Everything You NOW Need to Know about Reverse Mortgages ... You NOW Need... · A Capsule History of Reverse Mortgages in the United States 1961 First reverse mortgage loan made by

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Everything You NOW Need to Know about Reverse Mortgages: Learn the Updated Rules and their Use as Financial Planning Tools

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EVERYTHING YOU NOW NEED TO KNOW ABOUT REVERSE MORTGAGES: LEARN THE UPDATED

RULES AND THEIR USE AS FINANCIAL PLANNING

TOOLS Prepared in connection with a Continuing Legal Education course presented at New York County Lawyers’ Association, 14 Vesey Street, New York, NY

scheduled for February 12, 2014

Faculty: Alfie Schloss, Associated Mortgage Bankers (AMB); Kevin McMullen, Esq.

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Updated Rules and their Use as Fiscal Planning Tools Wednesday, February 12, 2014 6:00 PM to 8:30 PM

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Everything You NOW Need to Know About Reverse Mortgages: Learn the Updated Rules and their Use as Financial Planning Tools

Wednesday, February 12, 2014; 6:00 PM to 8:30 PM

Moderator: Kevin McMullen, Esq. Faculty: Alfie Schloss, Associated Mortgage Bankers (AMB);

Kevin McMullen, Esq.

AGENDA

5:30 PM – 6:00 PM Registration 6:00 PM – 6:10 PM Introductions and Opening Remarks 6:10 PM – 8:00 PM Discussion of Reverse Mortgages

Alfie Schloss, Associated Mortgage Bankers (AMB)

8:00 PM – 8:30 PM A Case Study Kevin McMullen, Esq.

NY County Lawyers – Wednesday Feb. 12 – 2-hr. Update on Reverse Mortgage – Outline of curriculum

By Alfie Schloss NMLS ID 404064 Reverse Mortgage Loan Originator

Associated Mortgage Bankers Reverse Mortgage Specialists Tel: 914-275-3361

I. History and Background of Reverse Mortgages

a. 1980’s Beginning’s as predatory loan b. 1989 Congressional hearings c. 1991 HECM Program is enacted by HR 255

II. What is a reverse mortgage?

a. HECM vs. Proprietary loans b. HUD’s involvement and mortgage insurance c. Eligibility – Youngest borrower must be 62 at time of closing d. Options available, Fixed & Libor e. How can one receive funds? New limits on initial draws. f. Non-recourse loans with no personal liability g. What can the funds be used for? What can’t they be used for? h. Typical scenarios i. Non-Borrowing Spouse restrictions.

III. The process of getting a reverse mortgage

a. HUD required counseling b. Application c. HUD appraisal d. Eligible properties – HUD does not provide product for Coops or Non-FHA approved

Condos. e. Trusts and Life Estates. We allow irrevocable trusts where in the beneficiary does not

have control of the funds. f. Underwriting g. Closing and three day right of rescission h. Funding i. Servicing

IV. Sample loans review and discussion.

V. Pitfalls of reverse mortgages

a. Who should not do one. b. What are some alternative’s to reverse mortgages?

VI. Advanced uses of reverse mortgages

a. Standby reverse mortgage for higher wealth individuals b. Delaying social security benefits until age 70 to maximize annual payouts.

Questions?

A Capsule History of Reverse Mortgages in the United States

1961 First reverse mortgage loan made by Nelson Haynes of Deering Savings & Loan (Portland, ME) to Nellie Young, the widow of his high school football coach

1963 First property tax deferral program offered in Oregon, financed through Public Employees Retirement Fund

1970 Survey research on a "housing annuity plan" conducted in Los Angeles by Yung-Ping Chen of UCLA

1975 Technical monograph on "Creating New Financial Instruments for the Aged" authored by Jack M. Guttentag of The Wharton School

1977 First RM loan program, "Equi-Pay", introduced by Arlo Smith ofBroadview Savings & Loan in Independence, OH

1978 "Reverse Mortgage Study Project" funded by Wisconsin Bureau on Aging, directed by Ken Scholen

First statewide deferred payment loan program offered by WI Dept of Local Affairs and Development, designed by William Perkins

1979 First national "Reverse Mortgage Development Conference" sponsored by WI Bureau on Aging in Madison, WI on May 21-22

San Francisco Development Fund's "Reverse Annuity Mortgage (RAM)" program funded by Federal Home Loan Bank Board, foundations, and WI Bureau on Aging; directed by Don Ralya

1980 Unlocking Home Equity for the Elderly, edited by Ken Scholen and Yung-Ping Chen, published by Ballinger (Cambridge, MA)

Two-year "Home Equity Conversion Project" funded by U.S. Administration on Aging, directed by Ken Scholen

FHA reverse mortgage insurance proposal by Ken Scholen endorsed by housing pre-conference to 1981 White House Conference on Aging

1981 National Center for Home Equity Conversion (NCHEC) incorporated as independent, non-profit organization in Madison, WI; directed by Ken Scholen

U. S. House Select Committee on Aging hears first Cong- ressional testimony on reverse mortgages, by Ken Scholen

White House Conference on Aging endorses proposal for FHA RM insurance, recommending that "the FHA should develop an insurance program for reverse mortgage loans"

Newsweek, Time, U.S. News, Good Morning America providefirst national media exposure for reverse mortgages

San Francisco RAM program closes first loans

1982 "National Potential for Home Equity Conversion" authored by Bruce Jacobs (University of Rochester)

San Francisco RAM program expands to new sites in California, directed by Bronwyn Belling

U. S. Administration on Aging funds NCHEC research on federal issues - including FHA RM insurance

U. S. Senate Special Committee on Aging stages first hearing on reverse mortgages; staffed by John Rother; testimony by Ken Scholen, Jack Guttentag, Maurice Weinrobe, James Firman

U. S. Senate Special Committee on Aging issues report citing need for reverse mortgage insurance

Garn-St. Germain Depository Institutions Act clears regulatory path for reverse mortgages; first federal statutory recognition of reverse mortgages

1983 Federal Council on Aging supports proposal for FHA reverse mortgage insurance

FHA reverse mortgage insurance demonstration program proposed by U.S. Department of Housing and Urban Develop- ment (HUD) in housing bill

"RMs: Problems and Prospects for a Secondary Market and an Examination of Mortgage Guaranty Insurance", authored by Maurice Weinrobe (Clark University)

"National Development Conference" sponsored by NCHEC with HUD support in Washington, DC; greetings sent by President Reagan and Representative Claude Pepper

U.S. Administration on Aging funds NCHEC information and training project

"Home Equity Financing of Long-Term Care for the Elderly" by Bruce Jacobs (University of Rochester) and William Weissert (Urban Institute)

FHA insurance proposal by Sen John Heinz adopted by Senate; House-Senate conference committee mandates HUD study

1984 First open-ended, risk-pooling reverse mortgage offered by American Homestead in New Jersey

SF RAM program and NCHEC provide training and technical assistance to new reverse mortgage programs in AZ, MA, NY, WI

Prudential-Bache announces marketing agreement with American Homestead

Social Security Administration releases policy memo on treatment of income from HEC plans

1985 HUD sponsors conference on home equity conversion

U. S. Senate & House Aging Committees sponsor joint briefing session for Congressional staffers, moderated by Ken Scholen

Line-of-credit development project initiated by United Seniors Health Cooperative (DC), directed by Bronwyn Belling

First "split-term" RM offered by CT Housing Finance Agency, designed by Stuart Jennings and Arnold Pritchard

1986 "Home Equity Information Center" established by AARP, directed by Katrinka Smith Sloan

American Homestead expands into CT, OH, and PA

California Home Equity Conversion Coalition established by RAM program counselors

MA Elderly Equity Program funded by Commonwealth of Massachusetts, directed by Len Raymond

HUD releases study opposing a federal reverse mortgage insurance demonstration

AARP releases analysis by Ken Scholen critiquing HUD study; AARP urges enactment of federal RM insurance demo

1987 NCHEC completes studies on home equity financing of long-term care for Minnesota and Connecticut

U.S. House Ways and Means Committee hears testimony on HEC and long-term care by James Firman (United Seniors) and Ken Scholen (NCHEC)

Congress passes FHA reverse mortgage insurance proposal

American Homestead expands into DE, MD, and VA

"Home-Made Money: A Consumer Guide to HEC" published by AARP, authored by Ken Scholen

1988 National survey of members' reverse mortgage needs and preferences by AARP

FHA reverse mortgage insurance legislation signed by President Reagan on 2/5/88; Judith V. May named to develop program

HUD announces HECM development team including Edward Szymanoski, Jr, Patrick Quinton, Donald Alexander, and Mary Kay Roma

"Innovation in Hone Equity Conversion" conference sponsored by AARP; attracts 200 participants from 25 states

New plan announced by Capital Holding Corporation (Louisville, KY); 10th largest investor-owned insurance company in America; "Home Income Security Plan" first offered in KY, MD, and VA

First line-of-credit reverse mortgage developed by VA Housing Development Authority

American Homestead expands into CA

Providential Home Income Plan (San Francisco) offers shared-appreciation plan throughout CA

HUD releases proposed regulations for FHA reverse mortgage insurance program

Fannie Mae announces intention to purchase reverse mortgages insured by FHA

U. S. Administration on Aging announces cooperative agreement with HUD to sponsor training of reverse mortgage counselors

1989 "A Financial Guide to Reverse Mortgages" by Ken Scholen for NCHEC introduces total loan cost rate method for analyzing costs

HUD selects 50 lenders by lottery to make first FHA-insured reverse mortgages

Software for determining reverse mortgage loan advances developed by FHA and made available to the public

Wendover Funding (NC) announces program for servicing FHA-insured reverse mortgages

HUD releases "Home Equity Conversion Mortgage" (HECM) program handbook (# 4235.1)

Fourteen 2-day HECM counselor training sessions conducted by Bronwyn Belling (AARP) and Ken Scholen (NCHEC) for FHA

Capital Holding expands into CA and FL

FNMA announces policies for purchasing FHA-insured (HECM) reverse mortgages

First FHA-insured HECM made to Marjorie Mason of Fairway, KS by the James B Nutter Co

National Center for Home Equity Conversion (NCHEC) moves from Madison, WI to Marshall, MN

1990 AARP releases FHA Counselor Training and Reference Manual, by Bronwyn Belling and Ken Scholen

American Homestead and Providential suspend lending as recession and falling appreciation expectations dry up debt sources for new loans

Fourteen more 2-day counselor training sessions conducted by Bronwyn Belling (AARP) and Ken Scholen (NCHEC) for HUD

"Reverse Angle" newsletter published for FHA counselors by AARP Home Equity Information Center

Congress increases FHA insurance authority to 25,000 loans by 9/31/95; requires disclosure of total loan cost & development of equity reserve option

AARP publishes "Model State Law on Reverse Mortgages"

HUD publishes "FHA Home Equity Conversion Insurance Demonstration: A Model to Calculate Borrower Payments and Insurance Risk," by Edward Szymanoski Jr.

