HECM Reverse Mortgage Loan Limits to Increase in 2017
The Federal Housing Administration announced Dec. 1 that the loan limits for HECM reverse mortgages will increase for 2017 in most areas of the country. This is the first time in several years that the loan limit has changed. FHA announced the increase in Mortgagee Letter 2016-19.
Beginning Jan. 1 through Dec. 31, 2017, the loan limit for FHA-insured HECM reverse mortgages will be $636,150 – an increase of $10,650 over the previous loan limit of $625,500. The new HECM loan limit is equal to 150 percent of the Freddie Mac national conforming limit of $424,100.
In a press release, FHA said the change in the loan limit is due to an increase in housing prices.
Unlike loan limits for forward mortgages, which are calculated based on median house prices and set by Metropolitan Statistical Area and county, the loan limits for HECM reverse mortgages don’t vary. Rather, the same limit applies to all HECM reverse mortgages regardless of where they originate, FHA said.
The Federal Housing Finance Agency (FHFA) has reported increases in U.S. house prices in the first three quarters of 2016. Quarterly price increases ranged from 1.2 to 1.5 percent through September. The FHFA reported in its 2016 third-quarter report that house prices rose 6.1 percent from the third quarter of 2015.
FHFA reports that home prices rose in 49 states from the third quarter of 2015 to the third quarter of 2016 with Delaware and the District of Columbia the only locations that did not experience home price increases. Florida, Oregon, Washington, Colorado and Utah had the highest appreciation in home prices, said FHFA. The South Atlantic division had the strongest third-quarter increase, according to the FHFA, with the New England division posting the lowest appreciation in home prices.
For homeowners, the change in the loan limit could increase the amount that some may borrow with an HECM reverse mortgage, depending on the appraised value of the home or its sales price. Where the maximum was previously $625,500, homeowners in 2017 may borrow up to $636,150 if they qualify based on appraisal or sales price.