THE
REVERSE OCTOBER 2010
review
Embracing change:
How brokers can successfully market the HECM Saver in their businesses Jason Levy
MetLife Bank
Happiness is getting everything you need, all from one reverse mortgage company.
Count on MetLife Bank for what you need to succeed. Proprietary technology to streamline the application process, so you can close more loans. Extensive training to help you attract more customers and grow your business. Ongoing support throughout the reverse mortgage process, including people who are there when you need them. It’s the complete package that helps our reverse mortgage wholesale brokers and correspondent lenders get real results. Find out how we can help you succeed as a reverse mortgage provider.
If you’re an FHA-approved lender, call 1-866-359-3817 to start the conversation.
61308 Snoopy with laptop.ai
All loans are subject to property approval. Certain conditions and fees apply. Mortgage financing provided by MetLife Bank, N.A., Equal Housing Lender. © 2010 METLIFE, INC. L0310092581[exp0311][All States][DC] © UFS
Technology. Training. Support. All from one reverse mortgage company.
October 2010 TRR
|3
TRR10.10
FEATURE
16
Embracing Change
How brokers can successfully
market the HECM Saver in their
“ M o v i n g F o r w a r d i n R e v e r s e .”
businesses.
Jason Levy
12 Taxation on “Modifications to products, regulations and policies have seen a slow but steady progression over time. But now a tidal wave of change is happening.” page 16
Foreclosure - Part 1
Tax consequences that come with a rise in foreclosures.
James E. Veale
20
ake a Reverse T Approach to Forward Missteps
Accepting growth in technology and automating now, can help in the future.
Trevor Gauthier
24 Recession-Proof Your Business
Learn how to climb the ladder of success by practicing the basics.
Sam Collins
26 The Financial
Regulatory Reform Bill and How it Will Impact Reverse Mortgages
Can we expect negative effects on reverse mortgages?
05
Editor’s Note
06 Ask the Underwriter
John A. Smaldone
Putting the pieces together.
08 Industry Stats July 2010
4 | TRR
October 2010
28
Directory
29 The Last Word Just what the doctor ordered.
THE
REVERSE review
The Reigns of Leadership As we enter the last quarter of this
16745 W. Bernardo Drive Suite 450 San Diego, CA 92127
calendar year, it begs me to reflect on our growth and development
up to this point. The Reverse Review
Publisher Aman Makkar
has come a long way over the last two and a half years. For most of
that time, our leadership has come from Erica English, a great person that many of you have come to
know well. As we continue our
journey into 2011, I would like to
introduce our new Editor-in-Chief,
Aman Makkar Publisher
Emily Vannucci. While change is
sometimes difficult, we must learn
Editor-in-Chief Emily Vannucci Copy Editor Kaitlin Dershaw Creative Director Traci Knight
to embrace it. Our greatest success at the The Reverse Review has been our ability to continue to publish this
National Accounts Manager David Peck
magazine every month, something that would not have been possible without our leadership and your
support. As Emily takes the reigns of leadership, I hope you all have
the opportunity to meet her this fall season. Thank you, as always, for your continued support.
As I close my first issue as
Editor-in-Chief, I would like to thank all of our contributors this month
who have been a pleasure to work alongside, as well as everyone in
Printer The Ovid Bell Press Advertising Information phone : 858.832.8320 e-mail : advertising@reversereview.com Subscriptions and Editorial Content phone : 858.217.5332 e-mail : information@reversereview.com website : www.reversereview.com
the industry for the warm welcome. The Reverse Review has been in great hands the past two and a half years
and I look forward to continuing the success of this publication. For those who I have not yet met, I hope I will
have the opportunity of meeting you
Emily Vannucci Editor-In-Chief
5 | TRR
July / August 2010
at the 2010 NRMLA Annual Meeting & Expo in November. Until then, we hope you enjoy our October issue!
© 2010 The Reverse Review, LLC. All rights reserved. The Reverse Review, LLC is a California limited liability company and is the publisher of The Reverse Review magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, The Reverse Review, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127
Putting the Pieces Together
Some common questions are answered as we prepare for fall changes.
A Ralph Rosynek
manufactured home, you will need to
stores! Let’s clean up a few questions from
What are the requisite “data” elements you must have in order to proceed with a reverse mortgage loan application?
seats for more news on the HECM Saver.
A. Generally, nine data elements and
This paper document contains both the
Are you already saying where did the fall season go? Octoberfest is in the air but
there are already holiday decorations in the last month as we sit on the edge of our
What is the expiration date of an appraisal completed on August 17, 2010? A. The answer to this question is actually
s
An initial appraisal is good for 120 days, so in simple terms this appraisal is good until approximately December 17, 2010.
s
However, the underwriter may utilize an additional 30 day extension which
is permissible under HUD guidelines, though this practice may vary from lender to lender. s
s s s s s s s s
deemed an application. The information
information including the geographic
writing. After all the data is provided/
was designed for.
Label Number in addition to other
and intent can be either verbal or in
zones in which the manufactured home
Name
When does the name of the lender have to be changed on the appraisal report?
Gross Monthly Income (if applicable)
A. Generally, the lender name does not
Date of Birth
Social Security Number
have to be changed when the appraisal
Estimate of Property Value
transaction which has been transferred
Property Address
is valid and utilized for a current
Principal Limit
from one lender to another.
Interest Rate
Product / Margin
Where is the data plate located on a manufactured home?
17th appraisal, it would be valid until
A. If you are thinking of the “red tag”
120 days or, in the case of our August
approximately February 17, 2011. Once
again, the actual practice may vary from lender to lender.
6 | TRR
October 2010
area of many manufactured homes.
given before a HECM transaction is
appraisal is valid for an additional
With an acceptable update, the initial
in an HVAC closet or in the kitchen
serial number and HUD Certification
provided. s
need. The data plate is generally located
borrower intent to proceed must be
obtained, only then can a GFE be
two-fold:
check further to satisfy this information
What is the new guideline for the maximum annuity amount you can sell to your borrower? A. Cross selling of annuities in a
simultaneous HECM transaction is a
(aka HUD Certification Label)
prohibited practice controlled through
of each transportable section of the
regardless of the contemplated amount.
attached to the rear tail light section
legislation, regulation and disclosure
If the comparable were better than the subject, would the appraiser line item amount be added or subtracted?
With regard to the previous question, as an underwriter, which of the available responses would be your primary concern?
A. Often confusing for those who do not
A. Some may say that depending upon
actively work with appraisals, the best way to remember the answer to this
question is by committing two simple acronyms to memory:
CBS – (not the TV network!) if the
Comparable amenity or item is Better than the Subject, the appraiser would Subtract value
SBA – (not the Small Business
Administration!) if the Subject amenity or item is Better than the Comparable, the appraiser would Add value
Can a manufactured home foundation inspection report be used more than once? A. A HUD Compliant inspection report of
a manufactured home foundation can be used for a subsequent FHA transaction providing the information contained
therein meets HUD requirements and
there have been no physical or structural changes to the existing manufactured home or its foundation.
Which item does FHA not automatically require? An inspection for wells, septic, termites, or flat and unobservable roofs? A. Unless mandated by state, local jurisdiction or codes, or lender requirement, HUD does not
automatically require inspection
for any of the above noted items.
