Its not just a different product.

1
The Reverse Mortgage Industry 2008

• Its not just a different product.
• CSBS Legal Seminar
• Portland, ME
• August 11, 2008

2
What is a Reverse Mortgage??

• Universal definition a loan secured by a 1st
  lien against real property that does not have to
  be repaid until the last surviving borrower no
  longer lives in the home
• Most products in the marketplace today have an
  age qualification of 62
• Most are non-recourse
• Most have no predefined maturity date
• Most have no income/credit qualifications

3
RM Products Today

• Current Reverse Mortgage Products
• HUD/FHA Insured HECM (Home Equity Conversion
  Mortgage)
• Lending Limit 362,790
• Fannie Mae Home Keeper
• Lending Limit 417,000
• Proprietary Products
• Virtually No Maximum Home Value Limit
• As of July 1st, 2008.. about to increase due to
  FHA Mod. legislation

4
RM Historic Growth

• Still less than 2 market penetrated
• Volume was up 27 06-07
• Active Lenders were up 65
• In the same period

5
The Reverse Mortgage Market

• The future holds great promise, with less than 2
  penetration from inception of the program to date
• The size of the senior market will grow
  dramatically as baby boomers age and join the
  ranks
• Social realities
• Under-funded Social Security System
• Unreliable Medicare and Medicaid Programs
• Undependable pension plans
• Unpredictable stock market
• ALL point to seniors use of home equity as an
  alternative for financial security

6
Social Reality

• Three-legged stool is no more
• Living longeroutliving assets
• No social or government solution
• 89 of people 50 want to stay in their home for
  as long as possible(1
• Average Net Worth excluding home equity 65
  58,1732
• 24 million seniors are homeowners 60 with 2.5
  trillion in home equity
• AARP state of 50 2006
• Exclusive of real estate and other non-financial
  assets such as vehicles. AARP state of 50 2006
• U.S. Census Bureau

7
The Reverse Mortgage Market
8
From Buzz to Low Roar

• RMs are on the corporate radar screen
• Declining forward market
• Limited RM talent pool
• Increased competition
• Professionals in the aging field taking notice
• Excellent growth prospects

9
Common Misconceptions

• Ill lose my house
• Homeowner retains full title to the property
• Non-recourse loan
• Ill be kicked out of my home as the loan
  balance grows
• Homeowner can stay in home until loan maturity
  event occurs
• What if I owe more than my home is worth?
• Homeowner can never owe more than value of home
  ( as long as the home is sold to an unrelated
  party)
• My heirs will be against it
• In fact, almost two-thirds of the adult children
  surveyed believe a reverse mortgage can help
  older people continue to live at home, compared
  with less than half of older homeowners (NCOA
  Study 2005)

10
NCOA Study

• A study released by the NCOA shows that revere
  mortgages can be used by over 13 million
  Americans to pay for long-term care expenses at
  home, allowing many to remain independent and in
  their homes longer. 1
• According to the study, there are 9.8 million
  elder households (aged 62 and older) that are
  dealing with an impairment that can make it hard
  to live at home. In total these households could
  access as much as 695 billion through reverse
  mortgages. For individuals, the extra cash could
  go a long way to help with family care giving and
  other long-term care expenses.1
• Almost two-thirds of the adult children surveyed
  believe a reverse mortgage can help older people
  continue to live at home, compared with less than
  half of older homeowners.2
• 1. NCOA Study 1/26/05
• 2. WSJ Article 1/27/05

11
Consumer Protections

• Mandatory counseling
• Interest rate caps on all variable rate products
• The National Reverse Mortgage Lenders Association
  (NRMLA) Code of Ethics and Professional
  Responsibility
• Comprehensive disclosures

