Arizona Laws 6-1704. Reverse mortgage; provisions
A. A reverse mortgage may provide for a fixed or variable interest rate or future sharing between the originator and the borrower of the appreciation in the value of the property, as agreed on by the originator and the borrower.
Terms Used In Arizona Laws 6-1704
- Agreement: means the document that on execution obligates the borrower and originator under the reverse mortgage. See Arizona Laws 6-1701
- Dwelling: means a residence that is designed principally for at least one and not more than four families in which the borrower occupies at least one of the units. See Arizona Laws 6-1701
- Fixed Rate: Having a "fixed" rate means that the APR doesn't change based on fluctuations of some external rate (such as the "Prime Rate"). In other words, a fixed rate is a rate that is not a variable rate. A fixed APR can change over time, in several circumstances:
- You are late making a payment or commit some other default, triggering an increase to a penalty rate
- The bank changes the terms of your account and you do not reject the change.
- The rate expires (if the rate was fixed for only a certain period of time).
- including: means not limited to and is not a term of exclusion. See Arizona Laws 1-215
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Life estate: A property interest limited in duration to the life of the individual holding the interest (life tenant).
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Originator: means a person who regularly makes or brokers reverse mortgages, including a creditor or broker. See Arizona Laws 6-1701
- Property: includes both real and personal property. See Arizona Laws 1-215
- Reverse mortgage: means a nonrecourse consumer credit obligation to which all of the following apply:
(a) A mortgage, deed of trust or equivalent consensual security interest securing one or more advances is created in the borrower's principal dwelling. See Arizona Laws 6-1701
B. The reverse mortgage agreement shall prominently disclose any interest rate or other fees to be charged during the period that begins on the date that the reverse mortgage becomes due and payable and that ends when repayment in full is made.
C. The reverse mortgage may provide for a single lump sum disbursal of monies out of home purchase proceeds and shall provide for future payments to the borrower based on accumulated equity minus any applicable fees and charges according to the method that the borrower selects from among the following:
1. Based on a line of credit.
2. On a monthly basis over a term specified by the borrower.
3. On a monthly basis over a term specified by the borrower and based on a line of credit.
4. On a monthly basis over the tenure of the loan.
5. On a monthly basis over the tenure of the loan and based on a line of credit.
D. Except in the case of a fixed rate reverse mortgage, the proceeds of which are fully disbursed at closing, the reverse mortgage shall provide that the borrower may convert the method of payment under this section to any other method offered by the lender during the term of the reverse mortgage.
E. The reverse mortgage shall contain restrictions that ensure the borrower does not fund any unnecessary costs for obtaining the reverse mortgage, including any costs of estate planning, financial advice or other related services. This subsection does not apply to counseling fees paid to a counselor who is qualified under section 6-1702.
F. A borrower’s principal dwelling securing a reverse mortgage may be held in trust or may be an interest under a life estate or a long-term lease.
G. The originator shall make available to the borrower on an annual basis not later than January 31 a statement summarizing the total principal amount paid to the borrower under the loan secured by the reverse mortgage, the total amount of deferred interest added to the principal and the outstanding loan balance at the end of the preceding year.