Posted by CMSNJ on 7/1/06 7:29am
Msg #130228

Reverse mortgage Amounts borrowed

I did a reverse mortgage yesterday and I was just curious as to why the amount listed on the HECM and note is higher that the amount of money the borrower has access to. Is it because of interest and what not? Are the figuring in advance how much will accrue on the amount borrowed? Or will she eventually have access to more money, up to the stated maximum amount?

I have done some research last night and this morning and I have found a ton of useful information from all of you here and on the web, but I can't find the answer to this one. TIA
~Christine

Reply by LkArrowhd/CA on 7/1/06 9:27am
Msg #130232

Re: Reverse mortgage Amounts borrowed-Christine did you

order Brenda TX's reverse mortgage book, if not, you can, she accepts paypal?

Reply by Kevin/Ct on 7/1/06 10:32am
Msg #130235

This point came up in a closing this week. The lender explained that depending on the borrower's age and a number of other factors, the borrower can typically cash out 65% to 70% of the equity in the property. The balance offsets the interest that will continue to accrue on the reverse mortgage. The trade off is that in addition to cashing out the equity the borrower gets to live on the property for the rest of his/her life without any mortgage payments.

Reply by BrendaTx on 7/1/06 10:55am
Msg #130237

**Or will she eventually have access to more money, up to the stated maximum amount? **
That depends on how much the property appreciates during her life. This is a maximum amount that might become feasible in her lifetime, but probably won't. Don't answer that question directly without the LO's input. Kevin's LO is telling the same basic story mine is, just to clarify a little (or muddy up)

Your security instrument will state:

***This Security Instrument secures to Lender: (a) the repayment of the debt evidenced by the Note, with interest, and all renewals, extensions and modifications of the Note, up to a maximum principal amount of $xxxxxxx.xx Dollars.***

Until you get involved with an LO and get the words from the horse's mouth, or in this case, a lawyer/Kevin, the safest and most appropriate response for a notary is to either know what HUD says verbatim, or to point back to the settlement statement as how much is involved in that particular transaction.

However, bear in mind that the people have been counseled thoroughly and you are somewhat limited as to what you can "explain" to them because this is not your regular daily note and DOT or Mortgage.

Here are some terms from HUD...since I am not a lawyer, I cannot tell you which one is the right definition, but I think you can figure it out by reading these.
=====================
HECM Terminology

Principal Limit: the maximum mortgage amount; equals the maximum claim amount times the principal limit factor

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

Net Principal Limit: the maximum mortgage amount minus financed loan costs and set asides
Maximum Claim Amount: whichever is less: the appraised value of the home, or HUD's 203-b limit for the county in which the home is located

203-b Limit: the maximum amount of home value that can be used to calculate the principal limit; varies by county, and also equals the limit on HUD's loan insurance under section 203 (b) of the National Housing Act

Rev Morts are dicey at best if you get into discussing what amount the bwr might get in the future. Not your call...however, inquiring minds want to know. I understand!

Keep referring them back to the HUD and get your definitions at the table from the agreement which is part of the package just to stay safe.

Reply by BrendaTx on 7/1/06 11:00am
Msg #130238

**That depends on how much the property appreciates during her life. This is a maximum amount that might become feasible in her lifetime, but probably won't. **

And, I meant to add that the number basically relates to what all factors have been considered as a means to insure the loan MIP as well.

Reply by Leslie_Mo on 7/1/06 12:36pm
Msg #130254

The attached information is something Reeves Hary/Signing Pro sent me and it sounds like it may be what you are asking.

• Duplicate Note, Deed of Trust “HUD insurable amount “

This package may have a duplicate note, deed of trust and conversion document. The reason is that when the escrow officer processes the package, one set of documents is sent to the lender and one set is sent to HUD. HUD (Housing Urban Development) insures the mortgage at 1 1/2 times the appraised value of the home (loan amount) or the Maximum FHA Limit in the County in which they reside, whichever is less.

The amount on the Deed of Trust or Mortgage is the “HUD insurable amount” not the loan amount that you see on a refinance or a conventional loan. In a Reverse Mortgage we notarize both deeds and treat each package as one mortgage or loan