The Reverse Review by David Peck

THE

REVERSE october 2011

review

Connecting with family caregivers to connect with seniors.

Kathleen Scharf

INSIDE this issue

Know when to say “no” By Alain Valles, CRMP

A look into the growing influence of cis By Brett G. Varner

+ robert

beverly sits down in our hot seat!

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Bye bye, big banks. Two of the main national bank providers of Reverse Mortgages have just left the market. Now is your opportunity to fill this vacuum.

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TRR 10.11

sixty-six percent Ad u l t c h i l d re n w h o r e p o r t t h e y i nf l uence t hei r parent s’ m a j o r d e c isi ons

n me wo

% 62 Number of care recipients who 4

are women

ou r hund r e d a n d fi fty bi l l i on dol l a r s i s the v alue o f f r e e caregi vi ng servic e s i n 2009

Average age of family caregiver

the Essentials

More thAN three in 10 (31.2%) U.S. households reported that at least one person has served as a family caregiver within the last 12 months

Meet the Team Publisher

Family Influence 20

Aman Makkar

Connecting with family caregivers to connect with seniors.

Editor-in-Chief

Emily Vannucci

Kathleen Scharf reversereview.com

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| 21

These facts can either be found as referenced in the article or in the Caregiving in the U.S. 2009 report (as listed in the article). caregiving.org/data/caregiving_in_the_us_2009_full_report.pdf

News Editor

Brett G. Varner

National Sales Rep. & Marketing Coordinator Kate Sheehan

Creative Director Traci Knight

Copy Editor

Kersten Wehde Printer The Ovid Bell Press Advertising Information phone : 858.832.8320 email : kate@reversereview.com

A Deeper Look into the Coalition for Independent Seniors 26 Jeff Lewis, Chairman of CIS, speaks on the growing influence of this emerging group.

Brett G. Varner

The Legal Brief Series 30 A fall roundup of HECM program changes: Mortgage Letters 2011-26, 2011-31 and short sales.

Fed Kamensky & Joel Schiffman l

the

Core

Subscriptions email : information@reversereview.com

The Report 7, 9

Editorial Content email : emily@reversereview.com

Ask the Underwriter 10

© 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. Bernardo Drive Suite 450 San Diego, CA 92127

The Advisor 12 The Perspective 14 The Hot Seat 16 The Industry Roundup 18 The Resources 33 The Last Word 34 reversereview.com 8 TRR | 5

the Contributors Robert Beverly

Feature Article l

Kathleen Scharf

The Hot Seat, pg 16

Robert Beverly is Co-founder of America’s Reverse Title Co. and Founder of Guaranteed Home Mortgage, Inc. Beverly previously co-founded Equity Title, which was sold after several years and is now known as NETCO and Transcontinental Title. Beverly was born and raised in Chicago and later attended the University of Illinois, Chicago. Now a full-time resident in Tampa, FL, Beverly is married with three children and two grandchildren. amrevtitle.com | 813.749.7404

Family Influence, pg 20

Fed Kamensky

The Legal Brief Series, pg 30

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

Jeffrey M. Lewis

Kathleen Scharf is the Director of Strategic Solutions for Immersion Active, the only U.S.based Internet marketing agency focused solely on mature consumers. Scharf has over 20 years of marketing, management and writing experience. Scharf played an integral role in the writing of Dot Boom: Marketing to Baby Boomers Through Meaningful Online Engagement. Scharf holds a bachelor’s degree from Pennsylvania State University and a master’s degree from Old Dominion University.

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Jeffrey M. Lewis is the Chairman of the Coalition for Independent Seniors (CIS) and the Chairman of the Board of Generation Mortgage Company, the nation’s largest privately owned reverse mortgage lender. Generation Mortgage Company has an A+ rating from the Better Business Bureau (BBB) and is Reverse Market Insight’s highest-ranked privately owned reverse mortgage lender in the nation.

John K. Lunde

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

Ralph Rosynek

5 5

6 6

A Deeper Look into CIS, pg 26

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

The Reverse Review October 2011

the Report

August 2011 Wells Fargo MetLife Bank, N.A. Bank, N.A. Endorsement Endorsement 1668 936

Top Lenders Report

One Reverse Generation Urban Mortgage, LLC Mortgage Co. Financial Endorsement Endorsement Group 420 405 Endorsement 291

12345 Lender

Endorsements

Lender

Endorsements

AMERICAN ADVISORS GROUP

198

ENVOY MORTGAGE LTD

GENWORTH FINANCIAL HM EQUITY

165

EQUIPOINT FINANCIAL NETWORK INC

SECURITY ONE LENDING

164

LIVE WELL FINANCIAL INC

THE FIRST NATIONAL BANK

ALLIED HOME MORTGAGE

NEW DAY FINANCIAL LLC

AMERICAN PACIFIC MORTGAGE

NET EQUITY FINANCIAL INC

SIDUS FINANCIAL LLC

REVERSE MORTGAGE USA INC

REVERSE MORTGAGE SOLUTIONS INC

M AND T BANK

METRO ISLAND MORTGAGE INC

MAS ASSOCIATES

GULF COAST BANK AND TRUST

GREAT OAK LENDING

HARVARD HOME MORTGAGE INC

SENIOR MORTGAGE BANKERS INC

ASSOCIATED MORTGAGE BANKERS

SUNTRUST MORTGAGE INC

FIRST MARINER BANK

PLAZA HOME MORTGAGE INC

FLAGSHIP MORTGAGE CORPORATION

MONEY HOUSE INC

GUARDIAN FIRST FUNDING GROUP LLC

SUN WEST MORTGAGE CO INC

GMFS LLC

WEST TOWN SAVINGS BANK

UNITED NORTHERN MORTGAGE BANK

CHERRY CREEK MORTGAGE CO INC

VALUE FINANCIAL MORTGAGE

ROYAL UNITED MORTGAGE LLC

VIG MORTGAGE CORP

ASPIRE FINANCIAL INC

HOMESTREET BANK

PRIMELENDING A PLAINSCAPITAL

AMTEC FUNDING GROUP LLC

THE MONEY SOURCE INC

CIRCLE MORTGAGE CORPORATION

OPEN MORTGAGE LLC

MCM HOLDINGS INC

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the Contributors Joel Schiffman

6 6

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

John Smaldone

The Perspective, pg 18 A Deeper Look into CIS, pg 20

Brett G. Varner is the News Editor for reversereview.com. Varner 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.

Tom Woods

Alain Valles, CRMP 9

The Last Word, pg 34

John Smaldone, Founder of Taylor, Bean and Whitaker and former Senior Vice President of TransLand Financial Services Reverse Mortgage Divisions, is the Executive Vice President of Hanover Financial Services, a consulting firm primarily in the reverse mortgage industry. With 42 years of mortgage banking experience, 10 years in reverse mortgages, Smaldone intends to remain in the reverse mortgage industry taking on longterm consulting assignments. johnsmaldone@charter.net

Brett G. Varner

The Legal Brief Series, pg 30

The Advisor, pg 12

Tax Tip, pg 13

As a National Client Relations Manager for ICG Inc., the nation’s most diverse and customizable real estate tax service, Tom Woods is responsible for managing client expectations, ensuring service levels, and designing and delivering tax solutions. Woods has more than 20 years of industry experience. Prior to joining ICG Inc. in 2008, Woods held operations and account management positions at Transamerica Real Estate Tax Service. He holds a Bachelor of Science degree in business administration from California State University, Hayward.

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’ mission is to improve the quality of life through responsible financing. avalles@dfcmortgage.com | 781.878.5626

the Response Feedback is very important to us here at The Reverse Review. Send us your thoughts on past articles or something that is on your mind and we will publish it in this section, the Response. information@reversereview.com

washington, dc

INSIDE this issue

3 steps to addressing a senior’s legacy By AlAin VAlles

cis headQuarters atlanta, ga

is it time to launch a new product? By Tony GArciA

+ answers to last month’s puzzle

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By rAlph rosynek

Dedicated to financial independence for seniors by Aman Makkar

On behalf of MetLife Home Loans, I would like to share our concern about a statement in the latest issue. In the article “We Are CIS,” Aman Makkar states:

“CIS is delivering a positive message to Congress and FHA: The departure of the big three isn’t a problem, it’s an opportunity.” Kindly note that MetLife Home Loans – one of the “big three” Mr. Makkar refers to – continues to originate reverse mortgages, making use of the word “departure” inaccurate and untrue.

