THE
REVERSE M AY 2 0 1 1
review
taking care of
SenioRs in need:
A mission still possible? Sherry B. Apanay
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TRR 05.11
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28
38
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the Essentials The Legal Brief Series 24 A springtime review of new HECM Mortgagee Letters: ML 2011-01 & ML 2011-09.
Fed Kamensky & Joel Schiffman
Taking Care of Seniors in Need 28 A mission still possible?
Sherry B. Apanay
Will Baby Boomers Go Boom or Bust? 34 A look at the true feelings and concerns of the baby boomer generation.
Roger Chiocchi
Living at Home Brings Peace of Mind 38 Long-term care and reverse mortgages create the ideal partnership for seniors wanting to stay in their homes.
Michael Banner l
the The Report 7, 9 Ask the Underwriter
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Ask the Appraiser
18
The Hot Seat
20
The Perspective 12
The Industry Roundup 22
The Advisor 14
The Resources 41
The Conversation
The Last Word 42
4
10
Core
16
Meet the Team Publisher
Aman Makkar Your greatest strength is knowing your greatest weakness.
Letter from the Editor
Editor-in-Chief
Emily Vannucci “You’re trying too hard... try less.”
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e
Copy Editor
Kersten Wehde I can’t read a menu, text or wedding invitation without proofreading it. The customer is always right.
is becoming more and more tech-
retail and service industry where we
note of this and develop new ways of
Growing up I had many jobs in the lived by this motto. I heard every
request in the book and ultimately… the customer always had to be right! In our May issue we talk about
educating the customer and, as
Brett Varner puts it in this month’s Perspective, “presenting your
argument in a way that corresponds with [the customers’] perspectives
for the purpose of education or just to keep them informed. Michael Banner
term care. He comments that there
are many misconceptions regarding
long-term care that a little education and knowledge could clear up.
with all the facts “in a way that
needed to really be “right”… could it
be the customer isn’t always right? In the case where additional education and further knowledge is needed, I believe this is very true.
Educating seniors is a theme
throughout our entire issue this
month. In The Advisor, Alain Valles
provides tips on originating by mail.
Both he and John LaRose, who wrote The Last Word, touch on the fact
that the baby boomer generation
Brett G. Varner “He who spends too much time looking over their shoulder, walks into walls.”
seniors about the benefits of long-
you are to make a sound decision.
didn’t have all the knowledge they
News Editor
also writes a great piece on educating
Whether the customer is right or
Maybe the customers I had in the past
Trizzle Knight Speck check is for the bird. Sorry, Kersten.
reaching out to seniors whether it is
and needs.” Knowledge is power and the more you know, the better able
Creative Director
savvy. Our industry needs to take
not, it’s our duty to provide seniors corresponds with their needs” to help them understand what options are
Printer The Ovid Bell Press
living the life they want.
Advertising Information phone : 858.832.8320 e-mail : advertising@reversereview.com
out there and allow them to continue
We’ve put together another great
issue for you this month so sit back
and enjoy all the hard work that went into our May issue of The Reverse Review.
Until next time,
Editor-in-Chief { emily
vannucci
}
Subscriptions and Editorial Content phone : 858.217.5332 e-mail : information@reversereview.com website : reversereview.com © 2011 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. .com 8 TRR | 5 Bernardo Drive Suite 450 San Diego, CAreversereview 92127
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the Contributors Dave Bancroft
1
Feature Article l
Sherry B. Apanay
1
The Conversation, pg 16
Dave Bancroft, former Executive Vice President and board member at Security One Lending, is an industry expert in the origination of reverse mortgages. Bancroft was the Founder and President of Omni Reverse Financing Inc, specializing in government lending. Omni Reverse was one of the largest originators of HECM Mortgages in the country and was acquired by Security One Lending in 2009. davebancroft@cox.net | 949.355.4653
Michael Banner
Taking Care of Seniors in Need pg 28
2
2
Living at Home Bring Peace of Mind, pg 38
Founder of LoanWell America, Inc., Michael Banner is one of few reverse mortgage professionals accredited to teach continued education classes to CFPs, CPAs, attorneys and insurance agents. Banner has been interviewed by the Wall Street Journal, Tampa Bay Business Journal, and appeared on the Fox Business Network. michael.banner@loanwellamerica.com | 877.753.1705
Roger Chiocchi
3
As Executive Vice President of Generation Mortgage, Sherry is responsible for the company’s wholesale and retail sales. With experience in both divisions, Apanay has been working within the reverse mortgage industry for the past 15 years and managed a business division for the past 11 years. She is a member of the National Reverse Mortgage Lenders Association and serves as Co-Chair for NRMLA’s Education Committee. 6
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Will Baby Boomers Go Boom or Bust?, pg 34
Roger Chiocchi is a lifelong advertising professional and writer. In his book, Baby Boomer Bust? How the Generation of Promise Became the Generation of Panic (www.babyboomerbust.net), he examines the factors underlying the economic meltdown of 2008/2009, utilizing his expertise in in-depth qualitative interviewing and analysis. Chiocchi is a graduate of Ithaca College and earned his MBA at The Wharton School and is currently a principal at marketing communications agency, Brandloft. www.brandloft.com
Fed Kamensky
4 4
The Legal Brief Series, pg 24
Fed Kamensky is an associate with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. kamensky@wbsk.com | 202.628.2000
John LaRose
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The Last Word, pg 42
John LaRose is the Chief Executive Officer of Celink, the nation’s largest reverse mortgage subservicer. LaRose also serves on the Board of Directors of the National Reverse Mortgage Lender’s Association and is the co-chair of its Compliance Subcommittee.
John K. Lunde
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The Report, pg 7, 9
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 eight of the top 10 reverse mortgage lenders plus investors, servicers and vendors to the industry. rminsight.net | 949.429.0452
The Reverse Review May 2011
the Report
March 2011 Wells Fargo Bank of Bank, N.A. America, N.A.
Top Lenders Report MetLife Bank, N.A. Endorsement 682
One Reverse Generation Mortgage LLC Mortgage Co. Endorsement Endorsement 186 186
12345
Endorsement
CHARLOTTE
1960
Endorsement
Lender
738
Endorsements
Lender
Endorsements
AMERICAN ADVISORS GROUP
115
ASPIRE FINANCIAL INC
29
GENWORTH FINANCIAL HM EQUITY
114
ROYAL UNITED MORTGAGE LLC
26
URBAN FINANCIAL GROUP
98
NATIONWIDE EQUITIES CORPORATION
20
GREAT OAK LENDING
83
HOME SAVINGS OF AMERICA
20
NEW DAY FINANCIAL LLC
83
TRIPOINT MORTGAGE GROUP INC
19
GUARDIAN FIRST FUNDING GROUP
82
MAS ASSOCIATES
18
PNC REVERSE MORTGAGE LLC
69
ENVOY MORTGAGE LTD
18
THE FIRST NATIONAL BANK
67
FIRST MARINER BANK
18
SECURITY ONE LENDING
66
AMTEC FUNDING GROUP LLC
18
1ST AAA REVERSE MORTGAGE
65
ALL FINANCIAL SERVICES INC
18
NET EQUITY FINANCIAL INC
59
TRINITY REVERSE MORTGAGE INC
M AND T BANK
56
BRIAN A COLE & ASSOCIATES LTD
17
MONEY HOUSE INC
53
SOVEREIGN LENDING GROUP INC
17
FINANCIAL FREEDOM ACQUISITION
47
REVERSE MORTGAGE SOLUTIONS INC
17
SUN WEST MORTGAGE CO INC
44
PLAZA HOME MORTGAGE INC
17
IREVERSE HOME LOANS LLC
41
NETWORK FUNDING
15
MIDCONTINENT FINANCIAL CENTER
40
CHERRY CREEK MORTGAGE CO INC
15
SUNTRUST MORTGAGE INC
38
CHRISTENSEN FINANCIAL INC
15
PRIMELENDING A PLAINSCAPITAL
36
ARAMCO MORTGAGE INC
15
SENIOR MORTGAGE BANKERS INC
35
ALLIED HOME MORTGAGE CAPITAL
14
EQUIPOINT FINANCIAL NETWORK
35
AMERICAN PACIFIC MORTGAGE
14
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the Contributors Scott Peters
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Scott Peters, President and CEO of Generation Mortgage, has 30 years of successful business leadership experience. Prior to Generation Mortgage, he held senior leadership positions with MassMutual, General Electric Capital Corporation, PRG, AT&T, CompuCredit Corporation, and Nortel Networks. Peters graduated from West Point, is a U.S. Army Veteran, and earned his MBA from California State Polytechnic University. Peters serves on the board of directors for NRMLA.
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Ralph Rosynek
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Joel Schiffman
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Ask the Underwriter, pg 10
Ralph Rosynek has been The Reverse Review “Ask the Underwriter” columnist for more than two years. Rosynek is the Vice President for National Correspondent Production at Reverse Mortgage Solutions, Inc. RMS is a premier provider of reverse mortgage servicing, a Ginnie Mae Seller/ Servicer and offers complete mortgage banking support and services to the reverse mortgage industry. He is currently seated as a member of the NRMLA Board, co-chair of the Professional Development Committee and holds HUD HECM Direct Endorsement credentials. rrosynek@rmsnav.com | 708.774.1092
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The Hot Seat, pg 20
The Legal Brief Series, pg 24
Joel Schiffman is a member with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. schiffman@wbsk.com | 949.754.3010
Brett G. Varner
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The Perspective, pg 12
Brett G. Varner is the News Editor for www. ReverseReview.com. He has served the mortgage industry for 10 years in leadership capacities in sales, marketing and operations. His unique and knowledgeable perspective is focused on developing useful content and strategies in a forum of open and lively debate.
Alain Valles, CRMP 10
The Advisor, pg 14
Alain Valles, CRMP is President of Direct Finance Corp., Hanover, MA, one of the leading reverse mortgage brokers in the country. Valles received a master’s in real estate from M.I.T., an MBA from The Wharton School, and graduated summa cum laude from the Univ. of Massachusetts. Valles’s mission is to improve the quality of life through responsible financing. avalles@dfcmortgage.com | 781.878.5626
Bill Waltenbaugh, SRA 11
Ask the Appraiser, pg 18
Bill Waltenbaugh, SRA is a certified appraiser of 20 years. During these years, Waltenbaugh witnessed and experienced firsthand the many changes that occurred in the appraisal industry, from the advent of licensing to the implementation of HVCC. Currently, Waltenbaugh is the Chief Appraiser at AppraiserLoft, a nationwide Appraisal Management Company, and writes a weekly blog called “For What It’s Worth.”
