AARP Pushing For 625K HECM Loan Limit?

image National Mortgage News reported last week that due to the growing concern among middle age and older Americans about their ability to make payments, AARP has put helping people facing foreclosure remain in their homes near the top of its agenda for the 111th Congress. 

According to the article, AARP supports legislation that would give bankruptcy judges the discretion to modify the primary mortgage debt of people who can’t afford to pay their loans. "Our political leaders need to make some tough choices," CEO Bill Novelli said at a press briefing outlining the group’s legislative goals. Elaine Ryan, AARP’s vice president for government relations and advocacy, said during a recent three-month period, more than 700,000 older Americans faced foreclosure.

"It’s not just first-time buyers, but seniors who are victims of predatory reverse mortgages and persons who had houses willed to them", she said. Released along with the group’s advocacy agenda were the results on a December telephone survey, including "a new finding" that one third of the 1,097 respondents were worried about being able to afford their mortgage or rent over the next 12 months.

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Almost half the respondents have already found it tougher to pay their utility bills. AARP’s housing plank also calls for a one-year moratorium on foreclosures, an expansion of home equity mortgages as a foreclosure avoidance tool, and great accountability for abusive lending practices.

I did a bit of research to see what an expansion of home equity mortgages as a foreclose avoidance tool was and found some interesting information.  AARP recently published its 2009 Legislative Priorities and one of its priorities looks to raise the HECM home value limit to $625,500.  See below:

Accessing Equity: Raise the home value limit to $625,500 for the FHA’s Home Equity Conversion Mortgage (HECM) program, which provides older homeowners the option of tapping the equity in their homes to pay off mortgages that have become too costly;

AARP’s 2009 Legislative Priorities

Very interesting AARP… very interesting…

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  • Russell:
    Here’s some info you might find useful.
    A Reverse Mortgage is an FHA (Federal Housing Administration)type of loan officially known
    as Home Equity Conversion Mortgage (HECM). To
    qualify, the Borrower/s must be 62 yrs of age
    or older, live in the property, using it as their
    principal residence (non owner occupied, or shall
    we say, investment properties, do not qualify).
    The Title to the property should be in the Borrowers
    name. Whether or not the Borrowers have an undesirable
    credit history is immaterial, because, unlike conventional loans, the Lender’s (Bank) interests
    are secured by the property and not by the person/s,
    per se. The borrowers’ may have an outstanding balance
    on their mortgage and this will have to be paid off
    by the proceeds of the new loan, since the new Lender
    wants to be in first place. The most important aspect
    of HECM is that the Title to the property ALWAYS remains in the Borrower/s name/s and NOT the Bank’s.
    Thereafter, the Borrowers never have to make any more
    mortgage payments for their lifetime. On the contrary, the bank actually sends them a check every month, the amount of which is based on/determined by, the Principal Loan balance remaining after payment of closing costs.
    When one of the Borrowers passes away, the remaining
    spouse still keeps the house. When both pass away, then HECM’s life also comes to an end, and the loan becomes due for full payment.
    However, the Lender is very lenient in such cases and
    offers the heirs (inheritors)the option to sell the
    property and pay-off the full amount of the loan,plus
    the accrued interest. If they have cash to pay off the loan, so much the better.
    I trust this partial/preliminary info will answer your
    question. However, if you need more details, I’ll be
    happy to answer them thru courtesy ReverseMortgageDaily.
    Shlimoon Youkhana

  • How Long do you think this would take affect? when its to late thats when. Why O why was this not put into the bill last year, how short sighted of AARP. They were too concered about seniors not paying for counseling and cutting the broker fee to 1.5%. Good old AARP a day late and a dollar short, or is that five dollars shot these days. I have had clients since last year that this limit would help, the $417k, could not help them.

  • Thanks Andrew and Shlim for taking time and trouble to enlighten me. They tend to be referred to as “equity release” over here and are only available to people over retirement age.

    All the very best from Sheffield, England.

    8¬)

  • Can somebody please explain how a having a reverse mortgage on your property would cause the borrower to go into foreclosure as AARP suggests.

    The only way this could happen would be if the borrower stoped paying thier taxes and or insurance for a very extended period or stopped occupying the property and did not sell it withing the 12 month window.

    I have actualy saved several clients from foreclosure by using a reverse mortgage…is that predatory?

