Is Equity Required to Qualify For A Reverse Mortgage?

It is a common belief that one must have a lot of equity in their home to qualify for a reverse mortgage. In reality, a reverse mortgage can still be done as long as there are enough proceeds from the reverse mortgage to pay off any current liens. Even if there aren’t enough reverse mortgage proceeds, a reverse mortgage can still be done as long as the borrower is able to come up with the difference.

If a senior is finding it difficult to stay current on their monthly mortgage payment and is now facing foreclosure, a reverse mortgage may be the best solution to save their home. Even if the reverse mortgage proceeds are used to pay off current liens, the senior’s disposable income improves because they will have eliminated their monthly  obligation.
For example, Wayne was struggling to make his mortgage payment of $1,200 a month, but he was able to get enough reverse mortgage proceeds to pay off his current lien. While he didn’t any have funds available after the reverse mortgage, he paid off his current lien which improved his monthly cash flow by $1,200 because he no longer had to make a mortgage payment.
When we ran the calculations for Minnesota home owners, Jerry and Dorothy the reverse mortgage proceeds were short $3,000 to pay off their current mortgage. They chose to pull some funds from their savings so they could do the reverse mortgage and eliminate their mortgage payments – a benefit and savings in the long run.

Note: HUD, who insures the most common reverse mortgage, the Home Equity Conversion Mortgage (HECM), does not allow the difference to be from another loan or credit cards. If the funds are coming from an outside source, not from your own resources, then it must be a gift, not a loan to be repaid.
If you are over the age of 62 and having a tough time handling your monthly housing or credit card payments, a reverse mortgage may be the solution.  Once the reverse mortgage pays off one’s current lien(s) or mortgage(s), there are no more monthly payments.

Mortgage Compliance: The New Four Letter Word

These compliance checks are killing my productivity.
The environment is crazy.   I just got a repurchase demand on a loan that {edited} bought THREE YEARS AGO and then subsequently sold in a small servicing sale.  The servicer who purchased the loan identified an        under disclosure on the TIL of $117 and is demanding repurchase for non-compliance with Federal disclosure law……..!!!  THREE YEARS AGO!!!!
How are we supposed to operate with that kind of foolishness going on…..!?!

We’ve talked about trailing risk before.  Every loan a mortgage banker sold in the past and sells in the future is not really a loan sold without recourse.  Mortgage bankers have continuous risk that they might have to repurchase loans because of a major or even minor defect.  In fact, if a loan is in default or delinquent, chances are the servicer or investor will do a deep audit to see if there is any issue with the loan that they can enforce the repurchase clause in the loan sale agreement.  They don’t want to have to deal with a delinquency or a loan default.  It is better to pass that onto the original seller and let him deal with it.
We know it’s tough and it’s probably going to get tougher. 

If you are a mortgage banker, you know what the new four letter word is: COMPLIANCE. Investors, regulators and consumers will be using compliance violations as a way to extort money from mortgage bankers or exert profound pressure.  This is Darwinism at its best. Some mortgage bankers will adjust, adapt and prepare for it and some will complain, ignore and die.  I know this is harsh, but these changes create opportunities for mortgage bankers to exploit the dramatic changes evolving from the mortgage meltdown.  Companies that adjust will survive and thrive. Companies that don’t adjust will lose money and eventually be forced to give up, creating more market share for the remaining players.
Some of the companies we’ve audited recently have hired a full time compliance officer to manage and monitor loan and corporate level compliance.  Loans are reviewed during various processing stages to ensure there is loan level compliance. This might be a good solution, but it can be expensive.
Others are outsourcing compliance reviews with companies like ComplianceEase.  The cost is variable and every loan is reviewed to ensure a loan is in compliance.  We like the outsourcing variable cost approach.   ComplianceEase offers several types of compliance products for mortgage bankers.
Adapting to change is a must for mortgage lending participants today.  The head winds are too strong to fight it.  Embrace compliance and make it a way of life in your organization.

Distressed Sales Constitute Big Share of Home Resale Market

Distressed home sales are once again approaching a one third share of the real estate market for existing homes, depressing home price trends and indicating that the housing market is not yet out of the woods.

