REVERSE MORTGAGES

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• REVERSE MORTGAGES
• Presented by
• PAUL BANGART
• Artisan Mortgage

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• Who is Artisan Mortgage?
• We believe in CUSTOMERS FIRST
• We see our function to our customers is to
  simplify complicated financial decisions and take
  the time to make sure our customers understand
  their options.
• We pride ourselves in the financial expertise of
  our TEAM. They will take the time to explain not
  just the available loan programs but also how it
  impacts you personally.

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• What is a REVERSE MORTGAGE
• A reverse mortgage enables older homeowners (62)
  to convert part of the equity in their homes into
  tax-free income without having to sell the home,
  give up title, or take on a new monthly mortgage
  payment.
• The reverse mortgage is aptly named because the
  payment stream is reversed. The lender makes
  payments to you. Eligible property types include
  single-family homes, manufactured homes (built
  after June 1976), qualified condominiums, and
  townhouses.

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• What is a REVERSE MORTGAGE (continued)
• There are no income or medical requirements to
  qualify. You may be eligible for a reverse
  mortgage even if you still owe money on an
  existing mortgage. You must qualify for a large
  enough reverse mortgage to pay off existing home
  loan(s) entirely.
• The amount of money you receive depends upon
• your age (or age of youngest borrower in the case
  of couples),
• appraised home value,
• current interest rates, and
• the lending limit in your area.
• In general, the older you are and the more
  valuable your home (and the less you owe on your
  home), the more money you can get.

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• REVERSE MORTGAGE Types
• The Home Equity Conversion Mortgage (HECM) is the
  oldest and most popular reverse mortgage product
  (over 90 of the total market). Available since
  1989, HECMs are insured by the federal government
  through the Federal Housing Administration (FHA).

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• REVERSE MORTGAGE Types
• In 1996, Fannie Mae developed its own proprietary
  Home Keeper reverse mortgage as a conventional
  market alternative to the HECM. The Home Keeper
  was developed to address unmet needs of the HECM
  program, such as
• individuals with higher property values,
• condominium owners, and
• seniors wishing to purchase a new home.

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• REVERSE MORTGAGE TYPES
• Cash Account "Jumbo" Loan
• Financial Freedom Senior Funding Corporation
  administers a "jumbo" proprietary reverse
  mortgage product called Cash Account to benefit
  homeowners living in higher-priced homes valued
  above the FHA and Fannie Mae lending limits. In
  addition to Financial Freedom, the program is
  offered by most reverse mortgage lenders. 

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• REVERSE MORTGAGE Use of Funds
• The funds from a reverse mortgage can be used for
  anything. Common uses include
• supplementing retirement income to cover daily
  living expenses
• repairing or modifying your home (i.e.
  handicapped access)
• covering health care expenses (buying Long Term
  Care Ins)
• paying off existing debts
• taking a vacation
• paying property taxes
• preventing foreclosure and,
• in some instances, buying a second home.

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• REVERSE MORTGAGES PAYMENT OPTIONS
• You can choose to receive the money from a
  reverse mortgage as a
• lump sum,
• fixed monthly payments (for up to life),
• line of credit most popular option (60),
• or a combination of these
• During the life of the loan, the loan "servicer"
  disburses monthly payments to the homeowner (if
  this option is chosen), advances line of credit
  funds upon request, collects any repayments on
  the line of credit, and sends periodic
  statements.

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• REVERSE MORTGAGES Effect on Government Programs
• A reverse mortgage does not affect regular Social
  Security or Medicare benefits.
• However, if you receive a lump sum payment, any
  amount retained the month after would count as an
  asset and could impact Medicaid eligibility. For
  example, if you receive 4,000 for home repairs
  and spend it the same calendar month, everything
  is fine. Any residual funds remaining in your
  bank account the following month would count as
  an asset. To be safe, you should contact a
  Medicaid expert

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• REVERSE MORTGAGES Mandatory Counseling
• Before applying for a reverse mortgage, you must
  first meet with a counselor. The counselors job
  is to educate you about reverse mortgages, answer
  your questions, and offer alternative options
  depending on your situation.
• I have a supply of the list of approved
  counseling agencies in Arizona.

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• REVERSE MORTGAGES Paying Back the Loan
• No monthly payments are due on a reverse mortgage
  while it is outstanding. The loan is repaid when
  you cease to occupy your home as a principal
  residence, whether you (the last remaining
  spouse) pass away, sell the home, or permanently
  move out. The loan is also due if the property is
  not maintained or the taxes and homeowners
  insurance are not paid.
• The Reverse Mortgage can be repaid at any time.
• The amount owed can never exceed the value of
  your home. Also if the home is sold and the sales
  proceeds exceed the amount owed on the reverse
  mortgage, the excess money goes to you or your
  estate.

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• REVERSE MORTGAGE Steps in Process
• 1. AWARENESS
• Homeowner learns about the reverse mortgage
  program from a news article, advertisement,
  word-of mouth, seminar, etc.
• 2. ACTION
• If necessary, homeowner seeks additional
  information.

