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National Settlement Services Summit

Tapping into Reverse Mortgages & the Fastest

Growing Mortgage Segment

David Gutmann

VP & Corporate Counsel

Customized Lender’s Services

Ralph E. Rosynek, Jr.

President & HECM Direct Endorsement Underwriter,

1st Reverse Financial Services, LLC

(2)

A Senior

A Senior

s Perspective

s Perspective

“I worked hard all of my

life – saved and planned

for my wife and I to

enjoy retirement …..I

thought my investments

and retirement accounts

would provide for our

old age but it seems

that the only good

‘investment’ was our

home – the rest has

dwindled…”

(3)

SO, WHAT

SO, WHAT

S THE LATEST

S THE LATEST

NEWS IN THE MORTGAGE INDUSTRY?

NEWS IN THE MORTGAGE INDUSTRY?

The Freefall of Sub

The Freefall of Sub

-

-

Prime

Prime

Write

Write

-

-

Downs!

Downs!

Congress Takes Action

Congress Takes Action

(4)

If You Watch TV or

If You Watch TV or

Read Newspapers

Read Newspapers

You can

You can

t miss that press that

t miss that press that

Reverse Mortgages have Garnered

(5)

Governmental Agencies

Governmental Agencies

Chime In

Chime In

FHA Modernization Bill

FHA Modernization Bill

makes significant

makes significant

changes to Reverse Mortgage Program:

changes to Reverse Mortgage Program:

HECM for purchase

HECM for purchase

National lending limit

National lending limit

Reduced Upfront Fees/Costs

Reduced Upfront Fees/Costs

Department of Health & Human Services

Department of Health & Human Services

provides

provides

grant to National Council on Aging (NCOA) to promote

(6)

Reverse Mortgage Fast Fact

Reverse Mortgage Fast Fact

Even with Great Growth,

Even with Great Growth,

We are at @ 1% Market Penetration!

(7)

A Brief History of Reverse

A Brief History of Reverse

Mortgages

Mortgages

Reverse Mortgage Loans have been

Reverse Mortgage Loans have been

around in several forms for decades

around in several forms for decades

In 1989, a truly nationwide product

In 1989, a truly nationwide product

becomes available:

becomes available:

The

The

HECM

HECM

(Home Equity Conversion Mortgage)

(Home Equity Conversion Mortgage)

Insured by Federal Housing Administration

Insured by Federal Housing Administration

(

(8)

A Brief History of Reverse

A Brief History of Reverse

Mortgages

Mortgages

Subsequently

Subsequently

-

-•

Fannie Mae enters the Reverse Mortgage Market

Fannie Mae enters the Reverse Mortgage Market

The HomeKeeper

The

HomeKeeper

Similar borrower criteria

Similar borrower criteria

More conservative property guidelines

More conservative property guidelines

Higher

Higher

Loan Amounts

Loan Amounts

Standardized National Lending Limits

Standardized National Lending Limits

(9)

A Brief History of Reverse

A Brief History of Reverse

Mortgages

Mortgages

Then,

Then,

Private Sector Adds Options

Private Sector Adds Options

Proprietary

Proprietary

Jumbo

Jumbo

Programs

Programs

Similar Borrower Criteria

Similar Borrower Criteria

More Complex Property Guidelines

More Complex Property Guidelines

Custom Underwriting

Custom Underwriting

High

High

-

-

End Spectrum Loans

End Spectrum Loans

(10)

What truly is a Reverse

What truly is a Reverse

Mortgage Loan?

Mortgage Loan?

A 1

A 1

st

st

Lien Mortgage that allows borrowers

Lien Mortgage that allows borrowers

Aged 62

Aged 62

or older to release their primary home

or older to release their primary home

s equity

s equity

with:

with:

No Monthly Mortgage Payments

No Monthly Mortgage Payments

No Income Qualifications

No Income Qualifications

No Credit Qualifications*

No Credit Qualifications*

No Restrictions on How The Funds Are Used

No Restrictions on How The Funds Are Used

(11)

Payment Options

Payment Options

1.

1.

Monthly Payments (Tenure) – equal monthly payments for

Monthly Payments (Tenure)

the life of th loan, sent the 1

st

business day of the month

2.

2.

Monthly Term Payments – equal monthly payments for a

Monthly Term Payments

specified period of time, sent the 1

st

business day of the

month

3.

3.

Lump Sum Draw at closing – A portion or All of the

Lump Sum Draw at closing

available funds are disbursed after rescission period

4.

4.

Line of Credit

Line of Credit

– Available whenever the borrower wants it

5.

