6800 Paragon Place, Suite 475
Richmond, VA 23230
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6800 Paragon Place, Suite 475 |
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Reverse Mortgages Glossary 203-b Limit in the federally insured HECM program, it's the dollar amount for each county that limits how much of a home's value can be used to determine a borrower's loan advances Acceleration Clause the part of a contract that defines when a loan may be declared due and payable Adjustable Rate an interest rate that changes, based on changes in a published market-rate index Adjusted Property Value the lesser of the appraised value of a property and the Lending Limit; this value is used in calculating the borrower's Principal Limit Annuity a monthly cash advance for life from an insurance product Appraisal an estimate of a home's market value Appreciation an increase in the home's value Cap a limitation on the amount by which an adjustable interest rate may change during a specified time period Cash Account Advantage® a proprietary reverse mortgage loan available from Financial Freedom Senior Funding Corporation; the loan is designed for high-value homes; includes three unique products, the Credit Line Option, Combo Option, and Cash Out Option Closing a meeting at which legal documents are signed to "close the deal" on a mortgage Credit Line (Line of Credit) a payment plan that permits a borrower to control the timing and amount of the loan advances Current Interest Rate the interest rate currently being charged on a loan. Calculated using an index and a margin (see margin). On the HECM, the index is the one-year rate for U.S. Treasury Securities. On the Home Keeper, the index is the one-month Certificate of Deposit (CD). On the Cash Account loan, the index is the LIBOR index. Default a breach or nonperformance of the terms of a mortgage loan; defaults under a reverse mortgage could include failure to repay loan after a repayment notice has been issued, failure to maintain property, and failure to pay property taxes and/or hazard insurance Depreciation a decrease in the value of a home EPLS Excluded Parties Listing System (see also the GSA lists heading in the Processing Section) ECOA Equal Credit Opportunity Act passed in 1974, better known as Regulation B, prohibits discrimination against consumers during any aspect of a credit transaction based upon a prohibited basis such as race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract and providing the applicant is of an age that meets the underwriting requirements for the reverse mortgage product); all or part of an applicant's income derived from a public assistance program; or the applicant has exercised any right under the Consumer Credit Protection Act Escrow to set aside money out of the funds available from the loan, so that those funds can be used to pay for expenses incurred after loan closing. With reverse mortgages, borrowers most commonly escrow to pay for repairs that will be completed after the closing. Expected Interest Rate the interest rate used to determine a borrower's loan advances. In the HECM program, this equals the 10-year rate for U.S. Treasury Securities, plus a margin (see margin). The expected rate for the Home Keeper is the same as the current interest rate. The expected rate for the Cash Account is always ½% above the current interest rate (see current interest rate). Fair Credit Reporting Act Congress passed FCRA in 1970 due to increasing concerns that there was a huge database of information on consumers that (1) the Companying system depends on, (2) contained incorrect information which caused unjustified denials of loans, jobs or insurance policies, and (3) was not open to inspection and correction by the people whose payment histories and other records were stored there Fannie Mae a private company that buys and sells mortgages; a government-sponsored entity that operates under the general oversight of the federal government. Reverse Mortgage investor for HECM and Home Keeper loan products Federal Housing Administration (FHA) part of the U.S. Department of Housing and Urban Development (HUD); Issues insurance to lenders for FHA products such as HECM Federally Insured Reverse Mortgage a Home Equity Conversion Mortgage (HECM) FHA Federal Housing Authority, the government body that created the HECM loan HMDA Congress enacted the Home Mortgage Disclosure Act in 1975 and implemented by the Federal Reserve Board's Regulation C. HMDA provides that loan data be made public to assist in dispersing public-sector investments in order to attract private investments to areas where needed and to assist in determining whether financial institutions are meeting the needs of their communities. Home Equity the value of a home, minus any debt against it Home Equity Conversion Mortgage (HECM) turning home equity into cash without having to leave your home or make regular loan payments; insured by FHA Home Keeper Mortgage reverse mortgage product developed and insured by Fannie Mae Index added to a margin to calculate the interest rate. On the HECM, the index is the one-year rate for U.S. Treasury Securities (for the current rate) or the ten-year rate for U.S. Treasury Securities (for the expected