NRMLA CRMP key terms

The federally insured reverse mortgage program for homeowners age 62 and older, administered by HUD and insured by FHA, allowing borrowers to convert home equity into loan proceeds without monthly principal and interest payments.

The maximum loan amount a HECM borrower may access, calculated from the youngest borrower's age, current expected interest rate, and the home's appraised value or the HECM lending limit.

A cap on how much of the principal limit may be drawn during the first twelve months after closing, generally 60 percent, with reduced availability above that threshold for the life of the loan.

The interest rate used at origination to calculate the principal limit and projected loan balance; for adjustable-rate HECMs it equals the initial rate plus the lender's margin.

The actual rate charged on the loan at closing, which for adjustable-rate products may adjust over time within the cap structure disclosed to the borrower.

The rate at which the loan balance and available credit line increase over time, reflecting accrued interest, mortgage insurance premiums, and servicing fees added to the balance.

The maximum appraised property value HUD will recognize for HECM calculations, adjusted periodically; appraised values above this ceiling do not increase the principal limit.

FHA insurance charged on HECMs, consisting of an upfront premium at closing and an annual premium accruing monthly on the outstanding balance, protecting lenders against loss.

The borrower protection meaning that total repayment is limited to the home's value or the loan balance, whichever is less, so heirs are never personally liable for a shortfall.

The underwriting review of a HECM applicant's income, credit history, and expenses to judge the ability to pay property charges, potentially requiring set-asides or rejecting the application.

A portion of loan proceeds withheld at closing and used to pay property taxes, hazard insurance, and other mandatory charges on the borrower's behalf when the financial assessment finds risk.

Obligations the borrower must keep current, including property taxes, hazard insurance, flood insurance where required, and HOA dues; failure to pay can trigger default.

The money left after subtracting verified expenses from verified income; a key measure in the financial assessment used to determine whether a set-aside or denial is appropriate.

Costs that must be paid from loan proceeds at closing, such as existing liens, closing costs, upfront mortgage insurance, and required set-asides, which affect the initial disbursement limit.

The feature that lets an unused HECM credit line increase over time at the growth rate, giving borrowers access to more funds later even as the loan balance rises.

The ways a borrower may receive HECM proceeds: lump sum, monthly tenure payments, monthly term payments, a growing line of credit, or any combination of these.

A fixed monthly payment from a HECM that continues for as long as the borrower lives in the home, regardless of the remaining loan balance.

A fixed monthly payment from a HECM that continues only for a borrower-selected number of months, after which payments stop.

A spouse who is not a borrower and is younger or otherwise excluded, but who may remain in the home after the borrower dies if the loan was properly structured and obligations were met.

The time during which repayment of a HECM is postponed after the last borrower dies or moves out, allowing an eligible non-borrowing spouse to stay in the home.

A required disclosure and acknowledgment that an eligible non-borrowing spouse's right to remain depends on meeting conditions such as timely property charge payments and occupancy.

An occurrence that makes the HECM due and payable, such as the last borrower's death, sale of the home, or failure to occupy the property as a principal residence.

A failure to meet loan obligations, most commonly not paying property charges or not maintaining the home, which can lead to foreclosure after required notices and cure periods.

The servicer's required process of contacting delinquent borrowers and offering options such as repayment plans, set-aside extensions, or other remedies before foreclosure.

The process heirs use after a HECM matures: they may repay the loan and keep the home, sell it, or deed it to the lender, and are never liable beyond the property's value.

A borrower's right to cancel a HECM within three business days after closing without penalty, receiving a refund of fees paid, with no funds disbursed during that period.

A required session with a HUD-approved counselor before application, intended to confirm the borrower understands costs, alternatives, and obligations, documented by a certificate.

The document a HUD-approved counselor issues after a completed session, which the lender must obtain before processing the HECM application.

A rule prohibiting lenders and originators from requiring borrowers to buy other financial products, such as annuities or insurance, as a condition of obtaining a HECM.

Limits on marketing reverse mortgages, including bans on deceptive or misleading advertising, false urgency, and presenting the loan as a government benefit or free money.

A private reverse mortgage not insured by FHA, typically for higher-value homes; it is not subject to HECM limits but may lack the same federal protections.

A reverse mortgage offered by some state or local agencies that must be used for a specific purpose, such as home repair or property taxes, and is usually low cost.

Required federal disclosures showing the annual percentage rate, finance charge, and payment terms, helping borrowers compare the cost of credit before committing.

The final settlement statement given to the borrower before closing, itemizing loan terms, projected payments, closing costs, and cash to the borrower.

Fees charged to originate and close a HECM, including origination, appraisal, title, recording, and counseling-related charges, which may be financed into the loan.

An independent valuation of the home conducted by an FHA-approved appraiser, used to determine the principal limit and confirm property condition and eligibility.

The total amount owed at any time, consisting of disbursed principal plus accrued interest, mortgage insurance premiums, and servicing fees; it grows until repayment.