TRAINING FOR WELLS FARGO REVERSE MORTGAGE 1 GENERAL INSTRUCTIONS Documents normally sent to borrowers • Original package sealed • Borrower’s copy • Pre-addressed return envelope * FedEx 800 463-3339 say “Drop off locations” * DHL 800 225-5345 option # 4 * UPS 800 742-5877 option # 5 • Documents arrive in signing order; you will return them in signing order. Signings before 3 pm, drop docs same day. Signings after 3 pm, do your best to drop same day, return to: Rels Settlement Services 4050 E Cotton Center Blvd Bldg 1 Suite 18 Phoenix AZ 85040-8862 • Documents are signed in BLACK INK; • Notary and Witness names must be printed below their signature lines • Expiration of notary commission is required • Corrections: borrowers may correct spelling mistakes in name and address only: one strike through, initial the change • California notaries use rubber stamps only • Indiana notaries provide county of residence • Do not seal or stamp over verbiage Contact Phone Numbers • Monday – Friday 6 am-6pm AZ time 866 259-1893 option # 1 • After hours contact Geoff Steenson 480 215-9124 Funds at Closing –payable to Rels Settlement • Under $1500.00, personal check acceptable • $1500.00 and above, cashier’s check, certified check, teller’s check Exception: Arizona Under $500.00 personal check; $500.00 and above, cashier’s check, certified check, teller’s check Stacking order of Documents – Restacking of Return documents will now be completed by Rels Settlement. Please ignore Addendum1A in the Sample Doc Package Borrower Closing Instructions (Addendum 2) Instructions for Proceeds Due Borrower (Addendum 3) Instructions for signing Trust Documents (Addendum 4) – The signature lines and printed names for the trustees will already be on the documents. IF the property is held in trust, all trustees must sign as individuals and as Trustees on Note, Security Instrument and all Riders. TRAINING FOR WELLS FARGO REVERSE MORTGAGE 2
Information contained within this training document is intended for the sole purpose of familiarizing the user with Reverse Mortgage documents. The information within does not purport to be specific to a particular state, please be sure to contact the lender involved with the loan for stipulations and requirements in your state. Any or all information contained within is subject to change without notice.
WHAT IS A REVERSE MORTGAGE?
Explanation of Loan Types 1. Home Equity Conversion Mortgage (HECM): Is the oldest and most popular reverse mortgage product. Available since 1989 to homeowners 62 or older, HECM’s are insured by the federal government through the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD). Currently (2005), the FHA loan limit varies from a low of $172,632 (for rural areas) to a high of $312,895 (for high-cost metropolitan areas). This currently equates to 48% of the Home Keeper for the low and 87% of the Home Keeper® for the high. Borrowers can choose to receive the proceeds as (1) a lump sum payment, (2) fixed monthly payments (most popular), (3) a line of credit (option not available for Texas) or (4) a combination of all three. The borrower is permitted to change payment plans at any time after origination, and as many times as desired, for a small fee. When the home is sold or vacated for other reasons, the loan balance, which includes the total amount borrowed plus accrued interest and mortgage insurance premiums, is due and payable, usually from proceeds from the sale of the home. Any proceeds in excess of the amount owed the lender belong to the borrower or the borrower’s estate. HECMs will have two (2) Security Instruments and two (2) Notes. 2. Home Keeper® (Fannie Mae proprietary Mortgage): Developed to address unmet needs that could not be served by the HECM program, such as individuals with higher property values and some condominium owners. The amount of funds available to the borrower is determined by a formula and varies with: (1) the age and number of borrowers at the time of application; (2) the adjusted value of the home; and (3) current interest rates. Home Keeper® loans can be larger than HECMs because Fannie Mae’s maximum mortgage limit - $359,650 for 2005 – is larger than the FHA maximum limit. Borrowers can choose to receive the proceeds as (1) a lump sum payment, (2) fixed monthly payments, (3) a line of credit (option not available in Texas) or (4) a combination of all three. Home