1991 Los Angeles County Employees Retirement Association sponsors information seminar on reverse mortgages as a potential fund investment and member benefit

AARP publishes 3rd edition of "Home-Made Money" by Ken Scholen; distribution tops 250,000

New consumer guide developed by Federal Trade Commission in partnership with NCHEC and AARP

HUD publishes new regulations making reverse mortgage insurance available to all FHA lenders

Interim report on FHA program by Judith V. May

Retirement Income On The House: Cashing In On Your Home With A "Reverse" Mortgage, 352-page book by Ken Scholen, preface by Jane Bryant Quinn published by NCHEC

National Leadership Conference on Home Equity Conversion sponsored by AARP (9/91)

First lifetime reverse mortgage programs proposed by Peter Mazonas of Homefirst (San Francisco) and Robert Bachman of Home Equity Partners (Irvine, CA)

FNMA expands funding for expanded HECM program; develops comprehensive "Instruction Package"

Wendover Funding announces correspondent program and "starter kit" for lenders

First multi-state HECM lending programs developed by Interna- tional Mortgage (DE, DC, MD, PA, VA, WV), Directors Mortgage (AZ, CA, NV), and ARCS Mortgage (CA, HI, NY, OR, WA)

1992 Capital Holding Corporation airs 60-second and 120-second prime-time network television ads in CA and FL for its "Homearnings" plan

Initial public stock offering by Providential Home Income Plan attracts strong investor interest

AARP publishes 79-page discussion paper on reverse mortgage counseling by Ken Scholen

AARP releases videotape for counselor training written and narrated by Ken Scholen

U. S. Securities & Exchange Commission issues directive prohibiting interest accrual in reverse mortgage accounting

U. S. Securities & Exchange Commission rescinds previous directive; issues directive on effective yield method for reverse mortgage accounting

AARP sponsors community coalition-building seminars in support of HECM development in OH, WI, IA, NY, NJ, PA, IL

Retirement Income On The House: Cashing In On Your Home With A "Reverse" Mortgage named best book of 1992 on financial services for the elderly by the National Association of State Units on Aging (NASUA)

HECM preliminary evaluation released by HUD

1993 Transamerica announces reverse mortgage product including deferred annuity from MetLife

Fannie Mae convenes roundtable on developing a conventional reverse mortgage

Capital Holding discontinues "Homearnings" plan

NCHEC prepares report on taxation of reverse mortgage transactions for AARP

Home Equity Partners (Irvine, CA) & Union Labor Life announce new "Freedom" plan including optional immediate annuity from MetLife

Wendover convenes 2-day conference of HECM originators

AARP sponsors community seminars in support of HECM program development in CA, LA, MI, & MS

Fannie Mae initiates series of information sessions for financial planners and elderlaw attorneys

Andrus Gerontology Center (USC) convenes national telecon- ference on reverse mortgages

National Center for Home Equity Conversion (NCHEC) moves from Marshall, MN to Apple Valley, MN

At year's end, the HECM program is all states except AK, SD, & TX); Unity Mortgage offers it in 25 states; Senior Income in 14 states; Directors Mortgage in 14 states; Amerifirst Mortgage in 9 states; ARCS Mortgage in 6 states; & International Mortgage in 4 states

1994 Household Senior Services offers "Ever Yours" creditline reverse mortgage in FL, GA, IL, KY, MD, MI, OH, and VA

Congress enacts "total loan cost rate" disclosure requirement for all reverse mortgages; Federal Reserve publishes proposed regulations

NCHEC prepares report on "Reversing Foreclosures" for AARP

New York rescinds mortgage tax on reverse mortgages

U. S. Court of Appeals (5th Circuit; # 93-8170; First Gibralter V. Morales) removes legal barrier to RM lending in Texas; Rep. Gonzales legislates statutory override of court decision

CA Public Employees Retirement System (CALPERS) initiates study of reverse mortgage investment

Transamerica introduces creditline plan and expands into NY, NJ, PA, and CT

At year's end, Unity Mortgage is offering the HECM in 42 states and Director's Mortgage has merged with Norwest Mortgage

1995 HUD releases "Evaluation of the Home Equity Conversion Mortgage Insurance Demonstration"

HUD releases first major revision of HECM handbook 4235.1

HUD approves direct endorsement processing of HECM loans

NCHEC publishes Your New Retirement Nest Egg: A Consumer Guide to the New Reverse Mortgages by Ken Scholen, 336 pages

AARP publishes 5th edition of "Home-Made Money" by Ken Scholen; distribution tops 400,000

HECM program lapses at end of federal fiscal year

AARP sponsors national conference on reverse mortgages in MD on 11/14-15

Fannie Mae announces "HomeKeeper" plan; media coverage includes front-page, above-the-fold article in USA Today

FHA Commissioner’s Award presented by Nicolas Retsinas to Ken Scholen for his work on reverse mortgages

1996 HECM program re-authorized on January 26, 1996

Fannie Mae begins lender training for "Home Keeper"

NCHEC issues Second Edition of Your New Retirement Nest Egg: A Consumer Guide to the New Reverse Mortgages by Ken Scholen, 352 pages

Hartford Life tests annuity complement to HECM and Fannie Mae reverse mortgages

HUD initiates counselor training via satellite TV

1997 AARP releases consumer videotapes written by Ken Scholen featuring Scholen and Bronwyn Belling

AARP sponsors HUD counselor training via satellite TV featuring Belling and Scholen

Referral fee scams denounced by AARP, HUD, Fannie Mae

Household Senior Services discontinues "Forever Yours" plan

AARP announces counselor support fund capitalized by HUD and Fannie Mae

NCHEC initiates "preferred" lender and counselor program and releases "Reverse Mortgage Counselor" software

Ibis Software (SF) releases "Reverse Mortgage Originator"

Texas approves referendum to permit RMs, but technical errors make impact uncertain, problematic AARP sponsors national reverse mortgage leadership roundtable and conference

National Reverse Mortgage Lenders Association (NRMLA) organized by Jeffrey Taylor with Peter Bell as staff

1998 NCHEC circulates discussion papers on "Strengthening Cost Disclosures on Reverse Mortgages" by Ken Scholen

AARP releases "HECM Training-in-a-Box" including videotapes, workbook, HECM handbook, and counseling manual

Fannie Mae conducts market research to identify reverse mortgage market segments

NCHEC publishes "Reverse Mortgages for Beginners: A Consumer Guide to Every Homeowner’s Retirement Nest Egg," 132 pages

NCHEC establishes website

Transamerica HomeFirst (SF) discontinues originating its proprietary "HouseMoney" loans and servicing new HECM and HomeKeeper loans

Federal Reserve clarifies inclusion of annuities in TALC disclosures

1999 Neighborhood Reinvestment Corporation (NRC) provides HECM training in cooperation with AARP

Texas approves reverse mortgage lending in statewide referendum but prohibits creditline choices preferred by most consumers

Fannie Mae announce new consumer protections in 5/22 lender letter

NRMLA and AARP support absolute limit on origination fees, refinancing reforms, and research on a single national 203b limit

AARP initiates test of HECM counseling by telephone and develops reverse mortgage counselor exam in cooperation with HUD, Fannie Mae, and NRMLA

2000 First national reverse mortgage counseling exam is taken by 425 counselors in 43 states

NRC provides 2-day HECM training in Atlanta, Minneapolis, Oakland, Tampa, New Orleans, and San Antonio

AARP completes "Model Specifications for Comparing Reverse Mortgages;" Financial Freedom and Fannie Mae agree to develop new software implementing the specifications

Congress approves absolute limit on origination fees, refinancing reforms, and research on a single national 203b limit

Fannie Mae discontinues "equity share" pricing option

AARP Foundation selects 30 HECM counselors to participate in HUD-supported pilot "telecounseling" project

Financial Freedom becomes largest reverse mortgage originator via merger with Unity Mortgage

2001 AARP releases new 68-page consumer guide, creates new reverse mortgage portal at www.aarp.org/revmort/, announces new tollfree consumer infoline and availability of HECM counseling by telephone

Fannie Mae announces it will waive the equity share fee on all loans in its Home Keeper portfolio

Financial Freedom releases counseling software meeting AARP model specifications

2008 Index for loan rate is changed to the 1-month Libor rate from the 1-year treasury 2009 Record volume is achieved as over 100,000 new loans are funded HUD increases annual Mortgage Insurance Premium from .50% to 1.25% as there is concern about much higher risk 2010 HUD introduces the HECM SAVER a version of the loan that offers a lower mortgage insurance cost. The HECM for Purchase is introduced allowing a home to be purchased using a HECM loan 2011 Bank of America and Wells Fargo the two largest HECM Originators leave the industry.

http://www.aarp.org/revmort/

2012 MetLife becomes the number one lender and soon thereafter exits the banking and mortgage industry. Many new lenders enter the space, some of whom were sub-prime lenders and the industry as a whole becomes more predatory. The emphasis shifts from the majority of loans being HECM Libor loans where the borrowers have a line of credit or monthly income from their loan to the more profitable “Fixed Rate” reverse mortgage that requires borrowers to cash out. Over 70% of all reverse mortgages are now fixed rate loans and there is worry that this will lead to much higher default levels. 9% of all HECM loans are currently in default. As a result, there are now moves by FHA/HUD being contemplated (HUD Has announced it will be making changes to the program within the next six months) and the CFPB is investigating how to stem this tide. 2013 Effective October 1, 2013 HUD issued a series of Mortgagee letters to shore up the HECM program, reduce their risk and put the program on a better financial footing. To reduce risk of Tax and Insurance defaults by borrowers, HUD reduced the available principal limit on HECM loans by approximately 15%. To further reduce misuse of the program HUD has limited the initial draw available during the first year to 60% of the available principal limit. If mandatory obligations are beyond 60% of available principal limit, the upfront mortgage insurance premium is increased from .5% to 2.5%. The borrower is also allowed to cash out 10% above the mandatory obligations up to the available principal limit. 2014 Effective sometime in April (Date TBD), HUD will begin requiring a financial assessment of all borrowers to determine their ability to afford living in the home and make their tax and insurance payments. There may also be a requirement that homeowners who have a history of late payments on taxes and or insurance be required to escrow funds from the available principal limit to be available in the event that taxes or insurance payments are not made in a timely fashion. Stay Tuned for more clarity in April. In the second quarter of 2014, it is expected that proprietary reverse mortgage products (not insured by HUD) will again become available. The new loans will provide reverse mortgage lending on high value homes (in excess of the $625,500 HUD limit), non-FHA approved Condos, and second homes.

Reverse Mortgage Retirement Planning

Strategies For Professionals

Presented by Alfie Schloss – NMLS ID 404064

Reverse Mortgage Loan Originator

Associated Mortgage Bankers

914-275-3361

[email protected]

For business and professional use only. Not for consumer distribution.

mailto:[email protected]

Today’s Agenda

• Reverse Mortgage Industry Overview

• Reverse Mortgage Product Overview

• Reverse Mortgage Retirement Planning Strategies

For business and professional use only. Not for consumer distribution. 2


Historical Perspective

3

First

FHA-insured

HECM

1989

1991

1993

1997 NRMLA

Is Founded

2000

Jumbo Reverse

Mortgages

HECMs in all

states except (AK, SD & TX)

1994

2001

Counseling

Offered by AARP

2009

Record

Volumes

Source: National Center for Home Equity

Conversion Mortgage (NCHEC)

The industry is relatively young,

with the first Home Equity

Conversion Mortgage (HECM)

loan closed in 1989. An industry

association, the National

Reverse Mortgage Lenders

Association (NRMLA), was

formed in 1997, and the

introduction of independent

counseling by the Association of

American Retired Persons

(AARP), a vested party from

early on, occurred in 2002.


Potential Market for Reverse Mortgages

24 million households with residents 60 years of age or older…

…with less than 2% of eligible households having a reverse mortgage.

4

5 For business and professional use only. Not for consumer distribution. Excerpted from: Tapping Home Equity in Retirement: The MetLife Study on the Changing Role of Home Equity and Reverse Mortgages, June 2009.

6 For business and professional use only. Not for consumer distribution.

HECM Product Basics

• All borrowers must be 62 (minimum age) and a citizen or a legal resident of the U.S.

• All borrowers must be on the deed, with limited exceptions such as life estates and trusts

• Primary, owner-occupied residences only

• Proceeds are generally tax-free*

• NO monthly mortgage payment required, as long as the conditions of the loan are met. (Interest only accrues on the portion of the loan amount disbursed)

*This presentation does not constitute tax advice; borrowers should consult a tax advisor regarding their situation.

Appraised property value may affect loan amount. All loans are subject to property approval. Certain conditions and fees may apply.

Property taxes and required insurance premiums must still be paid.


