Uniform Residential Loan Application for Reverse Mortgages
An index rate commonly used to calculate interest rate changes for HECM ARMs. Published daily by the Federal Reserve (H.15). See: CMT – Constant Maturity Treasury
For CMT-based HECM ARMs, this is added to the lender margin at application to determine the loan’s Expected Interest Rate, which is used to calculate the principal limit. This is the market’s best guess of the average CMT index rate over the next 10 years.
The 1st Note secures the lender’s lien position. The Note outlines the agreement that money is owed and outlines the terms of repayment of the debt.
HUD assumes the 2nd Note because they are ensuring that the homeowner will continue to receive loan advances in the event that the lender becomes incapable of doing so. Also, the 2nd note is activated if the loan is assigned to HUD when the balance reaches 98% of the max claim amount. This does NOT reflect a 2nd loan. When the reverse mortgage is paid off, both security instruments will be released from county records.
Part of a contract that says when a loan may be declared due and payable.
These employees assist and help manage our wholesale accounts from the sales side.
This is the balance of interest that has accrued but has not been paid.
The interest rate first charged on the loan beginning at closing; it equals one of the HUD-approved interest rate indices (1-month CMT or 1-year CMT) plus a margin. Also called Initial Interest Rate
Uncertainty about how long the borrower will live
This is a loan where the interest rate can move up or down based on changes in a published market-rate index.
Gross income minus specific reductions.
This is an agency of the US Department of Health and Human Services
The term means a denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in the amount or terms requested. The notice must be sent within 30 days of the denial of credit. Also:
Generally, this is the age of the youngest borrower or eligible non borrowing spouse in years. If the prospective borrower is closing within six months of their next birthday, FHA allows it to round up to the next year on HECM products. (Nearest age)
A calculation to determine the cost of a loan, which multiplies the loan amount by the applicable interest rate for a set period of time.
APR is a measure of the total cost of the loan expressed as a yearly rate. APRs are calculated by the lender.
Policies and underwriting guidelines that are designed to discourage refinancing within a period of time. We currently discourage refinancing a HECM within 12-months and in cases where the principal limit will not increase by 5 times the costs.
Application means the submission of a borrower's financial information in anticipation of a credit decision relating to a federally related mortgage loan, which shall include:
An application may either be in writing or electronically submitted, including a written record of an oral application.
FAR considers the borrower’s signature date on the initial 1009 to be the application date
An estimated value of a home in a fair market. The appraised value is the amount you could sell your home for if it were on the market today.
An appraisal is required for all HECM and HomeSafe® loans and is the process of a third party evaluating the home’s value based upon research of the market and other variables. The heart of the appraisal is an estimate of the fair market value of the home. Typically, the borrower pays a third-party appraisal management company (AMC) upfront to handle the appraisal. An FHA appraiser can also comment on whether home’s structure (condition) complies with the federal regulations.
These are third-party firms that serve as an intermediary between us (the lender) and the appraiser.
An increase in a home's value.
A HECM loan will be serviced by HUD when the loan balance reaches 98% of the max claim amount. The loan is assigned to HUD per HECM regulations.
A computer model used to estimate the current market value of a home. It calculates the figure with property records and various analytical methods, such as comparable sale prices, home characteristics and historical home appreciation.
A basis point is a percentage of 1%. Therefore, 0.5% origination could also be called 50 basis points.
This is an individual or firm that arranges transactions between an individual and a lender. They receive compensation when the deal is executed. In our case, a broker will originate our loans and get paid lender paid broker compensation (LPBC) as a result.
Cap is a limit on the amount an adjustable interest rate may go up or down during a specified time period. Currently, the adjustable HECM product offers caps of 5% or 10% above the starting rate which is listed in the note.
The occasion when a borrower signs loan documents, including the mortgage or deed of trust.
This refers to loan files that are closed for incompleteness, withdrawn or denied in accordance with procedures as stated in the Equal Credit Opportunity Act and with lender’s compliance policies.
This document is issued by a local government or building department certifying the building's compliance with local and federal codes. It indicates the home is suitable for occupancy.
A prohibited practice whereby lenders engage in multiple refinancing to generate additional profit from loan fees and charges. HUD and NRMLA have guidelines designed to prevent this. See: Anti-Churning.
