Reverse Mortgage NRMLA
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Reverse Mortgage NRMLA

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Reverse Mortgage NRMLA

Reverse Mortgage NRMLA

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Reverse Mortgage NRMLA Reverse Mortgage NRMLA Document Transcript

  • BORROW WITH CONFIDENCE: YOUR ROAD MAP TO A REVERSE MORTGAGE National Reverse Mortgage Lenders Association
  • Any new journey is much easier when you have a good map. The members of the National Reverse Mortgage Lenders Association (NRMLA) are dedicated to guiding you through the features of reverse mortgages and the process of obtaining one. We will equip you with everything you need to know to decide if a reverse mortgage might be the right financial instrument for you. To kick off this journey, here is a map that shows you the route you will be taking and what you can expect along the way.
  • Your Road Map to a Reverse Mortgage YOUR ITINERARY 1. AWARENESS 4 You hear about a reverse mortgage 2. First Stop: UPFRONT EDUCATION 5 - 6 You learn about a reverse mortgage 3. Next Stop: COUNSELING 13 - 16 Your third party educator 4. APPLICATION / FEES / DISCLOSURE 17 - 25 You begin the process 5. LOAN PROCESSING AND UNDERWRITING 25 - 26 You receive approval 6. CLOSING 27 - 28 You finish the process 7. DISBURSEMENT OF FUNDS 29 - 30 You receive your proceeds 8. LIFE OF LOAN ISSUES 30 - 31 You meet your responsibilities 9. Last Stop: SETTLING THE LOAN ACCOUNT 32 - 34 You repay your loan 10. THE NRMLA ADVANTAGE 34 You need information 11. NRMLA’S PLEDGE TO 35 REVERSE MORTGAGE BORROWERS
  • 4 ----------------------------------- 1. AWARENESS ----------------------------------- You are 62 years or older. You own your own home. Or your parents are 62 or older and own their own home. You hear about reverse mort- gages from a news article or an advertisement or a website. Or maybe from a friend or relative. Or you might contact a reverse mortgage lender on the phone or on the internet. You hear that you can borrow against the equity in your home while you still live in it. You hear that this is a loan you do not have to pay back until you leave the home permanently. Your interest is sparked. This might be just the right financial solution for a current or a future need. You can use a reverse mortgage to pay off your existing mortgage and lower your monthly expenses. You can use it to pay for health care. Or it might just provide you with the peace of mind that comes from knowing you have cash available. As a responsible consumer, you want to educate yourself, you want to learn as much as you can about a reverse mortgage. So where do you turn?
  • 5 ----------------------------------- 2. First Stop: UPFRONT EDUCATION ----------------------------------- How do you begin to learn about a reverse mortgage? You contact a reverse mortgage professional at a lender who specializes in these loans. We recommend you contact one who is a member of the National Reverse Mortgage Lenders Association (NRMLA). All NRMLA members must adhere to a Code of Ethics & Professional Responsibility and a Pledge to Reverse Mortgage Borrowers in which they promise to serve you with integrity and professionalism. Your best interests are our members’ only consideration. A NRMLA member will: ➔ Present you with a full range of reverse mortgage products that are available from his/her company; ➔ Explain the terms, benefits and costs of each product; ➔ Clearly explain his/her responsibilities to you; ➔ Clearly explain your responsibilities under the terms of a reverse mortgage, including paying
  • 6 property taxes on time, maintaining insurance and maintaining your home in good condition; ➔ Carefully review your income, assets and expenses to help you assess whether you can meet these obligations and determine whether the reverse mortgage is the best financial product for your situation; ➔ Meet with you as frequently as you need and, at your request, also meet with other members of your family or your financial advisors; ➔ Explain that, according to Federal statute, you must complete a reverse mortgage counseling session and provide you with a list of HUD-approved counselors you may contact. (As a means of maintaining a hands-off relationship so that you get unbiased third-party advice, a lender is not permitted to recommend any specific counselor); ➔ Prepare you for making your counseling session the most effective by providing you with questions you might want to ask and information you should confirm.
