Happy New Year! I sincerely hope that 2022 finds you well! In life, things are always changing, are they not? It’s no different in the reverse mortgage world. The new year brings with it a few changes to the HECM reverse mortgage and some big upcoming changes to MyHECM.com that we’re pretty excited about.
A new higher HECM lending limit for 2022
FHA periodically revises the HECM lending limit to reflect current real estate market conditions. Last year the HECM lending limit was $822,375, but this year it has increased to a whopping $970,800 for case numbers issued on or after January 1, 2022. This is a huge number!
The lending limit is effectively a cap on the appraised value for purposes of calculating proceeds. If the cap is increased, then it means many homeowners with higher value homes will have access to more equity than before. If you’re in a real estate market where prevailing values are far below the new lending limit, this change won’t affect you. If, however, you live in a more expensive real estate market, the lending limit increase may mean that you’ll have significantly more proceeds available if you pursue a HECM reverse mortgage this year.
One downside with the higher lending limit is that it also comes with a higher IMIP premium, which is calculated based on the lending limit. The maximum IMIP premium will rise from $16,448 to $19,416.
We’ve updated our reverse mortgage calculators to reflect the lending limit change.
Higher rates in 2022?
HECM lenders used to utilize the 10-Year LIBOR Swap to calculate the expected interest rate, which is used to calculate loan proceeds. Today, HECMs are calculated based on the 10-Year CMT. The 10-Year CMT has risen significantly since the start of last year, which means expected interest rates have risen as well. Higher expected interest rates generally result in lower HECM proceeds.
It’s very possible that interest rates will rise further from here as the Federal Reserve attempts to get inflation under control. If you’re on the fence about a HECM, I would urge you to get the ball rolling and lock in your proceeds before higher rates further erode what you can qualify for.
New protections for non-borrowing spouses
In 2021, HUD added some enhanced protections for non-borrowing spouses. Prior to 2014, the HECM balance became due and payable when the last borrower no longer lived in the home and paid the required property charges. By definition, non-borrowing spouses are not borrowers. When the older spouse passed away, it triggered a maturity event that made the HECM balance due and payable in full. A non-borrowing spouse faced with a maturity event had to either refinance or pay off the loan balance in full or potentially lose the home.
Fortunately, HUD resolved this problem by creating new protections for non-borrowing spouses in 2014. Today, non-borrowing spouses can remain living in the home after the older spouse passes away without having to repay the loan balance. This so-called deferral period remains in effect as long as the non-borrowing spouse fulfills the program obligations, including living in and maintaining the home and paying the required property charges.
Deferral period eligibility was expanded last year to include non-borrowing spouses married to individuals who have lived in a health care facility for at least the last 12 consecutive months. HUD also removed the requirement for non-borrowing spouses to establish marketable title or demonstrate their legal right to remain in the home following the death of the older spouse. This change makes it easier for non-borrowing spouses to establish their eligibility for the deferral period.
New edition of The Reverse Mortgage Revealed released on Amazon
I am pleased to announce that a new updated and enhanced edition of The Reverse Mortgage Revealed has been released on Amazon for 2022. This book has been a labor of love for me and I think this is the best edition yet! If you haven’t grabbed a copy, do so today (and please leave a review!). In this book you’ll discover:
- How a reverse mortgage really works.
- Who should (and shouldn’t) get a reverse mortgage.
- Common myths and misconceptions.
- Little-known insider tips and tricks the lenders don’t tell you (and you probably won’t learn anywhere else).
- How to increase your payout and reduce closing costs (this alone is worth the cost of the book).
- What payout options are available and how they work.
- What pitfalls to avoid.
- Why some applicants get approved and some don’t.
- How to finance a home purchase without a mortgage payment (yes, this is for real!).
- What to expect during the application, approval, and closing process.
- This book also includes detailed case studies based on real-life scenarios that tie key concepts and terms together. You’ll see for yourself how a reverse mortgage can be used to live a more enjoyable and financially secure retirement.
Big upcoming changes for MyHECM.com
We haven’t posted any new articles for a while because we’ve been super busy with a huge site enhancement for MyHECM.com. This site was started back in 2016 to help fill the void of good unbiased information online about the HECM reverse mortgage. We’d like to take the site further and enhance it with new features that will help seniors connect with qualified industry professionals in the reverse mortgage, reverse mortgage counseling, insurance, and financial services spaces. We’ll be posting about some of the changes in the near future and hope to have the new site rolled out early in 2022.
