FHA Keeps Reverse Mortgage Lending Limit Unchanged for 2014

The Department of Housing and Urban Development announced today it will keep reverse mortgage loan limits unchanged through 2014, though it has reduced forward lending limits in some counties across the country, namely high-cost areas.

The limit for Home Equity Conversion Mortgages will remain at a maximum claim amount of $625,500, with actual loan limits based on property value, borrower age and current interest rates, according to HUD.

For forward loans, single-family loan limits will be new as of January 1, 2014, as detailed in a mortgagee letter released by HUD on Friday. The change will impact roughly 650 counties.

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The current standard loan limits where housing costs are relative low will remain at $271,050, while the new national ceiling loan limit for homes in high-cost areas will drop from $729,750 to $625,500. Some areas are still eligible for higher loan limits based on median area home prices, with some additional exceptions.

“As the housing market continues its recovery, it is important for FHA to evaluate the role we need to play,” said FHA Commissioner Carol Galante. “Implementing lower loan limits is an important and appropriate step as private capital returns to portions of the market and enables FHA to concentrate on those borrowers that are still underserved.”

Written by Elizabeth Ecker

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  • As to lingo, the Lending Limit of $625,500 is the highest the HECM Maximum Claim Amount can be.

    It is the HECM Principal Limit which is based on 1) the expected interest rate, 2) the age of the youngest borrower, and 3) the Maximum Claim Amount. The Principal Limit is always lower than any of the following [since it is a percentage (less than 100%) of the Maximum Claim Amount]: 1) the appraised value, 2) the Maximum Claim Amount, 3) the Lending Limit, or 4) in a HECM for Purchase only, the purchase price.

    In all but HECMs for Purchase, the Maximum Claim Amount is the lower of 1) the appraised of the home or 2) the Lending Limit, now $625,500. In a HECM for Purchase, the Maximum Claim Amount is the lowest of 1) the appraised value, 2) the Lending Limit, or 3) the purchase price of the collateral, i.e., the home.

    I found the article somewhat confusing.

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