HECM is on the rise

Typically when something is on the rise, especially in today's market, that's not always a good thing. Defaults are on the rise. Rates are on the rise. Scams are on the rise.

When you see a headline in the paper boldly stating that HECM is on the rise I don't want you to be alarmed. HECM stands for Home Equity Conversion Mortgage. It's the way H.U.D. refers to Reverse Mortgages under the FHA label. So when you hear HECM just think Government Backed Reverse Mortgage. Simple.

Tim Paul, who writes a blog called Reverse Mortgage Information had an interesting graph illustrating the recent rise in HUD backed reverse mortgages. It shows a pretty steep curve, especially in the last couple of years.

I was interviewed yesterday about reverse mortgages and in particular those of the HECM version. The interviewer was from the east coast where many FHA loans are originated. I explained that while we could do HECM mortgages here in Jumbo-Land, CA it would be more likely that one of the "other" flavors would work better.

You see HUD and FHA put certain limitations depending on the county that you live. Those limitations often preclude the viability of a FHA mortgages. What that means to our client is that often times it's better to use a different loan program. Generally speaking, for the San Francisco Bay Area, that means a Jumbo Reverse Mortgage Program.

AARP has a great calculator on their site for two of the three common types of Reverse Mortgages. You can access it here: http://www.rmaarp.com

It will compute the HECM and the Fannie Mae versions only. Fannie Mae calls theirs the Home Keeper Mortgage. Fannie has limits too. Currently $417,000. The AARP calculator leaves out the third and maybe most important program right now (to those that live in the bay area, the jumbo reverse mortgage. Most jumbo limits are around $2,000,000.

The important part to take away from all this is that there are many different reverse mortgage products. It's not just one flavor, one brand, one version that is out there. There are many. Each version, the structure of the loan, the manner in which the money is dispersed has unique advantages and disadvantages. Which one is right for you? Only a true reverse mortgage professional will be able to point you in the right direction.

Which brings us back to this chart. There are conversations underway right now in Washington, D.C. that may raise the limits for FHA. If this happens I can see a quick change to this chart in the following months.

Thanks for the chart Tim!

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