According to a report issued by First American CoreLogic on Thursday, the sale of homes that could be considered distressed accounted for 29 percent of all home resales in January.  This was the second highest share recorded for these sales, exceeded only by the peak of 32 percent reached last April.  To provide further context, prior to the fourth quarter of 2007, distressed sales constituted less than 5 percent of the resale market.

CoreLogic defines a distressed sale as a non-arms length transaction such as the sale of bank-owned real estate (REO) or short sales in which the mortgagee agrees to release its loan for less than the full principal balance of the mortgage.  Both REO and short sales have increased in recent months after slowing for a time following the April 2009 peak. 

Sales of bank-owned property increased to 22 percent of home sales in January compared to 19 percent in December.  One year earlier, REO sales represented a 27 percent market share.  Short sales accounted for 8 percent of all sales in January compared to 7 percent in December.  In 2009 there were a total of 740,000 sales of REO and 234,000 short sales.

Distressed home sale prices have been running at around a one-third discount from market sales prices for the last year.  In January the average price for a house sold on the open market was $247,700, but the average REO property sold for $141,900 and the average short sale brought $215,300.  The average price for all distressed properties was $161,600.

Riverside, California had the largest percentage of distressed sales among the 25 largest markets at 62 percent of all sales followed by Las Vegas and Sacramento at 59 percent and 58 percent respectively.  The largest share of bank-owned housing sales occurred in Detroit (48 percent) and Riverside (47 percent).  The highest percentage of short sales was recorded in San Diego (19 percent) followed by Sacramento (18 percent) and Oakland (16 percent).  While Florida is home to all 10 markets having the most foreclosures, only Orlando and Cape Coral were among the top cities for distressed sales.  CoreLogic speculates that the judicial foreclosure process required in that state makes foreclosures take longer than in other distressed states like California and Nevada.

CoreLogic distilled data for the report from its data base of public records of property transactions for 2,200 counties in the U.S.   The data covers an estimated 85 percent of all sales transactions nationwide.  REO sales are measured by recorded deed transfers while short sales were identified by comparing the sales price to the senior and any junior mortgage lien amounts (including cash out refinances) to determine the total mortgage debt.

CoreLogic is a provider of property profiles, digital street maps, plat maps, automated valuation models, and research services and other real estate related products. 

Reverse Mortgage Basics

What is a Reverse Mortgage?
Reverse mortgages are designed for homeowners age 62 and older. They are called reverse mortgages because the lender advances the homeowner money based on the equity in the house. The amount of money depends on the amount of equity in the house and the age of the borrower. To qualify for this loan, the borrower must live in the home as the main residence. Unlike conventional mortgages, there are no income or credit requirements for these loans. The borrower does not have to make monthly payments for as long as they continue to live in the house. When the last borrower moves out of the home or dies, the loan then becomes due. As with any home, the borrower must continue to pay both property taxes and homeowners insurance. The borrower is also responsible for maintaining the house in good condition.

When Should a Reverse Mortgage be Considered?
If more money is required each month to meet monthly expenses, a reverse mortgage term payment plan might be a good option. Or if large health care expenses are in a borrower’s near future, a reverse mortgage with a line of credit may also be a good option. If a borrower has a balance on their existing mortgage, a reverse mortgage can be utilized to pay off the current mortgage.

Why is Reverse Mortgage Counseling Required?
Section 255 of the National Housing Act requires independent third party reverse mortgage counseling from a non-profit HUD-approved counseling agency. The reverse mortgage counselor will provide unbiased information on the process and will answer all questions so that a borrower can make an informed decision on whether a reverse mortgage is in their best interest.

How Can Reverse Mortgage Counseling be Found?
By entering their zip code in the "Find a Counselor" box, a list of "Reverse Mortgage Counseling Association" member agencies will be produced for the borrower that provides in-person or telephone reverse mortgage counseling in the borrower’s area. A senior homeowner can either choose to call the selected counseling agency from the list or choose the agency and register for reverse mortgage counseling online.

How Much Does Reverse Mortgage Counseling Cost
A reverse mortgage counseling session usually takes about an hour and may cost about $125 depending on the counseling agency. In some cases, the counseling fee may be waived. "Reverse Mortgage Counseling Association" (RMCA) agencies have the option to finance the counseling fee at closing or waive the counseling fee entirely if a financial hardship exists. Each RMCA member agency has a hardship policy. Reverse mortgage counseling can be conducted in-person and in most states by telephone.