The underwriter will declare the loan clear to close when there are no outstanding prior to closing conditions. At this point processor or loan officer is able to schedule the closing
A line of credit that you can make prepayment on, but those funds would not be available for future use.
Closed Loan Sellers originate, close and fund in their own name with their funds. FAR purchases loans from these wholesale partners post-closing.
The process of completing a loan transaction. At closing the mortgage documents are signed by the borrower and, unless it is a purchase transaction, the three day rescission period begins. Also called a loan settlement or consummation are signed to "close the deal" on a mortgage.
Closing costs on a reverse mortgage are the fees a borrower must pay to secure a reverse mortgage. These fees may include an origination fee, up front mortgage insurance premium, title insurance, appraisal, counseling, as well as state and local fees as required, etc.
Additional income that can help make up for a shortfall in residual income.
HECM and HomeSafe® reverse mortgage interest compounds on a monthly basis. The rate that a mortgage balance grows is more than just the interest rate. For example, on a HECM, the unpaid loan balance accrues based upon the interest, monthly mortgage insurance premium (MIP),
HUD's automated system that tracks the application for mortgage insurance from the initial appraiser request through to loan closing and MIC (Mortgage Insurance Certificate) issuance.
This is a court order that allows an individual to make financial decisions for a protected person.
An organization that typically sells the mortgages it originates to other lenders with which it has an ongoing relationship.
A service provided by an independent third-party, typically approved by the U.S Department of Housing and Urban Development, to make sure the borrower fully understands the reverse mortgage and reviews alternative options, prior to application. Mandatory for the HECM program and in certain states for all types of reverse mortgages.
This is a list of firms that perform HECM (and in some cases, HomeSafe®) counseling. Loan officers provide this list to the borrower, and then remove themselves from the counseling process due to anti-steering provisions. The list should contain the national intermediaries as well as some local HUD-approved counseling agencies.
The federal government mandates that all reverse mortgage borrowers, co-borrowers, non-borrowing spouses, POAs, and others meet with a HUD-approved counselor before proceeding with a reverse mortgage. The counselor explains the advantages and disadvantages of the program, discusses their suitability for the loan, and provides a certificate when completed. It is important that the lender receive the counseling certificate before the HECM application is processed.
Checks for delinquent records for the below:
Used primarily on the forward side, DTI is a way of analyzing how much of a borrower’s income goes to paying debt. It can be calculated by adding all monthly housing costs and debt payments then dividing by the borrower’s monthly income.
This occurs when the mortgagor conveys all interest in a property back to the mortgagee to satisfy a loan that is in default.
This is a document which pledges real property to secure a loan, used instead of a mortgage in certain states.
This is a breach or nonperformance of the terms of a note or of the provisions of a mortgage loan. Defaults under a reverse mortgage could include failure to repay the loan after a repayment notice has been issued, failure to maintain property, and failure to pay property taxes and/or hazard insurance.
HUD allows the NBS to remain in the subject after the death of the last surviving borrower as long as all FHA requirements are met.
Debt owed to a government agency that may or may not be a lien against the subject property. Certain circumstances may permit some delinquent federal debt to be satisfied at closing with the reverse mortgage proceeds. Otherwise, this debt will need to be satisfied prior to closing.
HUD defines itself as the Nation’s Housing Agency. It is a federal department committed to increasing homeownership. HUD is the creator of the HECM, the most popular and one of the first reverse mortgage products. The HECM is offered from qualified lenders.
A decrease in the value of a home.
This allows homeowners to secure mortgage insurance directly with a HUD-approved lender who has DEapproved underwriters on staff.
The right of a government to take private property for public use; for example, taking private land to build a highway.
A feature offered in proprietary reverse mortgages that allows a borrower to receive more funds, or pay a lower interest rate, in exchange for giving up a percentage of the home’s future value. No longer offered in any reverse mortgage programs.
Mortgages or lien balances required to be paid-off at closing.
On a Fixed Rate HECM, the expected rate is the same as the Initial or note rate, as it does not change over time. On the HECM ARM, the expected rate equals a published index plus the lender’s margin. The expected rate is used to determine the principal limit on a HECM loan.
An event or situation out of a borrower’s control that resulted in financial difficulty that offsets weaker credit history.
This was the first company to offer credit scoring, and the term FICO became synonymous with someone’s credit score.
Fannie and Freddie are Government Sponsored Enterprises (GSEs) that were created to free up (or provide a source of) funds for banks. Also, part of a secondary market for loans, Fannie Mae is a private company that operates under federal government oversight. It directs funds toward helping increase homeownership.
An estate in real property that the owner can dispose of, trade, or will, as he or she chooses. It represents absolute ownership of the property, only limited by the four basic government powers of taxation, eminent domain, police power, and escheat. However, it could also be limited by certain encumbrances or a condition in the deed.
The primary purpose of this federal agency is to coordinate the response to a disaster that has occurred in the United States and that overwhelms the resources of local and state authorities.
An agency within the U.S. Department of Housing and Urban Development (HUD) that issues insurance to private lenders for forward as well as reverse (HECM) loans.
A HECM reverse mortgage is FHA- insured, meaning the FHA insures the loan to ensure the borrower is protected in the event their lender defaults on their obligation. It also insures the non-recourse limit. See NonRecourse Limit.
A case number is assigned to all FHA-insured loan applications. It is specific to the property address and the borrower data. For HECMs, it must be assigned after the 1009 and counseling certificate have been signed and dated by the borrower.
A HECM program guideline that requires an underwriter to assess credit history, property charge, payment history, and monthly residual income to determine the loan sustainability for each borrower.
This is calculated by adding the index base rate plus the lender’s margin. With fixed-rate reverse mortgages, this is the only rate that the loan will ever have, while adjustable rate reverse mortgages adjust over time.
The date on which the originating lender disburses funds to the reverse mortgage borrower.
Gift funds are funds given to the borrower voluntarily and without compensation. No conditions may be attached, nor can repayment be expected. To qualify for consideration in the financial assessment analysis they must be sourced, and a gift letter attached to the file.
This is a government sponsored entity that comprises a portion of the secondary market. It guarantees investors’ timely payment of principal and interest on MBS-backed federally insured or guaranteed loans.
This is a reasonable estimate of settlement charges and loan terms. It must be provided to the borrower within 3 days of application.
Also called Government Sponsored Entities. These are financial services corporations created by the US Congress to enhance the flow of credit to targeted sections of the economy. Includes Fannie Mae, Freddie Mac, and Ginnie Mae.
This is an increase in the available line of credit in an adjustable rate HECM. The borrower is not earning interest; it is simply a greater capacity to borrow in the future.
A formula that applies to an increase in non-taxable income (often 25%).
Ground rent arrangements require periodic payments (monthly or quarterly for example) by the tenant (homeowner, in our case) to the landlord for the use of the land. The homeowner owns the building but not the land.
This is a court order that allows an individual to make healthcare decisions or living arrangement decisions for a protected person.
This is required to cover appraised value minus site value, and the payment of this is an ongoing requirement of all HECM borrowers.
Commonly referred to as a “Hek-um” or simply a reverse mortgage, the program is designed by the Federal Housing Administration (FHA) to enable elderly homeowners, 62 and over, to convert a portion of the equity in their homes to monthly streams of income and/or lines-of-credit. The FHA insures the HECM if all program guidelines are met.
See Real Estate Settlement Statement.
The fixed rate product requires the borrower to take all the available loan proceeds up front.
The HECM for Purchase is a unique home loan program for homebuyers 62 and older. It allows them to purchase a primary residence with no required monthly mortgage payment (however borrower is required to Page 9 of 20 cover property charges, including but not limited to HOA dues, homeowner’s insurance and property taxes). Title to the property is transferred to the new mortgagor, who will then occupy the property as a primary residence within 60 days of the closing. In the end, the HECM first and second liens must be the only liens against the property.
Historically, home value limits were determined by the county of the subject property. Since 2008, HUD publishes nationwide limits instead. While homes more than this amount are eligible for HECM lending, the home value is capped for calculating principal limits. These values often change on January 1st and limit the maximum claim amount (MCA) for a HECM loan.
Those that service HECMs can provide this as a summary of the transaction. When refinancing a HECM, it is important to obtain it to determine the borrower’s last closing date, the principal limit the upfront MIP that can be credited on this new HECM.
