2002 Q3 National Accounts Presentation

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MORTGAGE BANKERS ASSOCIATION REGULATORY COMPLIANCE CONFERENCE 2009 GOVERNMENT PROGRAM UPDATE – FHA, REVERSE MORTGAGES AND OTHER AGENCY DEVELOPMENTS September 15, 2009 JW Marriott Washington, D.C. JAMES A. BRODSKY Weiner Brodsky Sidman Kider PC

Update on HECM Issues – Federal Law Changes The Housing and Economic Recovery Act (or The HERA) – HECM Changes  Single National Loan Limit  Origination Fees  HECM for Home Purchase No “Cross Sel ing” or “Tying” (i.e, Annuities) More Info. Coming; HUD Studying Issue, Wil Request Comments on Potential Rule-making  Counseling Co-ops The American Recovery and Reinvestment Act of 2009 (or The ARRA)  Increased Single National Loan Limit 2 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

Update on HECM Issues – Federal Law Changes  Counseling  Counseling is a “Gate Keeper” Function  The Issues Are:  Quality of Counseling  Funding for Counseling  HERA Changed Funding for Counseling  No More Lender – Paid Counseling  HERA States FHA Can Use Part of the MIPs to Pay for Counseling 3 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

Update on HECM Issues – Federal Law Changes  Other Counseling Updates Outside of the HERA  HUD Updated its General Counseling Rules in September 2007 (created Part 214)  HUD’s Final Rule established:  HECM Counselor Testing Standards  HECM Counseling Roster  The Counseling Protocol Mortgagee Letter 2009-10  Senior’s Financial Situation 4  M BIA’n S RitEiGa UL tAiTo O n RY Co O fM PC LIA o NC u E n CO s NF e ER lEin NC g E 2009  10 Agency Referral

Update on HECM Issues – Federal Law Changes  Single National Loan Limit  Tied to the Freddie Mac Single Family Loan Limit – $417,000 under the HERA  The ARRA temporarily increased the HECM loan limit to $625,500 for calendar year 2009  Not Truly a “Loan Limit” A Property Value Used as a Starting Point to Calculate the Principal Limit Under a HECM Loan 5 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

Update on HECM Issues – Federal Law Changes  Origination Fees  Two (2%) Percent of the Maximum Claim Amount up to $200,000  One (1%) Percent of the Maximum Claim Amount Greater than $200,000  Subject to a Maximum Origination Fee of $6,000  May be Adjusted per the CPI in Increments of $500  Mortgagee Letter 2008-34: Minimum Origination Fee of $2,500 6 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

Update on HECM Issues  The “Cap”  HERA Changes to the HECM Law did not Remove the Cap  Technically, the HECM Program continues to be a “Pilot” Program  The Cap on the Number of HECM Loans that the FHA May Insure has been Successively Increased  Today, that Cap stands at 275,000  However, the Industry arguably exceeded the Cap sometime Ago  The Reverse Mortgage Industry Continues to Operate under a “Suspension” of the Cap 7 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

Update on HECM Issues – Additional FHA Guidance  FHA Administrative Changes re: HECM Program – 2008: A Year for the Record Books  ML 2008-08 – Fixed Rate HECMs  ML 2008-12 – Another Counseling ML  ML 2008-24 – Cross-Selling and “Anti-Tying” (or Required Use); Annuities and “Other Products”  ML 2008-28 – No Lender Paid Counseling  ML 2008-33 – HECM for Purchase  ML 2008-34 – Implementation of New Origination Fee  ML 2008-35 – Single National Limit  ML 2008-38 – Clarification on “Non-recourse” 8 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

HECM for Home Purchase and HECM Refinance  Mortgagee Letter 2009-11 – Provides compilation of guidance for HECM for Home Purchase program  Principal Residence Monetary Investment Rescission Counseling  Mortgagee Letter 2009-21 – Clarifies rules on HECM-to-HECM refinance (supersedes prior Mortgagee Letter 2004-18)  HECM for Home Purchase loans not eligible for reduced initial MIP 9  Cl M a BA’rS if R iEe GU d LA TH OR E Y C C OM M PLI A A NC n E C tOi- NFC ER h EN u CE r20n 09 ing Disclosure

POTENTIAL HECM CHANGES IN THE MORE DISTANT FUTURE (?) AND STATE REVERSE MORTGAGE LEGISLATION  HECM “Light”  “Hybrid” HECMs  State Laws Affecting Reverse Mortgages  Washington Vermont Minnesota California Rhode Island 10 1 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

HECM-RELATED ENFORCEMENT ACTIONS  HUD Office of Inspector General (“OIG”)  OIG is taking more active role in auditing and investigating HECM lenders/servicers Recent issues that came up on audit:  HECM Servicing Issues; Occupancy Status; Property Standards; Repairs  HUD Homeownership Center (“HOC”) – Indemnification Requests  Referrals or Threatened Referrals to the Mortgage Review Board 11 1 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

OIG IS PAYING CLOSE ATTENTION TO SPECIFIC HECM COMPLIANCE ISSUES  Loan Origination Issues  Borrower age requirement Primary residence  Address on the borrower’s driver’s license; Credit Report; Site visit  Required property repairs HECM Counseling Certificate Adequate Disclosures  TALC; List of HECM Counseling Agencies; No incomplete or blank documents 12 1 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

OIG IS PAYING CLOSE ATTENTION TO SPECIFIC HECM COMPLIANCE ISSUES  Servicing Issues  Property remains the borrower’s primary residence Borrower maintains the property Annual certificate of residency is obtained and maintained in the loan file Lender/Servicer maintains proof of payment of property taxes and hazard insurance  HUD is timely notified of due and payable status (within 60 days of borrower’s death) Property appraisal is obtained and maintained in the loan file Foreclosure is initiated within required timeframes  Word of Caution: Anything You Say Can and Will End Up in the Audit Report! 13 1 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

GAO STUDY ADDRESSED HECM MARKETING AND COUNSELING ISSUES  Government Accountability Office (“GAO”) Testimony Before the U.S. Senate Special Committee on Aging  Potential y Misleading Claims in HECM Advertising Evidence of Inappropriate Cross-Sel ing HUD’s Internal Controls Do Not Provide Reasonable Assurance That Counseling Agencies Are Complying with HECM Counseling Requirements 14 1 MBA’S REGULATORY COMPLIANCE CONFERENCE 2009

MORTGAGE BANKERS ASSOCIATION REGULATORY COMPLIANCE CONFERENCE 2009 GOVERNMENT PROGRAM UPDATE – FHA, REVERSE MORTGAGES AND OTHER AGENCY DEVELOPMENTS JAMES A. BRODSKY Weiner Brodsky Sidman Kider PC Washington, DC Brodsky@wbsk.com 202-628-2000 15 1