Section 11: Reverse Mortgages
Anchor: #i1032343Overview
Reverse mortgage (also known as a Home Equity Conversion Mortgage (HECM)) means a first mortgage which provides for future payments to the homeowner based on accumulated equity and which a housing creditor is authorized to make under any Federal law or State constitution, law, or regulation. It is a class of lien generally available to persons 62 years of age or older. Reverse mortgages do not require a monthly mortgage payment and can also be used to access a home's equity. The reverse mortgage becomes due when none of the original borrowers live in the home, if taxes or insurance become delinquent, or if the property falls into disrepair.
The payment for replacing a reverse mortgage shall be the difference between the existing reverse mortgage balance and the minimum dollar amount necessary to purchase a replacement reverse mortgage which will provide the same, or similar terms as that for the reverse mortgage on the displacement dwelling. In addition, payments shall include other debt service costs, if not paid as incidental costs, and shall be based only on reverse mortgages that were valid liens on the displacement dwelling for at least 180 days prior to the initiation of negotiations.
The following considerations apply when computing the reverse mortgage interest differential payment:
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- In the event the displaced owner-occupant obtains a reverse mortgage with a smaller principal balance than the reverse mortgage balance(s) computed in the buydown determination, the payment will be prorated and reduced accordingly. The reverse mortgage balance is the balance that existed 180 days prior to the initiation of negotiations or the reverse mortgage balance on the date of acquisition, whichever is less. Anchor: #MIHUNGVI
- The interest rate on the new reverse mortgage used in determining the amount of eligibility cannot exceed the prevailing rate for reverse mortgages currently charged by mortgage lending institutions for owners with similar amounts of equity in their dwellings in the area in which the replacement dwelling is located. Anchor: #VHGTVWEL
- TxDOT will pay purchaser's points and
loan origination, but not seller's points, to the extent:
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- they are not paid as incidental expenses, Anchor: #DYEKUYLN
- they do not exceed rates normal to similar real estate transactions in the area, Anchor: #YWSSMFIQ
- it is determined to be necessary, Anchor: #CACOOYJY
- the computation of such points and fees shall be based on the reverse mortgage balance on the displacement dwelling plus any amount necessary to purchase the new reverse mortgage.
Anchor: #XUNSRKCF - The displaced person shall be advised of the approximate amount of this eligibility and the conditions that must be met to receive the reimbursement as soon as the facts relative to the person’s current reverse mortgage are known. The payment shall be made available at or near the time of closing on the replacement dwelling in order to purchase the new reverse mortgage as intended.