The Reverse Review May 2011
the Report
INDUSTRY SUMMARY Retail Endorsement Growth
0.64%
February Endorsements Retail and Wholesale Volumes
Wholesale Endorsement Growth
16.25%
- Reverse Market Insight We noticed last month that the broker/wholesale channel performed
Total Endorsement Growth
6.47%
much better than retail/direct in a down month for the industry
overall, and now we can remove that last qualifier. Broker/wholesale
* Figures Above Reflect Change from Prior Month
Trailing Twelve Month Endorsements
outperformed again in February, up 16.2% compared to just 0.6% growth for retail/direct.
Of course, given all the regulatory headwinds, we don’t really expect brokers to gain back all the ground they’ve lost in the past year, but
they’re not dead yet (despite the many obituaries already written). Given the relative weakness in top 10 lenders’ retail business in March, we also suspect that we’ll probably see brokers make it a clean sweep of growth
10,000
for the quarter when we see next month’s Wholesale Leaders report.
8,000
Brokers comprised 40.8% of all endorsements in February, down
6,000
considerably from last year (55.5%) but up dramatically from the low of
4,000
33.7% in December.
2,000
Urban Financial Group (owned by Knight Capital) is notable as the only
0 3 4 5 6 7 8 9 10 11 12 1 2 Retail
Wholesale *Numbers Represent Months
RETAIL
WHOLESALE
UNITS CHG%
UNITS CHG%
10
-21.9%
11
2,692
-3.27%
2,813 -7.41%
5,505 -5.43%
12
2,465
-8.43%
2,086 -25.84%
4,551 -17.33%
1
2,900 17.65%
2,404 15.24%
5,304 16.55%
2
3,358 15.79%
2,521
4.87%
5,879 10.84%
3
3,969
18.2%
2,672
5.99%
6,641 12.96%
4
3,405 -14.21%
2,558
-4.27%
5,963 -10.21%
5
2,976
-12.6%
2,307
-9.81%
5,283 -11.4%
6
4,004 34.54%
2,547
10.4%
7
4,343
8.47%
8
4,049
-6.77%
9
4,075
0.64%
TOT
41,019
6,551
24.0%
2,207 -13.35%
6,550 -0.02%
9.33%
6,462 -1.34%
2,805 16.25%
30,371
same span. g
UNITS CHG%
5,821 -17.01%
2,413
12 months, a tall order given the declines wholesale has seen over that
TOTAL
2,783 -10.92%
3,038
top 10 lender that has grown their broker/wholesale business in the past
6,880
6.47%
71,390 reversereview.com
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The Reverse Review May 2011
ask the Underwriter HECM market. With the resolution
of broker compensation issues, the
implementation of redefined access roles within the FHA approval process, the
departure of many industry backbone lenders and a major shift in the retail
and wholesale workforce, it is a wonder how we continue to focus on assisting senior borrowers with their desire to remain in their homes.
It is important to note that the remainder of 2011 does not appear to be any
less turbulent. We will be watching
for the resolution of budget issues in
Washington and focus on counseling – again. Possible funding resources that provide a measurable offset to
counseling fees our borrowers pay could potentially cause lack of counseling
availability or delays in the scheduling process.
Pending resolution of a Financial
A Spotlight
on the Mortgagee Letters Ralph Rosynek
Assessment tool for borrowers, ongoing loan limit issues and additional DoddFrank implementation of consumer protection and
mortgage banking
controls are just a few of the other items on
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funding resources that provide a measurable offset to counseling fees our borrowers pay could potentially cause lack of counseling availability or delays in the scheduling process.
our plate.
While your focus was elsewhere,
several mortgagee letters were issued as detailed below:
Mortgagee Letter 2011-01
Are we having fun yet? 2011 continues to demand our patience and ability to remain flexible in the
It is important to note that the remainder of 2011 does not appear to be any less turbulent. We will be watching for the resolution of budget issues in Washington and focus on counseling – again. Possible
(Servicing-Related)
This Mortgagee Letter (ML) provides loss mitigation guidance for the
resolution of Home Equity Conversion
Mortgages (HECM) that are delinquent due to unpaid property charges and
mortgages wherein due and payable
requests were previously deferred by
HUD. The guidance in this Mortgagee Letter applies to all HECMs where
the mortgagor is delinquent in paying
property charges or the mortgagee has
advanced corporate funds to satisfy an
unpaid property charge on behalf of the mortgagor, or both.
Mortgagee Letter 2011-02 (Quality Control- and TPO-Related)
This Mortgagee Letter clarifies FHA’s
quality control requirements in light of recent changes to the lender eligibility criteria for participation in FHA
programs (refer to Section 203 of the
“Helping Families Save Their Homes Act of 2009” [HFSH Act]; Final Rule
FR 5356-F-02, “Continuation of FHA
Reform: Strengthening Risk Management through Responsible FHA- Approved
Lenders”; and Mortgagee Letter 2010-20). ML 2011-02 also clarifies Quality Control requirements for:
3 s ervicing transfers and loan sales 3 r eporting of fraud and material deficiencies
3 t he required timeframes for
mortgagees to review rejected applications
All FHA-approved mortgagees, including those in sponsored relationships, must
have a quality control plan that requires
the review of loans that are originated or underwritten. For those mortgagees that have sponsored third-party originators,
In addition, sponsors must document:
3 t he methodology used to review
sponsored third-party originators
3 t he results of each review 3 a ny corrective actions taken as a result of their review findings
A report of the quality control review
and follow-up that includes the review findings and actions taken, and the
procedural information (such as the
percentage of loans reviewed, basis for selecting loans, and who performed
originator’s loans to review based on
volume, past experience and other factors
specified by the Department in Paragraph 7-6(C) of HUD Handbook 4060.1, REV-2.
under the subheading “Appropriate Charges,” are superseded by new guidance in this ML under the
subheading “Appropriate HECM
Counseling Fee Charges.” The remainder of ML 2008-12 remains in effect.
On December 5, 2008, the U.S.
made available to HUD upon request. Consequently, all FHA-approved
mortgagees will be responsible for
performing quality control reviews of
their sponsored third-party originators. The procedures used to review and
monitor sponsored third-party originators
Department of Housing and Urban
Development (HUD) issued Mortgagee Letter (ML) 2008-38 to provide
clarification to mortgagees regarding the requirements for repayment
and termination of a Home Equity Conversion Mortgage loan.
must be included in a mortgagee’s
HUD’s intent in issuing ML 2008-38 was
minimum, these procedures must include
contained in the regulations at 24 CFR
FHA-approved quality control plan. At a the requirements outlined in Paragraph 7-6 of HUD Handbook 4060.1, REV-2.
This ML provides guidance to counselors
amount of each sponsored third-party
Note: The provisions in ML 2008-12,
Quality control review records must be
the mortgagee by each of its sponsored must determine the appropriate sample
criteria
Mortgagee Letter 2011-16
mortgagee for a period of two years.
Mortgagee Letter 2011-09
third-party originators. Mortgagees
counseling fees based on certain
the review), must be retained by the
the quality control plan must require the review of loans originated and sold to
3 a llowing agencies to establish
and lenders regarding when:
to supplement and explain provisions §206.125 and HUD Handbook 4235.1 (Home Equity Conversion
Mortgages). Since there has been some uncertainty regarding the guidance in
that ML, HUD is rescinding ML 2008-38, effective as of the date of this ML.
3 a HECM counseling fee should be
Basically, HUD is clarifying the confusion
3 a ctivities performed by a HECM
to its original non-recourse policy.
waived
counselor that are included in the amount of time recorded on form HUD-92902; Certificate of HECM Counseling
we have all experienced with regard
HUD has now restated its non-recourse (with reguard to HECMs) definition
as borrowers or heirs will never be >> continued on page 41
HUD has now restated its non-recourse (in context to HECMs) definition as borrowers or heirs will never be responsible for owing more than the value of the home when the reverse mortgage is repaid.
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The Reverse Review May 2011
the Perspective and communication skills I have learned over the years.
The saying illustrates that others do
ago and he started to display some
or argument is made, others will not
I was faced with how to successfully
a way that corresponds with their
and consistent parental guidance.
others to see the benefits of your
Arguing with him one morning about
the information they need to know to
that I was forgetting one of the most
than the information you want to give
not always see things the same way,
As my son turned 3 a few months
and no matter how well a presentation
“strength” in attitude and cooperation,
understand it until it is presented in
address his tests of authority with patient
perspective. To put it simply, persuading argument requires the ability to provide
picking up his toys, I suddenly realized
answer the questions they have, rather
important tools in sales: perspective.
them.
Success in sales extends far beyond
being the most polished presenter or
being the most versed in your product; it comes down to being able to present
information to a prospective client in a way that meaningfully addresses their
needs and concerns. This extends beyond salespeople. Whether you are trying
to convince a co-worker to help with a task, lobbying your employer for a
needed resource or selling to client, most communications in business involve
Success Training from a 3-Year-Old Brett G. Varner
I always knew having children would present new and interesting challenges, but I never expected how it would test many of the sales 12
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some form of persuasion, or sales.
To understand perspective, when I
would question why things were done in certain ways, a mentor used to tell
me, “There are many different ways of
looking at an elephant.” The first time I
...others do not always see things the same way, and no matter how good a presentation or argument is made, others will not understand it until it is presented in a way that corresponds with their perspective.
heard it, I was quite perplexed as to how
In training and managing salespeople,
came from open-air markets in India. The
are very detailed explanations of what a
buyers are standing around an elephant
what the benefits are. When I hear this,
the animal from a different angle. The
school student to memorize and recite
person from the viewpoint at the place
That doesn’t mean they understand
salesperson must guide the person to
the older homeowner. In the seventh
that most correspond to his need.
