Alain Valles, President CRMP, MBA, CSA. Direct Finance Corp.

Transcription

1 Alain Valles, President CRMP, MBA, CSA Direct Finance Corp.

2 Alain Valles President of Direct Finance Corp. Over 20 years of mortgage experience First person in New England designated by the National Reverse Mortgage Lenders Association (NRMLA) as a Certified Reverse Mortgage Professional (CRMP) Certified Senior Advisor Contributor to various trade publications Past-President of the Mass. Mortgage Association Masters in Real Estate from M.I.T. MBA from The Wharton School, Univ. of Pennsylvania Passionate about maintaining & improving the quality of life!

3 RIIA s Mission First build a floor, then expose upside Today s 3 Reverse Mortgage Goals The Market The Product The Opportunities & Concerns

4 The Market 20 Million people 65 years old or older 77% Own a Home (15.4 million) 84% Have No Mortgage (12.9 million) 85% Desire to Stay in Their Home (13.1 million) Source: National Council on Aging

5 The Market About 60,000 loans were originated in 2013 About 1% of total mortgage volume About 1~2% of eligible seniors have a reverse mortgage

6 Closed Reverse Mortgage Volume 140, , , , , , , FYE Source: National Reverse Mortgage Lenders Assn.

7 Reverse Mortgage Image What the news & people are saying I heard they re terrible Lose your home to the bank or government They re expensive My neighbor said Caution is that what you re saying too? The facts Extremely high satisfaction Recent program changes will mitigate loan program risks Lack of education (I miss the banks) The pendulum is shifting ever so slowly

8 WHAT ARE THE TOP CHALLENGES FACING SENIORS?

9 What are the current challenges? #1 Goal Remain Independent / Afford Home Increase monthly cash flow (no current mortgage) Lower mortgage payment, credit cards, debts Home improvements / real estate taxes Life happens Having the best quality of life possible (fear of outliving their money)

10 How Will Seniors Afford Life Primary Sources & Limitations 1. Social Capital - Social Security/gov t programs/family Insufficient to cover monthly expenses Significant financial, health & emotional cost 2. Financial Capital - Investments Underfunded/uncertain rates of return 3. Human Capital - Work Life happens can t continue 4. Consumption Eat less, lower liabilities, move Quality of life issue, emotional pain, impossible

11 .

12 What is a Reverse Mortgage? A reverse mortgage, also known as a Home Equity Conversion Mortgage or HECM, is a federally insured home loan administered by HUD that allows seniors to access the equity in their homes.

13 What are the key benefits? #1 Benefit No Monthly Payments Required No income or asset requirements* No minimum credit score* May close in a trust or life estate No health requirements Loan is non-recourse * Subject to Financial Assessment guideline changes

14 How does your client qualify? The Three Qualifying Questions: 1. How old are you? (Must be at least 62) 2. What is the estimated home value? 3. What is the current mortgage balance? THAT S IT, FOR NOW, TO QUALIFY!* Soon income, assets, credit BIG impact on market * Subject to Financial Assessment guideline changes

15 Maximum Loan Amount Examples +/- Age Home Value $250,000 $127,500 $139,000 $151,000 $400,000 $206,000 $225,000 $244,000 $500,000 $260,000 $284,000 $307,000 $625,500 $327,000 $357,000 $386,000 Rough rule of thumb 45% ~ 60%+ loan-to-value

16 How is the cash received? Three Basic Options Lump sum - Take all the cash at closing* Receive Monthly Payments for life or term * Subject to specific cash out limitations

17 How is the cash received? Three Basic Options Lump sum Tenure Monthly Payments (for life) example $500,000 home 75 yr old person Instead of $284,000 available maximum loan amount, borrower would receive approximately $1,837 per month FOR LIFE!!!

18 How is the cash received? Three Basic Options Lump sum Monthly Payments For a Term example for 120 month term $500,000 home 75 yr old person Instead of $284,000 available maximum loan amount, borrower would receive approximately $3,150 per month

19 How is the cash received? Three Basic Options Lump sum Monthly Payments for life or term Line of Credit most complicated part to explain to a senior BUT perhaps the best reverse mortgage option!!!

20 Reverse Line of Credit (LOC) AMOUNT AVAILABLE (65y.o,$500k fmv) Year Bank LOC Reverse LOC O $260,000 $260,000 1 $260,000 $269,800 2 $260,000 $278,300 3 $260,000 $287,930 Why does it grow?

21 Why Does Line of Credit Grow? 1) Person is older 2) HUD assumes home appreciates in value 3) Grows at cost of money which is around 3.46% today. Growth rate = Libor + margin* % HUD MIP* * Current margins range from 2.0% to 3.5% * Mortgage Insurance Premium

22 Reverse Line of Credit (LOC) INCREDIBLE SECURITY BLANKET!!! AMOUNT AVAILABLE+/- (65y.o.,$500k fmv) Year Bank LOC Reverse LOC 0 $260,000 $260,000 1 $260,000 $269,000 2 $260,000 $278,300 3 $260,000 $287,930 : : : 10 $260,000 $367,320

23 Reverse Line of Credit (LOC) INCREDIBLE SECURITY BLANKET!!! AMOUNT AVAILABLE+/- (65y.o.,$500k fmv) Year Bank LOC Reverse LOC 0 $260,000 $260,000 1 $260,000 $269,000 2 $260,000 $278,300 3 $260,000 $287,930 : : : 20 $ 0 $518,960

24 Reverse Line of Credit (LOC) If Libor Increases by 2.00% AMOUNT AVAILABLE+/- (65y.o., $500k fmv) Year Bank LOC Reverse LOC 0 $260,000 $260,000 1 $260,000 $269,000 2 $260,000 $278,300 3 $260,000 $287,930 : : : 20 $ 0 $518,960 $773,05

25 The Concerns/Challenges Compliance my side, your side Cross selling don t Cost compared to what, good news Proprietary sales software assumptions The press bad press sells Competency sales force, having a good day One bad apple (fraud) yes, even seniors Emotion vs logic F.E.A.R., blame it on something

26 The Opportunities First build a floor, then expose to upside Mitigating the top 3 disruptions Systematic & un-systematic risks Paying a monthly check Consumption & wealth

27 The Opportunities Mitigating the top 3 disruptions (un-systematic risk, paying a monthly check, consumption) Social Security Deferral Insured Line of Credit Growth Reducing Investment Return Pressure Funding LTC Insurance (caution) Defusing HELOC Time Bombs Legacy / Gifting Quality of life

28 Thank You! For More Information Alain Valles, CSA, CRMP NMLS Lic. #7946 Direct Finance Corp. 40 Accord Park Dr., Ste 208 Norwell, MA x224 Cell And Oh By The Way I m never too busy for any of your referrals!