hud-hecm reverse mortgage telephonic counseling session transcript

8/20/2019 HUD-HECM Reverse Mortgage Telephonic Counseling Session TRANSCRIPT

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IN RE: HUD-HECM Reverse Mortgage Telephonic Counseling Session of Neil J. Gillespie and Penelope M. Gillespie withSusan Gray, CCCS MMI .--------------------------/

RECEIVED AT: Home Office Telephone Extensionof Neil J. Gillespie

DATE & TIME: April 22, 2008

TRANSCRIBED BY: Michael J. BorsethCourt Reporter

Michael J. BorsethCourt Reporter/Legal Transcription

(813) 598- 2703


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* * * * * * * * * * * *

NOTE: Calls on home office telephone

extension (352)854-7807 are recorded for

quality assurance purposes pursuant to the use

exemption of Florida Statutes chapter 934,

section 934.02(4)(a)(1) and the holding of

Royal Health Care Servs., Inc. v.

Jefferson-Pilot Life Ins. Co., 924 F.2d 215

(11th Cir. 1991)

* * * * * * * * * *

AUTOMATED OPERATOR: This call is being

recorded.

MR. GILLESPIE: Hello.

MS. GRAY: Hi, may I speak to Penelope

Gillespie?

MR. GILLESPIE: Yes, hold on.

MS. GRAY: Thank you.

MR. GILLESPIE: You want to pick it up, mom.

MRS. GILLESPIE: Hello.

MS. GRAY: Hi, Ms. Gillespie.

MRS. GILLESPIE: Yes.

MS. GRAY: This is Susan Gray. I'm with Money

Management International. And I'm contacting you

this afternoon to provide the reverse mortgage

counseling for you.

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MS. GRAY: Okay. How did you hear about the

reverse mortgage?

MR. GILLESPIE: From our bank, Park Avenue

Bank.

MS. GRAY: Park Avenue, okay. And what are

some of your goals in obtaining a reverse mortgage?

MR. GILLESPIE: We want to eliminate our

monthly payment and have whatever equity is

possible.

MS. GRAY: Okay. And how much do you owe on

the existing mortgage?

MR. GILLESPIE: About 77,000.

MS. GRAY: Okay. And what is the approximate

value of the home?

MR. GILLESPIE: 140,000.

MS. GRAY: Okay. And Ms. Gillespie, I have

got you on the line and who the gentleman I am

speaking with?

MRS. GILLESPIE: It's my son.

MS. GRAY: Okay. And what is your name?

MR. GILLESPIE: My name is Neil Gillespie.

MS. GRAY: Neil. Is that N-e-i-l?

MR. GILLESPIE: Yes, it is.

MS. GRAY: Okay. And Gillespie is

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G-i-l-l-e-s-p-i-e?

MRS. GILLESPIE: That's right.

MS. GRAY: Okay. And Ms. Gillespie, did you

have a middle initial?

MRS. GILLESPIE: M.

MS. GRAY: N as in Nancy?

MR. GILLESPIE: No.

MRS. GILLESPIE: M as in --

MR. GILLESPIE: Your middle name, mom. Marie.

MRS. GILLESPIE: Marie.

MS. GRAY: Okay. Okay. Neil, do you use a

middle initial?

MR. GILLESPIE: J.

MS. GRAY: K?

MR. GILLESPIE: J. J as in Joseph.

MS. GRAY: Okay. And what is your date of

birth, Neil?

MR. GILLESPIE: March 19th, 1956.

MS. GRAY: Okay. And Ms. Gillespie, I need

your highest level on education completed.

MRS. GILLESPIE: Just high school.

MS. GRAY: Okay. And Neil, your highest level

of education completed?

MR. GILLESPIE: Bachelors Degree.

MS. GRAY: Okay. All right. There is a note

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in the file that -- let's see, bear with me just

one second. Okay. That you have a lender ID

number.

MR. GILLESPIE: No, we don't have a lender ID

number.

MS. GRAY: Okay.

MR. GILLESPIE: I believe the bank called you

about that issue yesterday.

MS. GRAY: Okay. Okay. Do you have anyone in

particular that you would like your certificate

faxed to?

