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5/28/2018 reversemortgageatsbimbafinanceprojectreport-120612010135-phpapp02

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REVERSE MORTGAGE AT SBI BELGAUM

CHAPTER- 1

EXECUTIVE SUMMARY

BABASAB PATIL MBA FINANCE PROJECT Page 1


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EXECUTIVE SUMMARY

The title of the project is REVERSE MORTGAGE. Project was carried out at

S! "ai# $ra#ch% statio# road el&au". The "ai# o$jecti'e $ehi#d the stud( was to

u#dersta#d the co#cept of Re'erse Mort&a&e a#d its feasi$ilit( stud(.

Objectives ! t"e st#$%&

To stud( the or&a#i)atio#al structure.

To stud( the theoretical aspects of Re'erse Mort&a&e.

Re'erse Mort&a&e practices i# S!.

*easi$ilit( Stud(.

St'te(e)t ! t"e *+b,e(&

Stud( has $ee# ta+e# i# order to +#ow the feasi$ilit( of Re'erse Mort&a&e i# S!

"ai# $ra#ch% el&au".

Rese'+c" Met"$,%&

Sa"pli#& "ethod, - eli$erate /o#'e#ie#ce Sa"pli#&. *or selecti#& the sa"ple

for "( sur'e( two i"porta#t criteria were co#sidered o#e is that the a&e of the

respo#de#ts should "ore tha# 0 a#d the other criteria is that respo#de#t should

ow# a house with its title.

Sa"ple si)e ,- 23

BABASAB PATIL MBA FINANCE PROJECT Page


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ata collectio# "ethod

Pri"ar( data

4uestio##aire Perso#al i#ter'iew

O$ser'atio#s

Seco#dar( data

Records of S!

5our#als

6e$sites

Scope of stud(

el&au" cit(

Tools used for a#al(sis

SPSS

Graphs a#d /harts

Li(it'ti)s ! st#$%&

The li"itatio# of the stud( is lac+ of i#for"atio# $ei#& pro'ided $( the

staff of the $a#+ $ecause of the pri'ac( polic( of the $a#+. As for the sur'e( deli$erate

co#'e#ie#ce sa"pli#& is used% i# which the respo#de#ts are selected o# the $asis of

certai# criteria the sa"ple si)e is less a#d this is a#other li"itatio# of "( stud(.



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Fi)$i)s&

7 A# attracti'e optio# to the elderl( to fi#a#ce their co#su"ptio# #eeds o# their

ow#.

7 The loa# is &i'e# without a#( i#co"e% "edical or credit re8uire"e#ts criteria.

7 E#coura&e "ore people i# the wor+i#& populatio# to i#crease the proportio# of

their sa'i#&s i#'ested i# housi#&.

7 Re'erse "ort&a&e le#der i# the !#dia# "ar+et "ust proceed with cautio#.

7 The actual si)e of the re'erse "ort&a&e "ar+ets is #owhere #ear its esti"ated

pote#tial.

7 Out of 23 respo#de#ts o#l( 93: had so"e $asic +#owled&e a$out Re'erse

Mort&a&e.

7 ; people were willi#& to &o for Re'erse Mort&a&e out of 23 respo#de#ts.



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S#esti)s.

7 Educate people a$out re'erse "ort&a&e, - As $( the sur'e( ! ha'e fou#d out that

o#l( 93: of the respo#de#ts ha'e so"e $asic idea a$out re'erse "ort&a&e% so $(

this it ca# $e said that people are #ot educated a$out re'erse "ort&a&e. So ! would

su&&est the $a#+ to educate the people a$out re'erse "ort&a&e throu&h

ad'ertise"e#ts% co#ducti#& wor+shops a#d lectures o# re'erse "ort&a&e etc.

7 Ta+e respo#si$ilit( for the e


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CHAPTER- /

INTRO0UCTION TO BANIN2

SECTOR IN IN0IA



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I)t+$#cti) t B')3i) Sect+ i) I)$i'

a#+i#& i# !#dia ori&i#ated i# the first decade of 1@th ce#tur( with The Ge#eral a#+

of !#dia co"i#& i#to e


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The a#+ of e#&al% which later $eca"e the State a#+ of !#dia.At the $e&i##i#& of

the 3th ce#tur(% !#dia# eco#o"( was passi#& throu&h a relati'e period of sta$ilit(.

Arou#d fi'e decades ha'e elapsed si#ce the !#diaFs *irst war of !#depe#de#ce% a#d the

social% i#dustrial a#d other i#frastructure ha'e de'eloped. Atthat ti"e there were 'er(

s"all $a#+s operated $( !#dia#s% a#d "ost of the" were ow#ed a#d operated $(

particular co""u#ities. The $a#+i#& i# !#dia was co#trolled a#d do"i#ated $( the

preside#c( $a#+s% #a"el(% the a#+ of o"$a(% the a#+ of e#&al% a#d the a#+ of

Madras - which later o# "er&ed to for" the !"perial a#+ of !#dia% a#d !"perial a#+ of

!#dia% upo# !#diaFs i#depe#de#ce% was re#a"ed the State a#+ of !#dia. There were also

so"e e


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tur$ule#t% a#d it too+ toll of "a#( $a#+s which si"pl( collapsed despite the !#dia#

eco#o"( &ai#i#& i#direct $oost due to war-related eco#o"ic acti'ities. At least D9 $a#+s

i# !#dia failed duri#& the (ears 1D12 to 1D1@.

Post-independence

The partitio# of !#dia i# 1D9; had ad'ersel( i"pacted the eco#o"ies of Pu#ja$ a#d

6est e#&al% a#d $a#+i#& acti'ities had re"ai#ed paral()ed for "o#ths. !#diaFs

i#depe#de#ce "ar+ed the e#d of a re&i"e of the Caisse)-faire for the !#dia# $a#+i#&. The

Go'er#"e#t of !#dia i#itiated "easures to pla( a# acti'e role i# the eco#o"ic life of the

#atio#% a#d the !#dustrial Polic( Resolutio# adopted $( the &o'er#"e#t i# 1D9@

e#'isa&ed a "i


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lar&e e"plo(er% a#d a de$ate has e#sued a$out the possi$ilit( to #atio#ali)e the $a#+i#&

i#dustr(. !#dira Ga#dhi% the-the# Pri"e Mi#ister of !#dia e


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&i'e# 'oti#& ri&hts which could e


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a#d 21 forei $a#+s. The( ha'e a co"$i#ed #etwor+ of o'er ?2%333 $ra#ches a#d

1;%333 ATMs. Accordi#& to a report $( !/RA Ci"ited% a rati#& a&e#c(% the pu$lic sector

$a#+s hold o'er ;? perce#t of total assets of the $a#+i#& i#dustr(% with the pri'ate a#d

forei $a#+s holdi#& 1@.: a#d 0.?: respecti'el(.



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CHAPTER- 4

INTRO0UCTIONSTATE BAN OF

IN0IA



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I)t+$#cti) St'te B')3 ! I)$i'

Ev,#ti) ! SBI

The ori&i# of the State a#+ of !#dia &oes $ac+ to the first decade of the #i#etee#th

ce#tur( with the esta$lish"e#t of the a#+ of /alcutta i# /alcutta o# 5u#e 1@30. Three

(ears later the $a#+ recei'ed its charter a#d was re-desied as the a#+ of e#&al H

5a#uar( 1@3DI. A u#i8ue i#stitutio#% it was the first joi#t-stoc+ $a#+ of ritish !#dia

spo#sored $( the Go'er#"e#t of e#&al. The a#+ of o"$a( H1? April 1@93I a#d the

a#+ of Madras H1 5ul( 1@92I followed the a#+ of e#&al. These three $a#+s re"ai#ed

at the ape< of "oder# $a#+i#& i# !#dia till their a"al&a"atio# as the !"perial a#+ of

!#dia o# ; 5a#uar( 1D1.

