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Reverse Mortgage Lending Limit to Rise in 2020

The lending limit for federally-backed reverse mortgages is increasing for the fourth consecutive year in a row and is set to rise to $765,600 in 2020.

The Department of Housing and Urban Development (HUD) announced on Friday via Mortgagee Letter 2019-20 a maximum claim amount of $765,600 for calendar year 2020, up from $726,525 in 2019.

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) last week to be $510,400 for calendar year 2020—up from $484,350 in 2019.

This rise marks a positive development for the reverse mortgage business, while also sending a message that widely-discussed regional lending limits will not be coming with the beginning of the new year, according to Reverse Market Insight (RMI) President John Lunde.

“It’s a decent increase for 2020 which is a positive development for additional volume,” said Lunde. “More importantly, they’re keeping the single national lending limit after there was public hinting about potentially reverting to county lending limits at some point. While the 2020 announcement doesn’t say that won’t ever happen, at least it’s not happening January 1, 2020.”

For several years, the reverse mortgage lending limit remained stagnant, before rising in 2017 from $625,500 to $636,150. Since then, a rise in the HECM lending limit has closely accompanied the announcement of conforming loan limits on Fannie and Freddie mortgages. The new loan limit will take effect for loans with case numbers assigned on or after January 1, 2020, through December 31, 2020, as specified by HUD.

The release of the new HECM lending limits followed closely after the release of Mortgagee Letter 2019-19, which specified new forward mortgage loan limits, which divides the limits between low- and high-cost areas and property unit numbers. In low-cost areas, the limits range from $331,760 for one-unit and $638,100 for four-unit.

In high-cost areas, the limits start at $765,600 for one-unit to $1,472,550 for four-unit. In the same special exception areas, the limits start at $1,148,400 for one-unit and go to $2,208,825 for four-unit.

For more detailed information about the new limits, check out HUD’s Mortgagee Letter 2019-20 and its loan limits page.