MR. GILLESPIE: Yes, Park Avenue Bank.

MS. GRAY: Okay. Whose attention should I

address this to?

MR. GILLESPIE: You would address that to Liz

Baize. L-i-z B-a-i-z-e.

MS. GRAY: Okay.

MR. GILLESPIE: Do you want the fax number?

MS. GRAY: Certainly.

MR. GILLESPIE: It's area code (352) 854-0112.

MS. GRAY: Okay. And is this a single family

residence, condominium or townhome?

MR. GILLESPIE: Single family.

MS. GRAY: Okay. And I have the address is

8092 Southwest 115th Loop; is that correct?

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MRS. GILLESPIE: Yes, yes.

MS. GRAY: Okay.

MR. GILLESPIE: Mom, you will have to speak up

louder, it's hard to hear you.

MS. GRAY: And that is Ocala, Florida 34481?


MR. GILLESPIE: Yes.

MS. GRAY: Okay. Would you like for me to

provide any household budget counseling for you

today or would you just like the presentation on

the reverse mortgage?

MR. GILLESPIE: Just the presentation on the

reverse mortgage.

MS. GRAY: Okay. Do you plan to use any of

the funds that you receive from the reverse

mortgage to obtain an annuity?

MR. GILLESPIE: No.

MRS. GILLESPIE: No.

MS. GRAY: Okay. Do you plan to sign a

contract on an agreement with an estate planning

firm to obtain a reverse mortgage?

MR. GILLESPIE: No.

MRS. GILLESPIE: No.

MS. GRAY: All right. Can you both hear me

pretty good?

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MS. GRAY: All right. I need to take just a

couple of minutes and read our disclosure in order

to obtain permission to counsel you today. Okay?

MR. GILLESPIE: All right.

MRS. GILLESPIE: Okay.

MS. GRAY: Before providing counseling we

disclosed and received your agreement to the

following: Money Management International,

Incorporated is a non-profit, HUD approved housing

counseling agency. We provide reverse mortgage

counseling to help you make an informed choice

about use of a reverse mortgage product. Your

counselor will try to help you make an informed

choice, but the decision whether to apply for a

reverse mortgage is completely yours. Your

counselor will not specifically recommend for or

against using a specific loan product or a specific

lender.

Client privacy is important to us and the

counseling services we provide are confidential.

At your request we may provide verification of

counseling to the lender of your choice, but no

personal financial information will be disclosed.

As part of this counseling interview you will

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be asked to provide information about estimated

income and expenses. We do this to help you

develop a clear overall financial picture of your

own day-to-day budget, to help you decide whether a

particular reverse mortgage meets your needs. This

information is held in strictest confidence and

will never be disclosed to your lender.

Information from your file may be released for

quality assurance purposes to a credible third

party such as program review staff from the U.S.

Department of Housing and Urban Development, who

will also ensure confidentiality. Our privacy

notice is available on our website at

www.moneymanagement.org. You will not be charged a

fee for a reverse mortgage counseling session.

However, to help offset our cost we may request a

contribution from your mortgage lender. This

request may include your name and the date when you

spoke with a counselor. We will not refuse service

if your lender declines to make this contribution.

By providing us with your mother's maiden name you

will authorize us to provide the counseling for

you. Do you understand the provisions outlined?

MR. GILLESPIE: Well, I heard what you said,

yes, uh-huh.

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MS. GRAY: All right, and may I have each of

your mother's maiden names, please?

MR. GILLESPIE: I'm not sure why you need

that.

MS. GRAY: Okay.

MR. GILLESPIE: Well, let me ask you this,

could we refuse the maiden names?

MS. GRAY: You sure can. You can use

something else. Do you want me to give you some

other ideas?

MR. GILLESPIE: We will use our pet name; how

is that?

MS. GRAY: That will be fine. As long as you

each have something different.

MR. GILLESPIE: My pet name is Fluffy.

MS. GRAY: Okay.

MR. GILLESPIE: And my mother's is Ginger.

MS. GRAY: Okay. That will work just fine.



MS. GRAY: Just something that is unique to

you. Okay. All right. Now, today we're going to

be talking about mostly the HECM Reverse Mortgage.