HECM Product Basics (continued)

• Loan amount is subject to Federal Housing Administration (FHA) 203b

limit (National limit of $625,500)

• All borrowers must receive independent counseling; lender must

provide a list of U.S. Department of Housing and Urban Development

(HUD)-approved counseling agencies to borrower

• HECM must be in a first-lien position; reverse mortgage proceeds

would first be used to pay off any existing mortgage

• HECM also takes a second position so no additional borrowing is

possible as long as the loan is not repaid

HECM 60

• In 2013, HUD was allowed by Congress to re-engineer the HECM

loan program in an effort to address varying consumer needs and

shore up the Mortgage Insurance Program

• In October 2013, HUD revamped the program and did away with the

HECM Saver and the HECM Standard and replaced them with the

HECM 60 LIBOR and HECM 60 FIXED

• Required up-front costs are still reduced as compared to the old

HECM Standard—this may save the average reverse mortgage

borrower thousands of dollars, depending on the home’s value

• Maximum amount of money (the principal limit) that can be

borrowed is now even less than with a HECM Standard or the

SAVER, but the lower up-front costs still may make it an attractive

option for many clients



HECM Product Evolution

Sept. 30, 2009

Oct. 1, 2009

April 1, 2010

Feb. 2014

Home Value

(72-Year-Old

Borrower)

$400,000 $400,000

$400,000

$400,000

Principal Limit $282,400 $254,000 $254,000 $213,600

Up-front MIP $8,000 $8,000 $8,000 $2,000

Third-Party Closing

Costs $5,200 $5,200 $5,200 $5,200

Origination Fee $6,000 $6,000 $6,000

$6000

Total Up-front Fees $19,200 $19,200 $19,200 $13,200

Servicing Fee

Set-Aside $4,872 $4,872 $0 $0

Net LOC available to

Borrower $258,328 $229,928 $234,800

$200,022 **

*This slide is for illustrative purposes only and does not represent an actual loan.

** Borrower is restricted to 60% of Principal limit at closing unless there are mandatory obligations. Loans requiring over 60% have

increased IMIP to 2.5% of the maximum claim amount.

HECM for Purchase

• A HECM for Purchase enables senior homebuyers age 62 or older to purchase

a new home without taking on monthly mortgage payments*

• Reverse mortgage customers receive title to their new home and cannot owe

more than the market value of their home, provided they comply with loan

terms

• The sale of a departure home is a completely separate transaction from the

purchase and reverse mortgage for a new home

• The reverse mortgage is utilized on the new primary residence

• Reverse mortgage proceeds will be calculated based on the youngest

homebuyer’s age and the lower of either the new home’s sale price, its

appraised value or the national HECM lending limit

• All of the normal costs associated with selling and buying property apply as

well as the normal reverse mortgage fees


*Although there are no monthly mortgage payments, as long as the terms of the loan are met, interest accrues on the portion of the loan

amount disbursed. Only applicable for the purchase of a single-family-unit dwelling to be occupied as a principal residence. Program, rates,

fees, terms and conditions are not available in all states and subject to change.

HECM Proceeds: Payment Plan Options

Tenure - equal monthly payments as long as at least one borrower

lives in and continues to occupy the property as a principal

residence.

Term - equal monthly payments for a fixed period of months selected.

Line of Credit - unscheduled payments or in installments at times and

in an amount of the borrower’s choosing until the line of credit is

exhausted.

Modified Tenure - combination of line of credit plus scheduled monthly

payments for as long as the borrower remains in the home.

Modified Term - combination of line of credit plus monthly payments

for a fixed period of months selected by the borrower.

Lump Sum – all loan proceeds are taken up front, usually to pay off a

mortgage or other substantial debts.

The current program the HECM 60 restricts first year draws to 60%

of the available principal limit during the first year on a LOC and

forever on Fixed rate loans



Reverse Mortgage Facts

• The Bank will NOT take title to the property in exchange for lending

money to the borrower

• There are NO required monthly mortgage payments, as long as the

terms of the loan are met. (Interest and mortgage insurance premium

[MIP] accrue on the portion of the loan amount disbursed). The

homeowners remain responsible for the property taxes, homeowner’s

insurance and maintenance on the home.

• Government benefits, such as Social Security and Medicare, generally

will NOT be affected (needs-based benefits, such as Medicaid and

Supplemental Security Income [SSI], may be impacted); borrowers

should consult their personal representative

12 12


HECM Products: A Marketplace Overview

• Adjustable-Rate HECM 60

- Rate is adjusted monthly

- Offered with a variety of margins

- Uses 1-month LIBOR as the index

- Often used by borrowers requiring a line of credit or desiring monthly payments made to them

• Fixed-Rate HECM 60

- One rate for the life of the loan

- Always taken as a full draw, but borrowers are restricted to 60% of the available principal limit unless mandatory obligations exceed that amount. In this scenario the Initial Mortgage Insurance Premium is always 2.5% of the Maximum Claim Amount.

- Most attractive for borrowers who are rate-sensitive or those paying off a high interest rate loans


HECM Property Eligibility

• Eligible Properties

- Single family

- Two-to-four unit dwellings, as long as one unit is the borrower’s

primary residence (not eligible for HECM for Purchase)

- * Condominiums and Planned Unit Developments (PUDs)

Non-Eligible Properties*

- Investment properties

- Vacation homes

- Properties with illegal accessories (e.g., units or mixed-use

properties where more than 25% is used for non-residential

purposes)

- Manufactured homes

- Coops *list is not all-inclusive Condos must be FHA approved in order to be eligible.


Consumer Protection

Mandatory borrower counseling

• HUD-approved counseling agencies have been established for all

HECM borrowers with HUD-mandated curriculum and protocols

• Lenders cannot order services until counseling has been completed

• HUD maintains a national roster of approved counselors

• HUD counseling rules are focused on anti-steering (e.g., lenders

must provide approved counselor lists to consumers)

• Counselors must determine that borrowers understand the

transaction in order to issue a certificate

• Counselors are required to review borrowers budget to determine

whether they are able to sustain themselves in the home


HECM Counseling Topics

• Options other than a HECM

• Financial implications of a HECM

• Advantages and disadvantages of a HECM

• Alternatives and options regarding each payment plan

• Explanation of the typical costs required to obtain a loan

• Disclosure information

• Budget review

16

HECM Net Principal Limit

• Principal Limit minus

- Up-front mortgage insurance premium (if applicable)

- Lender’s origination fee (if applicable)

- “Other” closing costs (appraisal, title insurance, etc.)

- Mortgage and other lien payoffs

- Initial Disbursment Limit is 60% of Principal Limit *

* Formula used is Mandatory Obligations (Payoffs, Taxes, Closing costs etc.) can be paid off using the principal limit. If this is more than 60%

of the principal limit the IMIP is increased from .5% to 2.5%. Borrower is allowed to additionally draw 10% of Principal Limit for cash out.


HECM Costs: Mortgage Insurance Premium

• Mortgage Insurance Premium (MIP) insures crossover risk, should

the loan balance exceed the market value of the property*

- Non-recourse to the borrower

- Lender is assured of repayment if crossover occurs

- HECM 60: Premiums are charged to the borrower (and almost

always financed) as an up-front cost, currently set by HUD at

.5% of the maximum claim amount plus 1.25% annualized,

charged monthly against the loan balance. .5% is for initial

draws of less than 60%

- HECM 60: Up-front MIP is drastically increased to 2.5%, plus

1.25% annualized charged monthly against the loan balance for

loans exceeding 60% initial draw.

*If the sale proceeds are insufficient to pay the amount owed when the loan becomes due, HUD will pay the lender the amount of the shortfall, provided that the sale is an arm’s length transaction in accordance with HUD guidelines.



I. Outliving Your Assets

II. House–Rich, Cash–Poor

III. Social Security Deferral

III. Line of Credit and Liquidity

IV. Rightsizing Your Next Home and Liquidity

Retirement Planning Strategies

19

Figures and calculations are for illustrative purposes only. They are based on hypothetical rates of return and do not

represent investment in any specific product. They may not be used to predict or project investment performance. Unless

noted, charges and expenses that would be associated with an actual investment are not reflected.

Outliving Your Assets: A Case Study

Client Facts: Couple in their early 70s with a $1million portfolio; plan

projections forecast their assets will be depleted by ages 85 and

87, respectively. This is despite a plan that is fully invested and

includes income sources; i.e., pension and Social Security.

Solution: Use a reverse mortgage in year 13 of the plan to provide tax-

free cash so that the clients have sufficient assets and income

through ages 89 and 91, respectively.


Retirement Needs Analysis Retirement Portfolio Results

Age Total Needs

Applied

Income

Applied

RMD and

Withdrawals

(Shortage)

Unmet Needs

RMD and

Withdrawals

Growth and

Additions

Retirement

Portfolio

Beginning

Balance 1,000,000

72/70 93,000$ 35,084$ 57,916$ -$ 77,221$ 59,444$ 982,223$

73/71 95,790$ 35,910$ 59,880$ -$ 79,840$ 58,130$ 960,513$

74/72 98,664$ 36,755$ 61,908$ -$ 82,545$ 56,557$ 934,525$

75/73 101,624$ 37,622$ 64,002$ -$ 85,336$ 54,703$ 903,892$

76/74 104,672$ 38,509$ 66,163$ -$ 88,217$ 52,544$ 868,219$

77/75 107,812$ 39,419$ 68,394$ -$ 91,192$ 50,054$ 827,081$

78/76 111,047$ 40,351$ 70,696$ -$ 94,262$ 47,207$ 780,026$

79/77 114,378$ 41,305$ 73,073$ -$ 97,430$ 43,971$ 726,567$

80/78 117,810$ 42,284$ 75,256$ -$ 100,701$ 40,317$ 666,183$

81/79 121,344$ 43,286$ 78,058$ -$ 104,077$ 36,210$ 598,316$

82/80 124,984$ 44,313$ 80,761$ -$ 107,561$ 31,613$ 522,368$

83/81 128,734$ 45,366$ 83,638$ -$ 111,157$ 26,489$ 437,700$

84/82 132,596$ 46,455$ 86,151$ -$ 114,868$ 20,796$ 343,628$

85/83 136,574$ 47,550$ 89,024$ -$ 118,698$ 14,490$ 239,420$

86/84 140,671$ 48,683$ 91,988$ -$ 122,651$ 7,522$ 124,290$

87/85 144,891$ 49,843$ 93,218$ (1,830)$ 124,290$ -$ -$

88/86 149,238$ 51,033$ -$ (98,205)$ -$ -$ -$

89/87 153,715$ 52,252$ -$ (101,462)$ -$ -$ -$

90/88 158,326$ 53,502$ -$ (104,824)$ -$ -$ -$

91/89 163,076$ 54,783$ -$ (108,293)$ -$ -$ -$

Notes:

The Applied Income (Pension and SS) for ages 72/70 is $45,599 and Taxes for Same Year are $10,515. Net is "Applied Income."

Source: Client Case developed in Financial Profiles, as of April 2011.

Without a Reverse Mortgage




Age Total Needs

Applied

Income

Applied

RMD and

Withdrawals

(Shortage)

Unmet Needs

RMD and

Withdrawals

Growth and

Additions

Retirement

Portfolio

Beginning

Balance 1,000,000

72/70 93,000$ 35,084$ 57,916$ -$ 77,221$ 59,444$ 982,223$

73/71 95,790$ 35,910$ 59,880$ -$ 79,840$ 58,130$ 960,513$

74/72 98,664$ 36,755$ 61,908$ -$ 82,545$ 56,557$ 934,525$

75/73 101,624$ 37,622$ 64,002$ -$ 85,336$ 54,703$ 903,892$

76/74 104,672$ 38,509$ 66,163$ -$ 88,217$ 52,544$ 868,219$

77/75 107,812$ 39,419$ 68,394$ -$ 91,192$ 50,054$ 827,081$

78/76 111,047$ 40,351$ 70,696$ -$ 94,262$ 47,207$ 780,026$

79/77 114,378$ 41,305$ 73,073$ -$ 97,430$ 43,971$ 726,567$

80/78 117,810$ 42,284$ 75,256$ -$ 100,701$ 40,317$ 666,183$

81/79 121,344$ 43,286$ 78,058$ -$ 104,077$ 36,210$ 598,316$

82/80 124,984$ 44,313$ 80,761$ -$ 107,561$ 31,613$ 522,368$

83/81 128,734$ 45,366$ 83,638$ -$ 111,157$ 26,489$ 437,700$

84/82 132,596$ 46,455$ 86,151$ -$ 114,868$ 20,796$ 343,628$

85/83 136,574$ 47,550$ 89,024$ -$ 94,828$ 370,640$ 619,440$

86/84 140,671$ 48,683$ 91,988$ -$ 98,035$ 23,233$ 544,638$

87/85 144,891$ 49,843$ 95,048$ -$ 101,393$ 23,076$ 466,321$

88/86 149,238$ 51,033$ 98,205$ -$ 104,854$ 22,817$ 384,284$

89/87 153,715$ 52,252$ 101,462$ -$ 118,525$ 18,544$ 284,303$

90/88 158,326$ 53,502$ 104,824$ -$ 139,766$ 9,311$ 153,848$

91/89 163,076$ 54,783$ 108,293$ -$ 144,391$ 609$ 10,066$

Notes:

The Applied Income (Pension and SS) for ages 72/70 is $45,599 and Taxes for Same Year are $10,515. Net is "Applied Income."

Tax-Free Cash Source: Client Case developed in Financial Profiles as of April 2011.

With a Reverse Mortgage

22


House-Rich, Cash-Poor: A Case Study

Client Facts: Couple in their mid-70s with a $500,000 portfolio; plan

projections forecast their assets will be depleted by ages 84 and

86, respectively. This is despite a plan that is fully invested and

includes income sources; i.e., pension and Social Security.

Solution: Use a $2,000 reverse mortgage monthly payment in year 1

of the plan to provide tax-free cash so that the clients have

sufficient assets and income through ages 89 and 91, respectively.

23




Age Total Needs

Applied

Income

Applied

RMD and

Withdrawals

(Shortage)

Unmet Needs

RMD and

Withdrawals

Growth and

Additions

Retirement

Portfolio

Beginning

Balance 500,000

77/75 75,000$ 32,250$ 42,750$ -$ 57,000$ 18,606$ 461,606$

78/76 77,250$ 33,019$ 44,231$ -$ 58,975$ 16,911$ 419,542$

79/77 79,568$ 33,807$ 45,761$ -$ 61,015$ 15,058$ 373,585$

80/78 81,955$ 34,614$ 47,341$ -$ 63,121$ 13,040$ 323,504$

81/79 84,413$ 35,422$ 48,972$ -$ 65,296$ 10,845$ 269,053$

82/80 86,946$ 36,290$ 50,656$ -$ 67,541$ 8,463$ 209,975$

83/81 89,554$ 37,159$ 52,395$ -$ 69,860$ 5,885$ 146,000$

84/82 92,241$ 38,050$ 54,191$ -$ 72,254$ 3,097$ 76,843$

85/83 95,008$ 38,963$ 56,045$ -$ 74,726$ 89$ 2,206$

86/84 97,858$ 39,899$ 1,654$ (56,305)$ 2,206$ -$ -$

87/85 100,794$ 40,858$ -$ (59,935)$ -$ -$ -$

88/86 103,818$ 41,842$ -$ (61,976)$ -$ -$ -$

89/87 106,932$ 42,850$ -$ (64,082)$ -$ -$ -$

90/88 110,140$ 43,844$ -$ (66,256)$ -$ -$ -$

91/89 113,444$ 44,943$ -$ (68,501)$ -$ -$ -$


24




Age Total Needs

Applied

Income

Applied

RMD and

Withdrawals

(Shortage)

Unmet Needs

RMD and

Withdrawals

Growth and

Additions

Retirement

Portfolio

Beginning

Balance $ 500,000

77/75 75,000$ 56,250$ 18,750$ -$ 25,000$ 19,950$ 494,950$

78/76 77,250$ 57,019$ 20,231$ -$ 26,975$ 19,655$ 487,630$

79/77 79,568$ 57,807$ 21,761$ -$ 29,015$ 19,262$ 477,877$

80/78 81,955$ 58,614$ 23,341$ -$ 31,121$ 18,764$ 465,520$

81/79 84,413$ 59,442$ 24,972$ -$ 33,296$ 18,153$ 450,378$

82/80 86,946$ 60,290$ 26,656$ -$ 35,541$ 17,423$ 432,260$

83/81 89,554$ 61,159$ 28,395$ -$ 37,860$ 16,565$ 410,965$

84/82 92,241$ 62,050$ 30,191$ -$ 40,254$ 15,570$ 386,280$

85/83 95,008$ 62,963$ 32,045$ -$ 42,726$ 14,429$ 357,983$

86/84 97,858$ 63,899$ 33,959$ -$ 45,279$ 13,134$ 325,838$

87/85 100,794$ 64,858$ 35,935$ -$ 47,914$ 11,673$ 289,598$

88/86 103,818$ 65,842$ 37,976$ -$ 50,634$ 10,036$ 249,000$

89/87 106,932$ 66,850$ 40,082$ -$ 53,443$ 8,213$ 203,771$

90/88 110,140$ 67,884$ 42,256$ -$ 56,342$ 6,192$ 153,621$

91/89 113,444$ 68,943$ 44,501$ -$ 59,335$ 3,960$ 98,246$

Tenure

Payment


25


Other Tenure Payment Plan Examples

Tenure - equal monthly payments as long as at least one borrower

lives and continues to occupy the property as a principal residence.

Scenario 1 (HECM 60 LIBOR):

62-year-old homeowner living in Rockland County ,NY, with a home that has a market

value of $350,000 and no mortgage.

Scenario 2 (HECM 60 LIBOR):

75-year-old homeowner living in Rockland County ,NY , with a home that has a market

value of $350,000 and no mortgage.

Monthly Tenure Payment $966

Estimated up-front cost $12,320

Monthly Tenure Payment $1,277

Estimated up-front cost $12,320

Note: The above examples are provided for educational purposes only. Examples assume a HECM 60 interest rate of 3.918% applicable loan fees on

average and a property state of NY.

26


Social Security Deferral: A Case Study

Client Facts: A 61-year-old client with $500,000 in an investment

portfolio, home worth $400,000+ (no mortgage) and no pension.

Projected living expenses are $47,000/year. Plan is projected

through age 90. Investment earnings and Social Security benefits

of $1,036/month at age 62 are not sufficient to finance the client’s

retirement through his life expectancy.

Solution: Defer Social Security benefits to age 70 so that benefits are

higher - $1,820/month - and use a reverse mortgage to supplement

income during the eight-year deferral period.

27

For business and professional use only. Not for consumer distribution. 28 Source: Client Case developed in Financial Profiles as of January 2011.



Source: Client Case developed in Financial Profiles as of January 2011.


HECM 60: Line of Credit Option

Client Situations: Clients can increase liquidity through use of a credit

line. Unused line of credit will grow. Line will not be frozen.

Scenario 1: 62-year-old client with a home worth $400,000; no

mortgage


Initial Line of Credit $186,129

Estimated Up-Front Cost $12,070

Credit Line in Year 10 $275,230

Credit Line Growth Factor 3.918%

Initial Line of Credit $200,747

Estimated Up-Front Cost $12,070

Credit Line in Year 10 $296,046

Credit Line Growth Factor 3.918%

Scenario 2: 70-year-old client with a home worth $400,000; no mortgage

Source: Loan Comparison Program as of Dec.2013. Note: The examples are provided for educational purposes only. Examples assume a HECM 60

interest rate of 2.668%, applicable loan fees on average and a property state of NY.


HECM Saver vs. Home Equity Line of Credit (HELOC)

HECM 60 HELOC

No Monthly Principal and Interest Payments

No up-front MIP Unused Line of Credit (LOC) Growth

Ability to Freeze LOC or Call Note

31


Downsizing With Liquidity: A Case Study

A 65-year-old sells his home for $500,000 and purchases a new

home for $350,000, and does not want any monthly mortgage

payments.

32

With using a reverse mortgage for purchase (HECM 60):

Although there are no monthly mortgage payments, interest and ongoing MIP accrue on the portion of the loan amount disbursed. Only applicable for the purchase of a

single-family-unit dwelling to be occupied as a principal residence. Program, rates, fees, terms and conditions are not available in all states and subject to change.

Note: The above example is provided for educational purposes only. Example assumes a HECM 60 interest rate of 5.56%, applicable loan fees on average and a

property state of NY.

Without using a reverse mortgage for purchase:

Sales Price (Old Home) 500,000$

Less 8% selling costs (commissions, fees, taxes) 40,000$

Net Proceeds (Old Home) 460,000$

Price of New Home, paid in cash 350,000$

Funds remaining 110,000$




Price of new home 350,000$

Maximum reverse mortgage for purchase 190,000$

Down Payment from sale proceeds 160,000$



Upsizing With Liquidity: A Case Study

A 70-year-old sells his home for $500,000 and purchases a new

home for $700,000, and does not want any monthly mortgage

payments.

33

With using a reverse mortgage for purchase (HECM 60):

Although there are no monthly mortgage payments, interest and ongoing MIP accrue on the portion of the loan amount disbursed. Only applicable for the purchase of a

single-family-unit dwelling to be occupied as a principal residence. Program, rates, fees, terms and conditions are not available in all states and subject to change.

Note: The above example is provided for educational purposes only. Example assumes a HECM Standard interest rate of 5.56%, applicable loan fees on average and

a property state of NY.

Without using a reverse mortgage for purchase:




Price of new home, paid in cash 700,000$

Funds remaining (240,000)$




Price of new home 700,000$

Maximum reverse mortgage for purchase 360,000$

Down Payment from sale proceeds 340,000$


A New Day in Retirement Planning


Most people consider just three

components to their retirement

planning.

SAVINGS & INVESTMENTS

PENSION

SOCIAL SECURITY

34

A New Day in Retirement Planning


SAVINGS & INVESTMENTS

PENSION

SOCIAL SECURITY

REVERSE MORTGAGE

A fourth component — a

reverse mortgage — can help

supplement retirement income

and provide increased cash flow

• Provides tax-free cash

• Requires no monthly mortgage

payments*

• Lets homeowners stay

in their home

*Homeowners continue to pay property taxes, homeowner’s insurance, keep up home

maintenance. Although there are no monthly mortgage payments, interest does accrue

on the portion of the loan amount disbursed.

35


Thank you for your time

All loans are subject to property approval. Certain conditions and fees apply.

36

Reverse Mortgage Top 10 Uses List

10. Bet on Red at the Trump casino. I had a client who set up the reverse mortgage with his

wife’s blessing so he could bet on the horses. There are no restrictions on what one can do with the

money from a reverse mortgage. This is not something I encourage.

9. Bail out my good for nothing children. Sometimes this is not the worst thing in the world to

do, but I’ve had situations where the kids just keep taking from the parents who can’t fend for

themselves. Most of my clients’ children want what’s best for their parents. On one occasion my

client took out a reverse mortgage to fund her son to pay for the cost of an adoption. Her quality of

life initiative was to become a grandmother.

8. Investment. I have a client who’s a day trader and uses the reverse mortgage to finance his

addiction. However, retirees who are depending on income from their investments can hedge when

the markets underperform by using the tax free reverse mortgage funds to supplement their income

rather than selling securities a decimating their future income potential. HUD does not want clients

to use reverse mortgages for investments but they cannot legally restrict someone from doing that.

This is not encouraged.

7. Pay for Long Term Care Insurance. This could be a legitimate use. LTC Insurance can be

expensive, but if one does not have it, one spouse could bankrupt the other. One needs to look at

this carefully with a financial advisor.

6. Pay rising real estate taxes. Homeowners in the suburbs, who are not eligible for the Senior

Citizen Low Income Star deduction, find themselves pinching pennies to pay the increasing R/E tax bill

each year. Someone who wants to remain in their home can afford to pay their R/E taxes using the

growth from their line of credit.

5. Pay off high interest rate or problematic debts. With the large amount of debt that the

American consumer accumulates over a lifetime, it should be no surprise that this is a top reason

people get reverse mortgages. Whether it is high interest rate credit cards, a relative's student loan

debt, or even a potential foreclosure that must be dealt with, reverse mortgages can be a very

effective way to get a large sum of cash to manage other debts. I have clients who retired early and

quickly amassed $100,000 in credit card debt and because of late payments, they we’re being

charged interest at an average rate of 30%. The reverse mortgage they took to pay off that debt has

a current APR of about 3.91%. They are paying down their debt making monthly payments on the

reverse mortgage and should be debt free in six years. They also get the mortgage interest deduction

on their income taxes for what they are repaying. Because it’s an adjustable rate HECM Libor, they

also can get access to the money they are repaying if they need it in an emergency.

4. Take that dream vacation. What better time to just get away, than when your working days

are behind you and the weather turns a bit gloomy? Proceeds from a reverse mortgage have allowed

many homeowners to take that vacation they've always dreamed about, but never had the time or

resources to take. Bon voyage! I have a client who used the proceeds to by a bus sized camper and

they now travel the byways of America at will.

3. Improve or modify a home. While this may not be an expansion of the home, the early part

of retirement is a great time to re-purpose your house to accommodate the way you will be living for

the next ten, twenty, thirty years and on. Maybe it's time to expand the kitchen, widen the hallways

or remove some steps, or exchange the old pool in the backyard for a beautifully landscaped garden.

As we get older, a top reason people get reverse mortgages is to outfit their house for their new

lifestyle. There’s also the HECM for Purchase that allows seniors to trade up to the retirement home

they dream of living in without a mortgage payment.

2. Pay hospital or medical bills. For many older Americans and retirees, medical issues are an

increasing reality in their daily lives. With the ever rising cost of healthcare, this can put tremendous

demands on a fixed income. Ongoing medical treatments, prescription drug regimens, or a large one-

time (possibly unforeseen) medical bill are all top reasons that people get reverse mortgages. I also

have done many loans for families wishing to keep their parents at home with caretakers rather than

moving into a nursing home.

1. Retire in style! Most homeowners getting close to retirement age have spent that last thirty

years or more making mortgage payments; depending on where you live, this monthly obligation

could be anywhere from a few hundred dollars a month to a few thousand dollars a month and

beyond - phew! Every month that one big check goes out the door to the bank and leaves you with

that much less cash to save, invest or spend on the items you need and want. How great is it to finally

turn the tables on Bank, where they now send you a check each month? Most retirees have steady

monthly costs, such as housing, medical, insurance and other necessary expenses. For non-working

retirees, those expenses are managed with a fixed income from retirement accounts, pension plans,

social security or other plan. The reverse mortgage allows a retiree to increase their fixed income and

provide cash to do some things that they might otherwise not be able to afford to do and it’s Tax Fee.

Typically, the personal quality of life is the number one reason people get reverse mortgages.

I’ve done over 400 reverse mortgages in the last nine and a half years and no two clients have done it

for the same exact reason.

This is not for everyone but where it works it is a godsend.

As I always say “QUALITY OF LIFE IS WHAT IT’S ALL ABOUT!”

ALFIE SCHLOSS – NMLS ID 404064 – Reverse Mortgage Loan Originator – 914-275-3361

Amortization Schedule - Annual Projections

Borrower Name/Case Number: NoRefinance:Sally Senior /

Age of Youngest Borrower:

Interest Rate (Expected / Initial):

Maximum Claim Amount:

Initial Principal Limit:

Financed Closing Costs:

66

$26,177.08

5.350% / 2.657%

$500,000.00

$250,000.00

$- 276,177.08

$500,000.00

Initial Property Value:

Beg. Mortgage Balance:

Expected Appreciation:

Monthly Payment:

Monthly Servicing Fee:

Mortgage Insurance (MIP)

$500,000.00

4.000%

$0.00

$250,000.00

$0.00

$0.00

1.25%

NOTE: Actual interest charges and property value projections may vary from amounts shown. Available

credit will be less than projected if funds withdrawn from line-of-credit.

Initial Line Of Credit:

Cash Due From Borrower:

Purchase Price:

Yr

Annual Totals End of Year Projections

Age SVC

Fee

Cash

Payment

MIP Interest Loan

Balance

Line Of

Credit

Property

Value

EquityRate

1 $0 $0 $259,944$6,763$3,182 $260,056$520,000$066 2.657%

2 $0 $0 $270,284$7,032$3,308 $270,516$540,800$067 2.657%

3 $0 $0 $281,035$7,311$3,440 $281,397$562,432$068 2.657%

4 $0 $0 $292,214$7,602$3,577 $292,715$584,929$069 2.657%

5 $0 $0 $303,838$7,905$3,719 $304,489$608,326$070 2.657%

6 $0 $0 $315,924$8,219$3,867 $316,736$632,660$071 2.657%

7 $0 $0 $328,490$8,546$4,021 $329,476$657,966$072 2.657%

8 $0 $0 $341,557$8,886$4,180 $342,728$684,285$073 2.657%

9 $0 $0 $355,143$9,239$4,347 $356,513$711,656$074 2.657%

10 $0 $0 $369,269$9,607$4,520 $370,853$740,122$075 2.657%

11 $0 $0 $383,958$9,989$4,699 $385,769$769,727$076 2.657%

12 $0 $0 $399,231$10,386$4,886 $401,285$800,516$077 2.657%

13 $0 $0 $415,111$10,800$5,081 $417,426$832,537$078 2.657%

14 $0 $0 $431,623$11,229$5,283 $434,215$865,838$079 2.657%

15 $0 $0 $448,792$11,676$5,493 $451,680$900,472$080 2.657%

16 $0 $0 $466,643$12,140$5,711 $469,847$936,491$081 2.657%

17 $0 $0 $485,205$12,623$5,939 $488,745$973,950$082 2.657%

18 $0 $0 $504,505$13,125$6,175 $508,403$1,012,908$083 2.657%

19 $0 $0 $524,573$13,647$6,420 $528,851$1,053,425$084 2.657%

20 $0 $0 $545,439$14,190$6,676 $550,122$1,095,562$085 2.657%

21 $0 $0 $567,135$14,755$6,941 $572,249$1,139,384$086 2.657%

22 $0 $0 $589,695$15,342$7,218 $595,265$1,184,959$087 2.657%

23 $0 $0 $613,151$15,952$7,505 $619,207$1,232,358$088 2.657%

24 $0 $0 $637,540$16,586$7,803 $644,112$1,281,652$089 2.657%

26 $0 $0 $689,268$17,932$8,436 $696,966$1,386,235$091 2.657%

28 $0 $0 $745,193$19,387$9,121 $754,158$1,499,352$093 2.657%

30 $0 $0 $805,656$20,960$9,861 $816,043$1,621,699$095 2.657%

32 $0 $0 $871,024$22,661$10,661 $883,005$1,754,029$097 2.657%

34 $0 $0 $941,697$24,499$11,526 $955,462$1,897,158$099 2.657%

DateSally Senior

Page 1 of 12008-2014 ReverseVision, Inc.

Printed: 2/4/2014Loan Officer Company NMLS #:

404064

24794

Loan Officer NMLS #:869,199 AMORT / 0285

Reverse Mortgage Comparison

Alfie Schloss, Associated Mortgage Bankers, Inc

600 Old Country Road, Suite 207, Garden City,

NY 11530

Phone: 516-558-1306

From:

Estimates For: Sally Senior Date Of Birth: 4/20/1948

22 New St.

Garden City, NY 11530

Closing Date: 4/23/2014 (estimate)

Rates and Fees

HECM 60 FixedHECM 60 Libor

N/A2.500%Margin

5.060%2.657%Initial Interest Rate

5.060%5.350%Expected Interest Rate

1.25%1.25%Ongoing Mortgage Insurance Rate

5.060%12.657%Cap on Interest Rate

N/A3.907%Initial Line of Credit Growth

Calculation

$500,000.00$500,000.00Home Value

$500,000.00$500,000.00Maximum Claim Amount

$273,000.00$250,000.00Principal Limit

$12,500.00$12,500.00 - IMIP

$6,000.00$6,000.00 - Origination Fee

$7,677.08$7,677.08 - Other Costs

$0.00$0.00 + Credits

$246,822.92$223,822.92Remaining Principal Limit

$500,000.00$500,000.00 - Purchase Price

$0.00$0.00 - Repair Set Aside

$0.00$0.00 - 1st Year Tax and Insurance Set Aside

$273,000.00$250,000.00Total Mandatory Obligations

100.00%100.00% % of Principal Limit

$273,000.00$250,000.00Initial Disbursement Limit


$0.00$0.00 - Additional Tax and Insurance Set Aside

-$253,177.08-$276,177.08Net Principal Limit

Available Funds and Requested Payments

-$253,177.08-$276,177.08Max Available Cash at Closing

-$253,177.08-$276,177.08 Cash Due From Borrower

N/A$0.00Total Line Of Credit

$0.00$0.00 Line Of Credit Available 1st Year

$0.00$0.00 Line Of Credit Available After 1st Year

$0.00$0.00Available Monthly Tenure Payment 1st Year

$0.00$0.00 Monthly Payment 1st Year

$0.00$0.00Available Monthly Tenure Payment

N/A$0.00 Monthly Payment Request

$273,000.00$250,000.00Initial Loan Balance

$0.00$0.00Unavailable Principal Limit

The above numbers are calculated based upon the specified interest rates and the estimated closing date noted above. Changes in interest

rates and/or changes in actual closing dates may cause the amounts available to be higher or lower than stated.

DateSally Senior

Page 1 of 1Printed: 2/4/2014

2008-2014 ReverseVision, Inc.

Loan Officer Company NMLS #:404064

24794

Loan Officer NMLS #:869,199 Compare / 0118

Amortization Schedule - Annual Projections

Borrower Name/Case Number: NoRefinance:Sally Senior /

Age of Youngest Borrower:

Interest Rate (Expected / Initial):

Maximum Claim Amount:

Initial Principal Limit:

Financed Closing Costs:

66

$14,077.08

5.350% / 2.657%

$500,000.00

$250,000.00

$0.00

$0.00

Initial Property Value:

Beg. Mortgage Balance:

Expected Appreciation:

Monthly Payment:

Monthly Servicing Fee:

Mortgage Insurance (MIP)

$500,000.00

4.000%

$0.00

$14,077.08

$235,922.92

$0.00

1.25%

NOTE: Actual interest charges and property value projections may vary from amounts shown. Available

credit will be less than projected if funds withdrawn from line-of-credit.

