This document provides an overview of reverse mortgages, including what they are, their history, types available, eligibility requirements, fees, repayment structure, and processing times. Key points covered include that reverse mortgages allow homeowners aged 62+ to access equity in their home with no repayment required until they move out or pass away; the most common type is the Home Equity Conversion Mortgage through HUD; and processing a reverse mortgage typically takes 4-6 weeks but can be delayed by title issues or other encumbrances on the property.

1. Reverse Mortgages
presented by
Vicki Cheairs
MetLife
281-855-1122
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2. Reverse Mortgages
What is a reverse mortgage?
• A loan that allows homeowners age 62+ to
tap into their home equity; never have to
make payments on the loan; while still
living in and owning the home. There are
no restrictions on the use of the proceeds
from the loan. No ratios, no credit scores,
no income requirements.
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3. History
• 19___ – First reverse mortgage loan originated in
the USA
• 1987 to 1990 –
AARP & HUD completely overhauled the
RM product
• 2001 – First RM in Texas (only 1 type)
• 2005 – Texas citizens voted in all reverse
mortgage products
• 2008 – The Housing & Economic Recovery Act
of 2008
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4. Types of Reverse Mortgages
• HUD/FHA Home Equity Conversion Mortgage
(HECM) - (Gov’t)
• Fannie Mae Home Keeper - (Conventional)
• Proprietary Products – (In-House)
• Jan 1, 2009 – FHA HECM for Purchase
• Proposed for October 4, 2010 HECM Saver-
complete details forthcoming.
Growth of Reverse Mortgages
– Prior to the year 2000, fewer than 55,000 HECMs
– 2007 alone, 107,000+ HECMs funded
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5. An Expanding Need
Economic factors
•Inflation
•Fixed incomes
•Rising healthcare costs
•Insufficient retirement savings
•Existing debt, including a first or second mortgage
Why? – Demographics
•People are living longer
•Tendency to underestimate life expectancy leads to
inadequate retirement savings/planning
•Baby Boomers – Starting in 2008, 6,000 people per
day turn 62
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6. Eligibility
• The subject property must be the borrower’s
principal residence.
•In the case of co-borrowers, at least one borrower must
occupy the property
•Youngest borrower minimum age of 62
•Borrower(s) must maintain the property and pay the
annual taxes and insurance
•Property meets U.S. Department of Housing and Urban
Development (HUD) minimum property standards
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7. Eligible Property
• Single family
• 2 – 4 units, as long as one unit is the
borrower’s primary residence (HECM and
PP only)
• Condominiums
• Planned Unit Developments (PUD)
• Manufactured Homes (FHA HECM only)
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8. Non-Eligible Properties
• At this time, the following property types are not
eligible for a reverse mortgage:
– Investment properties
– Vacation homes
– Second homes
– Properties with illegal accessories units or mixed use
properties where more than 25% is used for non-
residential purposes.
– Manufactured homes which are legally recorded as a
condominium or if property is not taxed as real estate.
– Two parcels on one deed.
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9. Income Tax and Social Security
Impact
The funds received through a reverse
mortgage are not considered income,
therefore, are not subject to reporting on
income tax filings.
• Likewise, Social Security and Medicare benefits
should not be affected.
• Note: Borrowers are to be encouraged to seek
their own legal advice from qualified tax
advisors, attorneys, or SSI benefits specialists
for guidance as it pertains to their own unique
situation.
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10. Counseling
All borrowers are required to receive
counseling from a third-party counseling
agency.
• Counseling may be performed in-person or via
telephone.
• The counseling must be completed and the
counseling certificate must be received by the
lender with the borrower’s original signature and
date before processing of an application can
begin.
• List(s) of counseling services:
– www.HUD.gov
– www.AARP.com Page 10

11. Potential Upfront Out of Pocket Costs
for the Senior
• Counseling Costs
$0, $75, $125 (Maximum)
* Each counseling service or individual
counselor either collects upfront or it is
collected at time of closing (HUD-1)
• Appraisal Fee
$325 to $475
* Each lender has their own policy whether
they collect upfront, senior pays appraiser
directly, or collected at time of closing (HUD-1)
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12. Repayment
• The loan is not due until the last remaining
borrower no longer owns or occupies the
home as their principal residence or
defaults on the terms of the loan.
• A reverse mortgage is a non-recourse
loan; meaning if the home is sold, the
borrower or the estate will not owe more
than the fair market value of the home, at
the time the loan is repaid.
– Partial prepayments or complete repayment is
permitted at any time without penalty. Page 12

13. Fees
• Origination
• Mortgage Insurance
-Non Recourse
• Other Financed Cost
-Appraisal
-Title Insurance
-Credit/Flood Cert/Doc Prep, etc
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14. Loan Service Set Aside
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15. Loan Comparison
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16. Loan Comparison
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17. Payment Plans
• Reverse mortgage borrowers can choose from
several payment plan options:
– Tenure: Borrower receives a monthly check for as
long as they live the home.
– Term: Borrower receives a monthly check for a
specified time period
– Line of Credit: Borrower can establish a line of credit
equal to the principal limit.
– Lump Sum: A lump sum of cash paid to borrower at
funding.
– Modified Tenure: A combination of tenure and line of
credit.
– Modified Terms: A term plan combined with a line of
credit
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18. Processing Time
• On average, it takes 4 – 6 weeks to process,
close, & fund a reverse mortgage.
• Funding is 3 days after closing (Right of
Recession period)
What delays processing, closing, fundings?
– Title issues from the past
– Federal debt or liens
– Trusts – All types
– POA’s – Power of Attorneys
– Family members
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19. Proposed Upcoming Changes
• October 4th
• Ongoing Mortgage insurance increase
from .50% to 1.25% per month
• Principle limit decrease between 1 to 5%
with older borrowers receiving greater
decrease
• HECM Saver
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