This is the most popular and widely available.

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However, I want to mention to you that there are

other reverse mortgages that share similar

characteristics, one of these being the Home

Keeper, which is underwritten by Fannie Mae. And

there are some lender specific reverse mortgage

products that are offered by several large learning

institutions. Now, these reverse mortgages are not

insured by FHA and are most commonly used by

borrowers with home values exceeding 500,000.

The HECM is a HUD FHA reverse mortgage that

allows you to convert some of the equity in the

home into usable cash that has no restrictions on

use. All homeowners on the deed must be at least

62 years old and living in the home as primary

residence. The home must meet FHA standards and an

appraisal will be required. The proceeds from the

reverse mortgage must be sufficient to pay off all

liens against the property. Homeowners must keep

their property taxes and insurance current and

continue to maintain the property in good

condition. Any questions on the material so far?

MR. GILLESPIE: No.

MRS. GILLESPIE: No.

MS. GRAY: Okay. With the reverse mortgage

you will retain all rights and privileges of home

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ownership without having to make a monthly mortgage

payment. The money that you receive from the

reverse mortgage is nontaxable, it need not be

reported as income. There are no restrictions on

how the funds are used and you need no income to

qualify. You can continue to receive your regular

Social Security payments and your Medicare

benefits.

It's important to remember that the HECM may

have an impact on your estate and the heirs;

meaning there may be little or no equity left in

the home at the end of the loan time.

The closing costs associated with the HECM are

typically high. And the interest that will be

added to your loan balance each month is deferred

and cannot be deducted from income taxes until the

house is sold.

A reverse mortgage may effect your eligibility

to receive assistance under Federal and State

income or asset-based programs. If you are

receiving any public assistance such as Medicaid,

SSI or Food Stamps, be careful not to jeopardize

these benefits by receiving more cash from the HECM

loan in a given month than you plan to spend in

that same month. Any questions so far?

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MR. GILLESPIE: No.

MRS. GILLESPIE: No.

MS. GRAY: Okay. There are some different

payment options available with the reverse mortgage

HECM, and I want to go over those with you. You

will notice it's very flexible as far as ways you

can access the fund. You can take out a lump sum

at closing to meet an immediate need, such as

paying off an existing mortgage. Or if you need

extra money on a monthly basis you could elect to

receive a 10 year payment for as long as you live

in the home. Or there is the term payment. The

term payment allows you to receive a larger monthly

payment than a 10 year. The shorter the term the

larger the payment. However, when the term expires

you would no longer receive that monthly payment.

You also have what is called the HECM Line of

Credit. The line of credit is a holding account

for the funds that you can draw from in any amount

at any time. And it even allows for automatic

credit line growth, so that you can end up with

more available cash. You can combine these options

and you can always make changes later for usually a

twenty dollar fee. Any questions on that?

MR. GILLESPIE: No.

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MRS. GILLESPIE: No.

MS. GRAY: All right. Now, the longer you

have this loan, the more the debt owed increases.

And that's due to the interest, fees and

disbursements being added to your loan balance.

And at some point in time this loan will have to be

repaid. And the repayment can either be the heirs

can either sell the home and pay back what has been

borrowed, or if they wish to keep the home they can

use funds from another source, or take out a

different loan and pay back the reverse mortgage.

However, no repayment is necessary unless you

permanently move from the home, sell the home or

pass away.

If the loan balance at the same time exceeds

the home value, FHA will pay the difference to the

lender. This is called the Non-Recourse Limit. In

other words, neither the borrower nor the heirs

will ever be held accountable for more than the

value of the home.

Okay. Have you seen some analysis for the

reverse mortgage as far as how much you would

receive and the different costs and fees associated

with it?

MR. GILLESPIE: Yes.

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MS. GRAY: Okay. I am going to put your

information in right quick and then I'm going to go

through this with you so that we can go over those

costs and fees with you and see if you have

questions on those.

Neil, I just want to be sure I have your name

as N-i-e-l, right?

MR. GILLESPIE: No. It's N-e-i-l.

MS. GRAY: N-e-i-l. Okay. Let me fix that

really quick.


MS. GRAY: And for some reason I was thinking

that didn't look right to me. There we go.

That's in Marion County?

MR. GILLESPIE: Yes.

MS. GRAY: Okay. Now, I'm going to use a home

value of 140; is that what they used when they did

your analysis for you?

MR. GILLESPIE: Yeah, I believe so.

MS. GRAY: Okay. And a payoff of 77,000?

MR. GILLESPIE: Yes.

MS. GRAY: Okay. I am trying to get my

numbers close to what they have so -- now, with

this reverse mortgage you're going to hear the term

Principal Limit. The principal limit is the

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maximum amount that HUD will allow you to borrow.

And to determine this amount they use a formula

which consists of the age of the youngest borrower,

the appraised value of the home, and the expected

interest rate.

So, for Ms. Gillespie your, your principal

limit would be -- now I'm going to use a 1 and a

half percent lender's margin which, is the higher,

so that I can -- let's see. And assuming a

35-dollar monthly fee for service, that would have

a principal limit of $106,000, is what you will

have available for the principal limit.

Now, what the lender typically does with this

loan is they roll the closing costs back into the

loan, so that you should not have any out of pocket

expenses. So from that principal limit they're

going to deduct your monthly service fee set aside.

Do you see that on your comparison that you have

there, does it say service fee?

MR. GILLESPIE: Well, I don't have a

comparison per se. What I have is 2 percent of

the -- 2 percent for the bank and 2 percent for the

FHA mortgage.

MS. GRAY: Uh-huh.

MR. GILLESPIE: 3,700 in closing costs and

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MS. GRAY: That fee could vary. And using $35

a month I am showing around $5,300 taken out.

MR. GILLESPIE: Yes, uh-huh.

MS. GRAY: What are they showing her principal

limit to be before anything is taken out?

MR. GILLESPIE: I don't have that figure.

MS. GRAY: You don't? Okay. If they take

that out that leaves you available principal limit

of about 100,000. And then from that they're going

to deduct your mortgage insurance premium.

Now, that particular cost is set by HUD. So

it's going to be the same from one lender to

another. And that is 2 percent of your home

appraised value. And then your origination fee,

now this is the lender's fee for making the loan.

The maximum the lender can charge is 2 percent of

the home's appraised value. Some lenders charge

the full 2 percent and some do not. So that fee

can vary from one lender to another. And now let's

see, you have your other costs; I'm coming up with

about 4,100, but that's your third party costs.

Now, after all those are taken out I show a

net principal limit of around 91,000. And from

that they will deduct your 77,000 dollar payoff on

your mortgage. Which leaves you about 14,000 on

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the table, that you can have to do whatever you

want to.

MR. GILLESPIE: Uh-huh.

MS. GRAY: Now, my numbers are just estimates

for illustrative purposes. Your lender will give

you your actual figures, but it sounds like ours

are fairly close.

MR. GILLESPIE: Yeah, uh-huh.

MS. GRAY: Okay. Any questions on the cost or

fees, interest? The interest rate, let me go back

and tell you that there is two types of HECM's.

You have a Monthly Adjustable HECM, which usually

gives you the most cash, because you have a lower

lender's margin. And then there is a Annually

Adjustable HECM. Now, some lenders now are

offering a Fixed Rate HECM if you want to take all

the money out in one lump sum. So those are your

different choices on the interest part.

MR. GILLESPIE: There is a monthly adjustable,

a annual adjustable and a fixed rate?

MS. GRAY: Right. The only thing about the

fixed rate is there is no monthly, 10 year or line

of credit, it's just a lump sum option.

All right, any questions on this?

MR. GILLESPIE: Well, on the interest rate,

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what is the interest rate multiplied against? Is

it the principal lending limit?

MS. GRAY: The interest rate is going to be

applied to whatever you have actually borrowed.

MR. GILLESPIE: And that is the principal

lending limit?

MS. GRAY: That is -- well, that's going to be

how much ever -- for her it's going to be the net

principal limit, if she takes it out in a lump sum.

If not, it's going to be the payoff on her existing

mortgage plus the closing costs. And then let's

say she takes that extra 14,000 and she puts it in

a line of credit, then that will actually grow, but

the interest won't be charged on that amount, just

on what she actually takes out.