(12)

Common Uses of Reverse

Common Uses of Reverse

Mortgages

Mortgages

Funds can be used for any purpose and in any

Funds can be used for any purpose and in any

way desired, including:

way desired, including:

ƒ

ƒ

Mortgage Payment Abatement

Mortgage Payment Abatement

ƒ

ƒ

Supplement Monthly Cash Flow

Supplement Monthly Cash Flow

ƒ

ƒ

Home Improvement

Home Improvement

ƒ

ƒ

Debt Consolidation

Debt Consolidation

ƒ

ƒ

Long Term Health Care

Long Term Health Care

ƒ

ƒ

Assistance to Family Members

Assistance to Family Members

ƒ

ƒ

Investment Strategy

Investment Strategy

ƒ

ƒ

Achieve Life Long Goals (I.e. Vacations, 2

Achieve Life Long Goals (I.e. Vacations, 2

nd

nd

Home, New Car and more

Home, New Car and more

(13)

When Must A Reverse Mortgage

When Must A Reverse Mortgage

Be Repaid?

Be Repaid?

Repayment of the Reverse Mortgage is required when:

Repayment of the Reverse Mortgage is required when:

All

All

borrowers no longer live in the property as their primary

borrowers no longer live in the property as their primary

residence.

residence.

This includes: sale of the property, relocation to another

This includes: sale of the property, relocation to another

primary residence or death of owners.

primary residence or death of owners.

The borrowers have not occupied the property for 12

The borrowers have not occupied the property for 12

consecutive months

consecutive months

When the youngest borrower turns 150 years old!

When the youngest borrower turns 150 years old!

Note:

Note:

If death of the owners occurs, the heirs/estate will have approx

If death of the owners occurs, the heirs/estate will have approx

imately 6

imately 6

12

12

months to repay the loan and/or sell the property

(14)

Reverse Mortgage Fast Fact:

Reverse Mortgage Fast Fact:

According to AARP:

According to AARP:

• In FY 2004, the Reverse Mortgage portion of

their website had

300,000

300,000

visits

• The AARP RMEP Website has over

100 + pages of information

100 + pages of information

1.4 Million Page Views

1.4 Million Page Views

in FY 2004

• AARP has mailed over

100,000 Reverse

100,000 Reverse

Mortgage Consumer Guides

Mortgage Consumer Guides

(15)

Eligibility

Eligibility

AGE

AGE

All borrowers must be 62 years of age

All borrowers must be 62 years of age

RESIDENCY

RESIDENCY

All borrowers must occupy the property as their primary

All borrowers must occupy the property as their primary

residence

(16)

Qualifications

Qualifications

CREDIT

CREDIT

No Credit Assessment Required

No Credit Assessment Required

No FICO Score Required

No FICO Score Required

All Federal Debts Must Be Paid (Can use proceeds to pay)

All Federal Debts Must Be Paid (Can use proceeds to pay)

HEALTH

HEALTH

No Health Requirements

No Health Requirements

INCOME

INCOME

No Income Requirements

No Income Requirements

DOCUMENTATION

DOCUMENTATION

Social Security Number Verification

Social Security Number Verification

Date of Birth Verification

Date of Birth Verification

(17)

Reverse Mortgage Fast Fact:

Reverse Mortgage Fast Fact:

According to Industry

According to Industry

Estimates:

Estimates:

“Over 90% of Senior who

have completed Reverse

Mortgage Counseling

actually apply for a Reverse

Mortgage Loan”

(18)

Property

Property

TYPES

TYPES

• Single Family, Condo’s, Townhomes

• 2-4 Units

• Manufactured & Modular Homes

CONDITION

CONDITION

• Repairs

• Inspections

• Certifications

• Treatments

(19)

Property

Property

VALUATION

VALUATION

FHA Appraisal

FHA Appraisal

VC Repairs

VC Repairs

FANNIE MAE APPRAISAL

FANNIE MAE APPRAISAL

Home Inspection

Home Inspection

TAXATION

TAXATION

REAL PROPERTY

REAL PROPERTY

(20)

Ownership

Ownership

LEGAL STATUS

LEGAL STATUS

Fee Simple/Leasehold

Fee Simple/Leasehold

Living Trust

Living Trust

Land Trust

Land Trust

Vesting

Vesting

Title

Title

POA, Guardian, Conservator

POA, Guardian, Conservator

(21)

Another Perspective

Another Perspective

“I am not prepared for

this….my aging parents

need my financial

support….with college

tuition for my children,

house payments and car

payments, there just isn’t

enough to take on this

additional responsibility – I

need an alternative to allow

for my parents to continue

to live in their home and

maintain their quality of

(22)

Reverse Mortgage

Reverse Mortgage

Fast Fact

Fast Fact

7,918

7,918

people will turn

people will turn

62

62

years

years

old each day in 2008.

old each day in 2008.

That equates to a total of

That equates to a total of

2,890,000

2,890,000

in 2008.

in 2008.

Or in other words,

Or in other words,

330

330

people

people

each

each

and every hour of each day in 2008,

and every hour of each day in 2008,

will turn 61 years of age!

(23)

The Reverse Mortgage

The Reverse Mortgage

Market

Market

b

b

1

1

in

in

5

5

Americans is now over 55 and this market is

Americans is now over 55 and this market is

GROWING!