Keeper® has only one Security Instrument and one Note TRAINING FOR WELLS FARGO REVERSE MORTGAGE 3 WHO IS ELIGIBLE FOR A REVERSE MORTGAGE? • Homeowners 62 years and older are eligible. • The home must be free and clear or have a very low outstanding mortgage balance that can be paid off at closing. • The home must be the principal residence, a single-family or two- to fourunit dwelling. • Units in condominiums or Planned Unit Developments (PUDs) may be eligible if they are in FHA-approved developments. • The borrower must also accept mortgage counseling from a HUDapproved counseling agency. Family members are strongly encouraged to attend these counseling sessions. Homeowners may receive proceeds as (1) a lump sum payment, (2) fixed monthly payments, (3) a line of credit (option not available in Texas), or (4) a combination of all three. WHAT ARE THE DIFFERENCES BETWEEN A CONVENTIONAL LOAN AND
REVERSE MORTGAGE (HECM)? Conventional Loan and HECM may both have these documents: • HUD sign, date • Addendum to HUD sign, date • Truth in Lending Statement sign, date • Residential Loan Application sign, date p.3 • Security Instrument (Mortgage/Deed of Trust) sign, date, notarize • Note sign, date • Riders sign • Loan Agreement sign • Compliance Agreement sign, date • W-9 sign, date; write SS # • Name Affidavit sign, date, notarize (witness, if property is in a witness state) • Flood Insurance Certification Notice sign, date • Notice of Right to Cancel (dates preprinted) 2 per borrower, sign receipt • Electronic Fund Transfer Request sign, date • Limited Power of Attorney sign, date, notarize • Patriot Act Documents already submitted to Rels TRAINING FOR WELLS FARGO REVERSE MORTGAGE 4 Reverse Mortgage: ADDITIONAL DOCUMENTS (number of pages may vary) • Home Equity Conversion Mortgage Payment Plan 2 ps, sign, date Stipulates Principal Limit, initial payments, closing costs, servicing fee set aside (estimated cost of servicing fee through life of loan), Net Principal Limit, term or tenure payments. • Authorization to Waive FHA Homebuyer Summary 5 day Notification Period 1 p, sign, date Waives 5 day waiting period for repairs, pest inspection, etc. • Pest Inspection 2 pages, sign both • All Inspections All pages must be signed by all borrowers • Estimated Amortization Schedule 1-2 ps, add lines,sign both pages To age 100 youngest borrower: Spreadsheet of various components. Add rows to obtain loan balance. • Summary of Loan Terms and Benefits 1 p, sign, date Recap of Mortgage Payment Plan, plus initial interest rate, estimated interest rate, other closing costs. • TALC (Total Annual Loan Cost rate) 1 p, sign, date Based on the length of the loan – generally, the longer the loan, the lower the TALC. This estimated cost is based on 4 different loan terms at 3 different assumed annual home appreciation: 1. 2 years
2. Half of the Life Expectancy for the youngest borrower’s age 3. Life Expectancy 4. 1.4 times Life Expectancy • Addendum – HUD/VA Loan Application 4 ps, sign, date 2, 3, 4 Since HUD will purchase 90% of these loans, HUD must be party to the transaction. • Comprehensive Valuation Package 1 p, sign, date TRAINING FOR WELLS FARGO REVERSE MORTGAGE 5 • Adjustable Rate Home Equity Conversion Deed of Trust (Security Instrument) 6-10 ps, sign, date, notarize Secures to the lender the repayment of debt evidenced by the Note, with interest at a rate subject to adjustment, and all renewals, extensions and modifications of the Note, up to a principal amount of 150% of the maximum loan amount. The reason for the 150% is for recording purposes. A forward loan can be recorded at its original amount (100%) because the borrower pays down each month decreasing the loan amount. On a Reverse Mortgage the loan amount increases each month because there are no payments required each month to pay down the loan. Because the loan balance will most likely increase each month, recording the loan at 150% alleviates the need for Wells Fargo to re-record every month. In essence, this is cost-effective in reducing the recording costs to the borrower. Remember, this is not the amount that the borrower owes, the borrower will receive quarterly and yearly statements from a company called Wendover Financial Services Corporation (owned by Wells Fargo) stating their balance. The Reverse Mortgage loan contains two (2) Security Instruments (Deeds of Trust/ Mortgages) which