this to Shaun Donoan’s staff?
Re: Agenda
HUD
FHA
HECM (Reverse Mortgages)
Conforming Loan Limits
High Cost Areas
Discriminatory (Home-owning Seniors)
Simply put: The 2008 housing legislation raised FHA Conforming Loan limits for “forward” (home purchase) mortgages permanently to $625,500 (and temporarily to $729,750) for high cost areas (principally both coasts and selected inland areas). Concurrently the limits for HECM (Home Equity Conversion Mortgages or “Reverse Mortgages”) were unwisely deemed to remain at the previously established national limit of $417,000 with no provision for higher limits for the same high cost areas (excepting Alaska, Hawaii, Guam, and the Virgin Islands).
This illogical decision (made presumably by HUD Secretary Steve Preston) discriminates against Senior Americans who have owned their homes for decades, are living on fixed incomes and now having difficulty maintaining a barely comfortable lifestyle.
Let me give you an example; I am 84 years old and my wife is 79. We live in a modest 2 bedroom, 1½ bath home of about 900 sq. ft. Our home is in Cambria CA, a small town of about 6,000 residents by the ocean in San Luis Obispo County (MSA Code 42020, County Code 079).
The current FHA forward mortgage single-family conforming loan limit for our County is $687,500 (94.2% of the $729,750). So, if we were just now buying our home, a current asking price of $525,000 would be the basis for computing an FHA purchase loan limit since the home value is below the $687,500. The loan could then be as high as $472,500 (90%) based on our qualifications (incidentally, our FICO Credit Score is 802).
However, since we own the home and simply need to gain access to the equity we have accrued since we purchased it 11 years ago, we do not have access to the $687,500 or $625,500 limits and are constrained by the arbitrary HECM limit of $417,000. Now the maximum loan we can get is based on $417,000 and not on the appraised value of our home at $525,000. With that limit and another FHA discriminatory calculation called a “Principal Limit Factor” (which discounts the loan to 0.767% of the $417,000) we are entitled to just $319,839. Apparently, Reverse Mortgage lenders are not entitled to know how the Principal Limit Factor is derived.
If a HECM limit of $625,000 had been established (an option then available to Secretary Preston and strongly recommended by Representative Barney Frank), we would have access to at least 75% of $525,000 or $393,750. That difference could be very important to our ability to financially cope with our remaining years.
Please address this inequity on behalf of the hundreds of thousands of Senior Americans who earlier failed to prevail on the Bush Administration. These citizens would quickly stimulate the economy by many millions of dollars if they could simply have fair access to the equity in their homes.