THE
JUNE 2011
the
review
Industry’s Message to Washington, D.C.
John Mitchell, CPA
INSIDE this issue
effects of the new compensation guidelines By Joshua Shein
PR TIPS on a budget By Justin Meise
5 ways to build your network By Timothy A. Sherman, Esq
ReverseVision The software that ... ... won’t leave you in the rain
ReverseVision is supported by more reverse mortgage lenders than any other software.
ReverseVision Suite
In these uncertain times, Freedom of Action can determine a company’s survival. Strategically thinking companies choose ReverseVision because ReverseVision combines the highest independence with maximum compatibility. ReverseVision protects its customers by giving them the maximum freedom of action.
www.reversevision.com (919) 834 0070 info@reversevision.com ReverseVision Inc. 3310 Pollock Place Raleigh, NC 27607-7006
TRR 06.11
24
28
36
34
l
the Essentials
HECM Counseling as a Marketing Tool 24 By understanding how HECM counseling works, you are able to increase loan production and boost referrals.
Alain Valles, CRMP
The Industry’s Message to Washington, D.C. 28 Reverse mortgages save billions of Medicaid dollars a year.
John Mitchell, CPA
Leveling the Playing Field 34 The effects of the new compensation guidelines.
Joshua Shein
Visibility on a Budget
36
Understanding the fundamentals of PR can help you generate visibility on a limited budget.
Justin Meise l
the The Report 9,11 Ask the Underwriter
| TRR
Ask the Appraiser
18
The Hot Seat
20
The Perspective 14
The Industry Roundup 22
The Advisor 16
The Last Word 41
4
12
Core
The Resources 42
reversereview.com
8 TRR
|5
Meet the Team Publisher
Aman Makkar Your greatest strength is knowing your greatest weakness.
Letter from the Editor l
Editor-in-Chief
e
Emily Vannucci “You’re trying too hard... try less.”
National Sales Rep. & Marketing Coordinator they are latecomers to this limitless
Kate Sheehan “Love what you do. Do what you love”... Done and done.
their friend request, I should be
Copy Editor
After finishing up this month’s issue,
to be on there. As a matter of fact,
rock-solid articles on marketing and
site. Instead of hesitantly accepting
I’ve realized that we have an array of PR for all those movers and shakers out there.
Not only is the industry changing,
times Mom and Dad!”
but characteristics of our target
Don’t miss The Advisor this month,
Justin Meise’s article, “Visibility
ESQ (a new contributor of the pub).
market are changing as well. In
on a Budget”, he shares some very significant stats about the baby
boomer generation and the Internet. Boomers are moving online and we need to be right there with them to continue to communicate through
tools such as Facebook, LinkedIn and YouTube.
I was an early user of Facebook and solely logged on to connect with
college friends who had access and to peruse the abundance of photos
posted to their profiles. I’m happy to
see that Facebook has finally evolved
into a means of communication for so
written by Timothy A. Sherman,
your personal network, a great article to bookmark for use throughout the workday.
News Editor
message of these articles is to stay connected. With the way that our industry is changing, we should
constantly be networking, talking,
emailing, YouTubing, Facebooking
and LinkedIn(ing?) with each other. The world is online and we need to make sure we are as well.
Reverse Review.
to terms with the staggering stats regarding baby boomers and the
Internet, I realized that they needed 6 | TRR
Brett G. Varner “He who spends too much time looking over their shoulder, walks into walls.”
I think in the end, the underlying
was a little taken aback when both on the social site. But after coming
Taracey Knight My spelling is better when I type with my toes.
should cultivate to build and grow
Please enjoy all of the hard work
my mother and father “friended” me
Creative Director
Tim provides five relationships one
many more age groups and especially growing businesses! I must admit, I
Kersten Wehde I can’t read a menu, text or wedding invitation without proofreading it.
thinking, “Come on, get with the
that went into our June issue of The
Until next time,
Editor-in-Chief { emily
vannucci
}
Printer The Ovid Bell Press Advertising Information phone : 858.832.8320 e-mail : kate@reversereview.com Subscriptions e-mail : information@reversereview.com Editorial Content e-mail : emily@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. Bernardo Drive Suite 450 San Diego, CA 92127
“
Our phone calls are always answered, emails always responded to. Your attitude just ROCKS. Thank you for setting us up with a team – it really works! Vicki AppraiserLoft Client
“
Ever wish your Appraisal Management Company treated you like a rock star?
