PERFECT STORM STATISTICS

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1 FPA Symposium

2 ABOUT US At Fairway, customer service is a way of life. Fairway is dedicated to finding the best rates for customers and also offers some of the fastest turn times in the industry. The goal is to act as a trusted advisor, providing highly personalized service and helping through every step of the loan process. It s all designed to exceed expectations, guarantee satisfaction and earn trust.

3 PERFECT STORM STATISTICS 1. 10,000 People A Day Turning 62 Now Living Longer Than Expected 2. Lower Savings With Less Preparation 3. Fewer Pensions & Defined Benefits 4. Lowest Return On Investment For Decades 5. 76% Plan To Delay Retirement According To Genworth 6. Less Than 5% Have A LTC Insurance Plan Yet At Least 30% Are Likely To Need It 7. Greater Need For Security & Certainty Than Ever Before 8. 4 Trillion In Senior Home Equity 9. 30% Of Seniors Over 62 Have A Mortgage With A Balance Of $80,000 Center Of Retirement Research At Boston College If All Baby Boomers Retire At 62 84% Would Be In Jeopardy Of Running Out Of Money. At 66 50% Would Still Be Likely To Run Out Of Money.

4 REVERSE MORTGAGE BASICS Age 62 Or Older FHA Qualified Home Must Live In Home More Than 6 Months A Year. Your Social Security And Medicare Benefits Will Not Change

5 REVERSE MORTGAGE BENEFITS Keep The Title To Your Home Basic Credit & Income Qualifications Tax Free Cash From Equity 45 70% Never A Monthly Payment You Are Responsible For Maintenance, Taxes, And Insurance As Long As You Occupy Your Home

6 REVERSE MORTGAGE BENEFITS DOES NOT Require Repayment Until The Last Living Borrower Permanently Leaves The Home Borrower Chooses To Sell The Property Never Owe More Than Home Value FHA Guarantee Able To Purchase Home For (30 50% Of New Residence Sale Price)

7 REVERSE MORTGAGE SAFETY FHA Guarantees No Repayment Of The Loan Until The Last Borrower Moves Out, Sells Or Passes Away When You Move Out Of Your Home, You Or Your Estate Has Up To 12 Months To Repay The Loan. Reverse Mortgage No Penalty For Early Payment This Loan Is A Non recourse Loan (If The Balance On The Loan Exceeds The Home Value, HUD/FHA Makes Up The Difference!) Heirs Of Estate Keep Any Excess Proceeds From The Sale Of The Home

8 INTRODUCING A PARADIGM SHIFT A Paradigm Shift Is A Change In One s Perspective Of Thinking The Old Days: The Loan Of Last Resort A Reverse Mortgage Is For People Who Are In Financial Distress. Today: A Financial Planning Tool Reverse Mortgages Are Best Used At Age 62 With Line Of Credit To Guarantee Future Home Equity Value

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10 Social Security Social Security: Worth Waiting For Age 8% Increase $1, $0 $1, $120 $1, $130 $1, $140 $1, $152 $2, $163 $2, $176 $2, $191 $2, $206 $2,778

11 Replacement Retirement Refinance Forward Payments Required Reverse Payments Optional Example: $200,000 Mortgage 30 Years At 4% In 30 Years With $954 Payment = Loss Of Cash Flow Of $343,000 Can Still Use As Tax Deduction

12 Long Term Care Use Small Amount Of Equity To Protect All Other Assets Traditional Monthly LTC Premiums Lump Sum LTC / Life Insurance UL Life Insurance With Living Benefit Riders

13 Life Insurance Replace Home Asset Leave Behind Larger Legacy Leverage Of Tax Free Payments To Heirs

14 Health Insurance Medicare Gap: Many People Can t Retire Because They Depend on Their Companies Insurance

15 Guarantee Of Future Home Equity Buy A Put On Home Equity Without Spending A Dime Of Cash From Bucket 2

16 Tax Planning 1. Make $20,000 Payment 2. Use $20,000 Deduction 3. Receive Immediate Line Of Credit Back of $20,000

17 Tax Planning Lowest Tax Bracket Planning Social Security W 2 IRA Roth IRA Life Insurance HECM L.O.C. $25,000 $35,000 $15,000 Partially Taxable Taxable Zero Tax SS Up To 85%

18 Money Guide Pro Example

19 Reverse Mortgage Comparison 62 Year Old Couple Home Value: 400,000 Principal Limit: 209,600 Total Line Of Credit: 199, Line Of Credit Available 1 st Year: $115, Line Of Credit Available After 1 st Year: $83,840

20 Psychology Of Reverse Mortgage Not The Loan Of Last Resort Cash Management Tool Liquid Safe Rate of Return

21 Recent Changes Financial Assessment (Spring 2015) Non Borrowing Spouse (Fall 2014) Same Sex Couple (Summer 2015)

22 PLANNING AHEAD FOR YOUNGER CLIENTS Year Old Clients With 15 Year Mortgages Decreasing Retirement Contributions Paying Extra on Home Mortgage Refinance to 30 Years To Increase Contributions To Retirement