Initial Line Of Credit:

Initial Advance:

Lien Payoffs with Reverse Mortgage:

Yr

Annual Totals End of Year Projections

Age SVC

Fee

Cash

Payment

MIP Interest Loan

Balance

Line Of

Credit

Property

Value

EquityRate

1 $0 $0 $14,637$381$179 $505,363$520,000$245,30766 2.657%

2 $0 $0 $15,219$396$186 $525,581$540,800$255,06567 2.657%

3 $0 $0 $15,825$412$194 $546,607$562,432$265,21168 2.657%

4 $0 $0 $16,454$428$201 $568,475$584,929$275,76069 2.657%

5 $0 $0 $17,109$445$209 $591,218$608,326$286,72970 2.657%

6 $0 $0 $17,789$463$218 $614,870$632,660$298,13471 2.657%

7 $0 $0 $18,497$481$226 $639,469$657,966$309,99372 2.657%

8 $0 $0 $19,232$500$235 $665,052$684,285$322,32473 2.657%

9 $0 $0 $19,997$520$245 $691,658$711,656$335,14574 2.657%

10 $0 $0 $20,793$541$254 $719,329$740,122$348,47675 2.657%

11 $0 $0 $21,620$562$265 $748,107$769,727$362,33876 2.657%

12 $0 $0 $22,480$585$275 $778,036$800,516$376,75177 2.657%

13 $0 $0 $23,374$608$286 $809,163$832,537$391,73778 2.657%

14 $0 $0 $24,304$632$297 $841,534$865,838$407,31979 2.657%

15 $0 $0 $25,271$657$309 $875,201$900,472$423,52180 2.657%

16 $0 $0 $26,276$684$322 $910,215$936,491$440,36881 2.657%

17 $0 $0 $27,321$711$334 $946,629$973,950$457,88482 2.657%

18 $0 $0 $28,408$739$348 $984,500$1,012,908$476,09883 2.657%

19 $0 $0 $29,538$768$362 $1,023,887$1,053,425$495,03584 2.657%

20 $0 $0 $30,713$799$376 $1,064,849$1,095,562$514,72785 2.657%

21 $0 $0 $31,934$831$391 $1,107,450$1,139,384$535,20186 2.657%

22 $0 $0 $33,205$864$406 $1,151,755$1,184,959$556,49087 2.657%

23 $0 $0 $34,526$898$423 $1,197,832$1,232,358$578,62588 2.657%

24 $0 $0 $35,899$934$439 $1,245,753$1,281,652$601,64289 2.657%

26 $0 $0 $38,812$1,010$475 $1,347,423$1,386,235$650,45791 2.657%

28 $0 $0 $41,961$1,092$514 $1,457,391$1,499,352$703,23393 2.657%

30 $0 $0 $45,365$1,180$555 $1,576,334$1,621,699$760,29195 2.657%

32 $0 $0 $49,046$1,276$600 $1,704,983$1,754,029$821,97997 2.657%

34 $0 $0 $53,025$1,380$649 $1,844,133$1,897,158$888,67199 2.657%

DateSally Senior

Page 1 of 12008-2014 ReverseVision, Inc.

Printed: 2/4/2014Loan Officer Company NMLS #:

404064

24794

Loan Officer NMLS #:869,199 AMORT / 0285

Reverse Mortgage Comparison

Alfie Schloss, Associated Mortgage Bankers, Inc

600 Old Country Road, Suite 207, Garden City,

NY 11530

Phone: 516-558-1306

From:

Estimates For: Sally Senior Date Of Birth: 4/20/1948

22 New St.

Garden City, NY 11530

Closing Date: 4/23/2014 (estimate)

Rates and Fees

HECM 60 FixedHECM 60 Libor

N/A2.500%Margin

5.060%2.657%Initial Interest Rate

5.060%5.350%Expected Interest Rate

1.25%1.25%Ongoing Mortgage Insurance Rate

5.060%12.657%Cap on Interest Rate

N/A3.907%Initial Line of Credit Growth

Calculation

$500,000.00$500,000.00Home Value

$500,000.00$500,000.00Maximum Claim Amount

$273,000.00$250,000.00Principal Limit

$2,500.00$2,500.00 - IMIP

$6,000.00$6,000.00 - Origination Fee

$5,577.08$5,577.08 - Other Costs

$0.00$0.00 + Credits

$258,922.92$235,922.92Remaining Principal Limit

$0.00$0.00 - Liens and Mortgages

$0.00$0.00 - Repair Set Aside

$0.00$0.00 - 1st Year Tax and Insurance Set Aside

$14,077.08$14,077.08Total Mandatory Obligations


$163,800.00$150,000.00Initial Disbursement Limit


$0.00$0.00 - Additional Tax and Insurance Set Aside

$258,922.92$235,922.92Net Principal Limit

Available Funds and Requested Payments

$149,722.92$135,922.92Max Available Cash at Closing

$149,722.92$0.00 Cash Request

N/A$235,922.92Total Line Of Credit

$0.00$135,922.92 Line Of Credit Available 1st Year

$0.00$100,000.00 Line Of Credit Available After 1st Year

$0.00$1,444.60Available Monthly Tenure Payment 1st Year

$0.00$0.00 Monthly Payment 1st Year

$0.00$1,444.60Available Monthly Tenure Payment

N/A$0.00 Monthly Payment Request

$163,800.00$14,077.08Initial Loan Balance

$109,200.00$0.00Unavailable Principal Limit

The above numbers are calculated based upon the specified interest rates and the estimated closing date noted above. Changes in interest

rates and/or changes in actual closing dates may cause the amounts available to be higher or lower than stated.

DateSally Senior

Page 1 of 1Printed: 2/4/2014

2008-2014 ReverseVision, Inc.

Loan Officer Company NMLS #:404064

24794

Loan Officer NMLS #:869,199 Compare / 0118

Estimated Closing Costs

This is not a Good Faith Estimate or a Truth-in-Lending Disclsoure Statement required by federal law. If you make an

application with us, your Good Faith Estimate and Truth-in-Lending Disclosure Statement will be provided to you in the

opening package. This is not a commitment to lend, nor is it a rate lock, pre-qualification or pre-approval. This

worksheet is intended to assist you in evaluating a loan or home purchase using estimated closing and property costs .

Closing and settlement costs, reserve deposits, interest rate and Annual Percentage Rate (APR) are subject to change

and the estimates shown below may be more or less depending on factors such as down payment, property type, and

occupancy. Housing costs will vary depending on location, homeowner's association dues, local and state fees, taxes,

and hazard and mortgage insurance. Charges from third parties, which may include Lender 's affiliates, will be passed

through at the actual cost charged by the third party. You may wish to complete these estimated charges in

considering the total cost of your mortgage.

Estimate of Closing Costs Worksheet

Sally SeniorPrepared For:

Property Address:

Date: February 04, 2014 Estimated Home Value:

22 New St., Garden City, NY 11530

$500,000.00

Estimated AmountPOC AmountFinance Charges

$125.00Document preparation

$9.00Flood certification

$125.00HECM counseling fee

$2,500.00Mortgage Insurance Premium

$6,000.00Origination Fee

$950.00Settlement or closing fee

Other Charges

$250.00Abstract/Title search

$475.00Appraisal fee

$90.00Contin

$13.08Credit report

$345.00Departmentals

$125.00Endorsements

$2,100.00Lender’s title insurance

$350.00Notary Fee

$500.00Recording charges mortgage

$100.00Tax Certification

$20.00Wire Fee

Total Estimated Settlement Costs $14,077.08

$14,077.08

EstimateOfClosingCostsPage 1 of 1 / 0677869,199Loan Officer NMLS #:

24794

404064Loan Officer Company NMLS #:

2008-2014 ReverseVision, Inc.Printed: 2/4/2014

The official reverse mortgage consumer booklet approved by the U.S. Department of Housing & Urban Development

Use Your Home to Stay at Home™

The National Council on Aging (NCOA) is committed to helping older persons to maximize all resources, public and private, so that they can be as independent as possible in the

residence of their choice.As people grow older, more and more of them face health or

economic challenges that can make it more difficult for them to continue to live in their own homes. For many seniors, their homes are their biggest financial asset. This booklet is designed to help older adults to understand and assess the potential range of options, including reverse mortgages, that may be available to them for paying for the services and supports they may need.

—James Firman, CEO

The National Council on Aging is a nonprofit service and advocacy organization headquartered in Washington, DC. NCOA is a national voice for older Americans—especially those who are vulnerable and disadvantaged—and the community organizations that serve them. It brings together nonprofit organizations, businesses and government to develop creative solutions that improve the lives of all older adults. NCOA works with thousands of organizations across the country to help seniors find jobs and benefits, improve their health, live independently and remain active in their communities. For more information, visit www.ncoa.org.

You are free to copy, distribute, and transmit this publication for counseling-related purposes.

The limits for reuse or distribution are spelled out at http://creativecommons.org/licenses/by-nd/3.0/

©2013 National Council on Aging. All Rights Reserved.


3

Overview

L ike most Americans, you probably want to stay in your home as you grow older. However, as it gets harder to do

things on your own, you may need a helping hand with everyday tasks. It can be costly to pay for help at home, along with home modifications and other health needs. For many people, these extra costs are a real burden.

Older Americans often hold onto their home as a nest egg in case they need extra money. But when that “rainy day” arrives, how do you tap the equity in your home? Some people may tell you to sell the house and move to assisted living or a nursing home. There is another option. If you’ve owned your house for many years, it could be worth a lot more than you paid to buy it. Home equity is the difference between the appraised value of your home and what you owe on any mortgages. A reverse mortgage can help you convert some of your home equity into cash and continue to live at home for as long as you want.

Using the equity in your home can seem like a good idea. But is it right for you? It is a decision you should consider carefully, because the house may be your most valuable financial asset. This booklet will help you understand the benefits and challenges of this funding option. After reading this booklet, you should be better able to:

n Decide if staying at home is right for you.

n Understand the different ways you can pay for help at home.

n Know where to go for more information.


4

People who need help at home face many challenges. An ongoing health problem can make it hard to know how much longer you can continue to live at home. You should also be aware of government benefits and community programs for seniors, and how a reverse mortgage may affect your eligibility for these programs.

This booklet will give you the tools you need to make wise choices. It will help you ask the right questions and plan ahead so that you can stay at home as long as possible.

Talking with family and a knowledgeable financial advisor also can help.


5

Challenges of Aging in Place

L iving at home can become difficult as you grow older. Ongoing health conditions such as arthritis or poor eyesight can make it hard to do household chores, drive a car, or climb stairs safely.

People who are forgetful may not take their medicine on time. Without extra help, older people often struggle with everyday tasks after a serious heart attack, stroke, or fall.

In the past, when an older person had trouble living alone, that was a signal that it was time to move in with family or go to a nursing home. But for most people this is no longer the case. Today, you can receive a wide range of services and supports in your home or community. New advances in medicine and technology are helping even people with complex medical problems to stay in their own homes for many years. This is often called “aging in place.”

Choosing to live in your home when you need extra help can be a big decision. There are many practical and financial factors to consider. You will need to balance health and safety issues with your desire for independence and a familiar setting. It is crucial to plan ahead as much as possible. Answering these questions can help you get started:

n Will living at home work for me?

n What resources do I have to help me stay at home?

n How long can I continue to live at home?

It is important to remember that every situation is unique. What may work for one person might not be the best choice for someone else.


6

Will Living at Home Work for Me?First, make sure that your home is safe and comfortable, and fits your needs. Check that the services you want are available in your area. If it is difficult for you to live by yourself, you should consider other options, such as a retirement community or assisted living.

The right housing for youWhere you live and the house itself can keep you from aging in place. Think about these factors to see if staying in your own home makes sense:

n Changing needs—A house that was ideal 30 years ago may now be too difficult to handle alone. Older houses often need a lot of costly maintenance, improvements, or repairs.

n Safety—A house with cluttered furniture or steep stairs is an accident waiting to happen. Unsafe neighborhoods may make you afraid to go shopping or attend social activities.

n Isolation—A trip to the grocery store, pharmacy, or place of worship can be a problem when you cannot drive. It is easy to feel lonely or trapped when family and friends are far away.

n Ease of use—If you need a walker or a wheelchair, it helps to have a bedroom on the first level, grab bars in the bathroom, and ramps for the entrance of the house.

You can fix some of these conditions by modifying your home. If you want to live in a safer neighborhood or closer to your family and friends, you will have to move.

Adequate helpMost older people who have health problems get help in their own homes. Family or friends who give this help are called caregivers. There are also many professional services. A homemaker can provide transportation, do household chores, and assist with daily activities. A nurse can check your medications and give medical care, while a therapist can provide rehabilitation in your home. Adult day centers may


7

offer social activities, health checks, and rehabilitation therapies. They provide a safe and fun place to be while family caregivers are at work or take a break from caregiving.