MetLife announced in July 2011 its decision to sell its depository business, including savings accounts, CDs, money market accounts and IRAs, but also stated that residential mortgages will continue to be offered by MetLife Home Loans. - Robert Sivori, Vice President, reverse mortgage division, MetLife Home Loans

The Reverse Review October 2011

the Report

INDUSTRY SUMMARY

July Endorsements

Retail Endorsement Growth

-5.18%

Retail and Wholesale Volumes - Reverse Market Insight

Wholesale Endorsement Growth

-7.02%

July endorsements showed a continued trend of better results for retail/direct lenders compared to wholesale/brokered volumes, with retail declining 5.2% and wholesale shrinking 7.0%. The gap between the two channels remained

Total Endorsement Growth

-5.91%

fairly small, as the past four months (April to present) have shown wholesale

consistently within 3% of overall industry growth rate each month. In the eight

months prior to April, we only saw that gap under 3% once and one month was as

* Figures Above Reflect Change from Prior Month

high as 13.6%.

Bottom line: The industry has basically finished the transition to the TPO world

and further changes in volume will be more related to factors such as lender exits

RETAIL

than past regulatory changes. g

UNITS CHG%

For more information on these stats, visit rminsight.net.

Trailing Twelve Month Endorsements Retail

Wholesale

*Numbers Represent Months

8,000 6,000 4,000 2,000 0 8 9 10 11 12 1 2 3 4 5 6 7

WHOLESALE

TOTAL

UNITS CHG%

3,969

18.2%

2,672

5.99%

6,641 12.96%

3,405 -14.21%

2,558

-4.27%

5,963 -10.21%

2,976

-12.6%

2,307

-9.81%

5,283

-11.4%

4,004 34.54%

2,547

10.4%

6,551

24.0%

4,343

8.47%

2,207 -13.35%

6,550

-0.02%

4,049

-6.77%

9.33%

6,462

-1.34%

4,075

0.64%

2,805 16.25%

6,880

6.47%

4,515

10.8%

2,785

-0.71%

7,300

6.1%

3,704 -17.96%

2,415 -13.29%

6,119 -16.18%

3,106 -16.14%

2,079 -13.91%

5,185 -15.26%

3,535 13.81%

2,322 11.69%

5,857 12.96%

3,352

-5.18%

2,159 -7.02%

5,511

TOT

45,033

2,413

29,269

-5.91%

74,302

Number

90%

American seniors who want to age at home. For more number facts like this, see our feature article on page 20.

caregiving.org/data/caregiving_in_the_us_2009_full_report.pdf

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The Reverse Review October 2011

ask the Underwriter Recent comments I have received indicate that many of us are experiencing changes in the report quality and content to which we have been accustomed. In attempting to determine the cause, I found a prevailing issue that prompted my comments for today.

It appears many of us who have fully embraced the AMC methodology have also failed to initially communicate our content and accuracy standards to newly engaged vendors. Effectively communicating a “predelivery” checklist of items for the appraisal vendor to review prior to transmitting the report for use may be an excellent way to avoid unnecessary underwriting conditions. Layering this quality control component on the vendor also provides an additional resource level for the vendor to further determine the skills and knowledge level of their panel appraisers as well.

Improving Quality Through Checks and Balance Ralph Rosynek Have you noticed your appraisal conditions increasing lately? 10

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Gone are the days when an appraisal provided by an approved “roster” appraiser can be considered compliant and complete. Continuing economic and market impacts combined with HUD guidance, protocol changes, continuing education requirements and varying state and local code changes have all created the need for the appraiser to remain on top of their game. Discussing needed appraisal elements and key concerns resulting from underwriting feedback is an excellent means of improving the quality of the appraisal report. Many of the current software applications utilized to produce the appraisal report include an audit and compliance feature provided the licensee maintains the database. Encourage the use of this check and balance on all of your reports. As you develop your discussion list, you may want to consider the following:

4 Do you have any appraiser identity, communication, or appearance requirements? 4 The appraisal must be completed by a certified residential or certified general appraiser. Trainees and license appraisers are not permitted to complete assignments for this client. 4 The loan number and FHA case number, including the ADP code, should be on the top right corner of every page. 4 Every report, regardless of property or assignment type, should include the appropriate statements relating to influences, terms and scope of the report, as well as interaction with any parties involved in the transaction. 4 It is not necessary to include well/ septic/leech line/property line distances unless a potential problem is observed or required minimum distances are not met. A comment stating the subject meets HUD minimum property standards/ requirements is sufficient. 4 If the subject has not been affected by a natural disaster, a report comment should be evident. If the subject property has been affected by a natural disaster, the report should include the specific disaster, the date and what portion of the property was affected. 4 Obtaining a copy of the condo association bylaws is suggested. The report should determine if the condominium is a condotel, confirm the Condo ID and show it approved in the FHA Connection. 4 A report comment regarding HOA advertising, website or signage promoting rentals, a check-in desk (registration) for the leased/rented units, or units in the project with less than 500 square feet should be addressed.

4 A statement regarding the current and prior listing history should be included in the report and for purchases, details of the contract seller and buyer and/or other owners of record noted. 4 If the subject is listed, the appraisal report should include the MLS number, date listed, original list price, price changes, dates of all price changes, final list price and days on market. 4 If the subject ownership recently changed, the report should provide the dates of these transfers along with the names of the parties involved. 4 Comparable sales information should be verified by two named sources. 4 If the market is declining or oversupplied, the report should include three sales closed within 90 days. If three sales can’t be provided, the report should include one listing for each sale used over 90 days.

purchaser would be just as inclined to purchase in either market. 4 Regardless of timeframe, the most recent prior transfer of the subject and all comparable properties must be reported. If no previous transfer is recorded, a report comment should state so.

Discussing needed appraisal elements and key concerns resulting from underwriting feedback is an excellent means of improving the quality of the appraisal report.

4 All FHA assignments must include two listings and have three sales transferred within the past year in the 1-3 slots on the market grid. 4 All listings should be adjusted to reflect the typical list to sale/price ratio for the market. If the list to sale/price ratio is zero, support and a comment should be made within the report. 4 Comparable sales located in different towns or markets should be fully addressed. Comments should address the same level of first responders, tax bracket, similar amenities, employment opportunities, schools and why a potential

4 If a recent previous sales history item is noted (three years for the subject and one year for the comparable properties), provide commentary and explanation regarding the reason for the previous sale and any differences in sale price. 4 All adjustments should be supported with commentary addressing the appraiser’s logic and rationale. 4 A detailed reconciliation of the estimate value by the sales comparison approach should be included in the report.

4 Commentary regarding the reliability and weight of each comparable property used (sales and listings) should include the logic and rational for the single point value elected within the adjusted and unadjusted range. 4 With the exception of condominiums, the cost approach method should be included on all reports. 4 The PUD section on page 3 of the 1004 should be completed for all PUDs regardless of HOA control or unit type. 4 All photos of the subject and comparables must be original. MLS photos can be used to supplement the report’s original photographs (provide left and right side, front and back photos).

4 Photos should include anything that might influence value or marketability such as deferred maintenance, special features, amenities, excessive personal items, adverse or beneficial views, recent upgrades or anything having a positive or negative effect on value. 4 Photos and report comments regarding any possible health and safety issues that might exist should be provided. 4 For detached accessory structures (shed, outbuilding, etc.) provide photos of the interior and exterior along with a comment describing how the structure is being used. 4 The sketch component of the report should detail all improvements with floor plan calculations and include all amenities as described with contributory value (i.e., sheds, barns, pools, decks, gazebos, basements, etc.). 4 All fields on the 1004MC addendum must be completed. If no information is available for a specific field, indicate N/A and provide a comment. 4 If REO, distressed or foreclosure properties are an influence in the subject market, a detailed commentary addressing the percentage/makeup of total market closed sales and active listings should be included. 4 The location map should reflect all properties noted in the report, including comparable sales, listings and rentals, clearly showing all physical boundaries. 4 A plat map of the subject site should also be included. 4 Certain property types are not eligible for HECM financing – provide a list of those items to your appraisal vendor. g

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The Reverse Review October 2011

the Advisor reverse mortgage, there are two scenarios where a loan won’t or shouldn’t close.

The first occurs when

a reverse mortgage is the optimum solution to meet a senior’s housing or financial goals but they obviously won’t qualify for the reverse. Reasons may include a low appraisal, title issues, condition or type of property, occupancy status, or even a temporary protected status visa (a recent experience). I’ll never forget my second reverse mortgage referral. I was so excited that I spouted off every reverse benefit, which caused the senior to get excited to the point where he wanted to meet immediately so I could save the day! I finally asked what he thought his home was worth. Sadly, based on his current mortgage, there was no hope he had sufficient equity to qualify. I felt terrible because I caused him pain. I vowed I would do my best to never cause that type of stress again.

