NEXT GENERATION FINANCIAL SERVICES

A Division of 1st Mariner Bank

McCaskill Amendment
Compliance Program

First Version: March 16, 2009

Last Updated: May 6, 2009

McCaskill Amendment Compliance Program

NOTICE
As a result of Senator Claire McCaskill’s amendments to the Housing and
Economic Recovery Act of 2008 and HUD Mortgagee Letter 2008-24,
FEDERAL LAW NOW REQUIRES that mortgagees who originate federally-
insured reverse mortgages:

1. MUST NOT condition a reverse mortgage on the purchase of any other

financial or insurance product;

AND

2. SHOULD STRIVE to establish, consistent with the new law, firewalls

and other safeguards to ensure there is no undue pressure or appearance of
pressure for a mortgagor to purchase another product of the mortgage
originator or mortgage originator’s company.

NEXT GENERATION FINANCIAL SERVICES IS FULLY COMMITTED TO

MAINTAINING COMPLIANCE WITH FEDERAL LAW. ALL EMPLOYEES
MUST READ THIS COMPLIANCE MANUAL IN ITS ENTIRETY AND
ABIDE BY ITS PROVISIONS.
 McCaskill Amendment Compliance Program

TABLE OF CONTENTS

I. Introduction and Statement of Purpose 1

II. McCaskill Amendment Compliance Program Overview 2

III. Firewall Procedure 2

a. Pre-Closing Interview 3

b. Pre-Closing HUD-1 Review 4

c. Post-Closing Interview 5

d. Annual Loan Officer Performance Evaluation 6

IV. Other Safeguards 7

V. Conclusion 9
 NGFS McCaskill Amendment Compliance Program Manual

McCaskill Amendment Compliance Program

I. INTRODUCTION AND STATEMENT OF PURPOSE

Home Equity Conversion Mortgages (“HECMs”), also known as ‘reverse mortgages,’ offer
a valuable benefit to senior citizens. In short, reverse mortgages offer qualified individuals an
opportunity to reside in their home without monthly mortgage payments or to access the equity
value of their home in order to meet their needs, such as long-term healthcare. The popularity of
this product has increased dramatically in recent years since the U.S. Department of Housing and
Urban Development (“HUD”) was authorized to insure reverse mortgages.

H.R. 3221, the Housing and Economic Recovery Act of 2008 (“HERA”), made significant
changes to the provisions of the National Housing Act that govern federally-insured reverse
mortgages. These changes include an amendment to HERA sponsored by Senator Claire McCaskill
(the “McCaskill Amendment”)1 that imposes significant requirements upon originators of reverse
mortgages. Passage of the McCaskill Amendment caused HUD to issue Mortgagee Letter 2008-24,
which states in relevant part:

[The McCaskill Amendment to the National Housing Act] provides that a HECM mortgage
originator or any other party that participates in the origination of a FHA2 insured HECM
mortgage shall (1) not participate in, or be associated with, or employ any party that
participates in or is associated with, any other financial or insurance activity; or (2)
demonstrate to the Secretary of HUD that the mortgagee or other party maintains, or will
maintain, firewalls and other safeguards designed to ensure that (i) individuals participating
in the origination of a HECM mortgage have no involvement with, or incentive to provide
the mortgagor with, any other financial or insurance product; and (ii) the mortgagor shall not
be required, directly or indirectly, as a condition of obtaining a mortgage under this section,
to purchase any other financial or insurance product.

Before providing definitive guidance on [The McCaskill Amendment to the National

Housing Act], FHA intends to seek comments from the public, including consumer groups,
industry participants and other interested parties through appropriate administrative means.
This will assist FHA in determining what requirements may already be in existence to
address the consumer protections with which this section is concerned; for example, there
may be state requirements in existence that govern insurance products. Until such comment
is solicited and received, and FHA issues more definitive guidance, FHA advises that
mortgagees must not condition a HECM mortgage on the purchase of any other financial
or insurance product, and should strive to establish, consistent with the new law, firewalls
and other safeguards to ensure there is no undue pressure or appearance of pressure for a
mortgagor to purchase another product of the mortgage originator or mortgage
originator’s company.

1
Section 2122(a)(9) of HERA, codified as federal law at 12 U.S.C. § 1715z-20(n) (Section 225(n) of the National
Housing Act.
2
The “Federal Housing Administration,” a division of HUD’s Office of Housing that provides mortgage insurance on
loans made by FHA-approved lenders throughout the United States and its territories.

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 NGFS McCaskill Amendment Compliance Program Manual

Next Generation Financial Services (“NGFS”) is fully committed to maintaining its

compliance with all applicable laws and regulations, including the McCaskill Amendment.3 In
order to ensure compliance with these new reverse mortgage lending laws, NGFS has prepared this
manual (the “Manual”) in order to implement its McCaskill Amendment Compliance Program. The
Manual will be distributed to all NGFS loan originators (an NGFS loan originator is referred to by
NGFS and this Manual as a “Loan Officer”) and the Manual will be reviewed and discussed with
each Loan Officer by his or her NGFS manager.

The purpose of this Manual is to implement NGFS’s McCaskill Amendment

Compliance Program, a program designed to ensure that NGFS meets the requirements of the
McCaskill Amendment as set forth in HUD Mortgagee Letter 2008-24.

II. McCASKILL AMENDMENT COMPLIANCE PROGRAM OVERVIEW

As noted above, HUD Mortgagee Letter 2008-24 states that there are two steps that reverse
mortgage lenders must take to comply with the McCaskill Amendment until HUD/FHA issues its
final regulations:

1. Lenders “must not condition a HECM mortgage on the purchase of any other financial or
insurance product;” and

2. Lenders “should strive to establish, consistent with the new law, firewalls and other
safeguards to ensure there is no undue pressure or appearance of pressure for a mortgagor to
purchase another product of the mortgage originator or mortgage originator’s company.”

With respect to step one, NGFS expressly prohibits its employees from conditioning the
sale or origination of a reverse mortgage on the purchase of any other financial or insurance
product. This policy is made clear to all NGFS employees through this Manual as well as other
training materials and internal NGFS communications. This policy is also made clear to all reverse
mortgage customers as part of every NGFS reverse mortgage transaction, through the Annuity
Disclosure and the Anti-Tying Disclosure and Customer Acknowledgment Forms, each of which
must be read and signed by every customer before a reverse mortgage transaction will be closed.

Regarding the second step identified in HUD Mortgagee Letter 2008-24, NGFS has
developed and established both (a) firewalls and (b) other safeguards to ensure there is no undue
pressure or appearance of pressure for a reverse mortgage customer to purchase another product of
the mortgage originator or the mortgage originator’s company, or to purchase another financial or
insurance product using the proceeds of the reverse mortgage transaction. These firewalls and other
safeguards are detailed elsewhere in this Manual.

III. FIREWALL PROCEDURE

In order to comply with HUD Mortgagee Letter 2008-24, and thereby maintain compliance
with the McCaskill Amendment’s requirements for reverse mortgage lenders, NGFS has
3
Several relevant HUD Mortgagee Letters, including Mortgagee Letter 2008-24, are attached as Appendices A – C.

