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Mortgage Registry Tax Reverse Mortgage

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A reverse mortgage or home equity conversion mortgage (HECM) is a special type of home loan for older homeowners (62 years or older) that requires no monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner's insurance.

The taxable principal debt amount under a reverse mortgage is the expected total disbursements (or cash equivalent) which will be made throughout the course of the reverse mortgage.  View the law, Minnesota Statute 287.05, subdivision 6.

In Minnesota, numerous types of reverse mortgages are offered both by private lenders alone, and by private lenders who are participating in national reverse mortgage offerings such as the HUD home equity conversion mortgage (HECM).

Under a HECM, there are two reverse mortgages. The first mortgage is taken by the private lender and is subject to the MRT. The second mortgage is taken by FHA/HUD and is exempt from the MRT under M.S. 287.05.
 

The expected total disbursements for all reverse mortgages except HECM’s include the sum of all cash advances that are allowed to be paid to the borrower under the agreement, plus any costs financed in the mortgage instead of being paid out-of-pocket by the borrower at the closing. For a HECM reverse mortgage, the expected total disbursements do not include interest costs, insurance premiums, service fees, or amounts to be paid to the borrower by HUD.

The county auditor/treasurer will have to rely upon the lender to certify the expected total disbursements subject to the MRT because many of the components(age of borrower, value of home, payment plan, etc.) used to determine the amount are not shown in the mortgage.
 

Minnesota lenders who take reverse mortgages should include specific language on the mortgage document to clearly indicate the basis of the MRT and the amount of the MRT due. 

Example: 

Mortgage Registration Taxable Amount: $141,000 (Expected total disbursement minus interest, mortgage insurance premium, and lender service fees).

Principal Limit Amount $150,000
Subtraction: Service Set-Aside (if applicable) ($5,000)
Available Principal Amount $145,000
Subtraction: Initial Mortgage Insurance Premium (if applicable) ($4,000)
Mortgage Registration Taxable Amount (Expected Total Disbursements) $141,000
Mortgage Tax Rate (.0023 or .0024--Hennepin/Ramsey County) .23%
Mortgage Tax Due $324.30
 

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