House Passes National Reverse-Mortgage Loan Limit

Last month, the U.S. House of Representatives passed the Expanding American Homeownership Act of 2006 (H.R. 5121). This new bill would create a single national limit for the HECM (Home Equity Conversion Mortgage) program equal to the conforming Freddie Mac loan limit, which is $417,000 for 2006.

Under the current law, the location of the home dictates the maximum loan amount, which varies by county. These amounts range from $200,160 to $335,800. The new bill would set one national rate that would allow seniors to take out much larger reverse mortgage loans.

The Expanding American Homeownership Act also would provide other improvements to the FHA HECM program. The new legislation calls for a "home purchase" option that would allow people to use a reverse mortgage to purchase newer housing that better suits their needs (currently only Fannie Mae offers a reverse mortgage home purchase program.) It would also remove the current volume cap on the number of HECM loans that FHA can insure (currently at 250,000 loans.)

Reverse mortgages have already exploded in popularity over the last couple of years, but with the passage of this act, we could see even larger increases in the number of seniors utilizing this powerful program.