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implemented a four-step firewall procedure accompanied by other safeguards. Because NGFS does
not market, offer, sell, or otherwise present any other financial products to its customers besides
reverse mortgages (and in fact expressly prohibits its employees from conducting such activities in
conjunction with reverse mortgage sales), NGFS does not face the need to create firewalls or other
barriers between employees working with such products and those working with reverse mortgages.
NGFS recognizes, however, that because the mortgage origination industry is no longer a
traditional, ‘nine-to-five’ profession, there may be a need for external firewalls in some situations.
Accordingly, NGFS mandates the following four steps as part of its firewall procedure, which must
be completed for every reverse mortgage that is originated:

Step 1: Pre-Closing Interview

Step 2: Pre-Closing HUD-1 Review

Step 3: Post-Closing Interview

Step 4: Annual Loan Officer Performance Evaluation with Compliance Attestation

Each of the first three steps in this firewall procedure must be completed for every NGFS
reverse mortgage originated, and each step must be completed not by the loan-originating Loan
Officer, but by a specifically-designated NGFS employee (the “Disinterested Employee”). The
Disinterested Employee must be an NGFS employee whose compensation is not based upon the
volume of reverse mortgages closed, whose income is not contingent on successful origination of
any NGFS reverse mortgage, and who does not report to an individual whose compensation is
based upon the volume of HECM mortgages closed. Because the Disinterested Employee will
conduct these steps of the process, and will not have any financial incentive that could present a
conflict of interest, the firewall procedure will ensure compliance with the underlying goal of the
McCaskill Amendment and HUD Mortgagee Letter 2008-24: preventing any “undue pressure or
appearance of pressure for a mortgagor to purchase another product” in conjunction with the sale of
a reverse mortgage. The fourth step in this firewall procedure is an annual loan officer performance
evaluation (the “Loan Officer Performance Evaluation”). The annual Loan Officer Performance
Evaluation will be performed by each Loan Officer’s NGFS supervisor (an NGFS Regional
Coordinator), and will contain a Compliance Attestation by the Loan Officer affirming his or her
compliance with NGFS reverse mortgage compliance policies such as those contained in this
Manual.

A. STEP 1: PRE-CLOSING INTERVIEW

The first step of the McCaskill Amendment Compliance Program firewall procedure is the
“Pre-Closing Interview.” In this step, each customer who wishes to enter into a reverse mortgage
must be contacted by an NGFS Disinterested Employee before the loan can proceed to closing. The
Disinterested Employee conducting the Pre-Closing Interview must speak directly and privately
with the customer via telephone, and must complete the checklist that is attached to this manual as
Appendix D. The Pre-Closing Interview includes questions for the customer such as:

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• Has your NGFS Loan Officer, or anyone associated with your NGFS Loan Officer, offered
to sell you any type of financial or insurance product to be purchased with the proceeds of
your NGFS reverse mortgage transaction?

• Have you felt pressured in any way by anyone to use the proceeds of your NGFS reverse
mortgage for a certain purpose? If so, what purpose?

• How do you plan to use the proceeds of your NGFS reverse mortgage?

• Do you understand that NGFS does not require and does not recommend using the proceeds
of your reverse mortgage to purchase any other financial or insurance product, including
products such as deferred annuities?

The goal of the Pre-Closing Interview is to have the Disinterested Employee verify the Loan
Officer’s compliance with the McCaskill Amendment and HUD Mortgagee Letter 2008-24.
Because the Disinterested Employee conducting the Pre-Closing Interview does not receive
compensation contingent on the sale of the reverse mortgage, this employee’s interview with the
customer helps ensure that there is a firewall between the sale of the NGFS reverse mortgage and
any potential sale of, or incentive to sell, other financial or insurance products to the reverse
mortgage customer. If there is any information gathered from the customer during the Pre-Closing
Interview which suggests that the loan may not be in compliance with the McCaskill Amendment,
the loan will be flagged and referred to NGFS upper management and legal counsel for review
before the loan closing process can continue. If there is nothing found in the Pre-Closing Interview
to indicate a compliance problem, the reverse mortgage loan will continue towards closing.

B. STEP 2: PRE-CLOSING HUD-1 REVIEW

The second step in the McCaskill Amendment Compliance Program firewall procedure is
the “Pre-Closing HUD-1 Review.” In this step, the HUD-1 settlement statement for each NGFS
reverse mortgage is carefully reviewed following the Pre-Closing Interview, prior to closing. Like
the Pre-Closing Interview, this review of the HUD-1 form is also conducted by a Disinterested
Employee who is not under the supervision or control of the Loan Officer and whose income is not
contingent upon the successful origination of the reverse mortgage in question. During this step, the
HUD-1 form is carefully reviewed in order to confirm that there are no disbursements to be made
using the customer’s reverse mortgage proceeds that would indicate the purchase of another
financial or insurance product by the customer. If no such disbursements are to be made according
to the HUD-1 form, and the Pre-Closing Interview did not reveal any issues that might prevent full
compliance with the McCaskill Amendment, the loan will be allowed to proceed to closing. If, on
the other hand, there is anything to suggest that the customer will be purchasing another financial or
insurance product with the proceeds of his/her reverse mortgage, the loan will be flagged and
referred to upper management as well as legal counsel for compliance review.

No reverse mortgage loan will be closed without either having: (a) passed both the Pre-
Closing Interview and Pre-Closing HUD-1 Review; or (b) having been reviewed and passed for
McCaskill Amendment compliance by both NGFS upper management and legal counsel. These
pre-closing firewall procedures will help ensure that no NGFS-originated reverse mortgage is

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conditioned on the purchase of another financial or insurance product, and that there is no “undue
pressure or appearance of pressure for a mortgagor to purchase another product” in conjunction
with the sale of an NGFS reverse mortgage.

C. POST-CLOSING INTERVIEW

The third step in the McCaskill Amendment Compliance Program firewall procedure is a
post-closing telephone call to each reverse mortgage borrower (the “Post-Closing Interview”).
Although the Pre-Closing Interview and Pre-Closing HUD-1 Review are intended to ensure
compliance with Mortgagee Letter 2008-28 at the time the NGFS reverse mortgage closes, the
FHA/HUD requirements are broad. In short, NGFS, as the mortgagee, must strive to ensure that no
individual participating in the origination of an NGFS reverse mortgage has involvement with, or
incentive to provide the borrower with, any other financial or insurance product.

Therefore, we believe that an effective firewall must also safeguard against the sale of
financial or insurance products to the reverse mortgage borrower shortly after the closing of the
mortgage. To this end, a follow-up telephone Post-Closing Interview should be made no less than
two weeks nor more than six weeks after the closing to ensure that the proceeds of the reverse
mortgage were not used for prohibited purposes shortly after closing. Such calls should be made by
a Disinterested Employee, as defined above.

