Their official announcement came out at 5:00 tonight stating that any loans in their pipeline must close by November 26, 2008 or the loans would have to be changed to the government Home Equity Conversion Mortgage (HECM or Heck-um) reverse mortgage program.

This comes as no surprise at a time when credit is so tight and the jumbo product is not readily marketable in the secondary mortgage market.

There are rumblings that other lenders may come out with other programs in the not too distant future, and in fact, this last remaining lender stated in their announcement that this is not an elimination of their program but rather a suspension.

However, the last few announcements from other lenders also cited temporary suspensions and none have yet to re-emerge.

What does this mean to senior homeowners with larger, more expensive homes, it means that for the time being if they are interested in a reverse mortgage, the HUD HECM is about the only game in town.

When H. R. 3221 passed, there was quite a buzz that the limits may go to $625,500 or at least that amount in high cost areas (which would have represented a sizable increase in high cost areas) but when HUD finally announced the actual limits, the nationwide limit for most of the United States came in at $417,000.

This helps many homeowners in areas that previously had lower limits but they were owners of more expensive homes, but it didn’t do too much for seniors in those high cost areas who owned properties valued at $625,500 and above who were previously short to close on the old limit of $362,790 the difference just wasn’t great enough.

This turn of events comes as many seniors have seen the values of their portfolios dive in the past 15 months and are now looking for some help that they may have felt they did not need before.

So what should senior borrowers do? The future is never certain. If the HUD HECM does net enough for the needs of the household, then that program should always be available.

Although it is never advisable to think of a reverse mortgage as a temporary solution, I have already spoken to two borrowers who have asked if they could get a HUD HECM and then if a suitable jumbo program does re-emerge, they wanted to know if they could refinance their HECM mortgage.

The idea behind a reverse mortgage is that you never have to make a payment for life for as long as you live in that property and with the costs associated with the program, it is not wise to think of reverse mortgages as temporary solutions.

However, for some borrowers with an immediate need and nowhere else to turn, it was either take what was available now and then look at other options later on if/when they became available, sell now at a reduced price for a quick sale or lose their homes.

The last borrower with whom I spoke felt as the though the costs for a reverse mortgage were only a fraction of what he would lose by selling in this market and the benefit received, even if he had to get another reverse mortgage later and paid the fees of a proprietary reverse mortgage then, he felt he would be much better off than taking the loss of the value in today’s market.

So are Jumbo Reverse Mortgages extinct?

I really don’t think so but for the time being Jumbo Reverse Mortgages are unavailable and barring a very deep pockets investor with a very large appetite for this product, it will take a strong improvement in the secondary market before the Jumbo Reverse Mortgages are readily available once again.

Michael G. Branson (CEO All Reverse Mortgage Company)is a Mortgage Broker who has over 31 years of mortgage banking experience. Toll Free (888) 801-2762
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You see, Lehman was the source for one of the two remaining proprietary or jumbo reverse mortgage loan programs in the market for senior borrowers, age 62 and over. Just as 2006 and 2007 saw the birth of many new jumbo products, 2007 has seen the exit of all but one proprietary program.

Several years ago, if a senior borrower with a high value home wanted a reverse mortgage, the Financial Freedom Cash Account product was about the only game in town. With all the liquidity issues in the secondary markets and the failures of IndyMac Bank and Lehman Brothers (the sources for two of the prominent jumbo reverse mortgage programs), the future of the jumbo reverse mortgage may be at risk, at least in the short run.

The remaining programs were already automatically cutting the property value and lending at greatly reduced rates and with only one program left standing (and the conventional wisdom wonders for how long), many high value homes may have to be limited to the government Home Equity Conversion Mortgage (HECM or Heck-um).

The only ray of sunlight in this cloudy scenario for senior homeowners is the recent passage of the Housing and Economic Recovery Act, H.R. 3221. By all accounts, the bill will raise the limits of the HECM loans but there is some confusion as to what the limits will ultimately be. There are interpretations out by the National Reverse Mortgage Lenders Association (NRMLA), that the national limit will go to $417,000 with the ability to go to $625,500 in high cost areas or a national limit of $625,500.

However, in a letter received by this author from Barbara Boxer, United States Senator from California dated September 12, 2008, she states I am pleased to report that the Housing and Economic Recovery Act of 2008 which passed Congress and was signed into law on July 30, 2008, permanently raises the HECM loan limit to $625,500. This letter was sent in response to inquiries made regarding H.R. 3221.

If the Federal Reserve cuts rates in their meeting again today (there seems to be about a 50/50 split between economists as to whether the Fed will take that action based on the instability in the financial markets and Monday’s worst drop on the stock market since 9/11 (FED Article – Associated Press) then seniors will again see a drop in their interest income from money in bank accounts. Falling stock prices have impacted many as well. With the proprietary reverse mortgage programs all but gone (at least for the time being), senior homeowners with higher valued properties really need the new provisions of H.R. 3221.

There are other options for seniors with higher net worth, multiple or high value properties and who are medically insurable. But for those who really need a reverse mortgage and have a home valued greater than the current HUD lending limit for the area (currently anywhere from $200,160 to $362,790), the new provisions cannot be implemented by HUD quickly enough.

If Ms. Boxer is correct and the national limit is now $625,500.00, that would fill the need of many borrowers currently seeking proprietary products and soften the effect of the disappearing jumbo product. Now we just need the division of HUD, the Federal Housing Administration (FHA) to issue the Mortgagee Letters to the lenders indicating they are ready to implement all the changes of this sweeping legislation and senior borrowers will be able to begin utilizing the higher limits.

Michael G. Branson (CEO All Reverse Mortgage Company)is a Mortgage Broker who has over 31 years of mortgage banking experience. Toll Free (888) 801-2762
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