Securing Retirement with a Reverse Mortgage

1. Securing Retirement with
Home Equity Conversion Mortgages

2. Agenda
HECM Basics
Borrower Protections
Fees/Costs
Product Misconceptions
Loan Amounts
Accessing Funds
Retirement Strategies
Right-Sizing the Home
San Diego Mortgage and Loans 760-500-1098
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3. Retirement Planning Using Home Equity
Home Equity: The 4th component
Using home equity can help
supplement retirement income
and provide increased cash flow
Retirement
Account &
Savings
• Provides tax-free cash*
Home
Equity
• Requires no monthly mortgage
payments**
• Homeowners stay
in their home & retain title
Social
Security
Pension
*Homeowners should consult their tax advisor
**Homeowners continue to pay property taxes, homeowner’s insurance, keep up home maintenance. Although there are no monthly mortgage payments,
interest does accrue on the portion of the loan amount disbursed.
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San Diego Mortgage and Loans 760-500-1098

4. HECM Basics
San Diego Mortgage and Loans 760-500-1098
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5. What is a HECM?
A Home Equity Conversion Mortgage, HECM, is a loan that an
individual can take using the equity that they have built up in their home.
Program Features:
•
Improves monthly cash flow by eliminating debt
•
No monthly mortgage payments due1
•
Loan proceeds are tax-free2
•
Heirs inherit any remaining equity
•
Net proceeds can be accessed
in multiple ways
•
Interest may be tax deductible when
HECM is repaid3
1
Homeowners continue to pay property taxes, homeowner’s insurance, keep up home maintenance. Although there are no monthly mortgage payments, interest does accrue on the portion
of the loan amount disbursed. 2 Homeowners should consult their tax advisor. 3 IRS Website - http://www.irs.gov/publications/p936/ar02.html
San Diego Mortgage and Loans 760-500-1098
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6. Eligibility
• Youngest borrower must be at least 62+ years of age
• Homeowner must live in home as primary residence (6 mo. + 1 day)
• Must be able to pay off their existing
mortgage using the HECM loan proceeds
• Property must be an eligible property type
San Diego Mortgage and Loans 760-500-1098
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7. Additional Conditions
• Borrower(s) must complete a HUD
approved 3rd party counseling session
• Property must be maintained according
to FHA requirements
• Borrower(s) must continue to pay
property taxes and homeowners
insurance
• Lending limit of $625,500
• HECM loan must be in first lien position
San Diego Mortgage and Loans 760-500-1098
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8. Borrower Protections
Non-recourse loan
3rd party counseling
Lien-holder not added to title
Property satisfies lien
Anti-steering regulations
Right of rescission
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San Diego Mortgage and Loans 760-500-1098

9. Program Protections – Repayment Events
No payments are required until a repayment event occurs.
Repayment events regulated by HUD guidelines
1. Fails to pay taxes/insurance
2. Borrower no longer lives in/sells property
3. Fails to keep home up to FHA standards
San Diego Mortgage and Loans 760-500-1098
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10. Loan Fees
Reverse mortgages have many of the same fee types as a traditional
forward mortgage:
Loan Origination
Fee
Calculation to determine amount
$6,000 maximum
3rd Party Closing
Costs Examples
Appraisal, flood certification, title
insurance, notary, courier, recording, etc.
3rd Party
Closing Costs
Varies, depending on state/county
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San Diego Mortgage and Loans 760-500-1098

11. Reverse Mortgage Specific Fees
There are two types of reverse mortgage specific fees, counseling
and mortgage insurance premium (MIP):
Counseling
$75 - $125 average fee
HUD provides grant support making it
possible to get for free
Ongoing Mortgage
Insurance Premium
1.25% of loan balance annually
Upfront Mortgage
Insurance Premium
.5% or 2.5% of max claim amount
(depending on mandatory obligations)
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San Diego Mortgage and Loans 760-500-1098

