Product Type: Reverse Mortgage

Overview

This demonstrates how to set up the reverse mortgage product type allowing for the split of loan amount and loan consideration values at file creation. Optional field names are created and will appear in various places in Resware; they do not change the settlement statement line descriptions.

Version History

Version	Date	Description
Pre 8.26		Information and screenshots created in version 9.7
	05/06/2019	Optional data fields on a 2010 HUD section was added.
	06/21/2022	Updated formatting.

About reverse mortgages and terminology

Reverse mortgages are also known as home equity conversion mortgages (HECM). They allow borrowers to receive cash for the equity in their home with no monthly payments required. Cash can be disbursed either in installments or as a lump sum depending on the mortgage’s customization. Interest accrues over the life of the loan at a specified rate. Borrowers must make a full repayment if they sell the property or at time of death.

The principal lending limit is the Loan Amount in Resware. This is the amount received based on specific parameters prior to subtracting any current mortgages, liens, loan costs incurred, or remaining funds available to draw as a lump sum or monthly distribution.
The maximum claim amount (MCA) is the Loan Consideration in Resware, is shown on the note and deed of trust (mortgage), and will equal 150% of the appraised value of the property or the HECM lending limit, whichever is less. In some states, the loan amount may be left blank.

NOTE: Regardless of the amount stated on the loan documents, only the actual amount borrowed plus applicable interest, mortgage insurance, financed fees, and any amounts the lender or HUD may advance are what is owed. This is similar to a HELOC loan.

The net principal limit is the amount of money a borrower can receive once a reverse mortgage closes, after accounting for closing costs. This amount is typically noted as the Additional Amount in Resware.
There are two notes and two deeds of trust (mortgages) on each reverse transaction when there are future financial advances such as monthly payments to the borrower. It is important to ensure that the correct settings are used in Resware to calculate accurate recording fees. The first note and deed of trust is between the borrower and the lender. The second note and deed of trust is between the borrower and the department of HUD. This second set is used as protection in case the lender defaults, becomes insolvent, or when the loan to value reaches 95%, at which point HUD steps in and makes all future advances to the borrowers under the terms of the loan agreement.

Product Type

Admin/Action Lists/Product Type

Click Add to create a new product.
Enter a Name such as Reverse Refinance.
Select an Action List to be associated with this product.
Select the Services For as Buyer.
Select the File Creation Options, Website Only File Creation Options, and Miscellaneous Options areas as desired including these needed options:
- Require Loan Amount: An amount is needed to display the GFE page of the 2010HUD.
- Require Loan Consideration: An amount is needed to calculate the lender’s premium.
- Reverse Mortgage: This option is only available if using a recording service to calculate recording fees.
- Show Additional 2010 HUD Dates: This option will show two additional date fields on Settlement/Reports which can be labeled as requested by lender on a file.
- Enter a 3 as the Disbursement Date Padding. This will calculate the Disbursement Date correctly for the rescission period based on the Actual Settlement Date entered on the file.
- Select the Settlement Statement Version as 2010HUD from the dropdown options.
Click Save.

Click on the Optional Display Names tab

The Option Display Names area allows an administrator to rename the settlement line descriptions to coincide with terms used when entering a reverse mortgage product. This feature is intended to display additional fields used when a user places an order for a reverse mortgage product as well as having the ability to rename the fields, including the Loan Amount field.

