With so many lending institutions facing bankruptcy during the current economic downturn there is reason to believe there may be decreases in the amount of funds a homeowner can borrow against the equity of his home. The recent bankruptcy of Lehman Brothers and the purchase of Merrill Lynch by Bank of America place some concerns in the foreground concerning the future of the current reverse mortgage industry and the levels that are currently available. There also seems to be controversy concerning the limits currently in force under the Housing and Economic Recovery Act of 2009. The National Reverse Mortgage Lenders Association believes current federal regulations allow a limit of $417,000 with an increase to $625,500 in high priced areas. This may mean many homeowners with high value homes may be limited to the Home Equity Conversion Mortgage with a standard limit of $625,500.
The key issue is to understand what the impact might be if these limits were lowered especially in light of the current cost of homes. In some areas the prices of even high priced homes is dropping significantly thus reducing the need for higher lending limits on reverse mortgages. If you are to compare the current price of homes to those in the past there is likely to be a significant difference in most areas. While this decrease will have no affect on those senior homeowners who already have reverse mortgages in place, it can have a significant impact on those who may look to the possibility of using a reverse mortgage in the future. This may also has disastrous effects on those whose home equity already exceeds the current limits.
If the limits are reduced on reverse mortgages it could make only those homeowners with mid-range homes able to qualify for a reverse mortgage. Those who have worked all of their lives to pay off a home that has a higher value will be unable to really cash in on the true value of their homes. The answer for those homeowners is for those who qualify now but have not done so to take advantage of the reverse mortgage programs at current lending limits while they are still able to do so.
Whether the limits will actually be dropped on reverse mortgages is yet to be seen, but there is little doubt if this happens it will have a huge impact on the industry as a whole. Though current housing prices have slowed in growth, they still remain at an industry high that dates to better economic conditions. Housing prices are hopefully not going to decrease significantly in value if at all but they are not significantly increasing either. If this trend continues it will also have an affect on the lending limits of reverse mortgages. The ultimate effect this can cause is an increase in both the sales of homes by older homeowners and an increase in the number of foreclosures by those who cannot make their mortgage payments.
A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of "62 Senior Moments."