MR. GILLESPIE: All right, so the net

principal lending limit in this example that you

said is about 91,000?

MS. GRAY: Exactly, uh-huh.

MR. GILLESPIE: So the interest would be

charged on that 91,000?

MS. GRAY: Well, if she takes it all out at

one time.

MR. GILLESPIE: Let's say she takes, just for

the sake of illustration, that she takes it all

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out.

MS. GRAY: Then, yes, that would be correct.

MR. GILLESPIE: And what is the current

interest rate?

MS. GRAY: Right now the expected interest

rate -- now this is based on HECM monthly 150. And

that would be 5.17, that's what it is right now.

MR. GILLESPIE: Okay. So that's roughly 4,700

a year?

MS. GRAY: Yeah -- well, and it compounds, so

it's going to -- it's going to -- let me do an

amortization real quick, Neil. I'll send you an

amortization, too, so you can see how it --

MR. GILLESPIE: All right. So that 4,700 is

going to be added to the balance; is that right?

MS. GRAY: Uh-huh.

MR. GILLESPIE: Every year, like you say, it

compounds.

MS. GRAY: It compounds, exactly.

MR. GILLESPIE: So how does that ever -- how

does the house ever increase more than that amount?

MS. GRAY: Well, your house, you know -- you

mean the value of the home?

MR. GILLESPIE: Yes.

MS. GRAY: Well, what we do when we do an

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amortization is we use a 4 percent appreciation

rate.

MR. GILLESPIE: Yes.

MS. GRAY: Which could be more than that some

years. You look at the past year or two in the

mortgage industry, might be less than that.

MR. GILLESPIE: Well, even using 4 percent,

that's still a 1 percent -- 1.17 percent loss.

MS. GRAY: Uh-huh. She's looking at -- hang

with me now just a second, I'm doing an

amortization. Okay. Now this is using, like I

say, 4 percent appreciation on the home value of

140. Okay. She should -- even with assuming she

takes the whole amount out in a lump sum -- now why

didn't I -- she should maintain positive equity in

the home for quite sometime because keep in mind,

her beginning balance is going to be around 91,000,

but her home value is around 140.

MR. GILLESPIE: I see.

MS. GRAY: So even with interest being accrued

and compounding, she's got a larger amount for her

home value that's going to be adjust -- you know,

adjusted, whatever the factor is, 4 percent. Could

be 6 percent one year and 2 the next, it's just

going to, you know, it's hard to say. We usually

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use 4 percent.

MR. GILLESPIE: Thank you for pointing that

out.

MS. GRAY: But I think that might be why, it

does maintain positive equity.

MR. GILLESPIE: Thank you for pointing that

out.

MS. GRAY: Sure. Sure. Matter of fact, in --

let me see something right quick. Okay. Let's

look at year 10. Okay. In year 10 her balance on

this loan will be around $150,000. And her home

value will be 207,000.

MR. GILLESPIE: 207 minus 150.

MS. GRAY: Uh-huh.

MR. GILLESPIE: Equity of 57.

MS. GRAY: Uh-huh.

MR. GILLESPIE: Okay.

MS. GRAY: Yeah. That part -- I'll send you a

printout of that.


MS. GRAY: Okay. Any other questions for me,

Neil?

MR. GILLESPIE: No, no, I don't think so.

MS. GRAY: Okay. Penelope, did you have any

questions?

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MRS. GILLESPIE: No, I don't.

MS. GRAY: Okay. All right. The next part of

this session will address other options and

resources that may be useful when considering a

reverse mortgage. Some State and Local government

agencies offer low cost reverse mortgages to

seniors. Eligibility criteria may vary. These

loans are usually for low to moderate income.

These are called Public Sector Reverse Mortgages.

Although these loans usually cost less than a

regular reverse mortgage, they are very restrictive

in terms of what the funds can be used for, and

they are not available in all areas. Some examples

of Public Sector Loans would be the deferred

payment loan for home improvements and repairs, the

property tax deferral loans for repayment of

property taxes, and long, excuse me, single purpose

state offer reverse mortgages, for longterm care

and medical costs. For more information on these

loans please contact your Local or State Housing

Authority.