Know When to Say “No” Alain Valles, CRMP

For a loan officer, a closing is always the goal. But do you know when saying “no” to taking an application is appropriate? Assuming a senior is educated about reverses and desires a

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My introductory dialogue with all new clients now includes a version of, “Before I explain the benefits of a reverse mortgage, the worst thing I could do is to get you excited only to find out later that you don’t qualify. So if it’s OK with you, I’d like to ask a few questions to see if you qualify … ” I never have a referral refuse my questions about home value, current mortgage balance, property ownership, their goals, etc. Having a more thorough knowledge of underwriting guidelines will also help reduce the emotional and financial cost to a senior and can help avoid starting an application that will not pass muster. Invest the time to read lending guidelines and run loan particulars by your account executive or underwriter.

The difficult part is when the person does not qualify and they ask for guidance on what to do next. Always have a resource guide for your area to give seniors direction to other support services to help them sort out a plan of action. I offer to speak with their family members about the senior’s predicament, but I’m conscious that I’m just the “loan officer” and not a marriage, family, grief, tax, estate, appraisal or debt counselor. Be prepared with other trusted resources to help seniors with difficult life decisions.

The second “no” is when

the senior wants a reverse and qualifies but circumstances lead the loan officer to believe that the senior should not obtain a reverse. This is more problematic for the loan officer. Examples I’ve personally experienced include perceived cognitive issues (a senior asking my name a dozen times); pressure from a family member The difficult (an adult child with visible part is when drug/alcohol the person issues or who does not wants money for their business); a qualify and trusted advisor’s they ask for conflict of guidance on interest (financial what to do planners focused next. Always on a lump sum have a resource distribution for guide for your them to invest); area to give a senior with a gambling seniors direction issue; reverse to other support funds not services to help lasting long; or them sort out a using proceeds plan of action. for dubious

Need assistance from the Advisor?

Send your question to advisor@reversereview.com and it will be addressed in the next issue.

purposes that go against the best interests of the senior. These situations fall into a gray area where there are no specific guidelines.

But saying “yes” when we should say “no” may lead our industry toward even more onerous regulations. I always use the

newspaper test: Would my mother be proud to read an article about the way in which I helped the senior? I have yet to encounter a circumstance in which I feel compelled to contact the authorities or a protective service agency. However, when I’m uncomfortable I will

share my concern with the senior to gain a better understanding. I’ll also ask their permission to speak with the referral source and family members. In the end, I’ll just plainly say, “You do qualify but I’m not comfortable moving forward because a reverse mortgage should be a long-term solution and the last thing I want is for you, a family member, or a regulator questioning down the road why I provided you a reverse mortgage.” I am a for-profit company but will not risk my livelihood or reputation because I don’t know when to say “no.” g

In the last few years many states and taxing authorities have eliminated their Senior Tax Deferral programs. California dropped its program in 2010, and as of July 2011 Oregon’s state legislature passed new rules for its deferment program, which essentially ban applicants that have a reverse mortgage. So what state still allows reverse mortgage borrowers to enter into a tax deferral that will not cause issues with their reverse mortgage lender/ servicer, you ask? Why, that would be Massachusetts.

“I want a tax service company that understands the Reverse Mortgage Market.”

At ICG, we know the key to an effective Reverse Mortgage product is all in the details. Conventional tax service models merely report delinquent accounts to their customers. ICG goes beyond the conventional model and embraces proactive, loss mitigation and industry best practices into our tax service products to provide clients an end-to-end solution specifically designed for the Reverse Mortgage market. We understand your industry, investor guidelines, regulatory requirements and more importantly your client base. We welcome the opportunity to design a solution exclusively for you. Industry Consulting Group, Inc. is committed to helping Reverse Mortgage companies overcome the challenges related to tax defaults.

Call us at 972-991-0391 or visit www.icgtax.com today. Tax Monitoring / Exemption Information

Tax Payment / Borrower Notification

Full or Partial outsourcing models

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The Reverse Review October 2011

the Perspective planning. A major cause of this stall

can be attributed to an overreaction to a very limited but very problematic issue of HECM borrowers being coerced into using reverse mortgage proceeds to buy inappropriate financial products. Reverse mortgages have long been portrayed as a solution for house rich but cash poor seniors to have access to additional money to fund their retirement.

Detractors and those with limited understanding of the product continue to review its utility as solely a product of last resort, stating that seniors should only turn to their homeâ&#x20AC;&#x2122;s equity when there are no other options available. The enhanced negative perception of cross-selling financial products in concert with HECM proceeds has clouded the positive potential of the reverse mortgage to leverage financial security and be prepared for life events associated with aging when incorporated as part of a larger plan.

Breaking Down the Firewall Brett G. Varner

The evolution of reverse mortgage products, specifically the HECM, seems to have been stalled by the limited applicability and utility of the product in the broader perspective of retirement 14

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The issue of how reverse mortgage proceeds are utilized came to the forefront of government attention when a couple of highly publicized cases highlighted how seniors were coerced into buying inappropriate long-term annuities that tied up the money for monthly distributions and put the undistributed funds at risk of loss upon the death of the borrower. Unfortunately, much of the media coverage portrayed that the risk to the senior was a direct result of the reverse mortgage instead of the financial product that was purchased from the proceeds. The problem was exacerbated by several organizations that were either directly cross-selling the reverse mortgage and annuity product, or had originators who were referring clients to insurance salespeople who placed clients in these

products. The products came with high commissions, but low applicability to the borrower. One could argue that the products guaranteed a monthly stream of income for the clients for as long as 30 years, but the individuals who purchased the products had no way to access the undistributed funds once the product was purchased, and those undistributed funds were lost when the senior passed away. These examples created a perception that seniors were being victimized by a conspiracy between HECM originators and annuity salespeople for the sole purpose of maximizing revenue without necessary consideration for the seniors needs. The result led to regulations stemming from the Housing and Economic Recovery Act of 2008 (HERA), which forbid originators or any party associated with the origination of FHA-insured HECMs from being associated with the sale of any other financial products. Similar state laws followed suit, including the recently passed AB 793, which prohibits insurance agents and brokers from employing or making referrals to an individual involved in the sale of reverse mortgages. The concept of a positive interaction between being able to access the home equity in a manner that creates a low level of risk to a borrower who is willing and able to maintain their obligations, and use that equity to purchase other financial and insurance products that can provide security and stability, has been essentially wiped out by the flood of regulatory restrictions. As government officials continue to vilify the concept of crossselling and stoke fear in order to drive media attention to their efforts to defend seniors, the number of older Americans that could improve their quality of life and security is compacted. By applying an atom bomb to the small number of abuses

that occurred in relation to cross-selling, the government response has destroyed the HECM’s place as a product of great versatility designed to meet a wide range of borrower needs.

problems. Although this is one of the more important utilities of the product, and the arena that has the most immediate impact for borrowers, it is just one of many potential utilities available from the product.

The problem, of As government officials course, has been continue to vilify the Due to the firewall heightened by the that regulations have prevalence of the concept of cross-selling endeavored to build fixed HECM product. and stoke fear in order between reverse While a fixed interest to drive media attention mortgages and any rate is preferable to other financial or the vast majority of to their efforts to defend insurance product seniors, the lump sum seniors, the number of older that may benefit distribution is not Americans that could improve seniors, many the ideal solution to their quality of life and security is originators shy away this same majority. compacted. from the idea of even However, in isolation, mentioning that the product that there may be positive benefits for seniors provides the highest level of benefit (i.e., to separate the equity in their home and the most cash) to the borrower, is generally apply it to extend other retirement assets, perceived to be the best option by both or prepare for life change events (such as borrower and originator. Somewhere in the long-term care insurance) that enhance mix of all this, the concept of meaningful the ability to age in place. In an article in solutions gave way to the simplest of Investment News in January of this year, a solutions. Without detailed financial advice financial planner laid out a simple case in and support, many seniors are not armed which incorporating a reverse mortgage with the knowledge of how to manage a in a retirement plan could significantly large lump sum of money. This creates a extend the longevity of retirement assets. significant risk to the longevity of the funds The simple example considered the impacts and opens the seniors to more potential for of supplementing monthly income from a financial fraud. reverse mortgage via a monthly payment or draws on the line-of-credit, without Whether they realize it or not, the wall weighing the potential of reinvestments of a between HECM originators and other lump sum distribution. financial professionals has caused many originators to limit their focus to a small A truly comprehensive retirement and aging subset of the larger senior population: plan requires that different professionals those with a specific and immediate need from the financial, insurance and health for the product. They seek out the prospect care fields are able to work in conjunction who is struggling under the weight of their current mortgage or have monthly cash flow to provide the highest level of security and

comfort for the client in the latter period of their life. It requires a holistic examination of all available resources and assets, along with a complete inventory of the client’s preferences for standard of living and health care needs, both expected and unexpected. Only from this broader vantage point can the full versatility of the reverse mortgage be discovered. When the discussion of reverse mortgages only includes the reverse mortgage itself, it is easy to zone in on the common perceived threat of consuming all the equity without reasonable consideration of the benefits provided. However, when the discussion includes a more comprehensive view that considers how the proceeds could provide greater options within a wide-ranging plan, then the potential importance of collaboration between the different professional service providers is highlighted. From this perspective, regulations that seek to protect seniors should encourage seniors’ advisors in different professional service areas to work together to devise the best possible plan to meet their needs, rather than strive to bar these professionals from interacting. Financing aging is an increasing issue in the United States. As the baby boomers age and Social Security and Medicare continue to be financially stressed, it seems commonsense that lawmakers would focus on alternatives available to fund aging from every resource – and would place increased fiduciary responsibility on financial professionals to find coordinated and comprehensive planning options to provide seniors with security and stability in their later years. g

