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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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MRS. GILLESPIE: Yes.
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?
MRS. GILLESPIE: Yes.
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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MRS. GILLESPIE: Yes.
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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MRS. GILLESPIE: Yes.
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.
MR. GILLESPIE: All right.
MRS. GILLESPIE: Okay.
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.
MR. GILLESPIE: All right.
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.
MR. GILLESPIE: Okay.
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.
MR. GILLESPIE: All right.
MRS. GILLESPIE: Okay.
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.
MR. GILLESPIE: Uh-huh.
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.
MR. GILLESPIE: Okay.
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.
MR. GILLESPIE: All right.
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MS. GRAY: Other than it's, you know, it's out
there now.
MR. GILLESPIE: Uh-huh.
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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MR. GILLESPIE: Uh-huh.
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 --
MR. GILLESPIE: I see.
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.
MR. GILLESPIE: I see.
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.
MR. GILLESPIE: All right.
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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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