HUD Approves Single National Loan Limit of $417,000 for Reverse Mortgage Program

WASHINGTON, DC – The National Reverse Mortgage Lenders Association announced today that the Department of Housing and Urban Development (HUD) approved a single national loan limit of $417,000 for federally insured Home Equity Conversion Mortgage (HECM) reverse mortgages.

The new, higher lending limit will enable borrowers to obtain a substantially greater benefit from their homes, if their home value is higher the previous HUD limit. Previously, the HECM program assigned different lending limits by county ranging from $200,160 in rural areas to $362,790 in the highest home value areas.

Similarly, existing borrowers whose home value is greater than the new HUD limit may be able to increase their benefit by refinancing their reverse mortgage and are encouraged to contact their lenders.

To identify a reputable lender, Consumer Reports, in its October 2008 Money issue, recommends that seniors contact NRMLA members, who are required to sign a code of conduct and follow best practices for the treatment and counseling of seniors. NRMLA’s consumer site at www.reversemortgage.org provides users with a searchable database of NRMLA lenders in their local area.

“HUD should be applauded for its expedient implementation of the single national loan limit for the HECM program, especially during such a tumultuous period,” said Peter Bell, president of NRMLA. “The higher single national loan limit and other provisions expected to be implemented in the coming months make reverse mortgages a more viable retirement financial option for a broader audience who can receive higher benefits at lower origination fees than ever before.”

HUD is aiming for an effective date of November 1st, however the exact date will not be finalized until HUD issues a mortgagee letter on the new loan limit.

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 Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration, an arm of the U.S. Department of Housing and Urban Development (HUD). More than 450,000 HECMs have been made since 1989.

Some seniors I have spoken with say they would stay in their homes even through long term care if they could be independent.  The money can be used for updates to your home to allow this.  No step showers, grab bars where needed.  A new bathroom remodel with a higher toilet.  Lower cabinets, and cook spaces.  Opening the design of the home to give more move ability.

Before you do a reverse mortgage be sure you understand EVERYTHING.  There are origination fees of 2% up to $200,000.  1% on the rest with the total cap of 6%.  Origination fees are not the only fees and total costs could rise up to 10%.  Make sure you research everything, the loan does have to be paid back if you then decide to move.

Wachovia Corp which is being acquired by Wells Fargo is suing 6 home builders for failed Nevada developments.  The builders being sued are KB Homes, Toll Brothers, Lennar Corp, Pulte, Meritage Homes and the Ryland Group.

Wachovia said, ” Focus Kyle land developers and eight home builders (2 of which were not sued) defaulted on guarantees to a develop a planned community in Las Vegas.”

The development which was to be called Kyle Canyon Gateway with 16,000 homes on 1,710 acres.  It was to include parks, a pedestrian plaza, with miles of trails, paths, and walkways.  This according to Commercial Property Magazine.

Focus Group has come under financial distress with other master-planned communities in Las Vegas, including Mountains Edge, Inspirada, and Providence.  Citing un-precedented market volatility and disruption in the financial system over the past 60 days and especially the last two weeks.

None of the homebuilders had comments or did not return phone calls.

The luxury real estate market is usually immune to the woes of the economy.  That is changing somewhat in the Las Vegas market.  Luxury real estate is defined as $1million dollars or more.  Las vegas with the highest foreclosure rate in the nation right now has had 87 properties become bank owned this year.

Many high end buyers are locked out of the market because they are unable to get financing.  Buyers that would move up in to a more expensive home are out of the market because they can not sell their present homes.

Foreclosure experts say that bank owned properties comprise 32% of the Las Vegas market but also account for 2,200 pending sales.  Short term there is no doubt the forclosure outlook is grim but longer term there is promising news, “foreclosures tend to peak well after the housing market has bottomed out, which may be forming as we speak.”  This was from Alexis McGee of Foreclosure.com.

Bright news over this last weekend a luxury home sold for  $11.3 million an all cash deal.  Things are looking up.

Real Estate is Still the Best

I was watching the news the other night and they had some financial strategist on talking about wealth building.  The conclusion was real estate is still your best long term investment.  With all of the news about the economy and bad loans and foreclosures, I was glad to see this statement made on air.  The newscasters then had a mortgage broker on talking about getting loans.  There are still loans out there!  The old truths still apply, find your Realtor® (notice I said Realtor® because if an agent is allowed to use Realtor® they belong to The National Association of Realtors® and adhere to a strict code of ethic’s, it is good to ask your agent if they are a member.)  After finding that perfect agent you feel comfortable with, they will define with you your wants and needs.  Then you will go and see a mortgage  person and again shop around and get your best deal and someone you feel comfortable with.  They will work with you to get a pre-approval.  If you have a few problems that need to be cleared up or not quite enough money for closing costs and down payment the lender and the agent should be able to give you help with working out a plan and a time table.  So what if it takes 6 months to a year?  Any agent worth their salt will be right there every step of the way:)  If you are looking to buy in Las Vegas please give me a call.

Investors are another story, a friend of mine Sandy Wright wrote these tips and has given me permission to use them.  There are some good tips here:

Here are some interesting facts and tips on building wealth through Real Estate. Even in these uncertain economic times, real estate is STILL one of the best investments!
Real Estate 411 - TIPS
Can the average person really build wealth with real estate?
TIP: Utilize a long-term growth strategy
TIP: Buy then sell to make a quick profit
TIP: Hold properties over a long period of time
TIP: Never run out of money! Spend less and save more
There have been more millionaires made through real estate than through any other wealth building medium anywhere in the world. It is based on one simple premise. That premise is the cost of land which appreciates through time. You cannot build more of it because there is a finite amount of it. As the demand for the land increases, so does its value. The world population is growing by leaps and bounds and people need places to live. As cities grow, land gets developed; the infrastructure built around it raises the value of the land a great deal because of its increased utility. The location of plot of land and the building situated on it also increase in value due to the demand.
Can an average person do this? The answer is yes. What do you have to do?
1. You must work to have an income
2. You must keep that income
3. You must put savings program on cruise control, in other words,
make your money, make money
Some choose to utilize a long term growth strategy by buying single family and multi-unit properties, renting them out and letting them appreciate thru time.
Others prefer to buy and sell to make a quick profit and then repeat the process over again. This strategy works on the basis of finding properties below their market value and selling them at market value for a profit. A variation of this is to buy properties and make improvements on the building or land and then sell at a higher value. Or you can hold properties over a long period of time and watch your investment grow!