There are several moving parts which make up a reverse mortgage, for this discussion we will focus on just two elements, the service set aside account and the mortgage insurance account.
The basic underlining premise of a reverse mortgage is to free the senior from monthly mortgage payments. This allows their equity to be used in a positive fashion during their autumn years. A reverse mortgage is taken out most commonly in the form of a lump sum or as one large distribution of funds. Having converted the equity into spendable dollars the balance due on the home begins to work internally without further intervention from the senior. While there are no payments obligations from the senior there are payment obligations which are administrated to by the servicing company responsible for the stewardship of the loan. The servicing company books internal post or additions to the mortgage balance for the interest due monthly and the mortgage insurance also due monthly. The servicing company is compensated or their efforts through the servicing set aside account which they book or post to the monthly balance as well. Read More.....
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