GLOSSARY

203-b limit - the dollar limit in each county for how much of a home's value can be used to determine the amount of money you can get from a federally insured HECM reverse mortgage; the name comes from Section 203-b of the National Housing Act


• AARP model specifications - rules recommended by AARP for analyzing and comparing reverse mortgages
  
  
• Acceleration clause - the part of a contract that says 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
  
  
• Annuity - a monthly cash payment you get from an insurance company for the rest of your life.
  
  
• Appraisal - an estimate of 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
  
  
• 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
  
  
• Condemnation - a court action saying a property is unfit for use: also, the government taking private property to use for the public by the right of eminent domain
  
  
• Credit line - 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 (see below)
  
  
• Deferred payment loans (DPLs) - reverse mortgages that give you a lump sum of cash to repair or improve a home; usually offered by state or local governments
  
  
• Depreciation - a decrease in the value of a home
  
  
• Eminent domain - the right of a government to take private property for public use; for example, taking private land to build a highway
  
  
• 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 (see below)
  
  
• 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 reverse mortgage guaranteed by the federal government so you will always get what the loan promises; also, 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 - turning home equity into cash without having to leave your home or make regular loan repayments
  
  
• Home Equity Conversion Mortgage (HECM) - the only reverse mortgage program insured by the Federal Housing Administration, a federal government agency
  
  
• Initial interest rate - in the HECM program, the interest rate that is first charged on the loan beginning at closing; it equals the one-year rate for U.S. Treasury Securities, plus a margin
  
  
• 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 to a borrower, or to another party on behalf of a borrower
  
  
• Loan balance - the amount owed, including principal and interest; capped in a reverse mortgage by the value of the home when the loan is repaid.
  
  
• 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
  
  
• 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 process of setting up a mortgage, including preparing documents
• Property tax deferral (PTD) - reverse mortgages that pay annual property taxes; usually offered by state or local governments
  
  
• Proprietary reverse mortgage - a reverse mortgage product owned by a private company
  
  
• Reverse annuity mortgage - a reverse mortgage in which a lump sum is used to purchase an annuity that gives the borrower a monthly income for life.
  
  
• 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 recission - 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
  
  
• Shared equity - an itemized loan cost based on a percent of a home's value at loan maturity; for example, a 5% shared equity fee on a home worth $200,000 at maturity would be $10,000
  
  
• 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
  
  
• Uninsured reverse mortgage - a reverse mortgage that becomes due and payable on a specific date
  
  

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