Maximum Claim Amount (MCA)
The Maximum Claim Amount (MCA) is the lesser of the home's appraised value or the FHA HECM lending limit at the time of origination. It caps the amount HUD will insure on a single HECM and serves as the basis for calculating the borrower's Principal Limit, initial Mortgage Insurance Premium, and the Life Expectancy Set-Aside if one is required.
What This Means
How MCA Is Determined
The MCA is set at loan closing and equals the lesser of two values: the home's appraised value as determined by an FHA roster appraiser, or the national HECM lending limit (which tracks the FHA conforming loan limit). The MCA does not change during the life of the loan, even if the home's value increases or decreases afterward. This fixed value is used as the base for all HECM calculations including the Principal Limit Factor, the initial MIP charge, and projected life expectancy property charges under the LESA formula.
Role in HECM Calculations
The Principal Limit is calculated by multiplying the MCA by a factor based on the age of the youngest borrower and the expected interest rate. A higher MCA produces a higher Principal Limit, which means more loan proceeds available to the borrower. The initial Mortgage Insurance Premium (MIP) is also based on the MCA: HUD charges 0.50% of the MCA when first-year disbursements are 60% or less of the Principal Limit, and 2.50% when disbursements exceed 60%.
MCA and the Non-Recourse Protection
The MCA also defines HUD's maximum insurance exposure per loan. When a HECM becomes due and payable and the outstanding loan balance exceeds the home's value, the mortgagee files an insurance claim with HUD under 24 CFR 206.125. HUD's Mutual Mortgage Insurance Fund covers the shortfall up to the claim amount. The borrower and heirs have no personal liability for any difference under the non-recourse rule at 24 CFR 206.27(b)(8).