12. Program Misconceptions
Myth # 1: The lender owns the home
Reality: Borrower retains title to home, no one is added
Myth #2: The home must be free and clear of existing liens
Reality: HECM designed to pay off existing liens
Myth #3: Loan proceeds are taxed
Reality: HECM proceeds are not income,
therefore not taxed
Myth #4: There are restrictions on
how to use proceeds
Reality: Any proceeds remaining after
paying off liens can be used however
the borrower wants, no restrictions
Myth #5: Only poor people need HECMs
Reality: HECMs provide an opportunity to diversify a portfolio and help
ensure against overdrawing existing retirement assets
San Diego Mortgage and Loans 760-500-1098
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13. HECM Loan Amounts – Net Proceeds
Equity Available (Principal Limit)
Example: $500,000 Home Value
At Age 62, 72 & 82
$320,000
$310,000
$310,500
$300,000
$290,000
$287,500
$280,000
$270,000
$260,000
$263,000
$250,000
$240,000
$230,000
62
13
72
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14. Accessing Funds
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15. Disbursement Options - Fixed
Fixed Rate Loan:
With a fixed rate HECM, all proceeds
available in the first 12 months are
disbursed to the client at funding. No
additional funds will be made available.
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San Diego Mortgage and Loans 760-500-1098

16. Disbursement Options - ARM
Lump Sum:
Draw some of the available cash at closing*
Credit Line:
Access money when they need it. Does not add
to loan balance until used. Available amount of
borrowing power can grow.*
Monthly
Disbursements:
Guaranteed monthly disbursements.
Disbursements set for a specific period of time
(Term) or for the life of the loan (Tenure). Does
not add to loan balance until used.*
Combination:
Choose 1, 2 or all 3 options simultaneously*
(changing disbursements also available)
*HUD limits amount of first year withdrawal to 60% of the principal limit or the borrowers
mandatory obligations + 10%, whichever is greater.
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San Diego Mortgage and Loans 760-500-1098

17. LIBOR Disbursement – Line of Credit
$800,000
Example: $500,000 Home Value
62 Year Old Borrower
$760,298
Available Line of Credit
$700,000
$600,000
$526,511
$500,000
$400,000
$364,613
$300,000
$252,497
$200,000
At age 62
+ 10 Years
+ 20 Years
+ 30 Years
Line of Credit growth over the course of 30 years
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Source: Liberty Home Equity Solutions, Inc., Quote Packages October 7, 2013. San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to
client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.

18. LIBOR Disbursement – Tenure Payments
Example: $500,000 Home Value
62 Year Old Borrower
$600,000
Total Payments Received
$523,350
$500,000
$400,000
$348,900
$300,000
$200,000
$174,450
$100,000
$0
10 Years
20 Years
30 Years
$1453/Month Throughout Retirement
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Source: Liberty Home Equity Solutions, Inc., Quote Packages Oct 17, 2013. For business professional use only. Not for consumer distribution. The preceding example and any
calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or
circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.

19. HECM Strategies for Retirement
San Diego Mortgage and Loans 760-500-1098
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20. Hedge Against Home Declines
Impact on HECM LOC in declining housing market
$600,000
$530,604
$500,000
$500,000
$424,483
$400,000
$338,779
$282,645
$300,000
$271,751
$271,669
$252,497
$200,000
$100,000
$0
62
63
64
65
Line of Credit
66
67
68
69
70
Home Value
Amount available dependent on home value
No monthly mortgage payments required
Available LOC balance will continue to grow if no draws are taken, regardless of home value
Source (LOC): Liberty Home Equity Solutions, Inc., Quote Packages October 7, 2013.
Source (Home Values): No supporting documentation available. Declining home values are based on assumptions due to the economic climate in recent years.
San Diego Mortgage and Loans 760-500-1098
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21. Case Study - Deferring Social Security
Client Facts:
Solution:
21
62 year-old clients need to retire due to health
issues. $200,000 in retirement account,
relying on social security. Claiming social
security now will not provide enough income.
Home value is $500,000. No current mortgage.
Use a HECM to increase cash flow to a
sufficient amount to allow them to retire now,
but wait until age 70 to claim social security.
San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or
accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified,
professional investment and/or tax advice.