This is a reverse mortgage variation that allows a current HECM borrower to refinance into a new HECM loan after a minimum of 12 months. The borrower will generally receive a full credit of any upfront mortgage insurance applied to the new upfront MIP.
The value of a home minus any debt against it.
Turning home equity into cash without having to sell your home or make regular loan repayments.
These loans permit older homeowners to convert a portion their home equity into cash without having to leave their home or make regular monthly mortgage payments. The HECM is the most popular type of reverse mortgage as it typically offers the greatest loan proceeds for average-priced homes. The HECM was designed by the Department of Housing and Urban Development (HUD) and is FHA-insured and regulated.
This is a traditional forward loan where the collateral is the equity in your home. It requires a monthly mortgage payment, where HECMs do not.
HUD’s Reverse Mortgage loan software to replace IACS that may, or may not, be completed in this decade.
Requires mortgage lenders to collect and report information on their lending practices.
These are regional offices that support HUDs initiatives in promoting home ownership.
These are corporations formed for the purpose of managing homes and common areas in residential neighborhoods or subdivisions. Dues are commonly paid by the homeowners on a monthly or annual basis.
This should cover appraised value minus site value, and the payment of this is an ongoing requirement of all HECM borrowers.
Proprietary product offered by Finance of America Reverse. It is specifically designed for borrowers with higher-priced primary homes and for those with other situations that would not qualify under the HECM program.
A HECM may be assigned to HUD when the loan balance reaches 98% of the max claim amount.
The estimated monthly income from dissipated assets.
Different reverse mortgage loan programs use different published indices to calculate the interest rate.. The lender adds a margin to reach the fully indexed rate.
With a HECM ARM, this is the interest rate currently being charged on a loan; it is a combination of a published index and the lender’s margin. See Index and Margin.
Any amount of the net principal limits the borrower might need to access at the time the loan funds.
A limit to how much a HECM borrower can draw at closing (for HECM Fixed) or during the first year (for HECM ARM products).
This is the interest rate that is charged on the loan until another scheduled rate change date. For ARMs, it equals a published index plus a lender margin. For fixed rate loans, the initial rate is the same as the note rate as it does not change.
Also called upfront MIP, this is 2% of the Maximum Claim Amount (MCA). This is paid to the federal government within 15 days of loan closing for insuring the loan.
This is the initial amount that is borrowed on the day the loan funds. This could include any draws, payoffs, and closing costs.
Interest rate caps restrict the movements (up or down) of the rates on an ARM. Annually-adjusted HECM ARMs have 2% periodic caps and a 5% lifetime cap above the start rate. Monthly-adjusted HECM ARM caps are at the lender’s discretion.
These trusts are unable to be amended.
A jumbo loan is a loan product for home values that exceed conforming or FHA limits.
No terms listed.
In leaseholds the borrower pays ground rent. This allows the borrower temporary rights to the land. They own the home but not the land it rests on. The term must be 99 years and renewable or extend 50 years past the 100th birthday of the youngest borrower
A lender is the entity that offers a loan. Any lender approved by HUD can offer the HECM product.
This is added to the published index to determine the note interest rate and added to a published 10-year security to determine the expected interest rate (used to establish the initial principal limit).
(see notes on YSP) this is payment to a broker for arranging the loan. LPBC cannot be paid if the broker is also receiving origination on a fixed rate HECM.
A lien is a legal claim against property that acts as security against payment of debts. A mortgage loan is the most common type of lien.
Borrowers may only pay off existing non-HECM liens using HECM proceeds if the liens have been in place for longer than 12 months or resulted in less than $500 cash to the borrower. Exceptions exist for HELOCs where the payoff is withing the borrowers first year disbursement limit.
A line of credit is available when the borrower decides to draw from the available funds. They may draw funds up to the available amount. Interest does not accrue on the unused LOC, but the unused LOC can grow based upon current interest rates. See LOC Growth Rate.
This allows ownership of property for the duration of a person’s life. Upon the owner’s death, ownership is automatically transferred to a successor called a remainderman.
Funds that are removed from a borrower’s principal limit and set aside for the payment of property charges over a calculated time. A LESA is established when the underwriter determines that the borrower fails to pass a financial assessment test.
A system that checks for individuals or businesses suspended, disbarred, or penalized for Department of Enforcement Center violations. The Department of Enforcement Center works with HUD's program areas in various capacities, takes suspension and debarment actions, and pursues civil money penalties or double damages, where there have been program violations. The LDP system is a database you can use to search for these violations.
A Line of credit is a popular payment plan for adjustable rate reverse mortgages-. The borrower draws funds as needed and interest is only charged on the outstanding loan amount. Any funds not drawn initially are in a line of credit and available for future use.
Living trusts are usually formed for their tax benefit and are either REVOCABLE (can be amended) or IRREVOCABLE (cannot be amended). Inter Vivos means it is established while the principal is living.
Liaison between TPO/PA and the Underwriting Department.
Loan amount is the term that refers to the actual amount you are eligible to borrow with a reverse mortgage. The loan amount is determined by the parameters and lending limits of the particular reverse mortgage product, your home’s location, the age of the youngest borrower or eligible non-borrowing spouse, and the prevailing interest rate for the product selected.
The amount owed, including principal and interest; capped in a reverse mortgage by the value of the home when the home is sold.
Date on which your reverse mortgage is scheduled to close
On forward mortgages, the LTV is a standard way of identifying how much of a home’s value the borrow can finance. On the reverse mortgage, we use principal limit factors instead.
An amount of money that is given in a single payment, rather than being divided into smaller periodic payments.
In the HECM program, the amount added to the index to determine the initial and current interest rates for the adjustable-rate option. For example, if the index is 1% and the margin is 3%, the interest rate charged on the loan balance will be 4%.
Fees and charges incurred in connection with the origination of the HECM that are paid at loan closing or for which provision is made at closing for the mortgagee to subsequently fund any disbursements during the first 12-month disbursement period that are a condition or a requirement for loan approval or any disbursements for a repair set-aside, including the cost of repairs and the repair administration fee.
These are items that are traditionally included in financing HECMs like:
A written promise to pay a debt at a stated interest rate during a specified term. The agreement is secured by a mortgage.
The lender in a mortgage contract.
Actions or circumstances that cause the loan to become due and payable, such as death of borrower, sale of the home, conveyance or transfer of title, non-occupancy or default of other terms outlined in the security instruments.
This is the lesser of a home’s appraised value or the maximum lending limit. On a HECM for purchase loan, it is the lesser of the appraised value, maximum lending limit or the sales price. This is used in determining the principal Limit for a HECM loan.
A type of payment plan that combines tenure payments and a line of credit
A combination of line of credit with monthly payments for a fixed period of months selected by the borrower. Modified term payments equal monthly payments to the borrower over a fixed term agreed to by the lender and borrower, combined with a line of credit on which the borrower may draw at any time up to the available balance.
A fee charged by the loan servicer for administering a loan after closing, such as disbursing loan funds, maintaining loan records and sending statements.
A legal document making a home security to a lender to repay a debt, in California a deed of trust is used.
Mortgage - A legal document making a home available to a lender to repay a debt.
Mortgage - A legal document that pledges property to a lender as security for the repayment of the loan.
Collectively, the security instrument, note title evidence, and all other documents and papers that evidence as secured debt. The term is also used to refer to the loan itself.
The HECM program requires borrowers to pay mortgage insurance premiums (MIP). These are required to be collected and paid to the Department of Housing and Urban Development (HUD). Most borrowers will finance the MIP as part of their loan. There are two types, INITIAL MIP (IMIP) and ANNUAL MIP. The MIP guarantees the non-recourse feature; that you will not owe more than your home is worth at the time it is sold.
The lender in a real estate transaction.
The borrower in a real estate transaction.
This is the legal system of record for non-depository, financial services licensing or registration for participating state agencies, including the District of Columbia and U.S. Territories. NMLS is the official system for companies and individuals seeking to apply for, amend, renew and surrender licenses managed through NMLS on behalf of the jurisdiction’s governmental agencies.
The amount of funds available to the borrower after removing any liens to the home, any financed fees, and any set-asides.
There are cases where a spouse will not be on the reverse mortgage. For example, the spouse may not yet be 62. Regardless, FHA requires non-borrowing spouses to be counseled for a HECM transaction.
A home loan where the borrower will not owe more than the home is worth at the time it is sold. No assets other than the home itself must be used to repay the debt. The HECM is a non-recourse loan.
