203b - This number identifies the section of the act of law that provides for the HECM reverse mortgage loan limits by county.

Acceleration Clause - Under certain circumstances, the reverse mortgage loan can become due in full immediately. For example, upon the death of the borrower or if the borrower moves out of the property.

Credit Lines - The proceeds from a reverse mortgage can be taken in the form of a credit line. This is often used in conjunction with either the term or tenure monthly payments. It allows the senior access to some of the home's equity for unexpected expenses. Using the credit line feature can save on interest costs since the money is just available until accessed.

Equity Reserve - Some of the home's equity will be reserved as protection that the reverse mortgage loan will not become upside down to the value. As in most traditional loans, there is a loan to value ratio so that the loan proceeds represent a safe ratio compared to the home's estimated value.

(HECM) Home Equity Conversion Mortgage - This type of reverse mortgage represents about 90% or more of the current fundings. It is the only product that is insured by the (FHA) Federal Housing Administration.

Index - Although fixed interest rates might be available, the majority of reverse mortgage loans are adjustable rate mortgages (ARMs). The "fully indexed" interest rate on an ARM is calulated using an index and a margin. The indices commonly used to calculate the interest rate on a reverse mortgage are typically the U.S. Treasuries or the London Inter Bank Offered Rate (LIBOR). The major indices are published daily in newspapers such as the Wall Street Journal.

Lump Sum - The reverse mortgage loan proceeds are taken at once. Often used to pay off an existing conventional mortgage and therefore stopping monthly mortgage payments.

Margin - The percentage amount added to the index. The index plus the margin will determine the "fully indexed" interest rate used to calculate the monthly interest owed.

Non-Recourse Mortgage Clause - In many cases, the reverse mortgage loan does not have to be repaid as long as the borrower is living in the home, regardless of the home's value compared to the balance owed on the loan. The reverse mortgage lender cannot call the loan due or sell the property as long as certain conditions are met because of this non-recourse clause.

Proprietary Reverse Mortgage - Most reverse mortgages are HECM loans insured by the FHA. But there are other types of reverse mortgages available. Bankers and investors often come up with a niche loan product to meet the needs of those not eligible for the HECM for some reason.

(TALC) Total Annual Loan Cost - The TALC is a calculation of a reverse mortgage's costs. It goes further than an (APR) annual percentage rate calculation. It includes things like annuity premiums and a percentage of any appreciation in the home.

Tenure Monthly Payments - This reverse mortgage monthly payment option provides for a fixed income for life. Because there is no set term, these payments will likely be less per month than a term monthly payment. But the senior can count on this payment for as long as the home is occupied.

Term Monthly Payments - This is another reverse mortgage monthly payment option. It gives the senior a regular monthly payment for a period of time, or term. For example, the monthly payment might be $300.00 for ten years. Ten years is the term.

Uninsured Reverse Mortgage - A reverse mortgage loan that becomes due and payable at a specified time. This would not be a HECM loan, but might be a proprietary product.

Renee Morgan
Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.