(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.
6-5972
(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.
6-5972.1
(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 .5 and rounded to the nearest
full year.