Credit profile that is established when a borrower doesn’t have the types of trade references that appear on a traditional credit report.
The note is a promissory note given to the lender as an agreement that money is owed, and it outlines the events that would cause the loan to become due and payable.
Origination fee is a one-time fee paid to the lender at the time the loan closes. It covers a lender's operating expenses for making the reverse mortgage. With a HECM, the maximum origination fee is 2% on the initial $200,000 in home value, and 1% on the value thereafter with a cap of $6,000. FHA does allow a minimum of $2,500 regardless of value.
Apart from the origination fee, mortgage insurance premium (MIP) and appraisal fee, there are various costs that are paid at the time of closing. These may include a credit report fee, courier fee, recording, document preparation, survey, and title insurance fees.
Fees in a mortgage transaction that are not financed in the loan.
A map of a piece of land showing boundary lines, streets, actual measurements and easements.
The funds from a fixed rate HECM can only be drawn as a lump sum.
The funds from an adjustable-rate HECM can be given to the borrower in the following payout options:
The adjustment period varies by product, monthly, bi-annually, or annually. The adjustment amount is the difference between the index base rate at the beginning of the period and the index base rate at the end of the period.
A preliminary assessment of a buyer's ability to secure a loan, based on a specific set of lending guidelines and buyer representations made. This is not a guarantee or commitment by a lender to extend credit.
The interest rate charged by banks to their preferred corporate customers, it tends to be an estimator for general trends in short term interest rates.
This is where the borrower typically spends most of the calendar year. Reverse mortgages are only available on primary residences.
This is the dollar amount ($) a lender can lend on a HECM transaction, according to the PLF tables. The principal limit is based on the maximum claim amount, the expected rate, and the age of the youngest borrower or eligible non borrowing spouse.
This is a percentage (%) of the home value that a lender can lend on a HECM transaction. It is based on 2 things: The age of the youngest borrower or eligible non-borrowing spouse and the expected rate of the loan.
The time during which a loan rate or funds available to the borrower is guaranteed not to change.
PLU is a percentage of the Initial Principal Limit of the HECM loan which will be used to satisfy mandatory payoffs paid when the loans is funded. PLU is calculated by adding mandatory payoffs of liens against the property, past due property charges, mandatory payoffs of outstanding judgments, and repair set aside amounts, and dividing that sum by the Initial Principal Limit of the HECM loan.
These are commonly the 4 components of required mortgage payments on forward loans.
These are underwriting conditions that must be cleared before closing.
These are underwriting conditions that must be cleared to get final approval and to get a cleared for closing status.
These are underwriting conditions that must be cleared before funding.
This could include property taxes, hazard insurance, flood insurance, HOA dues, condo fees, assessments, etc. The primary concern with a reverse mortgage is that the senior has sufficient income or assets to continue to pay these fees.
Property tax deferral programs may be offered to seniors where the state or local government will defer property taxes until the home is sold. Note: Borrowers who have deferred their property taxes may not be eligible for a reverse mortgage. Refer to individual state regulations
Sometimes these are referred to as private or jumbo reverse mortgages. At FAR, for example, we have a suite of HomeSafe® products as well as the EquityAvail® retirement mortgage.
Guidelines used by lenders to determine how much of a loan a home buyer qualifies for. Often referred to as debt-to-income ratios (or DTI).
These are generally properties that a mortgagee would acquire though the foreclosure process.
The charges made by the register of deeds to record the legal documents.
Prohibits lenders from discriminating against credit applicants, establishes guidelines for gathering and evaluating credit information, and requires written notification when credit is denied. This regulation covers creditor activities before, during and after the extension of credit.
Requires certain mortgage lenders to disclose specific data regarding their lending patterns. Administered and enforced by the CFPB. Associated disclosure forms: Fannie Mae Form 1009: Section I. Type of Mortgage and Terms of Loan, Section VIII. Information for Government Monitoring Purposes.
Prescribes uniform methods for computing the cost of credit, for disclosing credit terms in a timely manner, and for resolving errors on certain types of credit accounts. Administered and enforced by the
CFPB. Associated disclosure forms: TIL, TALC, HECM Disclosure – Application Truth-in-Lending Disclosure Important Terms, FRB’s What You Should Know About Home Equity Lines of Credit, Notice of Right to Cancel, Mortgage Transfer Disclosure.