GROWING!

b

b

34.5 million senior households

34.5 million senior households

b

b

80% are over 62 years old and own their home (US Census)

80% are over 62 years old and own their home (US Census)

b

b

60% of market is 65

60% of market is 65

-

-

70

70

b

b

85% want to remain in home (AARP study)

85% want to remain in home (AARP study)

b

b

$2+ trillion in home equity

$2+ trillion in home equity

b

b

Seniors

Seniors

Interest in Reverse Mortgages has doubled

Interest in Reverse Mortgages has doubled

since 1999

since 1999

and actual loan production has grown exponentially

and actual loan production has grown exponentially

b

b

Fannie Mae studies show

Fannie Mae studies show

90+% satisfaction rate

90+% satisfaction rate

with Reverse

with Reverse

Mortgages

(24)

Senior Population Growth is

Senior Population Growth is

Enormous

Enormous

In 1900, approx:

In 1900, approx:

35

35

Million Seniors

Million Seniors

By 2030, approx.

By 2030, approx.

70

70

Million Seniors

Million Seniors

(approximately 20% of total US population)

(approximately 20% of total US population)

Growing Senior

Growing Senior

Concerns:

Concerns:

•Desire to

Desire to

Age in Place

Age in Place

•Need for In

Need for In

-

-

Home &

Home &

Long

Long

-

-

Term Care

Term Care

•Risk of Institutionalization

Risk of Institutionalization

and Neglect due to lack of

and Neglect due to lack of

sufficient funds

(25)

What

What

s A Typical Transaction

s A Typical Transaction

Flow?

Flow?

The transactional.

The information gathering, decision workflow is

similar to “Forward” Mortgage Lending making

cycles and adaptation timeframes are distinctly

different.

(26)

Reverse Mortgage Fast Fact:

Reverse Mortgage Fast Fact:

The Internet is a valuable resource for

The Internet is a valuable resource for

Seniors and Their Children who are seeking

Seniors and Their Children who are seeking

information about Reverse Mortgage Loans.

information about Reverse Mortgage Loans.

One of the best methods to increase

One of the best methods to increase

Reverse Mortgage loan production is to

Reverse Mortgage loan production is to

let people know that you have access

let people know that you have access

to Reverse Mortgage Loans ! ! !

(27)

The Next Question

The Next Question

Are There Other Considerations To Do Business?

Are There Other Considerations To Do Business?

1.

1.

Specialized Staffing Needs

Specialized Staffing Needs

2.

2.

Unique Process and Work Flows

Unique Process and Work Flows

3.

3.

Limited Wholesale Access

Limited Wholesale Access

4.

4.

Training, Education and Resource Concerns

Training, Education and Resource Concerns

5.

(28)

Reverse Mortgage Lenders

Reverse Mortgage Lenders

While this list is not totally inclusive, the following

While this list is not totally inclusive, the following

lenders are considered to be among the major

lenders are considered to be among the major

players providing access to Reverse Mortgage Loans:

players providing access to Reverse Mortgage Loans:

1

1

stst

Reverse Financial Services

Reverse Financial Services

(a sub. of Family Federal Savings of IL)

(a sub. of Family Federal Savings of IL)

www.1streverse.com

www.1streverse.com

Everbank

Everbank

Reverse Mortgage

Reverse Mortgage

(

(

Everbank

Everbank

)

)

www.bnyreverse.com

www.bnyreverse.com

Wells Fargo Home Mortgage

Wells Fargo Home Mortgage

www.wellsfargo.com

www.wellsfargo.com

Countrywide Home Loans

Countrywide Home Loans

www.cwbc.com

www.cwbc.com

Seattle Mortgage/

Seattle Mortgage/

BofA

BofA

www.scmreverse.com

www.scmreverse.com

Financial Freedom Senior

Financial Freedom Senior

Funding Corporation

Funding Corporation

www.financialfreedom.com

(29)

Another Perspective

Another Perspective

“I am not prepared for

this….my aging parents

need my financial

support….with college

tuition for my children,

house payments and car

payments, there just isn’t

enough to take on this

additional responsibility – I

need an alternative to allow

for my parents to continue

to live in their home and

maintain their quality of

life.”

(30)

Reverse Mortgage Fast Fact

Reverse Mortgage Fast Fact

Traditional Marketing

Traditional Marketing

Methods Do Not

Methods Do Not

Generate the Same

Generate the Same

Response Rates for

Response Rates for

Reverse Mortgage

Reverse Mortgage

Loans.

Loans.

(31)

In Conclusion

In Conclusion

A Reverse Mortgage is not necessarily

A Reverse Mortgage is not necessarily

appropriate for all borrowers or

appropriate for all borrowers or

situations

situations

But a vast and growing number of

But a vast and growing number of

individuals can benefit from Reverse

individuals can benefit from Reverse

Mortgage Loans

Mortgage Loans

Access for lenders is somewhat limited

Access for lenders is somewhat limited

at this time

(32)

Should Your Company Consider

Should Your Company Consider

Adding Reverse Mortgages as a

Adding Reverse Mortgages as a

Service?

Service?

1,485

1,485

people turned

people turned

62

62

Years of age

Years of age

since you left home this morning

since you left home this morning

There are very few other loan programs

There are very few other loan programs

that have that many new potential

that have that many new potential

customers coming down the pipeline!

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