  • 7 TYPES OF REVERSE MORTGAGES The products, all or some of which a lender may have available, include: ------------------------------------------------------------------------------ Home Equity Conversion Mortgage (HECM) ------------------------------------------------------------------------------ HECM is the commonly used acronym for a Home Equity Conversion Mortgage, which is a reverse mortgage insured by and regulated by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD). A HECM is not a government loan. It is a loan issued by a private lender that is insured by the Federal Housing Administration (FHA). The borrower pays an insurance fee upfront at loan origination, and each year the borrower is charged an annual insurance fee of 1.25% of the outstanding loan balance. Your loan balance thus increases by the amount of this fee. The insurance purchased by this fee protects the borrower (1) if and when the lender is not able to make a payment; and (2) if the value of the home upon selling is not enough to cover the loan balance. In the latter case, the FHA will pay off the remaining balance. Currently, HECMs make up 99% of the reverse mortgages offered in America. HECMs come with rules and regulations that include a requirement that the borrower receive third-party counseling.
  • 8 ------------------------------------------------------------------------------ HECM Options ------------------------------------------------------------------------------ HECM Standard The term “HECM Standard” refers to a traditional Home Equity Conversion Mortgage,which has been available since 1989. There are currently more than 500,000 senior homeowners who have standard HECMs on their homes. The amount of money you receive is based on a table created by HUD and is based upon your age, the current appraised value of your home and interest rates. Fees can include an origination fee, an upfront mortgage insurance premium (MIP), an appraisal fee, traditional closing costs and a monthly servicing fee. (More on fees later.) This product is desirable for senior homeowners who need the most money available to them. HECM Saver HECM Saver is a lower-cost version of the HECM Standard. The savings comes from a lower upfront mortgage insurance premium (MIP). The MIP collected by the Federal Housing Administration on a HECM Saver is equal to 0.01% of the value of the home, rather than 2% on a HECM Standard. On a $250,000 home, for example, you pay $25 in MIP under the Saver option, instead of $5,000 for a HECM Standard.
  • 9 The trade-off is that you receive 10-18% less money. This product is desirable for people who don’t need as much money compared to a HECM Standard, or don’t want to pay the higher fees. Because the fees are lower, and no monthly payment is required, it may also prove to be an alternative to obtaining a home equity line of credit that requires monthly payments. HECM for Purchase While retirees typically use a HECM to cover living expenses, supplement income, eliminate debts, or pay for healthcare, a growing segment of the senior population is using HECMs to purchase new homes that better suit their needs. The advantage of using a HECM for Purchase is that the new home is purchased outright, using funds from the sale of the old home, which are then combined with the reverse mortgage proceeds. This homebuying process leaves you with no monthly mortgage payments. While study after study reveals that an overwhelming percentage of seniors want to continue living in their current home for as long as possible, for some people that isn’t the best, or safest, option. HECM for Purchase offers a solution for downsizing into a place that’s more easily navigable, possibly more energy efficient, with lower maintenance costs, or which is closer to friends and family.
  • 10 ------------------------------------------------------------------------------ Proprietary Reverse Mortgages ------------------------------------------------------------------------------ Right now, very few proprietary reverse mortgages exist. However, it’s important to mention them, because market conditions may REDLIGHT To obtain a reverse mortgage on a home, that home must be your primary residence, which means you must reside there 183 days per year or more. When you obtain a reverse mortgage and each year thereafter, you must confirm your residency by signing an Annual Occu- pancy Certificate that will be provided to you by your Servicer. If you must leave the home for an ex- tended period, due to work or health or for some other reason, you should notify your servicer and coordinate winterization and other preservation issues. If you are out of the home for twelve consecutive months, your loan could be in default. If for any reason you rent the property to someone else, it precludes the property from being your primary residence and the loan is in default. If the loan is in default, your servicer will request HUD approval that the loan become due and payable.