Declaration of Independence and then
this was relevant. He claimed the saying
I have heard many presentations that
theory suggests that if several potential
reverse mortgage is, how it works, and
for sale, each one will be looking at
my response is: I can teach a middle
salesperson, in turn, must address each
the concepts of a reverse mortgage.
they are standing. Additionally, the
the application of it or how it impacts
other viewpoints to highlight the features
grade, I was required to memorize the
recite it as part of an exam. I completed
the assignment without ever having to
and miss the opportunity to learn key
of those words was brought to life
The best method for managing a
perspective as burgeoning adults who
and informative as possible, followed by a
off your current mortgage and provide additional funds that you could use to visit your grandchildren more often, that would be a great benefit to you. The response reveals
if a prospect asks the catchall question,
whether it is time to discuss the process
truly reflect on the power of those words. It was several years later that the power for me. The teacher understood our
didn’t have experience or knowledge to comprehend the events that led to
the creation of that document. Through discussion and debate, we explored
what we envisioned Thomas Jefferson
information provided by the prospect related to their concerns.
conversation is to keep responses as short
question for the prospect. As an example,
where they are in the buying process and
What is a reverse mortgage?” a
of the reverse mortgage, or if additional
and the other Continental Congress
brief response should be
adopting the revolutionary document.
reverse mortgage program provides older homeowners such as yourself a safe way to access the equity in their home for use as they see fit, without monthly payments. What do you think you would do with additional money if it were available to you?
delegates went through in creating and By understanding our perspective, the teacher was able to pique our interest in the topic that lead us to a deeper
appreciation of the country and our
responsibilities, especially as we were
approaching our first opportunity to vote. Later, that lesson helped me see that in
sales, success is built upon relationships, and relationships are based upon
introductory, such as, “The
interaction and understanding. When a
I know some will think that this response
is a reverse mortgage?” and they respond
but you shouldn’t be concerned about
product, they risk pushing the prospect
prospect to provide a meaningful answer.
them, rather than developing relationship.
questions, you learn more about the
know you or what you want, so I am
concerns are and the detailed information
salesperson is asked by a prospect, “What
insufficiently answers the question,
with a five-minute monologue about the
that until you know enough about the
away by overwhelming them or confusing
By controlling the conversation with
It is basically telling the prospect, “I don’t
person, what their specific needs and
going to show you how much I know.”
they need to properly evaluate the
Developing relationship and perspective
more information than they need, you
conversation. This occurs when the
they need in a nonthreatening sales
product. Rather than flooding them with
requires engaged, interactive
are conversationally providing the details
person driving the conversation controls
approach.
leading questions to learn more about the
Utilizing this approach should result
during conversation, many people find
summation that demonstrates that you
of time. When the one person begins
the prospect is looking for from the
listening at first, but then they begin to
Based upon our conversation today, if the reverse mortgage could pay
the length of periods they talk and asks
other person. This is important because
in the ability to make a very direct
it difficult to listen for longer periods
have listened and understood the benefits
speaking, the other tends to focus their
reverse mortgage. For example,
think about what they are going to say in response. The result is that salespeople lose the attention of their prospects,
questions remain.
With my son, I was growing more
frustrated with him because no matter
how good my explanation was about why I needed him to do something or change a behavior, he responded with the same
question: “Why?” My competitive nature convinced me that I could win this battle (and by the way, you can’t win against a 3-year-old). I realized that I was telling
him what I needed him to hear, not what he needed to hear, and I was letting him
control the debate by asking questions. By
changing my tactics and providing simple answers and asking him questions, the results are changing.
The child is learning, and that process of self-discovery only comes from
experience. By challenging me, he
learns the boundaries of his behavior
(an important societal lesson). He also
communicates things to me that he may not know how to put into appropriate
words, such as being overtired, needing attention or wanting comfort.
So I have returned my focus to
communication. The experience of parenthood is wondrous in many
ways, but just as in business and other
interactions, it has reaffirmed my belief that success in relationships requires a willingness to see things from others’
perspectives, listen intently and adjust
my words to match the balance between
what I want to say and what they need to hear. g
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The Reverse Review May 2011
the Advisor Should you meet in person?
g
a borrower face-to-face is to create
options, discuss which option will best
Second call The purpose of
The principal reason for meeting
this call is to share possible HECM
greater trust. It also gives me a
meet the senior’s goals and educate the
better understanding of the senior’s
environment, including any physical
limitations, competency concerns, and condition of the property. It’s a chance to respond to body language. And it’s
senior about how the HECM process
works, including the requirement of a counseling session. When the senior desires to move forward, this call
ends with the loan officer
easier to explain disclosures and collect
promising to overnight
documentation.
the loan package with
accompanying disclosures
But the opportunity costs of all that
drive time (not to mention fuel cost and
application materials on a certain date.
Then there are the times when the senior
hour-plus.
feels pressure to “entertain” by cleaning
I am an “old-school” reverse mortgage broker in that I originate my loans in person, often driving two hours each way, investing three hours with my client and sometimes meeting a second or third time. I often
g
not sure the senior really wants to hear
having the senior sign the disclosures,
focus on explaining the loan package,
all my stories.
reviewing the required supporting
Time to change my thinking! My
discussions with successful “by mail” loan officers resulted in the following tips to share with you:
Use a three-call & mail approach
g
First call An introductory
conversation explaining the loan
officer’s goal of sharing information about HECMs and learning what
the senior would like to accomplish. The goal of this call is to capture the borrower’s age, estimated property
value, and current mortgage balance. The call ends with setting a time for the next call to discuss particular
arrive home feeling jet-lagged. But
do everything by mail and claim great
25 minutes.
borrower satisfaction. 14
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Third call Now it is time to
hard to swallow. And sometimes I’m just
options after reviewing the information
recently I’ve talked to loan officers who
Estimated call time: 30 minutes to 1
their home or providing food that can be
Top Secrets of Originating by Mail
Alain Valles, CRMP
commitment to review the
inherent driving dangers) are reason
enough to explore originating by mail.
Originate by Mail?
and information, and a
provided. Estimated call time: less than
3
documentation, and explaining how to
schedule the counseling session or call.
Assuming this call ends well, the senior agrees to a time schedule to complete counseling and to mail back the loan package in the provided, prepaid overnight envelope.
Presentation is key
Make sure your loan
packages are orderly,
have your disclosures in
large font, and are numbered. Provide a checklist of how the loan process
flows and what documents are needed, and make sure you have a compliant list of HECM counselors. Including
educational materials as well as a single-
page summary of the borrower’s goals is appreciated.
Presentation is key: Provide a checklist of how the loan process flows and what documents are needed.
?
Need assistance from the Advisor?
Send your question to advisor@reversereview.com and it may be addressed in the next issue.
Communication options
More and more seniors are computer
savvy and many are creating their own Facebook pages to keep track of the
grandkids. GoToMeetings and Skype are growing avenues to explain all
those forms as well as having a faceto-face conversation for those with
webcams. Have your support staff or
processors join the call to let the senior
know there’s a team eager to help them.
Supporting documentation
Make it easy for the borrower. Explain specifically what is needed and go the
extra step by identifying places they can go to make copies,
such as the local library or office
supply store. Sometimes the inability
to get a copy of a driver’s license can hold up a file for weeks. Stay in touch
Sending an
Communicate frequently throughout
picture helps to
to know what’s going
“office team” warm the
relationship.
the entire process. The senior needs on and must never be
made to feel like they’re just a number or have
been forgotten. A weekly call from the
loan officer is critical to monitoring the borrower’s emotions and addressing any new questions or issues.
Which is the best approach?
In the end, both. Being proficient at
originating both in person and by mail
is probably the best solution. I’m adding to my infrastructure systems that will better allow me to eliminate hours of
driving while improving productivity
and reducing costs. Maybe it’s time you try too. Please forward your thoughts and tips. I’d love to hear them! avalles@dfcmortgage.com g
reversereview.com
8 TRR
| 15
The Reverse Review May 2011
Unfortunately,
the Conversation
the real truth and force an agenda that will harm an already
ailing industry. The double helix of Adonis DNA
went on full display as
the Federal Reserve Board flexed its rhetoric and
somehow won the most
recent showdown. Am I
the only one recognizing
the similarities of Charlie
Sheen’s antics and the way this whole thing is going
down? The core of the law
is being created on idealism and grounded with a
skewed perception of what
impact this law is going to have is that the consumer will pay more at closing. Decimating compensation in business is counterproductive. Restrictions in this industry will only usurp the true spirit of business and stymie growth.
seems right. Like Charlie
somehow, like rehab, cleanse the industry of its evil ways. C’mon, truth be told, the products that were abused are gone and for the most part so are the thieves that stole our industry’s integrity.
16
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more at closing. Decimating compensation in business is
counterproductive. Restrictions in this industry will only usurp the true spirit of business and stymie growth. In essence,
without the flexibility to offer more product choices and
cost options, the consumer
suffers. Most rate sheets today show little difference in rebate
the highest of interest rates and that
mortgage products. In the past you could present a higher rate if cost was an issue and use the rebate on the backend to
absorb the third-party fees or even the origination to stay competitive. Or if
rate was the issue, you could lower the
rate and increase the origination, but the consumer had the choice.
Now we will be driving loans to lenders
nothing new and echoed its original
processes or even exceptional service
sided with the Board, which presented stance. Sidestepping real issues like
consumer access and limited competition other side did not do enough to show
possibly harness the power to blind the
that the consumer will pay
I find it disappointing that the court
while pointing fingers and saying the
blood running through his veins could
this law is going to have is
goes for both the forward and reverse
perpetrates every transaction and will
The Appellate Court’s decision to squash the postponement and drive forward the compensation changes reeks of the work of The Warlock. Only one with tiger
Unfortunately, the real impact
reality that is not the case. These laws
outrageous greed of the originator that
Dave Bancroft
poor choice.
between the lowest of interest rates and
are being created to curb the perceived
Adonis DNA
make a decision is typically a
and the Goddesses, you would like to
think that two is better than one, but in
Tiger Blood and
Making a decision merely to
not based on relationships or proven
but on loan amount only, can anybody see a problem with this? As Charlie
has found out in Detroit and again in
New York, what seems like a good idea
true cause. Am I the only one appalled
sometimes spirals into a sea of boo’s and
eleventh-hour late to stay the order, but
reverse the action and bring back some
that the court was molasses-slow and
is now lightening-fast to put it back in
play? Whatever happened to proper due diligence, weighing the pros and cons
and coming to a proper conclusion? Too
many times I have found in business that good intent can have bad consequences.
walkouts. Hopefully this industry can
sort of sense to the compensation models
before the damage is deadly. I am hopeful this much-maligned legislation will be
overturned in time but until then may the Trolls fight on! g
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www.appraiserloft.com reversereview.com
8 TRR
| 17
The Reverse Review May 2011
ask the Appraiser If you have any appraisal-related questions,
isn’t interested in having a condition
reversereview.com and we will address
affecting the subject’s appeal, value
please email the appraiser at information@ your question in an upcoming issue.
concern repaired doesn’t keep it from and/or marketability.
