HUD Extends $625,500 HECM Loan Limit Through 2011 (Updated)

The mortgage loan limit and max claim amount for for HECM loans will remain unchanged through December 31, according to a mortgagee letter issued today by the Department of Housing and Urban Development. ML 2011-29 specifies that the HECM loan limit of $625,500 will remain for all areas, including high-cost areas such as Alaska, Guam and the U.S. Virgin Islands.

“We’re glad to see FHA take this interim step. It eliminates uncertainty for loan applicants who might have been concerned about not getting their loans before the limits possibly dropped,” Peter Bell, National Reverse Mortgage Lenders Association president told RMD in an email. “Now, we need to focus on persuading HUD and/or Congress to retain this limit beyond calendar 2011.”

For forward mortgages, HUD states that the Federal Housing Administration will implement new single-family loan limits on October 1, which will reduce forward loan limits in the highest cost areas in the U.S., and will maintain current loan limits in most parts of the country.

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The loan limits for the HECM program were raised from $417,000 to $625,500 in February 2009 and were extended last year. They were previously scheduled to expire on October 1.

Many in the reverse mortgage industry have speculated as to the negative impact a return to the previous, lower loan limit would have in areas with high-valued homes.

The loan limits could still change at the end of the calendar year 2011.  Prior to the emergency loan limits, HUD would routinely adjust loan limits on a calendar basis.

“The only reason we adjusted our loan limits [last week] is because of a statutory expiration date at the end of the fiscal year,” said Brian Sullivan, HUD spokesperson in an email to RMD.

View ML 2011-29.

Written by Elizabeth Ecker

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  • While helpful, the lending limits need to reflect Freddie Mac limits as permitted by law.  While the temporary fix of ML 2011-29 is helpful, it puts the industry in exactly the same turmoil in three months.

    Under the same 12 USC 1454(a)(2) provision which governs HECMs, FHFA permits much higher lending limits than $417,000 in many parts of the contiguous United States for a single family one unit home.  The same limits should be allowed by FHA on HECMs.

    The FHFA lending limits for Freddie Mac can be viewed at: http://www.fhfa.gov/webfiles/21269/FullCountyLoanLimitList2011_HERA-BASED_FINAL_Z.xls

    While under 12 USC 1715z-20(g) FHA is permitted to use a lower lending limit , for HECMs than the maximum which FHFA is using for Freddie Mac loans after September 30, 2011, why is FHA doing something else?  Only the FHA executive staff can answer that question.

  • Invisible Hand,

    If one is not concerned about a potential lawsuit against HUD, it has no meaning.  HUD did not cite its authority for maintaining the higher limit.  That could prove a problem later on.

  • At least one person has claimed that HUD has increased the lending limit through some unknown time in 2012.  Apparently HUD sent out a cover letter expressing intent to do that but unless that intent is reduced to a Mortgagee Letter, it is just that, intent.

    With three different individuals sitting in the chair of the FHA Commissioner so far this calendar year, intent is a very relative matter.

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