  • 11 change in the foreseeable future when property values stabilize. Proprietary reverse mortgages are non-FHA insured reverse mortgages offered by banks and mortgage companies. They are not subject to all of the same regulations as HECMs. In some states, no counseling is required, although it is always recommended and required by some lenders. Proprietary reverse mortgages are sometimes called “jumbo” reverse mortgages, because they are taken on higher-valued homes, generally $750,000 or more. ------------------------------------------------------------------------------ Additional Information ------------------------------------------------------------------------------ In addition to company-specific educational materials provided by a lender, a prospective applicant can gather information from independ- ent sources, such as newspapers, magazine articles and informational websites. Educational material is available from HUD (hud.gov), AARP (AARP.org) and NRMLA (reversemortgage.org). Prior to being counseled, you will receive an information packet from either the counseling agency, or the lender, depending on who you contact first. This information packet will include the following materials:
  • 12 ➔ An informational document called “Preparing for Your Counseling Session” ➔ A printout of loan comparisons, so the counselor may review what you are poten- tially eligible to receive from the reverse mortgage ➔ A printout of the Total Annual Loan Cost (TALC) Disclosure required by the Federal Reserve Board on all reverse mortgage transactions. This form illustrates the cost of the loan if it is outstanding for different durations of time. ➔ The National Council on Aging (NCOA) booklet, Use Your Home to Stay at Home – A Guide for Homeowners Who Need Help Now. REDLIGHT Loan originators may not require you to purchase other financial products (i.e., annuities, long term care insurance) as a condition for getting a reverse mortgage. If they do, you should report this to HUD or NRMLA. However, once you complete your reverse mortgage loan process, you are free to use your proceeds to purchase anything you choose.
  • 13 ----------------------------------- 3. Next Stop: COUNSELING ----------------------------------- Counseling is required for all HECMs. Reverse mortgages are the only financial product (perhaps the only product, period) that require this. Why is this? Caution. Because reverse mortgages are designed for an older audience who are often on fixed incomes and involves what is usually everyone’s most valuable asset— their home—government and the reverse mort- gage industry want to make sure you have all the information you need to make the right decision. A counseling session can take place either face-to-face or by telephone. Counselors have been trained to deliver the required infor- mation either way. The session should generally last 90 minutes but can take longer as needed. Loan originators are not permitted to direct you to a specific counselor or counseling agency. Instead, they are required by HUD to provide a list of counselors, including local agencies and national intermediaries who are selected by HUD to provide counseling by telephone across the country.
  • 14 Best case scenarios indicate that scheduling a counseling session will take three to ten business days from the time you place the call to the counseling agency. Reverse mortgage “counseling” is not therapeutic or psychological counseling. It is most comparable to tutoring, extra help in under- standing something that can seem complicated due to all the details. The counselor will go over much of the same information provided to you by a lender. REDLIGHT No fees may be incurred by you or on your behalf, with the exception of a modest charge for a credit report, prior to completion of mandatory counseling.