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• REVERSE MORTGAGE Steps in Process
• 3. COUNSELING
• Homeowner seeks counseling. Counseling is
  mandatory regardless of which reverse mortgage
  product you choose. Counseling is conducted
  face-to-face or by phone. The counselor provides
  supplemental information on reverse mortgages,
  determines whether you're eligible to get a
  reverse mortgage, and discusses other options
  that may be available to assist with your daily
  living. The homeowner will be given a certificate
  to give to the lender as proof they were
  counseled.

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• REVERSE MORTGAGE Steps in Process
• 4. APPLICATION / DISCLOSURE
• Homeowner fills out loan application and selects
  payment option fixed monthly payments, lump sum
  payment, line of credit, or a combination of
  these. Lender discloses to homeowner the
  estimated total cost of the loan, as required by
  the federal Truth in Lending Act. Lender collects
  money for home appraisal. Homeowner provides
  lender with required information, including photo
  ID, verification of Social Security number, copy
  of deed to home, information on any existing
  mortgage(s) on property, and counseling
  certificate

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• REVERSE MORTGAGE Steps in Process
• 5. PROCESSING
• Lender orders appraisal, title work, lien
  payoffs, etc. An appraiser comes to your home to
  assign a value to the home and determine the
  physical condition of the property. If the
  appraiser uncovers structural defects that
  require repair, the homeowner must hire a
  contractor to complete the repairs after the
  reverse mortgage closes

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• REVERSE MORTGAGE Steps in Process
• 6. UNDERWRITING
• After receiving all pertinent information and
  data, the lender finalizes loan parameters with
  homeowner (i.e. payment option, frequency of loan
  interest rate adjustments) and submits loan
  package to underwriting for final approval.
  Remember, each loan is unique and it takes time
  to complete the underwriting of a loan package.

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• REVERSE MORTGAGE Steps in Process
• 7. CLOSING
• When the loan package is approved, closing
  (signing) of loan is scheduled. Interest rates
  are calculated. Closing papers and final figures
  are prepared. Closing costs are normally financed
  as part of the loan. Lender or title company has
  homeowner sign loan papers.

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• REVERSE MORTGAGE Steps in Process
• 8. DISBURSEMENT
• Homeowner has three business days after signing
  papers in which to cancel the loan. After this
  period, the loan funds are disbursed.
• Homeowner accesses the funds in the form of the
  payment option selected.
• Any existing debt on the home is paid off. A new
  lien is placed on the home.
• The homeowner may use the loan proceeds for any
  purpose.

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• REVERSE MORTGAGE Steps in Process
• 9. REPAYMENT
• Homeowner doesnt have to make any monthly
  payments to lender during the life of the loan.
• The loan may be repaid by the homeowner or the
  heirs/estate, with or without a sale of the home.
  
• The repayment obligation cant exceed the homes
  value or sales price.

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• REVERSE MORTGAGE Costs
• Many of the same costs that someone pays to
  obtain a home purchase loan, or to refinance
  their existing mortgage, apply to reverse
  mortgages too.
• In most cases, these fees and costs are capped
  and may be financed as part of the reverse
  mortgage.
• Lets take a look

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• REVERSE MORTGAGE Cost Examples
• Origination Fee-usually 2 of loan amount
• Mortgage Insurance Premium-2 at closing plus ½
  per month
• Appraisal Fee-300 to 400
• Servicing Set-Aside-The servicing set-aside is an
  amount of money deducted from the available loan
  limit at closing to cover the projected costs of
  servicing your account. This is only a
  calculation, not a charge. The actual charge is
  30-35 per month.

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• REVERSE MORTGAGE Cost Examples
• Closing Costs
• Credit report fee-generally under 20
• Flood certification fee-generally under 20
• Escrow, Settlement or Closing fee-150 to 450
• Document preparation fee-75 to 150
• Recording fee-50 to 100
• Courier fee-generally under 50
• Title insurance-varies by loan amount
• Pest Inspection-generally under 100
• Survey-generally under 250

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• REVERSE MORTGAGE Costs
• As you can see, Reverse Mortgages can be
  expensive.
• Consider a Reverse Mortgage as a long-term
  commitment. Average length is between 11 and 12
  years to pay-off. This allows amortization of
  front-end costs.

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• REVERSE MORTGAGE Consumer News
• Reverse mortgage lenders, with approval from the
  U.S. Department of Housing and Urban Development,
  have implemented a new consumer protection called
  the "principal limit lock" which freezes the
  expected interest rate on federally-insured
  Home Equity Conversion Mortgage (HECM) reverse
  mortgages for a period up to 60 days from the
  date of application. The expected interest rate
  is utilized to calculate the amount of funds
  available from a HECM reverse mortgage.

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• THANK YOU FOR COMING!
• ANY QUESTIONS?
• Paul Bangart [phone]
• Artisan Mortgage fax [phone]
• Please call if you have any questions or email
  to pbangart_at_artisanloans.com