Reverse Mortgage Glossary Terms
203-b limit - the maximum dollar amount used in all county for how
much of a home's value can be used to regulate the amount of money you can
receive from a government insured HECM reverse mortgage; the name derives
from Section 203-b of the National Housing Act
acceleration clause - the part of a contract that states when a
mortgage could be proclaimed due
adjustable rate - an interest rate that varies, based on changes in a
nationally published market-rate index
annuity - a monthly cash payment you receive from an insurance
company for the remainder of your life.
appraisal - approximately how much a property might sell for if it
were sold; also called its market value
appreciation - the home rises in value
cap - a limit on the amount an adjustable rate mortgage (ARM) may go
up or down during a predetermined time frame
closing - when all loan documents are finalized; this is where you
sign for the loan
condemnation - a court action stating a property is unfit for use:
also the taking of private property for public use by governments using
"eminent domain"
credit line - a credit account that permits a borrower to determine
when and how much money to take out; also recognized as a "line-of-credit"
current interest rate - in the HECM government program, the interest
rate presently being charged on a mortgage loan; it matches the one-year
rate for U.S. Treasury Securities, plus the margin (see below)
deferred payment loans - when reverse mortgages offer to give you a
either a lump sum or payments in order to repair or improve a home; usually
offered by federal, state or local governments
depreciation - when your home decreases in value
eminent domain - the government legal right to take private property
for public use; example - the taking private land to build or expand a
highway
expected interest rate - in the HECM program, the interest rate used
to decide a borrower's loan advance amounts; it matches the 10-year rate for
U.S. Treasury Securities, plus a margin (see below)
Fannie Mae - a private company that buys and sells mortgages; a
government-sponsored business that is watched, regulated and funded (as of
August 2008) by the federal government
FHA - the part of the U. S. Department of Housing and Urban
Development known as the Federal Housing Authority that guarantees HECM
loans
federally insured reverse mortgage - a reverse mortgage insured by
the federal government guaranteeing you always receive you promised
payments; also known as Home Equity Conversion Mortgage (HECM)
fixed monthly loan advances - payments made to the borrower each
month which consist of the same amount
home equity - the value you have left in your home after you subtract
all debts against; such as a mortgage loan
home equity conversion - the process of turning your home equity into
cash without having to leave your house or make typical loan repayments
Home Equity Conversion Mortgage (HECM) - the only government insured
reverse mortgage program
initial interest rate - when using the HECM program, this is the
interest rate which is first charged on the mortgage loan beginning at
closing; it equals the one-year rate for U.S. Treasury Securities (plus a
margin)
leftover equity - the sale price of the property minus the total
amount owed on it, plus fees for selling the home; the amount the homeowner
or heirs get when the house is sold after all debts against the home are
satisfied.
loan advances - payments made to a borrower, or to another party on
behalf of a borrower in advance
loan balance - the amount owed, this includes principal and interest;
capped in a reverse mortgage by the appraised value of the property when the
mortgage is paid back.
lump sum - a single large payment
margin - in the HECM program, the amount added to the one-year
Treasury rate to decide the first and on-going interest rates, and to the
10-year Treasury rate to decide the anticipated interest rate
maturity - when a mortgage loan needs to be repaid; when the loan is
considered due and payable
mortgage - a legal document making a property available to a buyer
non-recourse mortgage - a mortgage loan that the borrower can never
owe more than the properties value when the loan becomes due and payable
origination - the process of setting up a mortgage, including
preparing documents and looking for potential clients
property tax deferral - reverse mortgages that pay annual property
taxes; usually offered by state or local governments
proprietary reverse mortgage - enables owners of high value homes
access to larger amounts of their home equity.
reverse annuity mortgage - An agreement in which a homeowner
borrowers against the equity in their home and gets regular monthly tax-free
payments from the mortgage lender, also called the reverse mortgage or home
equity conversion mortgage
reverse mortgage - a mortgage loan that allows you to receive cash
advances and requires no repayment until a future time, and is capped by the
appraised value of the home when the loan is repaid.
right of recession - a borrower's legal right to cancel a home loan
within three business days of the closing; a buyer's remorse clause
servicing - administrative duties after a loan closes, such as
keeping loan records and sending mortgage statements
shared equity - an itemized loan cost set on a percent of a home's
appraised value at loan maturity; example, a 10% shared equity fee on a
property worth $200,000 at due date would be $20,000
Supplemental Security Income - a federal approved monthly income
program for low-income persons who are aged 65 or older, blind, and/or
disabled
tenure advances - fixed monthly loan advances for as long as the
homeowner lives in a house
term advances - fixed monthly loan advances for a specific time
period
Total Annual Loan Cost rate - the planned yearly average cost of a
reverse mortgage including all itemized costs
T-rate - the rate for U.S. Treasury Securities; used to discover the
first, expected, and current interest rates for the HECM program
uninsured reverse mortgage - a reverse mortgage which is due and
payable on a specific date