will be signed and recorded, establishing two liens against the property. Due and payable date will be 50 years past the 100 th birthday of the youngest borrower. The first lien is by the Lender (Wells Fargo) and the second is by HUD. The underlying principle for the second lien by HUD is if the loan were to be assigned to HUD by the lender (Wells Fargo). When this occurs, the lender (Wells Fargo) is paid off by HUD and the lender’s first lien is removed; the result is the second lien (HUD lien) is moved into first position. After attaining first position, HUD would then continue with the same conditions that were agreed to in the original loan agreement. TRUST – Be sure to follow Lender’s instructions. All borrowers who hold the property In trust must sign both individually as well as their Name, Trustee • Second Adjustable Rate Home Equity Conversion Deed of Trust (Security Instrument) 8 ps, sign, date, notarize The same rules and provisions apply as for the first Adjustable Home Equity Line of
Credit Conversion Deed of Trust TRUST – All borrowers who hold the property in trust must sign both individually as well as their Name, Trustee TRAINING FOR WELLS FARGO REVERSE MORTGAGE 6 • Adjustable Rate Note (Home Equity Conversion) 3 ps, sign, date This is the promissory note. For signing date purposes, each Monday the Rate may change. The Rate is good for seven days. The note must be signed by all borrowers. If the property is held in Trust, please follow Trustee signature instructions. Assignment may occur for the following reasons: 1. The originating or servicing lender went out of business 2. The borrower elected an annuity and the annuity exceeded the total amount of the “Expected Payout” by the lender (Wells Fargo). • Adjustable Rate Second Note (Home Equity Conversion) 3 ps, sign, date There are two notes, as well as two liens (see Deed of Trust explanation above). Reverse Mortgages follow FHA guidelines. There are 3 types of adjustable notes: 1. Monthly Adjustable: 90% of Wells Fargo Loans will be monthly adjustable. The Interest Rate may change monthly either up or down, and is based on an “Index” which is the weekly average yield on the United States Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve Board. Before each “Change Date”, the Lender (Wells Fargo) may calculate a new interest rate by adding a “Margin” (see actual Adjustable Rate Note for current “Margin”). The Interest Rate will never increase above ten percentage points (10%) of the original amount. 2. Annually Adjustable: Just as stated, may adjust annually. Interest Rate will never increase or decrease by more than two percentage points (2.0%) on any single “Change Date”. The Interest Rate will never be more than five percentage points (5.0%) higher or lower than the initial rate stated. Before each “Change Date”, the Lender (Wells Fargo) may calculate a new Interest Rate by adding a “Margin” (see actual Adjustable Rate Note for current “Margin”). 3. Home Keeper ®(Not included in training documents): Interest Rates will adjust monthly and have a lifetime Interest Rate Cap of twelve percentage points (12%) over the original amount, but will have no per-adjustment caps. Changes in Interest Rate do not affect the size or duration of payments to the borrower. TRUST – All borrowers who hold the property in trust must sign both individually as well as their Name, Trustee • Riders 3 ps, sign Condominium, Planned Unit Development Rider, others, such as: Inter Vivos Revocable Trust Rider: The revocable Trust Trustee(s) certifies to the Lender that the Revocable Trust is an inter vivos revocable trust for which the Revocable Trust Trustee(s) is holding full title to the Property as trustee(s). TRUST - All borrowers who hold the property in Trust must sign both individually as well as their Name, Trustee
