The FHA Modernization Bill

has been the talk of the Reverse Mortgage industry since last fall. As we get closer to the inevitable passage of this bill, I thought I would take a moment to review some of the key provisions of the bill, and what it can mean to you. I have several clients who are watching this closely with me as the benefits of the bill very important to them and their families. The most important provisions of the bill that applies to HECM (Home Equity Conversion Mortgages, those that are insured by the FHA) Reverse Mortgages, are the changes to the lending limit, and the changes to the origination fee (please see sidebar) and how it is calculated. The highest current lending limit (called the 203(b) lending limit), which is presently applied on a county by county basis, is $362,790. This limit applies to most of the high cost areas of California. Basically, this means that only the first $362,790 of appraised value is used in determining a homeowner’s cash benefit. FHA Modernization would raise this limit to $550,440 if the bill is approved in its proposed form. I cannot overstress the importance of this increase. What does this change mean to you and your family? If you are a 70 year old homeowner, and your home is valued at $500,000, you would currently be eligible for a cash benefit of $249,962. Under the pending FHA legislation the cash benefit will be approximately $344,500! Taken by itself , this increase is amazing, but when you combine this proposed increase with the low rates (which also positively affect the benefit calculation), and the benefits of FHA insurance I think you will agree that FHA Reverse Mortgage has truly come of age, (no pun intended). If you would like more information about FHA Modernization, or would like to track the bill’s progress, simply call me(my phone numbers are listed above) and I will phone, e-mail, or contact you through the postal service at your request.