Have feedback on this month’s articles?

Send your comments to information@reversereview.com and look for them in the Response section of an upcoming issue. reversereview.com 8 TRR | 15

hot

Seat U

20 questions - things you need to know or may have been wondering -october 2011

the

hot seat 16

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From the best lesson he ever learned to why he entered the reverse mortgage industry, we get the personal and professional facts from Robert Beverly, owner of Americaâ&#x20AC;&#x2122;s Reverse Title Co., in our monthly edition of The Hot Seat.

robert PERSONAL

america’s reverse title co. owner

When I was younger I wanted to be a Major League Baseball player.

Every morning I read the newspaper, check my emails and work out.

I can’t go without a good cup of coffee and a fine cigar.

Right now I’m listening to The Beatles. My favorite band ever.

My parents taught me how to love, forgive and be honest.

The best lesson I’ve ever learned was to never give up, always keep trying and always finish strong.

A good friend is something rare. If you can have one true friend in life, then you are blessed.

My favorite two books are The Great Gatsby and The Count of Monte Cristo.

I always try to laugh or find some humor every day. Life is way too short.

I’ve never been late; I’m either early or right on time.

I never miss an episode of Baseball Tonight on ESPN.

The worst purchase I’ve ever made were shoe insoles from an infomercial. They were the

My favorite website is Facebook. It’s a great way to keep in touch with all of my family

worst and they hurt. I think my back actually got worse. around the country.

My favorite quote is, “There’s nothing you can do that can’t be done. Nothing you can sing

that can’t be sung. Nowhere you can be that isn’t where you’re meant to be. It’s easy. All you need is love.” – The Beatles

My favorite quote, is “There’s nothing you can do that can’t be done. Nothing you can sing that can’t be sung. Nowhere you can be that isn’t where you’re meant to be. It’s easy. All you need is love.” – The Beatles

PROFESSIONAL >

Ten years from now the reverse mortgage industry will be explosive. The baby boomers will be seeking reverses in record numbers.

Industry growth is dependent upon educated originators who truly care about the well-being of seniors, and less government regulations.

People should seek a career in the reverse mortgage industry because they truly enjoy working with our seniors and taking the time to get to know them. Our seniors are living history books.

People should seek a career in the reverse mortgage industry

because they truly enjoy working with our seniors and taking the time to get to know them. Our seniors are living history books.

The best job I’ve ever had is right now. Owning America’s Reverse Title has been a blast and a complete joy so far.

I entered this industry because it is so satisfying to help a senior

keep their home. To see the smiles on their faces, and hear them thank you, is just priceless.

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October edition

The Reverse Review October 2011

the Industry

Roundup

m ov er s k sh a k e rs Reverse Market Insight: Launched new versions of its monthly reports to provide a clear depiction of the industry production and account for third-party originator activity. Generation Mortgage: Revamped its national retail division with the addition of Ed O’Connor as East Coast Regional Manager and Kevin Kaltenbach as West Coast Regional Manager. Knight Capital Group: Appointed C. Darren Stumberger as the Managing Director of mortgage and structured products with a specific focus on reverse mortgage MBS.

a roundup of this past month’s breaking news:

Who moved where; why a company closed its doors; WHO is new to the industry? Genworth Financial: Added Michael Suits, a former MetLife account executive, as a new Regional Account Manager for the Southwest region.

Up - k- C o m e r s Nationwide Equities: Launched a new wholesale reverse mortgage broker division called ReversePower, focusing on small- to medium-size brokers the firm feels are underserved. Royal United Mortgage: Is expanding its reverse mortgage operations by announcing plans to add 150 jobs.

W h at H a ppe n e d ? California: Governor Jerry Brown signed AB 793 into law, prohibiting interactions between lenders and insurance agents for the purpose of cross-selling reverse mortgages and other financial products. SunTrust: Ceased operations of its reverse mortgage division as of September 1 in order to focus its resources on its larger, forward mortgage production.

industryroundup

JG Wentworth: Officially launched its reverse mortgage division under the name Peachtree Financial Solutions, after months of running a “pilot program.”

America’s Reverse Title Company was founded to specialize in the reverse mortgage market. With over 10 years of reverse experience, we get the job done right and with a special care for the senior borrower. Our clients enjoy the following benefits and services:

P Nationwide service. P Low fees and swift turnaround times.

P No survey required.

P Complimentary gift

basket sent to your borrowers after funding, with your business cards or letter attached.

Be sure to visit us at the NRMLA expo at the Renaissance Boston Waterfront Hotel Boston, MA on Oct. 25, 2011 at 7pm for cocktails/ appetizers in the Library room.

SEE YOU THERE!

For more information, contact Bob Beverly, National Sales Director at:

727.481.3626 or rbeverly@amrevtitle.com | Visit us online: www.amrevtitle.com 18

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the

Essentials

The Essentials | iâ&#x20AC;&#x2122;sen sh l | - your monthly source of in-depth information, industry updates, highly opinionated views and at-your-fingertips news. Fed Kamensky K at h l e e n S c h a r f J o e l S c h i ff m a n B r e t t G. V a r n e r

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.

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Connecting with family caregivers to connect with seniors. Caregivers who feel they need

mor e

information about caregiving

Kathleen Scharf

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fifty-three% Caregivers who use the internet to find caregiving information

sixty-six percent Adult chi l dren who rep o r t t h e y i n f l u e n c e t h e i r p a r e n t s â&#x20AC;&#x2122; ma j o r d e c i s i o n s

f o u r hundred and fi fty bi llio n d o lla r s is th e v al ue of free caregi v i ng s e r vic e s in 2 0 0 9

%4 Number of care recipients who are women

Average age of family caregiver

More than three in 10 (31.2%) U.S. households reported that at least one person has served as a family caregiver within the last 12 months

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These facts can either be found as referenced in the article or in the Caregiving in the U.S. 2009 report (as listed in the article). caregiving.org/data/caregiving_in_the_us_2009_full_report.pdf

of the most insightful things I’ve learned as a strategic director for an Internet marketing agency that is focused on mature consumers is the power of connecting with family caregivers when you want to sell your products and services to seniors. Family caregivers are the sons, daughters, nieces, nephews, friends and neighbors who help seniors live their lives more fully. The levels of care provided can vary significantly, from running a few errands to 24/7 Alzheimer’s supervision. In any case, with more than 65.7 million U.S. family members providing care each year, they offer a potent path to connecting with potential clients.1 More importantly, according to a study published in Advances in Consumer Research, 66 percent of adult children reported that they have “a great deal” or a “fair amount” of influence on their parents’ major decisions, such as whether or not to get a reverse mortgage.2 In addition, 51 percent of the seniors being cared for by those 65.7 million caregivers live in their own homes.1

estimated to be $450 billion—that’s more than total Medicaid spending, total sales of the world’s largest companies (Wal-Mart had $408 billion in sales), and almost $1,500 for every person in the United States.3 Family caregivers are busy, stressed and often exhausted. As individuals entering the fall of their lives, they are simultaneously experiencing more life events than almost any other age group. In addition to caregiving, they may still have children in school; be empty-nesters; have grandchildren; be retiring; be unable to retire; be considering starting a second career; or facing health issues of their own. These events, combined with taking care of their senior loved ones, can overwhelm family caregivers. As one family caregiver put it, “I just need time to breathe.”

