Another year has come and gone… Where is the time going?  It sounded strange to say 2017 all year and now 2018 is upon us.  This year, the reverse mortgage industry experienced many changes.

2017 HUD Surprised Industry with Massive Changes 

In September, HUD sent the entire industry into a tailspin by announcing changes that were to take effect a month later in October.  Instead of the condo spot approval program finally coming back, we had to adhere to more restrictive Principal Limits and lower interest rate floors resulting in less money for homeowners.  Our heads were spinning as we endeavored to maintain the integrity of our customer service while being pushed to the limits by the demand of an impending change in 30 days.  The impact was felt industry-wide, including third parties who provide the necessary services to close reverse mortgages.  We are still hopeful as we continue to wait for HUD to implement the spot loan approval process for condominiums.

As if that were not enough, a series of natural disasters during the year required lenders to re-inspect homes.  Adding those circumstances to an already burgeoning volume of applications caused longer closing times and affected everyone, including appraisers, title companies, underwriting and processing.  Through it all, none of our borrowers lost their rates, loan amounts or lender credits despite the delays and changes.  We labored hard to get FHA case numbers assigned before the Oct. 1 deadline HUD mandated.

In terms of the changes that went into effect in October, I believe that the modeling is inaccurate and that they chose a model representing the “worse possible case scenario.”  Sooner or later someone will realize that the program is not losing money as was indicated, which prompted the changes.  For now, we will have to wait and see the results these changes bring, but in the interim we are glad the program is solvent and available to seniors.  We are all optimistic that HUD can loosen the program parameters in the future.

2018 Brings Higher Lending Limits and New Proprietary Programs  

In 2018, some positive things are surfacing.  The first meaningful loan limit change since 2009 will go into effect, increasing from $636,150 to $679,650.  For borrowers with higher-priced home, we have seen the re-emergence of jumbo loan programs.  The existing jumbo program had been under-utilized because it only benefited borrowers with homes valued at $1.5 million or more and it held a high rate.  The jumbo programs have been improved so that rates are lower, and borrowers receive more money (higher loan-to-value based on age).  This is a winning combination and will help more homeowners with property values as low as $850,000. If you looked at the proprietary product in the past and discounted because of the rate or the amount of money you would receive, give it another look, you may be delightfully surprised!

2020's Reverse Mortgage Principal Limit Factors

Age of BorrowerPrincipal Limit FactorCurrent Lending Limit
6252.4%
$765,600
6554.2%$765,600
7057.6%$765,600
7560.9%$765,600
8064.2%
$765,600
8568.5%$765,600
9073.0%$765,600
*Principal Limit Factors taken from HUD.gov using example expected rate of 3.00%. You must deduct closing costs and upfront insurance (approx. 3%) to arrive at your NET principal limit.
PLF tables source: https://www.hud.gov/sites/documents/august2017plftables.xls

5 Key Changes Moving into 2018

  • Rates are everything! Interest rates now have a direct impact on your available reverse mortgage benefit; taking out a reverse mortgage now before rates climb higher will yield you the most from your home’s equity. If you are short to close but have the funds to bring in now is the best time to do so and eliminate that mortgage payment FOR LIFE.
  • If your home value is between $625,500 and $850,000, the federally insured HECM now provides you with more benefit than ever before with the new 2018 $679,650 lending limit cap (effective on all new applications Jan. 1 2018)
  • If your home value is $850-$1M+ you may now get more than ever with our new JUMBO reverse mortgage.
  • If you live in a condo NOT APPROVED by HUD but the appraised value is $500k+, we can now help you with a new proprietary reverse mortgage program.
  • If you would like to move and use a reverse mortgage for new home purchase, we can help you buy that new home without taking on a traditional mortgage or having to pay all cash.

The Birth of ARLO 

This year we introduced ARLO!  The All Reverse Loan Optimizer (ARLO) is currently the only calculator of its kind.  It can help you in real-time by outlining programs and integrating accurate fees in your area with title and other local costs.  The information is available without you having to submit all your sensitive information (minimum information needed is your month and year of birth along with a zip code).  We will never ask you to supply your social security number or other personal information. We invite you to check ARLO out at https://reverse.mortgage/calculator.

We want to thank everyone who allowed us to work for them this past year.  We hope that 2018 is your best year yet!

Happy New Year!

Michael Branson CEO