Pri"aril( A#&lo-!#dia# creatio#s% the three preside#c( $a#+s ca"e i#to e


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deposit $a#+i#& was also a# i##o'atio# $ecause the practice of accepti#& "o#e( for

safe+eepi#& Ha#d i# so"e cases% e'e# i#'est"e#t o# $ehalf of the clie#tsI $( the

i#di&e#ous $a#+ers had #ot spread as a &e#eral ha$it i# "ost parts of !#dia. ut% for a

lo#& ti"e% a#d especiall( upto the ti"e that the three preside#c( $a#+s had a ri&ht of #ote

issue% $a#+ #otes a#d &o'er#"e#t $ala#ces "ade up the $ul+ of the i#'esti$le resources

of the $a#+s.

The three $a#+s were &o'er#ed $( ro(al charters% which were re'ised fro" ti"e to

ti"e. Each charter pro'ided for a share capital% four-fifth of which were pri'atel(

su$scri$ed a#d the rest ow#ed $( the pro'i#cial &o'er#"e#t. The "e"$ers of the $oard

of directors% which "a#a&ed the affairs of each $a#+% were "ostl( proprietar( directors

represe#ti#& the lar&e Europea# "a#a&i#& a&e#c( houses i# !#dia. The rest were&o'er#"e#t #o"i#ees% i#'aria$l( ci'il ser'a#ts% o#e of who" was elected as the

preside#t of the $oard.

B#si)ess

The $usi#ess of the $a#+s was i#itiall( co#fi#ed to discou#ti#& of $ills of e


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#i#etee#th ce#tur(. All co""odities% i#cludi#& tea% su&ar a#d jute% which $e&a# to $e

fi#a#ced later% were either pled&ed or h(pothecated to the $a#+.

e"a#d pro"issor( #otes were sied $( the $orrower i# fa'our of the &uara#tor%

which was i# tur# e#dorsed to the $a#+. Ce#di#& a&ai#st shares of the $a#+s or o# the

"ort&a&e of houses% la#d or other real propert( was% howe'er% for$idde#.!#dia#s were the

pri#cipal $orrowers a&ai#st deposit of /o"pa#(Fs paper% while the $usi#ess of discou#ts

o# pri'ate as well as salar( $ills was al"ost the e


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6hile the a#+ of e#&al had ei&htee# $ra#ches i#cludi#& its head office% seaso#al

$ra#ches a#d su$ a&e#cies% the a#+s of o"$a( a#d Madras had fiftee# each.

P+esi$e)c% B')3s Act

The preside#c( a#+s Act% which ca"e i#to operatio# o# 1 Ma( 1@;0% $rou&ht the

three preside#c( $a#+s u#der a co""o# statute with si"ilar restrictio#s o# $usi#ess. The

proprietar( co##ectio# of the Go'er#"e#t was% howe'er% ter"i#ated% thou&h the $a#+s

co#ti#ued to hold char&e of the pu$lic de$t offices i# the three preside#c( tow#s% a#d the

custod( of a part of the &o'er#"e#t $ala#ces. The Act also stipulated the creatio# of

Reser'e Treasuries at /alcutta% o"$a( a#d Madras i#to which su"s a$o'e the specified

"i#i"u" $ala#ces pro"ised to the preside#c( $a#+s at o#l( their head offices were to $e

lod&ed. The Go'er#"e#t could le#d to the preside#c( $a#+s fro" such Reser'e

Treasuries $ut the latter could loo+ upo# the" "ore as a fa'our tha# as a ri&ht.

The decisio# of the Go'er#"e#t to +eep the surplus $ala#ces i# Reser'e

Treasuries outside the #or"al co#trol of the preside#c( $a#+s a#d the co##ected decisio#

#ot to &uara#tee "i#i"u" &o'er#"e#t $ala#ces at #ew places where $ra#ches were to $e

ope#ed effecti'el( chec+ed the &rowth of #ew $ra#ches after 1@;0. The pace of

e


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the fi#a#ci#& of practicall( e'er( tradi#&% "a#ufacturi#& a#d "i#i#& acti'it( i# the su$-

co#ti#e#t. 6hile the a#+s of e#&al a#d o"$a( were e#&a&ed i# the fi#a#ci#& of

lar&e "oder# "a#ufacturi#& i#dustries% the a#+ of Madras we#t i#to the fi#a#ci#& of

lar&e "oder# "a#ufacturi#& i#dustries% the a#+ of Madras we#t i#to the fi#a#ci#& of

s"all-scale i#dustries i# a wa( which had #o parallel elsewhere. ut the three $a#+s were

ri&orousl( e


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auctio#s co#ducted $( the Reser'e a#+ o# $ehalf of the Go'er#"e#t. The esta$lish"e#t

of the Reser'e a#+ si"ulta#eousl( saw i"porta#t a"e#d"e#ts $ei#& "ade to the

co#stitutio# of the !"perial a#+ co#'erti#& it i#to a purel( co""ercial $a#+. The earlier

restrictio#s o# its $usi#ess were re"o'ed a#d the $a#+ was per"itted to u#derta+e

forei e


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a#+ of !#dia had till the# co#fi#ed their operatio#s to the ur$a# sector a#d were #ot

e8uipped to respo#d to the e"er&e#t #eeds of eco#o"ic re&e#eratio# of the rural areas. !#

order% therefore% to ser'e the eco#o"( i# &e#eral a#d the rural sector i# particular% the All

!#dia Rural /redit Sur'e( /o""ittee reco""e#ded the creatio# of a state-part#ered a#d

state-spo#sored $a#+ $( ta+i#& o'er the !"perial a#+ of !#dia% a#d i#te&rati#& with it%

the for"er state-ow#ed or state-associate $a#+s. A# act was accordi#&l( passed i#

Parlia"e#t i# Ma( 1D?? a#d the State a#+ of !#dia was co#stituted o# 1 5ul( 1D??.

More tha# a 8uarter of the resources of the !#dia# $a#+i#& s(ste" thus passed u#der the

direct co#trol of the State. Cater% the State a#+ of !#dia HSu$sidiar( a#+sI Act was

passed i# 1D?D% e#a$li#& the State a#+ of !#dia to ta+e o'er ei&ht for"er State-

associated $a#+s as its su$sidiaries Hlater #a"ed AssociatesI.The State a#+ of !#dia was

thus $or# with a #ew se#se of social purpose aided $( the 9@3 offices co"prisi#&

$ra#ches% su$ offices a#d three Cocal ead Offices i#herited fro" the !"perial a#+. The

co#cept of $a#+i#& as "ere repositories of the co""u#it(Fs sa'i#&s a#d le#ders to

creditworth( parties was soo# to &i'e wa( to the co#cept of purposeful $a#+i#& su$

ser'i#& the &rowi#& a#d di'ersified fi#a#cial #eeds of pla##ed eco#o"ic de'elop"e#t.

The State a#+ of !#dia was desti#ed to act as the pacesetter i# this respect a#d lead the

!#dia# $a#+i#& s(ste" i#to the e


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O+')i5'ti) st+#ct#+e ! t"e SBI ('i) b+')c"6 Be,'#(


ASS!STAT GEERAC MAAGER

/!E*

MAAGER

MAAGER

HA J AI

MAAGER

HI

/!E*

MAAGER H/AI

OMEST!/

R! J T!ME

EPOS!T

EPTL

MAAGER H*OI

EPTL

MAAGER H*OI

EPARTMET

MAAGER

H/ASI

EPTL

MAAGER

H/ASI

EPTL

MAAGER

HSLSTEMI

EPTL

MAAGER

H!TERAKI

EP. MAAGERHGEERAC A>/I

EP.