  • 15 A counselor will: ➔ Explain a reverse mortgage to you; ➔ Explain the various reverse mortgage product options; ➔ Explain the costs; ➔ Utilize a Financial Interview Tool (FIT) to help you determine if you can afford a reverse mortgage and meet your financial obligations, such as paying your taxes and insurance; ➔ Draw your attention to alternative options that might be available to you, such as property tax deferral programs; ➔ See if you might be eligible for grant money or other financial assistance by utilizing BenefitsCheckup, a tool for identifying services, such as housing assistance, tax deferral programs, home repair grants or loans, food stamps, fuel assistance, social services or healthcare; ➔ Explain the consequences affecting the prospective borrower’s eligibility under state or federal programs and the impact on the estate or your heirs; ➔ Review the loan comparisons provided to you by the lender as well as the Total Annual Loan Cost disclosure;
  • 16 ➔ A counselor will not recommend that you obtain a specific product from any particular lender. His or her role is to provide information and clarity but not to advise; ➔ Counseling generally costs in the vicinity of $125-250 per session. Some counseling agencies are awarded various grants that sometimes enable them to offer the service free of charge. ➔ When you complete the session, both the counselor and you will sign a counseling certificate verifying you have fulfilled this requirement. A REVERSE MORTGAGE GAVE US A SECOND LEASE ON LIFE “ ”
  • 17 ----------------------------------- 4. APPLICATION / FEES / DISCLOSURE ----------------------------------- If you decide to proceed with the loan, you now select a lender and fill out a loan application. The person you deal with will be called a loan originator or reverse mortgage consultant. Filling out an application does not obligate you to take the loan. You will have opportunities to change your mind. You will be asked to select a loan payment plan. Payment plans can be fixed monthly payments, a lump sum payment, a line of credit, or a combination of these. The lender discloses the estimated total cost of the loan, as required by the federal Truth in Lending Act. The Truth in Lending disclosure specifically designed for a reverse mortgage is called a TALC, or Total Annual Loan Cost disclosure. It illustrates all of the costs of the loan based upon the loan being outstanding for three different durations of time. The costs that the lender will describe to you are capped and may be financed as part of the reverse mortgage. They can include the following: Origination Fee The origination fee covers a lender’s operating expenses associated with originating a reverse mortgage.
  • 18 Under the HECM program, which accounts for most reverse mortgages made in the U.S. today, the maximum origination fee allowed is 2% of the initial $200,000 of the home’s value and 1% of the remaining value, with a cap of $6,000. Some lenders waive or reduce the origination fees on certain products. (Note: Many of the calculations and fees on a HECM are based on the Maximum Claim Amount, which is the value of the home at the time of loan origination, but which currently has a maximum limit of $625,500.) Mortgage Insurance Premium The Mortgage Insurance Premium (MIP) is a fee paid by the borrower to the Federal Housing Administration (FHA), an agency of the federal government, to provide certain protections for both the lender and the borrower in a HECM reverse mortgage. For the HECM Standard, borrowers are charged an upfront mortgage insurance premium (MIP) equal to 2 percent of the Maximum Claim Amount, plus an annual premium thereafter equal to 1.25% percent of the outstanding balance on the HECM loan. The HECM Saver, however, was set up to reduce upfront fees. On the Saver, the upfront MIP is only .01% of the Maximum Claim Amount.
  • 19 The annual premium remains at 1.25% of the loan balance. The Federal Housing Administration collects the insurance premiums, which are placed into a mortgage insurance fund. The insurance fund guarantees borrowers that their funds will always be available to them, no matter what might happen with their lender. The lender is insured against loss if the value of the home at the end of the loan is less than the balance due. If the company servicing the loan is inter- rupted, FHA assumes responsibility for the loan, providing the borrower with uninterrupted access to proceeds from his or her reverse mortgage. In cases where the sale of the home is not enough to pay back the reverse mortgage, the insurance protects the borrower or estate from owing more than the sale price by covering losses incurred by the lender. Appraisal Fee An appraiser is responsible for assigning a current market value to your home. Appraisal fees vary by region, type and value of home, but average $450. This is the one fee generally paid in cash, often before the loan is made, and not with the loan proceeds. In addition to placing a value on the home, an appraiser must also make sure there are no major structural defects, such as a
