Principal Limit
the maximum mortgage amount; equals the maximum claim amount times the principal limit factor. The maximum amount of money available from
... [Show More] the loan at any given time, including the amount already
borrowed, any set-asides, and any remaining available funds.
Principal Limit Factor
the percent of the maximum claim amount that equals the principal limit; determined by the age of the youngest borrower and the expected average mortgage interest rate
Net Principal Limit
the maximum mortgage amount minus financed loan costs and set asides (Principal limit (minus set-asides) minus loan balance = what the borrower can get)
Maximum Claim Amount (MCA)
whichever is less: the appraised value of the home, or HUD's national mortgage limit
203-b Limit (no longer used as of 11/2009)
the maximum amount of home value that could be used to calculate the principal limit; varied by county, and also equals the limit on HUD's loan insurance under section 203 (b) of the National Housing Act
HUD's national mortgage limit
Single national limit which replaced the 203(b) limit for the purposes of determining Maximum Claim Amounts, beginning November 2009.
Federal Housing Administration (FHA)
is the part of HUD that administers the HECM insurance program.
Fannie Mae
purchases HECM loans, in effect, providing the funds that are advanced to HECM borrowers.
Home equity
means the value of a home minus any debt against it.
Single-purpose reverse mortgages
are offered by some state and local
government agencies. Each loan can only be used for a single purpose.
Federally-insured reverse mortgages
are known as Home Equity
Conversion Mortgages (HECMs).
Proprietary reverse mortgages
are developed, owned, and insured by
private companies. They may be more costly than the federally-insured
HECM.
TENURE
Borrower receives monthly payments from the lender for as long as
the home is occupied as the principal residence.
TERM
Borrower receives monthly payments from the lender for a period of
months selected by the borrower.
LINE OF CREDIT
Borrowers can draw up to a maximum amount at times and in
amounts they choose until the creditline is exhausted. The amount of cash
available grows larger each month until then.
MODIFIED TERM
Borrower may combine a line of credit with monthly
payments for fixed number of months (term option).
MODIFIED TENURE
Borrower may combine a line of credit with monthly
payments for as long as one borrower remains in the home (tenure option).
A HECM does not have to be repaid
until the last surviving borrower
dies, sells the home, or permanently moves from the home. Borrowers may
partially or fully repay the loan balance at any time without any penalty.
Property Appraisal
generally an advance payment of about $350, but may be
refunded to borrower and added to loan balance at loan closing
Credit Report
generally an advance payment of about $25 for a simplified credit
report, but may be refunded to borrower and added to the loan balance at
closing.
Standard Local Closing Costs
title search and insurance, surveys, required
inspections, recording fees, mortgage-related taxes, etc.
Hazard or Flood Insurance Premiums
replacement value coverage is required;
may require advance premium to be paid at closing if coverage is increased.
Origination Fee
may vary by lender. Maximum origination fee is 2% of home
value up to $200,000 plus 1% of any amount over $200,000. Lenders are
permitted to use a minimum origination fee of $2500 and may not charge more
than $6000 regardless of home value. (Mortgagee Letter 08-34)
Mortgage Insurance Premium
up-front payment equals two percent of the
Maximum Claim Amount, paid or financed at closing, plus an annual premium of
1/2 percent, or 50 basis points, charged on the rising loan balance.
Servicing Fee
flat monthly charge, if not inc [Show Less]