MAAGER

HGOVT A>/I


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CHAPTER- 7

REVERSE MORT2A2E

BABASAB PATIL MBA FINANCE PROJECT Page


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Reve+se M+t'e

I)t+$#cti) t Reve+se M+t'e

#til rece#tl(% there were two "ai# wa(s to &et cash fro" (our ho"e the first o#e

is (ou could sell (our ho"e% $ut the# (ou would ha'e to "o'e a#d the seco#d o#e is

(ou could $orrow a&ai#st (our ho"e% $ut the# (ou would ha'e to "a+e "o#thl( loa#

repa("e#ts. ow there is a third wa( of &etti#& "o#e( fro" (our ho"e that does #ot

re8uire (ou to lea'e it or to "a+e re&ular loa# repa("e#ts that is Re'erse Mort&a&e. A

re'erse "ort&a&e is a loa# a&ai#st (our ho"e that (ou do #ot ha'e to pa( $ac+ for as lo#&

as (ou li'e there. 6ith a re'erse "ort&a&e% (ou ca# tur# the 'alue of (our ho"e i#to cash

without ha'i#& to "o'e or to repa( a loa# each "o#th. o "atter how this loa# is paid

out to (ou% (ou t(picall( do#t ha'e to pa( a#(thi#& $ac+ u#til (ou die% sell (our ho"e% or

per"a#e#tl( "o'e out of (our ho"e. Re'erse "ort&a&es is a powerful tool to help

eli&i$le ho"eow#ers o$tai# ta


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The le#der "a+es pa("e#ts to the ow#er% or arra#&es a li#e of credit that is

a'aila$le for the ow#ers use. This differs fro" a traditio#al "ort&a&e used to purchase or

refi#a#ce a ho"e i# which (ou "ust "a+e "o#thl( "ort&a&e pa("e#ts to the $a#+.

To 8ualif( for "ost loa#s% the le#der chec+s the applica#ts i#co"e to see how

"uch he ca# afford to pa( $ac+ each "o#th. ut with a re'erse "ort&a&e% he does#t

ha'e to "a+e "o#thl( repa("e#ts. So the ow#er or the applica#t does#t #eed a

"i#i"u" a"ou#t of i#co"e to 8ualif( for a re'erse "ort&a&e. e could ha'e #o i#co"e%

a#d still $e a$le to &et a re'erse "ort&a&e. 6ith "ost ho"e loa#s% if a perso# fails to

"a+e his "o#thl( repa("e#ts% he could lose his ho"e. ut with a re'erse "ort&a&e% he

does#t ha'e a#( "o#thl( repa("e#ts to "a+e. So he ca#t lose his ho"e $( faili#& to

"a+e the". Re'erse "ort&a&es t(picall( re8uire #o repa("e#t for as lo#& as the ow#er

or co-ow#er li'e i# the ho"e. So re'erse "ort&a&e differ fro" other ho"e loa#s i# these

i"porta#t wa(s% the first o#e is the applica#t do#t #eed a# i#co"e to 8ualif( for a

re'erse "ort&a&e a#d the seco#d o#e is he do#t ha'e to "a+e "o#thl( repa("e#ts o# a

re'erse "ort&a&e.

Re'erse "ort&a&es ha'e a differe#t purpose tha# forward "ort&a&es do. 6ith aforward "ort&a&e% (ou use (our i#co"e to repa( de$t% a#d this $uilds up e8uit( i# (our

ho"e. ut with a re'erse "ort&a&e% (ou are ta+i#& the e8uit( out i# cash. So with a

re'erse "ort&a&e (our de$t i#creases a#d (our ho"e e8uit( decreases. !ts just the

opposite% or re'erse of traditio#al "ort&a&e. uri#& a re'erse "ort&a&e% the le#der se#ds

(ou cash% a#d (ou "a+e #o repa("e#ts. So the a"ou#t (ou owe H(our de$tI &ets lar&er as

(ou &et "ore cash a#d "ore i#terest is added to (our loa# $ala#ce. As (our de$t &rows%

(our e8uit( shri#+s% u#less (our ho"es 'alue is &rowi#& at a hi&h rate. 6he# a re'erse

"ort&a&e $eco"es due a#d pa(a$le% (ou "a( owe a lot of "o#e( a#d (our e8uit( "a( $e

'er( s"all. !f (ou ha'e the loa# for a lo#& ti"e% or if (our ho"es 'alue decreases% there

"a( #ot $e a#( e8uit( left at the e#d of the loa#. !# short% a re'erse "ort&a&e is a risi#&

de$t% falli#& e8uit( t(pe of



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deal. ut that is e


26/84


0i!!e+e)ce bet8ee) t+'$iti)', (+t'e ')$ +eve+se (+t'e

Ite( M+t'e Reve+se M+t'e

Purpose of loa# to purchase a ho"e to &e#erate i#co"e

efore closi#& $orrower has #o e8uit( i#

the ho"e

$orrower has a lot of

e8uit( i# the ho"e

At closi#& $orrower owes a lot% a#d

has little e8uit(

$orrower owes 'er( little%

a#d has lot of e8uit(

uri#& the loa#%

$orrower...

"a+es "o#thl( pa("e#ts

to the le#der

loa# $ala#ce &oes dow#

e8uit( &rows

recei'es pa("e#ts

fro" the le#der

loa# $ala#ce rises

e8uit( decli#es

At e#d of loa#%

$orrower...

owes #othi#&

has su$sta#tial e8uit(

owes su$sta#tial

a"ou#t

has "uch less%

little% or #o e8uit(

T(pe of

Tra#sactio#

*alli#& e$t- Risi#&

E8uit(

Risi#& e$t- *alli#&

E8uit(



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Hist+% ')$ O+ii) ! +eve+se (+t'e

The histor( of re'erse "ort&a&e &oes $ac+ to 1D01.!# the (ear 1D01 the first re'erse

"ort&a&e loa# was "ade $( elso# a(#es of eeri#& Sa'i#&s J Coa# HPortla#d% MEI

to ellie Lou#&% the widow of his hi&h school foot$all coach.!# the (ear 1D02 the first

propert( ta< deferral pro&ra" offered i# Ore&o#% fi#a#ced throu&h Pu$lic E"plo(ees

Retire"e#t *u#d.!# 1D;3 Sur'e( research o# a Bhousi#& a##uit( pla#B was co#ducted i#

Cos A#&eles $( Lu#&-Pi#& /he# of /CA. !# 1D;? Tech#ical "o#o&raph o# B/reati#&

ew *i#a#cial !#stru"e#ts for the A&edB authored $( 5ac+ M. Gutte#ta& of The

6harto# School.!# 1D;; *irst RM loa# pro&ra"% BE8ui-Pa(B% i#troduced $( Arlo S"ith

of road'iew Sa'i#&s J Coa# i# !#depe#de#ce% O.!# 1D;@ BRe'erse Mort&a&e Stud(ProjectB fu#ded $( 6isco#si# ureau o# A&i#&% directed $( Ke# Schole# a#d *irst

statewide deferred pa("e#t loa# pro&ra" offered $( 6! ept of Cocal Affairs a#d

e'elop"e#t% desied $( 6illia" Per+i#s.!# 1D;D *irst #atio#al BRe'erse Mort&a&e

e'elop"e#t /o#fere#ceBspo#sored $( 6! ureau o# A&i#& i# Madiso#% 6! o# Ma(

1-.Sa# *ra#cisco e'elop"e#t *u#dFs BRe'erse A##uit( Mort&a&eHRAMIB pro&ra"

fu#ded $( *ederal o"e Coa# a#+ oard% fou#datio#s% a#d 6! ureau o# A&i#&=

directed $( o# Ral(a .

