Glossary of Terms

203-b limit - the dollar limit in each county for how much of a home's value can be used to determine the amount of money you can get from a federally insured HECM reverse mortgage.  (The name refers to Section 203-b of the National Housing Act).

acceleration clause - the part of a contract that says 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.

Aging In Place  - refers to living where you have lived for many years, or to living in a non-healthcare environment, and using products, services and conveniences to allow or enable you to not have to move as circumstances change.

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

appraisal - an estimate of how much a house would sell for if it were sold; also called its market value.  Appraisal fees generally range between $300-$400.

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.

Cash Account  - a jumbo reverse mortgage product that benefits homeowners living in higher-priced homes valued above the FHA and Fannie Mae lending limits.

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

condemnation - a court action saying a property is unfit for use; also, the government taking private property to use for the public by the right of eminent domain.

conforming limit - the conforming limit is a mortgage amount set by Congress and is the maximum loan size eligible for purchase by either Fannie Mae or Freddie Mac, two federally chartered organizations who purchase the underlying securities from mortgage originators.

credit line - 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".

credit report - verifies any federal tax liens, or other judgments, handed down against the borrower.

current interest rate - the interest rate currently being charged on a loan.

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 Reverse Motgage 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) - a part of the U. S. Department of Housing and Urban Development (HUD) that insures certain 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 reverse mortgage borrower each month.

flood certification - determines whether the property is located on a federally designated flood plain.

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. The amount of money you get from a HECM depends on several factors, including: your age, appraised home value, and current interest rates.

Housing Counseling Clearinghouse - available at 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

initial interest rate - in the HECM Reverse Mortgage program, the interest rate that is first charged on the loan as of the 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.

LIBOR - the six-month London interbank offered rate.

loan advances - payments made to a borrower or to another party on behalf of a borrower.

loan balance - the amount owed, including principal and interest.

lump sum - a single loan advance at closing.

margin - the amount added to a base rate or index to determine the current effective interest rate.

maturity - when a loan must be repaid; when it becomes "due and payable."

Modified Tenure - in a reverse mortgage combination of a line of credit with monthly payments for as long as the borrower remains in the home.

Modified Term - in a reverse mortgage combination of a line of credit with monthly payments for a fixed period of months selected by the borrower.

mortgage - a legal document making a home available to a lender to repay a debt.

Mortgage Insurance Premium (MIP) - a payment that must be made to secure a government loan guarantee on your reverse mortgage.  The 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. Furthermore, the MIP guarantees that you will never owe more than the value of your home when the HECM reverse mortgage must be repaid.

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.

origination fee - covers a lender's operating expense for making the mortgage.

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

recording fee - fee charged to record the mortgage lien with the County Recorder's Office.

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.

servicing set-aside - in a reverse mortgage, is an amount of money deducted from the available loan limit at closing to cover the projected costs of servicing your account.

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.

Simply Zero Cash Account - a type of reverse mortgage where the borrowers are required to draw 100% of their maximum available benefit at loan closing.

Supplemental Security Income (SSI) - a federal monthly income program for low-income persons who are aged 65+, blind, or disabled.

survey - determines the official boundaries of the property. It's typically ordered to make sure that any adjoining property has not inadvertently encroached on the borrower's property.

tenure advances - fixed monthly loan advances for as long as a borrower lives in a home and has a reverse mortgage.

term advances - fixed monthly loan advances for a specific period of time.

Title Insurance - insurance that protects the lender (lender's policy) or the buyer (owner's policy) against any loss arising from disputes over ownership of a property.

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 reverse mortgage program.

uninsured reverse mortgage - a reverse mortgage that becomes due and payable on a specific date.