TRAINING FOR WELLS FARGO REVERSE MORTGAGE 7 • Trust Acknowledgment 1 p, sign as individual • Conversion Loan Agreement 5 ps, sign Detailed information on loan agreement • Conversion Mortgage Federal Truth in Lending 4 ps, sign, date Loan Closing Disclosure Statement Restates the charges and settlement costs, terms. Also adds provisions for termination upon certain conditions particular to seniors. • Lender Certification (no signature needed) 1 p • Mortgagee Certification 1 p States that the Mortgage has been reviewed. (no signature needed) • Compliance Agreement (no need to notarize) 1 p, sign, write in date • Disclosure and Certification Regarding Third 2 ps, sign,date both parts Party Fees Part 1: HECM borrowers establishing to the Lender (Wells Fargo) that the HECM loan proceeds will be used in accordance to the law: Part II: Lump Sum Disbursement Certification: Borrower certifying to the Lender that the borrower WILL NOT use any portion of the lump sum disbursement of the HECM loan proceeds for payments to or on behalf of an “estate planning service firm”. • Notice to the Borrower in case of late payment by Lender 2 ps Contact information in case the of late payment or non-payment by Lender • Tax/Insurance Payment Notice 1 p, sign • Personal Liability Notice 1p, sign, write in date Notifies the borrower that he/she has no personal liability of the debt. The lender may only enforce the payment of debt through the sale of the property. • Notice to Mortgagor Regarding Prepayment 1 p, sign Borrower, without penalty, may prepay any or all of the outstanding debt due under the mortgage at any time. • Fannie Mae Form 928 ( Loan Submission Schedule) 1 p Borrower does not sign. • Information Concerning Borrower’s Intent to Purchase 2 ps, complete An Annuity as part of Reverse Mortgage Borrower will always answer NO TRAINING FOR WELLS FARGO REVERSE MORTGAGE 8 • Electronic Fund Transfer Request 1 p, sign,select options This enables Wells Fargo to electronically transfer funds into borrower’s account. If selected a voided check may be attached by paper clip, along with the borrower’s signature and date. A deposit slip is not acceptable. If there is more than one borrower, or a POA is involved, all parties’ names must appear on the bank account and voided check attached. If not selected, all borrowers must sign, date and write N/A
• Wells Fargo Bank, N.A. Nearest Living Relative Information Sheet 1 p, complete sign Contact information and authorization to contact. Must be completed and signed. • Correction Agreement Limited Power of Attorney 1 p, sign, notarize Allows the Lender limited power of attorney to correct and/or execute or initial all typographical or clerical errors discovered in any or all of the closing documentation required to be executed by the undersigned at settlement. This limited power of attorney shall automatically terminate 120 days from the closing date of the undersigned’s mortgage loan. • Follow up: Approximately 3-5 weeks after the disbursement date, the borrower will receive information via U.S. Mail from Wendover Financial Services Corporation. At that time the borrower will receive a welcome letter. Thereafter the borrower will receive quarterly and annual statements. Prior to receiving this information the borrower may call the Wells Fargo Customer Service telephone number at 1-800-472-3209. PLEASE BE AWARE THERE IS ALWAYS A POSSIBILITY THAT A REVERSE MORTGAGE COUNSELOR (RMC) MAY BE PRESENT AT SIGNING TRAINING FOR WELLS FARGO REVERSE MORTGAGE 9 MOST COMMON DEFICIENCIES 1. Incorrect signing of a Property held in Trust 2 DOTs, 2 Notes, all Riders must be signed as individual and as the Trustee. Example: ____________________ John C. Doe ____________________ John C. Doe, Trustee 3. All Inspections signature missing…pg 12 All pages of all inspection reports Must be signed by all borrowers 4. First page of Estimated Amortization signature missing…pg 16 Schedule Both pages must be signed by all borrowers 5. Residential Loan Application signature missing…pg 21 Please verify all signatures required 6. Addendum to Uniform Residential signature missing… pgs 24 and 25 (two Loan Application places to sign) 7. Home Equity Conversion Loan signature missing…pg 62 must be signed Agreement 8. W-9 failure to write in borrower’s SS #...pg 68 signature missing must be signed by each borrower
9. Disclosure and Borrower All borrowers must sign; borrower must Certification Regarding Third Party check the WILL NOT line Fees 10. Wells Fargo Electronic Fund borrower must complete information Transfer Request even if not applicable 11. Missing Signatures All borrowers must sign the documents where their names are printed 12. Truth in Lending & Settlement statement (HUD) Must be signed by all borrowers 13. Request for Info Concerning borrower always selects NO Borrower’s Intent to Purchase an Annuity as Part of a Reverse Mortgage 14. Nearest Living Relative Information Must be completed and signed