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Congress Considering Bill To Aid Reverse Mortgages
By James Comtois
According to National Reverse Mortgage Lenders Association, a Washington, D.C.-based nonprofit trade group, the U.S. House of Representatives is considering legislation that would improve upon the federal reverse mortgage program, including a plan that would allow older homeowners to access greater amounts of equity from their homes.
If passed, the legislation, called the Expanding American Homeownership Act of 2006, would create a single national loan limit for FHA Home Equity Conversion Mortgages. The HECM program accounts for 90% of all reverse mortgages made in the U.S. Currently, lending limits vary by county and range from $200,160 to $362,790. If the legislation passes, there would be one single limit equal to the conforming mortgage limit set by Freddie Mac, which is currently $417,000. The result would be that seniors could convert greater amounts of equity from their homes into retirement income.
Additionally, the legislation, if passed, would implement a "HECM for Home Purchase" option that would allow seniors to purchase newer housing that better suits their needs.
Another provision in the Expanding American Homeownership Act of 2006 would be to remove the existing cap on the number of HECM loans that FHA can insure. This is also contained in H.R. 2892 and S. 1710, the Reverse Mortgage to Help America’s Seniors Act, which is still pending approval in the Senate after passing in the House in December 2005.
"Taken together, these proposed changes would greatly benefit homeowners who are considering a reverse mortgage as part of their retirement planning," said NRMLA president Peter Bell. "A single national loan limit would be especially helpful. It would benefit homeowners living in high-value homes in countries where the FHA lending limit is much lower, which limits the amount of proceeds available form a reverse mortgage." Mr. Bell went on to applaud and congratulate both HUD and Congress for working on correcting this problem.
No companion bill has been introduced yet in the Senate, although the NRMLA expects one soon.
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