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How a Reverse Mortgage Works

Here is an overview of the steps involved in the process of getting a Reverse Mortgage.

 

Education
This is the step you’re at right now. You’ve heard about a reverse mortgage and are learning more about whether or not a reverse mortgage is right for you. You’re gathering information and weighing pros and cons, how the program works, how much money you might receive, and any other questions you may have.

Counseling
Once you decide to apply for a reverse mortgage, you are required to participate in a consumer education session with an independent certified, HUD-approved counselor. The counselor will explain the legal and financial obligations of the reverse mortgage program as well as any alternatives you may have. Counseling insures that all your questions have been answered and there is no confusion about the program; this is a protection device the government has built into the process of applying for a reverse mortgage. After the session has been completed, you are given a Certificate of Borrower Counseling, which is valid for 180 days after the session, and must be presented to the lender as proof that you have attended and completed the counseling session.

Application
Our reverse mortgage professional will assist you in completing the loan application. During this step you will select the payment option: fixed monthly payments, lump sum payment, line of credit, or a combination of these. The reverse mortgage professional discloses the estimated total cost of the loan, as required by the federal Truth in Lending Act. At this time the money for the home appraisal will be collected and you will provide the required documents (such as photo identification, verification of Social Security number, copy of deed to home, information on any existing mortgage(s) on the property, and counseling certificate).

Appraisal
We will arrange for a professional appraiser to determine the value of your home and the physical condition of the property and whether any repairs may be required to meet Federal Housing Administration guidelines.

Underwriting
Once all paperwork, information, and data has been gathered, our reverse mortgage professional will finalize the loan parameters with you before submitting the package.

Closing
Subsequent to approval from the underwriting process, the closing (signing) of the loan is scheduled. This generally will take place in your home. Closing papers and final, exact figures are prepared and initial and expected interest rates are set. Closing costs are normally financed as part of the loan. Financing closing costs will reduce the amount of the loan proceeds. The final papers are signed at this point. The date on which the closing will occur must be coordinated with many parties that may include: yourself, the lender, the attorney, and the title company representative.

A few days before the closing, our reverse mortgage professional will consult you and help you go through a checklist of what you’ll need to finalize and close your loan, such as closing costs, acceptable methods of payment, and any additional items that may be required (such as identification or other miscellaneous documents).

Disbursement
You have three business days after signing the papers in which to cancel the loan (this is known as the three-day right of rescission). Upon the expiration of this period, the loan is disbursed in the form of the payment option you selected. Any existing debt on the home is paid off, and a new lien is placed on the home. You may use the loan proceeds for any purpose.

Responsibilities
Although a reverse mortgage is a unique program, it does carry responsibilities similar to those associated with a traditional mortgage. You are expected to continue to pay property taxes, keep adequate property insurance up-to-date, and maintain the home. Remember, you retain the title to your home in a reverse mortgage as long as you follow the loan guidelines. This includes paying taxes and insurance and maintaining the home.

Repayment
You do not have to make any monthly mortgage payments to the lender during the life of the loan, only when certain events take place. The reverse mortgage becomes fully repayable upon the death of the borrower or last co-borrower; the sale of the home by the borrower; a permanent move from the home by the borrower (i.e., to a nursing home); another event after which the home is no longer the borrower’s principal residence; or if the loan guidelines are not followed. The loan may be repaid by the borrower or the borrower’s estate/heirs, with or without the sale of the home.

 

Additional information on Reverse Mortgages:

 

Contact

Sue Vrbaskovich
Reverse Mortgage Specialist
NMLS# 355380
504-834-1190, ext. 128

Marilyn Cox
Reverse Mortgage Specialist
NMLS# 685994
504-834-1190, ext. 357

 

These materials are not from HUD or FHA and were not approved by HUD or a government agency. Bank of New Orleans NMLS# 329248.

 

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