23 High Need Clients High Income High Taxation Paid Off House Have Current Mortgages Paying With Taxable Funds Anyone Withdrawing More Than 6% Decreased Income Increasing Expenses No Long Term Care Plan

24 SILOS OF INCOME DISTRIBUTION Income Allocation Assets 401k Savings IRA s Liabilities Home Mortgage Net Worth Increase

25 COORDINATED ACTIVE STRATEGY Results Based Off The Journal Of Financial Planning Study A Coordinated Strategy Has 85% Cash Flow Survival Rate With A 6.5% Initial Withdrawal Rate Based Off 32 Year Investment Return The Conventional, Passive Strategy Has 55% Cash Flow Survival Rate With A 6.5% Initial Withdrawal Rate Based Off 32 Year Investment Return At 6.5% withdrawal rate without a Reverse Mortgage. Cash Flow Survival probability is 35%

26 62 YEAR CLIENT PASSIVE STRATEGY Based Off Historical Data From The S&P Age 62 $1,500,000 IRA 7% Disbursement Age79 $264, IRA Value 7% Disbursement

27 62 YEAR CLIENT COORDINATED STRATEGY Coordinated Strategy Age 79 $51,807 LOC Available $1,380,621 IRA Value 7% Disbursement Passive Strategy Age79 $264, IRA Value 7% Disbursement

28 HECM LIFE BOAT This Chart Shows If You Only Invested In The S&P Historical Data For The Last 17 Years From An IRA Account Valued At 1.5 Million With A 7% Withdrawal Rate Of $126,000 A Year The Coordinated Strategy Outperformed The Non Coordinated Strategy After 17 Years By $1,168,328 Which Is Additional Years Of Withdrawals Not Calculating Growth The Available Line Of Credit Started At $321,000, And Still Ended Being Worth $51,807 After Taking Draws For Down Years In The Market After Subtracting The Equity Loss And Interest Accrued Net Worth Is Still Better By $433,000 $1,380,000 $683,000 = $697,000 $697,000 $264,000 = $433,000 *Yearly losses and gains are consistent with S&P and includes tax benefits from using LOC or interest rate adjustments.

29 REVERSE MORTGAGE LINE OF CREDIT 62 Year Old Client Home Value $600,000 Available LOC $324,399 At Age 76 Home Value $933,562 Available LOC $987,981 Reverse UPB $42,640 At Any Time Your Client Can Withdrawal From The LOC And Reinvest Back Tax Free The intensions of this chart are to educate consumers. Data is based off projections; the line of credit growth rate is based off the10 year SWAP rate and your age. Home price appreciated forecasts and 1 month Libor are based of Moody s Analytics.

30 USING A REVERSE MORTGAGE REAL WORLD APPLICATIONS Running Out Of Money Before You Run Out Of Life Is An Obvious Need Don't Overlook It When People Are Planning On Selling When They Don't Want To. But It Is Much Better To Be Able To Use A Reverse In The Following Ways: 1) Replacement Refinance For Standard Forward Mortgage To Make Payments Optional And Allow For Guaranteed Increase In The Credit Line 2) Standby Portfolio Protection Use A Reverse Mortgage As A Cash Management Tool In Stock Market Down Times Makes Portfolio Last Longer Will Make All Investments Last Longer While Net Worth Will Not Necessarily Decrease 3) Replaces Need For Cash Reserve Bucket Not Taxable Income 4) Ability To Purchase Needed Insurance Or Investment Products Because Of Change In Cash Flow. Insurance Can Multiply The Wealth And Guarantee The Home Equity Or Cash Depending On The Desire Of The Family 5) Purchase A Retirement Home Or A 2nd Home

31 USING A REVERSE MORTGAGE REAL WORLD APPLICATIONS 6) Shield From Medicaid Issues Self Insurance Or Ability To Purchase Long Term Care Insurance. 7) Tax Management Tool To Get Deductions When Needed Or Client Wants To Withdraw Less From Ira s And Other Taxable Sources. 8) Bridge Medicare Gap From For Early Retirees. 9) Extend The Draw Date For Taking Social Security 10) Hedge Against Future Declines In Home Equity Because Of Guaranteed Increasing Credit Line 11) Gifting To Family Help Family Out In Need Or Simply Leave A Larger Legacy 12) Gifting To Non Profits So You Can Enjoy Gifting While You Are Alive To See The Results

32 QUESTIONS Harlan Accola FAIRWAY Independent Mortgage Corporation Corporate NMLS #2289 Harlan Accola NMLS# Fairway Independent Mortgage Corporation. NMLS# S. Biltmore Lane, Madison, WI 53718, Copyright All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations should apply. Equal Housing Lender