  • I wouldn’t hold your breath for an increase, or discuss it with clients at this point. If it does in fact happen (may never happen), it could take a long time before it becomes available. Since customers will decide to wait if you mention the possibility, it could very well end up working against them, whether it happens or not.

  • I can see the government buying into a $625,000 lending limit since it will increase their upfront MIP proceeds from $8,340 to $12,500. Maybe the AARP should also strongly lobby that the origination fee be lowered to about $2000 to keep costs down for the borrower.

  • AARP is an interesting organization. They’re able to endorse a single insurance company that offers “Long Term Care” and “Medicare” insurance, and they’re compensated well for those endorsements. As such, you’ll read articles from AARP supporting those products and companies. However, they’re not able to endorse a single “Reverse Mortgage Lender”, so they don’t receive financial compensation from that particular marketplace, resulting in Reverse Mortgage articles that aren’t quite as nice as the ones written about the industries they’re able to receive financial compensation from … go figure.

  • Lets stop AARP from hijacking this. Show the senior and the public how their ideas have lead to higher margins. Also, MAKE them show AMERICA the senior that us foreclosed that had a reverse mortgage. It can’t happen if the borrowers are leaving up to the terms of the loan. Also, the industry needs to inform congress we will not due the loans with the current fee structure, but origination and mip fees. Also, who are these predatory lenders, if AARP are calling business that send out mail and run ads predatory, AARP is a predatory insurance company.

    Next item, if AARP had not been so against reverse mortgage over the last 10 years, more senior homeowners would be in a save and secure reverse mortgage now during these difficult times.

    Yes we all know the closing cost, but not having to worry about making a house payment or not worring about money lost on Wall Street is not a problem for all the wonderful folks who decidied to have a reverse mortgage.

    AARP should be ashamed of their tactics!!!!!

  • You are very welcome, Russell, from UK. I am glad the info I gave you was enlightening. Good luck on your
    endeavors. Don’t hesitate to ask more questions.
    Note to Ray Fry…I agree with you 100%, Ray, about
    the colossal MIP amount and to limit the origination
    fee to $2000.- or max. flat $2500.- for any amount of normal or Jumbo Loan amounts. Many deals you make are scuttled and lost due to the high closing costs. So lets hope that some higher-ups will take note of this and make life easier not only for the Senior Citizens
    that we strive to serve, but for all of us in the RM business.
    Shlim Youkhana
    Tempe, Arizona, USA

  • To Ray Fry,
    If $2000 is all that lenders can charge upfront, you will see the back end go up (bad for consumers). HUD has many guidelines that lender have us do (cost!!!!!), and if sales people only make $1000 per loan, the type of people that stay in this line of work will go DOWN. The next type that comes in will have to PUSH quantity over quality.

    I am always amazed how folks want other people income cut, but what theirs to go up. Always remember how people with low paying jobs treat you.

  • I would encourage all you people in the RM industry and their friends to email your congress people. I Googled my senators and my House Representative’s email address and pasted the AARP remark and my own personal message to them.
    It can’t hurt, the squeaky wheel gets the oil.
    Oh, I also hope the “predators”, the real ones don’t pop out of the wood work with higher limits.

  • To all;

    Sure a new program to hide!
    We presently have in place a product that can change the quality of life for many of our senior homeowners.
    (Not all, but many.)

    It is Federally Insured
    It is FHA Approved
    It is controlled by HUD

    With seniors and their loved ones educated by professional Reverse Mortgage Specialists, why hasn’t one (1) public official yelled “hey senior homeowners and loved ones learn the pros and cons this misubderstood product……

    Our government could and should inform all that it is possible to move forwad in Revese

  • to David and Russell. Russell first for your information England we could say did reverse mortgages but diffrent then today. a women in england in around 1940 bought property but instead of paying for it upfront she allowedn them to stay in the property and use the rent money to buy down the sale price.They say she did 5 properties that way some over again. could say she was the first real esate investor.
    To David: Wher is NRMLA they sold us out. we got a 417,000 kimit which has not helped me because of homes prices droping. secondly we did n’t get the cap removed we lost much of our commission , we don’t have the purchase program yet which we told oubout in november.Banks are coming in and wille making money with a 2.75 margin.Easer condo requrements same with manufactured homes, co-op. Only thing i see is our income whent down. And it must be great for banks as I see more and more coming into the market. Who is kidding who. NRMLA is for lenders and the name says. Were are we?????????????????????

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