  • 20 bad foundation, leaky roof, or termite damage. Federal regulations mandate that your home be structurally sound, and comply with all home safety and local building codes, in order for the reverse mortgage to be made. If the appraiser uncovers property defects, you must hire a contractor to complete the repairs. Once the repairs are completed, the same appraiser is paid for a second visit to make sure the repairs have been completed. Appraisers generally charge $125 dollars for the follow-up examination. If the estimated cost of the repairs is less than 15 percent of the Maximum Claim Amount, the cost of the repairs may be paid for with funds from the reverse mortgage loan and completed after the reverse mortgage is made. A “Repair Set-Aside” will be established from the reverse mortgage proceeds to pay for the cost of the repairs. The homeowner will be responsible for getting the repairs completed in a timely manner. Closing Costs Other closing costs that are commonly charged to a reverse mortgage borrower, which are the same for any type of mortgage, include: ➔ Credit report fee. Verifies any federal tax liens, or other judgments, handed down against the borrower. Cost: generally between $20-$50;
  • 21 ➔ Flood certification fee. Determines whether the property is located on a federally designated flood plane. Cost: generally about $20; ➔ Escrow, settlement or closing fee. Generally includes a title search and various other required closing services. Cost: can range between $150-$800 depending on your location; ➔ Document preparation fee. Fee charged to prepare the final closing documents, including the mortgage note and other recordable items. Cost: $75-$150; ➔ Recording fee. Fee charged to record the mortgage lien with the County Recorder’s Office. Cost: can range between $50-$500 depending on your location; ➔ Courier fee. Covers the cost of any overnight mailing of documents between the lender and the title company or loan investor. Cost: Generally under $50; ➔ 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. Varies by size of the loan, though in general, the larger the loan amount, the higher the cost of the title insurance;
  • 22 ➔ Pest Inspection. Determines whether the home is infested with any wood-destroying organisms, such as termites. Cost: Generally under $100; ➔ 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 reverse mortgage borrower’s property. Cost: Generally under $250 (Note: Cost estimates can change over time. For most current costs, consult a lender. Also, some states may have local fees that are not included here.) Servicing Fee & Set-Aside A lender typically earns monthly fees, known as servicing fees, for its administration of the loan. These can be a fixed monthly amount or calculated into the interest rate on the loan. If a fixed monthly amount is to be charged, an amount of funds will be “set-aside” from the loan proceeds, to be used to pay this monthly fee. The service fee set-aside is deducted from the available loan proceeds at closing to cover the projected costs of servicing your account. Federal regulations allow the loan servicer (which
  • 23 may or may not be the same company as the originating lender) to charge a monthly fee that is no higher than $35. The amount of money set-aside is largely determined by the borrower’s age and life expectancy. Generally, the set-aside can amount to several thousand dollars. Many lenders have either eliminated the servicing set-aside or included it in the interest rate. (Note: The servicing set aside is just a calcu- lation and not a charge. The only amount added to your loan balance is the monthly servicing fee, which is typically $35 per month or less.) Interest With a reverse mortgage, you are charged interest only on the funds (loan proceeds) that you receive. For example, if you take your loan proceeds as a line of credit, you are only charged interest on the portion of the line of credit you have withdrawn. The interest is compounded, which means you pay ongoing interest on the principal, plus accumulated interest. Reverse mortgage products are available with both fixed interest rates and variable interest rates. The variable rate is tied to an index, such as the 1-Yr. Treasury bill or the 30-Day LIBOR (London Interbank Offered Rate), plus a margin determined by yield requirements in the financial
  • 24 markets. The margin is set at the time of loan origination and does not change over the life of the loan. During the life of your loan, the loan balance increases by the amount of compounded interest accrued. Because there are no payments made by the borrower during the life of a reverse mortgage, interest is not paid on a current basis. It does not have to be paid out of your available loan proceeds either, but instead accrues, at a compounded rate, through the life of the loan until repayment occurs at the end. Other Disclosures Your lender will supply you with a large package of additional disclosure documents that are designed to help make the process as transparent as possible. One such document is the Total Annual Loan Cost (TALC) Disclosure, a form required by the Federal Reserve Board on all reverse mortgage transactions, that illustrates the cost of the loan if it is outstanding for different durations of time. The Good Faith Estimate clearly discloses line- by-line the various fees that are being charged. Other disclosures, like an amortization table, illustrate the amount of interest that will accrue, so that you are fully informed about the costs associated with getting a reverse mortgage.