Helping Family Caregivers Breathe As families provide care for their seniors, they face myriad considerations, including: Where will Mom be safest and healthiest? Caregivers consider this question most important.

Who Are Family Caregivers? In most cases, the family caregiver is the adult daughter who is caring for her widowed mother. She is between the ages of 45 and 65 and still working. She generally lives within a few miles of her mother, is married, and has a family of her own at home. According to a 2009 study by the National Alliance for Caregiving, more than three in 10 U.S. households (31.2 percent) reported that at least one person has served as a family caregiver within the last 12 months. These caregivers spend an average of 20 hours per week providing care for their loved one. In 2009, the value of the services they provided for free was

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What does Dad want? According to study after study, about 90 percent of American seniors say they want to remain in their own homes for as long as possible.4 How will we, as a family, communicate and make decisions? Stressful caregiving situations can amplify family communication issues.

How will we pay for care? Paying for senior care can strain even the wealthiest, bestprepared families.

Obviously, it’s easy to see how reverse mortgages can help family caregivers pay for care. But have you considered how your products and services can answer these other questions as well? Remodeling a home to make it safer for seniors is one of the hottest construction trends. The National Association of Home Builders (NAHB) now offers a Certified Aging-in-Place Specialist (CAPS) designation. Whether it’s adding a ramp, installing a walk-in tub or replacing the carpet with hard floors to let walkers glide more easily, seniorfriendly upgrades can make a home safer and healthier for older adults. A reverse mortgage may be the answer to financing these often expensive upgrades. In addition, a reverse mortgage can also fund in-home care that can help seniors fulfill their wishes to remain in their homes. In-home care generally comes in two flavors: medical and non-medical. Medical in-home care, sometimes called home health care, usually requires a licensed

number of U.S. family caregivers each year

1 Caregiving in the U.S. 2009. National Alliance for Caregiving in collaboration with AARP. Funded by MetLife Foundation. November 2009. 2 Patricia Sorce, Lynette Lomis, Philip R. Tyler (1989), “Intergenerational Influence on Consumer Decision Making,” in Advances in Consumer Research Volume 16, eds Thomas K Srull, Provo, UT; Association for Consumers Research, Pages 271-275. 3 Lynn Feinberg, Susan C. Reinhard, Ari Houser, and Rita Choula (2011), “Valuing the Invaluable: 2011 Update –The Growing Contribution and Costs of Family Caregiving,” in Insight on the Issues, AARP Public Policy Institute. aarp.org/relationships/caregiving/info-07-2011/valuing-the-invaluable.html 4 “Paid In-Home Care: More Care & Better Care for Seniors” a white paper from Home Instead Senior Care. homeinstead.com/news/pages/media-inquiries.aspx

Positioning your brand as the solution to simplify the family caregivers’ lives allows you to become their resource for helpful information and in turn, to become the trusted brand to solve their problems. professional to administer services such as wound care, injections or physical therapy. These services can occur a few times a week, for an hour or so each visit. On the other hand, non-medical, in-home care offers a broader range of support services. Non-medical care providers help with everything from meal preparation to doctor’s visits. Non-medical care takes over some of the more routine caregiving activities so families can focus on spending quality time with seniors. Unfortunately, many caregivers are unaware of both types of in-home care services, especially nonmedical services. Consider the relationship you could build with a family caregiver if you help them understand these services, and more importantly, how a reverse mortgage could fund them. Likewise, I encourage you to evaluate your marketing materials. Do you have materials specifically for family caregivers? What about their siblings and other family members? Family members may have concerns around reliability, trustworthiness and even loss of inheritance. Providing both the senior and the family caregiver with materials that make it easy to answer questions and provide information can greatly strengthen your positioning.

450

billion:

the value of f r e e caregiving services

in 2009

Positioning your brand as the solution to simplify the family caregivers’ lives allows you to become their resource for helpful information and in turn, to become

the trusted brand to solve their problems.

Becoming a Trusted Brand When I discussed becoming a resource for family caregivers, I did not restrict the topic of conversation to reverse mortgages. Instead, I mentioned things like remodeling, in-home care, and communication tools. If you want to gain family caregivers’ trust, you need to address their needs to provide exceptional care, not your need to sell reverse mortgages. Focusing on the needs of your audience instead of the features and benefits of your product is vital to building a strong connection with mature consumers. At Immersion Active, we subscribe to a marketing philosophy called Developmental Relationship Marketing (DRM). DRM proposes that we all share core needs and that our season of life predisposes how we will meet those needs. For example, as humans, we all have adaptation needs – we are biologically driven to learn and adapt to our environment. However, how we fulfill those needs varies depending on our season of life. It’s easy to see children and young adults in the spring and summer of their lives meeting their adaptation needs as they learn to read, write, participate in society, have a career, and start a family. However, society often forgets that adaptation needs continue during the fall and winter of our lives. All of the simultaneous life events family caregivers are experiencing make their adaptation needs as strong as ever. Likewise, seniors face more medical choices, technological advances, and changes in society than any previous older generation, forcing them to continuously learn and adapt. >>

fiftyone seniors receiving care who own their own homes

90 percent about

of American seniors say they want to

remain in their own homes

for as long as possible

average hours of care provided On average, boomers are asked for their opinion 90 times a year and they give it 90 percent of the time. Generally,

of that advice is provided online through email, reviews, comments, etc. reversereview.com

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These facts can either be found as referenced in the article or in the Caregiving in the U.S. 2009 report (as listed in the article). caregiving.org/data/caregiving_in_the_us_2009_full_report.pdf

By positioning your brand as the resource that meets these adaptation needs, through helpful resources, advice, and information, you organically build a relationship between the consumer and your brand. But to become that trusted resource, you must fulfill these needs in an authentic manner. You need to provide information about which you might reasonably be considered informed or about which you can partner with other experts. For example, if you want to share information about home remodeling and using reverse mortgages to pay for it, find a local CAPS contractor in your area To connect and cowith family market your caregivers you services. must connect That’s with the people authentic around them: information their husbands, and daughters, marketing. siblings, friends, On the other health care professionals, and hand, if yes, the seniors you started themselves. providing These individuals, medical often referred to advice, as the caregiver’s you risk social graph, losing your touch and interact audience’s with the caregiver trust on a daily basis, because you but sit outside the probably do daily stress and not have the grind of providing care. credentials to support your advice. Be a solution to the family caregiver’s needs, but only to the extent that your product actually fulfills that need. Don’t force a fit.

Fitting Your Message into Caregivers’ Lives Getting the attention of busy, stressed family caregivers can be challenging.

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However, here at Immersion Active we’ve managed to do so successfully by using four strategies:

marketing encourages sharing between family caregivers and their social graph.

4 Connect with the family caregivers’ social graph

When busy family caregivers need information, they turn to the Internet. Not only does it offer a plethora of information, it is also available 24/7 so caregivers can research when and where they want. Naturally, the first Internet strategy you should employ is to ensure that your company website is easy to use, well optimized for the search engine, and contains the types of helpful information previously discussed. Having a solid company website is the foundation upon which you build all other Internet marketing tactics.

4Encourage sharing 4Use the Internet 4 Make an emotional connection Connecting to the Social Graph To connect with family caregivers you must connect with the people around them: their husbands, daughters, siblings, friends, health care professionals, and yes, the seniors themselves. These individuals, often referred to as the caregiver’s social graph, touch and interact with the caregiver on a daily basis, but sit outside the daily stress and grind of providing care. As a result, they play key roles as confidants and supporters for the family caregiver and are considered trusted resources for advice.

tip

Encourage Sharing

tip

Then, when you market, purposefully ask for referrals. Encourage the social graph to share your information. Make your content share-worthy and valuable. Incentivize people to share through rewards, loyalty programs, discounts, and other similar programs. The power of sharing can’t be overemphasized. Family caregivers, like all boomers, rely on their social graph for guidance. On average, boomers are asked for their opinion 90 times a year and they give it 90 percent of the time. Generally, 45 percent of that advice is provided online through email, reviews, comments, etc.5 So be sure your

5 Weigelt, David and Jonathan Boehman. Dot Boom. LINX. Great Falls, VA. 2009. p 14. 6 ibid

Leverage the Internet

tip

Once you have a strong website make sure your brand appears when and where family caregivers are looking for information. Remember that helpful content I encouraged you to create? Not only does it help you become a trusted brand, it also can provide a significant boost in your search engine rankings. Remember, family caregivers are searching for solutions to their challenges, not necessarily for reverse mortgages, so be sure to include the keywords and phrases they use to search for solutions when you create your content. As mentioned above, the Internet is where 45 percent of boomers provide their referrals, often via email. Email is an especially powerful referral mechanism. By forwarding an email to someone else, the sender implicitly gives it a level of endorsement. In addition, email is one of the most common online activities for older adults, falling second only to conducting searches.6 Email can offer a significant return on your investment, but you must use it wisely. Make sure you have permission to send someone email through an opt-in option on your sign-up form. Then make

the direct

mail

10 sends = 10 people

c c

power

sharing

c c

10 sends = 18 people

0 extra cost

sure the content is valuable. Sending out regular emails that simply list the benefits of your services may seem valuable to you, but will probably cause many to unsubscribe to your email list. However, sending out regular emails that address topics like senior remodeling, fitness, nutrition, etc., could have your subscribers not only reading, but sharing the information with others.

social media tactics can also be used to connect with family caregivers. But as an experienced online marketer, my recommendation is to focus on a few tactics you can do well and consistently. Once they become ingrained in your marketing efforts, move on to a new tactic.

an emotional connection can significantly improve your marketing efforts. In a recent test for one of our clients, we compared emotional, story-based content to non-emotional, features-based content. The story-based content converted at a rate 400 percent higher than the features and benefits content.

