Fees, Costs and Payments at Origination

Origination occurs when the lender qualifies the borrower to get the loan, appraises the home, processes all the necessary documents and advances the money to the borrower. The fees, costs and payments which a lender may charge when the loan is originated are:

• Loan origination fee
• Document preparation and ‘recording’ the loan
• Appraisal or survey of the property
• Title and tax search
• Attorney’s fees charged to the lender in connection with the closing of the loan
• Credit report
• Flood zone search
• Inspection fee
• Annuity purchase payment
• Repairs contracted for, at or before the loan closing
• Tax reporting service (a one time fee)
• Mortgage insurance
• Real estate taxes and property insurance
• Mortgage brokerage services (not to exceed three points based on the value of the property)

Fees, Costs and Payments During the Life of the Loan

While the reverse mortgage is outstanding there are a few, limited additional fees and costs that the lender can charge you. The lender can ask that you pay these directly or add them to your loan balance. The only fees, costs and payments which a lender may charge during the loan are:

• The cost of additional mortgage insurance
• The cost to maintain the structural integrity of the home
• The cost of any appraisal for the refinancing or extension of the loan
• The cost of real estate taxes and property insurance
• A monthly servicing fee of not more than $30.00

In exchange for a lower interest rate the lender and the borrower may agree to “shared appreciation” or “equity participation.” Participation mortgages are so named because the lender “participates,” or has the right to a share in any increase in the value of your home as well as the interest on the loan.

A Shared Appreciation Mortgage (SAM) takes into account the appreciation in value of the house between the time the loan is signed and the end of the loan term. The lender receives an agreed-to percentage of the appreciated value of the loan when the loan is terminated.

The loan may be for a certain number of years which is known as a “term” loan, or for an undetermined length of time which is known as a “tenure” loan. A tenure loan matures upon an event such as when the last surviving borrower dies, sells the home or fails to live in the home for 12 months in a row.

You may have to pay the loan back if the lender determines that a change has been made that could affect the security of the loan like renting out part or all of your home, adding a new owner to the title, changing your zoning classification or taking out new debt against your home.

If you sell the house, you can pay back the loan from the money you get from the sale. If the balance of the loan is less than the value of the home at the end of the loan period or the money you get from the selling the home at any time, then the lender gets paid the amount owed, and you or your heirs keep the rest. Any heirs to the home can pay back the loan. The homeowner or the heirs can take out a new forward mortgage on the home.

The lender must also give you a description of the relevant features of the reverse mortgage being offered. This should include the following information:

• The interest rate to be charged and whether it is fixed, variable or both;
• Interest accrues from the time monies are advanced to you and the interest is compounded;
• All fees, costs and payments that must be paid by you;
• A description of any refinancing features that you have discussed;
• Any events that could terminate the reverse mortgage such as death or moving from the residence;
• A description of any shared appreciation or equity participation features; and
• A toll-free telephone number and the name of a person who can answer any questions, comments or complaints that you may have. If there is no toll-free telephone number, they must accept collect calls.