HECM Terminology with complete solutions 100% pass

Principal Limit the maximum mortgage amount; equals the maximum claim amount times the principal limit factor. The maximum amount of money available from the loan at any given time, including the amount already borrowed, any set-asides, and any remaining available funds. Principal Limit Factor 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 00:02 01:15 Net Principal Limit the maximum mortgage amount minus financed loan costs and set asides (Principal limit (minus set-asides) minus loan balance = what the borrower can get) Maximum Claim Amount (MCA) 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) 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 Single national limit which replaced the 203(b) limit for the purposes of determining Maximum Claim Amounts, beginning November 2009. Federal Housing Administration (FHA) is the part of HUD that administers the HECM insurance program. Fannie Mae purchases HECM loans, in effect, providing the funds that are advanced to HECM borrowers. Home equity means the value of a home minus any debt against it. Single-purpose reverse mortgages are offered by some state and local government agencies. Each loan can only be used for a single purpose. Federally-insured reverse mortgages are known as Home Equity Conversion Mortgages (HECMs). Proprietary reverse mortgages are developed, owned, and insured by private companies. They may be more costly than the federally-insured HECM.