  • 25 ----------------------------------- 5. LOAN PROCESSING ----------------------------------- The lender orders an appraisal by a professional appraisal firm. It is paid for by the homeowner. This determines the market value of the home. However, the final value is not established until the Loan Underwriter employed by the lender reviews the appraisal and approves it. After receiving all pertinent information from the homeowner and obtaining other required items, the loan package is submitted to the Loan Underwriter for final approval. It generally takes anywhere from 1-5 days to underwrite a loan. Underwriting involves verifying all information and making sure the loan complies with all laws and regulations. A conditional approval is provided with a final home value and any repairs or additional The application process formally begins after counseling, once you provide the lender with your loan application and the signed disclosures as well as required information, including verifi- cation of a Social Security number, a copy of the deed to your home, information on any existing mortgage(s), and a signed counseling certificate (signed by both the homeowner and counselor).
  • 26 inspections required, as well as anything else the lender may need in order to issue a final approval, so the loan can close. REDLIGHT Your home is the collateral for a HECM loan and must be maintained to meet HUD stan- dards. As part of the loan origination process, your Lender will order an inspection of your home and the inspector will deliver a report indicating if repairs are required. If so, a portion of your loan will be set aside to pay for those repairs. It is your responsibility to hire a contractor to do the repairs. Once the repairs are completed, the contractor will sign a lien release form. Then the completed repairs will be inspected. At that point, the Servicer will disburse the funds from the set- aside to pay the contractor and return any remaining funds to your loan proceeds. A borrower has one year from the closing date of the loan to complete the repairs. If repairs are not completed, loan payments will be suspended until they are completed or the Servicer may request that HUD deems the loan due and payable.
  • 27 ----------------------------------- 6. CLOSING ----------------------------------- Once the loan application has been approved, a closing (signing) of the reverse mortgage is scheduled with a title agent or attorney (depending on the state). The lender should confirm the payment plan the borrower wishes to receive (i.e. amount of fixed monthly pay- ments, line of credit), plus any requested cash the homeowner wishes to receive in a lump sum at funding. Closing documents and final figures are prepared. Closing costs are normally financed as part of the loan, but the homeowner is allowed to pay any costs in lieu of financing, if they so choose. If existing liens are identified, the payoffs are updated accordingly. Your closing agent will pay REDLIGHT A reverse mortgage must be the only lien on a property. This means, in order to obtain a reverse mortgage you must pay off any existing mortgage(s) or other obligations for which a lien has been placed on the property. You can use your reverse mortgage proceeds to pay off the mortgage or other obligations.
  • 28 off all existing liens, verify taxes are paid and make sure that you have a current homeowner’s insurance policy. Before closing on a reverse mortgage, you may consider seeking the advice of a tax professional or elder law attorney in the event you are faced with a situation that can affect your taxes, Medicaid or SSI eligibility. Social Security and Medicare are not impacted at all by a reverse mortgage. Under the best case scenario, it takes a few business days to confirm all fees and payoffs, schedule a closing date, prepare the documents and communicate to all parties involved. Closing agents who are NRMLA members will not pressure you to close by a certain time frame that you are unable to meet or uncomfortable meeting. And you still have an opportunity to change your mind about getting the loan.
  • 29 ----------------------------------- 7. DISBURSEMENT OF FUNDS ----------------------------------- The homeowner has three business days after signing the papers to cancel the loan. (These three days are known as the rescission period.) Upon expiration of this period, the loan funds are disbursed. The homeowner accesses the funds in the form of the payment option selected. Any existing debt on the home is paid off. A new lien is placed on the home. The homeowner may use the loan proceeds for any purpose. The only exception to a homeowner’s right of rescission is on a HECM for Purchase reverse mortgage. There is no rescission option on a purchase money mortgage. You can choose to receive the money from a reverse mortgage all at once as a lump sum, in fixed monthly payments either for a set term or for as long as you live in the home, as a line of credit, or as a combination of these. If you select fixed payments, your loan ser- vicer will disburse them on the first business day of each month. As a borrower, you have the right to change your payment plan at any time. You simply request a new Payment Plan Agreement form from your Servicer. A change may include a small administrative fee of no more than $20.
  • 30 ----------------------------------- 8. LIFE OF LOAN ISSUES ----------------------------------- After the loan closes, a loan “servicer“ manages the account and is responsible for disbursing monthly payments to the homeowner (if this payment option is chosen), advancing funds from the line of credit upon request, collecting Once the agreement is executed, the new pay- ment plan will go into effect the first business day of the next month. REDLIGHT A reverse mortgage borrower is responsi- ble for staying current on their real estate taxes and homeowner’s insurance. As a borrower you can pay the taxes yourself or set up a set-aside and have the Servicer pay them for you. If you go into arrears on your taxes and insurance, you take the chance of going into default. When your loan is in default, your Servicer will request that HUD deem the loan due and payable. Additional counseling is available to those who find themselves in default. Your servicer will help you find a counselor. A counselor will work with you to try to set up an acceptable repayment plan.
  • 31 any voluntary repayments and sending periodic statements. The servicer is also responsible for monitor- ing to make sure that real estate taxes are paid, insurance is maintained on the home, and the borrower continues to live in the property. A Servicer who is a NRMLA member will always be available to make sure you are aware of the current loan balance and all costs, as well as answer any questions you might have about your reverse mortgage. The Servicer has internal systems in place to inform and alert you if there are any tax and/or insurance issues with your loan and will notify you promptly if you fall behind on either responsibility. Servicers have also implemented safety nets that are intended to prevent borrower fraud, identity theft or outside parties taking undue advantage of borrowers.
  • 32 ----------------------------------- 9. Last Stop: SETTLING THE LOAN ACCOUNT ----------------------------------- The homeowner doesn’t make any monthly mortgage payments during the life of the loan. The loan is repaid when the homeowner or last surviving spouse on title ceases to occupy the home as a principal residence. The reverse mortgage is a non-recourse loan, which means no debt will be left to the heirs and if the loan balance is less than the market value of the home, the additional equity is retained by the homeowner/heirs (if the home is sold). If a name is removed from the title, that person is no longer an owner of the home. When the person whose name is on the deed passes, the surviving spouse or the heirs are responsible for informing the loan servicer. Servicers also audit deaths of borrowers using a variety of tools. Future payments stop at death, but interest, mortgage insurance premium and homeowner’s insurance continue to accrue until the loan is settled. The Servicer will mail a notice REDLIGHT All reverse mortgage borrowers must be at least 62.
  • 33 to the surviving spouse or heirs informing them the loan is now due and payable. The surviving spouse or the heirs are responsible for paying back the reverse mortgage loan. The loan can be paid back out of other resources or by selling the home. If there is a balance from the sale of the home after the reverse mortgage is paid, it belongs to the heirs. When the borrower sells or conveys title of the property, passes away or does not maintain the property as principal residence for a period exceeding twelve months due to physical or mental illness, you have reached what is called a “maturity event.” This means the loan is due and payable. You or your estate will work closely with the Servicer to ensure your loan is paid in full in a timely manner. The estate will have six months to satisfy the debt. In the fifth month, you will receive a letter from the Servicer advising you have 30 days to settle the loan, but can request a 90-day extension, which must be approved by HUD. You may also request a second 90-day extension. If the 30-day demand letter is not responded to, or after the 90-day approved extensions expire, or if the borrower has no heirs to help pay off the loan, the Servicer may initiate foreclosure. If, however, you or your estate are actively working to either refinance your property or sell
  • 34 ----------------------------------- 10. THE NRMLA ADVANTAGE ----------------------------------- NRMLA is there for you. This Road Map has been created with you in mind to provide you all the information you need to determine if you would like to further explore reverse mortgages. If you have any additional questions, please go to reversemortgage.org and use our Get Help form. If you want to contact someone about reverse mortgages, please go to reversemortgage.org and use our Find a Lender search tool and enter a state or company. If you ever have any questions or any complaints about anything your lender, servicer, closing agent or appraiser has done, NRMLA will field and respond to those questions and complaints. Simply go to reversemortgage.org and Report a Problem. your property so as to satisfy your reverse mortgage, then foreclosure may be forestalled. The key to a proper and clean end to a loan is to work closely with your Servicer from the time the loan is called due and payable.
