The lending limit for federally-backed reverse mortgages is increasing for the third consecutive year in a row and is set to rise to $726,525 in 2019.
The Department of Housing and Urban Development (HUD) announced on Friday via Mortgagee Letter 2018-12 a maximum claim amount of $726,525 for calendar year 2019, up from $679,650 in 2018.
HUD calculates this figure at 150 percent of the conforming loan limits on mortgages to be acquired by Fannie Mae and Freddie Mac, which was announced by the Federal Housing Finance Agency (FHFA) late last month to be $484,350 for calendar year 2019—up from $453,100 in 2018.
HUD also specifies that the new maximum claim amount is applicable to Freddie Mac’s special exception areas, which includes Alaska, Hawaii, Guam, and the Virgin Islands.
The reverse mortgage industry response was favorable. “We welcome the news that the HECM loan limits will increase in 2019,” said Steve Irwin, EVP of the National Reverse Mortgage Lenders Association (NRMLA).
In a year introducing so many proprietary jumbo products, the new limit will likely not have a pronounced impact, says John Lunde, president of Reverse Market Insight. “It’s always a net positive for HECM volumes with the lending limits rising,” he said. “I also don’t see the increase as significant enough to change the attractiveness of proprietary products for lenders or borrowers, so I’d say it’s a net positive although a modest one.”
For several years, the reverse mortgage lending limit remained stagnant, before rising in 2017 from $625,500 to $636,150. The new loan limit will take effect for loans with case numbers assigned on or after January 1, 2019, through December 31, 2019, as specified by HUD.
HUD also released the lending limits for forward mortgages in Mortgagee Letter 2018-11, which divides the limits between low- and high-cost areas and property unit numbers. In low-cost areas, the limits range from $314,827 for one-unit and $605,525 for four-unit.
In high-cost areas, the limits start at $726,525 for one-unit to $1,397,400 for four-unit. In the same special exception areas, the limits start at $1,089,787 for one-unit and go to $2,096,100 for four-unit.