The Federal Housing Administration has adjusted the nationwide cap on reverse mortgage lending to $417,000, up nearly 15 percent from the previous limit, which was about $362,790.
The increase was enacted as part of the Housing and Economic Recovery Act, which passed in July to help homeowners ward off foreclosures.
Prior to this law, which creates a nationwide standard, lending limits were determined on a county-by-county basis.
The Federal Housing Administration had considered increasing the lending limit to as high as $625,000, as some reverse mortgage lenders wanted. But it chose the lower figure instead and also capped origination fees at $6,000.
A reverse mortgage is a loan that allows homeowners aged 62 or older to convert the equity in their home into cash without the monthly payment typically associated with an equity line of credit or second mortgage.
The Hartford Business Journal reported in September that the loan option has become increasingly popular in the state.
Last year, 2,041 Connecticut residents took out a FHA reverse mortgage, up 353 percent from the 450 FHA reverse mortgages taken out in 2003.
In the first seven months of 2008, 1,646 FHA reverse mortgages were taken out in the state.
The increased lending limit will allow some home owners to take out a larger loan and will likely spur the popularity of reverse mortgages even further, said Jerry Delmato, a reverse mortgage specialist at Liberty Bank.
“My reaction to this is quite positive,” he said, adding that he was not surprised that reverse mortgages are gaining in popularity because they tend to run counter to the sales of traditional mortgages.
“In times of economic uncertainty, people are looking for ways to tap into other resources to supplement their income,” he said. “Reverse mortgages provide a way for people to do that.”
But not everyone is happy with the FHA’s decision. Jack Belles, vice president of Reverse Mortgages of New England, says the lending limit should have been increased even more.
Belles said the Federal Housing Administration should have raised the limit to $625,000, because that would have been more beneficial to older Americans living in high cost areas.
“It’s a little disappointing,” Belles said. “They could have done more for seniors on this.”
Belles is also concerned because the new law restricts reverse mortgage lenders from paying for their clients’ counseling session, which is required before an individual can take out an FHA reverse mortgage.
The counseling typically costs $125, Belles said, something not all seniors on a fixed income will be able to afford.
“[The government] is trying to overregulate this thing,” Belles said. “They are going in the wrong direction.”
The target date for the new lending limit to go into effect is Nov. 1.
Full Capture Solutions Honored
East Hartford-based Full Capture Solutions, an analytic and search software provider for the insurance industry, has won the Financial Services Company of the Year award presented by the Connecticut Technology Council, the state’s technology sector association.
The annual award recognizes companies with sales under $10 million that create an innovative product and business model that demonstrates potential for future success.
Full Capture Solutions’ technology aggregates, mines and extracts business intelligence from unstructured data held by insurance companies.
It’s different from similar products in the market because its main focus is on unstructured data, which is information that can’t be easily read by most computer software programs. Examples include e-mails, police reports and medical bills.
“Traditional data mining and business intelligence software usually requires structured data in order to be effective,” said Stephen Holcomb, president and CEO of Full Capture Solutions. But most insurance data is in an unstructured format, he added.
“As a result, that data has been inaccessible for most business intelligence purposes,” Holcumb said. When Full Capture Solutions applies its software program to insurance claims, it helps insurers better understand how and why a particular event happened and gives them information to improve their strategic decision making in the future.
Full Capture Solutions, which also has an office in California, opened in 2004. Earlier this year, it was named on the industry list of “ Up and Coming Insurance Technology Firms — Class of 2008,” by Financial Insights, analytical research firm.
Greg Bordonaro is a Hartford Business Journal staff writer.
