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

 

AARP:
A national nonprofit, nonpartisan membership organization dedicated to helping people age 50 and over improve the quality of their lives as they age.

 

Account Executive (AE):
The liaison between a broker or correspondent and MetLife Home Loans, a division of MetLife Bank, N.A.

 

Adjustable rate:
An interest rate that adjusts, based on changes in a published market-rate index.

 

ADP code::
HUD designation on loans insured by the FHA. The HECM Direct Endorsement Codes are as follows

 

                    HECM Standard (New & Old) ADP Codes

                    HECM Assignment/Fixed             951

                    HECM Assignment/ARM              952

                    HECM Condominium/Fixed         957

                    HECM Condominium/ARM           958

                    HECM SaverADP Codes

                    HECM Assignment/Fixed             951

                    HECM Assignment/ARM              952

                    HECM Condominium/Fixed        957

                    HECM Condominium/ARM          958

 

Annuity: 
An insurance product providing a monthly cash advance for life. 

 

Appreciation:
An increase in a property’s value. 

 

CAIVRS:
HUD's Credit Alert Interactive Voice Response System. This system (which is now computerized, not voice-activated) indicates if a borrower is presently delinquent on a Federal loan or has had a claim paid within the previous three years on a loan insured by HUD. 

Cap:
A limit on the amount an adjustable interest rate may go up or down during a specified time period. 

 

Closing costs: 
Loan fees charged to the customer at the time of closing, which may include but are not limited to: appraisal, title insurance, FHA mortgage insurance premium, origination fee, recording fees and escrow/settlement fees. With a reverse mortgage, these costs may be financed into the loan.  

 

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. 

Counseling:
Required from a third party for all reverse mortgage borrowers. The counseling must be completed and certificate received by the lender prior to processing the loan. AVM or preliminary title may be ordered prior to counseling.

 

Creditline:
A credit account that the borrower can access on an as-need basis; also known as a line of credit. 

 

Current interest rate:
In the HECM program, the interest rate currently being charged on the outstanding loan balance; it equals the one-year rate for U.S. Treasury Securities, plus a margin. 

 

Default:
A nonperformance or breach of the terms of the loan. Defaults on a reverse mortgage can include, but are not limited to: failure to maintain property, failure to pay property taxes and/or insurance (hazard and/or flood), and failure to repay the loan after a repayment notice has been issued. 

 

Depreciation:
A decrease in a property’s value. 

 

EPLS:
Excluded Parties List System. General Services Administration's (GSA’s) List of Parties Excluded from Federal procurement or nonprocurement programs. See the EPLS website, www.epls.gov.  

 

Expected rate:
In the HECM program, the rate used to determine a borrower's available loan amount; it equals the 10-year rate for U.S. Treasury Securities, plus a margin.  

 

Fannie Mae:
A government-sponsored enterprise (GSE) chartered by Congress with a mission to provide liquidity, stability and affordability to the U.S. housing and mortgage markets. Fannie Mae operates in the U.S. secondary mortgage market, working with mortgage bankers, brokers and other primary mortgage market partners to help ensure that they have funds to lend home buyers at affordable rates.  

 

Federal Housing Administration (FHA):
The part of the U.S. Department of Housing and Urban Development (HUD) that insures HECM loans. 

 

Fixed monthly loan advances:
Payments of the same amount which are made to a borrower each month. 

 

Fixed rate HECM:
A Home Equity Conversion Mortgage with a fixed interest rate set at closing for the life of the loan. 

 

HECM:
Home Equity Conversion Mortgage (see definition below). 

 

HECM fixed rate:
A Home Equity Conversion Mortgage with a fixed interest rate set at closing for the life of the loan. 

 

Home Equity Conversion Mortgage (HECM):
The reverse mortgage program insured by the Federal Housing Administration (FHA), a U.S. government agency.  

 

Home equity line of credit:
A mortgage loan that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified portion of the borrower's equity in a property. 

 

HUD:
U.S. Department of Housing and Urban Development. 

 

Initial interest rate:
The original interest rate of a mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). In the HECM program, the interest rate that is first charged on the loan balance beginning at closing; it equals the one-year rate for U.S. Treasury Securities, plus a margin.  

 

LDP:
HUD’s Limited Denial of Participation list.  

 

Lending limit:
A portion of the home’s value that is used when calculating the principal limit; varies by county for HECM products. 

Line of credit:
A credit account that the borrower can access on an as-needed basis. Also known as a credit line. 

 

Loan advances:
Payments made to a borrower from an established line of credit.  