The underwriter is responsible for
determining that the property site and conditions meet HUD guidelines, and based upon the information provided
in the appraisal, may determine further
professional inspection is required prior
to making a final underwriting decision.
where the property is geographically located, certain items have a greater or lesser degree of concern to an
underwriter. Yes, a snow covered roof in Miami would be an interesting subject
Lastly, on a personal note, I look forward to meeting many of you face-to-face in New Orleans next month at the NRMLA Annual Meeting (November 3-5). As you know, my column
property picture!! The significance
message has always
and soundness. With respect your
strongly advocated
of the question is relative to safety borrower’s ability to occupy the
property, it is important that each
of these (and more) items be given appropriate primary caution and
treatment in assessing the overall
quality, safety and soundness of the property by the underwriter.
What do the acronyms HRAP and DELRAP stand for? A. Condominium projects must be
approved before applications for FHA mortgage insurance can be processed for individual units. Mortgagee letter 2009-19 established two methods for approving condominium units:
HRAP – t he HUD Review and Approval Process
DELRAP – the Direct Endorsement Lender Review and Approval Process
B. It is important to understand the
condominium project approval status
early in the transaction as the acceptance of the individual unit by the lender may be subject to the review and approval process indicated, which adds an
additional time constraint to the initial timeline provided to the borrower.
seeking additional knowledge and skills on a continuous basis to assist seniors. This year I will be Co-Chairing the NRMLA Professional Development Committee with Torrey Larsen, President and CEO of Security 1 Lending. Both Torrey and I have a particular goal to increase the educational initiatives of NRMLA and provide greater access to knowledge and skills tools for NRMLA Members. If you are interested in supporting the industry, we welcome the opportunity to speak with you and to join our Committee to further these goals. Have a safe trip and “Laissez Les Bon Temps Roulez!”. October 2010 TRR
|7
INDUSTRY SUMMARY
July Endorsements Interesting times.
Retail Endorsement Growth
15.79%
Eagerly looking forward to clarity
Wholesale Endorsement Growth
4.87%
As we wind down the summer with Labor Day in the rear-view mirror, it’s perhaps only fitting that the rest of the year is coming into view. If
July’s numbers are any indication of what’s to come, the long rumored
shift in business momentum toward large institutional shops and away
Total Endorsement Growth
10.84%
from small brokers appears to be well under way.
* Figures Above Reflect Change from Prior Month
Both Retail and Broker/Wholesale volumes were up in July (albeit off the
pace of a furious bounce back in June), but the contrast couldn’t be clearer: Retail growth was more than 3x as fast as Broker/Wholesale, further
Trailing Twelve Month Endorsements
widening the lead Retail only recently gained in total volume.
Among lenders, there’s a very interesting divergence happening as well. From a combined Retail/Wholesale perspective, many of the top 10
lenders are under-performing the industry’s growth rate since the May low point, but 3 lenders are striking exceptions:
10,000 8,000
s
Genworth is up 228% to 581 units, with much of the growth coming from Wholesale
6,000 4,000
s
Metlife is up 85% to 1,062 units
s
Wells Fargo is up 37% to 1,460 units
2,000 0 8 9 10 11 12 1 2 3 4 5 6 7 Retail
Wholesale *Numbers Represent Months
Doing some quick math, it’s clear that these three lenders alone accounted for 97% of the increase in units from May to June for the entire industry. That’s perhaps the best example we’ve ever seen of a very narrow
RETAIL UNITS
CHG%
WHOLESALE UNITS
CHG%
TOTAL UNITS
CHG%
8
3,681 -17.02%
5,246 -2.71%
9
3,903
6.03%
5,567
6.12%
10
4,081
4.56%
4,692 -15.72%
8,773 -7.36%
11
3,836
-6.0%
3,901 -16.86%
7,737 -11.81%
12
3,954
3.08%
4,326 10.89%
8,280
1
3,171 -19.8%
4,450
2.87%
7,621 -7.96%
2
3,124 -1.48%
3,890 -12.58%
7,014 -7.96%
3
2,783 -10.92%
3,038 -21.9%
5,821 -17.01%
4
2,692 -3.27%
2,813 -7.41%
5,505 -5.43%
5
2,465
-843%
2,086 -25.84%
4,551 -17.33%
6
2,900 17.65%
2,404 15.24%
5,304 16.55%
7
3,358 15.79%
2,521
4.87%
5,879 10.84%
TOT
39,948
8 | TRR
October 2010
44,934
8,927 -9.17% 9,470
6.08%
7.02%
84,882
recovery in volume, which begs the question why these three are succeeding so much more than the rest of the industry together.
These are large institutions, but there are other large institutions here that did not see similar growth, and 1 of the 3 isn’t an HMBS issuer so that
argument has holes too. We don’t have an answer to this riddle for you
this month, for now we’re content to simply live in interesting times and hope someone does a case study someday.
NRMLA
GOES
TO
NOLA
National Reverse Mortgage Lenders Association
2010 Annual Meeting and Expo November 3-5, 2010 New Orleans, LA The Roosevelt New Orleans Hotel The largest single gathering of reverse mortgage professionals all year.
for more information, visit www.nrmlaonline.org
September 2010 TRR
|9
contributors
Ralph Rosynek
Ralph Rosynek has been The Reverse Review “Ask the Underwriter” for over two years. He is a recognized industry HECM consultant and trainer leveraging many years of executive and owner skills and knowledge in the reverse mortgage space including HECM Direct Endorsement credentials. Mr. Rosynek is currently a seated Director for the industry trade association NRMLA and Co-Chairs the Professional Development Committee. 708.774.1092 | rrosynek@ yahoo.com.
10 | TRR
October 2010
John K. Lunde
James E. Veale
Jason Levy
John K. Lunde is President and Founder of Reverse Market Insight, Inc., a performance data analysis and consulting firm specializing in the reverse mortgage industry. RMI clients include 8 of the top 10 reverse mortgage lenders plus investors, servicers and vendors to the industry. Find out more at 949.429.0452 | www. rminsight.net.
James E. Veale is a Senior Vice President at Security One Lending, Inc. James is also a California CPA and real estate broker with a master’s degree in business taxation from the University of Southern California. He has been a speaker for NRMLA and has authored several articles on tax matters and reverse mortgages.
Jason Levy is the CEO of Guardian First Funding Group based in New York, NY. Guardian First Funding Group is one of the largest privately owned Reverse Mortgage originators. Having offices in Manhattan, NY; Melville, NY; and Philadelphia, PA, Jason and his team of experienced Reverse Mortgage professionals are assisting and educating thousands of clients a month. www.guardianfirst.com.
Trevor Gauthier
Trevor Gauthier is the VP of Sales and Marketing at Mortgage Cadence. As a seasoned businessto-business sales and marketing professional his responsibilities include: development and execution of marketing and communication strategies, branding, content creation, market identification and segmentation, and recommending strategic approaches and executable plans to maximize sales activity and returns on investment. 303.991.8337 | tgauthier@ mortgagecadence.com.
Sam Collins
John A. Smaldone
David Bancroft
Sam Collins is the President of Sam Collins Reverse Marketing, LLC and Founder of REMALO, the Reverse Mortgage Association for Loan Officers. REMALO is a web based national sales, marketing, training, and full service center, created exclusively for Reverse Mortgage loan officers, correspondents, branch managers, key executives, and brokers. 877.262.7656 www.remalo.org.
