Reverse Mortgage Info

• Programs
• Calling for Parents/Friend/Client
• Reverse Mortgage Terms Glossary

Programs

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FHA Home Equity Conversion Mortgage (HECM)

The oldest and most popular reverse mortgage product with 90-plus percent of the total market is the FHA Home Equity Conversion Mortgage (HECM). Available since 1989, HECMs are insured by the federal government through the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development.

The amount of money you get from a HECM depends upon your age, appraised home value, and current interest rates. The older you are and the more valuable your home (and the less you owe on your home), the more money you get.

You and your heirs are protected by the mortgage insurance premium (MIP). This insurance premium guarantees that if the company managing your account – commonly called the loan “servicer” – goes out of business, the government will step in and make sure you have continued access to your loan funds and you and your heirs will never owe more than the value of your home when the HECM must be repaid.

Fannie Mae Home Keeper

Headquartered in Washington, DC, Fannie Mae is the nation's largest investor of home mortgages and a major investor of reverse mortgages, including the federally insured Home Equity Conversion Mortgage (HECM). In 1996, Fannie Mae developed its own proprietary Home Keeper® reverse mortgage as a conventional market alternative to the HECM. The Home Keeper was developed to address unmet needs that could not be served by the HECM program, such as individuals with higher property values, condominium owners, and seniors wishing to use a reverse mortgage to purchase a new home. Home Keeper loans can be larger than HECMs because Fannie Mae’s maximum mortgage limit – $417,000 for 2006 – is larger than the locally applied FHA maximum mortgage limit.

Cash Account "Jumbo" Loan

Financial Freedom administers a "jumbo" proprietary reverse mortgage product called Cash Account that has traditionally benefited homeowners living in higher-priced homes valued above the FHA and Fannie Mae lending limits.

In July 2006, Financial Freedom introduced a new version of its "jumbo" product, called Cash Account Advantage that enables homeowners living in properties valued between $450,000 and $750,000 to access greater amounts of equity. The Simply Zero Cash Account™, is the first-ever reverse mortgage loan to eliminate all up-front costs. With the Simply Zero Cash Account, borrowers are required to draw 100% of their maximum available benefit at loan closing. Currently, the program is offered in most states, but not all.

Calling for Parents/Friend/Client?

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ADULT CHILDREN

We, as adult children, find ourselves in the position of navigating the Internet and other sources in an attempt to help our parents find the resources available to them as senior citizens for everything from the best doctor in the area to changes in the Medicare program.

Academy Mortgage can help you understand the Reverse Mortgage program and how it will enable your parents to live independently in their own home. The Reverse Mortgage is designed to give senior homeowners financial stability and emotional security.

Imagine … the money they had to use for their mortgage payment is now freed up and can be used as additional income so that they can make home repairs, pay for home healthcare or take advantage of things that bring them joy. A Reverse Mortgage can bridge the gap between a challenging life and a comfortable one.

Call us to discuss the Reverse Mortgage program and how it can help your parents enjoy their retirement years. We will meet with you and your parents in the comfort of their home to answer your questions. Let us show you how the Reverse Mortgage will enable your parents to achieve economic stability, while you, as an adult child, will gain the peace of mind knowing your parents are free from financial worry.

If you have a Power of Attorney for your parents, please provide us with a copy of the document to determine that the correct language in included to facilitate timely processing. Our on-site title company will review the document for you.

FRIENDS

We can provide you with the general information you may need to discuss the program with your friend. Please understand that we cannot discuss the financial specifics with you unless instructed by the senior homeowner.

CLIENTS

Please complete the Custom Analysis with the necessary fields and your client’s contact information. We will need to get your client’s approval to discuss the financial specifics before providing you with the information. Call us to discuss the program and how to address the program with your clients.

Reverse Mortgage Terms/Definitions

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Annual Percentage Rate - APR

The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).

Annuity

A monthly cash payment you get from an insurance company for the rest of your life.

Closing

A meeting where documents are signed to “close the deal” on a mortgage; the time a mortgage begins.

Credit Line or Line of Credit - LOC

A credit account that lets a borrower decide when to take money out and also how much to take out.

Expected Interest Rate

In the HECM program, the interest rate used to determine a borrower’s loan advance amounts, it equals the 10-year rate for U.S. Treasury Securities, plus a margin.

FHA

Federal Housing Administration (HUD Office of Housing).

Good Faith Estimate

The good-faith estimate is a report from your lender that outlines the costs you will incur to get your mortgage. It is based on the lender's typical loan origination costs for the area where your home is located.

Home Equity

The value of a home, subtracting any money owed on it.

Home Equity Conversion Mortgage - HECM

The only reverse mortgage program insured by the Federal Housing Administration, a federal government agency.

HUD

U.S. Department of Housing and Urban Development

Initial Interest Rate

In the HECM program, the interest rate that is first charged on the loan beginning at closing, which equals the one-year rate for U. S. Treasury Securities, plus a margin.

Lump Sum

A single loan advance at closing.

Margin

In the HECM program, the amount added to the one-year Treasury rate to determine the initial and current interest rates, and to the 10-year Treasury rate to determine the expected interest rate.

MIP

Mortgage Insurance Premium.

Non-Recourse Mortgage

A home loan in which the borrower can never owe more than the home's value at the time the loan is repaid.

Origination

The overall administrative process of setting up a mortgage, including the preparation of documents.

Proprietary Reverse Mortgage

A reverse mortgage product owned by a private company.

Reverse Mortgage

A non-recourse home loan with no income or credit requirements that gives cash advances to a homeowner aged 62 or older against the home equity providing cash advances to the senior homeowner. No repayment is required until a future time, and repayment is capped by the value of the home when the loan is repaid.

Reverse Mortgage Counseling

In order to get a Home Keeper® reverse mortgage or a Home Equity Conversion Mortgage (HECM), you must receive counseling that explains how this financing option works. During counseling, you will receive an estimate of your loan advances and an explanation of your responsibilities as a borrower. Other sources of unbiased information education may also be provided. Usually, a non-profit agency will conduct the counseling.

Right of Rescission

A borrower’s right to cancel a home loan within three business days of the closing.

Servicing

Administering a loan after closing, such as maintaining loan records and sending statements.

Survey

A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features. Your lender may require you to have a survey of the property. This process confirms that the property's boundaries are correctly described in the purchase and sale agreement.

Tenure Advances

Fixed monthly loan advances for as long as a borrower lives in the home.

Term Advances

Fixed monthly loan advances for a specific period of time.

Title Search

A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims attached to the property. Encumbrances include any liens -- legal claims against a property filed by creditors as a means to collect unpaid bills. Liens can also be filed by the Internal Revenue Service for nonpayment of taxes. Any such claims must be paid by the seller -- this often occurs either before or at the closing.

Total Annual Loan Cost Rate - TALC

The projected annual average cost of a reverse mortgage including all itemized costs.