FHA’s HECM limit rises above $1.2 million in 2025

The limit for federally backed reverse mortgages is increasing for the ninth consecutive year. The Federal Housing Administration (FHA) announced on Tuesday via Mortgagee Letter (ML) 2024-22 a maximum claim amount of $1,209,750 in 2025.

That’s up $59,925 from the current limit of $1,149,825 for Home Equity Conversion Mortgages (HECMs), which equates to an increase of roughly 5%.

HUD calculates this figure at 150% of the conforming loan limits on mortgages backed by Fannie Mae and Freddie Mac. The Federal Housing Finance Agency (FHFA) on Tuesday announced that conforming limits will increase to $806,500 in 2025.

The annual FHFA announcement typically acts as a “sneak peek” at the limits for the HECM program in the new year, but both figures were published almost simultaneously in 2023 and 2024.

Steve Irwin, president of the National Reverse Mortgage Lenders Association (NRMLA), lauded the development.

“I am delighted to see the HECM lending limit increase for calendar year 2025,” Irwin said in a statement to HousingWire‘s Reverse Mortgage Daily (RMD). “Given the continued, though somewhat moderated, home price appreciation across the US, this increase will expand the accessibility of the FHA-Insured HECM program for older homeowners who may need to access their home equity to augment their retirement finances.”

FHFA’s third-quarter 2024 House Price Index, also published on Tuesday, saw national home prices increase by 4.3% compared to third-quarter 2023. This growth rate is slightly lower than the rate seen during the same period last year (+5.5%), and much lower than the rate observed two years ago (+12.3%).

“Loan limits for most of the country will increase in the coming year due to the continued appreciation of home prices over the past year,” FHA said in an announcement of the new limits.

The FHA typically aligns the new HECM limit with the new conforming loan limits, which reflect changes in annual home prices as required by the Housing and Economic Recovery Act of 2008.

The limit handed down by the U.S. Department of Housing and Urban Development (HUD) for federally backed reverse mortgages in 2024 was $1,149,825, which matched the FHFA’s high-cost limit and pushed the HECM lending limit above $1.1 million for the first time.

Continuing the trend from recent years as noted in the FHA’s Annual Report to Congress, the reverse mortgage portion of the Mutual Mortgage Insurance (MMI) Fund reached positive territory once again, with a higher level of home-price appreciation when compared to the prior years.

For several years, the reverse mortgage lending limit remained stagnant before rising in 2017 from $625,500 to $636,150. Since then, increases in the HECM limit have closely tracked those of conforming loan limits.

The new loan limit will take effect for loans with case numbers assigned on or after Jan. 1, 2025, through Dec. 31, 2025.

The release of the new HECM lending limits also came on the same day as the release of Mortgagee Letter 2024-21, which specified new forward mortgage loan limits. FHA’s nationwide forward mortgage “floor” and “ceiling” limits for a one-unit property in 2025 are $524,225 and $1,209,750, respectively.

This is a developing story.