What Kinds of Homes Qualify for a Reverse Mortgage?
To qualify for a reverse mortgage, the home must be a single family dwelling or a two-to-four unit property that is owned and occupied by the borrower. Condominiums must be FHA-approved. Townhouses, detached homes, individual condominium units, and some manufactured homes are also eligible.

How Long Can I Live in the Home with a Reverse Mortgage?
The reverse mortgage borrower can continue to live in the house for as long as the taxes and homeowner insurance are paid. A senior can never owe more than the value of the home.

How Much Money will be Realized with a Reverse Mortgage?
The following factors determine how much will be obtained from a reverse mortgage:

1. Age (generally, the older the borrow the more money is available)
2. The appraised value of the home or the FHA mortgage limit for the borrower’s area, whichever is less
3. Current interest rates

What Are the Costs to Obtain a Reverse Mortgage?
Loan closing costs for a reverse mortgage are similar as to what would be paid for a traditional mortgage. Because these closing costs are rarely folded into the interest rate, they can appear sizeable. These costs can range from about $6,000 for a $100,000 home to over $16,000 for a home worth $400,000. Closing costs can be financed into the loan and include the origination fee, mortgage insurance premium, appraisal, and other upfront costs.

What Impact is there on the Heirs of a Reverse Mortgage Borrower?
Over time a large part of the borrower’s home equity may be used up leaving less inheritance to the family. If a borrower’s heirs decide to retain the home, they have up to one year to pay off the reverse mortgage balance in full. The heirs can also choose to pay off the reverse mortgage loan in full by selling the house and retaining any remaining proceeds from the sale.

What are the Limitations on Using the Funds from a Reverse Mortgage?
There are no limitations on how a borrower chooses to use the proceeds from a reverse mortgage loan.

How Are Reverse Mortgage Payments Received?

There are five options available to meet the need of the borrower:
1. Tenure-Equal monthly payments as long as at least one borrower lives and occupies the property as a principal residence
2. Term-Equal monthly payments for a fixed number of months
3. Line of Credit-Unscheduled payments at a time and amount of the borrowers choosing until the line of credit is gone
4. Modified Tenure-A combination of a line of credit with monthly payments for as long as the borrower remains in the home
5. Modified Term-The borrower chooses a combination of a line of credit with monthly payments for a fixed period of months

What Are the Tax Implications of a Reverse Mortgage?
Reverse mortgage loan advances are not taxable and do not affect Social Security or Medicare benefits. Retained loan proceeds cannot exceed the monthly liquid resource limits for Supplemental Security Income (SSI) and Medicaid.

To find out if you are eligible for a reverse mortgage loan, take a moment to review the following requirements:

1. All homeowners must be age 62 or greater to qualify for a reverse mortgage. The required counseling must be completed no later than six months before applying.
2. Each homeowner must live in the home as a principal residence at least six months out of the year. The only exception is if a co-owner is living in a health care facility.
3. To qualify for a reverse mortgage, the home must be a single family dwelling or a two-to-four unit property that is owned and occupied by the reverse mortgage borrower. Condominiums must be FHA-approved. Townhouses, detached homes, individual condominium units, and some manufactured homes are also eligible. Mobile homes are not eligible unless they qualify as being manufactured housing. To qualify as manufactured housing a unit must meet the following requirements (only an appraiser can determine if a home meets these requirements):
   • The home must be permanently attached to a permanent foundation when the loan is closed
   • The land must be owned by the borrower or have a long lease of at least 99 years that is renewable or a lease with a remaining term of at least 50 years beyond the 100th birthday of the youngest borrower
   • The home must be classified and taxed as real estate
   • The home must not have been previously installed or occupied at any other site or location
   • The home must have a floor area of at least 400 square feet
   • The home must meet Federal Manufactured Home Construction and Safety Standards, as evidenced by a certification label affixed to the home (only homes built after June 15, 1976 can qualify for this certification)

Only a lender can determine whether a borrower qualifies for certain for a reverse mortgage loan. If all of the above requirements above are not met, a potential borrower may still wish to verify their eligibility by contacting a reverse mortgage lender.