!# 1D@3 #loc+i#& o"e E8uit( for the Elderl(% edited $( Ke# Schole# a#d Lu#&-

Pi#& /he#% pu$lished $( alli#&er H/a"$rid&e% MAI .Two-(ear Bo"e E8uit(

/o#'ersio# ProjectB fu#ded $( .S.Ad"i#istratio# o# A&i#&% directed $( Ke# Schole#

*A re'erse "ort&a&e i#sura#ce proposal $( Ke# Schole#e#dorsed $( housi#& pre-

co#fere#ce to 1D@1 6hite ouse /o#fere#ce o# A&i#&.!# 1D@1 atio#al /e#ter for

o"e E8uit( /o#'ersio# H/E/I i#corporated as i#depe#de#t% #o#-profit or&a#i)atio#

i# Madiso#% 6!= directed $( Ke# Schole# . S. ouse Select /o""ittee o# A&i#& hears

first /o#&- ressio#al testi"o#( o# re'erse "ort&a&es% $( Ke# Schole# 6hite ouse

/o#fere#ce o# A&i#& e#dorses proposal for *A RM i#sura#ce% reco""e#di#& that Bthe

*A should de'elop a# i#sura#ce pro&ra" for re'erse "ort&a&e loa#sB ewswee+%

Ti"e% .S. ews% Good Mor#i#& A"erica

BABASAB PATIL MBA FINANCE PROJECT Page ;


28/84


pro'ide first #atio#al "edia e


29/84


!# 1D@? spo#sors co#fere#ce o# ho"e e8uit( co#'ersio#.. S. Se#ate J ouse

A&i#& /o""ittees spo#sor joi#t $riefi#& sessio# for /o#&ressio#al taffers% "oderated $(

Ke# Schole# Ci#e-of-credit de'elop"e#t project i#itiated $( #ited Se#iors ealth

/ooperati'e H/I% directed $( ro#w(# elli#& *irst Bsplit-ter"B RM offered $( /T

ousi#& *i#a#ce A&e#c(% desied $( Stuart 5e##i#&s a#d Ar#old Pritchard . !# 1D@0

Bo"e E8uit( !#for"atio# /e#terB esta$lished $( AARP% directed $( Katri#+a S"ith

Sloa# A"erica# o"estead e


30/84


HSa# *ra#ciscoI offers shared-appreciatio# pla# throu&hout /A releases proposed

re&ulatio#s for *A re'erse "ort&a&e i#sura#ce pro&ra" *a##ie Mae a##ou#ces

i#te#tio# to purchase re'erse "ort&a&es i#sured $( *A . S. Ad"i#istratio# o# A&i#&

a##ou#ces cooperati'e a&ree"e#t with to spo#sor trai#i#& of re'erse

"ort&a&e cou#selors.

!# 1D@DBA *i#a#cial Guide to Re'erse Mort&a&esB $( Ke# Schole# for /E/

i#troduces total loa# cost rate "ethod for a#al()i#& costs selects ?3 le#ders $(

lotter( to "a+e first *A-i#sured re'erse "ort&a&es. Software for deter"i#i#& re'erse

"ort&a&e loa# ad'a#ces de'eloped $( *A a#d "ade a'aila$le to the pu$lic 6e#do'er

*u#di#& H/I a##ou#ces pro&ra" for ser'ici#& *A-i#sured re'erse "ort&a&es

releases Bo"e E8uit( /o#'ersio# Mort&a&eB HE/MI *ourtee# -da( E/Mcou#selor trai#i#& sessio#s co#ducted $( ro#w(# elli#& HAARPI a#d Ke# Schole#

H/E/I for *A /apital oldi#& e21>D?= re8uires disclosure of total loa# cost J de'elop"e#t of e8uit( reser'e

optio# AARP pu$lishes BModel State Caw o# Re'erse Mort&a&esB pu$lishes B*A

o"e E8uit( /o#'ersio# !#sura#ce e"o#stratio#, A Model to /alculate orrower

Pa("e#ts a#d !#sura#ce Ris+%B $( Edward S)("a#os+i 5r.



31/84


!# 1DD1 Cos A#&eles /ou#t( E"plo(ees Retire"e#t Associatio# spo#sors

i#for"atio# se"i#ar o# re'erse "ort&a&es as a pote#tial fu#d i#'est"e#t a#d "e"$er

$e#efit AARP pu$lishes 2rd editio# of Bo"e-Made Mo#e(B $( Ke# Schole#=

distri$utio# tops ?3%333 ew co#su"er &uide de'eloped $( *ederal Trade /o""issio#

i# part#ership with /E/ a#d AARP pu$lishes #ew re&ulatio#s "a+i#& re'erse

"ort&a&e i#sura#ce a'aila$le to all *A le#ders !#teri" report o# *A pro&ra" $(

5udith V. Ma( Retire"e#t !#co"e O# The ouse, /ashi#& !# O# Lour o"e 6ith A

BRe'erseB Mort&a&e% *irst lifeti"e re'erse "ort&a&e pro&ra"s proposed $( Peter

Ma)o#as of o"efirst HSa# *ra#ciscoI a#d Ro$ert ach"a# of o"e E8uit( Part#ers

H!r'i#e% /AI *MA e


32/84


!# 1DD2 Tra#sa"erica a##ou#ces re'erse "ort&a&e product i#cludi#& deferred

a##uit( fro" MetCife *a##ie Mae co#'e#es rou#dta$le o# de'elopi#& a co#'e#tio#al

re'erse "ort&a&e /apital oldi#& disco#ti#ues Bo"ear#i#&sB pla# /E/ prepares

report o# ta


33/84


Mort&a&es $( Ke# Schole#.AARP pu$lishes ?th editio# of Bo"e-Made Mo#e(B $( Ke#

Schole#= distri$utio# tops 933%333 E/M pro&ra" lapses at e#d of federal fiscal (ear

AARP spo#sors #atio#al co#fere#ce o# re'erse "ort&a&es i# M o# 11>19-1? *a##ie

Mae a##ou#ces Bo"eKeeperB pla#= "edia co'era&e i#cludes fro#t-pa&e% a$o'e-the-fold

article i# SA Toda( *A /o""issio#ers Award rese#ted $( icolas Retsi#as to Ke#

Schole# for his wor+ o# re'erse "ort&a&es .

!# 1DD0 E/M pro&ra" re-authori)ed o# 5a#uar( 0% 1DD0 *a##ie Mae $e&i#s

le#der trai#i#& for Bo"e KeeperB /E/ issues Seco#d Editio# of Lour ew

Retire"e#t est E&&, A /o#su"er Guide to the ew Re'erse Mort&a&es $( Ke#

Schole#% artford Cife tests a##uit( co"ple"e#t to E/M a#d *a##ie Mae re'erse

"ort&a&es i#itiates cou#selor trai#i#& 'ia satellite TV.

!# 1DD; AARP releases co#su"er 'ideotapes writte# $( Ke# Schole# featuri#&

Schole# a#d ro#w(# elli#& AARP spo#sors cou#selor trai#i#& 'ia satellite TV

featuri#& elli#& a#d Schole# Referral fee sca"s de#ou#ced $( AARP% % *a##ie

Mae ousehold Se#ior Ser'ices disco#ti#ues B*ore'er LoursB pla# AARP a##ou#ces

cou#selor support fu#d capitali)ed $( a#d *a##ie Mae /E/ i#itiates BpreferredB

le#der a#d cou#selor pro&ra" a#d releases BRe'erse Mort&a&e /ou#selorB software !$is

Software HS*I releases BRe'erse Mort&a&e Ori&i#atorB Te


34/84


we$site.Tra#sa"erica o"e*irst HS*I disco#ti#ues ori&i#ati#& its proprietar(

BouseMo#e(B loa#s a#d ser'ici#& #ew E/M a#d o"eKeeper loa#s *ederal Reser'e

clarifies i#clusio# of a##uities i# TAC/ disclosures .

!# 1DDD ei&h$orhood Rei#'est"e#t /orporatio# HR/I pro'ides E/M trai#i#& i#

cooperatio# with AARP Te


35/84


T"e Be)e!its ! ' Reve+se M+t'e

Ta


36/84


Reve+se (+t'e i) t"e US

Re'erse "ort&a&e was i#troduced i# the S i# the late 1D@3s. Si#ce the#% the

#u"$er of people pled&i#& their propert( for re'erse "ort&a&e has $ee# o# the rise. Ta+e

a loo+ at the #u"$ers.!# 1DD3% there were just 1?; people who had opted for this product.

