Materials Developed By: CLARIFI 1-800-989-2227

1. CLARIFI Reverse Mortgages Materials Developed By: CLARIFI 1-800-989-2227

2. About CLARIFI A Non-Profit Community Service Since 1966 • Counseling Programs (13 Offices) • Budget and Credit Counseling • Debt Management • Credit Report Counseling • Pre-filing Bankruptcy Counseling • Housing Counseling • Education Programs • FinanciallyHers - Women’s Financial Education • Financial Smarts • Financial Smarts for Seniors • Philadelphia Saves

3. What is a Reverse Mortgage? • A loan against your home that you do not have to pay back for as long as you live there • A loan that allows you to take out the equity in your home without having to move or repay a loan each month

4. How it works Reverse mortgages turn your home equity into: • Loan advances paid to you • Loan costs paid to the lender and others • Leftover equity, if any, paid to you or your heirs at the end of the loan

5. FHA’s Reverse Mortgage • HECM-Home Equity Conversion Mortgages is insured by the FHA (Federal Housing Administration) • Reverse mortgages issued under the HECM program offer the highest loan amount and lowest interest rate for most home owners • HECM mortgage ceiling is $625,500* *This ceiling was raised with the economic stimulus package and may be reset.

6. Eligibility Requirements • All borrowers must be 62 years of age or older • Own the property outright, or have small mortgage balance • Occupy the property as your principal residence • Not be delinquent on any federal debt • Participate in a consumer information session given be an approved HECM counselor

7. Common Uses of Funds

8. Reverse Mortgage Provisions • Homeownership-you remain the owner of your house and are responsible for paying your property taxes, homeowner’s insurance and for making needed repairs. • You can use the money from the reverse mortgage to pay the various fees that are charged on the loan. • When the loan ends, you or your heirs must repay all the cash advances plus the interest.

9. Reverse Mortgages Benefits • Allows you to stay in your home • Pays off existing mortgages on home • Simple to qualify because credit score and income are not considered • No monthly payments are due as long as you live in the home • Proceeds are not taxable

10. Additional Benefits • A reverse mortgage cannot get “upside down”, so heirs will never owe more than the house is worth. • Heirs inherit the home and keep all equity after the reverse mortgage is paid off. • The interest rate is lower than traditional mortgages. • The program is not well understood by most people and requires an independent HUD counseling session prior to receiving the reverse mortgage .

11. Reverse Mortgages Pay Out You choose how you want to receive payments: • Lump sum distribution • Line of credit • Monthly income • Any combination of the above

12. Reverse Mortgages Disadvantages • The closing costs are about the same as the cost of selling your home. • Although Social Security and Medicare are not affected, Medicaid and other need-based assistance can be affected if you withdraw too much in one month. • This product and selecting a mortgage company is confusing for most borrowers.

13. Reverse Mortgage Pricing & Fees Closing Costs $700-and up Servicing Fee Up to $35 per month Interest rate Fixed (market based) Variable (Libor & Increment) Mortgage Insurance Premium (MIP) • .01% - 2% • + 1.25% of loan balance annually Origination Fee • $2,500.-$6,000 Appraisal Fee • $400-$500

14. When is a Reverse Mortgage a Bad Idea? • If you only need the money for a short period of time and can repay the full balance. • Spouse or partner is not on title. • If you don’t need the money right away. • If you are being pressured into a reverse mortgage to use proceeds for other investments. • On low-equity homes. The closing costs will be a higher percentage of the home's equity.

15. Key Questions to Consider • Who else should I involve in considering this loan? • Which counselor should I choose? • Have I given due consideration to all my choices? • When would be the best time to take out a reverse mortgage? • What interest rate should I select? • Which lender should I choose? • How should I use this loan?

16. Exploring your Options • Property Tax Deferral (PTD) - no repayment required as long as you live in your home • Home Equity Loan • Selling and moving • Additional Resources

17. Points to Ponder You can analyze any reverse mortgage by asking: • How much would I get? • How much would I pay? • How much would be left at the end of the loan?

18. Canceling the Deal • You have three business days after closing to cancel your reverse mortgage. • You must notify the lender in writing. • The notice can be hand delivered, mailed, faxed or filed before midnight of the third business day.

19. Resources • www.aarp.org/revmort • www.reversemortgageguides.org • www.cccsdv.org

20. Wrap Up • Thank you for your attention and participation. • Are there any questions or comments on today’s presentation? • Will you use something you learned here? • Please take a few minutes and complete the survey on today’s presentation.

21. Contact CLARIFI CLARIFI 1608 Walnut Street, 10th Floor Philadelphia, PA 19103 • www.clarifi.org • 800-989- 2227