Rock on.
We know our devotion to customer service, quality and technology is what makes us the valuation partner for many of the nation’s most successful reverse mortgage lenders. Fact is, we’re proud that every month we help thousands of lenders close more loans with our quick turn times, accurate values and fanatical attention to every detail. Just don’t take our word for it, visit kudos.appraiserloft.com and see for yourself.
n
Approved with all Top Reverse Mortgage Lenders
n
Extensive Reverse Mortgage Experience
n
Senior Specific Appraiser Conduct Requirements
n
Valuation Products and Services proven to increase closing performance
n
Certified Appraiser Independence
877.870.LOFT
(5638)
| appraiserloft.com
reversereview.com
8 TRR
|7
l
the Contributors Peter Bell
1
Feature Article l
John Mitchell, CPA
1
The Industry’s Message to Washington, D.C. pg 28
The Hot Seat, pg 20
Peter Bell is a housing policy analyst and advocate who has focused his 35-year career on affordable housing and aging issues. His company, Dworbell, Inc., provides association management services to NRMLA, where he has served as CEO since 1996. Bell sits on the boards of several organizations involved in affordable housing and a few jazz organizations, including the Telluride Jazz Celebration and the DC Jazz Festival.
Dennis G. Gassoway 2
2
Tax Tip, pg 19
As the National Sales Executive for ICG Inc., the nation’s most diverse and customizable real estate tax service, Gassoway is responsible for business development at all levels of the loan servicing field. Prior to joining ICG Inc. in 2007, Gassoway held business development positions at Transamerica, Lereta and LandAmerica. In addition to many achievement awards, Gassoway is an honors graduate with a BA in marketing and finance.
Shannon Hicks
3
John Mitchell, CPA is the Founder of Reverse Mortgage USA (formally 1st AA Reverse Mortgage Inc.) In 2010 they were the largest reverse mortgage broker in the country and have been in the top 10 originators in the country for the last three years. The company is based in Austin Texas and originates in 10 states.
3
Shannon Hicks is VP of Product Development at Reverse Fortunes, Inc. Hicks draws from his experience as a reverse mortgage originator and prior work in the financial services industry. Hicks has spoken nationally at NRMLA events and is host of Reverse Fortunes Weekly, the nation’s only weekly podcast for reverse mortgage professionals. 800.805.9328
4
The Report, pg 9,11
| TRR
John K. Lunde
4
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
Justin Meise
5 5
Visibility on a Budget, pg 36
Justin Meise is a Principal with River Communications, a White Plains, NY PR firm specializing in financial services for over 20 years. Meise worked with NRMLA to launch the consumer education program starting in 2000 and provided PR services to Financial Freedom for over 10 years. jmeise@riverinc.com
6 8
The Last Word, pg 41
The Reverse Review June 2011
the Report
April 2011 Wells Fargo Bank of Bank, N.A. America, N.A.
Top Lenders Report MetLife Bank, N.A. Endorsement 616
One Reverse Generation Mortgage, LLC Mortgage Co. Endorsement Endorsement 423 243
12345
Endorsement
CHARLOTTE
1253
Endorsement
Lender
896
Endorsements
Lender
Endorsements
URBAN FINANCIAL GROUP
228
MAS ASSOCIATES
20
GENWORTH FINANCIAL HM EQUITY
140
IREVERSE HOME LOANS LLC
20
SECURITY ONE LENDING
123
SIDUS FINANCIAL LLC
19
GUARDIAN FIRST FUNDING GROUP
99
NATIONWIDE EQUITIES CO
17
AMERICAN ADVISORS GROUP
82
AMERICAN PACIFIC MORTGAGE
17
REVERSE MORTGAGE USA INC
82
PRIMARY RESIDENTIAL MORTGAGE
16
NEW DAY FINANCIAL LLC
77
LIVE WELL FINANCIAL INC
15
SENIOR MORTGAGE BANKERS INC
61
METRO ISLAND MORTGAGE INC
14
THE FIRST NATIONAL BANK
59
MIDCONTINENT FINANCIAL CENTER
14
GREAT OAK LENDING
53
NETWORK FUNDING
14
EQUIPOINT FINANCIAL NETWORK
53
GMFS LLC
14
PNC REVERSE MORTGAGE LLC
48
REVERSE MORTGAGE SOLUTIONS INC
14
FINANCIAL FREEDOM ACQUISITION
45
STAY IN HOME MORTGAGE INC
13
M AND T BANK
42
ENVOY MORTGAGE LTD
13
ROYAL UNITED MORTGAGE LLC
38
JAMES B NUTTER AND COMPANY
13
MONEY HOUSE INC
34
HOME SAVINGS OF AMERICA
13
ASPIRE FINANCIAL INC
