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.
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.
