California Reverse Mortgages by your Sacramento Reverse Mortgage Provider

The Death of the Jumbo Reverse Mortgages?

by Jeffrey L. Bangerter
September 11th, 2008

By now, if you have been watching the news at all you’ve either read or heard all about the bankruptcy of Lehman Brothers.

Lehman was the source for one of the two remaining proprietary or jumbo reverse mortgage loan programs in the market for senior borrowers.

2008 has seen the exit of all but one proprietary program which we at WSB Mortgage still offer.

Several years ago, if a senior borrower with a high value home wanted a reverse mortgage, the Financial Freedom Cash Account product was the only jumbo reverse mortgage product in town.

With all the liquidity issues in the secondary markets and the failures of IndyMac Bank and Lehman Brothers, the future of the jumbo reverse mortgage may be at risk.

The remaining programs were already automatically reducing the property value and lending at greatly reduced rates and with only one program left, many high value homes may have to be limited to the government Home Equity Conversion Mortgage (HECM).

The only hope for the high value senior homeowners is the recent passage of the Housing and Economic Recovery Act, H.R. 3221.

The bill will raise the limits of the HECM loans but there is some confusion as to what the limits will ultimately be.

There are interpretations out that the national limit will go to $417,000 with the ability to go to $625,500 in high cost areas.

However, in a letter from Barbara Boxer, United States Senator from California dated September 12, 2008, she states “I am pleased to report that the Housing and Economic Recovery Act of 2008 which passed Congress and was signed into law on July 30, 2008, permanently raises the HECM loan limit to $625,500.”

This letter was sent in response to inquiries made regarding H.R. 3221.

For those who really need a reverse mortgage and have a home valued greater than the current HUD lending limit for the area (currently anywhere from $200,160 to $362,790), the new provisions cannot be implemented by HUD quickly enough.

If Ms. Boxer is correct and the national limit is now $625,500.00 that would fill the need of many borrowers currently seeking proprietary products and soften the effect of the disappearing jumbo reverse mortgage product.