!# 330% ?D%;@1 people opted for re'erse "ort&a&e. The co#cept i# !#dia is si"ilar to the

o#e i# the S.To $e eli&i$le for re'erse "ort&a&e% (ou should $e at least 0 (ears old a#d

ow# a propert(.B!# a re'erse "ort&a&e% (ou $orrow "o#e( usi#& (our ho"e as collateral

$ut there are#Ft a#( pa("e#ts. The i#terest that is char&ed is added to the $ala#ce owed.

That "ea#s (ou owe "ore each "o#th. 6he# (ou die or whe# the house is sold% the de$t

&ets paid off%B sa(s 5effre( . Voudrie% /*P% /EPP% preside#t% Ce&ac( Pla##i#& Group

!#c.O#ce (ou pled&e (our propert( for re'erse "ort&a&e% (ou will recei'e fu#ds as lo#&

as (ou li'e i# that propert(. There are three "ai# sources that ho"e ow#ers ca# tap i# the

S. O#e of these is the federall( i#sured o"e E8uit( /o#'ersio# Mort&a&e%

ad"i#istered $( the epart"e#t of ousi#& a#d r$a# e'elop"e#t.The "ajorit( of

people opti#& for re'erse "ort&a&e &o for E/M as it offers the $est i#terest rates a#d

loa# a"ou#t. owe'er% if the( opt for &o'er#"e#t-i#sured re'erse "ort&a&es% the# the(

will also ha'e to pa( a fee for *ederal ousi#& Ad"i#istratio# i#sura#ce that will protect

a&ai#st the 'alue of the ho"e &oi#& $elow the loa# a"ou#t.There are also si#&le-purpose

re'erse "ort&a&es% offered $( state or local &o'er#"e#t a&e#cies for a specific reaso#

a#d% lastl(% proprietar( re'erse "ort&a&es offered $( $a#+s% "ort&a&e co"pa#ies a#d

other pri'ate le#ders.People pla##i#& a propert( re'erse "ort&a&e ha'e to u#der&o a free

"ort&a&e cou#selli#& fro" a# i#depe#de#t &o'er#"e#t-appro'ed Bhousi#& a&e#c(B.

Re'erse "ort&a&es offered $( other fi#a#cial i#stitutio#s also re8uire i#di'iduals tou#der&o si"ilar cou#selli#&. BSe#iors li+e this product $ecause it allows the" to sta( i#

their ho"es a#d the( are #ot re8uired to "a+e "o#thl( pa("e#ts%B sa(s Voudrie.

owe'er% a co#cer# a"o#& "ost elders is the risi#& i#terest rates% which i#creases the

cost of the loa#.



37/84


Csts 8"ic" '+e t be i)c#++e$ 8"i,e i) !+ Reve+se M+t'e

Processi#& or ori&i#atio# costs, - These are the costs which co'ers the

$a#+s operati#& e


38/84


Ris3s t RM Le)$e+s

There are so"e ris+s faced $( a Re'erse Mort&a&e le#der. These ris+s are at the heart ofthe relucta#ce of le#ders to &et i#to re'erse "ort&a&e le#di#&% i# the a$se#ce of pu$lic

polic( support. The pri#cipal a#d u#i8ue pro$le" faci#& the le#der is that of predicti#&

accu"ulated future loa# $ala#ces u#der a re'erse "ort&a&e% at the ti"e of ori&i#atio#.

The u#i8ue#ess is $ecause re'erse "ort&a&e is a risi#& de$t i#stru"e#t. Si#ce re'erse

"ort&a&e is a #o#-recourse loa#% the le#der has #o access to other properties% if a#(% of

the $orrower. E'e# if the collateral propert( appreciates i# 'alue% it "i&ht still $e lower

tha# the loa# $ala#ce at the ti"e of disposal of the propert(. The followi#& are the $asic

sources of this ris+,-

M+t',it% Ris3s&-

This is the ris+ that a re'erse "ort&a&e $orrower li'es lo#&er tha# a#ticipated. The le#der

"i&ht &et hit $oth wa(s he has to "a+e a##uit( pa("e#ts for a lo#&er period= a#d the

e'e#tual 'alue realised "i&ht decli#e. owe'er% this ris+ is usuall( di'ersifia$le% if the

re'erse "ort&a&e le#der has a lar&e pool of such $orrowers. Possi$ilit( of ad'erse

selectio# is cou#ter$ala#ced $( the possi$ilit( that e'e# $orrowers with poor health "a(

$e attracted $( Re'erse Mort&a&es credit li#e or lu"p su" optio#s. owe'er% there is #o

literature o# o#e possi$le source of s(ste"atic ris+. Si#ce re'erse "ort&a&e is projected

to su$sta#tiall( i"pro'e the "o#thl( i#co"e a#d> or li8uid fu#ds of the re'erse "ort&a&e

$orrowers% would it #ot itself result i# a s(ste"aticall( hi&her life e


39/84


I)te+est R'te Ris3s&-

Said that the t(pical re'erse "ort&a&e $orrower is elderl( a#d is loo+i#& for predicta$le

sources of i#co"e> li8uidit(% re'erse "ort&a&e loa#s pro"ise a fi

lu"p su" > credit li#e e#title"e#t. owe'er% for the le#der% this is a lo#&-ter"

co""it"e#t with siifica#t i#terest rate ris+s. 6hile fi


40/84


*or the le#der% $oth the i#terest a#d a#( shared appreciatio# co"po#e#t added to

the loa# $ala#ce are ta


41/84


Ris3 Miti'ti)

Ris+ "iti&atio# is the +e( for the success of a#( fi#a#cial product i#cludi#& re'erse

"ort&a&e. So"e of the ris+ "iti&atio# tech#i8ues which the pro'iders that is the $a#+erca# appl( to reduce the ris+ o# their $oo+s are as follow

7 P+*e+ e,iibi,it% c+ite+i)s

The first "iti&atio# of ris+ ca# $e do#e at the ti"e of pro'idi#& loa#s. This ca# $e do#e

throu&h proper 'erificatio# of the title of the propert(% a&e of the $orrower= his>her credit

a#al(sis etc. This reduces the ris+ of default $( the $orrower

7 V'+i'b,e i)te+est +'tes ,') 's c(*'+e$ t !i:e$ i)te+est +'te ,')

To a'oid i#terest rate ris+% the le#der ca# &o for 'aria$le i#terest rates $ased o# so"e

"ar+et $e#ch"ar+ li+e M!OR. This will also reduce the ris+ of Pre-pa("e#t as the

$orrower will #ot ha'e i#terest ar$itra&e o# prepa("e#t of the loa#

7 P+*e+ ')',%sis ! (+t',it% t+e)$s

As the product has siifica#t lo#&e'it( ris+% the le#der ca# do a detailed "ortalit( tre#d

a#al(sis o# a "acro le'el a#d also i# the "ar+et where it is operati#&.

7 2e+'*"ic', $ive+si!ic'ti)

The le#der ca# loo+ at spreadi#& the $usi#ess across the cou#tr( $( pro"oti#& the

product i# seco#dar( a#d tertiar( cities also so that the law of lar&e #u"$ers "a( wor+

properl( a#d if the pro'ider has a $ad e


42/84


7 Sec#+iti5'ti)

O#e of the "ost effecti'e wa(s of "iti&atio# ris+ is securiti)atio# !t i#'ol'es "a#( other

fi#a#cial pla(ers a#d thus it spreads the ris+ of default>prepa("e#t to "a#( other

participa#ts.