The person who inherits the property upon the death of an individual with a life estate.
A reverse mortgage is a financial tool that provides borrowers with funds from the equity in their homes. Generally, no monthly mortgage payments are required on reverse mortgages until the borrower moves, property is sold, or some other maturity event has occurred. The borrower is obligated to cover property charges, including property taxes, homeowners’ insurance, and HOA dues, as applicable.
Total monthly income from all sources for all borrowers on the mortgage, minus total monthly expenses
These are forms of living (inter vivos) trusts that have the ability to be amended. They usually pose no problems for the reverse mortgage, but a copy of the trust will need to be obtained.
A borrower has a right to cancel (rescind) a refinance home loan within three business days of closing. This applies to refinance, not purchase transactions.
A government database containing a comprehensive list of individuals and firms excluded by federal government agencies from receiving federal contracts or federally approved subcontracts, and from certain types of federal assistance and benefits.
The market wherein home loans are sold by the lender after closing to Fannie Mae, Freddie Mac or a variety of other institutional investors.
A map prepared by an engineer or surveyor charting a particular piece of real estate.
This includes handling multiple aspects of a mortgage loan after closing. It consists of maintaining loan records, reconciling with regulators and investors, issuance of periodic statements to the borrower, loan mitigation and delinquency management.
Also known as the prepayment waterfall, this determines in what order partial prepayments are applied to the outstanding loan balance (i.e., interest, principal etc.). This is outlined in the Note.
The servicing fee is a small monthly charge that covers the cost of servicing a mortgage loan. Typically, these fees are between $20 and $35 dollars per month.
Amount of funds estimated at closing that will be needed to service the reverse mortgage over the projected life of the loan. These funds are deducted from the initial principal limit and automatically paid each month.
Funds for specified uses that are set aside from the borrower’s available funds.
The individual or firm involved in completing a transaction between a buyer and seller. Also known as “closing agent”.
Reverse mortgages that can be used for only one purpose, generally offered by state or local government agencies.
Funded through payroll taxes called Federal Insurance Contributions Act tax (FICA) and/or Self Employed Contributions Act Tax (SECA). The tax deposits are collected by the Internal Revenue Service (IRS). And paid out to individuals who are entitled to receive social security benefits, often at retirement.
A federal monthly income program for low-income persons who are aged 65+, blind, or disabled.
The tenure payment plan provides borrowers with equal monthly payments for as long as their reverse mortgage is in good standing and not due and payable.
A policy designed to protect the buyer or lender after closing from financial losses arising from any defects in the title that may have occurred prior to purchase.
A check of public record to disclose the past and current facts regarding ownership of a particular piece of property.
In some areas city, county or state taxes imposed when property passes from one person to another.
This shows to a borrower the projected annual cost of a reverse mortgage, including all itemized fees. It provides more information than a TIL, as it shows the annual cost for 4 different time lengths and 3 different appreciation rates. The primary message is that the reverse mortgage is more cost-effective for those who plan to stay in the home for longer terms.
Also referred to as forward or standard mortgages. These mortgages require monthly principal and interest payments to be made to the lender for a set period of time. Most traditional mortgages have 360 month or 180-month terms, for example.
A merged report including information from all 3 credit bureaus.
Many homes are held in living (inter vivos) trusts for various reasons. They are generally revocable (can be amended) or irrevocable (cannot be amended).
Lenders utilize underwriters to review and determine the eligibility of a customer or property.
Private (or proprietary) reverse mortgage products like FAR’s proprietary HomeSafe® products, which are not insured by FHA.
Also known as the loan balance, this is the outstanding loan balance, which accrues interest and mortgage insurance, and therefore generally rises over time.
These are loans where rates can fluctuate, and the term can be used interchangeably with “ARM” or adjustable-rate.
Analysis of the borrower’s past performance and credit history to determine if he/she is likely to pay the ongoing property charges.
No terms listed.
A yield spread premium (YSP) is a form of compensation that a mortgage broker, acting as the intermediary, receives from the originating lender for selling an interest rate to a borrower that is above the lender's par rate for which the borrower qualifies. This differs from reverse mortgage broker compensation, which is either borrower-paid or lender-paid compensation based upon the home value and interest rate.
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