Make an Emotional Connection

Wrapping It All Up

Likewise, Facebook offers a powerful resource to connect with caregivers and their social graphs. When busy, hectic caregivers do have time, they use technologies like Facebook to stay connected with friends and family in the most efficient manner. In 2009, insidefacebook.com reported that women 55 and older were the fastest-growing group on Facebook.7

Emotions are physical responses initiated in our brain when it connects an external stimulus with internal information we already possess. Our brain determines the strength of these responses by the amount of relevance it places on the stimulus and whether it decides to make us aware of it. In other words, emotions are what make information relevant to a consumer. Therefore, they are critical to effective marketing, especially to more mature consumers who have more experiences with which to relate and evaluate the origin stimulus.

So, does all this stuff really work? Well, a little over four years ago, one of our clients decided to shift their marketing focus from seniors to family caregivers. At the same time, they hired Immersion Active as their Internet marketing agency and took the majority of their B2C marketing efforts online. Since 2009, together we have increased visits across their network of sites by 131 percent; grown their email list from 500 to 80,000; decreased their cost per lead by 62 percent, and increased their leads by 500 percent. And we’ve seen similar results for other clients.

However, remember why users come to Facebook and what their mode of engagement is when they are there. Family caregivers and their social graphs rarely come to Facebook searching for brands and products.8 They come to Facebook to participate in a community where they feel welcomed, safe, and trusted; therefore, you have to mirror that mode of engagement. Obviously, other Internet marketing strategies, such as paid search, display advertising, directories, and other

Ways to evoke emotions in your marketing efforts include storytelling; invoking the senses through words, images and sounds; and using conditional positioning wherein you define the characters in your messaging in such a way that the consumer can easily insert themselves into the story (like the beer commercials where you can imagine yourself on that beach). Making

in 2009, insidefacebook.com reported that women 55 and

older were the fastest-growing group on Facebook.

Targeting family caregivers offers you an opportunity to increase your marketing effectiveness. You can become caregivers’ trusted resource by positioning your services to solve their needs. By connecting with their social graph, encouraging sharing, leveraging the Internet, and making an emotional connection, you can significantly increase the likelihood that consumers will engage with your brand. As a result, you can more successfully market your brand and, in turn, improve your return on investment. g

7 “Fastest Growing Demographic on Facebook: Women Over 55.” Justin Smith. insidefacebook.com/2009/02/02/fastest-growing-demographic-on-facebook-women-over-55/. Feb. 2, 2009 8 “Razorfish: Facebook, Twitter Don’t Make Customers Feel Valued.” Mark. Online Media Daily. mediapost.com/publications/?fa=articles.showarticle&art_aid=143921. Jan. 31, 2011

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The Reverse Review October 2011

the Essentials

A Deeper Look into the Coalition for Independent Seniors Jeff Lewis, Chairman of CIS, speaks on the growing influence of this emerging group.

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Brett G. Varner

he Coalition of Independent Seniors was born out of a growing need to ensure there is a consistent effort to protect the financial independence and ability to age in place for seniors. The relationship between the HECM product and this larger effort fuels the objectives of this nonpartisan lobbying organization. Âś To get a more detailed picture of the activities and efforts of CIS, we sat down with organization Chairman Jeff Lewis, who is also the Chairman and CEO of Generation Mortgage. Lewis envisions that the goals of the organization serve to strengthen the importance of the HECM product by solidifying its place in the broader picture of preserving the financial independence of seniors.

To that end, the organization strives to foster relationships with lawmakers to make sure they have a solid foundation of knowledge and understanding of the issues surrounding the financing of retirement and care of older Americans.

Q y Brett: How would you describe the primary objective of the lobbying efforts of CIS? What are the current legislative imperatives that the organization feels are most important at this time? JEFF: Our primary objective is to enable seniors to stay in their home and live a financially independent life to the extent that it can be possibly done. We formed the nonpartisan organization that is intended to reach beyond individual industry interests – it is supposed to be less parochial than simply people defending their self-interest. It is supposed to be the common interest of seniors being financially independent. In order to secure that and make it a priority, we felt it was important to educate members of Congress on the problem and what the solutions are, one of which is the HECM. But it is vital that the HECM is supported by the people who created it, which is the Congress of the United States, and they need to understand what it is, what it does and why they need to keep it vibrant. We are in an environment that is rife with misinformation and creates the opportunity for people to take swipes at us.

An example would be foreclosing due to tax and insurance default. Wells Fargo suggested in its statement that one of the reasons they left the business was that they didn’t have the stomach for foreclosing on seniors. Look, nobody wants to see anybody, especially seniors, lose their home to foreclosure. It is a horrible process. It is demeaning and stressful, and you’re left without your home, and nobody wants to see anyone go through it.

When you step back, they were A y JEFF: The way Congress works essentially saying, “We would rather is that you have different roles; not go through the unpleasant and you have the leadership that affects necessary task of foreclosing on a few everything, you have the authorizers people who were acting in contravention who create the programs and you have of their contract, which was that they the appropriators who fund them. We would uphold their obligation. have very good relationships Rather than make a small with the folks that are in the number of people uphold their leadership of both the House obligations, we would prefer and Senate, and they are going a world where this product to be influential on a variety Lewis essentially doesn’t exist.” From of topics. The authorizers are envisions their perspective it is better responsible for not only the that the that hundreds of thousands creation of the program, but of people leave their home goals of the for assigning an agency to early not through foreclosure, organization oversee it. The authorizing but simply from running out committee created the HECM serve to of money, rather than a small strengthen as a way to help keep seniors number of people having to in their homes. Those people the go through this unpleasant importance are important because they can process. That doesn’t make any of the HECM change the program, they can sense to me. That’s the kind of rescind that authorization, or product by thing when you go through a they can have a different agency solidifying its meeting with a congressman regulate it. If FHA is going to place in the or a staff member and they get pressure about things they broader picture are doing with the program, it is have an article or letter from of preserving a constituent, it is important most likely going to come from the financial that somebody explains to the authorizers. The authorizing them that the borrowers have independence of committees in the House and an obligation with the loan, Senate are the banking and seniors. and they took it on willingly finance committees, and that and understood the ramifications of not is where we target our efforts. The fulfilling their obligations with the loans, appropriators are important because if and if we don’t hold them accountable money is needed to actually fund the then the whole process doesn’t work. program that was authorized and is As we have made the rounds of 50 or 60 offices of lawmakers, in most cases we found that they have not really given much consideration to the issue of aging in place and of financial independence for seniors and didn’t understand how the reverse mortgage fits into that. It is very important to explain the program to them because ultimately they make it possible for the HECM program to exist.

Q y Brett: In that respect is the organization strategically targeting specific legislators, or is it more of a broad-based approach?

We have very good relationships with the folks that are in the leadership of both the House and Senate, and they are going to be influential on a variety of topics.

being carried out by the agency, the only way to get the money is through the appropriators. The appropriators break down by the type of issue they look at, so we are very interested in the HUD appropriators.

Q y Brett: Considering that approach, each time you descend on Washington, is there an overall strategy or do you customize your message for each lawmaker based on what you know about them? JEFF: One of the things we feel is very important is to try to meet with everyone, whether they have a favorable view, no view or a negative view. >>

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We think that the information is powerful and can change people’s minds, even if they have a negative view. We don’t shy away from trying to influence people regardless of what we believe to be their position. The first step in the process is to create an education and knowledge base, in the offices of those congressmen to make sure that they understand first and foremost what the problems are and the financial trends that are going on with this generation, which make the product important. Then you can talk about the value of keeping people in their own home rather than their children’s home, or in a nursing home, or in another facility. You can talk about the value of that, how it is these individuals’ preference and why it should be the preference for society generally. Then you can layer how the HECM and the reverse mortgage fits into that. Once you have created that basis of understanding, those lawmakers become potential advocates when a specific issue arises. You really don’t want to be in the business of building champions from scratch when there is an emergency going on. You want to be calling up people who already understand what you are doing. They know you, they know the product, and they understand the context. It is likely to be a much more constructive conversation.

Q y Brett: Given the current political environment and how that has created an inherent battle between public policy and budgetary concerns, what challenges has that created for CIS in getting its message through? JEFF: The budgetary side, the authorizing side, is going to be quiet, primarily. We have an issue right now in getting counseling funded, and we have been working very actively with preserving those funds. Getting them back has been an important initiative for us. Generally speaking, the way the program is supposed to work and the way that it is designed and is FHA’s mandate is that it is supposed to break

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even. It is frankly not a long-term risk mitigation tool. You take the capital strategy for the industry to think that that you have in your house and spend we would ever live with a subsidized it on other products that mitigate your program, a program that lost money and risk. If you need health insurance, life had taxpayers filling in the insurance, longevity insurance, blanks. Since that is the way whatever you are exposed to, the program has to be, in a lot you use that as part of your of respects, I’m not concerned plan. If you’re looking at how about the budgetary crunch. long your IRA is going to last Frankly, It is more of a question of and are talking to the person having whether FHA’s resources are managing your IRA, you also aging going to be stretched. look at your house and how groups, both resources can be used to elder care The other issue is more of a maximize the amount of time groups, policy issue where there are that money will be available. people in Washington who That type of comprehensive veterans’ generally believe that the planning is not possible right groups, government is overly involved now because of a section of and home in the housing market and they health care the 2008 Housing Reform Act want to pull the government groups come that put a brick wall between back. It is not necessarily the HECM and any other in, actually an issue about HECMs financial activity of any kind. creates a much and reverse mortgages, but While lawmakers accurately more powerful generally a feeling that the perceived that people were message: We government does too much. being taken advantage of by are not just We like talking to those people being put into products that talking about because we think we have a were not suitable, it was not a product that very good argument for them. really the HECM that was We describe for them that what we benefit from not suitable, it was the other the reverse mortgage does is financial products that were selling, we are put the government in the kind sold to them. It is not the talking about of position that those people concept of people using the a problem in like to see it in: It enables society and how money from the HECM to people to help themselves with buy other financial products to solve it. their own resources. Since the that is scary, it is that some of program is not subsidized and doesn’t the types of products available that are cost money, the government is actually unsuitable can still be sold to seniors, just facilitating good acts by the public on regardless of the source of money used to its own. That’s the kind of government purchase them. those people typically want to see and they usually understand that argument We are probably talking about a when we present it. multiyear project in terms of educating enough people about the power of comprehensive planning, and how it can Q y Brett: How are you able to relate lead to that ability of people to stay in the HECM product in the context of their home longer because the financial the broader concept of comprehensive emergency does not affect them, because financial independence and aging in they have the right kind of protection and place? have mitigated their risk. A y JEFF: In most of the world, equity release is done in the context of a Q y Brett: As the coalition grows – plan and frankly in combination with and I know part of the growth plan is other financial products. It is used as a to add more strategic relationships

with other industries and organizations related to financial independence and aging in place for seniors, such as the relationship with RetireSafe – are there concerns about developing competing priorities that dilute the ability to focus on the HECM, or does broader scope of industries create additional leverage for the organization in Washington? JEFF: No, the idea of the coalition is not about the HECM; it is about financial independence. It happens that one of the most powerful tools to promote financial independence is the HECM. But starting with the concept of financial independence and aging in place changes the conversation and that’s why you can bring in other organizations. Frankly, having aging groups, elder care groups, veterans’ groups, and home health care groups come in, actually creates a much more powerful message: We are not just talking about a product that we benefit from selling, we are talking about a problem in society and

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how to solve it. Many in Washington are fairly cynical – they assume that somebody coming into their office is defending their own self-interest. One of the things that is important to understand is that there is something beyond our own parochial self-interest at stake here. Brett: How do the efforts of CIS complement or interact with the efforts of trade associations, such as NRMLA, or broader-based industry groups?

JEFF: We coordinate our efforts actively with NRMLA. It is important that we speak with one voice. When you have so many industry participants within CIS it is important that legislators and others hear one consistent voice. We are happy and pleased to work and coordinate together. We’ve also been looking at ways to work with other trade associations. We’re not looking to isolate ourselves; we’re looking to connect on as

many levels as possible with groups that have the same interests. As the CIS grows, it looks to continue to foster relationships with individuals, companies and organizations focused on addressing the needs of financial independence and aging in place for a growing population of aging Americans. Lewis sees key roles for people at all levels of participation, from those who are able to make small contributions to support the lobbying efforts, to those who are able to make larger contributions and participate in policymaking and communications efforts in Washington. While the activities of the organization ultimately serve a larger purpose, they continue to foster the idea of the HECM product as a powerful tool to help meet the needs of seniors in that broader perspective. For Lewis, the key is ensuring that the lobbying efforts extend beyond the immediate needs and maintain an ongoing focus of the long-term development of the concepts focused on financial independence and aging in place. g

8/11/2011 9:29:56 AM

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The Reverse Review October 2011

the Essentials

The Legal Brief Series A fall roundup of HECM program changes: Mortgage Letters 2011-26, 2011-31 and short sales. Fed Kamensky & Joel Schiffman

ith the leaves changing colors and fall upon us, we once again provide an update on recent Mortgagee Letters issued by the U.S. Department of Housing and Urban Development (HUD) concerning the Home Equity Conversion Mortgage (HECM) program, including a significant policy change clarified by HUD in frequently asked questions on its website. Some of these changes relate to counseling issues and provide more form than substance. However, a substantive policy change relating to short payoffs promises to have dramatic implications for non-borrower spouses and heirs who wish to retain the collateral property following death of the borrower.

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Short Payoffs on HECM Loans In general, when a HECM loan becomes due and payable, the outstanding loan balance must be paid in full if the borrower or the borrower’s heirs or estate desire to retain ownership of the property. However, in certain limited circumstances, HECM regulations have always permitted the borrower or the borrower’s heirs or estate to utilize a short sale of the property.1 Specifically, if a HECM loan is due and payable, Section 206.125(c) of the HUD HECM regulations allow the borrower or the borrower’s heirs or estate to sell the property for 95 percent of its appraised value and extinguish the reverse mortgage by applying the net proceeds of the sale to the loan balance.2 In July 2011, HUD issued updated HECM Servicing Frequently Asked Questions (FAQs), providing new guidance on repayment of HECM loans that become due and payable as a result of the death of the last surviving borrower. According to HUD’s FAQs, the borrower’s estate or heirs, including a non-borrowing spouse, may satisfy a HECM loan by paying the lesser of: (a) the loan balance, or (b) 95 percent of the current appraised value of the property. The fundamental change wrought by the FAQs is that no actual “sale” of the property is necessary to allow a short payoff. According to the FAQs, HUD considers any post-death conveyance by will or operation of law to the borrower’s heirs or estate (including a surviving spouse) to fall within the meaning of the term “sale.” According to the FAQs, the loan payoff must occur simultaneously with or immediately following the post-death conveyance. The FAQs also remind lenders and servicers that the property must be appraised after the HECM loan becomes due and payable. According to Section 206.125(b) of the HUD HECM regulations, an appraisal must be obtained: (a) no later than 30 days after

receiving notice that the loan is due and payable, (b) no later than 30 days after learning of the borrower’s death, or (c) upon the borrower’s request in connection with a pending sale. The property also must be appraised no later than 15 days before a foreclosure sale.