Many homeowners are eligible for Local, State

or Federal programs that may allow them to save

money on expenses. The Area Agency on Aging is a

resource to help find health, financial and social

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service programs. For more information on the Area

Agency on Aging you can contact them toll free at

1-800-677-1116, or by visiting their website at

www.eldercare.gov.

Homeowners who have access to the internet can

use a quick, easy, confidential service from the

National Counsel on Aging, which uses a

questionnaire to help instantly identify programs

for which they may be eligible. That website is

www.benefitscheckup.org.

And finally, you have the Sale Leaseback and

the Time Sale option. This is where the buyer

provides the seller a lease to remain in the home,

either for life or until the lease is terminated by

the seller. These arrangements are not very common

and they can be complex. For more information on a

Sale Leaseback or a Time Sale, please consult a

real estate attorney or specialist.

Homeowners should not pay a fee to the lender

to obtain information. Some companies under the

guise of estate planning charge 10 percent of the

amount borrowed for these services. These costs

are in addition to the traditional costs associated

with obtaining a HECM loan.

After the mortgage closing you will have three

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business days to reconsider your decision. This is

called the Right of Recision Period. If for any

reason you change your mind and you decide you do

not want the loan, you can make a written request

to cancel. Only HUD approved lenders are able to

offer the FHA insured HECM. We do not endorse any

particular lender or loan product.

I'm going to send you some loan comparison

examples. Please note these are to be used for

education and illustrative purposes only. These

will provide you an estimation of the likely loan

proceeds and costs. However, only a HECM lender

can give you your accurate loan offer details.

If you would like to learn more about the

reverse mortgage I do recommend that you obtain a

copy of AARP's 52 page publication: Homemade

Money. It is available by calling toll free

1-800-209-8085. Or by visiting their website at

www.aarp.org.

And that concludes the reverse mortgage

presentation as required by HUD. Did you have any

questions for me or anything you would like for me

to go over in more detail with me?

MR. GILLESPIE: Mom, do you have any

questions?

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MRS. GILLESPIE: No, I don't. Sorry.

MR. GILLESPIE: Well, it sounded pretty good

to me. What was your name again, ma'am?

MS. GRAY: My name is Susan Gray.

MR. GILLESPIE: Susan Gray.

MS. GRAY: Yes. Would you like my toll free

number and extension?

MR. GILLESPIE: Yes, yes, uh-huh.

MS. GRAY: It is 1-800-873-2227.

MR. GILLESPIE: 2227.

MS. GRAY: Yes, sir. And my extension is

6636.

MR. GILLESPIE: 6636. And that's Susan

S-u-s-a-n.

MS. GRAY: Uh-huh.

MR. GILLESPIE: Gray, G-r-a-y.

MS. GRAY: That's correct, uh-huh.

MR. GILLESPIE: And if we have any questions

can we call you at this number?

MS. GRAY: You certainly can. If you get my

voice mail, just leave me a message and I'll call

you back. And I usually try to return calls during

that business day.

MR. GILLESPIE: All right. I think you have

answered all the questions. You helped me

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understand the interest, how that was added back to

the principal and how that related to the annual

projected property value increase.

MS. GRAY: Okay.

MR. GILLESPIE: Because I don't think I had a

clear understanding of that prior.

MS. GRAY: That was a really good question,

observation about the property value increase and

the interest rate. But it's just you got a -- a

lower principal limit, so your home should maintain

positive equity for a long time.

MR. GILLESPIE: Uh-huh. All right. I think

then that is everything.

MS. GRAY: Okay. Well, I sure hope things go

well for both of you and I will make sure we get a

copy of this faxed over to Liz. I'll send that to

her in just a few minutes. And then, now, the

originals, I will be mailing those to your home.

Once you get those originals you will both need to

sign those. And then your lender is going to ask

you for those originals.



MS. GRAY: Okay. Anything else I can do for

you today?

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MR. GILLESPIE: I guess the only other

question I have about the interest rate was over,

you know, the last 10 years or so has it been about

that same amount or has it gone lower or higher?

MS. GRAY: You know, Neil, I have had -- I

have not pulled a history of the T-bill rates.

It's the one year T-bill rate.


