Reverse Mortgages and Linked Securities: The Complete Guide to Risk, Pricing, and Regulation

Glossary

acceleration clause—the part of a contract that says when a loan may be declared due and payable.

adjustable rate—an interest rate that changes, based on changes in a published market-rate index.

appraisal—an estimate of how much a house would sell for if it were sold; also called its market value.

appreciation—an increase in a home’s value.

Area Agency on Aging (AAA)—a local or regional nonprofit organization that provides information on services and programs for older adults.

cap—a limit on the amount an adjustable interest rate may go up or down during a specified time period.

closing—a meeting where documents are signed to “close the deal” on a mortgage; the time a mortgage begins.

CMT rate—the Constant Maturity Treasury rate, used as an interest rate index in the HECM program.

condemnation—a court action saying a property is unfit for use; also, the government taking private property to use for the public by the right of eminent domain.

creditline—a credit account that lets a borrower decide when to take money out and also how much to take out; also known as a “line-of-credit” or “credit line.”

current interest rate—in the HECM program, the interest rate currently being charged on a loan, which equals one of the HUD-approved interest rate indices (1-month CMT, 1-year CMT, or 1-month LIBOR) plus a margin.

deferred payment loans (DPLs)—reverse mortgages that give you a lump sum of cash to repair or improve a home; usually offered by state or local governments.

depreciation—a ...