Reverse Mortgages

Reverse Mortgages, who Cares?

5 years ago I was uninformed and ignorant of the advantages of a reverse mortgage. I thought they were another exotic product designed to take advantage of the consumer and did not have a large potential for proper use. Notice the key words in the first sentence, uninformed and ignorant. Now I understand that the reverse mortgage can be the savior for the person who has lived with the mentality of having no debt, but in doing so owns their house and has no other assets. At age 62 or older they are faced with a fixed income that is no longer meeting their needs due to inflation or failing health. They own a home and want to be able to stay there, but no longer can afford to maintain the house or meet their financial obligations. There are other creative reasons to get a reverse mortgage, but for most of the population, they will allow people to keep their home and have some additional income to live off of.

Here is the information provided by the brochure created by First Integrity Mortgage Services.

A HECM — Home Equity Conversion Mortgage — is commonly

called a Reverse Mortgage. Reverse Mortgages were created in

1989 through the cooperative efforts of Fannie Mae, Federal

Housing Administration (FHA) and AARP. It is not coincidental that

these mortgages have gained in popularity as a larger portion of our

nation’s population has reached or is nearing retirement age.

What makes Reverse Mortgages so popular? Other mortgage loans

require payments from the borrower for the principal and interest.

A Reverse Mortgage provides payments to the borrower in the

method he or she chooses.

First Integrity’s Reverse Mortgage is insured by the Federal

government through FHA. First Integrity is an FHA Direct Endorsed

Lender, the highest certification FHA gives to any lender.

History of

Reverse Mortgages

Understanding

Your Goals

Older Americans have goals regarding how they want to

live their lives. They share common questions on how they

can achieve those goals. How many of the following goals

apply to you?

■ I want to maintain my independence.

■ I want to avoid becoming a financial burden

on my family.

■ I want to maintain the quality of my lifestyle.

■ I need to supplement Social Security and/or

pension income.

■ I need to pay for long-term health care for

myself or my spouse.

■ I need to pay off bills so I can enjoy my life.

■ My house needs remodeling so I can continue

to live there.

■ I want to pay for my grandchild’s education.

■ I want to prepay “final expenses”.

■ I want to retire early, but need a source

of income.

Who Is Eligible

For A Reverse Mortgage?

To qualify for a Reverse Mortgage, you must:

1 Be at least 62 years of age.

In the case of couples and co-owners, both individuals must be at least 62 years of age. If one of the individuals is younger than 62, that person’s name must be removed from the title in order for the older co-owner to be eligible. You should seek legal advice before making any changes to the title.

2 Be a home owner with equity in your home.

You may qualify even if you have an outstanding balance on your first mortgage. Single-family homes and qualified

condominiums, townhouses, manufactured homes, and two- and four-family owner-occupied flats are eligible.

Reverse Mortgages are only available on owner-occupied principal residences.

“I want my money to last as long as I will.”

What Are My Payment Options?

You decide how to receive the money generated by a Reverse Mortgage.

• 1 Upfront cash
• 2 Monthly payments for a term you determine
• 3 Monthly payments for life
• 4 Line of credit
• 5 Combination of any of the above

“My monthly Social Security check seemed like a lot of money when I first retired. Unfortunately, a dollar doesn’t go as
far as it used to.”

How Much Money Can I Get?

The amount of money you can receive depends on several factors including your age, the value of your home, the amount of built-up equity, and interest rates at the time of the loan’s origination. The older you are, the more you can borrow. Another factor includes the type of payment option you choose. A calculator that can help you estimate how much you could receive under different payment options is available at the AARP Web site.

(www.aarp.org/money/revmort).

How Much Does A Reverse Mortgage Cost? What Are My Upfront And

Closing Costs?

Many of the same costs associated with a regular mortgage apply to Reverse Mortgages. You will be charged an origination fee, a mortgage insurance premium by FHA, an appraisal fee, and certain other standard closing costs. In most cases, these fees and costs are capped and may be financed as part of the Reverse Mortgage so you have little out-of-pocket expense. The only fee you need to pay upfront is the appraisal fee.

Do I Need To Get An Appraisal Of My Home To Get A Reverse Mortgage?

Yes. Since the value of your home is a factor in determining how much money you qualify to receive from a Reverse Mortgage, an appraisal is required. We will order the appraisal from an appraiser approved by FHA. You will pay the appraiser at the time of formal application.

“I want to help my children and grandchildren now, not years from now after I’m gone.”

Do I Need An Attorney To Apply For A Reverse Mortgage?

Legal counsel is not required. However, we encourage you to seek the advice of legal, tax or financial advisors, as well as family members, before committing to a Reverse Mortgage.

What Are Some Of The Safeguards Established By FHA?

Reverse Mortgages were designed to be extremely consumer-friendly. There are limits on the interest rate and

the origination fees. FHA limits the interest rate and other costs associated with the loan.

There is a ceiling on the repayment amount. You never have to pay back more than the value of your home at the

time of repayment.

