Blog

I write here when something in the program changes or when a client question deserves a longer answer than a phone call allows. Expect a few posts a year.

FHA raises the 2022 HECM lending limit

January 6, 2022

FHA’s December 1 letter put the 2022 HECM limit at $970,800. An increase of 18 percent in one year, the steepest since the stimulus era.

• 2021 limit. $822,375, the ceiling for cases written through December.
• 2022 limit. $970,800, for case numbers FHA assigns on or after January 1.

That limit determines how much home value the formula will count, so owners above the old ceiling left equity uncounted. Plenty of South Bay houses cleared $822,375 last year, and a new quote this month will come back five figures larger for some owners. Borrowers who closed years ago and drew everything may revisit the question, since a higher ceiling sometimes clears the refinance test from my October post.

The ceiling will not change your percentage, though. It raises what FHA includes; age and rates still set the factor, same as before. My calendar fills by March most years, so call early if the old number was your problem.

Should you refinance your reverse mortgage?

October 14, 2021

Three callers asked me this in the last month, and rising Torrance prices explain why. FHA allows a HECM-to-HECM refinance, and 2021 has produced more qualifying files than I recall. Two screens decide it for me:

• The benefit test. The new principal limit should exceed the closing costs by at least five times, under the industry standard most lenders follow.
• The seasoning rule. Ginnie Mae announced a twelve-month minimum between the original closing and any refinance it will pool.

The files that clear both screens usually carry six figures of new value since the first closing. But when a file fails one of them, I say so on the first call, before anyone pays for an appraisal. Refinance churning damaged this industry’s reputation a decade ago; the seasoning rule exists for that reason, and I support it.

Why an untouched HECM credit line keeps growing

June 9, 2021

The growth feature draws more disbelief than anything else I explain at kitchen tables. An unused HECM credit line grows at the same rate the loan charges, the note rate plus the half percent annual insurance premium. Open a $150,000 line at a combined 3.5 percent and the untouched balance will reach about $155,000 after one year and roughly $166,500 after three. No bank deposit pays that, and no lender can freeze the line the way banks froze HELOCs in 2008 and suspended new ones last spring.

Still, growth raises borrowing capacity only; no cash earns interest, and any draw will accrue it. I describe the line to planners as a standby resource for the late years, one that will be larger each year you leave it alone.

Wade Pfau and Barry Sacks published on the standby strategy years before lenders advertised it. A 2018 Forbes column summarized their findings, and I still forward it to skeptical planners.

What financial planners ask me about housing wealth

March 3, 2021

Half my referrals now come from financial planners and estate attorneys, and their questions differ from a homeowner’s. Eligibility rarely enters those conversations at all. Sequence risk dominates them, and the issue underneath is whether a credit line can spare a portfolio during a down year.

Sacks and Sacks modeled the approach in 2012. Retirees who drew on the line after loss years and repaid during recoveries kept their plans solvent longer than peers who sold stock on schedule. On timing, my answer surprises most planners. I tell them to open the line early, well before any need, because growth compounds every year the line stays open.

The Torrance Memorial advisory council seats me beside planners every quarter. They used to ask whether; now they ask how, and I count that as progress.

Reverse mortgage closings during the shutdown

May 7, 2020

Files kept closing through the spring, with adjustments at nearly every step.

• Counseling. HUD-approved agencies moved sessions to the phone, and the certificate carries the same weight.
• Appraisals. FHA authorized exterior-only inspections in March, so appraisers will report from the curb and public records.
• Signings. Mobile notaries meet clients outdoors, on patios and porches, with separate pens.
• Recording. County offices accept electronic filings, so funding timelines held close to normal.

My office shifted to phone and video reviews early on, and clients adapted faster than I expected. Several callers past 80 managed Zoom better than their children predicted. The counseling session and the appraisal stayed mandatory through every week of it, in new formats. April files closed about a week slower than my winter average, and I expected worse.

NMLS#: 167985

NMLS Consumer Access