The first sub-part of the Post-Closing Interview procedure is a review of the final HUD-1
from the reverse mortgage closing in question. To the extent that there are no excess funds returned
to the borrower, there are no funds that could be used to purchase financial or insurance products.
Because many (if not most) reverse mortgages are refinances, the number of loans that will need to
be monitored with a Post-Closing Interview will be relatively small. If funds are returned to the
borrower as a result of the reverse mortgage closing, however, the borrower should be contacted via
telephone by a Disinterested Employee for a telephone Post-Closing Interview.

During the telephone Post-Closing Interview, the borrower will be asked the following:

• Other than the NGFS reverse mortgage transaction, have you purchased any financial or
insurance products from the Loan Officer who originated your NGFS reverse mortgage?

• How have you used the funds that you received from your NGFS reverse mortgage?

• Do you have any other questions about your NGFS reverse mortgage?

Note: Unlike the Pre-Closing Interview, without which the mortgage will not close, the
borrower may be less willing to participate in the Post-Closing Interview. If a majority of NGFS
reverse mortgage borrowers fail to participate in the Post-Closing Interview step of the firewall
procedure within the first year of its implementation, NGFS will consider implementing some
type of incentive for borrowers in order to increase participation.

A checklist for use during the Post-Closing Interview is attached as Appendix E.

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D. ANNUAL LOAN OFFICER PERFORMANCE EVALUATION

The FHA requires that the relationship between NGFS and each of its loan originators be
that of employer and employee. In particular, the FHA requires that each employee of the
mortgagee be under the direct supervision and control of the mortgagee. The FHA requires that, at
a minimum, regular and ongoing reviews must be conducted of employee performance and of work
performed.

Each NGFS loan originator (referred to by NGFS as a “Loan Officer”) is supervised by a

Regional Coordinator. NGFS employs four such Regional Coordinators. The Regional
Coordinator will conduct a performance evaluation of each Loan Officer under their supervision at
least once annually. This evaluation (the “Loan Officer Performance Evaluation”) will be
conducted in the month on which the Loan Officer’s service anniversary date occurs, and the
evaluation shall include the following topics:

• The volume of NGFS reverse mortgages originated by the Loan Officer;

• An assessment of the Loan Officer’s compliance with NGFS policy on the origination
and documentation of HECM mortgages;

• An assessment of the Loan Officer’s efforts to promote NGFS’s policies with respect to
the Community Reinvestment Act.

• A discussion of any issues relating to the Loan Officer that arose from NGFS reverse
mortgage pre-closing or post-closing interviews, or pre-closing HUD-1 reviews.

In addition, the Loan Officer will be given the opportunity to respond in writing to any
aspect of the Loan Officer Performance Evaluation with which he or she disagrees. Finally, the
Loan Officer will be required to sign a Compliance Attestation as a part of the annual Loan Officer
Performance Evaluation, stating that:

1. The Loan Officer is aware of all NGFS policies with respect to the origination of reverse
mortgages; and

2. The Loan Officer did not, directly or indirectly (a) sell any financial or insurance product
to, or (b) benefit financially from the sale by any third party of any financial or insurance
product to, any borrower under an NGFS reverse mortgage with which the Loan Officer
was involved. If the loan originator has any doubt as to whether he or she benefited
directly or indirectly from the sale of a financial product to a reverse mortgage borrower,
the loan originator should immediately refer such a question to management for
resolution.

The form of the annual Loan Officer Performance Evaluation is attached as Appendix F.

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IV. OTHER SAFEGUARDS

NGFS’s McCaskill Amendment Compliance Program contains a number of other safeguards

in addition to the above-detailed firewall procedure. Like the firewall procedure, these safeguards
are also designed to ensure that there is no undue pressure or appearance of pressure for an NGFS
reverse mortgage customer to purchase another financial or insurance product in conjunction with
the origination of an NGFS reverse mortgage. The additional safeguards include:

A. Anti-Tying Disclosure and Customer Acknowledgment Form

This disclosure form is provided to each NGFS reverse mortgage customer before a reverse
mortgage is originated. By signing this notice, the customer acknowledges his or her understanding
of the following facts:

• NGFS does not encourage its customers to use mortgage loan proceeds to purchase
securities or other investment products that have an inherent risk of loss of principal, or
other products that may result in adverse tax consequences;

• The Internal Revenue Code restricts loan interest deductions when loan proceeds are
used to purchase certain life insurance, annuity, and endowment products, as well as
certain investment products;

o Only the customer’s income tax professional may provide the customer with tax
advice concerning the purchase of the products detailed above;

• In the event that an NGFS Loan Officer is licensed to sell insurance or securities
products as agents for another enterprise other than NGFS:

o The Loan Officer must disclose the relationship with the other enterprise to
customers before offering to sell such products; and

o The Loan Officer must be aware that the Broker Dealer for the other enterprise
may not permit sales of securities using loan proceeds;

o NGFS does not endorse other products other than those offered by NGFS;

• In connection with the reverse mortgage transaction, the NGFS Loan Officer will be
acting solely as a residential mortgage loan officer and not as a seller of any other type
of product; and

• The approval of the customer’s reverse mortgage loan application is in no way

dependent upon the customer’s agreement to purchase any other product or
service from NGFS or the Loan Officer.

The form of the Anti-Tying Disclosure and Customer Acknowledgment Form is attached as
Appendix G.

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B. Reverse Mortgage Advisor Disclosure

This disclosure form is also provided to each NGFS reverse mortgage customer before a
reverse mortgage is originated. By signing this form, the customer certifies:

• He or she was encouraged to consult an advisor about his or her decision to obtain a
reverse mortgage;

• Any fees for such an advisor are at the customer’s own expense;

• He or she has consulted with an advisor or has chosen not to;

• The names, titles and contact information of any advisor with whom the customer has
consulted.

The form of the Reverse Mortgage Advisor Disclosure is attached as Appendix H.

C. Annuity Disclosure for Reverse Mortgage Transaction

The Annuity Disclosure form is a third notice provided to each NGFS reverse mortgage
customer before a reverse mortgage is originated. By signing this disclosure form, the customer
acknowledges that NGFS does not require, offer, or arrange the purchase of annuities in connection
with the reverse mortgage transaction, and that NGFS does not endorse or recommend the purchase
of any such financial products. The form of the Annuity Disclosure is attached as Appendix I.

D. Anti-Coercion Statement

The Anti-Coercion Statement is presented to each NGFS reverse mortgage customer before
a reverse mortgage is originated in order to ensure compliance with state law. By signing this
notice, the customer acknowledges that the insurance laws of Maryland prohibit the lender from
requiring the customer to acquire property insurance through any particular insurance agent or
company. The notice informs the customer that the customer has the right to purchase insurance for
the mortgaged property through the insurance agent or company of his or her choice (subject to the
rules adopted by the Maryland Insurance Commissioner), and that the lender has the right to
designate reasonable financial requirements regarding the insurer and the adequacy of coverage.
The notice also asks the customer to designate the insurance agent and company that the customer
chooses. The form of the Anti-Coercion Statement is attached as Appendix J.

