203-b limit – in the federally insured HECM program, the dollar amount for each county that limits how much of a home’s value can be used to determine a borrower’s loan advances

 

AARP Web places – an Internet Web site featuring the most recent and detailed information on reverse mortgages at www.aarp.org/revmort

 

Acceleration Clause - the part of a contract that says when a loan may be declared due and payable

 

Actuarial Risk – uncertainty about how long borrowers will live

 

Adjustable Rate - an interest rate that changes, based on changes in a published market-rate index

 

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

 

Appreciation - an increase in a home’s value

 

Area Agency on Aging (AAA) - a local or regional nonprofit organization that provides information on services and programs for older adults

 

American Association of Retired Person (AARP) – a national organization providing information on services and programs for older adults

 

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

 

Credit Line (Line of Credit) - 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

 

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 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 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

 

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.

 

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

 

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 must be repaid; when it becomes "due and payable"

 

Mortgage - a legal document making a home available to a lender to repay a debt

 

Mortgage Insurance – insures the investor against risk. If the amount of the loan exceeds the amount that the lender can collect from the sale of the home, the mortgage insurance protects the lender against loss

 

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 administration process of setting up a mortgage, including preparing documents

 

Origination Fee – a fee charges to the borrower for the origination process. 

 

Proprietary Reverse Mortgage - a reverse mortgage product owned by a private company

 

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

 

Set-Aside – funds for specialized uses that are netted out when determining the borrower’s principal limit

 

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