Key Servicing Differences: Forward versus Reverse

Key Servicing Differences: Forward (closed-end mortgage) versus  Reverse (open-ended line of credit for seniors)

  • Reverse mortgages do not require monthly payments, however customers may choose to pay down their line or pay off their reverse mortgage
  • Customers receive payments from their servicer/subservicer in the form of an advance against their line of credit and may set up direct deposit for the regular deposit of their advance
  • Any draws/advances due within 60 days of loan closing are to be made at the closing table to allow time for the set-up/boarding of the loan 
  • Customers receive monthly statements - but not a “billing statement” - as they do not owe payments (they are due payments/draws from their servicer)
  • Monthly statements show all activity each month including any draws/advances made to the customer, that month’s interest accrual, the monthly MIP premium and the monthly servicing fee - all of which are added to the loan balance (which reduces the line of credit)
  • LESA – depending on property value and customer financial assessment at origination, the HECM may have a Life Expectancy Set Aside (LESA) to pay customers' taxes and insurance like a forward mortgage escrowed loan
  • HERMIT –  the HUD servicing system for HECMs - all key activity is reported and some activity transpires within HERMIT