E. Counseling Information

NGFS also ensures that its reverse mortgage customers meet the counseling requirements of
HUD before a reverse mortgage is originated. The Counseling Information notice informs the
customer that HUD requires the customer to obtain a counseling certificate from an approved

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organization in order to submit an application for a reverse mortgage. The notice also informs the
customer that HUD requires the customer be provided with a list of such counselors prior to
submission of the reverse mortgage application. By signing this notice, the customer acknowledges
that he or she has either received the list of counselors with the instructions necessary for the
customer to contact a counselor of his or her choice, or that the required counseling has already
been obtained before contacting NGFS. The form of the Counseling Information notice is attached
as Appendix K.

V. CONCLUSION

As Senator McCaskill stated in her floor remarks regarding the McCaskill Amendment,
“some reverse mortgages are good and they may be appropriate in some circumstances” as long as
certain safeguards are in place to protect borrowers.4 Indeed, reverse mortgages are useful products
that allows senior citizens to access the equity value of their residence, which is often their most
valuable asset, without having to sell or leave their home. Reverse mortgages can be a lifeline for
elderly Americans, providing them with a greatly-improved ability to meet the increasing financial
burdens of modern life (such as the immense costs associated with health care). These beneficial
aspects of reverse mortgages were thoroughly detailed in the National Council on the Aging’s 2005
report, “Use Your Home to Stay at Home – Expanding the Use of Reverse Mortgages for Long-
Term Care.”5

NGFS is keenly aware of both the benefits and hazards that reverse mortgages present to
senior citizens, and NGFS understands that the McCaskill Amendment does not seek to ban the
elderly from using reverse mortgages to meet their needs. Rather, the McCaskill Amendment seeks
to add additional safeguards to prevent abuse of the reverse mortgage system by those who would
sell inappropriate financial or insurance products to vulnerable seniors, or otherwise profit from
conflicts of interest. As the McCaskill Amendment press release notes:

[The Amendment] would help to protect seniors by ensuring they receive independent
counseling prior to signing up for a reverse mortgage. The U.S. Department of Housing and
Urban Development (HUD) will make counselors meet qualification standards and follow
uniform protocols. In addition, HUD will issue stronger consumer protection regulations
including protection against the marketing of financial and insurance products that are
inappropriate for seniors.

NGFS is fully committed to meeting the reverse mortgage origination requirements of the
McCaskill Amendment as set forth in HUD Mortgagee Letter 2008-24. To this end, NGFS will
continue its policy of not conditioning the origination of a reverse mortgage on the sale of any other
financial or insurance product. Furthermore, NGFS has implemented this McCaskill Amendment
Compliance Program in order to ensure that there is no undue pressure or appearance of pressure for
a customer to purchase another financial or insurance product in conjunction with the origination of
an NGFS reverse mortgage. In addition to a number of other safeguards, NGFS has implemented a
comprehensive firewall program utilizing Disinterested Employees who operate independently of
NGFS reverse mortgage loan originators (and whose compensation is not contingent upon the

4
See the McCaskill Amendment Press Release, April 3, 2008, attached as Appendix L.
5
Available at http://www.ncoa.org/Downloads/ReverseMortgageReportPublications.pdf.

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completion of such mortgages). These pre- and post-closing procedures are truly firewalls in the
sense that they separate enforcement of the McCaskill Amendment compliance measures from
those employees who benefit directly from reverse mortgage origination, eliminating potential
conflicts of interest.

NGFS urges any employee with questions regarding the McCaskill Amendment Compliance
Program as implemented by this manual to contact their Regional Coordinator immediately.

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 Appendix A
Document: U.S. Department of Housing and Urban Development Mortgagee Letter 2008-24

Date: September 16, 2008

Source: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-24ml.doc
 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING-

FEDERAL HOUSING COMMISSIONER

September 16, 2008

MORTGAGEE LETTER 2008-24
TO: ALL APPROVED MORTGAGEES

SUBJECT: Home Equity Conversion Mortgage (HECM) Program - Requirements on

Mortgage Originators

Section 2122 (a) (9) of the Housing and Economic Recovery Act of 2008 (HERA) added
Section 255 (n) to the National Housing Act to establish new requirements on HECM mortgage
originators. Sections 255 (n)(1) and (n)(2) are described separately below.

Section 255 (n)(1): This section provides that a HECM mortgage originator or any other
party that participates in the origination of a FHA insured HECM mortgage shall (1) not participate
in, or be associated with, or employ any party that participates in or is associated with, any other
financial or insurance activity; or (2) demonstrate to the Secretary of HUD that the mortgagee or
other party maintains, or will maintain, firewalls and other safeguards designed to ensure that (i)
individuals participating in the origination of a HECM mortgage have no involvement with, or
incentive to provide the mortgagor with, any other financial or insurance product; and (ii) the
mortgagor shall not be required, directly or indirectly, as a condition of obtaining a mortgage under
this section, to purchase any other financial or insurance product.

Before providing definitive guidance on Section 255 (n)(1), FHA intends to seek comments
from the public, including consumer groups, industry participants and other interested parties
through appropriate administrative means. This will assist FHA in determining what requirements
may already be in existence to address the consumer protections with which this section is
concerned; for example, there may be state requirements in existence that govern insurance
products. Until such comment is solicited and received, and FHA issues more definitive guidance,
FHA advises that mortgagees must not condition a HECM mortgage on the purchase of any other
financial or insurance product, and should strive to establish, consistent with the new law, firewalls
and other safeguards to ensure there is no undue pressure or appearance of pressure for a mortgagor
to purchase another product of the mortgage originator or mortgage originator’s company.

Section 255 (n)(2): This section requires that all parties that participate in the origination of
a mortgage to be insured under FHA’s HECM program must be approved by the Secretary. This
requirement means that loan origination must be performed by FHA approved entities including: (1)
a FHA-approved loan correspondent and sponsor; (2) a FHA approved mortgagee through its retail
channel; or (3) a FHA-approved mortgagee working with another FHA-approved mortgagee.

Consequently, Mortgagee Letter 2008-14, which provided guidance regarding the ways in
which a non-approved entity or third party may participate and be compensated, is rescinded,

www.hud.gov espanol.hud.gov
 2

effective on October 1, 2008. Beginning with case number assignments made on or after that date,
only FHA-approved mortgagees, as described above, may participate and be compensated for the
origination of HECMs to be insured by FHA.

If you have any questions regarding this Mortgagee Letter, please call 1-800-CALLFHA.

Sincerely,

Brian D. Montgomery
Assistant Secretary for Housing-
Federal Housing Commissioner
 Appendix B
Document: U.S. Department of Housing and Urban Development Mortgagee Letter 2008-28

Date: September 29, 2008

Source: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-28ml.doc
 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING-

FEDERAL HOUSING COMMISSIONER

September 29, 2008

MORTGAGEE LETTER 2008-28

TO: ALL HUD-APPROVED MORTGAGEES

ALL HUD-APPROVED HOUSING COUNSELING AGENCIES

SUBJECT: Prohibition on Mortgagee Funded Home Equity Conversion Mortgage (HECM)

Counseling

This Mortgagee Letter informs Federal Housing Administration (FHA) approved

Mortgagees and Department of Housing and Urban Development (HUD) approved housing
counseling agencies that mortgagees are no longer permitted to pay for HECM counseling on
behalf of mortgagors. This new statutory requirement is effective immediately. This ML
rescinds paragraph (2) of the section entitled Payment of Counseling Fee in ML 2008-12.

