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Your Reverse Mortgage Roadmap
1. BORROW WITH CONFIDENCE:
YOUR ROAD MAP TO
A REVERSE MORTGAGE
National Reverse Mortgage Lenders Association
2. 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.
3. 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?
4
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
5
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.
6
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.
7
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.
8
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.
9
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.
10
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:
11
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.
12
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.
13
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.
14
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;
15
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
”
16
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.
17
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.
18
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
19
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;
20
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;
21
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
22
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
23
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.
24
25. 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).
-----------------------------------
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
25
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.
26
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.
27
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.
28
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.
29
30. Once the agreement is executed, the new pay-
ment plan will go into effect the first business
day of the next month.
-----------------------------------
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
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.
30
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.
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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 REDLIGHT
also audit deaths All reverse mortgage
of borrowers using borrowers must
a variety of tools. be at least 62.
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
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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
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34. 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.
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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.
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36. 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
