|
|
|
Glossary
of Mortgage Terminology
A
Acceleration Clause:
The part of a contract that defines 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
Adjusted Property Value :
The lesser of the appraised value of a property and the Fannie Mae or FHA loan limit; this value is used in calculating the borrower's principal limit
Annuity:
An increase in the home's value
Appreciation:
an estimate of a home's market value
Appraisal:
an estimate of a home's market value
TOP
B
TOP
C
Cap:
A limitation on the amount by which an adjustable interest rate may change during a specified time period
Cash Account®:
A proprietary reverse mortgage loan offered by RLCA and available from Financial Freedom Senior Funding Corporation; the loan is designed for high-value homes
Closing:
A meeting at which legal documents are signed to "close the deal" on a Mortgage
Credit Line (Line of Credit):
A payment plan that permits a borrower to control the timing and amount of the loan advances
Current Interest Rate:
In the HECM program, the interest rate currently being charged on a loan, which equals the one-year rate for U.S. Treasury Securities, plus a margin (see margin)
TOP
D
Default:
A breach or nonperformance of the terms of a mortgage loan; defaults under a reverse mortgage could include failure to repay loan after a repayment notice has been issued, failure to maintain property, and failure to pay property taxes and/or hazard insurance
Depreciation:
A decrease in the value of a home
TOP
E
Expected Interest Rate:
In the HECM program, the interest rate used to determine a borrower's loan advances, which equals the 10-year rate for U.S. Treasury Securities, plus a margin (see margin)
TOP
F
Fannie Mae:
A private company that buys and sells mortgages; a government sponsored entity that operates under the general oversight of the federal government. Also, Reverse Mortgage investor for HECM and Home keeper loan products
Federal Housing Administration (FHA):
Part of the U.S. Department of Housing and Urban Development (HUD); Issues insurance to lenders for FHA products such as HECM
Federally Insured Reverse Mortgage:
A Home Equity Conversion Mortgage (HECM)
TOP
G
TOP
H
Home Equity:
The value of a home, minus any debt against it
Home Equity Conversion Mortgage (HECM):
Turning home equity into cash without having to leave your home or make regular loan payments. HECM is insured by FHA.
Home Keeper MortgageT:
Reverse mortgage product developed and insured by Fannie Mae
HUD:
U.S. Department of Housing and Urban Development
TOP
I
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 (see margin)
TOP
J
TOP
K
TOP
L
Leftover Equity:
The net proceeds from selling a home, minus the total amount of debt owed against it. With all reverse mortgage programs offered by RLCA, leftover equity passes to the homeowner or their heirs - not to the lender
Loan Advances:
Payments made from a loan to a borrower
Loan Balance:
The amount owed on a loan
Lump Sum:
A single loan advance at closing
TOP
M
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
Maturity:
When a loan becomes due and payable
Mortgage:
A legal document making a home available to a lender to satisfy a debt
TOP
N
Net Principal Limit:
The actual amount of money available to the borrower; equal to the principle limit LESS (1) any payments to the borrower, (2) any financed closing costs, (3) the servicing fee allocations, (4) any set-asides, plus (5) any partial repayments
Non-Recourse Mortgage:
A home loan in which a lender may look only to the value of the home for repayment; No other assets may be attached if the loan balance grows beyond the mortgaged home value.
TOP
O
Origination:
The overall administrative process of setting up a mortgage, including the preparation of documents
Origination Fee:
A fee charged to the borrower for the origination process. Each loan product may differ. HECM = the greater of $2000 or 2% of the Maximum Claim Amount. Home Keeper = the greater of $2000 or 2% of the Adjusted Property Value. The Jumbo loans, or Cash Accounts, have origination fees of zero to $3500, depending on the program.
TOP
P
Payment Plan:
Manner in which loan proceeds are paid to the borrower
PUD (Planned Urban Development):
A real estate project in which each unit owner has title to a residential lot and building and a nonexclusive easement on the common areas of the project. The owner may have an exclusive easement over some parts of the common areas (for example, a parking space)
TOP
Q
TOP
R
Reverse Mortgage:
A non-recourse loan against home equity providing cash advances to a borrower and requiring no repayment until a future time
Right of Rescission:
A borrower's right to cancel a home loan within three business days of closing
TOP
S
Set-Aside:
Funds for specified uses that are netted out when determining the borrower's principal limit
TOP
T
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
TOP
U
TOP
V
TOP
W
TOP
X
TOP
Y
TOP
Z
|
|
|
|
|