2024 HECM LIMITS ANNOUNCED:
The Federal Housing Administration has just announced that it will increase the maximum claim amount for Home Equity Conversion Mortgages in calendar year 2024 from $1,089,300 to $1,149,825 effective for case numbers assigned on or after January 1, 2024. This new maximum claim amount is also applicable to Freddie Mac’s special exception areas of Alaska, Hawaii, Guam, and the Virgin Islands.
Details were published in Mortgagee Letter 2023-22 and will be included in a future Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1) release.
Every year, HUD reviews the national reverse mortgage lending limit for the HECM program and determines the amount based on home prices for the preceding year. Based on this data, the 2024 HECM reverse mortgage lending limit will be $1,149,825.
2023 vs. 2024 Reverse Mortgage Limit Comparison
|AGE||Loan to value||2023 Limits ($1,089,300)||2024 Limits ($1,149,825)||Increase ($)|
History of HECM Lending Limits
HUD Lending limits typically move with home values. After the change in 2008 that first moved the lending limits to a national limit of $417,000 (from regional limits based on regional values), the limit took another significant increase in 2009 to $625,500 due to the Housing and Economic Recovery Act.
In 2019, the HECM lending limit rose another $46,875 to $726,525, and reverse mortgage borrowers started to enjoy the benefits of refinancing their HECM loans. In 2020, the limit increased again to $756,600 – up $39,075.
History of Reverse Mortgage Limits
|Year||National HECM Limit||Limit Increase (%)|
Covid Impact on Appraised Values & Lending Limits
Then, during the Covid pandemic, property values continued increasing. In 2021, the HECM limit increased to $822,375, representing an increase of $56,775. Then, against all odds, the country exhibited massive housing price growth in 2022, and the HUD limit grew to $970,800, a single increase of $148,425!
This was the most significant single increase that was not a result of a legislative change in the way the limit would be determined (in 2008, the limit was raised because of the Economic Stimulus Act that established the national limit of $417,000, and in 2009, the increase was the result of the House Economic Recovery Act).
This was a single-limit increase based solely on the appreciation of home prices.
Comparing HECM to Jumbo Reverse Mortgage Limits
This is the second time the HUD Home Equity Conversion Mortgage (HECM or “Heck-um”) limit has hit the $1,000,000+ mark. The 2024 limit increase gives borrowers with properties valued at more than $1,300,000 a viable option to proprietary or jumbo reverse mortgage options and one of the highest percentage increases in the past several years!
2024 HECM vs Jumbo Comparison
|Home Value||2024 HECM||2024 JUMBO||NET Benefit ($)|
Borrowers with houses worth more than $1,149,825 may consider a proprietary product instead of a HECM once the property reaches or exceeds that limit. Still, since the HUD HECM program allows borrowers a greater percentage of their property’s value in the loan amount, the loan makes sense for most borrowers even beyond the HUD lending limit in most cases.
We say “most cases” because the proprietary programs still allow borrowers to access cash differently than the HUD programs. Hence, it is always best to talk to your reverse mortgage specialist to determine which programs will meet your needs.
So now, in 2024, the new limit will be $1,149,825. This is an increase of $60,525! This increase is based on data derived from the growth of house prices before the rise in interest rates, but many markets are already seeing signs of price softening.
Suppose the prices erode further, as is almost certainly the case with higher interest rates, future lending limits may be reduced. The higher lending limits help some borrowers with higher existing mortgages to retire, especially at a time when interest rates are chipping away at borrowers’ available principal limits.
Many borrowers are surprised that the loan amounts they were eligible for at the beginning of the year are different now after the inflationary changes and interest rate increases. For those borrowers with higher-valued homes, a rise in the 2024 reverse mortgage lending limit is a welcome bit of good news!
2024 HECM limit details were published in Mortgagee Letter 2023-22 and will be included in a future Single Family Housing Policy Handbook 4000.1 (Handbook 4000.1) release.