List of New FHA Loan Limits

WASHINGTON - Housing and Urban Development Secretary Andrew Cuomo said today that senior citizens can now qualify for larger HUD-insured reverse mortgages - enabling some individual homeowners to borrow tens of thousands of dollars in extra funds.

In addition, Cuomo said he expects more lenders to start issuing HUD-insured reverse mortgages because the program has been made permanent

"This is good news that will benefit senior citizens," Cuomo said. "Larger and more widely available reverse mortgages will enable more senior citizens to continue living in their own homes, instead of being forced to sell their homes to get needed funds."

Effective this month, the highest amount of a home's value that can be converted to cash with a HUD-insured reverse mortgage ranges from $115,200 to $208,800 - depending on housing prices in the metropolitan area where a person lives. The maximum ranged from $86,317 to $170,362 before President Clinton signed legislation into law in 1998 raising the limits.

Reverse mortgages make it possible for homeowners age 62 and older to borrow thousands of dollars against the value of their homes without selling the homes. Homeowners can collect a lump-sum payment, monthly payments, or tap into a line of credit to get cash when needed.

No repayment is necessary as long as a homeowner lives in a home with a reverse mortgage. The reverse mortgage is repaid, with interest, when a homeowner sells the home or dies.

A HUD program run by the Federal Housing Administration, which is part of HUD, insures reverse mortgages to encourage lenders to make them available to older Americans.

The maximum cash available with a HUD reverse mortgage is based on a combination of the home's value and the borrower's age. The older the borrower, the larger percentage of a home's value he or she can borrow in a reverse mortgage.

For example, a 62-year-old widow could typically borrow about 45 percent of her home's value in a reverse mortgage. An 82-year-old woman could typically borrow about 70 percent of her home's value.

By law, HUD cannot consider the amount of a home's value that is above the local FHA loan limit when calculating the amount of cash that may be received from a reverse mortgage.

As a result, before the loan limits were increased an elderly woman whose home has grown in value to $115,000 would be forced to calculate the home's value as only $86,317 in most parts of the country when determining what she can borrow against with a reverse mortgage.

Now, with the new limit, the full value of a home can be calculated up to a range of $115,200 to $208,800 depending on where the homeowner lives - making the homeowner eligible for a larger reverse mortgage.

In addition to raising the loan limits, this new legislation converts the Reverse Mortgage program from temporary to permanent status. The program, begun in 1989, was scheduled to expire on Sept. 30, 2000.

Making the program permanent is expected to encourage more lenders to issue HUD-insured reverse mortgages, because they no longer have to fear the program will end.

There are also new safeguards in the law to prevent excessive or unnecessary charges to borrowers. HUD cracked down on in 1997 on companies that charged senior citizens needless fees of up to 10 percent of the total amount borrowed in a reverse mortgage simply for providing information about the program.