For which type of mortgage is a reverse mortgage excluded from the scope of a closing disclosure?

A reverse mortgage is excluded from the scope of a closing disclosure primarily because it is designed for a specific demographic, typically seniors, and operates differently compared to traditional loan products. Closing disclosures are generally applicable to loans that require structured payment plans, where borrowers are actively repaying principal and interest.

In the case of a reverse mortgage, the borrower receives payments from the lender based on the equity in their home rather than making monthly payments. This unique payment structure, where the loan balance increases over time and is paid off at the end of the loan term (often when the borrower sells the home or passes away), does not align with the standard requirements for a closing disclosure, which is focused on loans that require clear, defined repayment schedules.

HELOCs, or Home Equity Lines of Credit, while also revolving lines of credit similar to credit cards, are typically included in the scope of closing disclosures as they do involve borrowing against home equity with specific terms. Therefore, the exclusion of reverse mortgages from this requirement is a recognition of their distinct nature in the lending landscape.