Federated Lending Corporation

Reverse Mortgages

To speak with a Reverse Mortgage Specialist call 215-369-9100.

We answer your questions 9AM to 9PM M-F and 10AM-6PM Weekends.

Introduction

As seniors continue to live longer, outliving their assets is now their #1 concern.

That growing fear has been fueled by recent investment losses that most people – young and old alike – have experienced, by the volatility of financial markets, by ridiculously low yields in safe investments, and by a generally uncertain economic outlook. And frankly, many seniors have been forced to retire early before they were prepared for retirement, or many have just not had the luxury of being able to save enough money to ensure a comfortable retirement.

While about 80% of all seniors say that they want to remain in their home for as long as possible, many are finding this financially challenging – especially if they still have a mortgage.

The good news is that we may be able to help! If you are at least 62 years old, or close to it, and have equity in your home, then you may be able to benefit from a powerful retirement tool that is precisely designed to help you “age in place” – a reverse mortgage!

A reverse mortgage is a special type of home equity loan.

The loan proceeds available to the borrower can be used any way, at the borrower’s discretion.

Many borrowers tell us that they would be able to continue to live in their home or, in fact, to live a much more comfortable life if they simply did not have a mortgage payment. We may be able to pay off your mortgage with a reverse mortgage.

Most seniors just want the security, independence and peace of mind that a Reverse Mortgage can often provide.

A reverse mortgage, well planned out and carefully used, can help seniors for many years into the future. It can help them remain independent and   stay financially fit provide for a surviving spouse, or cover routine or extraordinary expenses – all while keeping the seniors in their beloved home.

A reverse mortgage is a powerful financial tool that brings peace of mind and security. There is simply nothing else like it on the market.

Reverse Mortgage Basics

• A reverse mortgage is a special type of home equity loan.
• All borrowers must be at least 62 years old.
• The borrower can sell the home or pay off the reverse mortgage at any time, without penalty.
• The borrower never makes a monthly mortgage payment.
• The property must be the primary residence of the borrower.
• The loan proceeds are not taxable. They are not income – they are a loan to the borrower.
• Single family and up to four-family, owner occupied properties are eligible. Townhouses are eligible. Some manufactured homes, leaseholds and condos may be eligible.
• Most reverse mortgages are FHA loans. They are safe, secure and backed by the US government.
• If the borrower currently has a mortgage, he/she may still qualify for a reverse mortgage, as long as we can pay off the current mortgage with the new reverse mortgage loan proceeds. The reverse mortgage must be in first lien position.
• If the borrower receives needs-based assistance, such a Medicaid, that does not automatically disqualify the borrower from a reverse mortgage. But it does need to be addressed.
• The borrower must ALWAYS continue to pay their real estate taxes and homeowner’s insurance.
• The reverse mortgage is due when the home is sold, when the last surviving borrower has passed away, when the last surviving borrower no longer lives in the home (for one year) or when the borrower violates any of the terms of the reverse mortgage – such as not paying their real estate taxes.
• A reverse mortgage is a non-recourse loan. This means that the home itself is the only asset that can be used to satisfy the outstanding mortgage debt. The lender cannot attach any other assets of the borrower or the estate to make up for any deficiency.
• Does your home need some repairs? A reverse mortgage, unlike a regular (forward) FHA loan, does have a capability for the lender to “set-aside” money for the required repairs from the amount of money available to the borrower. There are conditions and limitations that do apply. But overall, this system works remarkably well, allowing a senior to get a reverse mortgage which can then be used to pay for the required repairs, after the reverse mortgage funds.
• One of the requirements for a reverse mortgage is that the borrower(s) obtain reverse mortgage counseling from an FHA-approved third party counseling agency. The counseling is required to make sure that the borrowers understand the loan, the process and the implications. The counseling can be done either in-person or over the phone and usually lasts about one hour. Contact us for information on where/how to obtain this counseling.
• Seniors can also use a reverse mortgage to PURCHASE a home. With a reverse mortgage for purchase, the reverse mortgage funds at settlement, allowing a borrower to purchase a home with a mortgage that they don’t have to qualify for based on credit or income (at this time) and it does not require a monthly principal and interest payment. The reverse mortgage for purchase may enable a senior to move to a more suitable home or area and it may enable the borrower to keep more of their cash (retirement funds or investments) or proceeds from the sale of their current home. Contact us at 215-369-9100 for more information.

