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HUD Reverse Mortgage Lending Limits Arenít Guaranteed

By Nathaniel Hutchinson Business and Financial Expert


According to the National Reverse Mortgage Lenders Association, American seniors have accrued approximately $3.14 trillion in cumulative home equity, despite decreasing home values owed to the wide availability of affordable housing across the country. Unfortunately, earlier this year, many seniors were in danger of losing their right to tap the equity in their home to help manage their living expenses.

Faced with a statutory expiration date scheduled for the end of the fiscal year, Congress and the Department of Housing and Urban Development were compelled to renew a 2009 measure that padded the existing HUD reverse mortgage lending limits with an additional $208,000.

Unfortunately, this new measure only extends the limits another few months, when HUD and Congressional leaders plan to revisit the topic to see if a reduction is in order. Many who rely on the reverse mortgage industry have expressed worry that any potential reduction could have a seriously negative impact on certain homeowners who live in areas with high-priced homes. In response to such fears, numerous seniors have moved quickly to borrow against their home's equity before the HUD reverse mortgage lending limits expire in a few months.

What will the new limits be?

Before 2009, lending limits for reverse mortgages were set to $417,000. At that time, banks were only allowed to offer reverse mortgage home loans to seniors whose home values fell below this cut-off line. Once the increase took effect, lenders were able to work with seniors who owned more expensive homes, valued up to $625,500. This allowed many financially-strapped retirees to remain in their homes instead of having to sell them off to attain money to support their lifestyle.

Now, with these lending limits in jeopardy at the end of the year, some retirees may be cut out, and many mortgage experts and estate planning services are recommending that seniors take action now if they fear their house may be appraised above potentially lower set limits.

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