HUD just announced today that effective October 1, 2009, the principal limit factor (PLF) on reverse mortgages will be reduced by 10%. The new PLF table can be found at: http://www.hud.gov/offices/hsg/sfh/hecm/hecmhomelenders.cfm. This PLF table will go into effect for all loans taken on or after October 1, 2009.
These changes to the principal limit are not a large surprise, given the appropriations bills now going through Congress. The reverse mortgage program was not designed to be supported by a credit subsidy, and since the appropriations bill is also unlikely to grant a subsidy, program changes are the only way to keep the reverse mortgage program operating in the new fiscal year (which begins October 1, 2009). Nonetheless, these changes are not likely to be embraced by the reverse mortgage community, as they will prevent some seniors from receiving the amount of money from their homes necessary to be eligible for the program. A reverse mortgage was designed to help as many seniors as possible. This is likely to reduce their ability to do so.
The mortgagee letter can be found below:
