(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.
(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.
(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.
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