Product Information

• We have fixed interest rate programs and adjustable rate programs.
• A reverse mortgage is a refinance, so the usual refinance charges will apply – such as appraisal charge, recording fee charges, title insurance, etc. Some loans may have origination fees. Almost all of the costs of the loan come out of the proceeds of the loan itself, as with most refinances. Fees do vary from one product to another.
• Most reverse mortgages are FHA loans. These FHA reverse mortgages require upfront mortgage insurance, which is paid from the loan proceeds along with the other closing costs. The federal government insures the loan, guaranteeing payment to the lender. This FHA insurance is what makes this loan possible.
• Every month, interest is calculated, based on the outstanding principal balance of the loan. This interest gets added to the loan balance. Therefore, the loan balance INCREASES each month. Also, there is a small monthly charge (1.25%) for additional FHA mortgage insurance that is also added to the loan balance.
• The borrower will get be sent a monthly statement (THIS IS NOT A BILL) that shows them how much they owe, what the activity on the account has been for that month, and how much they may still have available to borrow.
• At Federated Lending, we work with SIX leading reverse mortgage lenders. We are able to shop rates and products for our borrowers to ensure that they get the best product – at the best price – and from a lender that is best-suited for the borrower’s situation.

How much money can I get

• The amount of money the borrower qualifies for is based on the value of the home (up to FHA limits), the age of the youngest borrower and current interest rates.
• Depending on the product chosen, the borrower can take the money available to them in a lump sum, in a credit line, as monthly payments to them (which can also be GUARANTEED for life) or, perhaps, a combination of all three options.
• If the borrower selects the credit line option, that credit line has a CREDIT LINE GROWTH RATE. This means that the amount of credit available to the borrower in the credit line INCREASES by a pre-determined amount each month. Over time, this is an extremely powerful tool and is unique to reverse mortgages
• Contact us at kova3@fedlend.com or 215-369-9100 so we can review your options, with your particular situation in mind. We understand that everyone’s situation is different.

FAQ – Frequently Asked Questions

Today, reverse mortgages are becoming an increasingly popular way for homeowners to supplement their retirement by offering a secure option for accessing cash based on the equity in their homes. Here are answers to common questions you may have:

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What is a reverse mortgage loan?

A reverse mortgage is a special type of home equity loan (usually a government-backed FHA loan) which enables homeowners aged 62 or older to access a portion of the equity in their home. The home must be the primary residence.

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Will the bank own my home?

NO! The borrower always retains the title to the home and cannot lose the home under normal circumstances. The borrower must, of course, always continue to pay their real estate taxes and homeowners insurance or be subject to foreclosure.

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How much money can I get?

The amount of money available to the borrower is based on the age of the youngest borrower, the value of the home, and current interest rates.

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How can I take the money?

Different reverse mortgage products have different payout options. If the borrower chooses a product with a credit line option, the available money can be taken as a credit line, as monthly payments, as a lump sum, or a combination.

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Are the proceeds from the reverse mortgage taxable?

No. The proceeds (the money you receive) are a loan to you – not income.

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Can I qualify for a reverse mortgage if I already have a mortgage or equity line of credit?

Maybe. After the calculation is made which determines how much money the borrower has available, the lender has to first be able to pay off any existing mortgages or liens before the reverse mortgage can be approved.

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What’s the advantage of a reverse mortgage over a regular home equity line of credit?

With a reverse mortgage, the borrower does not have to qualify for the loan,i and never makes a monthly payment – unlike with a home equity loan. In addition, the reverse mortgage line of credit is GUARANTEED and can never be terminated as long as the borrower complies with the terms of the loan. This is not the case with a regular home equity loan. In addition, a reverse mortgage that has a credit line option also has a CREDIT LINE GROWTH RATE. This means that the line of credit INCREASES, based on a pre-determined formula so over time the reverse mortgage line of credit will provide the borrower with access to more equity – regardless of (continued on next page)

how long the borrower continues to live in the home; regardless of what happens to the balance of the reverse mortgage; regardless of what happens to the value of the home.