rate). On the Home Keeper, the index is the one-month Certificate of Deposit (CD). On the Cash Account loan, the index is the LIBOR index. HUD U.S. Department of Housing and Urban Development Initial Interest Rate the interest rate that is first charged on the loan beginning at closing. LDP the Limited Denial of Participation list (see appropriate heading in Processing section) Leftover Equity the net proceeds from selling a home, minus the total amount of debt owed against it Lending Limit a cap of the portion of the home value that is used when calculating the Principal Limit. Varies by county for the FHA products; consistent nationwide for the Fannie Mae product; there is virtually no Lending Limit for the Financial Freedom products. See also 203-b Limit. Line of Credit See Credit Line Loan Advances payments made from a loan to a borrower Loan Balance the amount owed on a loan Lump Sum a single loan advance at closing Margin the amount added to the index (see index) to calculate the rate. The margins listed here are as of 7-27-06 and are subject to change. For the HECM Monthly Adjusting program, the margin is 1.5%. For the HECM Annually Adjusting program, the margin is 3.1%. For the Home Keeper, the margin is 3.4%. For the Cash Account, the margin is 5%. Maturity when a loan becomes due and payable Maximum Claim Amount same as Adjusted Property Value MIP see Mortgage Insurance Premium Mortgage a legal document making a home available to a lender to satisfy a debt Mortgage Insurance insures the investor against risk. If the borrower owes more money than the lender can collect from the sale of the home, the mortgage insurance protects the lender against loss. This allows the lender to loan more money because the risk of lending is reduced. Mortgage Insurance Premium an amount charged to the borrower to pay for Mortgage Insurance Net Principal Limit the estimated amount of money available to the borrower; equal to the principal limit LESS (1) any payments to the borrower, (2) any financed closing costs, (3) the servicing fee allocations, (4) any set-asides, plus (5) any partial repayments Non-Recourse Mortgage a home loan in which a lender may look only to the value of the home for repayment; no other assets may be attached if the loan balance grows beyond the mortgaged home value Origination the overall administrative process of setting up a mortgage, including the preparation of documents Origination Fee a fee charged to the borrower for the origination process. Each loan product may differ.
Payment Plan manner in which loan proceeds are paid to the borrower Pledged Value or Limit see Adjusted Property Value Principal Limit estimated amount available to the borrower at the closing, including set-asides, fees, and payoffs. The Principal Limit is calculated by the RMA software and is shown in the Comparison print-out Proprietary Reverse Mortgages a reverse mortgage product owned by a private company; the Cash Account Advantage® is Financial Freedom Senior Funding's proprietary reverse mortgage product PUD (Planned Urban Development) a real estate project in which each unit owner has title to a residential lot and building and a nonexclusive easement on the common areas of the project. The owner may have an exclusive easement over some parts of the common areas (for example, a parking space) RESPA the Real Estate Settlement Protection Act, which is the body of law governing ethical loan origination; all lenders are required to remain compliant with RESPA laws Reverse Mortgage a non-recourse loan against home equity providing cash advances to a borrower and requiring no repayment until a future time Reverse Mortgage Analyzer Software (RMA) proprietary software developed by Financial Freedom to calculate a potential borrower's proceeds from a reverse mortgage Right of Rescission a borrower's right to cancel a home loan within three business days of closing RM see Reverse Mortgage RMA see Reverse Mortgage Analyzer Software Servicing performing administrative functions on a loan after closing Set-Aside funds for specified uses that are netted out when determining the borrower's principal limit Shared Appreciation an itemized loan cost based on a percent of any increase in the value of the home between origination and maturity; e.g., a 10% shared appreciation fee on a home that increases in value by $100,000 would be $10,000 Shared Equity an itemized loan cost based on a percent of a home's value at loan maturity; e.g., a 10% shared equity fee on a home worth $200,000 at maturity would be $20,000 Single-Purpose Reverse Mortgage a reverse mortgage that can be used for only one purpose, generally offered by state or local government agencies Supplemental Security Income (SSI) a federal program providing monthly cash benefits to low income persons aged 65+, blind, or disabled Tenure Advances fixed monthly loan advances for as long as a borrower lives in a home Term Advances fixed monthly loan advances for a specific period of time Total Annual Loan Cost (TALC) Rate the projected annual average cost of a reverse mortgage including all itemized costs T-Rate the rate for U.S. Treasury Securities; used to determine the initial, expected, and current interest rates for the HECM program |