MS. GRAY: And I -- but I have been told that

it has remained fairly constant. It's probably one

of the more stable indexes. But I don't have a

history of it. I think you can probably pull that

off the internet.

MR. GILLESPIE: Yes.

MS. GRAY: A history of the T-bill rate. And

I keep saying I'm going to do that and I just

never, never do it, but I believe back in the 80's

it may have had some pretty -- a lot bigger

changes, but I would say the past 10 years it's

probably remained pretty constant.

MR. GILLESPIE: I see. All right. Well, it's

the T-bill rate and that is what I will look for.

MS. GRAY: Right. It's the one year.

MR. GILLESPIE: One year T-bill rate.

MS. GRAY: Uh-huh.

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MR. GILLESPIE: Okay. Sounds good.

MS. GRAY: And I don't have the information on

the fixed rate. That is still a relatively new

option and we don't have the information on that at

this time.

MR. GILLESPIE: Because under this it will be

this rate at 5.1, you know, approximately. That

will be adjusted in a monthly or annually?

MS. GRAY: That's going to be up to you how

you want to set that up. They can set it up, but

you can choose either option.

MR. GILLESPIE: But a fixed rate for the life

of the loan, that gives you more predicability.

MS. GRAY: It does. But I don't know what the

lender's margin, I don't know how they determine or

what they use to base the fixed rate on. We

haven't been given a lot of information other than

it is out there now.


MS. GRAY: But I am sure your lender can

advise you on that option and at least make you

aware of it so that you can, you know, decide if

that will help you or not. I just don't know too

much about it.


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MS. GRAY: Other than it's, you know, it's out

there now.


MS. GRAY: I know the annually adjustable HECM

you're going to have a higher lender's margin,

which at the end of the day gives you less money

out of your reverse mortgage than would a monthly

adjustable option. Which you will see that when I

send you these comparisons. I have the Fannie Mae

Home Keeper, the Monthly Adjustable and the

Annually Adjustable all next to each other, so you

can compare them and you can see the differences.

MR. GILLESPIE: All right. And what is this

margin you're talking about?

MS. GRAY: Okay. They're -- the lender is

allowed to charge a lender's margin, which is an

index that they attach to that one year T-bill

rate.

MR. GILLESPIE: And how much does that run?

MS. GRAY: The lender's margin can be as high

as 1 and a half percent. There may be a 2 percent

now. I really -- but I haven't been -- I don't

know a lot about it yet. But as far as I know 1

and a half percent is what we show as being the

highest.

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MS. GRAY: And it has been the case -- and let

me do something real quick here. That -- the 1 and

a half percent lender's margin actually netted you

more money at the end of the day. Let me do

something real quick and I'll tell you. If you

look at a HECM 1 percent lender's margin your -- I

believe that's the 14,000 was your -- based on

these numbers I have was what you would have on the

table.

MR. GILLESPIE: Yes, that's what you said.

MS. GRAY: Okay, if we look at a 1 percent

lender's margin, you would have around 13,000 --

well, 13,800 versus the 1 and a half percent. And

I am going to tell you why here in just a second,

why it's like that. The first time it's ever been

that way. The 150 gives you 14,073. So the

lender's margin in this example, the higher

lender's margin actually gives you more cash. And

I don't know that it wouldn't even be more with the

2 percent. I don't have a 2 percent, if they can

even do a 2 percent.

MR. GILLESPIE: Well, why would that be?

MS. GRAY: I'm fixing to tell you. I'm fixing

to tell you. Hang with me just one second. I'm

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trying to find my information on that. Okay. The

fact is that the expected interest rate has now

dropped so low that it is even below the floor that

was established for the factor table used in the

HUD formulas. This means that the HECM 150 has the

same or slightly higher principal limit than the

100. So --

MR. GILLESPIE: So the HECM 100 is really a

buyer's margin of 1 point?

MS. GRAY: 1 point.

MR. GILLESPIE: And a HECM 150 is a buyer's

margin of 1.1 and a half points.

MS. GRAY: That is right.

MR. GILLESPIE: And this 1 and a half points

is added to the interest rate.

MS. GRAY: To the T-bill rate.