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Are reverse mortgages expensive?

A reverse mortgage is a refinance so the normal refinance charges apply. A reverse mortgage is also an FHA loan so FHA insurance charges also apply. But the answer to this question actually is: “Compared to what?” There is no other product on the market like a reverse mortgage.

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Is a reverse mortgage just for those borrowers who need to supplement income or cash right now?

No.   Reverse mortgages can actually be used as powerful financial planning tools. A successful retirement strategy includes identifying and maintaining income streams. Putting a reverse mortgage in place now (with a line of credit and it’s accompanying line of credit growth rate) may provide an additional income stream for future use. Other retirement planning strategies, such as deferring social security benefits or postponing or reducing draw-downs of taxable, invested retirement savings, can involve using a reverse mortgage.

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Is there a fixed rate reverse mortgage?

Yes. We have various fixed rate programs as well as various adjustable rate programs. We focus in on the needs and goals of the borrower and, based on their particular situation, we help them determine which program is best for them.

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Does a reverse mortgage affect eligibility for Social Security or Medicare?

A reverse mortgage does not affect eligibility for Social Security or Medicare. However, some needs-based government programs, like Medicaid and Supplemental Security Income (SSI) may be affected. Consult with a qualified professional to determine what the impact to you may be if you are using any of these programs.

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Is any home eligible for a reverse mortgage?

Most single-family or 2-4 unit owner-occupied dwellings or townhouses are eligible. Condos MAY or MAY NOT be eligible. The home must meet minimum FHA property standards.

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Can I use a reverse mortgage to purchase a home?

Yes! More and more seniors are taking advantage of a reverse mortgage at purchase to help them preserve cash or to purchase a more suitable home, without having to make monthly mortgage payments.

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Testimonials

The reverse mortgage allowed me to bring my father home from a nursing home to the home he wanted to be in. We were able to pay for the at home nursing care with the funds from the reverse mortgage. He was able to stay at home and be with his dog.

Art, Newark, De.

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I have a great sense of peace. With no one to take care of me, I was able to pre-pay my funeral expenses and do repairs to my home. All my concerns were taken care of.

Ellen W., Philadelphia

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We were able to stop the foreclosure on our home. We couldn’t pay the taxes on our home and it was going up for sheriff’s sale. Working with Dick we were able to stop the sheriff’s sale. When we closed on the reverse mortgage our taxes were paid up and we had money to pay them in the future.

Ron and Lois, West Chester, Pa.

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Working with Dick helped us feel confident we were doing the right thing. We were unsure if a reverse mortgage was right for us. He took the time to explain how the program worked and answered all our questions. Even after the loan closed he was there to answer any questions we had. We would recommend working with Dick to anyone who is interested in reverse mortgages.

Don and Janie, New Castle, De.

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I felt like a boulder had been lifted off my chest. I had worked hard all my life and paid the bills to take care of my wife and 3 daughters. Mostly it had been living paycheck to paycheck. Now with the reverse mortgage, we have the money to do the things we want to do and a cushion for any emergencies. Budget pressures have been taken away.

Bill, Pittsburgh, Pa.

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When my husband passed away my financial planner brought Dick in to work with me. My husband’s pension was gone and so was my social security income. Rather than drawing down our savings and investments at a rate where I would run out of money eventually, I took a monthly income from a reverse mortgage. I can stay in our home and live a normal life.

Janet, Trevose, Pa

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When I was having trouble with the appraisal on my home, Dick was able to use his experience to get a fair value for my home. I was able to proceed with the reverse mortgage and to get the money I deserved.

Gerri Easton, Pa

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The reverse mortgage line of credit is a wonderful solution. Dick had explained the difference between a home equity loan and a line of credit with a reverse mortgage. After years of accessing the line of credit and not having to make payments, I am glad I chose the reverse mortgage. It should be something everyone who is retired should do.

Tom, Devon, Pa

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Nan was absolutely fantastic to work with!  I decided to finally go through with a reverse mortgage after I met her.  I had complete confidence in her and she made me feel very secure through the whole process.   I use my reverse mortgage to pay my real estate taxes and it’s a great emotional security knowing that money is there if I need it.