22. Claiming Social Security
Monthly Social Security Payments
Monthly Disbursements By Age
$3,500
$3,447
$3,000
$2,500
$2,437
$2,000
$1,958
$1,500
$1,000
62
65
70
Age of Claiming Social Security
Source: AARP online social security website calculator. $40,000 avg salary for one spouse, $20,000 avg salary for other spouse. San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to
client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
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23. Monthly Reverse Mortgage Payments
Deferring Social Security
HECM Options
$3,500
$3,338
$3,000
$2,500
$2,000
$2,016
$1,500
$1,453
$1,000
Tenure @ 62
8 year term
w/100k LOC
8 year term
w/out LOC
SS = $1958/Month @ age 62
SS = $3447/Month @ age 70
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Source: Liberty Home Equity Solutions, Inc., Quote Packages October 17, 2013. San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to
client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.

24. HECM Strategies: Deferring Social Security
Probability of successfully deferring SS
Source: MoneyGuide Pro Illustration July, 2012
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or
accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified,
professional investment and/or tax advice.
San Diego Mortgage and Loans 760-500-1098
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25. Case Study – Stretching Retirement Account
Client Facts:
Assumptions:
Need $40k (plus SS) in first year, 3% annual
cost of living inflation,15% tax bracket, S&P
500 annual returns (1983 – 2012) used for ROI
Solution:
25
62 year-old clients, $500k retirement account,
home value $500k, current mortgage $0.
Use HECM funds to offset increase cost of
living expenses to extend portfolio.
San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or
accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified,
professional investment and/or tax advice.

26. HECM Solution – Stretching Retirement Account
No HECM
With HECM
$2,000,000
$1,800,000
Account Balance
$1,600,000
$1,400,000
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93
Age
Savings Stretch From 18 to 30+ Yrs
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Source: Calculations based on assumptions listed on previous slide. San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to
client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.

27. Case Study – Allow Retirement Account Rebound
Client Facts:
Assumptions:
Need $40k (plus SS) in first year, 3% annual
cost of living inflation,15% tax bracket, S&P
500 annual returns (1983 – 2012) used for ROI
Solution:
27
62 year-old clients, $500k retirement account,
home value $500k, current mortgage $0. Need
$40k (plus SS) in first year
Use HECM funds to during S&P 500 down
years to allow value of assets in retirement
account to rebound.
San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or
accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified,
professional investment and/or tax advice.

28. HECM Solution – Retirement Account Rebound
$1,400,000
40.00%
34.11%
31.01%
Account Balance
21.27%
16.81%
17.62%
13.62%
$1,000,000
2.34%
$800,000
23.45%
20.26%
8.03%
3.00%
12.78%
20.00%
10.00%
3.53%
0.00%
-9.85%
-10.14%
-10.00%
$600,000
-20.00%
-23.37%
-30.00%
$400,000
-38.49%
-40.00%
$200,000
-50.00%
$0
-60.00%
62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93
Age
: Living expenses drawn from retirement account
: Living expenses drawn from HECM LOC
Line of Credit balance = $400,000 at age 93
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Source: S&P 500 from 1983-2012 and calculations based on assumptions listed on previous slide. San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to
client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
S&P 500 Returns
30.00%
26.38%
$1,200,000

29. Case Study – Defer Drawdown Until RMD
Client Facts:
Assumptions:
Need $40k (plus SS) in first year, 3% annual
cost of living inflation,15% tax bracket, S&P
500 annual returns (1983 – 2012) used for ROI
Solution:
29
62 year-old clients, $500k retirement account,
home value $500k, current mortgage $0. Need
$40k (plus SS) in first year
Use HECM funds to delay draws from
retirement account until RMD is required.
San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or
accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified,
professional investment and/or tax advice.

30. HECM Solution – Defer Drawdown Until RMD
No HECM
With HECM
Account Balance
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93
Age
HECM LOC covers expenses through age 68
$770k remaining in retirement acct @ age 93
30
RMD exceeded necessary expenses age 78 - 89
$415k left in LOC if excess RMD paid back into RM
Source: Calculations based on assumptions listed on previous slide. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are
hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information
contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.

