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Larger Reverse Mortgages Available Because of Higher Loan Limits
Part 3 of 5 Fannie Mae announced that its loan limit for single-family mortgages—which includes Home Keeper loans—will rise in 2003 to $322,700 from the prior limit, in 2002, of $300,700. The loan limit is 50 percent higher for Alaska, Hawaii, and the U.S. Virgin Islands. Fannie Mae is a private company that invests in-home mortgages, including reverse mortgages. The loan limits will also increase in 2003 for the HECM product, a reverse mortgage insured by the Federal Housing Administration, a part of the U.S. Department of Housing and Urban Development (HUD). The HECM loan limit, which is pegged to increases in the Fannie Mae/Freddie Mac loan limit, varies by geographic area. Thus, the highest of the loan limits—applicable generally to metropolitan areas—will increase to $280,749, up from $261,609 in 2002. The lowest loan ceiling, which generally applies to rural and non-metropolitan areas, will rise to $154,896, up from $144,336 in 2002. HUD must first issue an FHA Mortgagee Letter before the new HECM loan limits take effect. A letter should be forthcoming before year-end. A reverse mortgage is a unique loan that enables senior homeowners to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. Reverse mortgages are available to individuals 62 or older who own their home. Funds obtained from the reverse mortgage are tax-free. Borrowers can choose to receive the reverse mortgage funds as a lump sum, monthly income (for up to life), or line of credit, or as a combination of monthly income and line of credit. No mortgage payments are due during the life of the loan. Borrowers can use the funds anyway they wish—for home repairs and improvements, medical costs, in-home care, education, and supplemental retirement income. Borrowers make no monthly payments on a reverse mortgage during its term. The loan becomes repayable when the borrower sells the home or permanently moves out. In addition, the repayment amount can't exceed the value of the home. Reverse mortgages are originated largely by private lenders. The most popular is the federally insured HECM. Other types of reverse mortgages are the Fannie Mae Home Keeper loan and two jumbo reverse mortgage products developed by Financial Freedom Senior Funding Corporation of Irvine, CA. The HECM and Home Keeper loans are available in every state. To educate consumers about reverse mortgages, NRMLA has created a booklet entitled “Just the FAQs: Frequently Asked Questions About Reverse Mortgages.” This free booklet answers frequently asked questions, provides detailed information on the loan origination process, and includes a Code of Conduct for lenders, so that consumers can know their rights when working with a lender. The booklet may be obtained by calling NRMLA at 1-866-264-4466 (toll-free) or 202-939-1792. Source: (c) 2002 National Reverse Mortgage Lenders Association. All rights reserved. December 4, 2002 January 2003 | ||||||||
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