Seemingly headed in opposite directions, the HECM loan limit has risen just as home values are falling. The new HECM limit is $625,500 (only for this calendar year) – representing 150 percent of the GSE (Fannie Mae/Freddie Mac) forward mortgage conforming ceiling. The new limit is good for HECM loans closed on or after Feb. 24, according to HUD’s Mortgagee Letter 2009-07. Yet, this rise comes as the median home sale price in the United States fell to $201,100 in January, a 9.9 percent one-month drop from December.
“Appraisals are coming in lower,” acknowledges Mitch Davis, regional sales manager-southwest, Premier Reverse Closings, Rocklin, Calif. “The ‘sand states’ [California, Arizona, Florida] have been hit hard; down [in values] 20 to 30 percent,” he reports. As a result, “some people are not qualifying for loans because their equity amounts have been [adversely] affected.”
A resulting conflict has developed, according to Cliff Auerswald, president of Garden Grove, CA-based All Reverse Mortgage Corporation. “Dramatic changes in the real estate market continue to create disparity between appraisal values and actual values,” he says, adding: “In some of the most challenging markets, such as Florida and California, home appraisals are higher than actual sale prices.” Generally speaking, though, Auerswald says “seniors can take advantage of the new higher lending guidelines and permission to use a HECM for purchase for a terrific opportunity.”