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HECM Terminology (Complete Guide)
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HECM Terminology (Complete Guide)
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HECM Terminology (Complete Guide)Principal Limit Correct Ans - the maximum mortgage amount; equals
the maximum claim amount times the principal limit factor
Principal Limit Factor Correct Ans - 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 Correct Ans - the maximum mortgage amount
minus financed loan costs and set asides
Maximum Claim Amount (MCA) Correct Ans - 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) Correct Ans - 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 Correct Ans - Single national limit
which replaced the 203(b) limit for the purposes of determining Maximum
Claim Amounts, beginning November 2009.
Federal Housing Administration (FHA) Correct Ans - is the part of
HUD that administers the HECM insurance program.
Fannie Mae Correct Ans - purchases HECM loans, in effect, providing
the funds that are advanced to HECM borrowers.
A reverse mortgage Correct Ans - is a loan against home equity
providing cash
advances to a borrower, and requiring no repayment until a future time.
Home equity Correct Ans - means the value of a home minus any debt
against it.
, Single-purpose reverse mortgages Correct Ans - are offered by some
state and local
government agencies. Each loan can only be used for a single purpose.
Federally-insured reverse mortgages Correct Ans - are known as
Home Equity
Conversion Mortgages (HECMs).
Proprietary reverse mortgages Correct Ans - are developed, owned,
and insured by
private companies. They may be more costly than the federally-insured
HECM.
TENURE Correct Ans - Borrower receives monthly payments from the
lender for as long as
the home is occupied as the principal residence.
TERM Correct Ans - Borrower receives monthly payments from the
lender for a period of
months selected by the borrower.
LINE OF CREDIT Correct Ans - 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 Correct Ans - Borrower may combine a line of credit
with monthly
payments for fixed number of months (term option).
MODIFIED TENURE Correct Ans - 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 Correct Ans - 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.
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