John Smaldone is former Senior Vice President of AAXA Discount Mortgage’s Reverse Mortgage Divisions and now owner of Hanover Financial Services through which he consultants for Spiriter Financial LLC in areas of growth and marketing for their reverse mortgage operations. With 42 years of mortgage banking experience and 10 specific to Reverse Mortgages, John intends to remain in the reverse mortgage area of the business and continues to look at long term consulting assignments. johnsmaldone@charter.net
David Bancroft is the Executive Vice President of Sales for Security1Lending and former founder and President of Omni Reverse Financing Inc. Mr. Bancroft is a leading industry expert in the origination of Reverse Mortgages, FHA & VA Government Loans and uses his extensive experience to promote the Reverse Mortgage industry. Mr. Bancroft and his partners founded OmniHome Financing in 2002 in order to specialize in Government lending and is now one of the largest originators of HECM Reverse Mortgages in the country. 800.628.5093 | www. omnireverse.com.
October 2010 TRR
| 11
Taxation on Foreclosure – Part I Tax consequences that come with a rise in foreclosures.
W james e. veale
With foreclosures at all time highs and with
For purposes of this article, “foreclosure”
disposition. To the extent that accrued
in “technical default” than previously
short sale, trustee sale, deed in lieu of
and can produce favorable tax results.
the recent discovery of far more HECMs estimated, an airing of the income tax
consequences arising from foreclosure
seems timely. Unless home appreciation rates begin to rise in the near term, a
higher percentage of reverse mortgage
terminations will result in foreclosure (and
includes not only foreclosure but also
foreclosure, and any other disposition of
the property securing a reverse mortgage where:
1
its subsets).
make it more understandable.
Preliminary Information As described in the section titled
“Disclaimer,” this article has limited
application. Its purpose is to provide
general income tax information about the discharge (i.e., cancellation and
proceeds received from the disposition of the property securing the reverse mortgage.
While parts of this article are by necessity technical, examples are provided to help
The balance due is greater than the
2
The balance due is greater than the fair market value of such property at the time when the property is
transactions, this article focuses solely on those transactions.
been used by the borrower as a principal
proprietary reverse mortgages. The
different for HECMs than they are for
October 2010
the debt is transferred to the lender or
otherwise disposed of. Thus, in some cases, tax rules applying to recourse debt may
be more favorable than to those applying to non-recourse when debt is forgiven as
part of a taxable disposition of the property securing the debt.
loss on the sale of a principal residence, it from the taxable disposition of a principal residence is personal and cannot offset
gains or any type of other income anyway. Even when the forgiveness increases gain, such gain may be entirely or partially
excludible under the limited exclusion
rules pertaining to the sale of a principle residence.
amount of debt forgiven will generally
With estates, trusts, and heirs, other rules
the amount forgiven must be treated as
the decedent. As to homeowners who no
either increase, gain, or decrease loss since additional proceeds received in the taxable
12 | TRR
at termination where the property securing
has no practical tax detriment since a loss
mortgages outside of foreclosure type
As to foreclosure, the tax rules are no
nothing else.
the amount of non-recourse debt forgiven
indebtedness will occur with reverse
throughout the article that the property
residence (unless otherwise noted) and
to the cancellation of debt do not apply to
When the forgiveness simply decreases a
is little expectation that discharge of
Overview
securing the reverse mortgage has only
The exclusion rules which normally apply
transferred to the lender. Since there
forgiveness) of indebtedness related to reverse mortgages. It is assumed
interest is “forgiven,” it is treated as paid
apply depending on the date of death of
longer live in the home as their principal
residence (such as divorced or legally
Except as otherwise provided in this
Now, bringing in the discharge of
in a life estate), generally no exclusions
from whatever source derived, including
to $725,000. Since only $500,000 of the gain
separated spouses and remainder persons apply; however, loss may be eligible
to offset other gains and in some cases limited amounts of ordinary income.
All Reverse Mortgages Including HECMs are Non-recourse By federal law, all reverse mortgages are
non-recourse. Section 1602(bb) of Title 15 of the United States Code states in part:
The term ‘reverse mortgage transaction’ means a non-recourse transaction….
As to HECMs, HUD Mortgagee Letter
2008-38 states in part: “Specifically, HUD Handbook 4235.1 REV-1, Home Equity Conversion Mortgages, provides in Paragraph 1-3C, that:
The HECM is a ‘non-recourse loan’. This means that the HECM borrower (or his or her estate) will never owe more than
the loan balance or value of the property,
whichever is less; and no assets other than the home must be used to repay the debt. Paragraph 1-13B. of HECM Handbook 4235.1 REV-1 also states:
Since a HECM is a non-recourse loan, the
subtitle, gross income means all income
(but not limited to) the following items: … Income from discharge of indebtedness….
IRC Regulation (Reg.) § 1.61(a)-12 states in part:
The discharge of indebtedness, in whole
or in part, may result in the realization of income.
However, IRC Reg. § 1.1001-2(a)(1) states: …the amount realized from a sale or
Specific Tax Rules While the Internal Revenue Code (IRC) never declares that loan proceeds are
not taxable, it does declare, however, in Sections (§§) 61(a) and (a)(12):
under IRC § 121 there is little doubt that
all of the gain qualifies as long-term capital gain). Of course net capital losses from other sources can reduce the impact of
this gain as well other losses and available deductions.
Does FHA Insurance Shield HECMs?
features about HECMs is the limited
sale or disposition.
IRC Reg § 1.1001-2(a)(b) then goes on to
exclude recourse debt generally from this rule since it is taxable as ordinary income under IRC §61(a)(2) to the extent not
otherwise excludible under IRC § 108. Thus non-recourse debt which is forgiven
FHA “insurance.” One of the special
loss reimbursement feature promised to
lenders. As long as the home is not being retained by the borrower or heirs and all
other conditions are met, upon termination (prior to assignment to HUD) FHA will
reimburse a lender to the extent that the market value of the home is less than balance due on the HECM.
at foreclosure or other taxable disposition
Some claim that because borrowers pay
increases gain or decreases loss.
by FHA, the debt for tax purposes is in fact
is treated as additional proceeds. It
Oversimplified Tax Law Example
sale for $1,000,000. The amount of non-
of the loan balance.
gain. (By qualifying for the exclusion
transferor is discharged as a result of the
the amount of liabilities from which the
will be no deficiency judgment taken
there is no personal liability for payment
must be recognized as long-term capital
HECMs have special rules because of
A proprietary reverse mortgage borrower
against the borrower or the estate because
can be excluded, $225,000 of the gain now
other disposition of property includes
lender’s recovery from the borrower will
be limited to the value of the home. There
indebtedness, the gain goes from $225,000
sells his home in an approved short
recourse debt forgiven was $500,000. If he purchased his home for $650,000 and put
$125,000 in improvements into the home,
the gain without considering the discharge
the costs related to the protection provided paid in full and there is no cancelled debt. Others claim there is a specific tax ruling
which exempts HECM borrowers and their heirs from recognizing any income on a
HECM. Still, others claim it is no different than the proceeds received from a life
insurance upon the death of the insured. Unfortunately, none of these arguments have “roots” in tax law.
would only be $225,000. Assuming he
While there are no court cases, IRS
gain on the sale of a principal residence
there is the Allan Case [Allan et al versus
meets all rules for the limited exclusion of under IRC § 121 and is married, all of the gain will be excluded since the gain was less than $500,000.
rulings, or even private rulings on point,
Commissioner, 86 T.C. 655 (1986) affirmed
856 F.2d 1169 (8th Cir. 1988)]. It is a leading case on gains from cancelled non-recourse debt and involves partners in a limited
partnership. The partnership obtained g October 2010 TRR
| 13
a rental building and used a HUD insured mortgage to finance the acquisition. The partnership defaulted and HUD took over managing the property including making all payments. Eventually the partnership transferred the property to HUD in lieu of foreclosure. The partnership was required to recognize as additional gain the amount of debt which was forgiven. The reason why a HECM is non-recourse is not because it is insured by HUD. A HECM is non-recourse because the note with the lender is non-recourse by its very terms. If the note was not non-recourse, the loan would not qualify as a HECM. Even if HUD is prevented from honoring its insurance agreement because the HECM is defective, the terms of the note and federal law still make the debt non-recourse. Thus the same rules which apply to proprietary reverse mortgages also apply to HECMs.
