rm & declining property values

8/14/2019 RM & Declining Property Values

1/14

NGFS

The Reverse Mortgage

Declining Property Values

How to properly set the expectations of your prospectsand avoid disappointment, wasted effort and expenses.

N.Gen Inc. Copyright Protected 2007


2/14

NGFS



3/14

NGFS Things Have Changed Quickly

The environment has changed more rapidly than the public has been able toaccept, specifically home values are not what they used to be, resulting in

- .

Loser #1. Dramatic increased operating costs for NGFS.

.time and lost commission opportunities.

Loser #3. Disappointed and possibly even angry applicantsmeaning lost clients.



4/14

NGFS The Industry Problem

This problem typically happens when an applicant is hoping to use thereverse mortgage to pay of an existing mortgage.

Case As Illustrated / Pro osed

$300,000$300,000 Leaves littleLeaves littleroom for errorroom for error

$165,000$165,000 $160,000$160,000

ApplicantsApplicantsEstimatedEstimated

ExpectedExpectedProceedsProceeds

ExistingExistingMortgageMortgage



5/14

NGFS The Industry Problem

This problem typically happens when an applicant is hoping to use thereverse mortgage to pay of an existing mortgage.

Case As Illustrated / Pro osed Actual Results After A raisal

$300,000$300,000 $255,000$255,000versusversus

Just a 15% variance inJust a 15% variance inthe appraised value canthe appraised value can

Leaves littleLeaves littleroom for errorroom for error

$165,000$165,000 $160,000$160,000 $135,000$135,000versusversus

$165,000$165,000

$160,000$160,000

$25,000 shortfall!$25,000 shortfall!








This is what the industry is experiencing to an alarming 40% +/- on all applications!


6/14

NGFS Adversity & Opportunity Are Siamese Twins

The very thing that makes this an industry wide problem is a chance for theuniqueness of the NGFS field force to really shine and take the business

.

Because each of you has skills and knowledge beyond just reverse

creates an opportunity for you and NGFS to set ourselves apart from therest.

To do this requires you to set up the case properly from the very beginningwith your prospect.

e ea s a s mp e one. e t e super ero s o o , a youneed to do is to use your alter ego as a

Cash Flow Planner!!!



7/14

NGFS How To Avoid Or At Least Minimize The Problem

Be polite, but suspicious of the prospects estimated value of their home and

Option # 1.

.

Become familiar with the most recent sales (six months or less including foreclosures) of homes in the communities you are doing

.

Note - as many as 1,000,000 homes have been foreclosed on which is

considered a recent sale by the FHA rules governing appraisals.un severa scenar os or your prospec a eren va ues an ave a

plan of action that would enable them to proceed with each one.

Example run one at the value they believe is accurate, one at a 10% lower

benefit that can be provided by the reverse mortgage.

Then figure out how they might be able to come up with any potential shortfallfrom other assets (such as a policy loan from existing insurance) or possibly by


obtaining an unsecured credit line or loan that can be paid off quickly with themoney saved by paying off their existing mortgage.


8/14

NGFS For Example

Lets revisit the original example and see how it could have been dealt with tothe benefit and satisfaction of everyone involved.

$255,000$255,000versusversus

Lets assume that the monthlypayment on the existing mortgage

,,

$135,000$135,000

versusversus$165,000$165,000

$160,000$160,000

Consider that they could possibly

borrow the $25,000 shortfall at as

positive monthly cash flow and payoff the $25,000 in as little as 2years!$25,000 shortfall!$25,000 shortfall!





ome a ueome a ue romrom a ancea ance


9/14

NGFS Remember To Focus On The Cash Flow

If this was discussed ahead of time as part of an overall plan of action should thehouse not appraise at their estimated value, the case could still be saved with theclient realizing the financial relief they sought.

Loan Amount

Financed YearsFinance RateMonthly Payment

$25,000

26%$1,108

$25,000

36%$761

$25,000

46%$587

$25,000

56%$483

.

Finance Rate

Monthly PaymentImproved Mo. Cash Flow

10%

$1,154$96

10%

$807$443

10%

$634$616

10%

$531$719

Finance RateMonthly PaymentImproved Mo. Cash Flow

14%$1,200

$50

14%$854$396

14%$683$567

14%$582$668

Finance RateMonthly PaymentImproved Mo. Cash Flow

18%$1,248

$2

18%$904$346

18%$734$516

18%$635$615


However, if discussed after the fact, it could be misinterpreted and thought to be apressure tactic. As with most things in sales, its the set up that determines

the outcome.


10/14

NGFS Consider Other Options As Well

Then too, if they were to access funds from some other asset, such as asavings or investment account, a life insurance policy, or some such thing...

$255,000$255,000versusversus

They could create a plan that wouldallow them to replace the fundsused from the improved monthly

,,

$135,000$135,000

versusversus$165,000$165,000

$160,000$160,000

cash flow in as little as 20 months ifthey wished!

of both approaches

However, the key is to take the time$25,000 shortfall!$25,000 shortfall!




upfront to discuss all of the optionsbefore having them run the risk ofincurring the cost of the appraisal


ome a ueome a ue romrom a ancea ance and left with less than they started

with.


11/14

NGFS Yet Another Way To Avoid The Problem

Is so simple that it is often overlooked and that is to change the profile of

Option # 2.

.

If you are in an area that has suffered from a dramaticdown turn in home values adjust your prospect profileto people who have a current mortgage loan to value ratioof no more than 30%-35% of the last known (or prospect

provided) home value.

Thus, even if the home value is as much as 33% less than the prospectthought it was worth, you will still be able to obtain sufficient funds from thereverse mortgage to pay off the existing one and improve your prospect -

c ents mont y cas ow.



12/14

NGFSA Changed Environment Requires

Adjusting Your Prospect Profile

Adjusting the profile of your prospects is another way to assure you will havethe ability to provide a satisfactory solution and get paid for your time andeffort.

Case As Illustrated / Proposed

$300,000$300,000

Actual Results After Appraisal

The RM could still pay off the existingThe RM could still pay off the existing

$200,000$200,000

mor gage, even w a erencemor gage, even w a erencein the appraised value.in the appraised value.

,,

$100,000$100,000 $110,000$110,000 $100,000$100,000

A licantsA licants Ex ectedEx ected ExistinExistin A licantsA licants Ex ectedEx ected ExistinExistin


EstimatedEstimatedHome ValueHome Value

ProceedsProceedsfrom RMfrom RM

MortgageMortgageBalanceBalance

EstimatedEstimatedHome ValueHome Value

ProceedsProceedsfrom RMfrom RM

MortgageMortgageBalanceBalance


13/14

NGFS In Conclusion

Its a changed environment that we are dealing with from just six months ago.

The two best ways to adapt is to both change the profile of those youconsider as first class prospects.

And appreciate the value of an interested prospect and thus invest a little

more time with them in the beginning to properly set up the case.

Make sure to explore all of the possibilities with them,even the less than ideal ones, so as to develop a planof action that your prospects agree will result in an

mprovement rom t e r current state an t us ecommitted too.



14/14

NGFS In Conclusion

The extra time and effort to properly set up your prospectsunderstandin of all of the ossibilities will more often than not resultin your being able to avoid a lose - lose - lose scenario and achieve aWin Win Win one!

The Time To Engage Is Now!

And the best time to invest our time is in how ou


initially set up the case and your prospects expectations.

rm & declining property values

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