Homeowner seeks additional
information by contacting a reverse mortgage lender or the National Reverse
Mortgage Lenders Association.
Homeowner seeks counseling
from a HUD-approved counseling agency, or AARP-trained telephone counselor.
Counseling is mandatory regardless of which reverse mortgage product you
choose. Counseling is usually conducted face-to-face, unless you use an
AARP counselor. The counselor provides supplemental information on reverse
mortgages, determines whether you're eligible to get a reverse mortgage,
and discusses other options that may be available to assist with your daily
living. The homeowner will be given a certificate to give to the lender
as proof they were counseled.
APPLICATION / DISCLOSURE
Homeowner fills out loan
application and selects payment option: fixed monthly payments, lump sum
payment, line of credit, or a combination of these. Lender discloses to
homeowner the estimated total cost of the loan, as required by the federal
Truth in Lending Act. Lender collects money for home appraisal. Homeowner
provides lender with required information, including photo ID, verification
of Social Security number, copy of deed to home, information on any existing
mortgage(s) on property, and counseling certificate.
Lender orders appraisal,
title work, lien payoffs, etc. An appraiser comes to your home. The appraiser
assigns a value to the home and determines the physical condition of the
property. If the appraiser uncovers structural defects that require repair,
the homeowner must hire a contractor to complete the repairs after the
reverse mortgage closes.
After receiving all pertinent
information and data, lender finalizes loan parameters with homeowner (i.e.,
determining payment option, frequency of loan interest rate adjustments)
and submits loan package to underwriting department for final approval.
Currently, it can take anywhere from 4-8 weeks (sometimes sooner) to complete
the underwriting of a loan package.
If the loan package is approved,
closing (signing) of loan is scheduled. Initial and expected interest rates
are calculated. Closing papers and final figures are prepared. Closing
costs are normally financed as part of the loan. Lender or title company
has homeowner sign loan papers.
Homeowner has three
business days after signing papers in which to cancel the loan. Upon expiration
of this period, the loan funds are disbursed. Homeowner accesses the funds
in the form of the payment option selected. Any existing debt on the home
is paid off. A new lien is placed on the home. The homeowner may use the
loan proceeds for any purpose. During the life of the loan, the loan "servicer"
disburses monthly payments to the homeowner (if this option is chosen),
advances line of credit funds upon request, collects any repayments on
the line of credit, and sends periodic statements.
Homeowner doesnít make any
monthly mortgage payments to lender during the life of the loan. The loan
is repaid when the homeowner ceases to occupy the home as a principal residence.
The loan may be repaid by the homeowner or the heirs/estate, with or without
a sale of the home. The repayment obligation canít exceed the homeís value
or sales price.