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Reverse Mortgage Glossary

Maximum Claim Amount

The maximum claim amount (MCA) is the maximum dollar amount FHA will insure for a HECM reverse mortgage.

MCA is equal to either the appraised value of the property or the current FHA lending limit, whichever is less. For example, if the appraised value of the property is $300,000, then the maximum claim amount equals $300,000 as well. If the property is appraised at $700,000, then the maximum claim amount equals the FHA lending limit of $625,500.

The maximum claim amount is the starting point for determining how much a reverse mortgage borrower can initially qualify for. FHA publishes a table of principal limit (PL) factors that determine what percentage of the maximum claim amount a reverse mortgage borrower can qualify for based on age of the youngest borrower and prevailing rates in the reverse mortgage lending marketplace. The PL factor is a percentage that is multiplied by the maximum claim amount (similar to loan-to-value) to determine the initial amount of proceeds the borrower qualifies for.

For example, if the maximum claim amount is $300,000 and the PL factor is 0.50, then the initial proceeds available would be $150,000 (0.50 * $300,000), which is called the principal limit. These proceeds would then be divvied up to cover existing mortgage balances, closing costs, required property charges, and any allocations to the borrower in the form of cash or a line of credit.

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