glossaryThroughout this blog we may use terms you might not be familiar with. Following are some definitions. Some are unique to posts in the blog and some are unique to reverse mortgage lending. We will expand as time and circumstance permit.  Check this post frequently for updates.

Big Dog

A national lender that has a specialized reverse mortgage division. These are direct lenders (processing and actually lending in their own name under FHA authority).  Included are Wells Fargo (largest in terms of unit volume), Bank of America, Financial Freedom (post IndyMac bankruptcy), MetLife Home Loans and a very small number of others.   These institutions usually have both retail and wholesale operations.  Customers walk into the local branch (retail) of any of these organizations and are routed to an internal specialist.  Other borrowers (wholesale) are brought to them by brokers, agents and correspondents – who might be your local mortgage broker or regional bank or local credit union.

Boutique Broker

A phrase we made up to help illustrate the significant value a broker provides to you while you are considering a reverse mortgage transaction.  Most (not all) offer close personal attention and are available 24/7.  Ever try calling your local bank on Sunday morning with a troubling question or concern?  Each of my clients has my cell phone number and instructions to call me anytime… anytime.  Even years after the loan closes I am still in touch with most of my customers.

Call Center

A call center is a physical place where customer and other telephone calls are handled by an organization, usually with some amount of computer automation. Typically, a call center has the ability to handle a considerable volume of calls at the same time, to screen calls and forward them to someone qualified to handle them, and to log calls. Call centers are used by mail-order catalog organizations, telemarketing companies, computer product help desks, and any large organization that uses the telephone to sell or service products and services.

Direct Lender

Very few institutions qualify as reverse mortgage direct lenders.  Nationwide, there may only be a handful.  Almost all “lenders” except the big dogs are agents, correspondents or brokers allied with the handful of direct lenders.

NMLS

Nationwide Mortgage Licensing System. NMLS website

Preferred Lender

There is no such thing as a “preferred” lender as far as HUD/FHA is concerned. It’s really important to understand that this terminology is merely somebody’s opinion – probably because the lender paid a fee to be listed in a directory and/or online source. Lenders are either FHA approved (have met the requirements) or they are not.  NRMLA (National Reverse Mortgage Lenders Association), the reverse mortgage industry’s trade group, publishes a list of “preferred” lenders but this is nothing more than a membership roster. If you pay your annual dues, you get listed.  If you research the AARP web site you don’t get much help, either. They simply refer you to the HUd.gov list or NRMLA’s list of paid members.

Principal Limit

The Principal Limit is the gross amount of money the lender is willing to lend to the borrower… based upon a formula using the following criteria: the lower of the FHA appraised value of the home or the Maximum Claim Amount (currently $625,500), the age of the youngest borrower, and the expected interest rate based upon 10-year LIBOR (London Interbank Offered Rate).

SAFE Act of 2008

On July 30, 2008 President Bush signed into law the Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act of 2008 as part of the Housing and Economic Recovery Act. This provision sets forth procedures, requirements, education, testing, and standards including mandatory registration and state licensing of mortgage loan originators through the creation of a Nationwide Mortgage Licensing System and Registry (NMLSR). The goals NMLSR hopes to accomplish are: 1- Helping ensure that loan originators be required to “act in the best interests of the consumer”, 2- Giving consumers easy access to a loan originator’s employment history, and any disciplinary/enforcement actions taken, 3- Uniform education and licensing requirements, and 4- Accountability and tracking of loan originators

Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant