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REVERSE MORTGAGES Presented by PAUL BANGART Artisan Mortgage. Who is Artisan Mortgage? We believe in CUSTOMERS FIRST We see our function to our customers is to simplify complicated financial decisions and take the time to make sure our customers understand their options.

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REVERSE MORTGAGES

Presented by

PAUL BANGART

Artisan Mortgage


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  • Who is Artisan Mortgage?

    • We believe in CUSTOMERS FIRST

    • We see our function to our customers is to simplify complicated financial decisions and take the time to make sure our customers understand their options.

    • We pride ourselves in the financial expertise of our TEAM. They will take the time to explain not just the available loan programs but also how it impacts you personally.


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  • What is a REVERSE MORTGAGE

    • A reverse mortgage enables older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment.

    • The reverse mortgage is aptly named because the payment stream is “reversed.” The lender makes payments to you. Eligible property types include single-family homes, manufactured homes (built after June 1976), qualified condominiums, and townhouses.


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  • What is a REVERSE MORTGAGE (continued)

    • There are no income or medical requirements to qualify. You may be eligible for a reverse mortgage even if you still owe money on an existing mortgage. You must qualify for a large enough reverse mortgage to pay off existing home loan(s) entirely.

    • The amount of money you receive depends upon:

      • your age (or age of youngest borrower in the case of couples),

      • appraised home value,

      • current interest rates, and

      • the lending limit in your area.

      • In general, the older you are and the more valuable your home (and the less you owe on your home), the more money you can get.


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  • REVERSE MORTGAGE – Types

  • The Home Equity Conversion Mortgage (HECM) is the oldest and most popular reverse mortgage product (over 90% of the total market). Available since 1989, HECMs are insured by the federal government through the Federal Housing Administration (FHA).


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  • REVERSE MORTGAGE – Types

  • In 1996, Fannie Mae developed its own proprietary Home Keeper® reverse mortgage as a conventional market alternative to the HECM. The Home Keeper was developed to address unmet needs of the HECM program, such as:

    • individuals with higher property values,

    • condominium owners, and

    • seniors wishing to purchase a new home.


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  • REVERSE MORTGAGE – TYPES

  • Cash Account "Jumbo" Loan

    Financial Freedom Senior Funding Corporation administers a "jumbo" proprietary reverse mortgage product called Cash Account to benefit homeowners living in higher-priced homes valued above the FHA and Fannie Mae lending limits. In addition to Financial Freedom, the program is offered by most reverse mortgage lenders. 


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  • REVERSE MORTGAGE – Use of Funds

    • The funds from a reverse mortgage can be used for anything. Common uses include:

      • supplementing retirement income to cover daily living expenses;

      • repairing or modifying your home (i.e. handicapped access);

      • covering health care expenses; (buying Long Term Care Ins)

      • paying off existing debts;

      • taking a vacation;

      • paying property taxes;

      • preventing foreclosure and,

      • in some instances, buying a second home.


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  • REVERSE MORTGAGES – PAYMENT OPTIONS

    • You can choose to receive the money from a reverse mortgage as a:

      • lump sum,

      • fixed monthly payments (for up to life),

      • line of credit – most popular option (60%),

      • or a combination of these

    • During the life of the loan, the loan "servicer" disburses monthly payments to the homeowner (if this option is chosen), advances line of credit funds upon request, collects any repayments on the line of credit, and sends periodic statements.


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  • REVERSE MORTGAGES – Effect on Government Programs

    • A reverse mortgage does not affect regular Social Security or Medicare benefits.

    • However, if you receive a lump sum payment, any amount retained the month after would count as an asset and could impact Medicaid eligibility. For example, if you receive $4,000 for home repairs and spend it the same calendar month, everything is fine. Any residual funds remaining in your bank account the following month would count as an asset. To be safe, you should contact a Medicaid expert


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  • REVERSE MORTGAGES – Mandatory Counseling

    • Before applying for a reverse mortgage, you must first meet with a counselor. The counselor’s job is to educate you about reverse mortgages, answer your questions, and offer alternative options depending on your situation.

    • I have a supply of the list of approved counseling agencies in Arizona.


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  • REVERSE MORTGAGES – Paying Back the Loan

    • No monthly payments are due on a reverse mortgage while it is outstanding. The loan is repaid when you cease to occupy your home as a principal residence, whether you (the last remaining spouse) pass away, sell the home, or permanently move out. The loan is also due if the property is not maintained or the taxes and homeowners insurance are not paid.

    • The Reverse Mortgage can be repaid at any time.

    • The amount owed can never exceed the value of your home.Also if the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you or your estate.


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  • REVERSE MORTGAGE – Steps in Process

    1. AWARENESS

    Homeowner learns about the reverse mortgage program from a news article, advertisement, word-of mouth, seminar, etc.

