Glossary Pub
This reverse mortgage glossary is provided for your convenience. you will find the reverse mortgage terms and definitions most commonly used in the industry. While this is not a full reverse mortgage dictionary you will find most terms are included below:
Appraised Value: The assessed value of a home in the opinion of a qualified appraiser. The appraiser usually compares the property to similar homes sold in the past 3-6 months to determine the assessed value.
Appraised Value: The assessed value of a home in the opinion of a qualified appraiser. The appraiser usually compares the property to similar homes sold in the past 3-6 months to determine the assessed value.
Appreciation: An increase in home value. more
Closing: The process of completing a loan transaction at which time the mortgage documents are signed, and the title to the property is updated to reflect current ownership and lien holders. Also referred to as settlement.
Credit Line (Line of Credit): A credit account that permits a borrower to control the timing and amount of the loan advances.
Deed of Trust: A security instrument that collateralizes real estate against the mortgage loan. The mortgage loan documents spell out the terms of the loan and the loan agreement. The deed of trust is a separate document that secures that loan against the home.
Funding: The disbursement of the funds from the closing of the loan. Funding typically happens four days after closing on a reverse mortgage. This is due to a federally mandated three day right of rescission during which time the borrower may cancel the loan transaction. This mandate does not apply to purchase transactions. A few other exceptions apply.
Deferred Payment Loan (DPL): A reverse mortgage does not require regular monthly payments, thus the payments are deferred and paid in one sum upon selling or refinancing the property, or in cases of default. Other DPL’s exist outside the reverse mortgage product range, usually designed for home renovations and often offered by local government agencies.
Depreciation: A decrease in home value. (more information)
Federal (FHA) Housing Administration: An agency within the U.S. Department of Housing and Urban Development (HUD) that issues insurance to private lenders for HECM loans. FHA regulates the qualification and lending guidelines for all FHA and VA loans.
Home Equity: The value of the home once all debts against the home are paid. For example, a home worth $200,000.00 with a $110,000.00 mortgage against it would have $90,000.00 in equity. more
(HECM) Home Equity Conversion Mortgages: FHA-insured reverse mortgages that permit seniors over age 62 to borrow against the equity in their home without having to leave their home or make regular home payments.
HUD (Housing and Urban Development): The federal agency that oversees the Federal Housing Administration (FHA) and numerous housing and community development programs.
Modified Tenure Payments: Equal monthly payments made to the borrower from the HECM lender that continues until the borrower no longer occupies the property as his or her principal residence. May also be combined with a line of credit on which the borrower may draw at any time. Modified term payments differs as the monthly payments terminate at a specified date.
Mortgage Insurance Premium (MIP): A fee paid by a borrower to FHA for mortgage insurance. This fee is charged to the borrower to insure the lender from loss in the event that the outstanding balance exceeds the value of the property at the times that the reverse mortgage is due and payable. FHA requires both an upfront MIP to be paid at closing as well as a monthly premium that is assessed throughout the life of the loan. The monthly premium is added to the outstanding balance and submitted to HUD each month by the lender.
Origination: The overall process of setting up a mortgage, from taking a loan application through the closing and funding of the loan.
Payment Plan: The manner in which loan proceeds are paid out to the borrower. In the HECM program, six options are available: Tenure Payments, Term Payments, Credit Line, Lump Sum, Modified Tenure Payments, or Modified Term Payments.
Reverse Mortgage: A mortgage which provides seniors with funds from the equity in their homes that does not require them to move or make regular payments on the mortgage. On HECM reverse mortgages, the final repayment obligation is insured to not exceed the proceeds from the sale of the home by FHA and is usually repaid in lump sum once the home is sold or the borrowers pass away.
Right of Rescission: A borrower's right to cancel a home loan after the closing of the loan but before its funding. On a refinance of borrowers principle residence the right of rescission is mandated by the federal government at three days.
Servicing: The task handing the day to day affairs of the mortgage loan, including the collection of the loan payments, escrow administration for taxes and insurance, and delinquency management. The servicer may be the actual lender of the mortgage or a servicing company the lender has hired.
Set-Aside: Funds designated for specified uses that are netted out when determining the borrower's Principal Limit. These funds may include servicing fees or tax and escrow payments.
Total Annual Loan Cost (TALC) Rate: The projected annual average cost of a reverse mortgage including all itemized costs.
Servicing: The task handing the day to day affairs of the mortgage loan, including the collection of the loan payments, escrow administration for taxes and insurance, and delinquency management. The servicer may be the actual lender of the mortgage or a servicing company the lender has hired.
Set-Aside: Funds designated for specified uses that are netted out when determining the borrower's Principal Limit. These funds may include servicing fees or tax and escrow payments.
Total Annual Loan Cost (TALC) Rate: The projected annual average cost of a reverse mortgage including all itemized costs.
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