Disclaimer The IRS requires that readers are informed that the information contained in this article cannot be relied upon or used to reduce any income tax penalties (or interest). It is being written to provide general information on specific topics. Readers are encouraged to consult a competent tax professional to determine how the information applies in specific situations. The article only addresses simple situations. Far more complicated situations may exist including but not limited to:
1 2
Situations where not only non-recourse but also recourse debt is forgiven. The applicable property was fully or partially used in a trade or business of the taxpayer at the time of foreclosure or in some prior period.
It also does not address other complications such as use of funds for purposes of:
1
Allocation of gain between passive and non-passive trades or businesses, portfolio, and personal.
2
Allocation of interest between such activities and home mortgage interest for deduction purposes.
Debts which work somewhat like a reverse mortgage have been classified by some as reverse mortgages but they are not necessarily so for legal purposes. This article focuses on those reverse mortgages insured by The Federal Housing Administration (FHA), known as HECMs (Home Equity Conversion Mortgages), and proprietary reverse mortgages provided by major lenders. The tax rules described in this article are limited to federal tax rules. State and local income tax rules may be different.
14 | TRR
October 2010
advertisement
Great Oak Lending Merges with 1st Maryland Mortgage Corp. Deal makes Great Oak direct lender with ability to fund up to $25 million per month in home loans; new company plans to hire up to 30 employees by year-end. Timonium, MD—September 27, 2010—Great Oak Lending Partners, a trusted mortgage company servicing the Mid-Atlantic region, today announced that it has merged with 1st Maryland Mortgage Corp. of Damascus. The merger makes Great Oak a direct lender with the ability to fund up to $25 million a month in loans. Great Oak was ranked #1 in Maryland for reverse mortgage production and volume for the fiscal 2nd quarter of 2010 by RMInsight, the premier provider of data and analysis for the reverse mortgage industry. It has also been recognized as one of the fastest growing reverse mortgage companies nationwide. Great Oak provides traditional mortgages on new homes and investment properties, as well as refinancing and reverse mortgages. The merger combines 1st Maryland Mortgage’s seven employees with Great Oak’s 58 full-time employees. The new company plans to hire an additional 20 to 30 people by the end of the year. As part of the merger, Joshua Shein was promoted to president and chief executive officer of the new company. The combined company will be called 1st Maryland Mortgage but will operate under the name Great Oak Lending Partners. Financial terms of the deal were not disclosed. “This merger will allow us to meet all of our customers’ needs in-house, from underwriting to closing to funding loans,” Shein said. “These additional services and our predicted growth over the coming months reinforce our position as a major player in the mortgage industry.” Great Oak Lending has three offices in Maryland and operates in seven other states. The company plans to be operating in another seven states by the end of the year.
About Great Oak Lending Partners Great Oak Lending Partners is a trusted mortgage company servicing the MidAtlantic. With strong ties in the industry and community since 2001, Great Oak provides a full-range of mortgage products and services, ranging from refinance and reverse mortgages to financing new homes and investment properties. Based in Timonium, Maryland, Great Oak has originated more than $1.5 Billion in loans and is currently licensed in Maryland, Washington, DC, Delaware, Pennsylvania, North Carolina, Connecticut, Texas, Oregon and Virginia.
For More Information Visit: www.GreatOakLending.com
|
www.GreatOakReverse.com October 2010 TRR
| 15
Embracing
How brokers can successfully market the HECM Saver in their businesses
C han g e { jason levy }
TV commercials featuring celebrities hit the airwaves.
2004
16 | TRR
October 2010
Buying leads what is that? Reverse mortgages were a referral sale from the beginning of time.
2005
Call center sales models emerge but critics speculate whether this distribution channel had the strength to compete with the kitchen table sale.
2006
Multiple margins & LIBOR based products are introduced to the marketplace. The overall sentiment was “What’s a LIBOR & why do we need it?”
2007
The 1st Fixed HECMs are written. The product leaves originators wondering about the likelihood of its future – accounting for less than 1% of the overall product mix.
2008
Secondary markets weaken but the Fixed HECM is the bright spot. Businesses across the nation focus on the Fixed HECM.
2009
2010
The launch of the new HECM Saver, MIP and PLF change, and new counseling protocols.
October 2010 TRR
| 17
E
Every October, like clockwork, I am
based” product. I take a much different
strategies around the HECM Saver.
limits, HECM Cap, PLF reduction, and now
insured “wants-based” Reverse Mortgage.
Re-examine your marketing campaigns.
products that were self-insured and never
the Standard HECM is not the same way
waiting for some sort of change…loan a new HECM product.
It’s time to embrace change. Since I have been originating Reverse Mortgages, the changes have been minimal each year – that is until 2010.
Modifications to products, regulations
and policies have seen a slow but steady progression over time. But now a tidal wave of change is happening.
What a Difference a Year Makes Back in October of 2009, I wouldn’t have
dreamed of being able to afford to write a
zero origination fee product. The appetite
for a reverse mortgage security has grown dramatically, driving up broker pricing.
Luckily, enhanced pricing has helped to fund things like: s
A dramatic increase in loan officer training and licensing expenses
s
Higher marketing costs due to rapid home price declines
s
Shifts in the Principal Limit Factors and MIP change qualification criteria, so we
once again have to redefine “who is our customer”
view on the Saver. This is the first FHA
Previous attempts have been proprietary really took off.
For years, critics such as financial planners, attorneys, caregivers, and accountants had concerns over the product’s costs. The Saver is opening the door to new
opportunities and will be discussed more openly as an option or alternative to
income generating financial products for retirees.
beginning to embrace Reverse Mortgages for their ability to
provide additional income to retirees?
I think so. If you don’t believe me, than read “Five Ways to
Boost Retirement Income” by Jeff Benjamin, appearing in
the September 19, 2010 edition of Investment News. Reverse Mortgages were listed as one
of the “examples of strategies that can provide…stable
18 | TRR
October 2010
s
Income producing financial tool Analysis of retirement plan
Alternative to immediate annuity
the wants-based client.
these questions:
Now more than ever, you need to examine
different advertising tactics and campaigns; you need a fresh approach. Competition homeowners will require you to think outside the box.
Making the Most of Every Opportunity Marketing the HECM Saver is not going to solve all of your problems. Your business
will inevitably be affected in some capacity
where the opportunities are and create a
?
“Who is the wants-based client?”
last resort, the desperation tool, the “needs-
s
speak), you really need to analyze it, see
challenges that can affect a business.
