Reverse Mortgages

from Gefen Financial

Corp.
Enabling older homeowners to
turn home equity into tax-free
income.
Gefen Financial Corp
 Dovid Winiarz President and Chief
Mortgage Manager ....
 Helping people manage the debt
through mortgage and equity
financing since 1986
Reverse Mortgage
Program
 Enables homeowners age 62 and
older to tap the equity they have
in their home and receive tax-free
income
 No repayment is required until
the home is no longer their
principal residence
 There are no income, asset,
employment or credit
Some Benefits of the
Loan
 The homeowner always retains
title and ownership of the home
 Cash advances can be used for
any purpose
 No Fixed Maturity Date
 Tax-free income will not affect
Social Security or Medicare
benefits
Eligibility
 62 years of age or older
(Revocable Trusts, Guardianships,
Conservatorships, DPOA’s)
 Own home free and clear or have
a balance that can be paid off with
the reverse mortgage
 Occupy property as principal
residence
 Agree to attend a informational
Principal Residence
 The property must be the principal
residence of each borrower
 Married spouses or other co-
borrowers may be living apart
because one of them is in a health
care facility; however
 At least one borrower must be
living in the home in order for the
HECM to close
Properties Eligible
 1 - 4 Unit Dwellings
 Town homes / Condominiums
 PUD’s
 Manufactured / Mobile Homes
(FHA Standards)
 Life Estate
 Leasehold Interest in Property
 Co-op’s (Pilot in NY State only)
How much can be
received?
 Age of the youngest
homeowner
 Current interest rate
 Market value of home
 County where property is
located
Payment Plan Options
 Term
– monthly payments for a specified
period of time
 Tenure
– monthly payments for as long as
homeowner occupies the property
 Line of Credit
– payments received upon request
 Combination of Above
Payment Plan
Flexibility
 In the HECM program, the
borrower may change payment
plans at any time
 This flexibility enables the
homeowner to reshape the loan
as circumstances change
 Administrative charge of $20
Settlement Costs
 Origination Fee
 Mortgage Insurance Premium (MIP)

 Traditional “FHA Allowable” fees

Origination Fee
 This fee covers the lender’s
administrative costs in processing
and underwriting the loan
 Borrower is permitted to finance a
minimum fee of $2,000 and no
more than 2% of the Maximum
Claim Amount
Mortgage Insurance
Prem.
 Reduces the risk of loss in the
event that the outstanding
balance, including accrued
interest, MIP, and fees, exceeds
the value of the property at the
time the mortgage is due and
payable
– A one-time non-refundable initial MIP
equal to 2 % of maximum claim
amount
FHA Allowable Fees
 Appraisal
 Title Insurance
 Credit Report
 Recording Fee
 Termite Report

 Flood Zone Certification

 Document Preparation
Adjustable Interest
Rate
 Set by the U.S. Treasury Securities
rate adjusted to a constant maturity
of 1 year
 Monthly (Margin: 150 bps) or Annually (310
bps) Adjustments
Servicing Fee
 Lender is permitted to charge a
servicing fee
 Fee is established at closing as a
monthly figure (Currently, $30)
 The amount necessary to pay this
fee is calculated and set aside at
closing
 The lender adds this fee to the
borrowers outstanding balance
Consumer Protections
 Non-Recourse
 No Prepayment Penalty
 Three Day “Right of Revision”
 Advance Disclosures
 Third Party Counseling
Counseling
Requirement
 Ensures the participant
understands how the program
works
 Examine options other than a
reverse mortgage that might
better meet the needs of the client
 Provided by a HUD-approved
agency
After Loan Closing
 Annual Payment of Property
Taxes
 Annual Payment of Homeowners
Insurance
 Maintenance of Property
 To Make Repairs, if required
Termination Actions
 All the borrowers have died or sold
the property
 Property is no longer principal
residence of at least one borrower
for a period exceeding 12 months
 Borrower refuses to fix property in
disrepair
 Borrower violates any other
covenant
Recovery of Mortgage
Proceeds
 When the borrower does not
occupy the property for 12
consecutive months
 Loan must be repaid in one lump
payment
 Usually the loan balance is paid
from sale proceeds of the home
 A non-recourse loan
Requirements for
Appraisals
 Property must meet Minimum
Property Standards for existing
properties
Required Repairs
(Less than 15%)
 Repairs that are estimated to cost
less than 15% of the maximum
claim amount can be completed
after closing
 At closing, the borrower must
establish a repair set aside at least
equal to 150% of the cost or
repairs, plus a repair
administration fee
Tax Effects
 Payments received by the
borrower are not taxable, as they
are loan payments
Limited Liability
 The “non-recourse” provision of the
program limits the borrowers
liability to the net sale proceeds
from the sale of the property
 No deficiency judgement may be
taken against the borrower or the
estate
Prepayment
 The loan may be repaid either in
whole or in part, at any time
without penalty
 If the loan is repaid if full, this will
terminate the loan and further
draws would be unavailable
 A partial repayment can be used
to increase the monthly payment
or set up a line of credit (revolving
Effect on Public
Benefits
 Proceeds are considered a loan
and not as income
 Will not effect Social Security,
Medicare or others programs
that are not based on need