You receive advance disclosures so that you are made fully aware of the cost incurred in obtaining a

Reverse Mortgage.

“We’ve worked hard all of our lives. We want the financial freedom to enjoy our retirement years.”

Am I Required To Receive Counseling Before I Can Get A Reverse Mortgage?

Yes. Counseling is required for the FHA Reverse Mortgage currently available. This session is for your benefit. The counselor’s job is to make sure you are informed about Reverse Mortgages and other options. You can get the name of a qualified local counseling agency or a qualified telephone counselor by calling First Integrity (314-878-7900); The National Foundation of Credit Counseling (1-866-698-6322); Money Management International (1-877-908-2227); AARP (1-800-209-8085); or HUD’s Housing Counseling Clearinghouse (1-800-569-4287).

Is The Money From A Reverse Mortgage Taxable Income, And Will It Affect My Social Security Benefits?

Funds from a Reverse Mortgage are tax-free. It’s your money, not additional income. A Reverse Mortgage does not affect regular Social Security or Medicare benefits. However, if you receive a lump-sum payment from a Reverse Mortgage, any amount retained the month after you get it would count as a resource and could affect Medicaid eligibility. To be safe, consult a Medicaid expert.

What Is The Process For Getting A Reverse Mortgage?

The first step is to become informed by doing your research and talking with a Reverse Mortgage specialist at First Integrity. The next step is to schedule the counseling sessions with the FHA-approved counselor. After completion of this session you will be given a certificate of completion. This certificate will be required for the next step, formal application. Now you may fill out an application for the Reverse Mortgage with a First Integrity Reverse Mortgage Specialist. The loan will be processed, underwritten and closed. You will receive your first check the first of the month following closing.

Who Owns Title To My Home While My Reverse Mortgage Is Outstanding?

You! You retain title to your home during the period when you have a Reverse Mortgage.

Am I Required To Pay Anything During The Course Of The Reverse Mortgage Loan?

No. The flow of payments is reversed during the term of the Reverse Mortgage. THE LENDER PAYS YOU! However, you are responsible for keeping up payments on your homeowner’s insurance and property taxes, and to maintain the condition of your home.

“A Reverse Mortgage is an important financial tool in planning for our retirement.”

Are There Any Limits On How I Can Use The Reverse Mortgage Funds?

No. Borrowers have used Reverse Mortgages for any variety of purposes, including:

• Paying health care expenses

• Paying for long-term health insurance

• Supplementing retirement income

• Financing home improvements

• Financing home modifications

• Buying a safer automobile

Others have used Reverse Mortgages to:

• Purchase a boat or RV

• Buy a vacation home

• Pay off other mortgages

• Start a small business

• Pay off credit cards

• Travel

“I have always controlled my life, made my own decisions. I don’t want to stop now.”

What Is The Interest Rate On A Reverse Mortgage And How Is It Determined?

The interest rate varies by the type of Reverse Mortgage you choose. For the FHA Home Equity Conversion Mortgage (HECM) the interest rate is adjusted either monthly or annually (whichever the borrower chooses) and is based on an index called the “One-Year U.S. Treasury Rate” which changes weekly. The rate is published in many financial publications. For monthly adjusting Reverse Mortgages, the interest rate charged on the loan for the next month is equal to the current One-Year Treasury Bill Rate plus 1.5% margin. For annually-adjusting Reverse Mortgages, the interest rate charged on the loan is equal to the One-Year Treasury Bill Rate plus 3.1% margin. The interest charged on the Reverse Mortgage is accrued (added to the amount owed), since there are no payments. This amount is due when the loan is paid off.

What Happens If I Move Out Of My House After I Get A Reverse Mortgage?

A Reverse Mortgage comes due and must be repaid when the borrower dies or permanently moves out of his or her home. Similarly, if you sell your house, the Reverse Mortgage comes due.

What Happens When My House Passes On To My Heirs?

Once your home is passed on to your heirs, the Reverse Mortgage comes due. Your heirs may either pay the balance due on the Reverse Mortgage and keep the home, or sell the home and use the proceeds to pay off the Reverse Mortgage. If they sell the home the heirs get to keep any excess equity from the sale proceeds.

Where Can I Get A Reverse Mortgage?

First Integrity is one of a select few lending institutions in the nation approved to offer Reverse Mortgages. Because we are a St. Louis-based hometown lending institution, the entire process — from application to underwriting to closing — takes place locally.

Why Should I Choose First Integrity?

First Integrity Mortgage Services stands head and shoulders above other mortgage lenders. First Integrity is a Mortgage Banker, not a broker, and has experience in all areas of mortgage lending. First Integrity offers unique benefits on Reverse Mortgages, as well as other mortgage programs, that most other lenders can’t match. We are St. Louis based, so we are your hometown mortgage lender. We offer personal service — when you call us, a “live” person answers the phone, not a machine. We’re authorized to underwrite loans for FHA, VA, MHDC and Fannie Mae® (see www.firstintegrity.com). Where First Integrity really stands out is the quality of service we provide. Our goal is to build long-term relationships with our customers, who give us a 99.38% approval rating. We’ve also received the Better Business Bureau’s Online Reliability Seal.