Section 2122 of the "Housing and Economic Recovery Act of 2008" (HERA) (Pub. L.
No. 110-289), enacted July 30, 2008, requires that the HECM mortgage must be executed by a
mortgagor who received adequate counseling from an independent third party that is not either
directly or indirectly associated or compensated by a party involved in 1) originating or servicing
the mortgage; 2) funding the loan underlying the mortgage; or 3) the sale of annuities,
investments, long-term care insurance, or any other type of financial or insurance product.

No Permissible Method for Payments

Lenders can no longer pay HUD-approved counseling agencies, directly or indirectly,

for counseling services through either a lump-sum payment or on a case-by-case basis. An
example of prohibited indirect funding is Lenders funneling payment for HECM counseling
through a nonprofit, foundation, association or any other entity or organization that is a branch
of, affiliated with or associated with a lending institution.

Funding for Other Housing Counseling Services

Lenders may continue to pay for other types of housing counseling not associated with the
HECM program, including pre-purchase and foreclosure prevention counseling, under certain
conditions, as addressed in 24 CFR Part 214, regulations for HUD’s Housing Counseling Program.

www.hud.gov espanol.hud.gov
 2

As required by section 214.303(g) of the Housing Counseling regulations, these transactions

and relationships, as well as any other financial relationship between the counseling agency and any
industry participant, must be disclosed to the counseling recipient.

If you have any questions regarding this Mortgagee Letter, please contact the FHA
Resource Center at 1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech
impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-
2483).

Sincerely,

Brian D. Montgomery
Assistant Secretary for Housing-
Federal Housing Commissioner
 Appendix C
Document: U.S. Department of Housing and Urban Development Mortgagee Letter 2008-33

Date: October 20, 2008

Source: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-33ml.doc
 U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING-

FEDERAL HOUSING COMMISSIONER

October 20, 2008

MORTGAGEE LETTER 2008-33

TO: ALL APPROVED MORTGAGEES

ALL HUD-APPROVED HOUSING COUNSELING AGENCIES

SUBJECT: Home Equity Conversion Mortgage (HECM) for Purchase Program

The Housing and Economic Recovery Act of 2008 (HERA) provides HECM mortgagors with the
opportunity to purchase a new principal residence with HECM loan proceeds. Section 2122(a)(9) of
HERA amends section 255 of the National Housing Act to authorize the Department of Housing and
Urban Development (HUD) to insure HECMs used for the purchase of a 1- to 4-family dwelling unit.
Accordingly, eligible mortgagors now have the opportunity to purchase a principal residence with HECM
loan proceeds. HECM for purchase transactions, for which the FHA case number is assigned on or after
January 1, 2009, must satisfy existing program requirements and the provisions of this Mortgagee Letter.

The Federal Housing Administration (FHA) defines “HECM for Purchase” as a real estate
purchase where title to the property is transferred to the HECM mortgagor, which the mortgagor will
occupy as a principal residence, and, at the time of closing, the HECM first and second liens will be the
only liens against the property. HECM mortgagors must occupy the property within 60 days from the
date of closing. Lenders are required to ensure all outstanding or unpaid obligations incurred by the
prospective mortgagor, in connection with the HECM transaction, are satisfied at closing.

Eligible Property Types

Only properties where construction is completed, as defined in Mortgagee Letter 2007-06, are
eligible for FHA insurance under the HECM for Purchase program. Loan proceeds may be used to satisfy
outstanding payment obligations associated with a land contract, contract for deed or other similar
purchasing arrangements that will ensure the property, which will be used as collateral for the HECM,
meets FHA’s title requirements. Those requirements, as provided in section 255(b)(4) of the National
Housing Act and implemented in the HECM regulations at 24 CFR 206.45, provide, in part, that the
HECM must be on real estate held in fee simple, or on a leasehold under a lease for not less than 99 years
which is renewable, or under a lease having a remaining period of not less than 50 years beyond the date
of the 100th birthday of the youngest mortgagor.

www.hud.gov espanol.hud.gov
 2

Ineligible Property Types

The following property types are ineligible for FHA insurance under the HECM for Purchase
program:

• Cooperative units;
• Newly constructed principal residence where a Certificate of Occupancy or its equivalent has not
been issued by the appropriate local authority;
• Boarding houses;
• Bed and breakfast establishments;
• Existing manufactured homes built before June 15, 1976; and
• Existing manufactured homes built after June 15, 1976 that fail to conform to the Manufactured
Home Construction Safety Standards, as evidenced by affixed certification labels (e.g. data plate
and HUD certification label) and/or lack a permanent foundation as required in HUD’s Permanent
Foundations for Manufactured Housing Guide.

Property Flipping

Prospective mortgagors should be alert to efforts to coerce them into obtaining a reverse mortgage
as part of a purchase contractual obligation, or purchasing a distressed home in need of substantial repairs
but being sold at or above market rate.

As such, HECM lenders must take steps to ensure that: a) only current owners of record may sell
properties that will be financed using FHA-insured mortgages; b) any resale of a property may not occur
90 or fewer days from the last sale to be eligible for FHA financing; and c) for resales that occur between
91 and 180 days where the new sales price exceeds 100% of the previous sales price, FHA will require
additional documentation validating the property’s value. Lenders providing HECM financing for
purchase transactions must comply with guidance provided in Mortgagee Letter 2006-14.

Refinancing and Existing Upfront Mortgage Insurance Premium (MIP)

The HECM refinance authority is only applicable when the property that serves as collateral for
FHA-insurance remains the same. Therefore, existing HECM mortgagors who participate in a HECM for
Purchase transaction are ineligible for a reduction of the upfront MIP and lenders must enter the
transaction into FHA Connection as a new HECM.

Monetary Investment

Consistent with existing policy, the maximum claim amount and principal limit will continue to be
calculated in accordance HECM regulations at 24 CFR 206.3, HUD Handbook 4235.1 REV-1, and
applicable MLs. At closing, HECM mortgagors must provide a monetary investment which will be
applied to satisfy the difference between the HECM principal limit and the sales price for the property,
plus any HECM loan related fees that are not financed or offset by other allowable FHA funding sources.
HECM mortgagors may choose to provide a larger investment amount in order to retain a portion of the
available HECM proceeds for future draws.
 3

Required Investment Examples

Example #1 Example #2 Example #3

Appraised Value/MCA*$300,000 Appraised Value/MCA*$300,000 Appraised Value/MCA*$300,000
Sales price $300,000 Sales price $325,000 Sales price $280,000
Principal Limit** $199,500 Principal Limit** $199,500 Principal Limit** $199,500
Minus Loan Fees $ 15,500 Minus Loan Fees $ 15,500 Minus Loan Fees $ 15,500
Avail. HECM proceeds $184,000 Avail. HECM proceeds $184,000 Avail. HECM proceeds $184,000
Req. Investment $116,000 Req. Investment $141,000 Req. Investment $ 96,000
* Appraised Value/MCA is defined as the maximum claim amount and is used to determine the principal limit which is the
lesser of the appraised value or the FHA national mortgage limit. The principal limit is the maximum amount available to
the HECM mortgagor.
** Assumes the age of the youngest HECM mortgagor is 67 and a principal limit factor of .665 for a 5% expected average
mortgage interest rate.

