Source: Genworth Financial Home Equity Access, Inc. Reverse Mortgage Study- 10/2008 2

Transcription

1 REVERSE MORTGAGES 1

2 Source: Genworth Financial Home Equity Access, Inc. Reverse Mortgage Study- 10/2008 2

3 Benefits of a Reverse Mortgage Senior will receive money without having to leave their home No income, medical or credit qualifications No monthly mortgage payments No repayment of loan until the last borrower moves out permanently, sells the home, or passes away Loan proceeds are tax-free and may be tax deductible upon loan payment Borrowers may choose a cash flow plan tailored to their needs No restrictions on how borrower may use the funds Financial Independence Lender has no claim on borrower s income or assets other than the current market value of the home Borrower will never owe more than the value of their home 3

4 Potential Market 21+ Million senior homeowners 60% of market is % want to remain in home (AARP study) $2 trillion in home equity Loan Volume has increased by 70% per year for the past two years 4

5 HECM Product History The Home Equity Conversion Mortgage (HECM) Program was established by the Housing And Community Development Act of 1987 As part of the program, the FHA issues mortgage insurance that ensures the borrower never has to repay more than the home is worth at time of sale* (*HUD Mortgagee Letter ) 5

6 Eligibility Borrower and co-borrower must be 62 years of age or older (Max benefits are reached at age 95) Borrower must own home outright, or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan Home value or HUD lending limit (whichever is less) is used to calculate the loan amount. Counseling is conducted by a HUD approved third party counselor to ensure product understanding and alternatives Income, assets & credit score are generally not used for qualification 6

7 Types of Reverse Mortgages FHA Home Equity Conversion Mortgage Effective in January 2011, FHA Maximum Loan Amount = $417,000 7

8 Reverse Mortgage Loan Proceeds Loan Proceeds Available to the Borrower Based on: The age of the youngest borrower The value of the home The current interest rates Options for Receipt of Loan Proceeds: Tenure: equal monthly payment as long as at least one borrower lives 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 installments, at times and in amounts of your choosing until the line of credit is exhausted Lump Sum: All proceeds received at closing after 3 day right of rescission 8

9 Eligible Properties Owner Occupied ONLY Single Family Residence 2-4 unit home with one unit occupied by the borrower Condominium (HUD-approved) Manufactured Homes (Must meet FHA requirements) 9

10 Loan Program Specifics Loan is repaid at permanent move out, and repayment never exceeds value of home Amount repaid is principal, accrued interest, and service fees At the time the loan becomes due and payable, borrower heirs can either choose to repay the loan and keep the house, or sell the home and repay. Heirs will also receive remaining equity, if any, after sale of the home. Benefits received from Social Security and Medicare are not affected by a Reverse Mortgage Must be first lien holder POA s must be approved by title company Mandatory counseling by an independent counselor to ensure borrower understands the terms 10

11 When Loan becomes Due & Payable Borrower fails to pay property taxes for hazard insurance or violate other obligations Borrower permanently moves to a new principal residence The last borrower fails to live in the home for 12 months in a row. Example: 12-month or longer stay in a nursing facility Borrower allows the property to deteriorate and fails to make necessary repairs. 11

12 Common Myths The Lender will own the home FALSE Homeowner continues to own the home during the life of the loan Borrower must own home free & clear- FALSE Must have sufficient equity (amount determined by age) Current mortgage will be paid off as part of the process. The Lender cannot wait for the borrower to get out of the house so the loan can be repaid FALSE The Borrower can be thrown out of the house FALSE Foreclosure risk is minimized because there are no monthly payments ( Must meet loan obligations such as paying taxes and insurance and maintaining as primary residence) The Borrower can owe more than the house is worth FALSE Loan balance is limited to home value at sale* (*HUD Mortgagee Letter ) Borrower s heirs will be responsible for repayment of the loan FALSE Borrower can outlive the equity- FALSE Tenure option provides monthly payment during the life of the loan 12

13 Costs MIP = 2% of appraised value Origination Fee = 2% of appraised value Closing Costs Up front costs = Appraisal Fee ($450 credited back at closing) HUD Counseling = Depends on the Counseling Agency 13

14 Taxes IRS does not consider loan advances to be income Interest on the loan is not deductible for tax purposes until loan is actually paid If proceeds are used to purchase an annuity, part of the income may be taxable and could be treated as income by SSI, Medicaid and other programs, resulting in reduction on benefits or loss of eligibility 14

15 Partnership Opportunities with Member First Mortgage: Service, Grow, and protect your Credit Union Membership To expand the Credit Unions Product Line Credit Union can utilize Marketing Material Offer Competitive pricing Help members strengthen financial situation Credit Union will receive potential income 15

16 Reverse Mortgage Product Flow: Credit Union to provide Member First Mortgage with the member s phone number or address Member First Mortgage will call or the member with information regarding a Reverse Mortgage Member First Mortgage will complete the mortgage application with the member and review the process When the member decides to move forward with the Reverse Mortgage, Member First Mortgage will guide the member through the entire process 16

17 Reverse Mortgage Contacts: Carmen Sherman SVP of Operations direct Jamie Wiersma SVP of Sales and Marketing direct Toll Free: