Q & A with Dottie Herman

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Q1 - What is a reverse mortgage?

A - A reverse mortgage is a special home loan product that allows a homeowner aged 62 or older the ability to access the equity that has accumulated in their home.

To qualify, you must own the property outright or have a small mortgage balance. Often, the lender may require, as part of the program, that the small mortgage balance be paid. A reverse mortgage does not require payments back to the lender for as long as you live there. The home itself will be the source of repayment.

The loan is underwritten based on the value of the collateral (home) and the life expectancy of the borrower. The loan must be repaid when you die, sell your home, or no longer live there as your principal residence.

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Q2 - How can I receive payments on a reverse mortgage?

A - A reverse mortgage provides a borrower with choices in how they will access the funds. The choices include:

•    a single lump sum payment;
•    a regular fixed monthly payment;
•    a line of credit to be accessed as you choose; or
•    a combination of these options.

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Q3 - What will happen to the balance in the escrow account after payoff?

A - A refund of the escrow balance should be sent to the customer's mailing address within 30 calendar days of payoff.

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Q4 - The bank notified me that there was a shortage in my escrow account and increased my payments. Is this legal?

A - Yes. Under the Real Estate Settlement Procedures Act (RESPA), if your bank determines that there will be a deficiency (shortage) in your escrow account balance, they can obtain repayment for the deficiency amount. Usually, you may choose to repay the deficiency amount in one lump sum or spread the payments over a 12-month period.

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If you have a real estate question for Dottie, please send it to; Reporters@WorldPropertyChannel.com