Reverse Mortgages Reverse Mortgages from Gefen Financial from Gefen Financial Corp.Corp.Enabling older homeowners to Enabling older homeowners to turn home equity into tax-free turn home equity into tax-free income.income.

Gefen Financial CorpGefen Financial Corp Dovid Winiarz President and Chief Dovid Winiarz President and Chief

Mortgage Manager ....Mortgage Manager .... Helping people manage the debt Helping people manage the debt

through mortgage and equity through mortgage and equity financing since 1986financing since 1986

Reverse Mortgage Reverse Mortgage ProgramProgram

Enables homeowners age 62 and older Enables homeowners age 62 and older to tap the equity they have in their to tap the equity they have in their home and receive tax-free incomehome and receive tax-free income

No repayment is required until the No repayment is required until the home is no longer their principal home is no longer their principal residenceresidence

There are no income, asset, There are no income, asset, employment or credit requirements to employment or credit requirements to participateparticipate

Some Benefits of the Some Benefits of the Loan Loan The homeowner always retains The homeowner always retains

title and ownership of the hometitle and ownership of the home Cash advances can be used for Cash advances can be used for

any purposeany purpose No Fixed Maturity DateNo Fixed Maturity Date Tax-free income will not affect Tax-free income will not affect

Social Security or Medicare Social Security or Medicare benefitsbenefits

EligibilityEligibility 62 years of age or older (Revocable 62 years of age or older (Revocable

Trusts, Guardianships, Trusts, Guardianships, Conservatorships, DPOA’s)Conservatorships, DPOA’s)

Own home free and clear or have a Own home free and clear or have a balance that can be paid off with the balance that can be paid off with the reverse mortgagereverse mortgage

Occupy property as principal residenceOccupy property as principal residence Agree to attend a informational session Agree to attend a informational session

with an approved counseling agencywith an approved counseling agency

Principal ResidencePrincipal Residence The property must be the principal The property must be the principal

residence of each borrowerresidence of each borrower Married spouses or other co-Married spouses or other co-

borrowers may be living apart borrowers may be living apart because one of them is in a health because one of them is in a health care facility; however care facility; however

At least one borrower must be living At least one borrower must be living in the home in order for the HECM to in the home in order for the HECM to closeclose

Properties EligibleProperties Eligible 1 - 4 Unit Dwellings1 - 4 Unit Dwellings Town homes / CondominiumsTown homes / Condominiums PUD’sPUD’s Manufactured / Mobile Homes Manufactured / Mobile Homes

(FHA Standards)(FHA Standards) Life EstateLife Estate Leasehold Interest in PropertyLeasehold Interest in Property Co-op’s Co-op’s (Pilot in NY State only)(Pilot in NY State only)

How much can be How much can be received?received?

Age of the youngest homeownerAge of the youngest homeowner Current interest rateCurrent interest rate Market value of homeMarket value of home County where property is locatedCounty where property is located

Payment Plan OptionsPayment Plan Options Term Term

– monthly payments for a specified monthly payments for a specified period of timeperiod of time

Tenure Tenure – monthly payments for as long as monthly payments for as long as

homeowner occupies the propertyhomeowner occupies the property Line of CreditLine of Credit

– payments received upon requestpayments received upon request Combination of AboveCombination of Above

Payment Plan Payment Plan FlexibilityFlexibility In the HECM program, the In the HECM program, the

borrower may change payment borrower may change payment plans at any timeplans at any time

This flexibility enables the This flexibility enables the homeowner to reshape the loan homeowner to reshape the loan as circumstances changeas circumstances change

Administrative charge of $20Administrative charge of $20

Settlement CostsSettlement Costs Origination FeeOrigination Fee Mortgage Insurance Premium (MIP) Mortgage Insurance Premium (MIP)

Traditional “FHA Allowable” feesTraditional “FHA Allowable” fees

Origination FeeOrigination Fee This fee covers the lender’s This fee covers the lender’s

administrative costs in processing administrative costs in processing and underwriting the loanand underwriting the loan

Borrower is permitted to finance a Borrower is permitted to finance a minimum fee of $2,000 and no minimum fee of $2,000 and no more than 2% of the Maximum more than 2% of the Maximum Claim AmountClaim Amount

Mortgage Insurance Mortgage Insurance Prem. Prem. Reduces the risk of loss in the event Reduces the risk of loss in the event

that the outstanding balance, that the outstanding balance, including accrued interest, MIP, and including accrued interest, MIP, and fees, exceeds the value of the fees, exceeds the value of the property at the time the mortgage is property at the time the mortgage is due and payabledue and payable– A one-time non-refundable initial MIP A one-time non-refundable initial MIP

equal to 2 % of maximum claim amountequal to 2 % of maximum claim amount– A monthly MIP equal to one-twelfth (1/12) A monthly MIP equal to one-twelfth (1/12)

of the annual rate of 0.5 % of the balanceof the annual rate of 0.5 % of the balance