33
BRIAN A COLE & ASSOCIATES LTD
13
SUN WEST MORTGAGE CO INC
33
CHRISTENSEN FINANCIAL INC
12
SUNTRUST MORTGAGE INC
33
HARVARD HOME MORTGAGE INC
11
WEBSTER BANK
28
FULTON BANK NATIONAL ASSOCIATION
11
PRIMELENDING A PLAINSCAPITAL
23
TOWNEBANK
11
reversereview.com
8 TRR
|9
l
the Contributors Ralph Rosynek
7
7
8
Ask the Underwriter, pg 12
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
Joshua Shein
8
9
Leveling the Playing Field, pg 34
Joshua Shein is CEO of 1st Maryland Mortgage Corp. dba Great Oak Lending Partners in Timonium, MD. He Co-Founded the company more than nine years ago and recently led Great Oak’s merger with 1st Maryland Mortgage Corp., which made the company a FHA Full Eagle direct lender. Great Oak has been ranked number one in Maryland for reverse mortgages for the last three quarters and in the top twenty nationwide.
Timothy A. Sherman, ESQ 10
11
12
10
| TRR
13
9
The Advisor, pg 16
Attorney Sherman is a proud graduate of Boston College High School (‘93) and the University of Notre Dame (‘97). Sherman earned his J.D. from Boston College Law School in 2002. Sherman worked at Ernst & Young and has been working in the real estate industry since ‘99. Before cofounding Sherman & Calla, he managed three offices of a regional title and escrow company and has handled approximately 2,000 closings since his admittance to the Massachusetts Bar. tim@timshermanlaw.com | 781.930.3103
Brett G. Varner
10
The Perspective, pg 14
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
11
HECM Counseling as a Marketing Tool, pg 24
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 12
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 June 2011
the Report
INDUSTRY SUMMARY Retail Endorsement Growth
10.8%
March Endorsements Retail and Wholesale Volumes
Wholesale Endorsement Growth
-0.71%
- Reverse Market Insight As regulation forces the reverse industry to evolve, there are many ways that
Total Endorsement Growth
6.1%
we’ll eventually see the impacts. We’ve been tracking a declining number of
originators for quite some time, which is the expected result of many changes pushing revenue down and costs up for the smallest reverse originators.
* Figures Above Reflect Change from Prior Month
The potential offset to that trend is just starting to show up, as TPO
Trailing Twelve Month Endorsements
originations by non-FHA approved originators (working through an approved sponsor) grew dramatically in March. The chart below shows this activity by sponsor for the first three months of 2011:
HECM Non-FHA Approved TPO Activity By Sponsor HECM Non-‐FHA Approved TPO Ac5vity By Sponsor
400
10,000
METLIFE BANK
350
WELLS FARGO BANK NA GENWORTH FINANCIAL HM EQUITY A
300
8,000
SUN WEST MORTGAGE CO INC BANK OF AMERICA NA CHARLOTTE
250
GENERATION MORTGAGE COMPANY
6,000
200
PLAZA HOME MORTGAGE INC URBAN FINANCIAL GROUP
4,000
150
NATIONWIDE EQUITIES CORPORATION LIVE WELL FINANCIAL INC
100
2,000
SECURITY ONE LENDING CHERRY CREEK MORTGAGE CO INC
50
0
JAMES B NUTTER AND COMPANY FINANCIAL FREEDOM ACQUISITION
0
4 5 6 7 8 9 10 11 12 1 2 3 Retail
1/1/2011
Wholesale *Numbers Represent Months
2/1/2011
MCM HOLDINGS INC
3/1/2011
While this activity wasn’t enough to keep broker/wholesale endorsements from falling -0.7% in March to 2,785, much less keep up with direct/retail
RETAIL UNITS CHG%
WHOLESALE UNITS CHG%
TOTAL UNITS CHG%
4
2,692
-3.27%
2,813 -7.41%
5,505 -5.43%
5
2,465
-8.43%
2,086 -25.84%
4,551 -17.33%
6
2,900 17.65%
2,404 15.24%
5,304 16.55%
7
3,358 15.79%
2,521
4.87%
5,879 10.84%
8
3,969
18.2%
2,672
5.99%
6,641 12.96%
9
3,405 -14.21%
2,558 -4.27%
5,963 -10.21%
10
2,976
-12.6%
2,307
-9.81%
5,283 -11.4%
11
4,004
34.54
2,547
10.4%
12
4,343
8.47%
1
4,049
-6.77%
2
4,075
0.64%
2,805 16.25%
6,880
6.47%
3
4,515
10.8%
2,785 -0.71%
7,300
6.1%
TOT
42.751
6,551
24.0%
2,207 -13.35%
6,550 -0.02%
9.33%
6,462 -1.34%
2,413
30,118
71,390
endorsements that grew 10.8%, the sheer growth from February is astounding. At the most pessimistic, it should ease the declines in the broker/wholesale
channel, and an optimist might hope for a rebound given the potential of credit unions and community banks.
