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Reverse Mortgages
Definitions
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HUD
- Department of Housing and Urban Development
FHA
- Federal Housing Administration
HECM
- Home Equity Conversion Mortgages
Reverse Mortgages
- Home Equity Conversion Mortgages with $625,500 Property Value Ceiling.
Proprietary Reverse Mortgages
- Home Equity Conversion Mortgages with $2,500,000 Property Value Ceiling.
Loan Limit
- Calculated using Homeowners Age, Current Interest Rate and Appraised Value of the Home.
Estate Inheritance
- In the event of death of the homeowner, the Estate can pay back the Reverse Mortgage Balance or sell the home to cover the balance. Any amount in excess of the balance goes into the Estate. If the proceeds of the sale of the home does not cover the balance, the lender takes the loss and seeks reimbursement from the FHA. Investments, second homes, cars and other valuables in the Estate cannot be taken from the Estate to pay the balance.
The following Professionals are involved in today's Mortgage Markets :
Table of Contents
MIP
- Mortgage Insurance Premium which insures the loan and must be paid by the borrower. It can be financed into the Reverse Mortgage.
Servicing Fee
- $30 to $35 monthly fee charged the borrower to cover statements and monitoring the hazard insurance and real estate tax payments. Usually added to the Reverse Mortgage balance due.
Interest Rate
- The rate charged on the outstanding balance of the Reverse Mortgage and added to the principal balance each month. Is not paid until the Reverse Mortgage is ended when either the borrower moves or passes away. The rate can be adjustable or fixed. Adjustable rates cannot be adjusted by more than 2 percentage points per year and not more than 5 percentage points over the life of the loan.
Closing Costs
- Include the FHA mortgage insurance, the origination fee and title insurance which usually can be financed by the Reverse Mortgage. The property appraisal and counseling fee are usually paid by the borrower out of pocket.
HECM Counseling
- All borrowers who apply for Reverse Mortgages must complete counseling either over the phone or in person with a HUD certified housing counselor around the country. The counseling cost the borrower $125 and once completed, the counselor send a signed copy of the HECM Counseling Certificate to the borrower who must present it to the lender. Lenders cannot pay the counselor fee.