7 Re*'%(e)t sc"e$#,e

!# the Repa("e#t schedule% so"e default co#ditio#s or cha#&es that affect the securit( of

the loa# for the le#der that ca# "a+e re'erse "ort&a&es pa(a$le should also $e added%

li+e eclaratio# of $a#+ruptc(% o#atio# or a$a#do#"e#t of the house% /o#de"#atio#>

So'erei Ta+eo'er of the propert( $( a &o'er#"e#t a&e#c(% addi#& a #ew ow#er to the

ho"es title% ta+i#& out #ew de$t a&ai#st the ho"e etc.

F+ces '!!ecti) ;Reve+se M+t'e a##uit(.

/larit( i# ta< treat"e#t of re'erse "ort&a&e receipts% accrued i#terest% capital

&ai#s etc.

Optio# to refi#a#ce i# case i#terest rates decli#e su$sta#tiall(

Protectio# a&ai#st le#der defaults- thou&h #ot 'er( critical.

Le)$e+ Pe+s*ective&-

The "ajor co#cer# is with respect to the ris+s of lo#&e'it(% i#terest rates a#d propert(

appreciatio# rates. There is #o si"ple wa( to e ta


50/84


Gi'e# the re8uire"e#t of propert( "ar+et related e


51/84


O8)e+ )ee$ ' ce+t'i) ,eve, ! i)c(e6 $ c+e$it6 + $ "e',t" t

9#',i!%

A Re'erse Mort&a&e has #o i#co"e% credit% or health re8uire"e#ts.

O8)e+ "'s t ('3e ()t",% *'%(e)ts ) "is Reve+se M+t'e

There are #e'er a#( "o#thl( pa("e#ts. Pa("e#t of ta


52/84


o loa# ser'ici#& or repa("e#t re8uired duri#& the lifeti"e of $orrower a#d

spouse.

!f the $orrower dies duri#& the period% the spouse will co#ti#ue to &et the loa#

a"ou#t for 1? (ears.

Ta< treat"e#t of a RMC will $e as loa#% #ot i#co"e% so #o ta< will $e pa(a$le o#

the re&ular cash flows

The $orrower a#d their spouse ca# co#ti#ue to sta( i# the house till $oth die.

eirs of the $orrower will $e e#titled to &et the surplus of sale 'alue of the

propert(.

orrower>heir ca# &et "ort&a&e released $( pa(i#& loa# with i#terest without

ha'i#& to sell propert( at a#( ti"e. Reassess"e#t of propert( 'alue will $e do#e periodicall( sa( o#ce e'er( ? (ears.

=e'3)esses

This loa# product has a "a


53/84


Most !#dia#s ha'e stro#& prefere#ce for ow# ho"e. Therefore "a#( eli&i$le

citi)e#s "a( opt for the sche"e.

T"+e'ts

Propert( 'aluatio#s are a"$i&uous.

There is a #o#-recourse &uara#tee% which "ea#s that loa# plus i#terest should

#e'er e


54/84


Ste*s t !,,8e$ !+ etti) ' Reve+se (+t'e

The followi#& are the i"porta#t steps which are to $e followed $( e'er( perso# who is

&oi#& for re'erse "ort&a&e.

1. EDUCATION

The applica#t "ust first educate hi"self a$out the re'erse "ort&a&e $( 'isiti#&

this we$site= this will the $e&i##i#& of re'erse ho"e "ort&a&e lear#i#& process.

Ma#( $a#+s #owada(s se#d their represe#tati'es to the ho"e of the applica#ts to

e


55/84


isclosure% Coa# applicatio#% Pri'ac( Polic( isclosure. The loa# officer will collect

copies of ri'ers Cice#se or other for" of Picture !% Social Securit( /ard or

Medicare /ard% Most rece#t Propert( ta< state"e#t% o"eow#ers *ire !#sura#ce

Polic(% Most rece#t "ort&a&e state"e#t.

9. PROCESSING THE LOAN

6he# $oth the applicatio# a#d cou#seli#& ha'e $ee# co"pleted% (ou are

read( to start processi#& the loa#. The #e


56/84


The followi#& are the cases where i# the re'erse "ort&a&e co#tract "a( $e ter"i#ated

that is ter"i#ati#& the co#tract of &i'i#& re&ular pa(outs to the $orrower $( the $a#+

$efore the te#ure &ets o'er,-

The $orrower has #ot sta(ed i# the "ort&a&ed propert( for a co#ti#uous period of

o#e (ear.

The $orrower fails to pa( propert( ta


57/84


Reve+se M+t'e i) SBI

The State a#+ of !#dia HS!I has started offeri#& re'erse "ort&a&e products for se#ior

citi)e# o# Octo$er 1% 33;. 5oi#t loa#s will $e &i'e# if the spouse is ali'e a#d is o'er ?@

(ears of a&e. The loa# is $e offered $( all $ra#ches of S! fro" Octo$er 1% 33;. The

loa# is offered at a# i#terest rate of 13.;?: pa a#d is su$ject to cha#&e at the e#d of e'er(

fi'e (ears alo#& with re'aluatio# of securit(. E'er( fi'e (ears% $a#+ "a( e'e# re-adjust

the loa# i#stall"e#ts% if it is #eeded% depe#di#& o# "ar+et co#ditio#s a#d loa# status. !#

a# press report The /hief Ge#eral Ma#a&er for Perso#al a#+i#& HS!I% Mr. Sa#&eet

Shu+la told that there is #o upper li"it of a"ou#t of loa#. Also% the "a


58/84


Reve+se M+t'e i) SBI6 ('i) b+')c" Be,'#(&-

As re'erse "ort&a&e is offered $( all the $ra#ches of S! fro" Octo$er 1 33;%

S! "ai# $ra#ch i# el&au" also started pro'idi#& the facilit( of Re'erse Mort&a&e. ueto lac+ of +#owled&e a$out re'erse "ort&a&e i# el&au" there are #o a#( custo"ers for

this product i# S! "ai# $ra#ch el&au". Rece#tl( o#e custo"er is willi#& to ta+e

re'erse "ort&a&e fro" S! "ai# $ra#ch. This deal has #ot (et $ee# fi#ali)ed% it is i#

process.

The $a#+ pa(s i#stall"e#ts "o#thl(% 8uarterl( a#d e'e# lu"p su". The loa#

a"ou#t is paid i# i#stall"e#t for 13 (ears or for 1? (ears as per the re8uire"e#t a#d wish

of the $orrower.

The followi#& is the ta$le showi#& the i#stall"e#ts o# "o#thl(% 8uarterl( $asis

for the period of 13 tears a#d 1? (ears for a loa# a"ou#t of Rs 133333 at a i#terest rate of

13.;?:.

L') Te)+ 1 %e'+s 1 %e'+s

M)t",% i)st',(e)ts

DRs90@ ?

>#'+te+,% i)st',(e)ts

DRs1%92 0@;

L#(* s#( *'%(e)t

DRs 20%3 1%01D

BABASAB PATIL MBA FINANCE PROJECT Page ?@


59/84


!# S! "ai# $ra#ch rece#tl( o#e custo"er showed willi#ess to ta+e up re'erse

"ort&a&e. As due to the pri'ac( polic( of the $a#+ he#ce forth the #a"e of the custo"er

will $e ta+e# as Mr. A. Mr. A is of 09 a&es a#d ow#s a house with its title. After the e

'aluatio# of the house% the 'alue of the house is esti"ated to $e Rs 13% 33%333. As per the

S! &uideli#es o#l( the loa# is &i'e# o# D3: of the propert( 'alue so i# this case Mr. A

ca# ta+e a loa# of Rs D%33%333 Hthat is D3: of 13%33%333I. MR .A wa#ts to &et the

i#stall"e#t o# "o#thl( $ases for a period of 1? (ears. So his "o#thl( i#stall"e#t for the

period of 1? (ears for the loa# a"ou#t is Rs %3?.

BABASAB PATIL MBA FINANCE PROJECT Page ?D


60/84


2#i$e,i)es !+ ;Reve+se M+t'e< i) SBI

Objective ! t"e sc"e(e

To pro'ide a source of additio#al i#co"e for se#ior citi)e#s of !#dia who ow# self-

ac8uired a#d self-occupied house propert( i# !#dia.

