Operations & Technology
Using Reverse Mortgages
Using Reverse Mortgages
to Fund Longevity
to Fund Longevity
Michael Banner
National Education Director
Sec rit One Lending
Who Is Eligible?
Clients over age 62
Principal residences
Principal residences
Single Family Homes up to 4 units
Single Family Homes up to 4 units
Flexible Payout Options
L
ll t
Lump sum, all at once
Line of Credit
Payment for Life (Tenure)
Term payments
Term payments
Wh t A
Th B
’
What Are The Borrower’s
Responsibilities?
Keep taxes current
Homeowner’s Insurance
Myths
vs
. Reality
1 - Who Retains Title to the Home?
The clients (s) always retain the title to the home
2 - Remaining Equity Goes?
To the heirs, estate or where ever directed
3 - Loan Repayment?
p y
Closing Costs
2010 Saw the Retooling of the Reverse
2010 Saw the Retooling of the Reverse
Mortgage:
• April 2010 – closing costs were decreased greatly
thus removing the #1 obstacle advisors had with
th
d
t
the product
• Oct 2010
The Introduction of a totally New
• Oct 2010 – The Introduction of a totally New
Cross Selling
* Contrary to what most believe Cross
Contrary to what most believe Cross
Selling
IS NOT
against the law!
(Never has been)
• Section 2122 of HERA clearly states
that safeguards and firewalls must
b i
l
t
t
t th
i
be in place to protect the seniors
• But they do not define those
safeguards
safeguards.
$
Example - $625,500 Market Value
Mr. and Mrs. Borrower, Ages 68 and 70
,
g
Principal Limit: $625,500
Loan Amount: $ 293,985
Upfront Cash Draw:
$25,000 CASH
$125 000 to payoff mortgage
$125,000 to payoff mortgage
Monthly Income:
10 year Term: $992.81 / month for ten years
Plus we eliminated monthly mtg payment of $1 155 00
Plus we eliminated monthly mtg. payment of $1,155.00.
The New Purchase Reverse Mortgage
Joe & Mary are
Purchasing a Home
(75 ears old) (75 years old)
The Old Way
Sell previous home for $400,000
Uses Proceeds to purchase New Home $400,000
The Reverse Mortgage Way
Down Payment $154 089
Down Payment $154,089
Secures reverse mortgage $245,911
Extra money for retirement savings!
Downsizing Example
•
Joe Sells Home.
Joe Sells Home.
Joe is 74 years old
-Sells home for $400,000.
-Downsizing to new home.
Wants NO mortgage payments
y
-Wants NO mortgage payments
•
Joe Buys New Home
-Purchase price is $250,000
-Qualifies for a Reverse Mortgage.
-Joe’s down payment is $97,276*
Joe s do
pay e t s $9 ,
6
*Bases on rates from 4-20-10
RESULT
$302,724 goes into Joe’s Savings Account
Joe enhances life style!
Joe enhances life style!
Proper Position Concerning Financial Products
Funds are not to be used for the intention of
Funds are not to be used for the intention of
funding investments!
Funds should only be utilized to improve clients
Funds should only be utilized to improve clients
present financial situation which may or may not
include:
P
id S
l
t l R ti
t I
Provide Supplemental Retirement Income
Enhanced Retirement Lifestyle
Purchase Long Term Care Insurance
Purchase Life Insurance
Reverse Mortgage to LTCi
• Not just another “pocket” from which
• Not just another pocket from which
to pay LTCi premiums
Strateg m st fit o erall financial
• Strategy must fit overall financial,
retirement and LTC plans
M
t l
k t t t l
t f th
t
• Must look at total cost of the mortgage
in the plan
• Consider a smaller/shorter base of LTCi
with a reverse mortgage as a future
Using a Reverse Mortgage for LTC
Educating Seniors About Reverse Mortgages
Role of the National Council on Aging
HUD approved Reverse Mortgage Counseling Intermediary 57 RM HUD-approved Reverse Mortgage Counseling Intermediary – 57 RM
counselors at 21 social service agencies nationwide.
Policy research – NRMLA, MetLife Mature Market Institute, HUD, CFPB.
The counseling session covers:
The counseling session covers:
An overview of reverse mortgages and their features.
The amount of money that may be available and loan costs. Other housing, services, and financial options.
Using RMs for LTCI or financial investments – RED FLAG.
NCOA developed the Financial Interview Tool (FIT)
CO de e oped t e
a c a
te e
oo (
)
Review client’s financial goals, debt, and budget.
Ask about health status, limits with activities, home barriers.
Shifting Reasons for Tapping Home Equity
FIT Review AARP Survey Reason for Considering a RM
FIT Review 2010
AARP Survey 2006
Enhance quality of lifeq y 27% 70%
Plan ahead for emergencies 23% 73%
P ff d bt 67% NA
Pay off debt 67% NA
Pay off mortgage NA 34%
Pay off non-mortgage debt NA 27%
Characteristics of RM Counseling Clients, 2010
Median age = 70.
g
Proportion married = 43%.
Median annual income= $26 724
Median annual income= $26, 724.
Median home value = $200,000.
O
h
f
d l
60%
Own home free and clear = 60%.
Median net home equity = $147,000.
Health Status of RM Counseling Clients, by Age
Income by Age Among RM Counseling Clients
Age of Youngest Potential Borrower
Net Home Equity by Income – Counseling Clients
Annual Household Income
LTCI Can Protect Home Equity
Amount of Remaining Equity
