Senior Homeowners

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Everything You Ever Wanted To Know About Reverse
Mortgages

• The Loan With A Heart

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The Reverse Mortgagefor senior citizens
Home Equity Conversion Mortgage Home
Keeper HomeFirst Forever Yours (and others)
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The Market For Reverse Mortgages

• 2.86 million households over age 70, who own
  homes free and clear, have an annual income below
  30,000 and home equity above 60,000
• Housing preference - to age in place
• By 2025, the 50 age group will have grown by 80
  to more than one third of the total population

Fannie Mae
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The Market For Reverse Mortgages

• Average annual Social Security benefit for
  retired workers
• 1976 2,693
• 1996 8,688
• Percentage of retirees who rely on Social
  Security for half or more of their income 66

Smart Money February 1997
5
The Market For Reverse Mortgages

• Number of workers per retiree
• 1960 5.1
• 2020 2.4 (projected)
• Year that the Social Security Trust Fund will
  begin to lose money 2012
• Year it will be completely depleted 2029

Smart Money February 1997
6
The Market For Reverse Mortgages

• Percentage of Americans who are almost
  deliberate in their refusal to deal with
  retirement 19
• Percentage of young adults who believe that
  Social Security will exist when they retire 28
• Percentage who believe in extraterrestrial life
  46

Smart Money February 1997
7
Background -Reverse Mortgages

• 1989 Industry needed lenders to offer program to
  seniors
• FHA developed program and offered to insure
  against property values falling
• No one knew how to make these loans or service
  them!

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Features

• Allows seniors to tap the equity in their home

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Features

• Gives them a choice of the following options

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Options

• Fixed payment for as long as the homeowner
  remains in the home
• FHA and FNMA
• Fixed payment for a specific period
• FHA Only
• Line of Credit - FHA and FNMA
• Combination of the above
• FHA and FNMA

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Preferred Payment Plan Types(HECM)
Fannie Mae
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Additional features

• No loan repayment is required so long as the
  homeowner lives in the home.

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Features

• The homeowner retains title to the home.
• At death, the heirs can pay off the loan and keep
  the home, if they prefer.

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Features

• Loan proceeds are not taxable to the homeowner
  and can be used for any purpose.

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Primary Uses for Reverse Mortgages

• Debt Consolidation
• Repairs
• Repair reserve
• Basic habitability
• Home upgrades
• Assist children or grandchildren
• Medical bills
• Property taxes insurance

• Upgrade basic standard of living
• food
• heating
• other household expenses
• Other uses
• Home health care
• Annuity

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Which Consumers are Interested?
Avg age 76
Fannie Mae HECM HomeKeeper
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How the process works
Servicing
Processing Underwriting Closing
Application
Origination Counseling
Start
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Counseling

• Counseling/Consumer education is required
• FHA HUD-Approved Counseling Agencies only
• FNMA Several Options

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Origination

• Loans can be originated -
• Through your branches
• By dedicated loan officers
• Through a centralized calling location

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How to market this program

• Advertising
• Senior publications
• Newsletters
• Counseling Agencies
• City / County Government Agencies
• Tax Departments

• Fannie Mae list
• AARP List
• Media
• Radio
• TV
• Newspaper
• Adult Children

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Processing

• No income requirement
• No credit requirement (except federal liens)
• No minimum funds on hand
• Normal appraisal requirement

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Underwriting

• Review title, appraisal, and the age of the
  homeowner(s)

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Closing

• Origination fee financed
• Homeowner may have cash draw immediately or set
  up monthly payments

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REVERSE MORTGAGEServicing
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Servicing

• Requires special system and separately staffed
  customer service operation
• Cannot be serviced on standard servicing system
• May be serviced by contractor

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Servicing Requirements

• Payments remitted to homeowners monthly
• Tracking of taxes and insurance
• Disposition of property upon death or move-out
• Investor Reporting
• Quarterly statements

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Payments to customers

• Funds can be sent by check or deposited into the
  homeowners DDA account at their bank

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Customer service

• A separately-staffed customer service unit
  provides prompt, courteous service to this
  special group of customers.

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Taxes and Insurance

• Servicer verifies that property taxes and hazard
  insurance have been paid to protect the value of
  the house.

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Disposition of the property
FOR SALE

• If the heirs dont want the property, Servicer
  monitors its listing and sale to repay the loan.

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Getting started

• You will need
• Legal documents
• Training
• Marketing assistance

REVERSE MORTGAGE Legal Documents
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Funding / delivery options

• Servicing Released
• Sale of Servicing
• Subservicing

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Fee Revenue Opportunity

• Origination Fee
• All or portion can be financed

• Premium paid for servicing rights when purchased
  by Wholesaler
• Excess service fee (subservicing)

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HECM HomeKeeper Loan Deliveries (Top 10 States)
Fannie Mae 8/96
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Reverse Mortgages

• DO WELL AND DO GOOD.