Relying on paid services may not work if you do not want a stranger in your home. It can also be hard to find the services you want at a price you can afford. Without good quality and reliable help, people with health issues often find it hard to live at home.

Cost of supportive servicesWhen you get help at home, usually someone comes into your house from a home health agency. Professional services in your home can be expensive. Some service providers charge by the hour, while others charge for each home visit. While services in the home and community may cost less than in a nursing home, these expenses can add up over time. If you need a few hours of help from a home health aide in the morning and at night, you could easily spend $76 per day, or $2,280 per month.

Median national cost of services, 2012Homemaker: $18/hour

Home health aide: $19/hour

Adult day health care: $61/day

Assisted living: $3,300 per month

Nursing home: $200-$220/day

Source: Genworth Financial 2012 Cost of Care Survey.


8

You also may need to make changes to the house to make it easier and safer to stay at home. Home modifications can range from a hundred dollars to install a grab bar to thousands of dollars to install a lift or add a bathroom to the main floor. Costs vary in different regions of the country. They tend to be higher in areas where the cost of living is high.

What Resources Do I Have to Help Me Stay at Home?Look at all the resources you can use to help you live at home. You likely have three major sources of help: support from family and friends, personal income and assets, and the equity in your home.

Support from othersMost older Americans who have difficulty doing everyday tasks depend on family and friends for help. Children can run errands, provide transportation, and maintain the house. Neighbors may help with yard work or home repairs. A spouse or adult children can also provide a high level of loving care.

Family caregiving can be a rewarding experience. But think about this carefully if you expect to rely on your spouse or children as your only source of help. It can be very tiring to help someone every day, especially if they have trouble walking or have Alzheimer’s disease. Caregivers may develop health problems because of the strain of these activities. Working caregivers may have to give up their job or cut the number of hours they work to give help at home.

Personal finances Paying for in-home services and other health-related expenses can quickly use up a big part of a retirement nest egg. Review your finances carefully. They will be an important part of your decision to remain at home. Your finances include your income, savings, and investments.


9

n Estimate your household budget. Work out your income and living expenses, along with the monthly cost of any loans and credit card debt. You also have to budget for home repairs and maintenance, and keep up with insurance and tax payments.

n Keep an eye on cash flow. Make sure you have enough money readily available each month to pay for expenses. Your need for help may vary as your health changes.

If you have financial resources such as stocks, bonds, or property other than the home, you could sell those assets to get more money now. If you own a life insurance policy, you may be able to use part of the death benefit to pay for supportive services (“accelerated benefit”). If you have very limited finances, you may be eligible for government programs.

Home equityHome equity is the difference between the appraised value of the home and what you owe on any mortgages. If you’ve owned your house for many years, it could be worth more than you paid to buy it. Tapping the equity in your home can quickly give you extra cash for a ramp or lift, or to help pay day-to-day expenses. A home loan may also be less costly than high interest rates from credit cards.

It can be a very emotional decision to tap home equity. Many people see their house as a place to live, not as a resource to pay for everyday expenses. For some, it is important to leave an inheritance for their children. You must balance your desire to preserve home equity with the risk of not having enough funds to continue to stay at home. Pinching pennies can lead to poor nutrition, health complications, or a serious accident that can put you in the nursing home.


10

Other Housing OptionsLiving with an ongoing health condition can be hard. You may need to change your living situation when you:

n Cannot take care of yourself or manage the home on your own anymore.

n Have had several falls or other accidents.

n Need round-the-clock supervision (such as in the later stages of Alzheimer’s disease).

One option may be to live with your children. First, think about how this will work. How easy will it be to live together? Will your kids have to

make changes to their house, such as adding grab bars or building a ramp? Who will pay for expenses such as rent?

You may not want to move because you are afraid of losing your independence. However, today there are many attractive housing choices where you can get the help you need. For example, senior housing makes it easier to live independently by offering services such as transportation and social activities. In assisted living, you can live in a private apartment and get help with everyday activities. Continuing care retirement

communities (CCRCs), or life care communities, offer a full range of services from independent living, to assisted living, and nursing care.


11

Your House As A Resource

Once you decide to continue living at home, the next step is to make sure that you have enough money to pay for the help you need. This section describes your choices for tapping home

equity. Typically, you would take out a loan that uses your home as the collateral to guarantee that you will repay the loan. To help you decide which option may be best for you, answer these questions:

n Why do I need the money?

n How much cash can I get from my house for help at home?

n Am I prepared to tap home equity?

The equity you have built up over many years should be used wisely. It is important that you understand the costs, benefits, and risks of the different type of loans.

Why Do I Need the Money?Since home loans can be costly, you need to be clear about how you plan to use the money. Some homeowners like to plan ahead by taking out a line of credit. These funds give them the flexibility to pay for expenses as they arise. Others want a lump sum to deal with a specific, one-time cost such as adding a bathroom or paying off an existing mortgage.

How long you will need the loan will also make a difference in your decision. Are you tapping home equity to solve an immediate problem? Or do you need funds for many years to pay ongoing household expens-es? When you take out a loan to tap a portion of your home equity, you usually cannot use the remaining equity for other needs until you pay off the loan. It is important to look at your overall financial situation, or you may find yourself stuck with a loan that doesn’t fit your changing needs.


12

Short-term solutions for immediate needsIf you want to use home equity to deal with an emergency or for specific problems that need attention right away, you can use several financial options.

Single purpose loans Many states and communities offer special loans to help older homeowners who are struggling to live at home. These loans are designed to meet specific needs:

n Home repair and improvement loans: Borrowers get a one-time, lump-sum payment that can be used only for the specific repairs or improvements that each program allows.

n Property tax deferral loans: These programs allow older homeowners to defer payment of some or all of their property taxes until they move out of the home.

Borrowers do not need to make payments on these single-purpose loans for as long as they continue to live in the home.

Advantages

n Single purpose loans usually cost less than conventional home equity loans.

n You may not have to pay back all of the loan if you continue to live in the home for a certain period of time.

Disadvantages

n Most programs require borrowers to be at least 65 years old. Often, only homeowners with low or moderate incomes can apply.

n These loans may not be available where you live.

n The remaining equity in your home may not be available to use for other needs.


13

Conventional home equity loans These loans can be useful if you are unsure how long you can continue to live at home or how much help you will need. Conventional home equity loans can also help families who have other assets they do not want to sell right away. Until you have a good sense of what’s going on with your health situation, you can get extra funds from these loans without paying large fees or making drastic changes. There are two types of home equity loans:

n Home equity line of credit: This loan works like a credit card. You can borrow up to a certain limit for the life of the loan. During that time, you can withdraw money as needed. As you pay off the principal, your credit revolves and you can use it again.

n Home equity loan: You receive the money in a lump sum. You pay off the loan over a set amount of time, with a fixed interest rate and the same payments each month.

With these loans, you will pay ‘points’, appraisal fees, closing costs, and loan initiation fees. Closing costs include attorney’s fees, fees for preparing and filing a mortgage, fees for title search, taxes, and insurance.

Advantages

n If you qualify and your credit is good, you may be able to get a home equity loan quickly.

n With a line of credit, you only pay interest on what you borrow.

n Since you pay for the loan from income, your home equity does not go down.


14

Disadvantages

n You may not qualify for these types of loans. Lenders look carefully at your income, other debt, and credit history.

n You must be able to make monthly payments on the home equity loan. If you can’t make these payments, you could lose your house.

n When your line of credit ends, you must pay off the entire loan. A lender may not let you renew the loan.

Using a conventional home equity loan to solve cash-flow problems can be risky. If your health declines, monthly loan payments along with other expenses may become more than you can handle.

Long-term solution—Reverse mortgageIf you expect to live in your current home for several years, you could consider a reverse mortgage. Reverse mortgages are designed for homeowners age 62 and older. These types of loans are called “reverse” mortgages because the lender pays the homeowner. To qualify for this loan, you must live in the home as your main residence.

Unlike conventional mortgages, there are no income requirements for these loans. You do not need to make any monthly payments for as long as you (or in the case of multiple homeowners, the last remaining borrower) continue to live in the home. When the last borrower moves out of the home or dies, the loan becomes due.

There are two types of reverse mortgages available in the market. These include:

n Home Equity Conversion Mortgage (HECM)—This program is offered by the Department of Housing and Urban Development (HUD) and is insured by the Federal Housing Administration. These are the most popular reverse mortgages, representing about 95% of the market. There are two types of HECM reverse mortgages—the traditional HECM Standard loan, and the HECM Saver loan. With a HECM Saver loan, borrowers pay lower upfront costs, but do not receive as much money as they would with a HECM Standard loan.


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n Proprietary reverse mortgages—Some banks, credit unions, and other financial companies may offer reverse mortgages designed for people with very high value homes.

Depending on the type of loan, borrowers may be able to receive payments as a lump sum, line of credit, fixed monthly payment for a specific period or for as long as they live in their homes, or a combination of payment options. The money you receive from a reverse mortgage is tax-free, and can be used for any purpose. Reverse mortgages have unique features:

n All homeowners must first meet with a government-approved reverse mortgage counselor before their loan application can be processed (HECM program).

n Older borrowers may receive more money, because lenders include life expectancy in calculating loan payments.

n The national limit on the amount you can borrow under the HECM program may change from year to year. You can check the current national limit at http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmabou.

You now may use a HECM reverse mortgage to buy a home. This can make it easier for you to downsize to a house that better suits your needs, or to move closer to family caregivers.

Loan closing costs for a reverse mortgage are the same as what you would pay for a traditional “forward” mortgage. These include an origination fee, appraisal, and other closing costs (such as title search and insurance, surveys, inspections, recording fees). HECM borrowers also pay a mortgage insurance premium.

Most of these upfront costs are regulated, and there are limits on the total fees that can be charged for a reverse mortgage. The origination fee for a HECM loan is capped at 2% of the value of the property up to the first $200,000 and 1% of the value greater than $200,000. There is an overall cap on HECM origination fees of $6,000 and a minimum fee of $2,500. You can finance these costs as part of the mortgage.


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Advantages

n You (or your heirs) will never owe more than the value of the home if you sell the property to repay the loan, even if the value of your home declines. If your heirs choose to keep the home, they will need to pay off the loan at 95% of the fair market value of the home, as determined by a third-party appraiser.

n You continue to own your house and can never be forced to leave, as long as you maintain the home and pay your property taxes and insurance.

n Depending on the type of loan, you may be able to get your loan funds through a combination of payment options (such as lump sum and line of credit). You can change the payment plan for a small fee.

n For HECM loans, the available balance on the line of credit may increase over time, depending upon interest rates.

n If there is in an existing mortgage on the property, the proceeds of the reverse mortgage are typically used to pay off the loan. This can increase the cash you have available each month, because you no longer have to make payments on your regular mortgage.

Disadvantages

n Closing costs for a reverse mortgage (origination fee, mortgage insurance premium, appraisal and other upfront costs), and the servicing fee can vary a lot by the type of HECM loan, and by lender. Closing costs can be financed into the loan.

n You may use up a large part of your home equity over time and have less to leave as an inheritance to your family.

n If you are the only homeowner and you stay in an assisted living or nursing facility for more than a year, you will be required to repay the balance of the loan.

n Reverse mortgage borrowers must keep their home in good repair, and pay property taxes and homeowners insurance. If you do not have enough money for these expenses, you could face foreclosure and lose your house.


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The loan amount can vary by thousands of dollars among different reverse mortgages. So it will be important for you to consider your options carefully when selecting a loan.

How Much Cash Can I Get From My House?Several factors control how much you can borrow. These are the value of the home, the type of loan you select, and the current interest rate. The age of the youngest homeowner is also a factor for reverse mortgages. To find out how much money you may be able to get from a reverse mortgage, use the simple, online calculator from IBIS (http://rmc.ibisreverse.com/default_nrmla.aspx).

The condition of the home and property values in your area may also determine how much cash you will have to pay for help at home. If you’ve lived in your house for many years, it will have aged considerably. The house needs to be in good repair to qualify for a reverse mortgage.

