Helping Seniors Make Informed Financial Choices

The recent increase of the national loan limit for Home Equity Conversion Mortgages (HECMs) is barely four months old and already lenders see it as a game-changer.

The federally insured HECM limit climbed to $625,500 from $417,000 on February 17th when President Obama signed the American Recovery and Reinvestment Act of 2009 into law.  The higher loan limit, which stays in effect until year end, follows by less than four months an increase of the loan limit to $417,000; previously, the loan limit varied by county and maxed out at $362,790.

The financial crisis has accentuated the value of the higher limit. With so many seniors reeling from diminishing investments, weakened home values, and scant availability of consumer credit, many reverse mortgage professionals say the HECM increase offers a valuable option to cash-strapped seniors.

 

“This increase is going to help a lot of people after that triple whammy,” said Michael Branson, chief executive of All Reverse Mortgage Company in Garden Grove, California.  “Many people come to us saying, ‘if I sell right now I’ll lose my shirt.’  A reverse mortgage can be the only alternative to a fire sale of the property.”

The interest in higher limit HECMs is coming from the more affluent end of the marketplace, lenders said.  Many wealthy consumers are finding their investment portfolios depleted, making them cash poor, yet still house rich.

“I have seen a lot more interest in the many benefits of a reverse mortgage from those seniors who own homes in the $750,000 to $1,500,000 price range,” said Harry Gordon of Lake Tahoe Mortgage in Northern Nevada.

 

  Michael Olden, vice president and reverse mortgage product manager for M&I Bank in Milwaukee, Wisconsin said the old HECM loan limits below $370,000 hamstrung the affluent market.

“A lot of people around here retire to their lake house, which can be worth $500,000 or more,” Odden said.  “The new limit really opens this market up.”

However, Gordon and other reverse mortgage professionals are quick to remind clients that the $625,500 limit is part of the Stimulus Bill and will sunset on December 31, 2009.   The limit will then revert back to the prior limit of $417,000.