MR. GILLESPIE: T-bill rate, uh-huh. I still

don't see how a higher interest rate leads to a

higher amount of money being able to take out.

MS. GRAY: And I'll be honest with you, Neil,

I don't understand the mathematical reasoning

either, other than it has something to do with the

floor that was used when they made up these factor

tables.

MR. GILLESPIE: And you said something

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about -- well, what do you mean by the floor?

MS. GRAY: Like I say, to get you really

detailed information I don't -- I don't have the

mathematical -- I just don't, I'm being honest with

you, I don't know. I just know that it's coming

out -- I would imagine if your lender could

probably give you more insight as to that

particular reason.

MR. GILLESPIE: Well, what do you mean by

floor?

MS. GRAY: It's just -- it just says the floor

that these factor tables have. I guess --

MR. GILLESPIE: In other words, you don't

really know what the floor is.

MS. GRAY: No, I do not know. I'm sorry.

MR. GILLESPIE: It's not the thing that's

covered with wall to wall carpet.

MS. GRAY: Yeah, yeah. I don't know what the

floor was when they developed the formula for this

program that we use, I don't know.

MR. GILLESPIE: And what did you -- you

mentioned something about these rates are lower

than what they had projected historically sometime

ago.

MS. GRAY: No, that the variance in the 150

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giving you more money than a 100 is something that

has -- it was never like that until around the

latter part of last year --


MS. GRAY: -- when the interest rate dropped.

MR. GILLESPIE: The interest rate dropped?

MS. GRAY: Yeah. I guess the T-bill rate

dropped lower than what they had built into the

formula. I really don't understand it. I just

know that whenever you factor a 150 up against a

100 you're getting more cash out.

MR. GILLESPIE: And the T --

MS. GRAY: It was never like that before.

MR. GILLESPIE: And the T-bill rate dropped

last year?

MS. GRAY: It dropped -- I mean, it goes up

and down every week.


MS. GRAY: It changes from week to week.

MR. GILLESPIE: I need to do a historical

search on that.

MS. GRAY: Yeah, check that out. Because, in

fact, I'll probably do that when we hang up today.

I'll probably check it out myself because I don't

have that information. I know that it's out there

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on the web, I just never pulled it up. I know it's

published ever week in the Wall Street Journal.


MS. GRAY: If you go to their website, and I

believe it's on Wednesdays that they publish that

T-bill rate.

MR. GILLESPIE: All right, I'll look for that.

MS. GRAY: So you can kind of, if you want to

follow it you can.

MR. GILLESPIE: All right. Did you have any

other questions, mom?

MRS. GILLESPIE: No, I don't, no.

MR. GILLESPIE: All right, well, we will look

for this stuff you're going to mail us.

MS. GRAY: Okay. I'll send you some things in

the mail. And like I say, be sure to hold on to

those certificates for your lender.

MR. GILLESPIE: We will.

MS. GRAY: Okay.

MR. GILLESPIE: All right. Thank you for

calling.

MS. GRAY: Sure. Thank you.

MRS. GILLESPIE: Thank you.

MS. GRAY: Thank you.

MR. GILLESPIE: Goodbye.

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MS. GRAY: Bye-bye.

(Whereupon, the above recording was

concluded.)

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37

C-E-R-T-I-F-I-C-A-T-E

STATE OF FLORIDA

COUNTY OF HILLSBOROUGH

I , Michael J . Borseth, Court Reporter

for the Circui t Court of the Thir teenth Jud ic ia l

Circui t of the State of Florida, in and for

Hillsborough County O HEREBY CERTIFY, tha t I was

authorized to and did t r ansc r ibe a tape/CD recording of

the proceedings and evidence in the above-styled cause,

as s ta ted in the caption hereto, and t ha t the foregoing

pages cons t i tu te an accurate t r anscr ip t ion of the tape

recording of said proceedings and evidence, to the bes t

of my ab i l i t y.

IN WITNESS WHEREOF, I have hereunto se t my hand

in the City of Tampa County of Hillsborough, State of

Florida, t h i s 14 Apri l 2013.

MICHAEL J . BORSETH, Court Reporter

hud-hecm reverse mortgage telephonic counseling session transcript

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