Potential borrowers considering a reverse mortgage loan may wish to attend a reverse mortgage education session offered by a HUD-approved non-profit counseling agency. Please review the list of member RMCA counseling agencies in the Senior Homeowner section of the Web site.

Aging in Place

Many older people need help paying for prescription drugs, health care, utilities, and other basic needs. Millions of older Americans are eligible for but are not receiving benefits that are available from existing federal, state, and local programs.

Developed and maintained by the National Council on Aging (NCOA), BenefitsCheckUp is the most comprehensive Web based service to screen for benefits programs for seniors with limited income and resources. BenefitsCheckUP includes more than 1,800 public and private benefits programs from all 50 states and the District of Columbia.

Click here to Learn More (www.BenefitsCheckUp.org)

Helpful Links

American Savings Education Council (ASEC)
Consumer Action
Consumer Federation of America (CFA)
Consumers Union
Cooperative State Research, Education and Extension Service
Credit Union National Association
Department of Labor (DOL)
Department of the Treasury
Fannie Mae
Federal Consumer Information Center (FCIC)
Federal Deposit Insurance Corporation (FDIC)
Federal Reserve Board of Governors
Federal Trade Commission (FTC)
Financial Literacy 2010
Freddie Mac
IDA Network
Jump$tart Coalition for Personal Financial Literacy
Junior Achievement (JA)
Money2020
Money Talks News with Stacy Johnson
National Community Reinvestment Coalition (NCRC)
National Consumer Law Center (NCLC)
National Consumers League
National Council on Economic Education (NCEE)
National Endowment for Financial Education (NEFE)
Neighborworks Network
Securities and Exchange Commission (SEC

Home Equity Conversion Mortgage (HECM)
HECM’s are insured by the Department of Housing and Urban Development (HUD). They represent about 95% of the reverse mortgage market. HECM’s can be used for any purpose and have either monthly adjustable or annually adjustable interest rates. Some lenders offer fixed rate HECM’s that typically are only used by borrowers wishing to draw down 100% of the available proceeds at closing.

Propriety Reverse Mortgage
These reverse mortgages are not insured by HUD and also can be used for any purpose. They are typically designed for borrowers with high value homes.

Single Purpose Reverse Mortgage
These reverse mortgages are usually available through state and local government agencies to be used for only specific purposes such as for home repairs or property tax deferral. The state housing finance agency in the borrower’s area can provide more information on these programs.

Reverse Mortgage FAQ’s

Who Can Request Counseling?
The borrowers on the property deed or the authorized legal representative of the borrowers can request reverse mortgage counseling. Lenders cannot contact or select a HUD-approved agency to request counseling on behalf of the borrowers. Authorized legal representatives can be a guardian, conservator, or a person holding a durable power of attorney who has been authorized to act in this matter by the borrower.

How Can Counseling be Obtained?
The Reverse Mortgage Counseling Association (RMCA) is the largest non-profit reverse mortgage counseling association in the country. Its member agencies combined have over 230 member counseling locations that employ over 300 reverse mortgage counselors across the country. RMCA members have helped over 75,000 seniors within the last year with their reverse mortgage counseling and continue to counsel over 4,000 seniors each month. Reverse mortgage counseling can be conducted in-person, or by telephone in most states. The easiest way for a senior to find a counselor is to visit the "Senior Homeowner" section of the RMCA Web site entering their zip code in the "Find a Counselor" box and following the instructions.

How Is a Lender Chosen?
It is imperative that a senior select a qualified HUD-approved reverse mortgage lender to help determine eligibility for a reverse mortgage. Please visit "How Do I Choose a Lender" in the Senior Homeowner section of the RMCA Web site.

How Does the Reverse Mortgage Counseling Process Work?