HECM has been known as the product of
points for your ads:
Mortgagee Letter is hot off the press (so to
You need to ask yourself
because it can be a savior. For years the
LTV). Here are some examples of talking
by the MIP and PLF changes. Since the
income to (retirees).”
Here are some tips on how to cope with
You need to embrace the HECM Saver
a solid home value, no mortgage or a low
as well as the number of qualifying
The challenge and the opportunity lie with
Embrace the HECM Saver
wants-based, affluent client (someone with
Are Financial Professionals
“Control your own destiny or someone else
the new product, policy and profitability
testing a campaign that is targeted to the
products
Reverse Your Thinking
will.”
to market the Saver. I would recommend
s
One of my favorite CEOs, Jack Welch, once said, “Change before you have to,” and
The ways that you traditionally market
“How am I going to market to them?”
Once you define the target market, then you will see the opportunity. If your
game plan on how to capitalize on them. I have to say that I was pleasantly
surprised when I saw the floor rate change. This will positively impact my business
since my core market is the 70 to 75 year
old borrower, and they actually will qualify for more. The result will be a greater
marketing focus on this age group (as you can see, I like to make the most of every opportunity).
business contracted due to declining home
On the flip side, with a decline in the floor
share by developing sales and marketing
decline as well. This means it’s time to start
values, then you can makeup market
rate, we have to anticipate broker pricing to
focusing on efficiency by maximizing lead
loan that may not qualify. Determine
are prepared for the costs, training, and
processing time. All of this will improve
– tighten up your qualifications so you
a budget and a matrix for the hiring
conversion, reducing costs, and decreasing
ways to alter your advertising criteria
the bottom line.
Ways to Monitor Your Business s
reduce the amount of non-qualified s
Drive down your per loan marketing costs by implementing an effective
referral campaign. You need to monitor
drives up operational costs. Every loan
what percentage of your leads are
application that hits your back office
customer referrals and constantly strive
and does not close will cost you money.
to improve this percentage. A referral is
A great way to monitor loan fallout is
like a free lead – spend time and focus
by advertising source – certain sources others. Don’t waste time processing a
process and develop a max cost per
leads generated.
Loan fallout is a critical factor that
may have higher fallout rates than
licensing of new employees. Create
on how to build more. s
Recruiting new loan officers can be an
expensive proposition. Make sure you
recruit budget. s
Email your client base. It’s a quick, easy and rather inexpensive way to market
to your clients. If you are not gathering email addresses, you need to. Inform
your prospects of product changes, new loan criteria, and other announcements. Over 30% of our customers provide an
email address; corresponding this way reduces your marketing and mailing costs substantially.
Now more than ever, you need to examine different advertising tactics and campaigns; you need a fresh approach. Competition as well as the number of qualifying homeowners will require you to think outside the box.
Be Prepared and You Will Succeed
1. Join NRMLA if you have not done so already. Membership fees go
I’ve learned that if you plan for almost any
towards lobbying efforts and working
Keeping your business nimble will prepare
sustainability of the product.
outcome then you will be ahead of the curve. you for change and help you adapt quickly. Always make sure you are “in the know.” Read everything you can and attend conferences.
with government entities to ensure
2. Visit the AARP site every now and then and see what they are posting about Reverse Mortgages.
3. Create a “Google Alert” for Reverse
Mortgages – this will generate an email
notifying you of any story or update on the Reverse Mortgage industry.
4. There are great educational sites for
Reverse Mortgage originators – check
Here are my
top 10 tips for staying informed:
them out and listen to some of the webinars.
5. Take a peek and see what the MBA is doing.
6. NRMLA’s Monday Report – read it!
It provides updates on any proposed legislation.
7. Know what the counselors are doing
– there are associations and blogs that can give you an insight as to what is happening on the front lines.
8. RMI’s industry trend reports and
Neighborhood Watch (https://entp.
hud.gov/sfnw/public/) will give you a clear idea of where the product’s
adoption levels are highest and a look at what the competition is doing.
9. Read the industry blogs each and every day.
10. THIS IS A MUST: Go to the NRMLA Policy Conference in Washington DC and you will learn everything you
need to know about proposed changes to the program from the stakeholders themselves. The guest speakers are right from HUD and government
entities actively involved in the Reverse Mortgage program.
October 2010 TRR
| 19
Take a Reverse Approach to Forward Missteps
Accepting growth in technology and automating now, can help in the future.
T
TREVOR GAUTHIER There’s a common statement that talks
Take the Mortgage Disclosure Information
The problem in all of this is the inactivity
twice and expecting a different outcome.
protect the borrower. The law stipulated
meet the challenges of tomorrow. Ignoring
about the futility of doing the same thing My hope in penning this article is that the
reverse mortgage lending professional does not get caught up in this trap. What do I
mean? Well, let’s start by looking at what has happened in the world of forward lending.
Act (MDIA), which was instituted to
what has to be disclosed and when. After the proper disclosure happens there are time frames as to when the process can
progress after disclosure. In reaction to this new piece of regulation, forward lenders adopted electronic disclosures.
When the market crashed, what did
With electronic disclosures, the lender
No. Did they think proactively about the
the borrower opened the disclosure,
forward lenders do? Did they innovate?
future? No. They went into what can best be characterized as batten-down-the-
hatches mode. They chose to do nothing
and ride it out. That strategy was far from successful.
What happened next? The government stepped in. New regulations entered the space that literally changed how
business was done. And let’s face it, new
regulation is still flooding the space. These developments escalated the headaches
for forward lenders to what I would call migraine status.
20 | TRR
October 2010
knew exactly what was disclosed, when when the borrower signed that disclosure and so on. The lender had a full audit trail proving that they adhered to the
new rules. Despite all of the advantages of e-disclosures, it took the MDIA for
forward lenders to look at and adopt this
technology. Today, e-disclosures are finally becoming mainstream, but at what cost?
of forward lenders to look for and plan to problems doesn’t make those problems
go away. For example, for anyone that has had a migraine, you know how painful they can be. Why bring on more pain?
The goal should be to move to a pain-free place. How is this achieved? You make sure that you’re not only prepared to
meet the challenges that exist right now, but also that you are prepared to meet
future challenges. Fast-forward to what’s transpiring in the forward lending world today, and you’ll see almost the same scenario. It’s fine to preach about the
need to be proactive, but forward lenders
should have been ready for today’s recordlow rates, a mini refinance boom and an increase in activity.
The technology is not new. Further, when
This should be welcome news for forward
a legally enforceable, quick and efficient
Why? Because when forward lenders had
you think back, can’t lenders benefit from process no matter what market conditions are? We all know the answer to that question.
lenders, but it’s not turning out that way. an opportunity to rethink how they do
business, and take a second look at their
process, they chose to do little to nothing. So, what resulted from this? Forward
lenders now have more regulations to deal with, more volume to handle and no new or more efficient ways to accomplish this.
How does this relate to the reverse mortgage world? Reverse lenders today find themselves in a similar situation that forward lenders
found themselves in after the crash. How so? Volume is stagnant and
The RESPA Challenge
new regulation is expected. The difference is that reverse lenders have an opportunity to do things a bit differently as compared to their colleagues in the forward world.