M.E.B., Reading, PA

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The reverse mortgage was the best thing we ever did!  We had thought about doing a reverse mortgage for 3 years and finally decided to do it after Nan explained everything to us and gave us the information and assurances we needed.  She was always straight-forward with us.  I only wish we had done the reverse mortgage sooner so my husband, who passed away a few months later, would have been able to enjoy the peace of mind that I enjoy today.

Rita G., Sharon Hill, PA

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The reverse mortgage helped us with our financial needs, which were many.  It helped us stay in our home and to maintain it.  Nan was a blessing.  She met with us and our son and spent time explaining everything to us and giving us the confidence to proceed.

Mr. & Mrs. H., Edgewater, NJ

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Nan is one of my favorite people!  She hung in there and fought for us until we were finally able to get the reverse mortgage done (we needed a short payoff to prevent us from being foreclosed on).  Because of Nan’s hard work, our family home was saved for my whole family, including my wife who is very ill.  I can’t say enough about the relief and peace of mind that has been given to my family with the reverse mortgage.

W.M. Conshohocken, PA

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Nan was referred to my son-in-law by a business associate of his.  She met with us and we came up with a plan that would provide me with the extra monthly income I needed and also give me access to a large credit line for future needs.  Now I will be able to pay my own expenses when the whole family travels out of state for my grandson’s wedding.

D.M., Levittown, PA

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Because of Nan’s hard work in dealing with the unexpected title issue which developed, I was finally able to get a reverse mortgage which paid off my existing mortgage just in time!  I was getting close to foreclosure and I knew that I would be OK if I could just get my mortgage paid off.  I was able to keep my home.

Maria, Willow Grove, PA

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The reverse mortgage saved me a lot of headaches. And Nan was a pleasure to work with.

Nadene, Toms River, NJ

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Nan was very helpful.  A friend of mine who had done a reverse mortgage with Nan had urged me to talk to her which I finally did.  I didn’t know anything about reverse mortgages and Nan explained everything to me in a way that I could understand.  I now have great peace of mind and less stress at bill time.

Frances, Ewing, NJ

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Nan was an excellent representative for her company.  She presented me with many different loan scenarios and happily met with my financial advisor and accountant and even my attorney.  We all decided that taking out the reverse mortgage was the best thing for me because it put to work some of the large amount of equity I had in my home.  This meant that I could draw down less of my investment accounts.

Joe F., Wilmington, DE

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My wife and I were separated and working on a divorce.  I had been unable to figure out how I could buy out her equity from our home so I could continue to live there.  I simply did not have enough money to do so.  A mortgage loan officer who knew Nan recommended that I contact her to find out whether or not a reverse mortgage might be able to provide the needed cash.  It did!  I am so relieved to have this challenging and very difficult part of my life behind me and so thankful that I can now remain in my home.

Mr. W., Morrisville, PA

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The confidence I soon gained in Nan helped me ‘take the leap’ after much thinking and many anxious moments.  She helped make the process of getting a reverse mortgage much easier and I thank her for that and for her efforts and patience.  It was a pleasure working with her as well.

Greg, Red Lion, PA

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By using the reverse mortgage to purchase a new home, I was able move into a quieter neighborhood and into my dream home.  I now have plenty of room for my new library and I have a garage so no more problems with parking!  My realtor recommended Nan.  I never could have purchased this home without the reverse mortgage and without Nan’s tireless efforts to ‘get it done’!

D.L., Philadelphia, PA

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A previous loan officer had not been able to get the required FHA approval for our condominium.  But Nan worked hard on tying up the final loose ends which gave us the approval we needed to get the reverse mortgage done.  We are now without a mortgage payment for the first time in our lives!  And we will now be able to put money aside from our monthly income so we will be able to travel.

Mr. & Mrs. T., Ocean City, NJ

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I needed a fair amount of work done to my home which I could not afford.  Nan worked closely with me on the repair issues and we got the reverse mortgage approved with the repair money ‘set aside’ in an escrow account.  I will now be able to have the work done in the spring and paid for by the proceeds from the reverse mortgage.  I could not have accomplished this without her help and the reverse mortgage!

Gerald, Fairless Hills, PA