Mortgages

TYPES OF REVERSE MORTGAGES

FHA - Home Equity Conversion Mortgage (HECM)

HomeKeeper by Fannie Mae

Financial Freedom Cash Account

HECMs Versus Other Reverses

The largest loan advances of any reverse mortgage and most choices in how proceeds are paid.

Proceeds can be used for any purpose. Less costs associated with loan. Available to homeowners with low to

moderate incomes.

Comparison of Loan Types

Eligibility

Must be aged 62 or over, and live in home as a principal residence

Must be a single-family residence Cooperatives NOT eligible

Home must be at least one year old and meet HUD's minimum property standards

Mandatory Counseling

Repayment

When the last surviving borrower dies or sells the home.

Borrower allows the property to deteriorate All borrowers permanently move to a new

principal residence the last surviving borrower fails to live in the

home for 12 months in a row because of physical or mental illness

Taxes or homeowners insurance is unpaid

Loan Limits

Dependant on age, current interest rates, home's value and method of payment

Loan amount of money is based on county limit, not on home's actual value.

Section 203-b of the National Housing Act sets home value limits by county. In 2003, limits range from $154,896 to $280,749

If home is valued at $400,000 and county limit is $280,749, then cash advances are the same as if home were valued at $280,749.

HECM Maximum Loan Amount

Credit Line Appreciation

Credit Line grows larger over time. Amount of cash available increases until all is withdrawn

Unwithdrawn proceeds increase at same rate as mortgage interest rate

Credit Line grows larger every month until the last of principal of the reverse mortgage is withdrawn.

Taking a large lump sum of cash from a HECM and putting it into savings or most investments not advised.

Monthly Loan Advances Tenure Plan - Payments for only as long as

borrower lives in home Term Plan - Payments for a specific period of

years– A higher payment each month than tenure plan– The shorter the term, the larger the monthly

advances– Payments end with term, with no obligation to

repay.

Can use any combination

Interest Rates Most are adjustable interest rates tied to the

current one-year U. S. Treasury Security rate Annually Adjustable:

– must be the same change (up or down) that occurred in the one-year Treasury rate

– capped at 2 percentage points per year and 5 total points over the life of the loan.

Monthly Adjustable:– must be the same change (up or down) that

occurred in the one-year Treasury rate– capped at 10 percentage points over the life of the

loan.

MULTIPLE DISTRIBUTIONMETHODS

Costs of Loan Origination Fee 3rd-Party Closing Costs

– Appraisal– Title search and insurance– Surveys and inspections– Recording fees– Mortgage taxes– Credit checks

Mortgage Insurance Premium (MIP) Servicing Fees