How Much Money You Can Get for a Reverse Mortgage Will Increase and Qualifying for a Reverse Mortgage Will Get Easier with the FHA Modernization Bill
The FHA Modernization Act is designed to improve the Federal Housing Authority’s ability to help Americans obtain safe and affordable home loans and many see the Act as an answer to some of the woes of the subprime debacle. The Act is a bipartisan measure and has the support of the Bush Administration as well as both consumer and industry groups.
S. 2338, the Federal Housing Authority (FHA) Modernization Act, is good news for borrowers interested in a Reverse Mortgage. The Bill has been passed by the Senate by an overwhelming majority (93 to 1) and many hoped that it would be tacked onto the Economic Stimulus Package and be signed into law this week. However, it was not and is now waiting to be voted on by the House of Representatives. The House version of this Bill differs in many ways, but on HECM Reverse Mortgage issues, the House and Senate versions are identical.
The FHA Modernization Act Will Improve the Terms of Reverse Mortgages
The FHA Modernization Act will change the HECM program (HECM is the most popular type of Reverse Mortgage) in the following ways:
- Offer a Single National Loan Limit: Currently the actual amount you can qualify for with a HECM Reverse Mortgage varies depending on your county. The FHA Modernization Bill sets a single national limit of $417,000.. For most borrowers this means more money is available to them.
- Eliminate of the Authorization Cap: Currently only a set number of Reverse Mortgage loans may be granted. The FHA Modernization Act eliminates this limit, enabling the FHA to authorize as many loans as the market demands.
- HECM Could Be Used for Home Purchase: Currently Reverse Mortgage borrowers must reside in their home for at least one year before they can get a Reverse Mortgage on it. The FHA Modernization Act enables borrowers to actually purchase a home with a Reverse Mortgage — assuming an adequate down payment. This change makes a Reverse Mortgage an appealing loan for retirees who are downsizing and others.
- HECMs Could Be Used on Coops: Currently only single family homes are eligible.
- New Limits Would be Set on Reverse Mortgage Origination Fees: Fees would be limited to 1.5 percent of the maximum claim amount verses the current 2% percent of the maximum claim amount (or FHA lending limit in the county). More information on fees is available here:
- New Fees:
- Current Fee Structures:
As a whole, these changes should mean more money and better terms for seniors doing a Reverse Mortgage.
Learn More About FHA Modernization and Contact Congress Now
If you wish to see the FHA Modernization Act become law, consider contacting your Congressperson. You can locate them here: http://www.house.gov/