 

LOS:
Loan Origination System  

 

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 rate. 

 

Maturity:
When a loan is due and payable. 

 

Maximum claim amount:
In the HECM program, the lesser of the home’s appraised value or the maximum FHA 203b county limit for a one-unit building in the county where the property is located, even if the property is a 2-, 3- or 4-unit property. The lesser of the appraised value or the Fannie Mae single-family national lending limit. 

 

Maximum financing:
A mortgage amount that is within five percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product. 

 

Merchandise trade balance:
Released monthly, this figure measures the difference between imports and exports. When exports are higher than imports, there is a surplus in the balance of trade. When imports are higher than exports, there is a deficit. The import-export differential is referred to as the trade gap. 

 

MIP:
Mortgage insurance premium (see definition below) 

 

Modified tenure:
A reverse mortgage product that combines a tenure loan with a line of credit. 

Modified term:
A reverse mortgage product that combines a term loan with a line of credit. 

 

Money supply:
The amount of money in circulation. M1 = cash + regular demand deposits + other check-type deposits. M2 = M1 + savings and small denomination time-deposits. When the money supply figure is up, it is an inflationary factor and, therefore, generates concern that the Federal Reserve will tighten money growth by allowing short-term interest rates to rise. 

 

Mortgage insurance:
Protects the lender/investor against loss and risk if the borrower owes more than what can be collected from the sale of the property.  

 

Mortgage Insurance Premium (MIP):
Guarantees that the borrowers will receive the promised loan advances and not have to repay the loan as long as they live in the home. 

 

Negative amortization:
A gradual increase in mortgage debt that occurs when the monthly payment is not large enough to cover the entire principal and interest due. The amount of the shortfall is added to the remaining balance to create negative amortization. 

 

Net cash flow:
The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments and subordinate financing payments. 

 

Net worth:
The value of a person's assets, including cash, and minus all liabilities. 

 

Nonconforming loan:
A loan that exceeds Fannie Mae’s legislated mortgage amount limits. Also called a Jumbo loan. 

 

Non-farm payroll:
A component of total civilian employment that measures the number of people employed in all activities except agriculture. 

 

Non-recourse mortgage:
As relates to the reverse mortgage, when the loan becomes due and payable the borrowers or their estate may not have to repay more than the property's fair market value and no other assets may be attached if the mortgage balance is more than the property value. If the home is sold, the lender cannot claim more than the fair market price received as payment of the loan—even if the loan balance exceeds the fair market value at the time of sale—provided that the sale is an arm’s length transaction in accordance with HUD guidelines.  

 

Original principal balance:
The total amount of principal owed on a mortgage before any payments are made. 

 

Origination:
The process of setting up a mortgage, including preparing documents. 

 

Origination fee:
The fee charged to the borrower for processing the loan. The origination fee is stated in the form of points. One point is one percent of the mortgage amount.
HECM origination fees are regulated by HUD.  

 

Owner financing:
A property purchase transaction in which the property seller provides all or part of the financing.

 

PITI reserves:
Principal, interest, taxes and insurance reserves — a cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The PITI reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months. 

 

Point:
A one-time charge by the lender for originating a loan. A point is one percent of the amount of the mortgage. 

 

Power of attorney:
A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or periods of time. 

 

Prearranged refinancing agreement:
A formal or informal arrangement between a lender and a borrower, in which the lender agrees to offer special terms (such as a reduction in costs) for the future refinancing of a mortgage being originated. Offered as an inducement for the borrower to enter into the original mortgage transaction. 

 

Principal limit:
The total borrowing power available to the borrower at origination. With a reverse mortgage, it is calculated based on the borrower’s age, maximum claim amount, loan type and expected average interest rate.  

 

Producer Price Index (PPI):
Monthly measurement of the level of prices for all goods produced and imported for sale in the primary marketplace. Increase in the PPI tends to lead other measures of inflation.  

 

Proprietary reverse mortgage:
A reverse mortgage product owned by a private company. 

 

PUD:
Planned Unit Development — a real estate project in which the individual owners may have rights or nonexclusive rights to a common area in addition to the exclusive ownership of their own unit and residential lot (e.g., a street, clubhouse, pool, playground, etc.). HUD no longer requires PUD approval. 

 

Qualifying ratios:
Consists of two separate calculations: housing expense as a percent of income ratio and total debt obligations as a percent of income ratio. Used in determining whether a borrower can qualify for a traditional mortgage. 

 

Quit claim deed:
A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made. 

