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Title: AARP Foundation Reverse Mortgage Counseling Project Author: Bronwyn Belling Last modified by: pwlak71 Created Date: 1/31/2003 8:40:01 AM Document presentation ... – PowerPoint PPT presentation

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Title: What

1
Whats New with Reverse Mortgages?

LTC Briefing on Housing LTC
St. Paul, MN
August 6, 2004

2
Reverse Mortgages The Right Choice for Some

80.6 of older households (headed by
people 62) own the unit they live in
72 of those homes have no mortgage
2 trillion locked up in equity among 62
58 of older owner households meet HUD
definition of low income (lt 80 of median)
84 of older homeowners want to stay
in their homes and never move

3
Reverse Mortgage Definition

Loan Against Home Equity
Provides Cash Advances to Borrower
Requires No Repayment Until The Last Surviving
Borrower Sells, Moves out Permanently or Dies
Generally Larger Advances to Older
People in Highest Valued Homes

4
Definition Other Forms of Home Equity Conversion

Property Tax Deferral/Relief
Deferred Payment Loans for Home
Repairs/Improvements
Sale Leaseback Transactions
Remainder Interest Plans

5
3 Types of Reverse Mortgages

Single Purpose Home Repairs/Prop Taxes
Income Based Limited Uses Lower Cost
Sponsored by Non-Profits/Local Governments
Federally Insured by HUD
HECM Home Equity Conversion Mortgage
Any purpose, any state (TX limitations)
Largest amounts of at lowest cost for most
Proprietary from Fannie Mae and Financial
Freedom Value Cash Cost

6
HECM Eligibility

All borrowers 62 years of age or more
Own/occupy 1-4 unit residential property
Most condos and PUDs, no coops
Property must be in good condition
Must pay off any existing mortgages
Can use proceeds for 2 items above
Independent counseling provided by
public/nonprofits before application

7
How Much Can a Homeowner Get? Based on 3 Factors

Age of Youngest Borrower or
Joint Life Expectancy of All Borrowers
Interest Rates (and other Loan Fees)
Rates Fixed or Tied to Index
Property Value or Program Limits
(as applicable)
Calculator for HUD and Fannie Mae products
www.aarp.org/revmort

8
HECM Cash Advances 5 Payment Options
(Utilization 5/00)

Term Monthly Advances for Fixed Number of Months
or Years (6)
Tenure Monthly Advances for As Long as Remain in
Home (6)
Line of Credit on Demand (68)
Modified Term 1 3 (12)
Modified Tenure 1 4 (8)

9
HECM Example Monthly Advances for As Long As One
Borrower Remains in Home (Tenure) or Line of
Credit Available

Age of 150,000 Home 300,000 Home
Youngest Tenure or LOC Tenure or
LOC
Borrower
65 444 74,260 677
113,199
75 599 89,580 906
135,493
85 917 106,211 1378
159,493
Assumptions as of 8/04 5.96 Expected Rate,
3.62 Initial Rate
2 Mtg Ins Premium 2 Origination Fee 35
monthly servicing fee
where program equity limit maximum for all
high cost areas (221,160)

10
Business is Booming

HECMs 90-95 of market share
Interest Rates Lower Than Ever in History
Increasing Public Awareness Outreach
Property Values Continue to Appreciate
Retirement Plan Investment Setbacks
50 Increase Last Year to 18,000 closings
28,000 HECMs bought by Fannie Mae in 2003

11
HECMs Complementary OptionFannie Maes
HomeKeeper

Equity Share Feature No Longer Available
Very Limited Market Share
Single Family Homes and Condos Only
Higher National Equity Limit (333K versus HUD
range from 154K to 290K by county)
No Term, Modified Term Options
Unlike HECM, no creditline growth
Couples Underwritten Jointly Less

12
Jumbo Reverse Mortgage

Cash Account and Cash Account High Benefit from
Financial Freedom
Marketed to high valued homes (600,000)
Available in most but not all states
High Benefit Option Annuity Purchase Guarantees
Income for Life
Separate Counseling by FinFree Staff
Calculator at www.financialfreedom.com

13
Comparing Products?? You Better Shop Around!

AARP Does Not Endorse Any
Lenders or Products
Equity Limits Vary by Product
Household Size Affects Payout
Creditline Growth How Much Often
Costs Whats Left Over in Equity
Get Independent Information and
Make Product Decisions Before
Contacting a Lender

14
Consumer Protections Now in Place

Counseling Required by Law
Independent Non-Profit/Public Agencies
Better Understand Transaction and Alternatives
Protection of Non-Recourse Limit
Never Owe More Than House is Worth
Truth-in-Lending Disclosure Rules
Total Annual Loan Cost (TALC) Rate

15
Importance of Counseling

Free to consumers through AARP Foundation
Counseling Network
Personalized software analysis to identify all
costs and fees
Counselors provide info on less costly
alternative programs services
See www.hecmresources.org

16
Caution Reverse Mortgages Arent for Everyone

Local Program or Service May Be
Faster and Cost Less
VERY Expensive Way to Borrow Money
Short Term, Especially If Not Much
Principal Drawn Down In That Period
Consumers Must Do Their Homework
Before Making Any Decision

17
Caution RM Generates New Cash for Vulnerable

Creditline Flexibility Reward and Risk
Some Consumers Dont Manage Large Sums of Money
Well
Potential Abuse by Professionals or Family
Members
Estate Planners Service Fee Abuses in 1997 led to
more consumer protections

18
Current Project Improving Quality, Availability
Access

Collaborating with 43 Counselors who met High
Score on 2002 National Computer Based Competency
Examination, additional 54 in 03
Subgrants of 1.1 mil. made to 36 agencies
AARP Identify, Screen and Refer Clients for
Counseling (FYO4 goal 9K)
Counselors Follow Detailed Protocol Receive
Ongoing Technical Assistance
Client Notification, Tracking, Alternatives
Database and Invoicing on Shared Website

19
AARP Consumer Resources

Home Made Money A Consumer Guide to Reverse
Mortgages - 46 pages (Spanish version now in
development)
For free single copy call AARP at
800-424-3410 (ask for stock D15601)
www.aarp.org/revmort - web version
of guide, downloadable pdf, plus reverse mortgage
payment calculator

20
Additional Technical Information and Resources