In each example above, loan fees are deducted from the principal limit of the HECM. However, it is not
required that loan fees be deducted from HECM proceeds. The mortgagor may pay loan fees as part of
the required monetary investment and use all HECM proceeds toward the purchase transaction.

Funding Sources

HECM mortgagors must use cash on hand or cash from the sale or liquidation of the mortgagor’s
assets for the required monetary investment.

Verification of Funding Sources

Lenders will be required to verify the source of all funds prior to closing. A verification of
deposit, along with the most recent bank statement, may be used to verify savings and checking accounts.
If there is a large increase in an account, or the account was opened recently, the lender must obtain a
credible explanation of the source of those funds. Such documentation must be provided in the FHA case
binder. Failure to provide the necessary documentation may result in a notice of rejection and delay of
endorsement.

Gap Financing

Consistent with existing regulatory requirements at 24 CFR 206.32(a), HECM mortgagors may
not obtain a bridge loan (also known as “gap financing”) or engage in other interim financing methods to
meet the monetary investment requirement or payment of closing costs needed to complete the purchase
transaction. This restriction includes subordinate liens, personal loans, cash withdrawals from credit
cards, seller financing and any other lending commitment that cannot be satisfied at closing.
 4

Gap Financing Example

A prospective HECM mortgagor completes the required reverse mortgage counseling and receives
an estimate stating the required monetary investment could be $25,000. The prospective HECM
mortgagor has $20,000 in liquid assets but is short the remaining $5,000. The prospective HECM
mortgagor cannot take $5,000 from a credit card or obtain interim financing in order to deposit the money
into their banking account in anticipation of being required to bring this amount to closing. However, the
prospective HECM mortgagor may obtain the $5,000 from an allowable FHA funding source.

Enhanced Counseling

HUD-approved housing counseling agencies that have been approved to provide reverse mortgage
counseling, must counsel those who anticipate using the HECM for Purchase option on all topics covered
in this Mortgagee Letter and other HUD requirements and issuances.

Right of Rescission

The three-day right of rescission period is not applicable to HECM for Purchase transactions.
Therefore, all initial advances may be disbursed on the day of closing by the settlement agent. However,
FHA encourages lenders to seek their counsel’s opinion to assure compliance with Federal or State laws.

Closing Guidance

Lenders are required to ensure the property, when used as collateral for the HECM, meets the
following property requirements:

• Will serve as the principal residence of the HECM mortgagor.

• Construction is complete and a certificate of occupancy or its equivalent has been issued.
• Any construction loan financing for the property, which will serve as the collateral for the HECM
loan, is satisfied and the HECM liens will be in a first and second lien position and, at the time of
closing, no other liens against the property exist.

Consistent with existing lending practices, lenders are responsible for determining whether a
particular HECM loan is open or closed-end credit. In accordance with 24 CFR 206.43, lenders must
comply with the regulatory disclosure requirements.

Data Entry

Instructions on how to enter HECM for Purchase transactions into FHA Connection and Insurance
Accounting Collection System will be provided in a separate instruction.
 5

Information Collection Requirements

The information collection requirements contained in this Mortgagee Letter were approved by
the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of
1995 (44 U.S.C. 3501-3520). Approval of HECM Program is covered by OMB control number
2502-0524, with disclosures requirements being covered by OMB control numbers 2502-0265 and
2502-0059. An agency may not conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a valid control number.

If you have questions regarding this Mortgagee Letter, please call FHA’s Resource Center at
1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this
number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,

Brian D. Montgomery
Assistant Secretary for Housing-
Federal Housing Commissioner
Appendix D
 NEXT GENERATION FINANCIAL SERVICES
A Division of 1st Mariner Bank

Reverse Mortgage Origination Pre-Closing Interview Checklist

Date and Time: __________________________

Name of Loan Officer: __________________________

Name of Supervisor: __________________________

Regional Coordinator

Name of Borrower: __________________________

Borrower’s Telephone Number: __________________________

Questions:

• Has your NGFS Loan Officer (the person originating your NGFS reverse mortgage), or anyone associated with
your Loan Officer, offered to sell you any type of financial or insurance product to be purchased with the
proceeds of your NGFS reverse mortgage transaction?

YES / NO IF YES, WHO AND WHAT: ____________________________

• Have you felt pressured in any way by anyone to use the proceeds of your NGFS reverse mortgage for a certain
purpose?

YES / NO IF YES, WHAT PURPOSE: ____________________________

• How do you plan to use the proceeds of your NGFS reverse mortgage?

______________________________________________________________________________________

• Do you understand that NGFS does not require and does not recommend using the proceeds of your reverse
mortgage to purchase any other financial or insurance product, including products such as deferred annuities?

YES / NO IF NO, WHY: ____________________________

• Have you discussed your NGFS reverse mortgage and how it works with a financial advisor, family member, or
trusted friend, other than your NGFS Loan Officer?

YES / NO IF YES, WHO: ____________________________

• Do you have any questions about your NGFS reverse mortgage, and are there any questions or concerns about
this mortgage that you feel your Loan Officer has not answered to your satisfaction?

YES / NO IF YES, WHAT: ____________________________

INTERVIEW CONDUCTED BY DISINTERESTED EMPLOYEE:

______________________________ ______________________________
Name Signature
Appendix E
 NEXT GENERATION FINANCIAL SERVICES
A Division of 1st Mariner Bank

Reverse Mortgage Origination Post-Closing Interview Checklist

Date and Time: __________________________

Name of Loan Officer: __________________________

Name of Supervisor: __________________________

Regional Coordinator

Name of Borrower: __________________________

Borrower’s Telephone Number: __________________________

Questions:

• Has your NGFS Loan Officer (the person originating your NGFS reverse mortgage), or anyone associated with
your Loan Officer, offered to sell you any type of financial or insurance product to be purchased with the
proceeds of your NGFS reverse mortgage transaction?

YES / NO IF YES, WHO AND WHAT: ____________________________

• Have you felt pressured in any way by anyone to use the proceeds of your NGFS reverse mortgage for a certain
purpose?

YES / NO IF YES, WHAT PURPOSE: ____________________________

• Other than the NGFS reverse mortgage transaction, have you purchased any financial or insurance products
from the NGFS Loan Officer who originated your NGFS reverse mortgage or anyone associated with your Loan
Officer?