QUESTION
Why have appraisers become so picky about repair items such as minor peeling paint on structures and even fences? To be honest, I was a little confused
when I first read your question. The
way it’s phrased makes it sound like something recently changed; that
appraisers are now singling out more
repair items than they did in the past. A lot of things have changed, but the way
concerns like peeling paint are reported isn’t one of them.
Bill Waltenbaugh, SRA
We recently received a question for our knowledgeable appraiser, which is addressed in this month’s column. 18
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reported for an FHA assignment completed for HUD can be
very different from how it is
completed for a conventional
lender for a conventional
assignment. That’s because HUD has
specific policy regarding condition, how it is reported and whether repairs are required before closing.
Based on the question above, I can
assuredly assume your inquiry has
to do with FHA assignments because
peeling paint and how it is addressed is a well-known HUD concern. As such, to provide clarification and to be sure
Before I go any further, I need to clarify
When Repairs Are Needed
The way a condition concern is
a few things. Conditioning an appraisal and making the value subject to repair has a lot to do with the assignment
type, the intended use and the intended user(s). In other words, what is the purpose of the appraisal
everyone is on the same page, I will answer your question from HUD’s
perspective regarding an FHA-insured mortgage-related transaction.
HUD has general acceptability criteria for all FHA-insured mortgages. To
qualify, a property must
and who is relying on the
meet minimum property
results? This is important
requirements mandated
because the intended
user has some say as to how these concerns are
addressed. Do they want
by HUD. Before 2006,
Conditioning an appraisal and
to know what the property
making the value is worth before repairs subject to repair has are made or what it is a lot to do with the worth after repairs are assignment type, the made? The appraiser can intended use and the complete the report either intended user(s). way but the fact that the
condition currently exists
remains unchanged. Just because a client
these requirements were
fairly strict and included
general maintenance items, cosmetic items and even
concerns over normal wear and tear. To qualify for
FHA-insured financing, it wasn’t uncommon to
find repairs for items such as cracked window glass,
minor plumbing leaks like leaky faucets, defective floor coverings such as badly
?
Have a question for the Appraiser? Email questions to information@reversereview.com and look for your answer in an upcoming issue.
soiled carpet and even the removal of debris from the crawl space.
On December 19, 2005, HUD revised
their minimum property requirements and limited their concerns to items
that affect the safety of the occupants and the security and soundness of the property. Let me be very clear:
This doesn’t mean inferior cosmetic
items shouldn’t be reported within the
appraisal; it simply means HUD doesn’t require these items to be repaired to be eligible for an FHA-insured
mortgage. All condition concerns still need to be reported and, if necessary, accounted for in the final value by
making adjustments in the appropriate approaches.
If an item is found that affects the
safety of the occupants and the security and soundness of the property, the appraiser should make the report
“subject to” the repair of that item.
Since the value is made “subject to,” no adjustment is necessary and the value reported is reflective “as if” the repair
was already complete. Once the repair is completed, an inspection is made to
verify acceptability and the condition is cleared for closing.
When it comes to defective surfaces
including peeling, scaling or chipping paint, HUD requires all defective
paint, both interior and exterior, to be
corrected if the home was constructed
before January 1, 1978. However, there
aa
is some confusion when it comes to
an increase in the number of defective
exterior surfaces, despite the age of the
explanation I can offer is tied to changes
paint repair requirements, the only
peeling paint on exterior surfaces. All
in appraiser independence. It wouldn’t
home, require repair when the exterior
surprise me if loan production staff
finish and materials are unprotected.
applied a little pressure to appraisers
That’s because unprotected exterior
to overlook what they considered
surfaces will eventually become
soundness concerns without current maintenance. All
exterior surfaces include, but are not limited to: g garages g storage sheds g decks g porches g railings g eaves g windows g doors g fences Whether interior or exterior, it is the appraiser’s
responsibility to
provide a detailed description and
exact location of
the deficiency and
condition the appraisal “subject to” repair.
minor defective paint concerns in
the past. Now that there is a stronger
firewall between the appraiser and loan production, appraisers may feel more
at ease identifying these legitimate and required repairs. g
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At the end of the day, one would expect
a decline in repair
requirements given
the changes made in
2006. If you are finding
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Providing our clients with Knowledge, Experience and Trust.
reversereview.com
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hot
Seat U
C
C
20 questions - things you need to know or may have been wondering -may 2011
the
hot seat 20
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From his favorite website to his outlook on the future of the reverse mortgage industry, we get the personal and professional facts from Scott Peters, President and CEO of Generation Mortgage, in our monthly edition of The Hot Seat.
scott PERSONAL
Generation Mortgage
president & CEO
>
My favorite website is ESPN.com.
>
My favorite magazine (besides The Reverse Review) is Men’s Health.
>
When I was younger I wanted to be a professional tennis player.
>
Every morning I thank God for my life, wife, children, family and friends.
>
I’ll never forget the first time I jumped out of an aircraft while leading soldiers on a mission in the military.
>
The best job I’ve ever had is the one I have now; I get to work with the great
>
My parents taught me to help everyone that I possibly can.
>
The best lesson I’ve ever learned is to always tell the truth.
>
A good friend is one you can trust and who accepts you for who you truly are.
>
My favorite book is The Greatest Game Ever Played, which taught both sports and life lessons.
people at Generation Mortgage and truly help our senior customers.
When I was younger I wanted to be a professional tennis player.
PROFESSIONAL >
The future of reverse mortgages is bright because the need for seniors to fund their longevity is growing as
>
Ten years from now the reverse mortgage industry will be stronger because our product will be more
>
If I could change one thing about the reverse mortgage industry, it would be to add escrow accounts to help
>
I am optimistic about the reverse mortgage industry because as more Americans learn what a reverse mortgage
>
People should seek a career in the reverse mortgage industry because it allows one to personally witness the
>
I entered this industry because I wanted the opportunity to lead a company whose main goal is to help seniors.
>
Reverse mortgage professionals can best support the public image of reverse mortgages by always putting
more and more baby boomers qualify for this product.
mainstream and genuinely valued as an appropriate retirement planning tool. solve default problems.
can do for them or a family member, the more it will become an accepted financial tool. positive impact a reverse mortgage can have on people’s lives.
the senior client’s needs first. This means providing superior product education and service carried out with honesty and integrity.
>
The most important thing financial advisors can learn about reverse mortgages is that they are not
>
Industry growth is dependent upon better educating consumers about what the product can do for those who are
>
I would encourage a family member to consider a reverse mortgage because if the need is there and they meet
“expensive,” nor simply a product of “last resort.” eligible.
the criteria, it could be life-changing for all family members. In fact, I have recommended the product to my own family members who now have a reverse mortgage.
reversereview.com
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| 21
The Reverse Review May 2011
the Industry
Roundup
industryround up edition
a roundup of this past month’s breaking news:
Who moved where; why a company closed its doors; WHO is new to the industry?
Find it here mov er s k sh a k e rs Robert Ryan:
Following the departure of David Stevens,
FHA Risk Manager, Robert Ryan was named Acting Commissioner.
Texas Mortgage Bankers Association:
Announced its 10th annual Reverse
Mortgage Day, to be held in Houston on
September 7-8. The event will be co-hosted by NRMLA.
George Lopez:
The Missouri governor appointed this James B. Nutter & Company Vice President to the
Residential Mortgage Board. He will serve a term ending October 10, 2013. Legacy Reverse Mortgage:
Jim Cory stepped up from his role as
President to become CEO. Todd Ausherman was named to replace Cory. He will also
assume the role of Chief Operating Officer. Reverse Fortunes:
Added functionality to their customer
relationship manager to allow for direct
import of client information directly into MetLife’s loan origination system.
NRMLA:
The Annual Washington Policy Conference, scheduled for May 10-11 at the L’Enfant
Plaza Hotel in Washington, D.C., highlights the important relationship between the
industry and government representatives. With key officials from HUD and other agencies discussing current regulatory
issues, NRMLA encourages attendees to
schedule meetings with their congressional
representatives to show their support for the industry.
U p- k- C o m e r s HUD Rescinds ML 2008-38:
Heyen was hired by FirsTrust Mortgage as Reverse Mortgage Specialist to lead
the addition of reverse mortgages to their product menu.
W h at H a p p e n e d ? HUD Cuts Counseling Funding:
Grant funding for housing counseling
programs became a victim of spending
cuts as Congress approved a final budget for 2011 that eliminated $88 million in
counseling funding, $9 million of which was for reverse mortgage counseling. Industry Job Cuts:
As the mortgage industry continues through a process of contraction and consolidation,
which rescinded the narrowed definition
additional 5.9 percent from a year ago and
HUD released Mortgagee Letter 2011-16,
industry employment has dropped by an
of “non-recourse” to exclude non-arm’s
51 percent from the peak in February 2006.
in limbo as HUD referred mortgagees to
LO Compensation Rule:
HUD.
along with efforts by multiple other
ClearPoint Credit Counseling Solutions :
it, the Loan Originator Compensation rule
length transactions. The policy is somewhat the statutes pending further guidance from
Announced a merger with Consumer
Credit Counseling Service of New York. The
addition, pending regulatory approval, will
expand ClearPoint’s counseling services into their 12th state. The move will give them 10
Urban Financial Group:
As the wholesale/broker channel strives
to battle back with consecutive months of surpassing retail in percentage growth,
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Doug Heyen:
Relating to the lawsuit filed by AARP,
locations in the state of New York.
22
May
Urban has the distinction of being the only Top 10 lender whose broker/wholesale channel has grown in the past year.
Despite lawsuits by NAMB and NAIHP, organizations and officials calling to delay went into effect on April 5, 2011.
the
E
Essentials
The Essentials | i’sen sh l | - your monthly source of in-depth information, industry updates, highly opinionated views and at-your-fingertips news. S h e r ry B. A pa n ay Michael Banner Roger Chiocchi F e d K am e n sk y J o e l S c h i ffma n
It takes a lot to create an attention-grabbing, informative article and The Reverse Review is very fortunate to have worked hand in hand with industry leaders over the past couple of years. We are always searching for new writers and industry-related articles. If you are interested in contributing your views and have what it takes to intrigue our readers, we would love to hear from you! Email emily@reversereview.com to start the conversation.
reversereview.com
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The Reverse Review May 2011
the Essentials
The Legal Brief Series A springtime review of new HECM Mortgagee Letters: ML 2011-01 & ML 2011-09.