• A potential borrower must first choose a counseling agency (please see "How Can Counseling be Obtained" above) and schedule an appointment directly with the counseling agency. Lenders cannot initiate or participate in the counseling session.
• Once an appointment has been made, the counseling agency will send pre-counseling information for the senior to review prior to counseling.
• The counselor will obtain name, contact and other key information for the counseling session.
• The counselor will discuss the borrower’s needs and circumstances, providing information about reverse mortgages and other alternative types and assistance that may be available to the senior.
• Once the counseling session has been completed and both counselor and senior are satisfied that the essentials of the reverse mortgage are understood by the potential borrower, the counselor will issue a certificate.
• The reverse mortgage counselor will follow-up to determine if the potential borrower needs further assistance, information, or has any questions about the reverse mortgage process.

The US Department of Housing and Urban Development (HUD)requires that all borrowers taking out a reverse mortgage participate in a counseling session with a a HUD approved Reverse Mortgage Counselor. These counselors work for non profit organizations and must have successfully completed certification examination with HUD.

The counseling session covers a lot of information about the reverse mortgage but generally has the following objectives:

• To educate the client around many different aspects of the reverse mortgage process
• To ensure that the homeowner understand the costs, benefits, features and options available under the reverse mortgage program
• Provides an opportunity for the homeowner to ask questions about the reverse mortgage, safe in the knowledge that the counselor has no financial stake in whether they decide to take out a reverse mortgage.
• Help the client review their personal situation to asses the likely benefits and drawbacks for taking out reverse mortgage.
• To identify other resources and programs that may help the homeowner and may supplement or sometimes replace the need for a reverse mortgage.

Although loan counseling is mandatory, it is also an opportunity to learn more about reverse mortgages and gain valuable insight into to what extant this loan will meet their needs. Taking out a reverse mortgage is one of the larger financial decisions that homeowners will make and the counseling session can help homeowners sort through their options and be confident about making a fully informed decision.

How Do I Choose A Lender

Choosing a reverse mortgage lender is a critically important step. Homeowners should consider contacting and interviewing several lenders before deciding who they wish to work with, good lenders will understand and respect your comparison shopping and will be prepared to work to win your business.

Things to consider when selecting a reverse mortgage lender.

• Rates and fess: Closing costs, and monthly serving fees are limited by government regulation, however this sets a maximum level and not all lenders charge the maximum fee allowed. Even more importantly the differences in the interest rate, even small ones, can significantly effect the both the total cost of the loan and the amount of loan proceeds the borrower can access Although the rates and fees are not the only thing to be considered, it is worth checking to make sure you are getting the best deal you can.
• Lender Expertise: Being a great reverse mortgage lender usually involves much more than simply selling a product. The lender you work with should be willing and able to discuss the details of how each loan option works and be prepared to ensure that you are completely comfortable with your decision. If a lender you speak with is unwilling or unable to answer your questions, its worth looking around to find another who will.
• Lender Ethics: Most lenders work on commission, and even if they don’t, their organizations still only make money when they originate a loan. However, a good reverse mortgage lender will want to make sure that you personal situation. In this way lenders can help suggest what loan features might work best for you and in some cases may suggest you delay making a discussion on whether to take out a reverse mortgage until you have explored other options.
• Warning signs: Sadly, there are individuals who do not live up the the best ethical standards that you should expect from a lender. Warning signs include:
  • Exaggerated or misleading Promises: A Reverse Mortgage is not "free income for life" or a "free benefit program" any lender making a claim like this should be avoided.
  • Attempts to sell other financial products or investments (insurance annuities etc.) with the proceeds of the reverse mortgage are another warning sign. Many of these services are not in the best interests of the homeowner but do generate a hefty commission for the salesman. Claims any product must be purchased in order to get the reverse mortgage are untrue.
  • Hard sell and vague general reassurances: Homeowners should be wary of any lender who attempts to pressure a home owner into making a decision quickly, or before they fully understand what they are getting into.
• Where to Start:
  • The U.S. Department of Housing and Urban Development maintains a list of all Lender eligible to make reverse mortgages here, http://www.hud.gov/ll/code/llslcrit.cfm
  • National Association of Reverse Mortgage Lenders Association (NRMLA) maintains a list of its Members who have voluntarily agreed to abide by a professional code of conduct here. http://www.reversemortgage.org/Default.aspx?tabid=255

In the case, Matter of Doar, 31393/07, the borrower, Ms. Hermina Brunson, took out a reverse mortgage with Financial Freedom on her home in Queens for $300,000 in December of 2001, refinancing for $375,000 in June of 2003.