YES / NO IF YES, WHAT PURPOSE: ____________________________

• How have you used the funds that you received from your NGFS reverse mortgage?

______________________________________________________________________________________

• Do you have any other questions about your NGFS reverse mortgage?

______________________________________________________________________________________

INTERVIEW CONDUCTED BY DISINTERESTED EMPLOYEE:

______________________________ ______________________________
Name Signature
Appendix F
 NEXT GENERATION FINANCIAL SERVICES
Loan Officer Performance Evaluation
Evaluation for the period ending: __________________________

Name of Loan Officer (“LO”): __________________________

Name of Supervisor: __________________________

Regional Coordinator

Loan Production

Number of loans originated during the evaluation period: __________

Number of loans closed during the evaluation period: __________
Dollar amount of loans closed: __________

Compliance with NGFS Administrative Requirements (Check one)

LO always submits accurate and timely applications. _______

LO usually submits accurate and timely applications. _______
LO occasionally submits inaccurate or late applications. _______
LO frequently submits inaccurate or late applications. _______

Compliance with NGFS Community Reinvestment Act (“CRA”) Policy (Check one)

LO enthusiastically supports NGFS’s CRA policies. _______

LO supports NGFS’s CRA policies. _______
LO does not support NGFS’s CRA policies. _______

Comments from Pre-and Post-Closing Interviews (Check one)

No issues as to the LO’s interactions with borrowers _______

Some issues identified. _______
Many issues identified. _______

Comments: ______________________________________________________

______________________________________________________

Overall Evaluation:

Excellent _____ Satisfactory _____

Needs improvement _____ Unsatisfactory _____

Page 1 of 2
Other Feedback:

________________________________________________________________

________________________________________________________________

___________________________________ ________________________
Regional Coordinator Date

I have read and discussed this performance evaluation with my Regional Coordinator
supervisor and I have the following comments:

________________________________________________________________________

________________________________________________________________________

___________________________________ ________________________
Loan Officer Date

LOAN OFFICER COMPLIANCE ATTESTATION

I, _____________________________________, NGFS Loan Officer, do hereby

certify and affirm that:

1. I AM AWARE of all NGFS policies with respect to the origination of reverse

mortgages; and
2. I HAVE NOT, during the period covered by this Performance Evaluation, directly
or indirectly:
a. Sold any financial or insurance product to any borrower under an NGFS
reverse mortgage with which I was involved; or
b. Benefited financially from the sale of any financial or insurance product by
any third party to any borrower under an NGFS reverse mortgage with
which I was involved.

___________________________________ ________________________
Loan Officer Date

Page 2 of 2
Appendix G
Anti-Tying Disclosure and Customer Acknowledgement
Form and Loan Proceeds Use Disclosure

As a matter of policy, Twin Capital Mortgage (“Company” or “we”) does not encourage its customers to
use mortgage loan proceeds to purchase securities or other investment products that have an inherent risk
of loss of principal or other products that may result in adverse tax consequences. Internal Revenue Code
Section 264 (a) (2) restricts loan interest deductions when loan proceeds are used to purchase certain life
insurance, annuity and endowment products. Internal Revenue Code Section 163 (d) (1) limits loan
interest deductions when loan proceeds are used to purchase certain investment products. Only your
income tax professional is competent to give you tax advice concerning these matters.

Where the Company’s mortgage Loan Officers are licensed to sell insurance or securities products as
agents for enterprises other than the Company, we require the Loan Officer to disclose that relationship to
customers before offering advice concerning such products where mortgage Loan Officers are licensed to
sell securities, be aware that their respective Broker Dealers may not permit sales of securities using loan
proceeds. Investors desiring to purchase securities can generally do so directly from the Broker Dealer at
favorable interest rates using margin accounts. Many Broker Dealers will require the investor to sign a
statement disclosing the source of invested funds at part of the required suitability test. Moreover, we do
not endorse products other than those offered by the Company.

In connection with the loan application that you are now contemplating, the Company’s employee Steve
SysAdmin Antini SysAdmin (“Loan Officer”) will be acting solely as a residential mortgage Loan Officer
and not as a seller of any other type of product. The approval of your loan application is in no way
dependent upon your agreement to purchase any other product or service from the Company of the Loan
Officer.

To confirm that you have read this disclosure and you understand that the Loan Officer’s role in connection
with your application is limited to residential mortgage lending services rendered on behalf of the
Company, we ask that you sign below. A copy of this form will be submitted as part of the mortgage loan
application package. Thank you.

Read and Acknowledged:

Darth Joseph Vader Date

Oprah Marie Vader Date

Loan Officer: Steve SysAdmin Antini SysAdmin Date

Printed:5/4/2009
Copyright (c) 2008 ReverseDocuments - 46310 Page 1 of 1 AntiTyingDisclosure__NGFS
Appendix H
Reverse Mortgage Advisor Disclosure
I/We have been encouraged to consult a trusted advisor, such as an Attorney, Accountant,
Banker, Relative, or Friend to assist Me/Us in My/Our decision to obtain a Reverse Mortgage.
I/We understand that any fees for advice and counsel are at My/Our own expense.

I/We acknowledge the above and have either consulted with the following trusted advisors or
have chosen not to do so. Please check the appropriate box and complete the requested
information.

_____ Yes, I/We sought the advice from the following advisor(s)

Name:

Phone:

Street Address:

City/State/Zip:

Type of Advisor:

Name:

Phone:

Street Address:

City/State/Zip:

Type of Advisor:

_____ No, I/We have chosen NOT to seek advice

I/We hereby certify that I have read and understand the Notices set forth above

Bess Kim Date

Sue Haviland Date

Loan Officer

Copyright (c) 2008 ReverseDocuments Page 1 of 1 AdvisorDislosure

Appendix I
Annuity Disclosure for Reverse Mortgage Transaction

The lender does not require, offer, or arrange the purchase of annuities in connection with your
reverse mortgage transaction nor does it endorse or recommend the purchase of any such
financial products. In addition, your reverse mortgage loan does not anticipate that an annuity
will supplement or replace proceeds available under the loan. If you choose to purchase an
annuity or other financial or insurance product, you must do so separate and apart from your
reverse mortgage transaction.

Darth Joseph Vader Date

Oprah Marie Vader Date

Loan Officer: Steve SysAdmin Antini SysAdmin Date

Printed:5/4/2009
Copyright (c) 2008 ReverseDocuments - 46310 Page 1 of 1 AnnuityDisclosure__NGFS
Appendix J
Anti-Coercion Statement

Borrower(s): Darth Joseph and Oprah Marie Vader

Property Address: 100 Yankee Way, San Diego, CALIFORNIA 92120

The insurance laws of this state provide that the lender may not require the applicant to take
insurance through any particular insurance agent or company to protect the mortgage property .
The applicant, subject to the rules adopted by the Insurance Commissioner, has the right to have
the insurance placed with an insurance agent or company of his /her choice, provided the
company meets the requirements of the lender. The lender has the right to designate reasonable
financial requirements as to the company and adequacy of the coverage.