Fed Kamensky & Joel Schiffman
W 24
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ith winter ending, the snow melting, and love back in the air, there seems to be no better time for reviewing the Home Equity Conversion Mortgage (HECM) Mortgagee Letters released by the United States Department of Housing and Urban Development (HUD) during the first quarter of 2011. Fortunately, with so many other regulatory changes impacting the industry, the volume of HECM-specific Mortgagee Letters issued by HUD remained manageable, with only two letters, ML 2011-01 and ML 2011-09, published during the first quarter.
Notwithstanding the foregoing, following the end of the quarter, and as this article
went to press, HUD published ML 2011-
due and payable status due to delinquent property charges.
16, a significant missive concerning the
According to ML 11-01, a loan is
provisions in the HECM loan documents.
mortgagee receives notice of the
proper application of the non-recourse
Given the importance of that subject, we
will review ML 2011-16 in a later article in this series.
Reflecting a degree of scrutiny and
concern by HUD risk managers with the overall level of HECM loans in
tax or insurance default status, which reached approximately 13,000 loans
according to an August 2010 report by
HUD’s Office of Inspector General, the very first Mortgagee Letter published by HUD in 2011 provides important
guidance to lenders and servicers on
the handling of these delinquencies. ML 2011-09 deals with a more prosaic (if
no less controversial) subject, namely
considered delinquent when the mortgagor’s failure to pay a property charge. At that point, the loan cannot be assigned to HUD pursuant to the
assignment option under FHA insurance.
ML 11-01 requires HECM lenders to send
the borrower to cure the delinquency
providing the borrower with 30 days to
HECM lenders must begin to work with as early as possible. Lenders must
inform the borrower that the loan is
delinquent within 30 days of the first
missed payment for property charges. A
lender may not submit a due and payable request to HUD until the lender exhausts
all loss mitigation options. Available loss mitigation options include, but are not limited to:
one
the fee amount that can be charged for
Establishing a repayment plan (pursuant
Letters are important developments in
11-01);
HECM counseling. Both Mortgagee
the near-constant evolution of the HECM program, requiring the attention of
industry participants in springtime, while the bees are buzzing, no less than any other time of the year.
ML 2011-01 On January 3, 2011, the FHA issued
Mortgagee Letter 2011-01 (ML 11-01),
providing guidance to FHA-approved
lenders and servicers on how to handle HECM loans with delinquent property charges (i.e., real estate taxes, ground rents, flood and hazard insurance
ML 2011-01: Mortgagees must offer borrowers a repayment plan for reimbursement of property charges advanced by the Mortgagee.
to a repayment schedule provided by ML
two Contacting a HUD-approved Housing Counseling Agency (HCA); and
three
a Property Charge Delinquency Letter,
respond and cure the default. For loans
delinquent as of January 3, 2011, lenders
must send the letter by April 29, 2011. For loans that become delinquent after that
date, lenders must send the letter as soon as the lender receives notice of a missed
payment for property charges. ML 11-01
provides a model letter for use by HECM
lenders. Although HUD allows lenders to vary the model letter to a certain extent, the letter must contain the substantive information provided in ML 11-01.
Mortgagees must offer borrowers a repayment plan for reimbursement
of property charges advanced by the
mortgagee. The due dates for repayment plans, depending on the amount of the
advance, must be consistent with the time periods set forth in the chart below:
Refinancing the delinquent HECM loan
If the mortgagor provides evidence to the
equity in the borrower’s home to satisfy
the advance within the allotted repayment
into a new HECM loan, if sufficient the existing loan and outstanding property charges is available.
mortgagee that they are unable to repay timeframe, mortgagees may, at their
discretion, extend the repayment schedule
up to 24 months, irrespective of the amount of the advance. HUD has not clarified >>
premiums and special assessments).
Corporate Amount Advanced Repayment Schedule
the borrower has failed to pay property
ML 11-01 applies to HECM loans where
$1 - $500
Up to 3 months
charges or the lender has made a
$501 - $1,000
Up to 6 months
on behalf of the borrower, or both. ML
$1,001 - $5,000
Up to 12 months
$5,001 or more
Up to 24 months
corporate advance of property charges 11-01 also applies to HECM loans where HUD has previously granted a deferred
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| 25
the nature of the evidence necessary to
notice. ML 11-01 requires lenders
within the specified timeframe, but leaves it
the due and payable letter to the
show that the mortgagor is unable to repay
to the mortgagee’s discretion, so long as the documentation collected by the mortgagee clearly supports its decision.
to include certain information in
borrower, including all available options to cure the delinquency and avoid foreclosure.
Pursuant to HUD’s publication of responses
ML 2011-09
30, 2011, HUD clarified that the advance
On February 4, 2011, the FHA
include calculated interest on the amounts
2011-09 (ML 11-09), providing
to frequently asked questions on March
amounts specified in the chart should not
advanced, and that such repayment plans should be made available to pre-existing delinquencies, irrespective of the age or
amount of such delinquency. Repayment
plan agreements must also be signed by the borrower.
published Mortgagee Letter guidance to FHA-approved
counseling agencies and HECM lenders on the amount and the waiver of a HECM counseling
fee. ML 11-09 became effective March 7, 2011.
As of January 3, 2011, lenders must report
HUD previously indicated
loans on a repayment plan and loans
(ML 08-12) that a HECM fee of
all delinquent loans to HUD (including in a deferred due and payable status).
Initially, lenders were required to submit an Excel file via email to HECMAdmin@
hud.gov by February 7, 2011, pursuant to
special formatting requirements provided in ML 11-01. Lenders are also required
to provide HUD with notice of current
delinquencies in a monthly Excel file or by
manually updating HUD’s IACS system as delinquencies occur.
HECM lenders must send a due and payable request to HUD’s National Servicing Center if the borrower is
unwilling to reimburse the lender for
property charges, or if the lender exhausts all available loss mitigation options and the borrower is unable to cure the loan. ML 11-01 requires lenders to include
documentation supporting their efforts to
in Mortgagee Letter 2008-12
$125 per counseling session is
considered reasonable. ML 11-09 overrides this provision of ML
is below 200 percent of the
HUD previously indicated in Mortgagee Letter 200812 (ML 08-12) that a HECM fee of $125 per counseling session is considered reasonable. ML 11-09 overrides this provision of ML 08-12, authorizing counseling agencies to charge more than $125 per session.
08-12, authorizing counseling
agencies to charge more than $125 per
session. According to ML 11-09, HECM
counseling agencies may establish a fee
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closing provided the borrower has been advised during the
counseling session of the amount
of the fee. ML 11-09 also describes procedures for determining
the borrower’s ability to pay a
HECM counseling fee, including the documentation required for waiver of the fee.
According to ML 11-09, only the actual time spent on providing counseling to the borrower (in person or by telephone) may be recorded on the HECM
Counseling Certificate. Time other than actual counseling (such
as intake, putting together the
information packet, and followup) may not be included on the
HECM Counseling Certificate but
can be included when determining the cost of HECM counseling.
from HUD concerning property charge
that are provided; and is not being charged to pay for the service that is already
funded with HUD’s grants or other funds. The fee structure must be included in the counseling agency’s work plan and must
be disclosed to the borrower during intake.
In any event, a borrower may not be turned
away because of an inability to pay a HECM counseling fee.
HECM counseling fee at the time of the
26
counseling fee at the time of loan
commensurate with the counseling services
and customary; does not exceed a level
inform the borrower that he or she has 30
3
charge such borrowers a HECM
Although ML 2011-01 and ML 2011-09 are
ML 11-09 also provides that HECM
days to respond to the due and payable
counseling agencies may
structure as long as the fee is reasonable
resolve the delinquency in the lender’s due and payable request. Lenders also must
Federal Poverty level. However,
counseling agencies should not collect a counseling session if the borrower’s income
not the last words we are likely to hear
delinquencies or counseling, they do reflect important changes in the operation of the HECM program. Since both Mortgagee Letters are already effective, lenders,
servicers and counselors should ensure
that appropriate processes and procedures
are in place to fully comply with these new directives. g
This article provides only an overview of some of the federal and state laws and regulations that may affect reverse mortgage lending, marketing and finance matters. Although the practice of Weiner Brodsky Sidman Kider P.C. is national in scope, attorneys within our firm do not actively practice law in all jurisdictions, and these materials are not intended to and do not provide legal advice. Because of the generality of this article, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
ML 2011-01: A lender may not submit a due and payable request to HUD until the lender exhausts all loss mitigation options
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taking care of
SenioRs in need:
A mission still possible? Sherry B. Apanay reversereview.com
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Financially Rewarding, Emotionally Satisfying
is a man I had the privilege of working
I could wallpaper my entire home with
knowledge with his senior clients. He
from seniors whose lives were positively
sales is to listen.
mortgage
to get a reverse mortgage. One of my
He would spend hours on the phone
undergone
woman who cried at her HECM closing
to their home. There, he would use an
it nearly 20 years ago. In the early 1990s,
sent from God!” She was overwhelmed
He would meet face-to-face with his
was in the dozens, not thousands, as is
that her reverse mortgage afforded her.
through the specifics of how a reverse
very passionate pursuit of “taking care
the impact this had on those of us in the
whatever need they had. He never rushed
industry’s primary mission is to take care
that we were doing something good, to
expressed a desire to move forward. He
changing times with incredibly volatile
no good answers, was intoxicating. It
to ensure his customer was comfortable
he
with for several years. He saw it as his
responsibility to share his vast financial continually preached that your first job in
the testimonials I’ve read over the years
reverse
affected when they made the decision
industry has
favorite stories is of an elderly widowed
with clients before he made the trip
significant changes since I first entered
and said her loan officer was an “angel
approach called “The Kitchen Table.”
the number of reverse mortgages funded
by the independence and peace of mind
potential clients to listen and lead them
the case today, and our mission was a
Amazingly, her story was not unique and
mortgage might provide a solution for
of seniors in need.” I still believe our
industry was profound. The knowledge
the application – even when the senior
of seniors. However, in these constantly
provide a solution to someone who had
listened and explained each disclosure
financial markets, it seems highly
brought real meaning to our lives.
with their decision. Mind you, he knew
are we doing?”
One of the best salesmen I’ve ever
many others how to follow his lead. But,
appropriate to ask ourselves, “How well
A few early changes
contributed to our industry’s survival.
‘90
known in the reverse mortgage industry
The origination fee for a HECM loan was increased from a flat fee of $1,500 to 2 percent of the Maximum Claim Amount.
s
Around the mid-1990s, the two major
lenders/servicers began to train and accept loans from
NRMLA (National Reverse Mortgage Lenders Association) was formed.
any positive changes within our small industry.
correspondents
| TRR
Reforms allowed the application or counseling to be conducted in person, which was also later allowed over the phone. Finally, face-to-face counseling was no longer required.
voice and certainly no ability to affect
mortgage
30
the difference is that the “sale” was not
Before NRMLA, we had no collective
FHA-approved
(brokers).
how to ask for the decision and he trained
NRMLA
Fast forward a few years and
you’ll find that evolution continued within our industry: some good changes, and some perhaps not so good, depending on your perspective.
In our industry’s founding years, the loan officer who found success was not your typical high-powered salesman. This salesman was more like
a social worker, spending double or triple the time with a client than his counterparts in the “forward” mortgage world. However, this was not really seen as a negative. When you have a higher mission and receive rewards beyond monetary gain, your priorities shift.
his main goal. The driving force for him each day was simply serving the senior.
When you have a higher mission and
our industry grew, the opportunities for
your priorities shift.
early issues of greed with unscrupulous
receive rewards beyond monetary gain,
In our industry’s founding years, the loan officer who found success was not your
Surviving the Middle Years
salesman was more like a social worker,
Our little cottage industry continued
a client than his counterparts in the
solutions for older homeowners, always
typical high-powered salesman. This
along for more than a decade, providing
spending double or triple the time with
expecting that “next year” we’d see an
“forward” mortgage world. However,
explosion of acceptance and growth. As
this was not really seen as a negative.
helping seniors grew. We fought a few home repair scandals and ill-advised
sales from consultants outside our niche
industry. Yet, I’m proud to say the reverse mortgage industry handled these issues
swiftly and decisively and implemented guidelines and disclosures to ensure
loopholes were addressed and seniors remained protected. >>
wall street
2000
No face-to-face meetings for the application process brought new marketing approaches and channels to our industry. Call centers, purchasing leads, or cultivating your own leads via the Internet became successful and the “on-the-street” loan officer providing personal service to seniors began fading from business plans.
Wall Street investors enter the market and force Fannie Mae to meet the market with premiums available for FHA HECM loans. For the first time, back-end premiums are available to augment the origination fee and provide additional money for marketing budgets, while attracting new lenders, new investors and expansion for many in the industry.
A dramatic shift toward younger reverse mortgage borrowers in the past few years,
and particularly in the most recent year. Reverse Mortgage Insight (RMI) reports that in
2000, there were more borrowers age 76 than any other age with that figure dramatically shifting downward – 74 in 2003, 71 in 2006, and 63 in 2009. RMI goes on to point out
On a year-over-year basis, reverse mortgage volume has been declining. Overall, the total reverse mortgage volume fell 35 percent to 72,748 in 2010, compared to 111,924 in 2009, according to RMI data. This marked the second consecutive year of decline. It’s difficult to pinpoint all the contributing factors – the most obvious, however, is the drop in home prices in recent years. The
that baby boomers
decline in home equity resulted in a large proportion of potential borrowers – those who couldn’t borrow enough to repay their primary mortgages – completely ineligible for reverse mortgages. Reduced equity also made reverse mortgages less attractive for other borrowers by making it less likely that they could borrow enough to offset the upfront costs.
’09-’10
seem much
more likely
to use reverse mortgages
than the WWII
generation and those before.
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| 31
“Suitability” – The New Catchphrase
There’s also the 2010 Wall
2010. Obviously, the smaller
I firmly believe our industry’s
calls for a reverse mortgage
study designed to determine
industry have been the
integrity remains intact, but it’s most troubling that we
seem to find ourselves in a
defensive position these days. With so many new financial
regulations and state reverse mortgage laws, it feels like the mindset has become
contrary, and the very people and lenders who sacrificed
to see the industry grow are now perceived as the “bad guys.”
The concept of “suitability“
has become the new industry catchphrase. Instead of
Street Reform bill, which
mortgage transactions are necessary or appropriate for accomplishing the
purposes and objectives of
this title, including protecting borrowers with respect to the
obtaining of reverse mortgage loans for the purpose of funding investments, annuities, and other
investment products and the suitability of a borrower in
obtaining a reverse mortgage for such purpose.”
possible solutions to make
mortgage lenders from also
lawmakers, as well as other
consumer advocacy groups, seem intent on “protecting seniors from themselves.”
Consider one report issued by the National Consumer
Law Center (NCLC), which
suggests the implementation of a “suitability standard” requiring lenders to offer
reverse mortgages that are
in the best financial interest of their clients. Would not a standardized approach
steer us too far away from the more one-to-one sales
consultation that so naturally occurs with
our “Kitchen
Table” lenderborrower
interaction?
32
| TRR
If lenders can’t survive
or limitations on reverse
The 2008 FHA reform bill,
their own financial decisions,
most adversely affected.
whether any “conditions
lenders simply providing borrowers education and
brokers and lenders in our
which banned reverse
selling annuities to seniors, addressed the part about
funding investments. But,
with a suitability standard, lenders would be on the
line to demonstrate that a loan was appropriate for a borrower – seemingly
possible to determine only in the case of borrower
foreclosure. If it turns out that the loan was not “suitable,” then the lender would face
financial penalty; the amount still undetermined awaiting completion of the study. This less-than-positive
business climate has most
certainly contributed to the significant decline
in the number of active reverse mortgage
lenders. RMI reports a 47 percent decrease in
in our current economic
I firmly believe our industry’s integrity remains intact, but it’s most troubling that we seem to find ourselves in a defensive position these days.
With so many new financial regulations and state reverse mortgage laws, it feels like the mindset has become contrary, and the very people and lenders who sacrificed to see the industry grow are now perceived as the “bad guys.”
and legislative reality, the
senior will ultimately suffer! Fewer brokers and fewer
lenders translate into fewer
choices and less “free market
competition” that historically provides better options for people. I’m hopeful that
our industry is successful in working with lawmakers to find a balance in regulation and a balance of protection that ultimately leaves us better.
Continuing to Make a Difference For an industry that initially
grew and evolved so slowly, it hit warp speed in more
recent years. As an industry
veteran, I’ve been privileged to be a part of something
special, a part of our history, and to have performed a job that made me proud,
providing positive solutions to seniors in need.
I believe all of us committed
to ensuring the future success of our industry must follow one mandate: Accept the
responsibility to truly listen
the number of active lenders
and ask the probing questions
and December 2010. RMI
every senior is truly served
10 lenders grew as a share
with the positive feeling that
percent in January 2010 to
provided a good solution for
between December 2009
that are necessary to ensure
also reported that the top
and every loan leaves us
of retail volume from 40.5
we’ve made a difference and
64.5 percent in December
a senior in need. g
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The Reverse Review May 2011
the Essentials
Will Baby Boomers Go Boom or Bust? A look at the true feelings and concerns of the baby boomer generation. Roger Chiocchi
W 34
| TRR
e’ve all seen the commercial. The late Dennis Hopper, a revered icon of the Easy Rider days of the 1960s and a poster boy for the “love generation” – aka the baby boomers (although not technically one himself) – is standing on a beautiful beach with calming, azure water; warm, soothing sands; puffy clouds; and a hint of an inviting, uninhabited island on the horizon. He’s wearing a black collared shirt and a pair of ultra-cool, understated shades, and sports a small salt-and-pepper goatee. Holding a tattered dictionary, he reads the definition of the word “retire”: “to withdraw, go away, disappear.” Then in his inimitable, sort of aloof, rebellious voice, he announces, “Time to redefine.”
He drops the dictionary on the beach and
Oh yeah, and one other thing: Our
Bah-dah-dah-dah-dah-bump.
the music begins.
Bah-dah-dah-dah-dah-bump.
With the opening chords to “Gimme Some Lovin’” by the Spencer Davis
Group—classic 1960s rock—pulsating
underneath, Hopper goes on to tell us
that, “Your generation is definitely not
headed for bingo night. In fact you can
write a book about how you’re going to turn retirement upside down.”
Unfortunately, it looks like we’re not
going to turn retirement upside down in quite the way that Hopper and
Ameriprise, the sponsor of the ad,
envisioned. We’re going to turn it upside down because most of us are pulling our hair out in a state of outright panic and shock
The Way We Were Most of our parents had pensions, Social Security and the value of their homes to
fund their retirements, creating a certain expectation in their children that our
post-career lives would be somewhat comfortable as well. Unfortunately,
cherished 401(k)s and IRAs have tanked.
The bad news: Almost half the people we talked to
Bust? How the Generation
As part of the research for my book, Baby Boomer Bust?
estimated that the value
How the Generation of Promise Became the Generation of Panic, I conducted a survey of a broad spectrum of baby boomers in spring 2009—when the effects of the economic downturn of 2008/2009 settled in, after the initial shock and numbing period.
The good news: Almost
of Promise Became the Generation of Panic, I
conducted a survey of a broad spectrum of
baby boomers in spring
2009—when the effects of the economic downturn of 2008/2009 settled in,
after the initial shock and
numbing period. Because the online sample was
not random, the results
are not projectable to the entire population, but
nonetheless, they provide us with a broad-scale
qualitative snapshot of the feelings, behavior and the
adjustments baby boomers
Security—a sort of transfer payment from the next generation to ours—is still around when we need it, the maximum payment
(currently
about $3,000 per month)
doesn’t really
excite anyone.
by 10-30 percent in the previous 12 months.
60 percent of the baby
boomers I talked to own their homes and think
they will be fine in terms
of being able to make their mortgage payments going forward. Surprisingly, only about 8 percent
fear that their houses are “underwater.”
So with cautious optimism, it looks as if baby
boomers will get some return on their
than the population at large, thereby
dependent on the housing market coming
anything, our panel was more upscale giving us a good “acid test” of the impact of the recession.)
do you plan to pay for your retirement?”
our homes diminish, and even if Social
of their homes declined
made as a result of the downturn. (If
plans as formally defined (unless
employee). We’ve seen the value of
ride that escalator as well?
for my book, Baby Boomer
I asked our online panel many questions,
perhaps you’re a union worker or public
their homes. Could the baby boomers
As part of the research
our generation generally doesn’t have
pensions or defined-benefit retirement
bank on the appreciation in the value of
but one of the most important was, “How
The sassiest answer? The lottery.