However, at the time, Ms. Brunson was being treated for chronic paranoid schizophrenia. By the end of 2001, her psychiatrist testified that Ms. Brunson was hearing voices, believed her neighbor was trying to take her home away from her, and claimed that she no longer had the deed to the home.

Despite the counseling session lasting 45 minutes over the phone, the judge wrote that it was “not meant to be perfunctory or a mere rubber stamp of the banking or mortgage industry. It was intended to secure that the rights of elderly homeowners were protected.  The mortgagee is entrusted with the responsibility of conducting an inquiry of the applicant’s understanding of the mortgage agreement.”

Judge Thomas continued, “There is no evidence that Ms. Brunson understood the terms of the mortgage or the Counseling Certificate that she signed on June 20, 2003.” He faulted the counselor for not unearthing the borrower’s mental illness and her delusions regarding her home. Most significantly for the industry, Judge Thomas ruled:

While the Certificate of Counseling is an indication that information was given to the homeowners it is not dispositive of the issue of the mortgagor’s knowledge and understanding of the implications of a reverse mortgage or that the National Housing Act has been satisfied.  That determination rests ultimately with the court.

As a result, the responsibility is on the lender to prove that the borrower understood the reverse mortgage, regardless of whether or not they received a counseling certificate.

The judge further faulted the counseling process, noting that there was no evidence as to the qualifications of the counselor, whether the counselor spoke to Ms. Brunson or only to her brother, if Ms. Bunson’s questions were answered, and what information the counselor provided.

While recent counseling reforms such as the qualification of the counselor addresses some of these issues, this is still a situation that could be repeated today.

In the ruling, Financial Freedom was ordered to void the mortgage, but the Guardian of the borrower is directed to reimburse Financial Freedom for monies paid out at the closing which includes taxes, water charges, and the New York City Department of Social Services liens.  It is unclear whether Financial Freedom will appeal.

The Government National Mortgage Association (GNMA) guaranteed a record $1.598 billion of reverse mortgage MBS (HMBS) in December, bringing 2009 issuance to $8.538 billion.

Ginnie Mae’s HMBS volume is up 629% compared to the $1.357 billion issued in 2008. 

Reverse mortgage lenders started turned to Ginnie Mae last year after Fannie Mae drastically adjusted its pricing strategy and are showing no signs of turning back as investor demand continues to increase.  In fact, “There really isn’t enough supply,” said David Fontanella of Knight Libertas at the National Reverse Mortgage Lenders Association Annual conference late last year.  

With more reverse lenders waiting for Ginnie Mae approval to issue HMBS, volume in 2010 should continue to climb.

Chart: Ginnie Mae HMBS 2009

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More Realtor Education Is Needed To Increase HECM For Purchase Volume.

With the Federal Housing Administration predicting a surge in HECM for Purchases next year to 3,420, up from 423 in FY 2009, it seems a little surprising that the industry is not more optimistic about the program.

“Everyone in the industry was really excited about it when we realized we were going to get the HECM for Purchase product,” said Monte Howard, Affinity Relationship Director at Generation Mortgage.  But this excitement has proven to be short-lived as the dramatic burst in business has yet to be realized.

After several conversations with professionals in all parts of the reverse mortgage industry, it is clear the problem with the unique reverse mortgage for purchase program is education.  This education needs to take place on several levels, but the first is educating realtors.

Derry Hampton, a reverse mortgage professional at Security 1 Lending and a licensed realtor for nearly 25 years, pointed out just how little realtors know about the product and how much they are being neglected as an ally by many in the reverse mortgage industry.

“No one’s talking to the realtor about how this can fit into their business,” said Hampton, “I think really it’s up to the reverse mortgage industry to learn how to work with the real estate industry.”

Hampton, a member of the National Association of Realtors (NAR) and the California Association of Realtors said, “In California alone, [there are] 170,000 members of California Association of Realtors—that’s the new market for the reverse mortgage industry…. What we need to do is teach about this product.”

