The reverse mortgage market is growing sharply due to provisions in the economic stimulus bill, according to the Los Angeles Times ,which cites Federal Housing Administration data showing a 17 percent increase in the number of loans the agency insured in March.

The recently signed economic stimulus bill temporarily lifts the limit on the size of HECM loans from $417,000 to $625,500. The new loan limits are in force for 2009 only. Additionally, new federal rules that took effect in January make it possible to use HECM loans to purchase a new home.

With HECM loans, the percentage of equity you can borrow is roughly 10 percent less than your age. So a 75-year-old individual seeking to buy a $300,000 home could get 65 percent of the equity as a loan–roughly $200,000. The new rules don’t permit any other mortgage loans on the new property, so the balance must be funded with cash from the seller’s previous home.

Related posts:

1. Wells Fargo exit another blow to reverse mortgage market
2. AARP lawsuit turns up heat on government, reverse mortgage industry
3. AARP lawsuit turns up heat on reverse mortgage foreclosures
4. Reverse mortgage borrowers face growing default problem
5. Housing slump creates a problem for seniors who need to sell

Tags | real estate, reverse mortgages