Loan Amount:
- This field is always displayed to users. If nothing is set here, the default name Loan Amount is used. Typically, this field would be renamed to something else like Principal Lending Limit or Mortgage Amount.
  - NOTE: This loan amount is set by the lender based on the home’s appraised value less anticipated accrued interest for the life of loan.
- The amount in this field will show as the total on HUD line 202 on File/Settlement/Loan Items.
Loan Consideration:
- If nothing is set here, this field will not be displayed to users at file creation and the principal lending limit will be used as consideration to calculate the lender’s premium. To make sure this field is visible at file creation and is used to calculate the lender’s premium correctly, give this field a name like Insured Amount or Max Claim Amount.
  - NOTE: The maximum claim amount (MCA) is the lesser of a home’s appraised value or the current maximum FHA lending limit.
- The amount in this field will show as the consideration on HUD line 1104 on File/Settlement/Title Charges and is used in calculating the insurance premium.
Additional Amount:
- If nothing is set here, this field will not be displayed to users. To make sure this field is visible, give this field a name like Net Principal Limit or Cash Out Limit.
- This is for information purposes only and the amount in this field is not used elsewhere in Resware.
- NOTE: The net principal limit is the principal lending limit less all expenses incurred and current liens or the amount the borrower can receive at closing.
Use Consideration to Calculate Recording Fees: Check this box if the recording fees, which are normally based on the loan amount, should be based on the lender’s consideration instead.
- This may be useful for a reverse mortgage, depending on how the loan amount and lender’s consideration fields are be used. If the initial draw will be on page 1 and the full loan amount will be on line 1104, then this box should most likely be checked.

Transaction Type

Admin/Action Lists/Transaction Type

When using a fee service such as Ernst or Certus, a new transaction type needs to be created to correctly map and have fees returned related to a reverse mortgage.

Click Add.

Enter a Name such as Reverse.
- Click Add in the Product Types area.
- Select the Reverse Refinance product type created in the above step or any reverse product and click Add.
Optionally, click Add in the Recording Document Types Required on File to Change File’s Status to ‘Clear for Policy area if a recording document type should be required on a file prior to changing the file’s status.
- Select the document type to add as a required document, then click Add.
Click Save

Client Product Group

This step will associate the new product with a client product group, and all clients associated with the group are able to place reverse product orders.

Select the product group to add the reverse product.
Click Edit.

Click Add
Select the reverse product or select multiple by holding the Ctrl key while selecting products with the left mouse key, then click Add.

Select the Trans/Products, then select the location restrictions: Click the Enable blue hyperlink to enable in all states OR Select the State from the dropdown options and enable counties as needed, then repeat for each state as needed. Click Save.

File Creation Fields

File/File Wizard

The optional display names will appear when the reverse product is selected.

Loan Amount (i.e., Principal Lending Limit): This amount will populate Principal Amount of new loan on Settlement Charges/Loan Items. Enter $1.00 if this amount is unknown when the order is entered.
Loan Consideration (i.e., MCA – Insured Amount): The description and amount will populate the consideration field of Lender’s coverage on Settlement Charges/Title Charges and will calculate the insurance premium.
Additional Amount (i.e., Net Principal Limit): The description and amount will be displayed on the New Loans panel.

New Loans Panel

File/New Loans

Loan Amount (i.e., Principal Lending Limit)
Additional Amount (i.e., Net Principal Limit)

Title Charges

File/Settlement/Title Charges/Lender’s Coverage

Loan Consideration (i.e., MCA – Insured Amount)

Optional Date Fields on a 2010HUD

Settlement/Reports

If the Show Additional 2010 HUD Dates is enabled on a product, an Additional Dates area will appear which can be used to enter and label up to two additional dates that a lender may request to be displayed on a reverse mortgage.

Enter a description in the Label field.
Enter a Date or use the dropdown to select a date from the calendar.

HUD Reporting of Principal Amount of the Loan

Admin/General Setup/Settlement Type Defaults/Principal amount of first loan

In the instance where the lender wants the Principal amount of the loan to display out of column, the following settlement type default properties would need to be set prior to a file being created in Resware:

NOTE: Changes to settlement type default properties will affect all transactions using 2010HUDs.

File/Settlement/Loan Items/Principal amount of first loan

Check the Override Line Desc box, then enter the amount from the Total to the end of the line description field.
Remove the amount in the Total field.
Click Force to show the line description on the settlement statement.

File/Settlement/Deposits, Credits, Debits

The lender will provide the buyer credits to enter which will offset the removal of the loan amount from loan amount settlement line in the above step. Here is an example which includes an initial cash draw:

Sample areas of 2010HUD:

Updated on June 21, 2022