 

Rate-improvement mortgage:
A fixed-rate mortgage that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early years of the mortgage term. 

 

Rate lock:
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time.

 

Repayment:
The point at which the reverse mortgage becomes due and payable, which occurs when the last surviving borrower sells or permanently leaves the home; the homeowner fails to pay taxes or homeowner’s insurance, or to maintain the home; or when other conditions of the loan are not met.

 

Retail sales:
Key components include the sale of automobiles, building materials, furniture, clothing and gasoline as well as items from department stores, food stores, restaurants and drug stores. High retail sales are an indication of economic growth and an expanding economy.  

 

RESPA:
The Real Estate Settlement Protection Act, which governs mortgage lenders and loan origination. 

 

Reverse mortgage:
A type of loan that enables older homeowners (62+ years) to borrow from the equity in their homes. The loan proceeds are paid from a lender to the homeowner and may be in the form of a lump-sum payment, monthly payments, cash withdrawals or a combination of these. The borrowers continue to live in and own their home, even if one of the co-borrowers passes away, as long as the terms of the loan are met. Unlike other types of home equity-based loans, monthly mortgage payments are not required. The borrower is required to continue paying property taxes and homeowners insurance, and to maintain the home's condition. The loan does not have to be repaid until the last remaining borrower permanently leaves or sells the home. Repayment is usually done through the sale of the house or other estate assets.  

 

 

Secured loan:
A loan that is backed by collateral. 

 

Security:
The property that will be pledged as collateral for a loan. 

 

Seller take-back:
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. 

 

Servicing:
The process of administering a loan after closing, such as maintaining loan records, sending statements and remitting funds to the borrower. 

 

Supplemental Security Income (SSI):
A federal monthly income program for low-income persons who are age 65+, blind or disabled. 

 

Survey:
A drawing or map showing the precise legal boundaries of a property and the location of improvements, easements, rights of way, encroachments and other physical features. 

 

Tango™:
MetLife Home Loans’ proprietary reverse mortgage point-of-sale system, used by our brokers and correspondent lenders to manage leads, generate loan scenarios, generate documents and submit loans for underwriting.  

 

Tenancy by entirety:
A type of joint ownership of property that provides rights of survivorship available only to a husband and wife. 

 

Tenancy in common:
A type of joint ownership in a property without rights of survivorship. 

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. 

 

Title:
A legal document evidencing a person's right to or ownership of a property. 

 

Title company:
A company that specializes in examining and insuring titles to real estate. 

Title insurance:
Insurance to protect the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of property. 

 

Title search:
An examination of the public records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding. 

Total Annual Loan Cost (TALC) rate:
The projected annual average cost of a reverse mortgage including all itemized costs. 

 

TPO:
Third-party originator.  

 

Transfer tax:
State or local tax payable when title passes from one owner to another. 

 

T-rate:
The rate for U.S. Treasury Securities used to determine the initial, expected and current interest rates for the HECM program.

 

Truth-in-Lending Act:
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges. 

 

Underwriting:
The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's creditworthiness and the quality of the property itself. 

 

Unemployment rate:
The percent of the civilian labor force currently unemployed. If unemployment figures are up, it indicates a lack of expansion within the economy and is, therefore, good for the bond market. Conversely, a big gain in employment would be an obvious cue for the Federal Reserve to tighten (raise) either the federal funds rate or the discount rate. 

 

Unpaid Principal Balance (UPB):
At the time of closing, the UPB consists of the amount of funds actually disbursed (i.e., closing costs, lien advances, other draws and any other items paid at that time). After closing, the UPB will increase due to the addition of interest, payments to or for the borrower, and servicing fees actually incurred; it will decrease by any payments paid to reduce the principal.

 

VA loan:
A loan that is guaranteed by the U.S. Department of Veteran Affairs. Also referred to as a government mortgage. 

Voluntary conveyance:
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called “deed-in-lieu.” 

 

What-if analysis:
An affordability analysis that is based on a what-if scenario. Useful if borrowers do not have complete data or want to explore the effect of various changes to income, liabilities or available funds, or to the qualifying ratios or down-payment expenses that are used in the analysis. 

 

What-if scenario:
A change in the amounts used as the basis of an affordability analysis. Can include changes to monthly income, debts or down payment funds, or to the qualifying ratios or down payment expenses that are used in the analysis. Borrowers can use a what-if scenario to explore different ways to improve their ability to afford a home. 

 

Wraparound mortgage:
A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee. The first mortgage portion of the payments is forwarded to the first mortgagee.