    2. ACTION

    If necessary, homeowner seeks additional information.


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REVERSE MORTGAGE – Steps in Process

3. COUNSELING

Homeowner seeks counseling. Counseling is mandatory regardless of which reverse mortgage product you choose. Counseling is conducted face-to-face or by phone. The counselor provides supplemental information on reverse mortgages, determines whether you're eligible to get a reverse mortgage, and discusses other options that may be available to assist with your daily living. The homeowner will be given a certificate to give to the lender as proof they were counseled.


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REVERSE MORTGAGE – Steps in Process

4. APPLICATION / DISCLOSURE

Homeowner fills out loan application and selects payment option: fixed monthly payments, lump sum payment, line of credit, or a combination of these. Lender discloses to homeowner the estimated total cost of the loan, as required by the federal Truth in Lending Act. Lender collects money for home appraisal. Homeowner provides lender with required information, including photo ID, verification of Social Security number, copy of deed to home, information on any existing mortgage(s) on property, and counseling certificate


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REVERSE MORTGAGE – Steps in Process

5. PROCESSING

Lender orders appraisal, title work, lien payoffs, etc. An appraiser comes to your home to assign a value to the home and determine the physical condition of the property. If the appraiser uncovers structural defects that require repair, the homeowner must hire a contractor to complete the repairs after the reverse mortgage closes


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REVERSE MORTGAGE – Steps in Process

6. UNDERWRITING

After receiving all pertinent information and data, the lender finalizes loan parameters with homeowner (i.e. payment option, frequency of loan interest rate adjustments) and submits loan package to underwriting for final approval. Remember, each loan is unique and it takes time to complete the underwriting of a loan package.


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REVERSE MORTGAGE – Steps in Process

7. CLOSING

When the loan package is approved, closing (signing) of loan is scheduled. Interest rates are calculated. Closing papers and final figures are prepared. Closing costs are normally financed as part of the loan. Lender or title company has homeowner sign loan papers.


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REVERSE MORTGAGE – Steps in Process

8. DISBURSEMENT

  • Homeowner has three business days after signing papers in which to cancel the loan. After this period, the loan funds are disbursed.

  • Homeowner accesses the funds in the form of the payment option selected.

  • Any existing debt on the home is paid off. A new lien is placed on the home.

  • The homeowner may use the loan proceeds for any purpose.


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REVERSE MORTGAGE – Steps in Process

9.REPAYMENT

  • Homeowner doesn’t have to make any monthly payments to lender during the life of the loan.

  • The loan may be repaid by the homeowner or the heirs/estate, with or without a sale of the home.

  • The repayment obligation can’t exceed the home’s value or sales price.


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  • REVERSE MORTGAGE – Costs

    • Many of the same costs that someone pays to obtain a home purchase loan, or to refinance their existing mortgage, apply to reverse mortgages too.

    • In most cases, these fees and costs are capped and may be financed as part of the reverse mortgage.

    • Let’s take a look:


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  • REVERSE MORTGAGE – Cost Examples

    • Origination Fee-usually 2% of loan amount

    • Mortgage Insurance Premium-2% at closing plus ½% per month

    • Appraisal Fee-$300 to $400

    • Servicing Set-Aside-The servicing set-aside is an amount of money deducted from the available loan limit at closing to cover the projected costs of servicing your account. This is only a calculation, not a charge. The actual charge is $30-$35 per month.


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  • REVERSE MORTGAGE – Cost Examples

    • Closing Costs

      • Credit report fee-generally under $20

      • Flood certification fee-generally under $20

      • Escrow, Settlement or Closing fee-$150 to $450

      • Document preparation fee-$75 to $150

      • Recording fee-$50 to $100

      • Courier fee-generally under $50

      • Title insurance-varies by loan amount

      • Pest Inspection-generally under $100

      • Survey-generally under $250


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  • REVERSE MORTGAGE – Costs

    As you can see, Reverse Mortgages can be expensive.

    Consider a Reverse Mortgage as a long-term commitment. Average length is between 11 and 12 years to pay-off. This allows amortization of front-end costs.


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  • REVERSE MORTGAGE – Consumer News

    Reverse mortgage lenders, with approval from the U.S. Department of Housing and Urban Development, have implemented a new consumer protection called the "principal limit lock" which freezes the “expected interest rate” on federally-insured Home Equity Conversion Mortgage (HECM) reverse mortgages for a period up to 60 days from the date of application. The expected interest rate is utilized to calculate the amount of funds available from a HECM reverse mortgage.


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THANK YOU FOR COMING!

ANY QUESTIONS?

Paul Bangart (480) 248-7171

Artisan Mortgage fax (623) 889-6272

Please call if you have any questions or email to: [email protected]


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