We know that new regulation is coming as well as that volume will
once again increase. So, do reverse lenders copy forward lenders and do nothing, or do they take this time to innovate? If reverse lenders follow the lead of forward lenders, it’s hard to see a different result
for the world of reverse mortgage lending after new regulation hits
and volume increases. Proactive lenders, heck, proactive companies in all business sectors, are always looking ahead and preparing for the
future. Now is the chance for the proactive reverse mortgage lenders out there to look ahead and be ready for better days to come.
To take a step back, it’s great to say that reverse lenders should take this time to be proactive, but many reverse lenders reading this
right now might wonder how to execute on that principle. They
may be asking themselves, “Where do I start?” As these concepts
are digested, it is important to understand the importance lending solutions can play in significantly reducing risk by providing
reverse lenders with advanced technology, commitment tracking,
business workflow, as well as industry knowledge and expertise that provides a comprehensive and streamlined approach to mandatory
live pricing and delivery. It is important to have a solution that puts reverse lenders in a position to minimize risk and optimize market
opportunities, while competitively pricing reverse loans to the broker
2010, announcing a second option for the Home Equity Conversion
Stricter RESPA rules, lower principal limits, a more complex FM1009 and other changes pose a serious challenge to our industry. Lenders will take on additional responsibilities and need to be meticulous while working with brokers. Brokers will lose all or most of the YSP and any mistake made in the GFE could cut into their origination fee as well.
initial mortgage insurance premium (MIP) option for the purpose
But there is also good news around the corner...
base.
Another common mistake is that when lenders look to solve problems or adjust their process, they sometimes narrow in on one problem or
one fix. Now is the time to evaluate your entire business and look at it holistically.
In terms of meeting the challenge of new regulation, we have
already seen HUD issue Mortgagee Letter 2010-34 on September 21, Mortgage (HECM) Program. FHA designed HECM Saver as a second of lowering up front loan closing costs for mortgagors who want to
borrow a smaller amount than what would be available with a HECM Standard. For all HECM case numbers assigned on or after October 4, 2010, mortgagors may select either HECM Saver or HECM Standard with a resulting UFMIP. g
ReverseVision Inc.
3310 Pollock Place • Raleigh, NC 27607 www.reversevision.com (919) 834 0070 • info@reversevision.com
October 2010 TRR
| 21
platform. This is important because lenders
It is important to have a solution that puts reverse lenders in a position to minimize risk and optimize market opportunities, while competitively pricing reverse loans to the broker base.
should seek a solution that provides full
end-to-end loan management functionality for both forward and reverse lending,
which includes commitment tracking, pipeline management, automated
decisioning, business rules management,
product and pricing, data driven workflow
automation, as well as electronic document management.
This Mortgagee Letter provides policy
extensive real-time management tools,
A system of this kind will also allow the
Standard by describing the amount of
with commitment tracking, delivery and
often, lenders are driven by paper. The
and comprehensive vendor experience
reverse lender to be more data-driven. Too
secondary marketing activities.
issue is that paper brings with it its own set
options, how to calculate initial MIP due
Automated workflow is central to
do you tell? In a data-driven environment,
access new principal limit factor (PLF)
core technology solution. The solution
that loan. What exactly does that mean
driven workflow. Automated messaging,
location for maintaining rules, security,
queuing with auto-resolution, real-time
automation. This eliminates problems
should all be standard with any enterprise
thus reducing the time required to add
imaging and tracking combined with
the competitive landscape. It also provides
to a more streamlined approach.
data required by your customers. The
strategies, lenders are turning to true
The technology provider should have
driven workflow automation (powered by
their core, these solutions reduce risk while
As the reverse mortgage industry is
resolution capabilities that greatly improve
model that exists in the forward business,
training, and deliver a significant increase
technology vendors whose experience is
service.
business. Reverse lenders need to engage
Technology can provide a helping hand
a vendor that has the knowledge and
operation away from paper in favor of
significant change in reverse lending.
throughout the entire workflow of a
challenges. Technologies employed include
As reverse lenders take this time to think
think, but with the right system, it is just
tracking as well as effective rules-based
will be rewarded for their efforts. How
include advanced electronic document
superior technology on one comprehensive
look for a solution that can capture any
guidance for HECM Saver and HECM initial and monthly MIP, the availability of all existing program features for both
on HECM refinance transactions, how to tables, changes to FHA Connection, and how to manage pipeline loans.
This Mortgagee Letter also reiterates
HUD’s long-standing policy of requiring
mortgagees to adapt the legal documents
as necessary to ensure compliance with the program requirements.
To overcome the new requirements and lack of expertise for reverse lenders
to engage in mandatory live pricing
Enterprise Lending Solutions. Why? At
achieving an improved return for correctly
tracking and delivering loan commitments. How do these types of systems reduce
risk? Leveraging this technology, reverse lenders can successfully meet the
requirements to engage in live pricing and significantly improve their commitment tracking and delivery success rate by
incorporating comprehensive technology and data analytics to address these
comprehensive pipeline and commitment analysis, automated workflow,
22 | TRR
October 2010
of problems. Was that paper altered? How
your next big decision regarding your
you know everything that happened to
should ensure both data and document
to the lender? Having one centralized
document generation and distribution, task
products, and workflow is key to workflow
management monitoring, and visibility
of synchronizing multiple systems,
solution. Fully integrated document
products, change processes, and adapt to
industry knowledge and expertise can lead
the ability to quickly and easily access
solution should offer sophisticated data-
extensive forward and reverse expertise.
a robust Rules Engine) including auto-
transitioning itself to the secondary market
efficiencies, mitigate the need for additional
reverse lenders can no longer rely on
in employee productivity and customer
limited solely to the reverse-side of the and interact now more than ever with
in order to transition a reverse lending
experience to help guide them through this
data and have those principles continue loan. Easier said than done, you might
big, be proactive and innovate, they
that easy. Your future solution should
so? By finding a solution that provides
management and imaging. You should
document from anywhere, utilize Optical Character Recognition (OCR), efficiently index and store documents, automate events,
actions and data analysis, retrieve specific documents for specific
tasks, and view and annotate documents. This creates an electronic audit trail, eliminates re-keying of data and ensures greater data quality and consistency.
The RESPA Opportunity
Why did I bring up the example of how forward lenders dealt
with similar circumstances now working their way toward reverse
mortgage lending? As I said earlier, reverse lenders can’t do the same thing that forward lenders did, which is basically nothing and expect a different result. I also bring forward lending into this conversation because it is important for reverse lenders to understand that their business does not exist in a vacuum.
Reverse lenders looking to stay ahead of the curve should find a
company that will partner with you for the long-term. Look for one
that understands the full spectrum of industry issues in both forward and reverse, as well as offering the best mix of solutions to meet the needs of your business. The company should provide consulting,
technology implementation, training, support, and in-depth industry expertise. Experience and expertise in dealing with mandatory live
pricing on the forward side provides great insight, best practices and proven solutions that are ready for market now. Don’t risk working
with a reverse vendor that is learning the ropes along with you; your business is too important to take that type of risk.
As reverse lenders look ahead, the best time not only to automate but also to genuinely rethink how the business of reverse lending is done is today. Now is the time. Look for and invest in a solution that can achieve all of your needs today and far into the future.
Reverse lenders need to engage and interact now more than ever with a vendor that has the knowledge and experience to help guide them through this significant change in reverse lending.
ReverseVision's international team of software engineers, attorneys and mortgage specialists turn these challenges into opportunities. They build the tools that give their customers a competitive advantage. This is why over 6000 reverse mortgage specialists in over 600 companies rely on ReverseVision every day.