Stay of Existing HECM Foreclosure and Eviction Cases The HECM Servicing FAQs also address the model notice that HECM servicers must use to notify all related parties of the deceased borrower of HUD’s policy change, as articulated in the FAQs, allowing the loan to be satisfied by paying 95 percent of the current appraised value of the property. For this purpose, HUD separately provided HECM servicers with a model notice to be used for notifying the deceased borrower’s related parties. HUD subsequently clarified in the HECM Servicing FAQs that HECM servicers are not required to conduct a search for the borrower’s heirs. HECM servicers are instructed to send the model notice to the property address, the borrower’s personal representative of executor, if any, and to any other heirs and known related parties that may be interested in the property. In the FAQs, HUD also clarified that foreclosures and evictions must be stayed in order to send out the model notice in connection with those HECM loans where the due and payable status is based on the borrower’s death. HUD also clarified that the stay is required only if the loan potentially involves a non-borrowing spouse or other heir of the borrower that may be interested in retaining the property. According to the FAQs, HECM servicers are granted an exception from the

foreclosure timeframes established under HUD’s regulations for delays incurred as a result of sending the model notice and reviewing any responses from interested parties. The FAQs indicate According to that HUD will HUD’s FAQs, the not curtail debenture borrower’s interest (paid to estate HECM lenders or heirs, as part of a claim for insurance including benefits under a nonthe HECM borrowing program) if spouse, may the servicer sends out the satisfy a HECM model notice loan by paying and reviews the lesser responses from the interested of: (a) the loan parties within balance, or (b) the required 95 percent of the timeframe. current appraised The FAQs set value of the a reasonable timeframe for property. obtaining a response from the interested parties as 45 days from the servicer’s receipt of a notification that the notice has been received. According to the FAQs, HECM servicers must exercise due diligence in sending the model notices and obtaining any responses prior to proceeding with foreclosure. HECM servicers must document their loan files with evidence of compliance with these requirements. HECM servicers must retain supporting documentation in the servicing file for purposes of post claim reviews, and must be able to demonstrate that the delay in the foreclosure timeframe was related to sending the model notice and >>

1. The HECM regulations also authorize lenders and servicers to accept a deed-in-lieu of foreclosure, assuming that there are no subsequent liens that attach to the property and the borrower can convey good and marketable title to the lender. 2. HUD’s prior guidance in Mortgagee Letter 2008-38 (ML 08-38), issued December 5, 2008, required short sales involving HECM loans to be conducted pursuant to an “arm’s length” transaction. However, ML 08-38 was rescinded by Mortgagee Letter 2011-16 (ML 11-16), effective April 5, 2011.

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reviewing any responses from interested parties.

New Counseling Intermediaries Approved by HUD In general, HECM lenders are required to provide each borrower with a list of HECM counseling agencies, including no fewer than nine HUD-approved counseling agencies. More specifically, the list must include at least five counseling agencies within the local area, state or both of the borrower, with one of the local agencies located within a reasonable driving distance for the purpose of face-to-face counseling. The list also must include the following four national intermediaries: National Foundation for Credit Counseling (NFCC), Money Management International (MMI), National Council on the Aging (NCOA), and CredAbility.3 On August 12, 2011, HUD issued Mortgagee Letter 2011-26 (ML 11-26), which requires HECM lenders to also provide borrowers with the names of counseling intermediaries that have been awarded HECM counseling grant funds by HUD. According to ML 11-26, the names of counseling intermediaries that must be provided to HECM applicants could potentially change each year. For 2011, the following three intermediaries have been added to the list: ClearPoint Financial Solutions, Neighborhood Reinvestment Corporation and Springboard. According to ML 11-26, if the “referral date” is on or after May 1, 2011, the list of counseling agencies provided to the borrower must include the three additional intermediaries, for a total of seven intermediaries (i.e., the four national intermediaries listed above plus the three additional intermediaries receiving HECM grant funds set out in ML 11-26).4 It should be noted that HUD originally announced the three additional 32

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intermediaries in April 2011 through informal guidance to HECM lenders. However, HUD’s formal guidance on this subject in ML 11-26 was not officially issued until August 12, 2011.

Revised HECM Counseling Requirements

c: d:

Agency Tax Identification Number was replaced with Agency Housing Counseling System Identification number; and HECM for Purchase Certification by the homebuyer was added to the HECM counseling certificate.

According to ML 11-31, lenders should On August 26, 2011, HUD issued use the Case Number Assignment screen Mortgagee Letter 2011-31 (ML 11-31) or the Insurance Application revising HECM counseling screen in FHA Connection to requirements and associate the HECM counseling providing an updated form certificate number with a new of the HECM counseling FHA case number. According to certificate. The guidance The provisions ML 11-31, existing case numbers and requirements in ML 11of ML 11-31 may be transferred by one 31 become effective 30 days HECM lender to another without from the date of ML 11-31. represent a regard to the HECM counseling change in certificate expiration date. ML 11-31 requires nonHUD’s policy borrowing spouses to Under HUD’s existing rules, obtain HECM counseling. by requiring the HECM counseling certificates Thus, the following parties non-borrowing expire 180 days from the date of will now be required to spouse to attend counseling. ML 11-31 indicates obtain HECM counseling HECM counseling that FHA case numbers expire and sign the HECM and sign and six months after the date of the counseling certificate: date the HECM last activity on FHA Connection. (A) all property owners ML 11-31 reminds lenders to act appearing on the title to counseling expediently to obtain a new FHA the property (or their legal certificate. case number because each case representative if the case must be associated with a unique HECM involves lack of competency), and (B) the counseling certificate which expires 180 non-borrowing spouse. The provisions days from the date of counseling. of ML 11-31 represent a change in HUD’s policy by requiring the non-borrowing HUD’s new short payoff policy, ML spouse to attend HECM counseling and 11-26 and ML 22-31 represent the latest sign and date the HECM counseling developments in the HECM program certificate.5 HECM originators and servicers would be wise to ensure that appropriate ML 11-31 also announced the processes and procedures are in place to following changes to the HECM fully comply with these new directives. g counseling certificate (Form

HUD-92902):

a: b:

ame and signature line was n added for the attorney-in-fact holding the power of attorney;

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.

t he HECM Saver was added as one of the options that counselors will present to HECM applicants;

3. See HUD Mortgagee Letter 2010-37 (Nov. 8, 2010). 4. The “referral date” is the date when the borrower received the list of HECM counselors from the lender. According to ML 11-26, a new field for the “referral date” has been added to the HECM Referral List Update screen on FHA Connection. 5. HUD previously recommended, but did not require, that the HECM non-borrowing spouse receive counseling. See HUD Mortgagee Letter 2006-25 (Sept. 28, 2006).

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The Reverse Review October 2011

the Last

Word Wells Fargo, Bank of America and Financial Freedom are all gone and not competitive factors. This now becomes a major plus for those of us left, right? The question is, how do we reach out and attract seniors to do business with us? Buying leads utilizing Internet marketing programs and call centers are tools being used by many companies to attract business. But what about the traditional methods with some new twists that can not only get you immediate business but future business as well? Letâ&#x20AC;&#x2122;s examine a few ways you can differentiate yourself from the originators that are procuring business using the traditional method of networking.

Where Is the Business? John Smaldone

Those of us in the reverse mortgage industry face major challenges. What does the future hold? How should we originate loans? Why should a senior want to do business with us? 34

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Seek out senior citizen recreational centers (private and countysponsored) and set up educational workshops with them. If you approach it right, the center will advertise the workshop for you by putting it in their newsletter. Increase attendance by asking an elder law attorney to speak as a special guest. Make it appear that the recreational center is the one putting on the workshop and ask them to deliver a press release regarding the event. This gives the educational workshop a completely different image than just some sales presentation. Then, place an ad in the paper with the same theme as the press release, remembering to mention your special guest speaker. Work referrals: If you do right by your senior, they will help you; all you have to do is ask! Ask them if you can hold a neighborhood workshop in their home. With the help of your referral source, try to get six to nine people to attend the workshop. Eventually you will have pockets of referral sources. Treat your referral source to a dinner every time they

give you a referral that turns into a closed loan. They will love you for it! Call on small community banks. They are looking for ways to increase their customer base and reverse mortgages are a way to do this. Talk to a decision maker who is in charge of lending. Donâ&#x20AC;&#x2122;t just ask them for referrals, tell them what you can do to increase their customer base. Have your plan displayed in a presentation format. Be sure to include: A. Your plan to conduct educational workshops in their branches on their behalf. Explain to them how they should advertise it (as a community educational program for seniors). B. A tri-fold brochure without your company name on it (this way the bank can stamp the name of their institution on the brochure). The branches can then place your brochures in clear plastic racks on the teller counters as well as any other table in the waiting room. C. A simple information worksheet that seniors can fill out. Leave them at the teller counter with your brochures so the branch personnel can contact you with the prospective borrower. These suggestions will set you apart from your competitors. Remember to focus on the platform you choose and become proficient in the ones you take on. We have many opportunities in the years ahead and if you use some of these techniques, you will be successful in the reverse mortgage industry. Good luck, prospect wisely and remember, we are in the business to help our seniors. Do all you can for them and you will not only be successful but words will not describe the gratification you will feel from the help you have provided them. g

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