And what about
housing? Our parents’
generation
practically
went to the
housing investment. Of course, that’s all back in future years, what they actually paid for their house, how long they’ve
held it, how many refinancings they have been forced—or will be forced—to do,
and of course, their employment now and in the future.
As one baby boomer told me, despite the fact that their loan-to-value ratio is only at about 20 percent, “it’s all dependent
upon staying employed.” Another added, “The answer is based on the condition of my husband’s employment. With
difficulty I could maintain my home with my present salary, but any cost increases
would force me to sell it or find a second job.”
And now for the coup de grâce. We
invested in a magical panacea called a
401(k), which was designed to incent >> reversereview.com
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| 35
savings that would accumulate with
to retire based upon the current value of
years through other means than greater
a mere 6 percent or 7 percent a year, our
A prevailing thought was expressed
How baby boomers plan to fund their retirements
value of what we stashed away would
of retirement has become further and
(They were able to pick several sources from a list of options.)
average citizens in this country.” And
?
deferred taxes over the years and ride the never-ending rise of the stock market; at
financial advisors told us, the cumulative double every 10 to 12 years.
Mesmerized, we ogled the spreadsheets. Jesus Christ, honey! In 2020, our 401(k) will be worth $3 million. Maybe we
their assets.
by one of the respondents: “The idea
further away for the average and belowanother told us: “I will not be able to
wealth would have allowed.”
?
style cottage with a water view on
Then the bottom fell out. The 14,000 Dow from 2007 became
the 6,700 Dow in March 2009. Down more than 50 percent. The Dow has
subsequently recovered, but many of us
boomers had to borrow from our savings and portfolios during this time to fund our daily living. So when the market
rebounded, guess what? We had less of a financial base to rebound from.
Without a doubt, the economic downturn of 2008/2009 wreaked havoc on the lives, dreams, aspirations, consumption habits and net worths of our cherished baby
boomer generation. I found a number of interesting and sometimes frightening
More than 30 percent of the baby boomers I talked to told me, “Frankly, I don’t think I’ll ever be able to retire.” About 43 percent of them thought they were OK before the current economic downturn but now doubt their ability to retire based upon the current value of their assets.
themes in my survey of this vaunted
According to Dr. Ronald Manheimer,
Center for Creative Retirement at UNC
generation.
Let’s start by tackling the veritable
800-pound gorilla in the room: retirement.
A Less-ThanIdyllic Retirement More than 30 percent of the baby
boomers I talked to told me, “Frankly,
I don’t think I’ll ever be able to retire.”
About 43 percent of them thought they were OK before the current economic
downturn but now doubt their ability 36
| TRR
61%
Social Security
Nantucket.
401(k)s
retire and maintain my present lifestyle.”
should start looking for that little shingle-
63%
former Executive Director of the NC
Asheville, “There are several studies
and surveys out there done by academic researchers and financial services
?
41%
Personal Wealth
?
35%
Sale of Existing Residence
?
28%
Had Some Sort of Pension
So exactly how adequate – or inadequate – are these resources to fund a decent
retirement? The Center for Retirement
Research at Boston College estimated that as of 2008, the average family approaches
retirement with only $60,000 in retirement savings – downright shocking, isn’t it?
So for most baby boomers, the dream of
retirement as that frolic on the beach with Dennis Hopper is exactly that: a dream. No wonder 17 percent of baby boomers told me, “I plan to work until I drop because I have to.”
companies that paint a dire picture of
Employment Angst
In the aggregate this is probably true,
Worrying about staying employed is
boomers’ ability to retire soon or ever. though most will eventually retire either because they want to or have to. They
will simply adjust … not painlessly, but
resignedly. People will have to sell their homes and move into apartments or
low-cost condos. They will have to find satisfaction and meaning in their later
an anxiety all boomers can relate to
these days. Forty-seven percent of our total boomers group expressed some sort of fear or discomfort about their employment status going forward.
Comments such as, “My husband works
for a modest-sized company and I would
Employment Angst
say his job is tenuous, too, because it’s
workforce is covered by such plans – the
work for a small business and feel secure
contribution plans like 401(k)s, which in
not only concerned about their jobs – that
dependent upon the travel industry”; “I for now but I think I’ll be laid off next winter if things don’t pick up”; “Had
to lay off most of the people who work
for me and change assignments”; and “I
work for my town as an art instructor … I assume my job could be cut at any time” set the tenor of the group.
Another boomer told us, “We are toward the end of our earning potential. My
husband and I are really feeling some
major downturns financially. We were
forced to pay our taxes on credit cards
– at 22 percent … If we lose our house it
will be the last one we own. My hubby is
56 years old … he now repairs metal roofs by himself. He cannot find someone to
hire him outright … again, I emphasize a
baby boomer is at the end of their earning potential. What now?”
However, all was not so bleak. Several
boomers told us that things were going quite well: “I’m actually turning down work, I’m so busy”; “I run a $4 million software company which is growing”;
rest of us have to rely upon defined-
most cases are an inadequate alternative); b) the high divorce rate, which in
many cases takes one economically
viable household unit and creates two household units, at least one of which
is usually economically fragile (in most cases, the woman’s); c) the extremely
skewed inequality of income and wealth
percent of the nation’s financial wealth) that the rest of society is left with too few dollars to adequately cover life’s
necessities; and d) the boom-and-bust
asymmetrically punish the middle and lower socioeconomic classes during
busts, leaving millions jobless, many without homes, health insurance, or adequate savings.
some potential opportunities, but beware of the pitfalls as well. Here are some things to take into consideration: Insecurity Over Retirement
doesn’t look good. They are worried-
pension programs (based on studies I’ve seen, only about 20 percent of today’s
I
Institutional Distrust
Coming off the meltdown I saw a
of boomers directed toward “traditional institutions” – banks, Wall Street, big
business, the real estate industry and government.
opportunity for reverse mortgages to
profits during booms and, likewise,
research, I would posit there are four
virtual evaporation of defined-benefit
markets.
very rich with tremendous windfall
Boomers have been “doing the math”
of the baby boomer generation: a) the
for their losses in the stock and housing
Many of the conditions spawned by
of today asymmetrically reward the
the forces underlying the predicament
main elements behind the current plight
that they might never be able to make up
economy we live in. The business cycles
The current mindset of boomers presents
of baby boomers today. Based on my
at the end of their prime earning years
tremendous wave of mistrust on the part
1 percent of the population controls 43
And, from perhaps the luckiest person of
future may hold, it’s useful to examine
lose their job. Boomers fear since they’re
many disproportionate dollars (the top
the income/wealth scale suck up so
Tapping Into the Market
To get an accurate gauge of what the
about getting hired again should they
been relatively unscathed.”
The Enemies Within
is, if they are employed – but also worry
in the U.S. – the top few percentiles on
and “I own an ad agency which has so far
the bunch: “I have a pension.”
Most boomers in their mid-50s or so are
since the meltdown and, for most, it to-horrified about whether they can
ever retire. To a certain extent, a reverse mortgage can be positioned as one of
the economic meltdown provide an
play the hero. But Seller Beware: Boomers have been overhyped and oversold for years. In the ’80s, it was all about the
“good life.” In the ’90s, they watched
their 401(k)s inflate with the tech boom
and the so-called “productivity dividend” that would fuel the market for years, even decades. In the early 2000s, they were
inundated with messages telling them
what a paradise retirement will be while simultaneously having their pockets
picked by near-usurious interest rates
on their credit cards. Then we all hit the proverbial wall and reality set in.
Be honest, straightforward and discuss
the pros and cons. If a reverse mortgage is not right for a potential customer, tell
him or her so. You may lose that one sale, but it will be recovered in droves as the positive word of mouth circulates: “At last, someone we can trust!” g
several tools to help them address this problem.
Forty-seven percent of our total boomers group expressed some sort of fear or discomfort about their employment status going forward.
reversereview.com
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The Reverse Review May 2011
the Essentials
Living at Home Brings Peace of Mind Long-term care and reverse mortgages create the ideal partnership for seniors wanting to stay in their homes.
38
| TRR
A
Michael Banner
s most of you know, I feel very strongly that educating the trusted senior advisors in this nation on the true strengths of the reverse mortgage is the single most important factor of our industry’s survival and growth. Until we show the financial community that the reverse mortgage is not just a “needs-based product” or “product of last resort,” the struggles we are all facing right now will continue, or even worsen.
No consultant is looked to more in a
Obviously health and safety issues for
endeavor but may be well worth the
advisor.
over their desire to remain at home, but
independence and live where they feel
senior’s life as their long-term care
In the past I have written about the
relationship of long-term care and reverse mortgages and I was very surprised at
the negative comments I received. I have referred to the Use Your Home to Stay at Home study that was completed by Dr.
Barbara Stucki and the National Council on Aging (NCOA), endorsed by many
major players in our industry, including the Met Life Mature Institute. I was still accused of using this study as a “sales pitch” for reverse mortgages.
Fear and ignorance (that’s right, I said it) seem to be running rampant in our great industry as guidelines and new
the senior must take precedence even
there are tens of millions of seniors who are quite able to age in place but are not aware of the services available to assist
them in that goal, and if they are aware, they feel as if they are unable to afford
insurance. And of course, if we talk about any insurance in the same sentence as a reverse mortgage, the fear I mentioned above turns into pure panic as the
thought of cross-selling sends everyone
into their homes to hide under their beds. But we will leave this subject for last.
The truth of the matter is, the long-term care industry has many facets of which
insurance is just one. In-home care (which is not always covered by Medicare), for
may be declining is a very obtainable
built-in seat.
the home is a very viable option for many
Install handrails in the shower,
for this has always been to assume that
the hallways.
goal. Bringing professional services into
Medicare and some type of Medicare
supplemental policy would cover these services, but in fact that is not true.
Obviously health and safety issues for the senior must take precedence even over their desire to remain at home, but there are tens of millions of seniors who are quite able to age in place but are not aware of the services available to assist them in that goal, and if they are aware, they feel as if they are unable to afford them.
medications, check vital signs and attend
mortgages in any way, shape or form. It ultimately offers alternatives to a senior who may not be ready or willing to go into a retirement home.
