The Housing Bailout Act

The Senate  has  passed  the  housing Bailout bill.  President Bush is  expected  to sign  this important  piece  of  legislation  this  week. Several key  provisions relate  to  Reverse Mortgage  and  we  will talk  about  those in  more  detail. First  I  wanted  to  mention  one other  part of  the  bill  that might  affect low income  seniors. If  you  do  not  currently  itemize  deductions  because  of low  income or limited  deduction eligibility you  can deduct property taxes paid for  tax year  2008. The  sunset provision  currently only  grants a one  year  window  then  the  deduction  increase  for  non itemizing filers is  set  to  expire after 2008. Standard  deduction for  couples  that  do not  itemize  will  be  up to $11,900, or  for  individuals the  standard  deduction  will be $5,950. Talk  to  you  tax  prepared to see  exactly  what  this  will mean to  you  in you particular  tax  situation.

Now  for  the  changes  in  the  reverse  mortgage loan  marketplace. Two  major  changes  will  be  implemented  and  we  have  been   waiting  for  both  of  these  to  come  to the  market. First,  the  fees  charged  for  a HUD HECM Reverse Mortgage Loan  have  beenm  set  by  the  federal  government. The  maximum  fees  that  can  be  charged are being  reduced  saving  the  homebuyers money. Understand  that  the  fees  generally  are  calculated  and  rolled  into  the  loan. They  are  not  paid up  front.  The  only  up front  fees  are typically  only  about $450-600 and  include a loan  application  fee  and  often a termite  inspection fee. The fees  we  are talking  about that  the  law  will change are  the origination fees. The  new  fee limits  are 2% on a reverse mortgage ammount for  up to $200,000 in value plus  an  additional  fee of 1% on  loan  over the $200,000 home limit. The  fees  are  also  capped  under  the  law at a  statutory  limit of  $6,000.

From  my  clients viewpoint the  larger  issue  is  that  the  lending limit  is  going  up  to  a national  maximum loan  value of $625,500.  The previous national lending limit  was between $300-400 K. In  many  states or  areas  within a particular  state  the regional lending  limit  has  been  as low  as $200,160. What  this  will mean  is  that  many  customers  who would  have  been  rejected  for  a  reverse mortgage  last  year  might now  be  good  candidates  for  a reverse mortgage  moving  forwards. I had  several  candidates  who  were  rejected  last  year that  wanted  to purchase  a  reverse  mortgage that might now  be  able to  qualify.

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Tags: Finance, home finance, Hud HECM Reverse Mortgage, Money, Reverse Mortgage