• Adjustable Rate HECM (ARM) – A HECM which has an interest rate that is subject to change, usually on a monthly or annual basis.
• Home Equity Conversion Mortgage (HECM) – A reverse mortgage insured by the Federal Housing Administration.
• Good Faith Estimate – Lists the approximate closing costs of obtaining a loan.
• HECM for Purchase – A HECM that is used to help finance the purchase of the borrower’s principle residence.
• Lender – A bank or institution licensed to originate residential mortgage loans.
• London Interbank Offered Rate (LIBOR) – The average interest rate that leading banks in London charge when lending to other banks. It is the index used as the basis for Adjustable Rate HECM's.
• Line of Credit (LOC) – A HECM disbursement option whereby the borrower receives the loan proceeds in unscheduled payments or installments, at times and in amounts of the borrower’s choosing, until the line of credit is exhausted.
• Lump Sum – Receive all proceeds at loan closing.
• Non-Recourse Loan – In regards to a HECM loan, this term describes the fact that a borrower or their heirs will not owe more than the home is worth when the home is sold to repay the loan.
• Mortgage Insurance Premium (MIP) – Protects the borrower and lender in case the loan balance grows higher than the home value when the loan becomes due.
• Reverse Mortgage – A home loan that allows senior homeowners age 62 and older to access a portion of the equity in their home.
• Servicing – The maintenance of the loan after it is originated. It includes services such as providing regular statements and providing loan disbursements to the borrower as requested.
• Tenure payments – Monthly payments throughout the life of the loan.
• Term payments – Equal monthly payments that are disbursed for a specified amount time.
• Total Annual Loan Cost (TALC) – The projected annual average cost of a reverse mortgage, including all the itemized costs.
• Right of rescission – A three business day time period after a loan closes in which a borrower may change their mind and cancel the loan.