Reverse Mortgage Lending Limit to Rise in 2020

“Every man has his secret sorrows which the world knows not; and often times we call a man cold when he is only sad.” – Henry Wadsworth Longfellow

FHA Reverse Mortgage Limit to Rise in 2020

There’s positive news for reverse mortgages as we end the year and start looking towards 2020.

The Federal Housing Administration is increasing its maximum claim amount for reverse mortgages for 2020.

According to the FHA, the HECM limit will increase in 2020 from 2019’s level of $726,525 to $765,600.

This marks the fourth straight year that the FHA has increased the HECM limit. Two years ago, the loan limit was $675,650, which means the HECM limit has increased by almost $100,000 since 2018.

The HECM limit is based on 150% of the Federal Housing Finance Agency’s conforming loan limits for Fannie Mae and Freddie Mac, which were recently raised to more than $510,000.

But unlike Fannie and Freddie’s loan limits and FHA’s forward mortgage limit, there is no geographic variation for the HECM loan limit.

The reverse mortgage limit is $765,600 for all parts of the U.S., including the high-cost areas and the special areas of Alaska, Hawaii, Guam, and the U.S. Virgin Islands, where forward mortgage limits far exceed the rest of the country.

The increase of nearly $40,000 over last year’s HECM limit means borrowers will soon be able to extract more equity from their homes using a government-insured reverse mortgage.

It also might mean that more people can qualify for the loan.

HECM requires borrowers to pay off an existing mortgage before obtaining the loan, so some borrowers with high mortgage balances may not have been able to secure enough proceeds to qualify.

With a higher claim amount, there may be enough money in the HECM loan to make it work.

According to the FHA, the new HECM limits are effective for case numbers assigned on or after Jan. 1, 2020, through Dec. 31, 2020.

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