31. RIGHT-SIZING THE HOUSE
For business and professional use only. Not for consumer distribution.
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32. Right-Sizing the Home Example
Client Facts:
70 years-old
$500,000 current home
$0 existing mortgage
$350,000 new home
Does not want any monthly mortgage
payment with new home
San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or
accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified,
professional investment and/or tax advice.
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33. Right-Sizing the Home Example – No HECM
Sales price existing home:
$500,000
Selling costs (commission, fees etc.):
$40,000
Net proceeds:
$460,000
New home price:
$350,000
Remaining funds:
$110,000
San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or
accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified,
professional investment and/or tax advice.
33

34. Right-Sizing the Home Example – HECM
Net proceeds from home sale:
$460,000
New home price:
$350,000
HECM for Purchase funds:
$197,400
Borrower funds to complete purchase:
$166,853
(includes loan closing costs)
Remaining funds:
$293,147
Source: Liberty Home Equity Solutions, Inc., Quote Packages October 16, 2013. San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in
regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment
and/or tax advice.
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35. Summary
Transaction similar to
home refinance
It’s Flexible
• Fixed or adjustable rate
• Proceeds may be accessed in
multiple ways and borrowers can
change disbursement methods
It’s Safe
• FHA insured (HECM)
It’s Useful
• Use as a monthly cash flow tool
• Credit line
• Relieves existing debt and monthly
mortgage payments
• Purchase a home (right-size or move
to “retirement friendly” community)
• Consumer counseling required
San Diego Mortgage and Loans 760-500-1098
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36. Thank you for your time.
San Diego Mortgage and Loans 760-500-1098
San Diego Mortgage and Loans 760-500-1098

37. APPENDIX
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San Diego Mortgage and Loans 760-500-1098

38. S&P 500 Annual Returns
S&P 500 Annual Return
40.00%
34.11%
30.00%
26.38%
21.27%
Annual Return
20.00%
16.81%
17.62%
-10.00%
23.45%
19.53%
13.62%
7.06%
10.00%
0.00%
20.26%
2.34%
0.35%
3.00%
3.53%
0.00%
-1.54%
-10.14%
-9.85%
-20.00%
-23.37%
-30.00%
-38.49%
-40.00%
-50.00%
62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93
Age
Annual returns of the S&P 500 beginning in 1983 and ending in 2012
Age 62 is assumed to be 1983, 63 is 1984, etc.
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Source: S&P 500 from 1983– 2012. San Diego Mortgage and Loans 760-500-1098
The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to
client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.

39. Glossary of Terms
• Adjustable Rate HECM (ARM)
– A HECM which has an interest rate that is
subject to change, usually on a monthly or annual basis.
• U.S. Department of Housing and Urban Development (HUD)
• Federal Housing Administration (FHA)
• Home Equity Conversion Mortgage (HECM) – A reverse mortgage insured
by the Federal Housing Administration.
• Good Faith Estimate
– Lists the approximate closing costs of obtaining a loan.
• HECM for Purchase
– A HECM that is used to help finance the purchase
of the borrower’s principle residence.
• Lender – A bank or institution licensed to originate residential mortgage loans.
• London Interbank Offered Rate (LIBOR) – The average interest rate that
leading banks in London charge when lending to other banks. It is the index used as
the basis for Adjustable Rate HECM's.
San Diego Mortgage and Loans 760-500-1098
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40. Glossary of Terms (continued)
• Line of Credit (LOC) – A HECM disbursement option whereby the borrower
receives the loan proceeds in unscheduled payments or installments, at times and in
amounts of the borrower’s choosing, until the line of credit is exhausted.
• Lump Sum – Receive all proceeds at loan closing.
• Non-Recourse Loan – In regards to a HECM loan, this term describes the fact that
a borrower or their heirs will not owe more than the home is worth when the home is
sold to repay the loan.
• Mortgage Insurance Premium (MIP) – Protects the borrower and lender in case
the loan balance grows higher than the home value when the loan becomes due.
• Reverse Mortgage – A home loan that allows senior homeowners age 62 and older
to access a portion of the equity in their home.
San Diego Mortgage and Loans 760-500-1098
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41. Glossary of Terms (continued)
• Servicing – The maintenance of the loan after it is originated. It includes services
such as providing regular statements and providing loan disbursements to the borrower
as requested.
• Tenure payments – Monthly payments throughout the life of the loan.
• Term payments – Equal monthly payments that are disbursed for a specified
amount time.
• Total Annual Loan Cost (TALC) – The projected annual average cost of a
reverse mortgage, including all the itemized costs.
• Right of rescission – A three business day time period after a loan closes in
which a borrower may change their mind and cancel the loan.
San Diego Mortgage and Loans 760-500-1098
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