Thank you for exploring your Reverse Mortgage options with us at First Integrity Mortgage Services. We hope this brochure has been helpful in your financial or estate planning.

For a Reverse Mortgage specialist to assist you in determining your individual circumstances, please contact us at 314-878-7900 or e-mail us at info@firstintegrity.com. Please feel free to include a trusted advisor or family member in the process.

Special thanks to Bill Cooper for the referral of Bob Swanbum and to Brian Kohlberg for the referral of Emily Baumann.

Consumer Credit Counseling

What happens to your ability to purchase a house when you go to Consumer Credit Counseling? Well if you are like most people, you are under the impression that your credit is improving because you are making timely payments and the creditors have stopped calling. However this is one of the biggest mistakes that a person wanting to purchase a house can make, assume that the creditors are happy getting a portion of what is owed them and not all of what is owed them.

Here is what happens to your credit score when you negotiate with a Consumer Credit Counseling. If falls like a cliff diver in Acapulco! The counseling service takes the money you pay them each month and depending upon the service they either pay a portion to all of your creditors or they pay the debts off in the order that they negotiate on your behalf. Thus, the creditors are not getting the money you originally agreed to pay them and they report you as late on your credit report. Not only late once, but they start with the first 30 day late and then each month they continue to report you as 30 days late. In the industry we call this a rolling 30 day late, but what it does to your credit score is destroy it. Just this week I had a client call who thought his credit was fine only to find out that his credit scores were in the low 400’s. That is so far below the acceptable level to get a home loan that it will take him years to recover.

So what is the way to avoid this? Well first I have to question the wisdom of a person going to consumer credit counseling trying to buy a house. There is a good chance that this person has not learned how to save money and is living paycheck to paycheck. That person should not be buying a house. If you find yourself considering consumer credit counseling, first evaluate how you spend your money and what else you can do to make more money; get a second job, work overtime, what ever it takes to start making enough money to meet your needs. If you can’t find a solution that way, then call your creditors yourself. Get written agreements from them working out a payment plan that includes them not reporting you as late on the credit report. If that stills does not work, then consider filing Chapter 13 bankruptcy. A Chapter 13 will keep the creditors from reporting you as late. If you refuse to file Chapter 13, then go to consumer credit counseling, but know that you will put yourself in a position to not buy a house for at least 2 years after you finish paying off your creditors.

Thanks to Christopher Boedenfeld for the referral of Chris Stabile.

For more information on getting a “Mortgage Fitness Checkup” please contact me at chrisscheer@firstintegrity.com.

Mortgage Fitness Checkup

When was the last time you had a “Mortgage Fitness Checkup?”

For most people, their house is the single largest investment that they will ever make. In most cases it is also the single largest amount of money they will ever borrow. In addition to that, each and every day they are bombarded with advertising from companies trying to get them to refinance their first mortgage, second mortgage and in some cases even a third mortgage. Why is it that the majority of these people don’t invest the time to visit with their professional mortgage banker or broker to review their mortgage. If life happens, and it does for most of us, don’t our plans, goals and family situations change on a regular basis? All of a sudden the spouse wants a pool in the backyard. They want the basement finished. They want to go back to school to get a better job. Their company is planning on moving its headquarters and that may mean a career change. No longer are we dealing with people getting a 30 year fixed rate loan and paying all 360 payments to pay the loan off.

Most people are keeping their mortgage for an average of 3-5 years, even after the last refinance boom that ended in 2003, over 65% of the people who refinanced or purchases during 2002-2003 have refinanced or will refinance all or part of their mortgage in the past 12 or the next 12 months. Why is that you ask? Two reasons: the first being that many of those people took advantage of the historical low interest rates and financed into adjustable rate mortgages which are now coming up on their first adjustment period. The rest are people that I have previously mentioned, life happened to them and they decided to act. It is that simple. So what are the benefits of a “Mortgage Fitness Checkup?”

Benefits of Mortgage Fitness Checkup

• Determine clients’ current financial goals pertaining to mortgage payment.
• Review interest rate with current market.
• Discuss new programs that have been introduced in last 12 months. Educates borrower to help them from falling prey to the “Dark Side.”
• Prepares potential buyers for upcoming opportunity to purchase.
• Prepares potential investors for the opportunity to build wealth through real estate.
• Prepares current homeowners for possible moves, including assisting in developing strategies to maximize equity in current home.
• Provides credit theft screening.

How long does it take to complete? Depending upon the clients’ questions, a Mortgage Fitness Checkup can take as little at 10 minutes or up to 1 hour if the client wants to spend time strategizing ways to create wealth by using their mortgage as tool. For more information on the Mortgage Fitness Checkup, contact Chris Scheer at 314.223.9824 or chrisscheer@firstintegrity.com.

Special thanks to Bill Cooper of XO Communications for the referral of Sonya Kennedy. Also thank you to Amy O'Brien of Agape Construction for the referral of Juhn Mendin.