Can you afford not to use ReverseVision?
ReverseVision Inc.
3310 Pollock Place • Raleigh, NC 27607 www.reversevision.com (919) 834 0070 • info@reversevision.com
October 2010 TRR
| 23
Recession-Proof Your Business Learn how to climb the ladder of success by practicing the basics.
I
Sam Collins In uncertain financial times most people, especially seniors, cut back on discretionary spending. While the cycle of uncertainty persists, reverse mortgage consultants need to focus more of their attention on the “essentials.” So what are you supposed to do to withstand your reverse mortgage business and make it recession-proof? If you have the will there is a way! First, you must have the discipline to refocus your business quickly. We need to understand what essentials our senior clients are experiencing and then base our marketing efforts around them. It might be useful to look at the essential needs of humans and develop an idea of what motivates us to act, change, buy products and ultimately consider doing a reverse mortgage. Psychologist Abraham Maslow suggested that we each have a “needs hierarchy” which essentially tracks our life cycle from birth to maturity. A good analogy is to consider your needs as they relate to a ladder. To picture this ladder hierarchy, keep in mind that we’re not usually motivated by the higher needs until the basic ones have been filled. On the other hand, all of our needs are recurring in
24 | TRR
October 2010
our daily lives, so we’re up and down the ladder quite a bit.
who are concerned about terrorism, job loss, and the future in general?
Now, you can relate the major benefits of your reverse mortgage products to one or more of these essential human needs. Refocus your marketing—your wording, your look, and your positioning statement. Revise your overall message so that it clearly indicates just how you can help your senior have his or her needs met. Next, ask yourself what psychological “button” does your message push to get the attention of those you can help?
Think about the specific personal security issues that you can solve for your senior clients by building your marketing around their specific needs. For example, as a reverse mortgage loan consultant, your goal should be to provide peace of mind for families who might have lost a breadwinner or may just be relying on entitlements such as social security or SSI.
Survival is the first basic human instinct as well as the first step of the ladder—we all have the need for food, water, clothing and shelter. Reverse mortgage originators don’t just refinance houses; we provide shelter for families and help provide the ability for our seniors to pay for the essentials such as food and clothing.
After people have had their survival and safety needs more or less met, they are ready to move on to the third rung of the ladder—to give and receive love, to make friends, and to belong to a group or community. Being part of the social community is especially important to seniors who gather because they have many of the same needs, wants, and issues in common.
Comfort and security sit on the second rung of the needs hierarchy. After the basic requirements of survival are met, we naturally want to preserve and enhance what we have. Seniors who have been retired for awhile are now seeing some of their comfort and security leave and become more difficult to maintain; here’s where home security issues begin. How can you offer security and protection from physical and emotional harm to people
If we’ve climbed this far up our needs ladder, we find ourselves on the fourth rung. Here is where we find ourselves wanting to be respected - we are building not only self-respect, but also our reputation and status in the family circle and within the senior community. This is very true for seniors who may sense they are giving up their self-respect and status within the family by having to resort to doing a reverse mortgage. Our job is to
reassure them this is only natural and it is OK. Ask yourself what you can do that adds to a senior client’s “approval rating” in his or her senior community and family circle. Moving further up the ladder to the fifth rung—once we have made it here, we are ready to “live our real lives.” The need for self-actualization and inner meaning is not always recognized until we have endured a period of discontentment. We are here for a purpose and, try as we might, we won’t achieve real self-fulfillment until we recognize and activate our purpose.
How Can Reverse Mortgage Professionals Help Seniors Activate Their Purpose? Ask yourself the following questions: “ What do I do that can help individuals picture and fulfill their dreams, and relieve their financial stress?”
ORNEY A TT
Offer Outstanding Customer Service
“How might I refocus my reverse mortgage business to direct seniors to their own solution?” Remember, at this level it’s not so much a factor of having gotten to the senior first, rather, our goal should be to provide information and education that will enable seniors to make wise decisions about their future financial stability.
Contact Past Clients and Leads Go through your database, card file, address books or cancelled appointments. Next, phone or send a letter to your former clients to let them know of any new program changes. Inform your seniors of your workshops, seminars, website, blog or monthly newsletter. You never know when someone might decide they need a reverse mortgage and it’s up to you to keep your senior prospects, leads, and former or present clients updated on the ways you can help them. A disciplined marketing approach helps people in need find you when they need you, not when you need them.
Once you’ve started attracting senior clients, you’ll have to worry about retaining them, and in a stagnating economy, that may be even more difficult than usual. You are expected and must provide not only a high quality product, but also exceptional customer service. When money’s tight, clients expect more for their dollar. If you want to keep their business, you must keep them happy. Refine your senior client service strategy to ensure that every step from calling to closing the reverse mortgage is client-focused and effective. You may want to conduct a customer satisfaction survey in order to make sure your senior clients’ needs are being met; this will give you the opportunity to hear the real story.
Good luck to you as you climb the ladder of success in your reverse mortgage business.
TRUST REVIEW
If you are a Lender and you review Trusts in house, you are taking unnecessary risk! Title companies insure that a trust owns the property but does not insure a trust meets HECM guidelines. In an industry that focuses on Risk Management, Attorney Trust Review eliminates the Risk of a loan being unsalable because a Trust approved by the lender turns out not to meet HECM guidelines. We provide: • Risk Management • Amendment To Trust containing required HECM language • Attorney Opinion Letter • 48 Hour Turn Around No risk to lender, our fee is paid only if the loan closes.
Paul N. Lovegrove PC Representing lending institutions for reverse closings for over 15 years
631.669.4370 plovegrove@AttorneyTrustReview.com • www.AttorneyTrustReview.com October 2010 TRR
| 25
The Financial Regulatory Reform Bill and How it Will Impact Reverse Mortgages Can we expect negative effects on reverse mortgages?
T
John A. Smaldone The reverse mortgage has taken a beating
property. This impacted seniors all over
Unfounded bad publicity from some of
a program that was a saving grace for
with seniors by the thousands nationwide.
program nationally. There are many other
over the past eighteen months. This is
seniors and still is. However, over the past
eighteen months, we have seen the federal
government reduce the effectiveness of the program for our senior citizens through its agencies like Fannie Mae and HUD, or by direct legislative action.
As an example, the principle limit a senior qualifies for is a gross percentage of the
value of the home. This represents the gross amount of money the senior would receive before closing costs and any existing loan pay off. The calculations that go into
determining the gross principle limit are determined by the age of the youngest
borrower, the value of the home, and current interest rates. They are done according
to actuary tables, similar to that of a life
the country. Foreclosures are occurring
This is never reported on the news, but is
in fact happening. The 10% reduction on a
home valued at $200,000 could be a $20,000
reduction in the gross principle limit of what
will impact the reverse mortgage and our
is the last resort for many seniors that are
facing a foreclosure. However, we are also
regulatory reform bill and how it appears seniors.
finding that because of the drop in home
Out of the financial regulatory reform bill is
the principle limit available to the senior is
which is a handpicked committee by our
values around the country, the amount of
not enough to pay off the existing mortgage
on the home. This reduction in the principle limit (referred to above), is making it much more difficult to save a senior from facing foreclosure.
limit may occur by October 1, 2010.
October 2010
reverse mortgage as well.
