Posted by snoopdogMs on 9/15/08 8:26pm
Msg #264308

question for the RM specialists

I did an app. for a RM with a TIL disclosure indicating there would be a payoff in 10 yrs.(2018). Also an article came out in our Sun. paper about RM's, explaining the 3 ways that the RM can be repayed but then there was a paragraph that read "One exception is a "term" RM which requires borrowers to repay the loan after a set number of years. Can someone enlighten me on this payoff clause due? I did not realize the RM had this kind of feature.

Reply by GA/Atty on 9/15/08 8:55pm
Msg #264311

That doesn't sound like an RM; it sounds like a normal loan

that just doesn't require any monthly payments but instead calls for 1 payment upon maturity.

Reply by snoopdogMs on 9/15/08 9:13pm
Msg #264312

Re: That doesn't sound like an RM; it sounds like a normal loan

This was a standard RM application which included the TIL disclosure which I had never seen in a RM application packet. His application read that it was for a FHA HECM Fixed Rate. This gentleman thought he was applying for a standard RM where he could live in it till he died and then let his estate take over. He is a widower without kids.

Reply by MikeC/NY on 9/15/08 11:08pm
Msg #264316

This from the FTC's web site on reverse mortgages...

"With a reverse mortgage, you retain title to your home. You are responsible for maintaining your home and paying all real estate taxes. Depending on the plan you select, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. When you die, the lender does not take title to your home, but your heirs must pay off the loan. Usually, the debt is repaid by selling the home or refinancing the property."

Option 3 seems to be what you're referring to - so yes, they do exist.

Source:

http://tinyurl.com/589rs4

Reply by PAW on 9/16/08 7:28am
Msg #264324

Re: This from the FTC's web site on reverse mortgages...

Yes, they do exist. It really is a hybrid "deferred payment balloon" loan. Since there are no payments required for an extended period of time, it falls under the HECM guidelines which means it is a form of a reverse mortgage.

In the past 20 years, I've only seen one where there was a deferred payment balloon involved. It had an overall lower interest rate and was fixed instead of the normal adjustable rate conditions.

Reply by MW/VA on 9/16/08 9:15am
Msg #264332

I hope the borrower fully understood that this RM called for repayment in 10 years.
Depending on his age, maybe that won't be an issue. On the RM's I've done, the Note has a termination date (usually like 2090). I haven't seen one like you're describing.

Reply by MichiganAl on 9/16/08 12:19pm
Msg #264350

The termination date that you're talking about is usually their 150th birthday.

Reply by DD/OR on 9/16/08 12:28pm
Msg #264352

It sounds to me like the LO didn't advise the client correctly. So what is the client going to do? DD