E,iibi,it%

o. of $orrowers, - Si#&le or joi#tl( with spouse i# case of a li'i#& spouse.

A&e of first $orrower ,- A$o'e 03 (ears

o. of sur'i'i#& spouses o# date of sa#ctio# of loa# ,- Should #ot $e "ore tha#

o#e. orrowers will ha'e to &i'e a# u#derta+i#& that the( will #ot re"arr( duri#&

the curre#c( of the loa#. !f the $orrowers choose to re"arr(% the loa# will $e

foreclosed.

A&e of spouse ,- A$o'e ?@ (ears

Reside#ce ,-

' orrower should $e sta(i#& at se,!-'c9#i+e$ a#d se,! 8)e$

house > flat a&ai#st which loa# is $ei#& raised% as his

*e+(')e)t *+i('+% +esi$e)ce

b Mo$ile>Telepho#e>/redit /ard $ills>/ertificate fro" the

ousi#& Societ( where the $orrower is sta(i#& >Affida'it "ade

$efore the E


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Title of the propert( a#d #u"$er of $orrowers.- !# case if the title i# si#&le #a"e

a#d loa# #u"$er of $orrowers. a'ailed joi#tl( with spouse. Title holder should

"a+e a 6ill i# fa'our of the other spouse. The 6ill should co#fir" that this is the

last 6ill a#d that it supersedes all earlier wills% if a#(. The $orrower to u#derta+e

that #o fresh 6ill shall $e "ade duri#& the curre#c( of the loa#

E#cu"$ra#ces, - The propert( should $e free fro" a#( e#cu"$ra#ces. owe'er

i# case of propert( purchased $( a'aili#& o"e Coa# fro" S! a#d "ort&a&ed to

S!% it will $e co#sidered for RMC% su$ject to closure of the o"e Coa# accou#t

out of the proceeds of RMC

Residual Cife of propert(, - Should $e at least 3 (ears i# case of si#&le $orrower

a#d ? (ears i# case of spouse $ei#& $elow 03 (ears of a&e. /ertificate fro"

e"pa#elled e#&i#eer> architect will $e re8uired to $e o$tai#ed for this purpose% i#

additio# to 'aluatio# of propert(.

Sec#+it%

The Re'erse Mort&a&e Coa# shall $e secured $( wa( of e8uita$le "ort&a&e of

reside#tial propert(.

Te)+

A&e of the %#)e+ of the $orrowers $etwee# ?@ a#d upto 0@ (ears, 1? (ears

A&e of the %#)e+ of the $orrowers a$o'e 0@ (ears, 13 (ears

OR till death of the $orrowerHsI%

6hiche'er is earlier

0isb#+se(e)t

( credit to a# S accou#t i# the joi#t #a"es of the $orrowers operated $( E or S.

Pe+i$icit% ! 'v'i,i) ,')



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Mo#thl( pa("e#t.

4uarterl( pa("e#t

Cu"p su" pa("e#t

>#')t#( ! ,')

The loa# a"ou#t would $e D3: of the 'alue of propert(. Coa# a"ou#t would i#clude

i#terest till "aturit(. The (':i(#( loa# a"ou#t is +ept at Rs. 1 /rore a#d (i)i(#(

Rs.2 lacs

P#+*se ! L')

Supple"e#ti#& i#co"e% a#( perso#al e


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The $ala#ce surplus Hif a#(I% re"ai#i#& after settle"e#t of the loa# with accrued

i#terest a#d ele&al heirs.

orrowers will $e re8uired to su$"it a##ual life certificates i# the "o#th of

o'e"$er e'er( (ear. This certificate will also i#clude clauses re&ardi#& "arital

status% a#d per"a#e#t reside#ce of the $orrowers% i# additio# to the $ala#ce

co#fir"atio# as o# 21st Octo$er of that (ear.

Cist of le&al heirs will $e o$tai#ed at the ti"e of sa#ctio# of loa#. 6ith a 'iew to

a'oidi#& disputes at the ti"e of settle"e#t of loa# a"ou#t $( le&al heirs% specific

i#structio#s a$out i#herita#ce of the propert( a#d pa("e#t of $ala#ce a"ou#t% if

a#(% of the sale proceeds after settli#& the a#+s dues % will $e re8uired to $e part

of the $orrowers 6ill.

F+ec,s#+e

The loa# shall $e lia$le for foreclosure due to occurre#ce of the followi#& e'e#ts of

default.

!f the $orrowerHsI has>ha'e #ot sta(ed i# the propert( for a co#ti#uous period of

o#e (ear

!f the $orrowerHsI failHsI to pa( propert( ta


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!f the $orrowerHsI effect cha#&es i# the reside#tial propert( that affect the securit(

of the loa# for the le#der.*or elu"p-su" a"ou#t e'er( ?

(ears alo#& with re'aluatio#. !# the sce#ario of fall i# propert( prices% the a#+

"a( decide to re'ise the a"ou#t at a#( ti"e earlier tha# ? (ears. At e'er( sta&e

of re'isio#% it should $e e#sured that the Coa# to Value ratio does #ot e


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!f the orrower does #ot accept the re'ised ter"s% #o further pa("e#ts will $e

effected $( the a#+.!#terest at the rate a&reed $efore the re'iew will co#ti#ue to

accrue o# the outsta#di#& a"ou#t of the loa#. The accu"ulated pri#cipal a#d

i#terest shall $eco"e due a#d pa(a$le as "e#tio#ed i# clauses D a#d 13.

I)te+est R'te

1G *' H*i


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O*e+'ti)', iss#es

T(pe of facilit(, - o#-re#ewa$le O'erdraft without led&er folio char&es. o

che8ue $oo+>de$it card will $e li#+ed to this accou#t.

A'aila$ilit( of product ,- All $ra#ches



67/84


CHAPTER-

FEASIBILITY STU0Y

BABASAB PATIL MBA FINANCE PROJECT Page 0;


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Fe'sibi,it% st#$%

*easi$ilit( stud( is the li+elihood stud(. !t is the wa( to deter"i#e if a $usi#ess idea is

capa$le of $ei#& achie'ed. The results which we &et out of this stud( are used to "a+e a

decisio# whether to proceed with the project or #o. ! too+ out the feasi$ilit( stud( to see

the li+elihood of Re'erse Mort&a&e offered $( S!.! li"ited "( stud( o#l( to S! "ai#

ra#ch% el&au".!# order to do the feasi$ilit( stud( of re'erse "ort&a&e for S! "ai#

$ra#ch ! co#tacted a#d sur'e(ed 23 respo#de#ts. ! prepared a 8uestio##aire i# which !

as+ed the respo#de#ts details a$out their house% whether the( &et a#( pe#sio#% whether

the( are i# #eed of a#( fi#a#cial assista#ce% their +#owled&e a$out re'erse "ort&a&e a#d

whether the( are willi#& to &o for re'erse "ort&a&e or #o.

So $( this feasi$ilit( stud( we ca# co"e to +#ow how "a#( people are #eed

fi#a#cial assista#ce% how "a#( people ha'e so"e +#owled&e a#d how "a#( people are

willi#& to &o for re'erse "ort&a&e.

BABASAB PATIL MBA FINANCE PROJECT Page 0@


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M'+3et V',#e

Market Value

8 26.7 26.7 26.7

17 56.7 56.7 83.3

5 16.7 16.7 100.0

30 100.0 100.0

Rs200000-500000

Rs500000-1000000

Above Rs1000000

Total

Valid

Frequenc !ercent Valid !ercent

"u#ulative

!ercent

$ar%et Value

Above Rs1000000

Rs500000-1000000

Rs200000-500000

I)te+*+et'ti)&

!# the sa"ple si)e of 23 people% @ people had house whose "ar+et 'alue was $etwee# Rs

33333 to Rs ?33333% 1; people had house whose "ar+et 'alue was $etwee# Rs ?33333

to Rs 133333 a#d ? people had house whose "ar+et 'alue was a$o'e Rs 1333333.

