(a) Definition. For purposes of this subpart, reverse-mortgage
transaction means a nonrecourse consumer credit obligation in
which—
(1) a mortgage, deed of
trust, or equivalent consensual security interest securing one or
more advances is created in the consumer’s principal dwelling; and
(2) any principal, interest,
or shared appreciation or equity is due and payable (other than in
the case of default) only after—
(i) the consumer dies;
(ii) the dwelling is
transferred; or
(iii)
the consumer ceases to occupy the dwelling as a principal dwelling.
6-972
(b) Content
of disclosures. In addition to other disclosures required by
this part, in a reverse-mortgage transaction the creditor shall provide
the following disclosures in a form substantially similar to the model
form found in paragraph (d) of appendix K of this part:
(1) Notice. A statement that the consumer is not obligated to complete the reverse-mortgage
transaction merely because the consumer has received the disclosures
required by this section or has signed an application for a reverse-mortgage
loan.
(2) Total-annual-loan-cost rates. A good faith
projection of the total cost of the credit, determined in accordance
with paragraph (c) of this section and expressed as a table of “total-annual-loan-cost
rates,” using that term, in accordance with appendix K of this part.
(3) Itemization of pertinent information. An
itemization of loan terms, charges, the age of the youngest borrower,
and the appraised property value.
(4) Explanation
of table. An explanation of the table of total-annual-loan-cost
rates as provided in the model form found in paragraph (d) of appendix
K of this part.
6-972.1
(c) Projected total cost of credit. The projected
total cost of credit shall reflect the following factors, as applicable:
(1) Costs to
consumer. All costs and charges to the consumer, including the
costs of any annuity the consumer purchases as part of the reverse-mortgage
transaction.
(2) Payments to consumer. All advances to and
for the benefit of the consumer, including annuity payments that the
consumer will receive from an annuity that the consumer purchases
as part of the reverse-mortgage transaction.
(3) Additional
creditor compensation. Any shared appreciation or equity in the
dwelling that the creditor is entitled by contract to receive.
(4) Limitations on consumer liability. Any
limitation on the consumer’s liability (such as nonrecourse limits
and equity-conservation agreements).
(5) Assumed annual
appreciation rates. Each of the following assumed annual appreciation
rates for the dwelling:
(i) 0 percent.
(ii) 4 percent.
(iii) 8 percent.
(6) Assumed loan period.
(i) Each of the following assumed loan
periods, as provided in appendix L of this part:
(A) Two years.
(B) The actuarial life expectancy
of the consumer to become obligated on the reverse-mortgage transaction
(as of that consumer’s most recent birthday). In the case of multiple
consumers, the period shall be the actuarial life expectancy of the
youngest consumer (as of that consumer’s most recent birthday).
(C) The actuarial life expectancy
specified by paragraph (c)(6)(i)(B) of this section, multiplied by
a factor of 1.4 and rounded to the nearest full year.
(ii) At the creditor’s
option, the actuarial life expectancy specified by paragraph (c)(6)(i)(B)
of this section, multiplied by a factor of 0.5 and rounded to the
nearest full year.