FHA Allowable FeesFHA Allowable Fees AppraisalAppraisal Title InsuranceTitle Insurance Credit ReportCredit Report Recording Fee Recording Fee Termite Report Termite Report Flood Zone Certification Flood Zone Certification Document PreparationDocument Preparation

Adjustable Interest Adjustable Interest RateRate Set by the U.S. Treasury Securities Set by the U.S. Treasury Securities

rate adjusted to a constant maturity rate adjusted to a constant maturity of 1 yearof 1 year

Monthly Monthly (Margin: 150 bps)(Margin: 150 bps) or Annually or Annually (310 (310 bps)bps) Adjustments Adjustments

Servicing FeeServicing Fee Lender is permitted to charge a Lender is permitted to charge a

servicing feeservicing fee Fee is established at closing as a Fee is established at closing as a

monthly figure (Currently, $30)monthly figure (Currently, $30) The amount necessary to pay this fee The amount necessary to pay this fee

is calculated and set aside at closingis calculated and set aside at closing The lender adds this fee to the The lender adds this fee to the

borrowers outstanding balance borrowers outstanding balance monthlymonthly

Consumer ProtectionsConsumer Protections Non-RecourseNon-Recourse No Prepayment PenaltyNo Prepayment Penalty Three Day “Right of Revision”Three Day “Right of Revision” Advance DisclosuresAdvance Disclosures Third Party CounselingThird Party Counseling

Counseling Counseling RequirementRequirement Ensures the participant Ensures the participant

understands how the program understands how the program worksworks

Examine options other than a Examine options other than a reverse mortgage that might reverse mortgage that might better meet the needs of the clientbetter meet the needs of the client

Provided by a HUD-approved Provided by a HUD-approved agencyagency

After Loan ClosingAfter Loan Closing Annual Payment of Property Annual Payment of Property

TaxesTaxes Annual Payment of Homeowners Annual Payment of Homeowners

InsuranceInsurance Maintenance of PropertyMaintenance of Property To Make Repairs, if requiredTo Make Repairs, if required

Termination ActionsTermination Actions All the borrowers have died or sold All the borrowers have died or sold

the propertythe property Property is no longer principal Property is no longer principal

residence of at least one borrower residence of at least one borrower for a period exceeding 12 monthsfor a period exceeding 12 months

Borrower refuses to fix property in Borrower refuses to fix property in disrepairdisrepair

Borrower violates any other Borrower violates any other covenantcovenant

Recovery of Mortgage Recovery of Mortgage ProceedsProceeds When the borrower does not When the borrower does not

occupy the property for 12 occupy the property for 12 consecutive monthsconsecutive months

Loan must be repaid in one lump Loan must be repaid in one lump paymentpayment

Usually the loan balance is paid Usually the loan balance is paid from sale proceeds of the homefrom sale proceeds of the home

A non-recourse loanA non-recourse loan

Requirements for Requirements for AppraisalsAppraisals Property must meet Minimum Property must meet Minimum

Property Standards for existing Property Standards for existing propertiesproperties

Required Repairs Required Repairs (Less than 15%)(Less than 15%)

Repairs that are estimated to cost Repairs that are estimated to cost less than 15% of the maximum less than 15% of the maximum claim amount can be completed claim amount can be completed after closingafter closing

At closing, the borrower must At closing, the borrower must establish a repair set aside at least establish a repair set aside at least equal to 150% of the cost or repairs, equal to 150% of the cost or repairs, plus a repair administration feeplus a repair administration fee

Tax EffectsTax Effects Payments received by the Payments received by the

borrower are not taxable, as they borrower are not taxable, as they are loan paymentsare loan payments

Limited LiabilityLimited Liability The “non-recourse” provision of the The “non-recourse” provision of the

program limits the borrowers program limits the borrowers liability to the net sale proceeds liability to the net sale proceeds from the sale of the property from the sale of the property

No deficiency judgement may be No deficiency judgement may be taken against the borrower or the taken against the borrower or the estateestate

PrepaymentPrepayment The loan may be repaid either in The loan may be repaid either in

whole or in part, at any time without whole or in part, at any time without penaltypenalty

If the loan is repaid if full, this will If the loan is repaid if full, this will terminate the loan and further draws terminate the loan and further draws would be unavailablewould be unavailable

A partial repayment can be used to A partial repayment can be used to increase the monthly payment or set increase the monthly payment or set up a line of credit (revolving credit)up a line of credit (revolving credit)

Effect on Public Effect on Public BenefitsBenefits Proceeds are considered a loan Proceeds are considered a loan

and and notnot as income as income Will Will notnot effect Social Security, effect Social Security,

Medicare or others programs Medicare or others programs that are not based on needthat are not based on need