The House is considering legislation that will improve the increasingly popular reverse mortgage program.

The Expanding American Homeownership Act of 2006, H.R. 5121, will allow older homeowners access to greater home equity. Improvements on the federal program include creating a national loan limit for FHA Home Equity Conversion Mortgages, which account for 90% of reverse mortgages in the U.S.

A single national limit will help homeowners living in areas with high-priced homes. Current lending limits vary by county, ranging from $200,160 to $362,790. The legislation would mirror Freddie Mac's conforming limit at $417,000.

The Senate is expected to introduce a companion bill in the near future.

The Reverse Mortgage Program allows seniors to convert the equity from their homes into retirement income.

The Act would also implement a HECM for Home Purchase, which would allow seniors to purchase newer housing. It would also remove the existing cap on the number of HECM loans that the FHA can insure.

"Taken together, these proposed changes would greatly benefit homeowners who are considering a reverse mortgage as part of their retirement planning," said Peter Bell, President of the NRMLA.

"A single national loan limit would be especially helpful. It would benefit homeowners living in high-valued homes in counties where the FHA lending limit is much lower, which limits the amount of proceeds available from a reverse mortgage. We applaud the Department of Housing and Urban Development and Congress for proposing to correct this problem."

Reverse mortgages are simply loans that enable homeowners 62 or older to borrow against the equity in their homes, without having to sell the home or take on new monthly mortgage payments.

The loan can be used in any way, taken out as a lump sum, fixed monthly payment, line of credit or a combination of ways. The loan amount depends on the current interest rate, the borrower's age and the value of the home.

A reverse mortgage is not collected upon until the borrower moves out of the home permanently. The repayment amount cannot exceed the value of the home.

Once the loan is repaid, any remaining equity in the property is distributed to the borrower or the borrower's estate.

A senior does not have to own his or her home free and clear to receive a reverse mortgage. Reverse mortgages are often used to retire existing debt on a property.