12
Market Opportunity 24mm Homeowners

• 28 MSAs represent 60 of opportunity
• Top 10 48

13
Product DevelopmentThe Market Today

• Currently, over 90 of all reverse mortgages are
  HECMs
• HECMs are insured by FHA (Government Seal of
  Approval)
• Principal limits represent excellent value
• Customer must borrow the entire amount
  available, regardless of need - unused portion is
  held in a LOC.
• Closing costs on HECMs are high in high cost
  markets - average 16-17K.
• In December, 2006 nearly all HECMs have interest
  rates of CMT150, adjusted monthly, established
  by Fannie Mae.
• Practically impossible to individualize to
  consumers needs
• Bottom lineThe HECM used to be a one size fits
  all product, dominated by a one price fits all
  investor.
• Today there are over 14 variations of HECM
  (including a Fixed Rate HECM, and both CMT and
  LIBOR based HECM ARMs) with several active
  investors bidding for the paper. More flexibility
  to match the product to the need of the borrower.

14
Product DevelopmentThe Market Today (cont.)

• Proprietary products have come into the market at
  warp speed (and some have disappeared even
  faster)
• FNMAs HomeKeeper has been around the longest
  (since approx 1995) but has lost market share
  since they eliminated an Equity Share feature
• Other Jumbo Reverse Mortgage Products have
  supplemented the HECM product in serving the
  needs of borrowers with significantly higher
  property values
• Most are open-end variable rate loans with either
  a lump sum or line-of-credit payment plan (one
  notable exception is a fixed rate closed-end
  product with a lump sum and/or tenure payment
  plan).
• Closing costs are typically based on property
  value with some products offering no closing
  costs in exchange for a higher interest rate
• Mandatory counseling is required for almost all
  proprietary products
• Secondary market disruption has spilled into the
  RM space, and today there are only 4
  regional/national Prop. Products left in the
  marketplace.

15
How do borrowers receive funds from a HECM?

• Payment Plans
• Line of Credit (unused portion grows tax-free)
• Tenure Payment monthly payment that lasts as
  long as the loan is outstanding
• Term Payment higher monthly payment for a fixed
  period of time
• Modified Tenure (combination of LOC and Tenure)
• Modified Term (combination of LOC and Term)
• Can be changed post-closing - 20 per change
  administrative fee

16
HECM Principal Limit i.e. how much money can
be borrowed?

• 24 CFR 206.3, HUD Handbook 4235.1 REV-1 (1-4)
• 3 Part Formula
• Maximum Claim Amount (lesser of the appraised
  value or the HUD 203(b) limit for that particular
  county)
• Age of youngest borrower
• Expected Interest Rate
• Fixed Interest Rate for fixed rate HECMs
• 10 year t-bill or 10 year LIBOR swap rate
  lenders margin
• for adjustable rate HECMs

17
HECM 203 (B) Loan Limits i.e. Property Value
limits

• Middlesex County, MA - 362,790
• Cumberland County, ME - 256,025
• Escambia County, FL - 200,160
• To change to a single national loan limit
  after FHA Mod becomes enacted

18
Examples of borrowing capacity calculations

• 75 year old borrower
• 300,000 home value with an existing mortgage of
  100,000
• Lives in Cumberland County, ME 203-b limit is
  256,025
• Wants to pay off mortgage and the take proceeds
  in a Tenure Payment

19
Examples of borrowing capacity calculations
cont.
20
What do the disclosures/docs look like??

• Application Docs
• Yes there is a standard form of application
  just add 6 to the 1003 (the 1009)
• Most other forward disclosures still apply to
  RMs e.g. servicing transfer disclosure, GFE,
  Important Terms Disclosure (open-end only)
• Whats a TALC???

21
What do the disclosures/docs look like?? (cont)

• CLOSING Docs
• Do not look for a payment amount on the Note!!!!!
• No you are not seeing double (HECM only)
• The loan matures in 75 years???
• The mortgage amount is 450,000??

22
The Reverse Mortgage Opportunity

• Its not just a different product.
• Its a different business

23
Reverse Mortgage Lending

• EverBank Reverse Mortgage, LLC
• A wholly owned subsidiary of MetLife Bank NA
• Contact Joseph P. DeMarkey, Regional Sales
  Director
• Phone [phone]
• Cell [phone]
• E-mail jdemarkey_at_everbankreverse.com