Page 727
b. Mortgage and Note (04/29/2024)
i. Definitions
Mortgage refers to any form of security instrument that is commonly used in a jurisdiction in connection with a loan secured by a one- to four-family residential Property and the land on which it is situated, such as a deed of trust or security deed or land contract.
Note refers to any form of credit instrument commonly used in a jurisdiction to evidence a Mortgage.
Page 728
II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT B. Title II Insured Housing Programs Reverse Mortgages
6. Closing
ii. Standard
The Mortgagee must develop or obtain a separate Mortgage and Note that conforms generally to the Freddie Mac and Fannie Mae forms in both form and content, but that includes the specific modification required by FHA set forth in the applicable Model Note and Mortgage. The Mortgagee must ensure that the Mortgage and Note comply with all applicable federal, state, and local requirements for creating a recordable and enforceable Mortgage, and an enforceable Note.
All Borrowers obligated on the Note must be on the title to the Property. The HECM must be executed by all parties necessary to make the lien valid and enforceable under state law.
Mortgagees originating a HECM in escrow closing states must arrange to have the Borrower sign the Note while the same interest rates are in effect as when the mortgage documents are drawn.
(A) Maximum Mortgage Amount
FHA policy does not require a maximum mortgage amount to be stated in the Mortgage. Where state law requires the Mortgage to reflect a maximum mortgage amount, the Mortgagee must use an amount that is at least equal to 150 percent of the MCA. When a maximum mortgage amount is stated in the Mortgage, the Mortgagee is not secured for payments to the Borrower beyond the stated amount. Where state law does not require the Mortgage to reflect a maximum mortgage amount, the Mortgagee may use an amount that is at least equal to 150 percent of the MCA.
(B) Rounding Interest Rates
The Mortgagee may round the Expected Rate or the initial Adjustable Rate Mortgage
(ARM) Note rate to the nearest one-eighth of one percentage point. The Mortgagee may round both rates, only one rate, or none of the rates.
The Mortgagee must maintain the same rounding throughout the life of the HECM.
(C) Commingling of Index Types
Commingling of index types between the Expected Rate and Note rate is only allowed for annual adjustable rate HECMs.