ireverse home loans, llc(800) 486-8786 a subsidiary of hopkins federal savings bank reverse mortgage...

iReverse Home Loans, LLC (800) 486-8786a Subsidiary of Hopkins Federal Savings Bank www.iReverse.com

Reverse Mortgage Training Manual

Ethical Overview

• Learn the program—this program is not for every senior

• Explain the program—educate the senior

• Encourage participation—family, advisers

• Don’t offer legal or financial advice

• Treat the senior with dignity


Reverse Mortgages--What are They?

• Allow seniors to tap into home equity to obtain tax-free money

• Funds can be used for anything

• No monthly payments

• Senior retains title

• Loan is repaid when the senior moves or upon death


Who is eligible?

• All borrowers must be over the age of 62

• All borrowers must occupy the property as their principal residence for at least 12 months

• No credit or income requirements

• Existing single-family homes, PUDs, condos, manufactured homes and 2-4 unit properties

• Existing liens OK


Flexible Payout Options

• Lump sum

• Monthly term

• Monthly lifetime (tenure)

• Line of credit—can grow annually

• Combination


Application Process

• Meet with the senior—explain program

• Senior attends mandatory counseling

• Loan Officer takes application

• Obtain FHA case number

• Loan is processed

• Loan is underwritten

• Loan is closed and funded


Mandatory Counseling

• Provide the senior with at least ten counselors:– Five must be in local area and/or state

– One must be close enough to allow for face-to-face

• Links are provided in software

• Lender cannot contact, schedule, attend, or contribute to cost of counseling

• Senior will have to pass simple test with counselor—lender can meet with senior in advance to explain program basics


Closing Costs--Part 1

• Far more regulated than forward mortgages• No discount points• No mark-ups• No underwriting, processing, or application

fees• Some third-party fees allowed • FHA allows for a counseling fee up to $125


Closing Costs--Part 2

• Counseling must be completed before incurring a cost or taking a deposit

• Origination fee: 2% of the first $200,000, 1% above $200,000 with a $6,000 maximum and a $2,500 minimum

• 2% up front mortgage insurance premium

• Escrows not collected


Processing

• Determine eligibility of all seniors

• Obtain original signed counseling certificate, proof of DOB and SS#

• Obtain FHA case number

• Order appraisal, title, credit report, flood, AVM (Automated Valuation Model)

• Obtain proof of homeowner’s insurance

• Prepare underwriting package


POAs and Trust Loans

• Can close HECM held in a revocable trust

• Can use a POA to execute application and/or closing documents—must be durable

• Title Company must approve the instrument

• Lender must approve the instrument

• Review HECM manual for all conditions


Required Repairs Overview

• Prefer repairs be completed prior to closing

• Repair set-aside = 150% of repair cost ($750 minimum)

• Repair set-aside cannot exceed 15% of the maximum claim amount

• If the cost to cure is greater than 3% of the appraised value, a contractor’s bid must be obtained

• Repairs subject to final inspection (usually performed by the appraiser)


Taxes & Insurance

• Senior responsible for T&I• Escrow accounts are set up only in cases of

serious delinquency (this is rarely enforced)• Senior to furnish annual proof of payment• Importance of timely payment cannot be

overstated• Line of credit is particularly useful


Servicing

• Senior can access a line of credit approximately 30 days after closing

• Senior to furnish proof of residency

• Interest is not deductible on an annual basis

• Payment plans can be changed at no cost

• No repair administration fees

Products

Monthly Adjusting, CMT• HECM-T325 = 3.25 margin• HECM-T350 = 3.50 margin• HECM-T375 = 3.75 margin

Monthly Adjusting, LIBOR• HECM-L300 = 3.00 margin• HECM-L325 = 3.25 margin

Annually Adjusting

• HECM Annual= 4.25 margin

Fixed Rate

• HECM Fixed = margin changes weekly



HECM Interest RatesAdjustable Rate HECMs

• Expected Rate = Locked in at app w/float down to close; determines principal limit and payment amounts

• Initial total loan rate = Determined at closing, adjusts monthly, and includes .5% annual MIP

• Fixed Rate HECMs = 5-Year Swap Rate + predetermined margin, and .5% annual MIP. Rate floats to close.

CMT (using 2.30 for 10-Year T-Bill index) 3.25 3.50 3.75

5.55 5.80 6.05

CMT (using .43 for 1-Year T-Bill index) 3.25 3.50 3.75

4.18 4.43 4.68


Monthly Service Fee

• The senior is charged a monthly service fee by the servicer

• Monthly HECM Products = $35, $30, or $25/month• Fixed rate HECM = $30/month• Annual HECM Product = $30/month• Loan service set-aside = adjustment made to

Principal Limit to account for monthly service fees


Maximum Claim Amount

The lesser of:

• HECM Lending Limit = $625,500

• Appraised Value

• Maximum Claim Amount used to determine origination fee, up front MIP, title insurance, homeowners insurance coverage, etc.


Principal Limit

• That portion of the maximum claim amount that the senior can borrow

• Based on the Expected Rate, Maximum Claim Amount, and age

• Used to determine funds available for lien payoffs and payout options


HECM Lien Position

• First Mortgage = 1.5 times the MCA (lender)

• Second Mortgage = 1.5 times the MCA (a silent mortgage for FHA)

• 150% LTV used to discourage junior liens


Why leave money in a reverse mortgage?

Line of Credit:

• Intended for those that need larger sums less frequently

• Borrowing power increases over time

• Compounds monthly

• Note: growth based on Initial Total Loan Rate (inc. MIP)



Monthly Advances:

• Intended for those that need smaller sums more frequently

• Growth calculated up front

• More money is disbursed than is available in a lump sum at closing

• Note: growth and resulting payment based on Expected Rate


Other Reasons:

• Senior has options if financial needs change in the future

• Interest charged only on disbursed funds

• Unused funds do not have to be repaid

• Note: unused funds not available to the estate

ireverse home loans, llc(800) 486-8786 a subsidiary of hopkins federal savings bank reverse mortgage...

Documents

ireverse home loans

combination slide

dignity slide

funded slide

death slide

cost of counseling senior

home equity

senior moves