  • 35 ➔ Know and comply with all State and Federal laws and regulations that protect reverse mortgage borrowers. ➔ Present you with the full range of reverse mortgage products available from our company. ➔ Clearly explain the terms, benefits and costs of each product we present. ➔ Inform you of your responsibilities as a reverse mortgage borrower including paying real estate taxes on time, keeping the property properly insured and maintaining the home in sound condition. ➔ Work with you and, if you request, with your family and financial advisors either face-to-face or on the telephone as fre- quently as you choose to educate you, answer any and all questions and help you assess whether a reverse mortgage might be beneficial to you. ➔ Explain the benefits of and statutory requirement that you have reverse mort- gage counseling. ➔ Provide you with a list of HUD-approved independent housing counseling organi- zations that employ exam qualified coun- selors to serve you. The choice of the organization is yours and yours alone. ➔ Help you prepare for your counseling session to makeit most effective by pro- viding you with questions you might ask and information you should be prepared to provide to the counselor. ➔ Prepare loan comparison projections and an amortization table for the loan being pro- posed to review at your counseling session. ➔ Not charge any fees prior to the completion of mandatory counseling. ➔ Help you analyze your financial ability to meet your responsibilities under the reverse mortgage. ➔ Recommend that you seek professional advice if you are receiving assistance from SSI, Medicaid or other government programs. ➔ Recommend you seek professional tax advice when appropriate. ➔ Allow you to decide when to close on the reverse mortgage loan and not pressure you to make a decision. ➔ Provide you with opportunities during the loan process to change your mind and not take the loan. ➔ Pay off the existing liens shown of record, verify taxes are paid, and make sure that you have proper insurance upon closing. Once you have a reverse mortgage, a NRMLA member loan servicer will: ➔ Notify you promptly if you have fallen behind in your tax and insurance obligations and direct you to seek advice in the event you are not able to fulfill your responsibilities. ➔ Keep you informed of your current loan balance and of all costs by providing regular statements detailing your account. ➔ Be available to answer any questions you may have about your account. NATIONAL REVERSE MORTGAGE LENDERS ASSOCIATION PLEDGE TO REVERSE MORTGAGE BORROWERS The mission of the National Reverse Mortgage Lenders Association is to educate you about reverse mortgages and to help you determine if one might be the right choice for you. We know your home is a prized possession of you and your family. We are sensitive to the fact that utilizing your home equity while you remain in the home is a major financial and emotional decision. All NRMLA members are required to abide by a Code of Ethics & Professional Responsibility in which we pledge to serve you with integrity. Your best interests are our primary consideration. Prior to you getting a reverse mortgage, as a NRMLA member we will: You can BORROW WITH CONFIDENCE from a NRMLA member. Copyright © National Reverse Mortgage Lenders Association 2011
  • The Certified Reverse Mortgage Professional designation gives experienced lenders and loan originators an opportunity to further demonstrate their dedication and knowledge. Look for the CRMP logo on your loan originator’s business card and promotional materials. You can borrow with confidence from a NRMLA lender. National Reverse Mortgage Lenders Association 1400 16th Street, Suite 420 • Washington, DC 20036 Phone: 202-939-1760 • www.ReverseMortgage.org