BABASAB PATIL MBA FINANCE PROJECT Page 0D


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Pe)si)

Pension

22 73.3 73.3 73.3

8 26.7 26.7 100.0

30 100.0 100.0

&es

'o

Total

ValidFrequenc !ercent Valid !ercent

"u#ulative

!ercent

!ension

'o

&es

I)te+*+et'ti)&

!# the sa"ple si)e of 23 respo#de#ts people said the( &et pe#sio# a#d re"ai#i#& @

people said the( did #ot &et a#( +i#d of pe#sio#. So $( seei#& the a$o'e chart we ca#

"a+e a i#fere#ce that i# the sa"ple si)e of 23 respo#de#ts "a


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Fi)')ci', Assist')ce

Financial Assistance

22 73.3 73.3 73.3

8 26.7 26.7 100.0

30 100.0 100.0

&es

'o

Total

Valid


"u#ulative

!ercent

Financial Assistance

'o

&es

BABASAB PATIL MBA FINANCE PROJECT Page ;1


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I)te+*+et'ti)&

*i#a#cial assista#ce refers to whether the respo#de#t is i# #eed of "o#e( for his dail(

#eeds. ere out of 23 respo#de#ts ;2.2: of the people #eeded fi#a#cial assista#ce for

their e


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)no*led+e about Reverse $ort+a+e

'o

&es

I)te+*+et'ti)&

ere +#owled&e a$out Re'erse Mort&a&e refers to how "a#( people are aware a$out the

co#cept of Re'erse Mort&a&e. So accordi#& to "( sur'e( of 23 respo#de#ts o#l( 93:

that is 1 respo#de#ts had a $asic idea a$out Re'erse Mort&a&e a#d the re"ai#i#& 03:

that is 1@ people did #ot had a#( +i#d of +#owled&e a$out re'erse Mort&a&e. So $( this

we ca# sa( that "a#( people do#t ha'e a $asic idea a$out Re'erse Mort&a&e a#d the

$a#+ #eed to focus o# spreadi#& the co#cept of re'erse "ort&a&e.

=i,,i))ess !+ Reve+se M+t'e



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Willingness for Reverse Mortgage

7 23.3 23.3 23.3

23 76.7 76.7 100.0

30 100.0 100.0

&es

'o

Total

Valid


"u#ulative

!ercent

,illin+ness or Reverse $ort+a+e

'o

&es

I)te+*+et'ti)&

As $efore we saw that o#l( 93: of the respo#de#ts had so"e $asic +#owled&e a$out

re'erse "ort&a&e a#d after pro'idi#& the +#owled&e a$out re'erse "ort&a&e o#l( ;

respo#de#ts were willi#& to &o for re'erse "ort&a&e. *ro" the a$o'e chart we ca# sa(

that "a


75/84


C)c,#si)&-

*or the purpose of feasi$ilit( stud( ! co#ducted a sur'e( of 23 respo#de#ts. These 23respo#de#ts were selected o# the $asis of certai# criteria .The first criteria for

selecti#& the respo#de#ts was the a&e of the respo#de#ts should $e "ore tha# 03 a#d

the seco#d o#e is that he should ow# a house with its title. After co#ducti#& the

sur'e( of 23 peoples% ;2.2: of the respo#de#ts #eeded so"e +i#d of fi#a#cial

assista#ce% 93: of the respo#de#ts had so"e $asic +#owled&e a$out re'erse

"ort&a&e% $ut after &i'i#& the details a$out re'erse "ort&a&e to all the 23 people o#l(

; people were willi#& to &o for re'erse "ort&a&e. ( the outco"es this stud( it ca#

$e said that this was #ot the ri&ht ti"e for i#troduci#& the co#cept of re'erse

"ort&a&e $( S!.! ha'e also fou#d out that e'e# if the people #eed so"e fi#a#cial

assista#ce the( are #ot willi#& to &o for re'erse "ort&a&e the reaso#s "a( $e that the

house is o#l( i"porta#t assets% the elder people would li+e to tra#sfer their house to

their le&al heirs. As we ca# see i# !#dia joi#t fa"ilies are "ore the elder people do#t

li+e to sell their house the( would li+e to li'e i# the sa"e house a#d would li+e to

tra#sfer the house to their le&al heirs. So it ca# $e co#cluded that i#trodusi#& re'erse

"ort&a&e at this ti"e was #ot feasi$le $ut it "a( wor+ 'er( well i# future.

BABASAB PATIL MBA FINANCE PROJECT Page ;?


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CHAPTER-

FIN0IN2S AN0 SU22ESTIONS



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Fi)$i)s&-

7 A# attracti'e optio# to the elderl( to fi#a#ce their co#su"ptio# #eeds o# theirow#.

7 The loa# is &i'e# without a#( i#co"e% "edical or credit re8uire"e#ts criteria.

7 E#coura&e "ore people i# the wor+i#& populatio# to i#crease the proportio# of

their sa'i#&s i#'ested i# housi#&.

7 Re'erse "ort&a&e le#der i# the !#dia# "ar+et "ust proceed with cautio#.

7 The actual si)e of the re'erse "ort&a&e "ar+ets is #owhere #ear its esti"ated

pote#tial.

7 Out of 23 respo#de#ts o#l( 93: had so"e $asic +#owled&e a$out Re'erse

Mort&a&e.

7 ; people were willi#& to &o for Re'erse Mort&a&e out of 23 respo#de#ts.

BABASAB PATIL MBA FINANCE PROJECT Page ;;


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S#esti)s&-

7 Educate people a$out re'erse "ort&a&e, - As $( the sur'e( ! ha'e fou#d out that

o#l( 93: of the respo#de#ts ha'e so"e $asic idea a$out re'erse "ort&a&e% so $(

this it ca# $e said that people are #ot educated a$out re'erse "ort&a&e. So ! would

su&&est the $a#+ to educate the people a$out re'erse "ort&a&e throu&h

ad'ertise"e#ts% co#ducti#& wor+shops a#d lectures o# re'erse "ort&a&e etc.

7 Ta+e respo#si$ilit( for the e


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CHAPTER- G

BIBLIO2RAPHY

BABASAB PATIL MBA FINANCE PROJECT Page ;D


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Bib,i+'*"%&-

1 =ebsites

www.s$i.co.i#

www.&oo&le.co.i#HGoo&le search e#&i#eI.

www.wi+ipedia.co"

/ B3s

Mar+et Research - Tull a#d aw+i#s

4 J#+)',s6 '+tic,es ')$ Reiste+s ! t"e b')3

The jour#al of a#+i#& studies

BABASAB PATIL MBA FINANCE PROJECT Page @3
http://www.sbi.co.in/http://www.google.co.in/http://www.google.co.in/http://www.wikipedia.com/http://www.sbi.co.in/http://www.google.co.in/http://www.wikipedia.com/


81/84


CHAPTER- G

ANNEXURE



82/84


>UESTIONNAIRE

1. o (ou ow# a house with its clear title

Les o

. 6here it is situated

------------------------------------------------

2. 6hat is the "ar+et 'alue of the house

elow 33333

33331 U ?33333

?33331 U 1333333

More tha# 1333333

9. !s the house used for reside#ce

Les o

?. o (ou &et a#( pe#sio#

Les o

0. o (ou #eed a#( fi#a#cial assista#ce

Les o

;. o (ou +#ow a$out Re'erse Mort&a&e

BABASAB PATIL MBA FINANCE PROJECT Page @


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Les o

@. !f #o% do (ou #eed details a$out Re'erse "ort&a&e

Les o

D. Are (ou willi#& to &o for re'erse "ort&a&e

Les o

----------T.an% &ou ---------



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