Property values may increase over time. A home that appreciates by 2% each year will increase in value from $150,000 to over $165,000 in five years. If you can continue to live at home safely, it can be worthwhile to use some of your growing equity.


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How long will the reverse mortgage last?Reverse mortgages make the most sense for you if want to stay in your current home for many years. If you have an ongoing health condition, it is important to understand how much money the loan will give you to pay for help over time.

Let’s consider the situation of three families who take out an adjustable rate HECM reverse mortgage. They live in a house that is in good repair and worth $200,000. They own their homes free and clear of any debt.

Scenario #1: Bill Smith (age 63) recently retired and struggles to pay his current mortgage. At his age, Bill receives over $115,000 from his HECM Standard reverse mortgage which he uses to pay off his existing mortgage. This frees up extra cash for monthly expenses. He needs to be sure that he can pay property taxes and insurance each year. He also has to plan ahead, because interest payments add up over time, which can leave him with little or no home equity.

Scenario #2: Joe and Liz Anderson (ages 75 and 73) built their 2-story dream home after retiring. Recently, Joe had a mild heart attack and has difficulty climbing the stairs. They opt for a HECM Saver with its lower closing costs. Based on Liz’s age, the Andersons receive about $105,000 from their reverse mortgage. They take $20,000 of the loan to install a lift and make other home modifications. They keep the rest ($85,000) in a line of credit for future needs.

Scenario #3: Melba Jones (age 80) has lived in the same town all her life. She knows she can rely on family and friends for help with her arthritis. Her big concern is using up all her retirement funds. She receives over $134,000 from the HECM Standard loan and selects a tenure payment plan. This gives her $925 per month for as long as she stays in her house. This gives her peace of mind, knowing that she can pay for extra expenses and won’t be a burden to her children.

Interest rates change frequently, so only a mortgage lender can tell you how much you may get from a reverse mortgage.


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Am I Prepared to Tap Home Equity?Whether you are considering a loan or decide to sell the house, chances are that it will take time to get the equity in your home. Plan carefully to make sure that these funds will be available when you need them. These problems could slow the process:

n Legal issues—Make sure that you have a durable power of attorney that includes real estate. This allows your family or trusted friend to make decisions if you cannot do so.

n Title to the home—Understand who owns the home. If you add children or grandchildren to the title, you may not be able to qualify for a reverse mortgage (since all homeowners have to be at least age 62), or sell the house without their consent.

n Home repairs—For major repairs, it can take up to several months to find a contractor, get the necessary permits, and complete the job.

n Finding a new place to live—If you sell the house, you must find somewhere else to stay. Your children may need time to prepare their home if you plan to live with them. Retirement communities and senior housing apartments often have long waiting lists.

Transactions involving the home usually involve many, different people. These may include your banker, a real estate agent, lawyer, appraiser, inspector, and contractors. To avoid delays, plan ahead as much as possible.


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Government Programs

Government programs provide an important safety net. They help older Americans who have limited financial resources, and who cannot pay for help at home. Several public programs help older

people cope with an ongoing health condition. If you qualify for these programs, you may not need to use your home equity.

MedicaidMedicaid is a joint Federal-state program. It pays for long-term care for older Americans with low incomes and resources, and those who have high health care expenses. Medicaid may cover case management, homemaker services, home health aide, personal care, adult day programs, respite care, and nursing home care. These services can vary by state. To qualify for Medicaid, you must meet the income and asset requirements in your state. To get help at home, you also need to have a serious physical or mental condition. Under certain circumstances, if you receive certain Medicaid services and you pass away, the state is required to recover the money it spent on your care from your estate.

The rules for Medicaid eligibility and treatment of the house are complicated and vary from state to state. Taking out a home loan may affect your eligibility for Medicaid or other means-tested public programs. To learn more, talk to a senior counselor or knowledgeable financial advisor.


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Department of Veterans Affairs (VA)The VA provides long-term care services primarily to veterans with a service-related disability, low-income veterans, and former prisoners of war. Veterans may be eligible for nursing home care, assisted living, or help at home including respite care, homemaker services, home health care, or adult day care. If you are a veteran, you and sometimes your spouse may receive low-cost care in state veterans homes. You may also be able to pay for home repairs and modifications by refinancing your house with a low-cost VA loan.

MedicareMedicare, the national health insurance program for seniors, mainly covers medical care (doctors and hospitals). If you have Medicare, it will pay for a home health aide, but only while you get skilled nursing care or rehabilitation therapies at home. However, you must be homebound and these services must be delivered through a certified home health agency. Once you no longer need skilled care, Medicare will stop paying for home health care. This is true even if you still need help with everyday activities.


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Other Resources to Help You Live

at Home

Your local Area Agency on Aging offers a wide array of services. These can include help with household chores, meals served in community locations, adult day care programs, senior centers,

protective services, and legal counseling. You may be able to get these programs free or at very low rates. Many communities also provide low-cost services so that seniors can continue to live at home.

These programs may include special transportation programs, friendly visits or telephone checks to seniors who live alone, light housekeeping, and help with home modifications or repairs. Faith-based organizations and charities can also help. Your pharmacy or grocery store may offer free home delivery.


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Where to Go for More Information

Home Equity Advisor is a free website where you can find information, tools, and consumer advice on how to use and protect the value in your home: http://www.homeequityadvisor.org

BenefitsCheckUp® is a quick, confidential, and free web service that helps you find federal, state, local, and private benefit programs for which you may be eligible: http://www.benefitscheckup.org/

Eldercare Locator can help you find services and programs in your area: Call 1-800-677-1116 or check the web at http://www.eldercare.gov

The Fall Prevention Center of Excellence offers tips on how to check if homes are safe for elders and how to pay for home modifications: http://www.homemods.org/

The Family Care Navigator can help to find resources for families who are caring for a loved one: http://caregiver.org/caregiver/jsp/fcn_content_node.jsp?nodeid=2083

The Consumer Financial Protection Bureau’s Ask CFPB website provides answers to many consumer questions about reverse mortgages: http://www.consumerfinance.gov/askcfpb/search?selected_facets=category_exact:Mortgages&selected_facets=tag_exact:reverse%20mortgage

The National Reverse Mortgage Lenders Association has publications and a reverse mortgage calculator. Visit http://www.reversemortgage.org


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Look at the big pictureYour ability to live at home is likely to change over time. It is important to look at your financial situation beyond what you need right now. Short-term solutions could be risky if you require ongoing funds for several years. It helps to save some of your home equity so you have the option of moving to a better living situation.

Don’t wait until the last minute Timing is critical when making decisions about the home. You or your family could end up facing a serious cash crunch if you wait until a crisis to start thinking about how to tap home equity. To avoid stress, disappointment, and costly delays, plan in advance. The longer you wait, the harder it can be to find a good solution.

Have ready cash for emergenciesIt helps to have a three-month emergency fund of cash you can access easily, such as a money market account or short-term certificate of deposit. If this is not possible, make plans and prepare for how you would pay for an emergency. If you run short, use credit cards sensibly. Avoid salespeople who show up at your door with a quick fix to your financial problems.

Tips for Older Homeowners


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Create a family budgetA sudden change in health can disrupt the best laid financial plans. You will need to monitor your finances each month to keep family affairs running. The best way to understand your family’s cash flow needs is to create a budget.

Talk to your familyIt can be hard to discuss personal financial matters. However, good communication can bring a family together and reduce confusion. Talk with family or other heirs before taking out a loan. They will need to pay off the loan balance or repay Medicaid if they want to keep the house.

Don’t rush into any decisionIf you decide to take out a home loan, weigh all the options to find the best solution for you. Shop around with different lenders to check that the interest rate and fees are competitive and fair.

Only sign papers that you understand. Ask questions if you are confused. Get help from a trusted family member or friend who understands financial matters. Agencies that offer reverse mortgage counseling can give you independent advice.

The only time you need to act fast is if you decide you do not want the loan. Federal law gives you three days to get out of a reverse mortgage or home equity loan contract. You may cancel the loan for any reason, but you must do it in writing within three days.


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Notes

About NCOA The National Council on Aging is a nonprofit service and advocacy organization headquartered in Washington, DC. NCOA is a national voice for millions of older adults—especially those who are vulnerable and disadvantaged—and the community organizations that serve them. It brings together nonprofit organizations, businesses, and government to develop creative solutions that improve the lives of all older adults. NCOA works with thousands of organizations across the country to help seniors find jobs and benefits, improve their health, live independently, and remain active in their communities. For more information, please visit: www.ncoa.org, www.facebook.com/NCOAging, www.twitter.com/NCOAging.

1901 L Street, NW, 4th Floor n Washington, DC 20036 202-479-1200

www.NCOA.org n www.facebook.com/NCOAging www.twitter.com/NCOAging

Payment of the Reverse Mortgage after Death

Kevin P. McMullen

March 24, 2006

Notice of Reverse Mortgage Being Due

April 12, 2006

Request for the Standard Six Month Extension

April 20, 2006

Letter Granting the Extension

April 20, 2006

Fax re Brokerage Extension

Sept. 14, 2006

Notice of Delinquent Taxes

Oct. 2, 2006

Request to Change the Name of the Mortgagee with the Insurance Company

Dec. 31, 2006

Monthly Statement of the Reverse Mortgage

Dec. 31. 2006

Annual Statement of the Reverse Mortgage

April 25, 2007

Renewed Notice of Reverse Mortgage Being Due

July 2, 2007

Executor and Authorization for Mortgagee to Issue Payoff Letter to Law Firm

July 3, 2007

Payoff Letter for Reverse Mortgage

The closing was held on July 9, 2007.

Alfie Schloss

Reverse Mortgage Loan Originator

Current Associated Mortgage Bankers Reverse Mortgage Specialists

Previous MetLife Home Loans, Wells Fargo Bank, NA, Technicolor

Education Syracuse University

Kevin McMullen

Kevin P. McMullen, Esq. earned his J.D. from St. John’s Law School, Brooklyn, an L.L.M. from NYU Law School and an M.A. in comparative government and a certificate in international law and diplomacy from St. John’s, Jamaica. He worked for a firm specializing in trusts and estates and was house counsel for a small corporation before joining the Marino Bar Review Course and then Marino-Josephson/BRC. He is now a ghost writer, specializing in law and military affairs. A long-serving reservist, Mr. McMullen was retired with the rank of lieutenant colonel (infantry) after serving in Germany, Panama and Korea. He is an honor graduate of the resident course at the United States Army Command and General Staff College, and he is also an alumnus of the Air Staff College, the Naval War College, the Air War College, and the Industrial College of the Armed Forces. Mr. McMullen is a long standing NYCLA member and has served on the Library Committee and International Law Committee.

http://www.linkedin.com/pub/alfie-schloss/0/70b/60b#background-experience

http://www.linkedin.com/search?search=&company=Associated+Mortgage+Bankers+Reverse+Mortgage+Specialists&sortCriteria=R&keepFacets=true&trk=prof-0-ovw-curr_pos

http://www.linkedin.com/pub/alfie-schloss/0/70b/60b#background-experience

http://www.linkedin.com/search?search=&company=MetLife+Home+Loans&sortCriteria=R&keepFacets=true&trk=prof-0-ovw-prev_pos

http://www.linkedin.com/search?search=&company=Wells+Fargo+Bank%2C+NA&sortCriteria=R&keepFacets=true&trk=prof-0-ovw-prev_pos

http://www.linkedin.com/search?search=&company=Technicolor&sortCriteria=R&keepFacets=true&trk=prof-0-ovw-prev_pos

http://www.linkedin.com/pub/alfie-schloss/0/70b/60b#background-education

http://www.linkedin.com/college/?eduSchool=19054&trk=prof-0-ovw-edu

Documents

Everything You NOW Need to Know about Reverse Mortgages ... You NOW Need... · A Capsule History of Reverse Mortgages in the United States 1961 First reverse mortgage loan made by