New View Advisors

Resources

Reverse Mortgage Definitions

 

Crossover Loss

Crossover losses are losses that occur when a reverse mortgage loan balance exceeds the property value at the time the loan pays off.

 

Expected Rate

For adjustable rate HECMs, the Expected Rate is equal to the ten-year benchmark corresponding to the base index, as designated by FHA, plus the net margin. For fixed rate loans, the expected rate is the fixed rate itself.

 

Forward Mortgage

A forward mortgage is any mortgage where the borrower has a monthly or other periodic mortgage payment obligation.

 

General Insurance Fund (GI)

The GI is FHA’s second largest fund, comprising approximately 10.7% of FHA’s insurance-in-force, or $81 billion at 2009 fiscal year end. The FHA operates its programs through five insurance funds supported primarily by premium, fee and interest income, Congressional appropriations, and borrowing from the U.S. Treasury. The other funds are the Mutual Mortgage Insurance (MMI) fund, the Special Risk Insurance (SRI) fund, the Cooperative Management Housing Insurance (CMHI) fund, and the Hope for Homeowners (H4H) fund.

 

HECM Mortgage-Backed Security (HMBS)

An HMBS is a Ginnie Mae insured certificate backed by a pool of HECMs.

 

Home Equity Conversion Mortgage (HECM)

A HECM is an FHA-insured reverse mortgage.

 

Home Price Appreciation (HPA)

HPA is the amount of price appreciation or depreciation, typically expressed as an annual percentage, which occurs for a given single-family property, or in a given pool of single-family properties.

 

Loan Liability Guaranty (LLG)

The LLG is the net present value of cash outflows (claim payments, premium refunds, property maintenance, and selling costs) and cash inflows (premium receipts, proceeds from asset sales, and P&I from assigned mortgages) on FHA’s mortgage loan portfolio.

 

Loan To Value (LTV)

LTV is a percentage equal to the outstanding amount of the loan divided by the value of the underlying property.

 

Maturity Event

A Maturity Event is when one of the following occur:
a) the property is sold or transferred
b) the last remaining borrower dies
c) the property ceases to be the borrower's principal residence
d) the borrower fails to occupy the property for more than 12 consecutive months
e) the borrower defaults under the terms of the mortgage or note.

 

Maximum Claim Amount (MCA)

The MCA is a proxy for home value calculated by HUD. It is equal to the lesser of the value of property upon which the Principal Limit is based and the FHA limit, currently $625,500 for the lower 48 states. The $625,500 limit while temporary, has been extended by HUD through 2012.

 

Mortgage Insurance Premium (MIP)

The MIP is the borrower-paid mortgage insurance payment. The upfront MIP is 2% of the Maximum Claim Amount for the HECM Standard, and 0.01% for the HECM Saver. The ongoing annual MIP is 1.25% of the loan balance for both the Standard and the Saver. The annual MIP was raised from 0.50% effective October 1, 2010.

 

Mutual Mortgage Insurance Fund (MMI)

The MMI is FHA’s largest fund, comprising approximately 89% of FHA’s insurance-in-force, or $674 billion at 2009 fiscal year end. The FHA operates its programs through five insurance funds supported primarily by premium, fee and interest income, Congressional appropriations, and borrowing from the U.S. Treasury. The other funds are the General Insurance (GI) fund, the Special Risk Insurance (SRI) fund, the Cooperative Management Housing Insurance (CMHI) fund, and the Hope for Homeowners (H4H) fund.

 

Negative (Positive) Subsidy

A negative (positive) subsidy is a surplus (deficit) created by subtracting crossover losses occurred from the mortgage insurance premium collected. Negative and positive subsidies are terms used by HUD to describe their insurance premiums’ impact on the federal budget.

 

Net Principal Limit

The Principal Limit, less the amount that has been borrowed.

 

Prepayment

A prepayment occurs when the loan balance is paid in full.

 

Principal Limit

The principal limit is the amount the HECM borrower can borrow at closing, equal to the allowable LTV ratio multiplied by the Maximum Claim Amount.

 

Proprietary Reverse Mortgage

A proprietary reverse mortgage is any non FHA-insured reverse mortgage.

 

Reverse Mortgage

A reverse mortgage is a first-lien, home equity line of credit on a primary residence, with no monthly payment obligation and an event-based maturity, for homeowners aged 62 and older.

 

Servicing Fee Set-Aside

The servicing fee set-aside is an estimate of the present value of all future servicing costs, which is deducted from the Principal Limit, but not added to the loan balance.

 

T&I Default

A T&I default is a borrower default on real estate taxes and/or homeowner’s insurance. A HECM in T&I default is not eligible for put back to FHA.

 

Total Annual Loan Cost (TALC)

The TALC is a summary of all of the costs associated with taking out a reverse mortgage, disclosed as a single annual average rate.