I have read the foregoing statement or the rules of the Insurance Commissioner
relative thereto, and understand my rights and privileges and those of the lender
relative to the placing of insurance.

I have selected the following agent/company to write the insurance covering the
property described above.

Insurance Company Name Agent’s Address

Agent’s Name Agent’s Telephone Number

Darth Joseph Vader Date

Oprah Marie Vader Date

Loan Officer: Steve SysAdmin Antini SysAdmin Date

Printed:5/4/2009
Copyright (c) 2008 ReverseDocuments - 46310 Page 1 of 1 AntiCoercionStatement__NGFS
Appendix K
Counseling Information

Borrower Name(s): Darth Joseph and Oprah Marie Vader

Address: 100 Yankee Way, RALEIGH, NC 27607

It is a requirement of HUD that in order to submit an application for a Reverse Mortgage, you
must obtain a counseling certificate from an approved organization. It is also a requirement that
you be provided with a list of counselors whom you may contact to provide this service prior to
your formal loan application.

o By signing below, I/we hereby acknowledge receipt of the counseling list with the instructions
to contact a counselor of my choice.

o Counseling has already been obtained prior to lender contact.

Acknowledged by:

Darth Joseph Vader Date

Oprah Marie Vader Date

Loan Officer: Steve SysAdmin Antini SysAdmin Date

Printed:5/4/2009
Copyright (c) 2008 ReverseDocuments - 46310 Page 1 of 1 Counseling Information__NGFS
 Appendix L
Document: McCaskill Amendment Press Release

Date: April 3, 2008

Source: http://mccaskill.senate.gov/newsroom/record.cfm?id=295550

WASHINGTON, D.C. – U.S. Senator Claire McCaskill late Thursday spoke on the floor about
an amendment that aims to protect seniors from aggressive marketing and predatory lending
amid the rapid growth of the reverse mortgage industry. The provision, which is similar to
legislation introduced by McCaskill in December, was filed as an amendment to the Foreclosure
Prevention Act, a housing stimulus package being considered on the Senate floor this week.

McCaskill’s amendment would help to protect seniors by ensuring they receive independent
counseling prior to signing up for a reverse mortgage. The U.S. Department of Housing and
Urban Development (HUD) will make counselors meet qualification standards and follow
uniform protocols. In addition HUD will issue stronger consumer protection regulations
including protection against the marketing of financial and insurance products that are
inappropriate for seniors.

McCaskill chaired a hearing before the U.S. Senate Special Committee on Aging in December in
which members heard compelling testimony from a family affected by aggressive, predatory
marketing of reverse mortgages, senior advocates, an official from HUD, and an industry insider.

Excerpts of McCaskill’s Floor Speech, Thursday, April 3, 2008:

I rise to talk about reverse mortgages. I have an amendment that will be called up at a later time.
I'm proud we have been working on this amendment. We had a hearing on the subject in the
Aging Committee. We have been working with Senator Shelby and his staff. We have been
working with HUD and we have AARP helping with this.

If you look at the subprime mess and you sit back and you go, well, what really caused the
problem. Well, the root of the problem is the people who were selling the mortgages had no risk.
If you have risk, you're careful. If you have no risk, then there's -- it's simple, just get to close the
sale.

We are doing the exact same thing with reverse mortgages. Now, if you are watching any cable
TV and probably way too many people in this chamber are watching way too much cable TV
right now because everyone is watching the cable news because we are all addicted to the
presidential race and every twist and turn it has encompassed. So if you are watching the cable
news shows, you are seeing advertisements over and over again by Robert Wagner and by Pat
Boone and the trusted faces saying "don't miss out."
Advertisements marketed to elderly people across the country say "don't pass up this government
benefit you're entitled to." Now, I got to tell you the truth. I don't think anybody envisioned that
reverse mortgages were going to be called a "government benefit" that you are entitled to. They
say that because ultimately the taxpayers are on the hook for the loans.

But guess what? The people who are selling them are making commissions and they have no
risk. Now, we kind of like these reverse mortgages because guess what? We make some money
on it too -- that is, the federal government. So there's a push to lift the lid on how many reverse
motors can be marketed to elderly people because the federal government is getting some of the
money when they are sold. But we are going down a dangerous path because we are marketing a
product that is complicated and expensive to the most vulnerable population in America.

And for many of these elderly people, all they have is their home. And for many of these elderly
people, they do not have a loved one that they can talk to about whether or not this financial
instrument is a good idea. Now, don't get me wrong, some reverse mortgages are good and they
may be appropriate in some circumstances but here's what's not appropriate: we require
counseling. Although, we've only appropriated a whopping $3 million for counseling. But still,
they have to have counseling in every case. Guess who is paying for the entire counseling tab?
Bad news -- the lenders are paying for the counseling. So the same people who want to close the
loans are paying the counselors that are supposed to be giving these elderly people advice that is
unbiased as to whether or not this is a good idea for them.

So, the amendment will step up to the plate and say we're not going to repeat the subprime fiasco
with the nation's greatest generation. We're going to, in fact, fund the counselors so they get good
independent information. We're going to make sure those counselors are certified. Right now
they can have a criminal record, they can have no training. This is the wild, wild west out there
selling a financial product that's expensive and complicated to our elderly. Well, it doesn't take a
rocket scientist to figure out that's a dangerous, dangerous combination.

The other thing this does is it will prohibit someone who is marketing one of these products, one
of these reverse mortgages, from being able to sell another product. Believe it or not, there are
actually people sitting down with elderly people right now in America who are saying, ‘we're
going to get you a reverse mortgage and, by the way, at the same time, we are going to sell you a
deferred annuity.’ Now, I don't know how these people look themselves in the mirror. We had a
witness in front of our committee whose mother was in her 80s and was sold a deferred annuity
and a reverse mortgage at the same time. Unconscionable! To make this sale and to make this
money. It is a get-rich-quick scheme for some of the sales people.

If we can provide certified counselors that are truly independent to make sure that every elderly
person understands exactly what they're getting into and if we can make sure that they're not
being marketed products that are inappropriate by the same people who are selling them the
reverse mortgages, and if we can make sure that we are not closing a blind eye to this because we
are benefiting in the short run from the marketing of these products, then, I think, reverse
mortgages have an appropriate place as one potential help to people in their elderly years who
need to get the equity out of their homes for emergencies or medical bills or even to send a loved
one to college.
But right now it's a dangerous, dangerous situation. So, I look forward to, hopefully, having
unanimous bipartisan support for this amendment. As I say, HUD has been very helpful in
drafting this language, along with AARP, along with our colleagues on other side of the aisle. It
is well thought out. I think it is very appropriate and noncontroversial. It is not opposed by the
industry. There are many good guys in this that are doing this work. We just want to make sure
that we're protecting the elderly from the bad guys and making sure that we're not standing here
five years from now saying, why didn't we do something about reverse mortgages? It's the same
kind of dangerous mix that we had in the subprime mortgages. Thank you, Mr. President. I yield
the floor.