Senior residents of San Francisco who are considering a reverse mortgage have a good reason to breathe a collective sigh of relief. Everyone has watched the slide of real estate values across the state of California over the past year, but San Francisco homeowners have long known that they live in one of most desirable and wealthiest parts of the state. Call it good luck, timing or fortune - their home values have been spared any sharp drops.

The minimal (if any) decline in the San Francisco market gives mortgage lenders more confidence in the stability of the market and can make larger amounts of loan money easier to obtain. This fact has spared the San Francisco metropolitan statistical area (MSA) from the recent announcement by a major reverse mortgage bank that they will be cutting the loan amounts for areas that they deem to be a "declining market". As a leader in their industry, other lenders are likely to follow suit. Many major population centers, and most sparsely populated areas of California, have been listed in the recent announcement by the lender to its correspondents as "declining markets""

The term declining market could, in fact, be applied to some homes in San Francisco in a residential real estate appraisal. Appraisers review the recent sales prices of homes in neighborhood from sources such as the county recorder's office and the local Multiple Listing Service. If they see a declining trend in prices, then their Department of Real Estate guidelines require them to check the box for a "declining market". But in San Francisco, the lender is not as concerned with individual neighborhoods, as they are with the larger area as a whole. Fortunately for San Francisco, the over average price trend has at least been steady enough to spare it the "declining market" stigma.

The nearby Oakland-Fremont-Hayward MSA was not so lucky. These San Francisco neighbors were listed in the mortgage lender's recent announcement as a declining market. This means that seniors trying to obtain a reverse mortgage in the area may find an unpleasant surprise when they review the resulting reduction in loan amounts. The lender is cutting the principle limit by an automatic 6% in those markets it has deemed as declining. The principle limit is the amount of money that they lender is willing to lend as an up-front lump sum (not including future interest) to the senior homeowner based on their age and the value of their home. For example, an 80 year old single homeowner, with a home worth $800,000 in San Francisco, would enjoy a principle limit of $400,000. But across the bay, in the declining market of Oakland, that same home value and homeowner age would bring 94% of San Francisco's amount, or $376,000.

Before San Francisco seniors, who are looking at a reverse mortgage, get too smug, they ought to keep a close eye on the selling prices of their neighbors. Even lacking the declining-market label, if home prices nearby begin to settle, the value of their home will drop too. If too much settling occurs, it will only take an email by the large lender to declare San Francisco as a declining market too. And what one large mortgage bank does, the others are likely to copy.

Fortunately, there are still several major lenders who have not cut their principle limits. Contact a lender who offers all reverse mortgage programs, and you will be sure to find one that meets your needs.

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