It is largely anticipated that the FHA may move to effectively curtail equity releases by as much as 5%.  Different reasons have been provided included the lack of home price appreciation, and the insurance fund that stands behind these loans needing to be more conservative.  There has been no announcement, but the buzz is that an announcement will be made on October 1, 2009.  There has been a SURGE of activity in NEW applications that are hoping to beat this date and squeeze the most equity out of a house, even though there is no specific guidance that lenders or the FHA have provided.

Also of note is that the $625,500 limit is still set to expire on 12.31.09.  So there has been a SURGE in higher balance applications for reverse mortgages as well, also looking to beat that date.  Sort of like cash for clunkers, and the FTHB Credit expirations, this expiration is forcing people into the market based on an expiration date that may or may not be extended.  Borrowers have decided not to wait and to apply now.

Reverse mortgages continue to be a giant "door opener" with financial planners.  This product now features larger loan or line amounts (in the high 400k’s), fixed rates as low as 5.5%, the highest equity releases in the history of the product, greatly reduced fees (2% on the first 200k, 1% on everything over that capped at $6000 in total origination fees), and substantially more expedient home buyer counseling options.  There is only one prohibition which is that the proceeds of a loan can not go to purchase an immediate annuity.  But, essentially there are no strings attached to the money released outside of paying off all liens of record.  So, rather than selling stocks at a loss, or withdrawing funds from retirement accounts, this seems to be a very attractive tool for financial planners to go "find some money" to tide retirees over while they wait to see their accounts go up rather than down in value.  Whether its the cash-out, or the elimination of a mortgage payment, or both….the time is finally here for planners to appreciate this product.

Maturity – when a loan must be repaid; when it becomes "due and payable" .

Mortgage – a legal document making a home available to a lender to repay a debt.

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 process of setting up a mortgage, including preparing documents.

Property tax deferral (PTD) – reverse mortgages that pay annual property taxes; usually offered by state or local governments.

Proprietary reverse mortgage – a reverse mortgage product owned by a private company.

Reverse annuity mortgage – a reverse mortgage in which a lump sum is used to purchase an annuity that gives the borrower a monthly income for life.

Reverse mortgage – a home loan that gives cash advances to a homeowner, requires no repayment until a future time, and is capped by the value of the home when the loan is repaid.

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.

Shared equity – an itemized loan cost based on a percent of a home’s value at loan maturity; for example, a 5% shared equity fee on a home worth $200,000 at maturity would be $10,000.

Supplemental Security Income (SSI) – a federal monthly income program for low-income persons who are 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.

Uninsured reverse mortgage – a reverse mortgage that becomes due and payable on a specific date.

Appraisal – an estimate of much a house would sell for if it were sold; also called its market value.

Appreciation – an increase in a home’s value.

Cap – a limit on the amount an adjustable interest rate may go up or down during a specified time period.

Closing – a meeting where documents are signed to "close the deal" on a mortgage; the time a mortgage begins.

Creditline – a credit account that lets a borrower decide when to take money out and also how much to take out; also known as a "line-of-credit" or "credit line."

Current interest rate – in the HECM program, the interest rate currently being charged on a loan; it equals the one-year rate for U.S. Treasury Securities, plus a margin.

Deferred payment loans (DPLs) – reverse mortgages that give you a lump sum of cash to repair or improve a home; usually offered by state or local governments.

Depreciation – a decrease in the value of a home.

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.

Fannie Mae – a private company that buys and sells mortgages; a government-sponsored business that is watched over by the federal government.

Federal Housing Administration (FHA) – the part of the U. S. Department of Housing and Urban Development (HUD) that insures HECM loans.

Federally insured reverse mortgage – a reverse mortgage guaranteed by the federal government so you will always get what the loan promises; also, a Home Equity Conversion Mortgage (HECM).

Fixed monthly loan advances – payments of the same amount that are made to a borrower each month.

Home equity – the value of a home, subtracting any money owed on it.

Home equity conversion – turning home equity into cash without having to leave your home or make regular loan repayments.

Home Equity Conversion Mortgage (HECM) – the only reverse mortgage program insured by the Federal Housing Administration, a federal government agency.

Initial interest rate – in the HECM program, the interest rate that is first charged on the 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 home minus the total amount owed on it and the cost of selling it; the amount the homeowner or heirs get when the house is sold.