1. Using Reverse Mortgages to Fund Longevity
Operations & Technology
Using Reverse Mortgages to Fund Longevity
Michael Banner
National Education Director
Security One Lending
American C.E. Institute

2. Single Family Homes up to 4 units Clients With Existing Mortgages
Who Is Eligible?
Clients over age 62
Principal residences
Single Family Homes up to 4 units
Clients With Existing Mortgages

3. Flexible Payout Options
Lump sum, all at once
Line of Credit
Payment for Life (Tenure)
Term payments
Combination of the above

4. What Are The Borrower’s Responsibilities?
Keep taxes current
Homeowner’s Insurance
Maintain the property

5. 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? The reverse mortgage is a non recourse residential loan

6. 2010 Saw the Retooling of the Reverse Mortgage:
Closing Costs
2010 Saw the Retooling of the Reverse Mortgage:
April 2010 – closing costs were decreased greatly thus removing the #1 obstacle advisors had with the product
Oct 2010 – The Introduction of a totally New Reverse Mortgage – The HECM Saver- Designed for the upper income borrower

7. But they do not define those safeguards. We are those safe guards!
Cross Selling
* 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 be in place to protect the seniors
But they do not define those safeguards.
We are those safe guards!

8. Example - $625,500 Market Value
Mr. and Mrs. Borrower, Ages 68 and 70
Principal Limit: $625,500
Loan Amount: $ 293,985
Upfront Cash Draw:
$25,000 CASH
$125,000 to payoff mortgage
Monthly Income:
10 year Term: $ / month for ten years
Plus we eliminated monthly mtg. payment of $1,
Net Result- Monthly disposable income increased - $2,147.81! 8

9. The New Purchase Reverse Mortgage
Joe & Mary are
Purchasing a Home
(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
Secures reverse mortgage $245,911
Extra money for retirement savings!
RESULT - $245,911 in extra liquidity! 9

10. $302,724 goes into Joe’s Savings Account
Downsizing Example
Joe is 74 years old
Joe Sells Home.
-Sells home for $400,000.
-Downsizing to new home.
-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*
*Bases on rates from
RESULT
$302,724 goes into Joe’s Savings Account
Joe enhances life style!
Lives in new home without a mortgage payment!

11. Proper Position Concerning Financial Products
Funds are not to be used for the intention of funding investments!
Funds should only be utilized to improve clients present financial situation which may or may not include:
Provide Supplemental Retirement Income
Enhanced Retirement Lifestyle
Purchase Long Term Care Insurance
Purchase Life Insurance
Protect Estate

12. Reverse Mortgage to LTCi
Not just another “pocket” from which to pay LTCi premiums
Strategy must fit overall financial, retirement and LTC plans
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 back up

13. Using a Reverse Mortgage for LTC
Barbara Stucki, Ph.D.
Vice President, NCOA Home Equity Initiatives
ILTCI Meeting Las Vegas, March 2012 13

14. Educating Seniors About Reverse Mortgages
Role of the National Council on Aging
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:
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)
Review client’s financial goals, debt, and budget.
Ask about health status, limits with activities, home barriers.
NCOA is the repository for mandated FIT review data – 100,000+ cases. 14

15. Shifting Reasons for Tapping Home Equity
Reason for Considering a RM
FIT Review
AARP Survey 2006
Enhance quality of life
27%
70%
Plan ahead for emergencies
23%
73%
Pay off debt
67% NA
Pay off mortgage
34%
Pay off non-mortgage debt
Increase income
33%
46% 15

16. Characteristics of RM Counseling Clients, 2010
Median age = 70.
Proportion married = 43%.
Median annual income= $26, 724.
Median home value = $200,000.
Own home free and clear = 60%.
Median net home equity = $147,000.
Source: NCOA analysis of data from 21,079 FIT reports, from September to November 2010 16

17. Health Status of RM Counseling Clients, by Age
Percent 17

18. Income by Age Among RM Counseling Clients
Age of Youngest Potential Borrower
Annual Household Income 18

19. Net Home Equity by Income – Counseling Clients
Annual Household Income
Net Home Equity (Home Value Minus Debt) 19

20. LTCI Can Protect Home Equity
Amount of Remaining Equity
For illustrative purposes only
$600 monthly from a RM to supplement LTCI
$2,000 per month RM
out-of-pocket for LTC 20

21. Financial Issues for Long-Term Borrowers
Need to pay LTCI premiums using RM for many years or lapse.
Borrowers must continue to pay property taxes, hazard insurance and maintain the home to avoid foreclosure.
Borrowers can continue to keep their RM only as long as they continue to live in their current house.
When the borrower moves, the loan must be repaid. Single borrower must repay the loan if they stay in a nursing home for 12+ months.
May get stuck in an unsafe or isolated home - can increase LTC risks.
May not be able to afford or maintain the home with age.
Paying compound interest on the loan for many years may:
Leave little equity to fund a move to another home.
Leave little equity to support a spouse. 21

22. Vice President, Home Equity Initiatives National Council on Aging
Barbara R. Stucki, Ph.D.
Vice President, Home Equity Initiatives
National Council on Aging 22