3
your home on a weekly basis to monitor to basic needs certainly has a cost to it,
but in comparison to the average cost of
a living facility in this nation, it is a very viable option.
Making a senior’s home safer and easy to navigate can also be an expensive
Install ramps between bedrooms and living areas of the home.
4
many families worldwide.
theory is not a sales pitch for reverse
next to the toilet and possibly in
seniors. The standard thought process
Having a health care professional come to
The Use Your Home to Stay at Home
with a step-in shower with a
portion of their lives when their health
the elderly population is by far the largest segment of long-term care and touches so
of what can be done: Replace an old-fashioned tub
deserves to be discussed.
often confused with long-term care
Here are a few examples
secure place for them to be during this
But this is an important subject and it
is that the long-term care industry is
most comfortable.
them. Making their home a safe and
regulations continue to tighten around us.
I think one of the greatest misconceptions
investment for a senior to maintain their
If the master bedroom is located upstairs, a chairlift can make life so much better.
These are just a few options of what can
be done for a senior to allow them to stay
in their home and have the peace of mind to know they are safe.
Now, let’s talk about the elephant in the room. Is it legal, ethical or moral to use
the proceeds from a reverse mortgage to purchase long-term care insurance?
For those of you who are not involved in the long-term care insurance industry, it is being totally reshaped at this point in
time (much like the mortgage industry).
Major carriers have withdrawn from the market, premiums are being increased
at record levels and present products are being scrutinized. Yet many great longterm care insurance products still exist.
Let’s look at a few of the options available today.
Certain linked products have gained
popularity over the last 18-24 months. >>
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– that truly benefits the client, protecting
For those of you who are not involved in the longterm care insurance industry, it is being totally reshaped at this point in time (much like the mortgage industry). Major carriers have withdrawn from the market, premiums are being increased at record levels and present products are being scrutinized. Yet many great long-term care insurance products still exist. A linked product is defined as one that
Does it make sense to fund these monthly
within the same policy. It could be the
of a reverse mortgage? Well, even though
offers two separate financial vehicles
combination of long-term care insurance and life insurance, or it could be the
combination of long-term care and an annuity product.
These products are single-premium, and require a sizable upfront investment. They offer “multiples” of coverage
for long-term care and life insurance
depending on the client’s age and health.
In the case of the linked annuity product,
there is usually a guaranteed interest rate of return as well.
insurance premiums with the proceeds this may appear to be a simple “yes or no” question, it is not.
The answer to this question depends on many variables:
g g
the age and health of the clients; the amount of the monthly premiums;
g
the amount of the benefits of the proposed policy;
g
their present level of income and assets;
g
and whether they have allocated a certain amount of their assets for long-term care or unplanned
Is it logical for a person to secure a
fixed-rate reverse mortgage and use the
medical expenses.
proceeds to fund one of these products?
The answers to these questions determine
I must say that in most cases it is not a
term care insurance makes sense for that
I have done much research on this and good decision. There are times it may
make sense but under most circumstances the long-term costs of the reverse
mortgage outweigh the potential benefits of the policy.
if using a reverse mortgage to fund longindividual scenario. To take a position of
yes or no on this very important decision without knowing all the facts above (and more) is not only wrong; it is shortsighted and narrow-minded.
Still, as these products continue to evolve,
Improper cross-selling – cross-selling of
of returns and the multiples they offer.
that does not truly benefit the client’s
we should all stay informed on the rates
And what of the traditional long-term
care insurance products; the five-, sevenand 10-year pay periods?
products to earn a fee or a commission quality of life on a long-term basis – is
wrong, unethical and immoral. But the
cross-selling of a product – any product
his current assets and offering protection
against the ever-rising costs of health care in this country at a time when the client’s assets are diminishing – is well worth considering!
Reach out to the long-term care experts in your community. We may not be
qualified to answer many of the questions listed, but they are. Don’t turn a blind eye to helping seniors in this fashion because the phrase “cross-selling” brings fear to so many in our industry.
The bottom line is modern medicine and scientific breakthroughs have
extended life spans way beyond what
was predicted. This fact has brought the
reverse mortgage from relative obscurity right to the forefront of the industry. Unfortunately it has also brought us
under the microscope of certain members of Congress and regulators to make sure
we do what’s right. That is why we must always put the client’s needs first.
Suitability, suitability, suitability… That same modern medicine and those same scientific breakthroughs are also causing the long-term care insurance
industry to totally rethink their product. We serve the same people! We have the same goals! Shouldn’t we be working together?
Here’s my best advice, which I learned
from Tony Robbins: “The mind is like a
parachute; it works best when it is open.” Have a great month and let’s help as
many seniors, in as many ways as we can. g
I think one of the greatest misconceptions is that the long-term care industry is often confused with long-term care insurance.
40
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l
the Resources Information at your fingertips. A listing of advertisers and contributors featured in this issue. l
l
l
AppraiserLoft
iReverse Home Loans
Brandloft
Loan Well America loanwellamerica.com 727.669.1705
rmsnav.com 888.918.1110
Celink
Mortgage Cadence
Tradition Title
Direct Finance Corp
Reverse Market Insight
Weiner Brodsky Sidman Kider, P.C.
appraiserloft.com 877.229.7799 brandloft.com 203.857.4141 celink.com 517.321.9002 dfcmortgage.com 781.878.5626
Generation Mortgage generationmortgage.com 404.995.5500
continued from page 11
ireverse.com/employment 800.486.8786
mortgagecadence.com 888.462.2336
reversemarketinsight.com 949.429.0452
Reverse Mortgage Crowds
And an Oops! While a mortgagee letter is forthcoming,
potential impact to our industry and
Management International, National Council on Aging and National
legislation and regulation. It is not too
late to join a large fellow constituency to make our voice heard.
list of five local counseling agencies,
relaxation. The number of unresolved
in addition to all seven national intermediaries.
providing both the latest update and
approved counseling agencies:
customers of current and proposed
As summer approaches, our focus
Lenders are still required to provide a
that lenders must provide to prospective the addition of three nationally
and their staff members on matters of
Foundation for Credit Counseling.
On May 10-11, NRMLA will host the
HECM clients was updated with
wbsk.com 202.628.2000
Counseling Solutions and Neighborhood
on March 28, 2011, the FHA Connection
list of national counseling intermediaries
traditionta.com 631.328.4410
their leaders to assist in educating them
These agencies join CredAbility, Money
mortgage is repaid.
RMS
Springboard Nonprofit Consumer
Reinvestment Corporation.
value of the home when the reverse
reversevision.com 919.834.0070
reversemortgagecrowds.com 800.604.6535
Credit Management, ClearPoint Credit
responsible for owing more than the
Reverse Vision
annual Washington Policy Conference, forecasts to various issues that could
affect our continuing service to senior
borrowers. Attendees will also be visiting
slightly changes to include family and issues begs our continued interest and
support. If you are unable to participate
in the Policy Conference, before you dig out the flip-flops and travel brochures, take a moment to write your state
leadership and voice your opinion on the matters that could potentially affect your ability to pay for that vacation when the charge bills arrive! g
reversereview.com
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| 41
The Reverse Review May 2011
the Last
Word on landline telephones. The ability to tweet,
speaking with a borrower, and touch points
come easily, and for many, never came at all.
with this product. Technology provides speed,
Skype, text, bank electronically or email did not
The Boomers (1946 -1964) are coming into our industry and they are nothing like
their parents! Boomers grew up during the
Civil Rights and women’s movements, and
against the backdrop of the Vietnam War. In a 180-degree turn from their parents, Boomers questioned all authority. Who can forget the
riots and escalating tension surrounding the Vietnam War at Chicago’s 1968 Democratic National Convention (“Hell no, we won’t go!”)?
I’m a Boomer, and we will not “go gently into
that good night.” We are comfortable with any
servicers must adapt to this population of
tech-savvy consumers. Boomers will want
statements via email, electronic access to their
loan data, and will prefer access to their funds electronically (debit cards). These demands
will create great challenges for servicers: How can we implement safeguards to protect these borrowers now and as they age? The reverse mortgage industry is in for some profound changes.
uncover inappropriate fund distribution until after the fraud has been committed. When
borrowers receive monthly statements through secure email, the servicer will no longer
receive return mail – a critical red flag of a
potential occupancy issue. If reverse mortgage loan servicing becomes an entirely electronic
process, what additional safeguards can be put in place to protect our borrowers?
reconfigured to appeal to Boomers who have decisions for decades. Financial products
can be researched online and obtained by
online application or a quick trip to the bank. In a short time, borrowers are able to access what can be a formidable amount of funds. A financial product that requires personal
attendance at a lengthy counseling session, followed by a test, may be perceived as a
hindrance rather than help. I foresee Boomers
protesting and questioning protective rules and regulations and demanding that congressional representatives remove the obstacles to freely obtaining a reverse mortgage.
The reverse mortgage industry is faced with
request. The numerous touch points of the
demands of this new demographic, while
current servicing process create, by specific
design, internal safeguards against fraud and theft. Occasionally, servicers discover family
members forging borrowers’ signatures, and
worse yet, third parties coaching borrowers to
create draws for the express purpose of stealing
Emblematic of this group was overwhelming
their money.
interactions with people in the same room or
Reverse mortgage servicing agents are highly
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electronic means only, servicers might not
At present, when a borrower wants to draw funds, they are required to submit a written
42
When borrowers access funds through
been making major lifestyle and corporate
reverse mortgage borrower. Reverse mortgage
acceptance of authority. They prefer social
a concerned servicing agent’s “gut feeling.”
and closed on financial transactions without the makeup and dynamic of the “typical”
When the reverse mortgage product was created, its primary audience was persons born between 1925 -1945, often referred to as “The Silent Generation.”
technology cannot match the effectiveness of
Mandated counseling sessions may have to be
ever leaving their family room. We’re changing
John LaRose
efficiency and reliability, but the best-designed
and all forms of electronic communications. Boomers have refinanced home mortgages
The Times, They Are a-Changin’
between servicers and borrowers are critical
skilled at detecting harmful nuance when
the challenge of adapting to the needs and
continuing to acknowledge that cognitive skills can be lost with age and that some protection
is not entirely out of order. Boomers are more
health-conscious and will enjoy a longer, betterquality life than their parents. Let’s make sure the reverse mortgage product does not make
itself extinct by failing to adapt to this massive change in our market. g
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reversereview com
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