We are finding that the reverse mortgage
Fourteen months ago, FHA/HUD reduced
26 | TRR
that have had an adverse impact on the
Now to get to the main point: the financial
To add fuel to the fire, there is a very good
by approximately 10% of the value of the
areas of change over the last eighteen months
the senior would receive.
insurance policy.
the principle limit percentage calculation
our senators and congressmen has hurt the
chance another reduction in the principle
“The Consumer Protection Bureau� (CPB), President. This committee will surely be
made up of bureaucrats that will be deciding and making decisions affecting our entire financial system that we live by.
One of the areas the CPB will prevail over is lending in our country. This means lending policies, underwriting guidelines, program types, and much more will be under their control.
Some of the items being considered on reverse mortgages are:
1
Requiring seniors to qualify for a reverse mortgage from an income and credit standpoint.
Thinking of Getting into the Reverse Mortgage Business?
Since the establishment of the reverse mortgage in 1989 by HUD in
conjunction with Fannie Mae, a senior has not had to qualify for the
loan program and still should not have to. The home has always been the collateral for the loan.
2
Looking to head off FHA insurance losses upon death of the senior.
Our federal government and the agencies are looking at the housing crash and the potential losses the FHA insurance fund may face. The losses in
their opinion, is when the senior passes away and the balance of the reverse mortgage comes due, but what happens if the balance is greater than the value of the home?
This is a genuine concern, however the way the CPB, FHA/HUD, and
the Federal government are discussing this openly, one would think this
3
administration has no confidence that housing values will ever go back up. Imposing another reduction in the principle limit.
If this occurs, very few seniors will be able to qualify for a reverse
mortgage that will do them any good. Other than those who have a
tremendous amount of equity in their homes, the program will be almost worthless.
These three items mentioned are only a few of what is being discussed
and coming from the CPB (Financial Regulatory Reform Bill). The CPB committee spells danger for all of us. The power the CPB will have is
dangerous in the hands of anyone, experienced or not, and unfortunately most of the committee members will not have the experience needed to rule over our entire financial system.
We are convinced that the senior will face the loss of the reverse
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mortgage program through the inadequacy of the committee. This is
a profound statement, however it must be said. It is my belief that this
administration has an actuary table of its own for seniors. In short, I feel the Federal government has an age in mind at which a senior serves no purpose here on earth.
This administration has demonstrated that a case can be made for the statement above through the passing of certain bills.
Just the health care reform bill, along with the financial regulatory reform bill raise many questions about the intentions this administration has
For more information, contact: Marc Helm, 281-404-7824 or Bob Yeary, 281-404-7818 www.RMSNAV.com
regarding our seniors.
October 2010 TRR
| 27
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www.guardianfirst.com 800.682.1577 option 3
866.359.3817 mmooney1@metlife.com
www.rminsight.net 949.429.0452
www.rmsnav.com 888.918.1110
28 | TRR
October 2010
www.AttorneyTrustReview.com 631.669.4370
www.ireverse.com/employment 800.486.8786
www.mortgagecadence.com 888.462.2336
www.nrmlaonline.org
www.reversemortgagecrowds.com 800.604.6535
www.S1L.com 619.794.0797
www.spiriter.com 571.366.7744
www.celink.com 517.321.9002
www.jbnutter.com 800.798.3946
www.remalo.org 800.283.1323
www.reversevision.com 919.834.0070
www.traditionta.com 631.328.4410
I
Just What the Doctor Ordered If we can let go of yesterday, good times lie ahead.
I
david bancroft I am sitting at Nick’s Restaurant in Laguna
hope on the horizon; the FHA dropped the
street will have comfortably absorbed this
Pabst Blue Ribbon, served in a tall-boy can,
Williams—it hits the ground and the “Oh
through refinance booms before and I don’t
Beach and I order my favorite item, a
wrapped in a brown paper bag. I love this. It is like sneaking on to Pebble Beach in board shorts and flip-flops, oh, the commoner takeover has begun. Soon the manager, Ron, nestles up to the table and tries to
explain to me that the novelty of PBR has run its course at Nick’s. Damn it, I am as distraught as a loan officer that just had
his appraisal whacked by an underwriter.
Thanks, Ron; next time you drop news like
this, you’d better have an order of calamari in your hand or a complimentary round of Jagerbombs.
You see, I have been looking for good news lately and a good back up to Reggie Bush
in my fantasy league. The only bright light I have seen lately is the light at the end of
the tunnel…and it is another train coming
right at me. But now, out of the blue, there is
floor on rates. It is like a pass from Romo to yeah!” moment is upon us. I don’t care about the PBR anymore, we have loans to do. This
change in benefit, specifically to the younger borrower, is just what the doctor ordered. I was beginning to feel like the best days
had passed us by and that maybe McNabb
looks good in red. Then, without notice, and surprisingly light-footed, the news breaks out and blind sides even the guys in the
new rate. All I know is that we have gone
remember back ends destroyed—reduced, maybe, but not decimated. I am keeping my fingers crossed that the appetite for
the product in the secondary market is still ferocious. It doesn’t have to be as eager as
that Siegfried and Roy tiger, but just hungry enough, like that MGM lion who took a bite out of his trainer in Vegas.
know. Sweet! I will take what I can get.
Word on the street is that the secondary
So put your refi-shoes on and let’s go for
has been their M.O. for years. It’s time to
a run. We should be able to create a nice pipeline of past clients; it is time to earn
them some more money and reduce their
fixed rate for relatively little or no cost. Oh
wait, I hear the investors screaming already and as I write this, there is no trading
going on in the secondary markets. By the time you read this article, hopefully the
... out of the blue, there is hope on the horizon; the FHA dropped the floor on rates. It is like a pass from Romo to Williams—it hits the ground and the ‘Oh yeah!’ moment is upon us.
market is getting worried, but “panic first” take a step back and see it for what it really is. Action in any market is good and if we
have to accept a little less to do more, than so be it. Spoiled rotten are the new brokers and large are the checks right now. I remember
the good old days. I was running Omni and sitting in a meeting at Financial Freedom’s Corporate office in Irvine when I thought
my prayers had been answered. One back was introduced to us. Imagine creating a
successful company on origination only— what a concept. I know only McCartney
should be the one singing “Yesterday”, but we all have to see where this is headed.
Lower rates mean less return on investment and a smaller price for pools. This g
October 2010 TRR
| 29
equates to tinier checks for all of us, but
Good times lie ahead and hopefully this
particles breaking away from the glass. I
will have to accept the fact that huge back
past clients, but also to a frenzy of many new
always get what you want, but if you try
hopefully volume will rule the day. We all ends will soon be a thing of the past, but that is not to say that we can’t be as successful
as before. At this juncture in the industry, it
may be about compromise...PBR instead of
Bastard Ale or Outback Steak House instead
of Maestros, but come on, who cares about 23 herbs and spices anyways?
boom can not only lead to business with
clients. These lower rates and even lower
costs should penetrate the invisible wall of
ignorance that still taints this product. I am hopeful that these walls tumble down like they did in Jericho so long ago and then
can hear Mick Jagger in my ear, “You can’t sometimes, you get what you need.” Maybe we can all enjoy the fruits of our labor, and kudos to those that have fought the good fight. You will be rewarded.
we can help so many others. Oh wait, here comes Ron again from the bar, this time
bringing me a Stella so cold you can see ice
Good times lie ahead and hopefully this boom can not only lead to business with past clients, but also to a frenzy of many new clients.
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October 2010
September 2010 TRR
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