From a lender perspective, we saw 4 of the top 10 lenders hit 12 month highs in the month as the industry set its own high water mark for the same period.
• Wells Fargo captured 31.9% of all loans through both retail and wholesale channels, well above their 12 month share average of 26.4%.
• Generation was whisper close to breaking double digits in market share at 9.7%.
• One Reverse continues to grow their direct lending business, up 22.2% in the past 12 months and showing a 5% market share.
• Sun West is on the comeback trail and back in the top 10 this month for the first time since November. g
reversereview.com
8 TRR
| 11
The Reverse Review June 2011
ask the Underwriter by warmer temperatures ushering in summer. Unfortunately, spring memories for many include the remnants of northern melting snows and those April showers.
The new guidance contained in this Mortgagee Letter is as follows: 8 A notice that any property located within a designated Coastal Barrier Resource System (CBRS) unit is not eligible for an FHA- insured
In a year-to-date already filled with significant weather advisories and hazards, the Northeast and the
upper and lower Midwest are now experiencing flood issues. Weather
related events coupled with an already
economically impacted housing market
federal disaster declaration. In December 2010, FHA issued additional
guidance and changes to its Flood Zone
FHA-insured mortgages.
improvements (the dwelling and related value of the property and subject to
flood damage) is located within a SFHA, the property is not eligible for FHA
mortgage insurance unless additional
documentation, certification, elevation and/or mapping requirements and
conditions are provided per guideline and subsequently approved.
Requirements.
The mortgagee is responsible for
43 provides new guidance
a special flood hazard area (SFHA) as
Mortgagee Letter 2010-
on FHA Flood Zone requirements
and updates Mortgagee Letter 2009-37. FHA now requires that all mortgagees obtain a flood zone determination
on all properties instead of strongly
encouraging such action. In addition,
FHA is now consistent with the Coastal Barrier Resources Act (CBRA) by
prohibiting FHA Mortgage Insurance
| TRR
properties that will be collateral for
structures/equipment essential to the
determination and the existence of a
12
determination services for all
as we move into summer. Particular the subject property flood zone
Late spring is a memorable time for most. Green grass, budding trees and spring flowers brought about
obtain life-of-loan flood zone
If any portion of the property
attention is needed when considering
Ralph Rosynek
8 A requirement that mortgagees
will no doubt also affect the ability for
many seniors to remain in their homes
Flood Zone or FEMA Disaster Area?
mortgage.
for properties located within designated coastal barriers.
determining if a property is located in designated by the Federal Emergency Management Agency (FEMA). The
FHA appraiser is required to review
the FEMA Flood Insurance Rate Map,
note the FEMA zone designation on the Uniform Residential Appraisal Report
(URAR), and if the property is located in a SFHA, attach a copy of the flood map
panel. Mortgagees are required to obtain life-of-loan flood zone determination
services independent of any assessment made by the appraiser.
FHA now requires that all Mortgagees obtain a flood zone determination on all properties instead of strongly encouraging such action.
Prior to closing, mortgagees must
What do you do when your property is
to obtain adequate flood insurance as a
disaster declaration by FEMA (Federal
inform borrowers of the requirement condition of closing
not in a flood zone and is part of a federal Emergency Management
for properties where
Agency)?
any portion of the
dwelling and related structures and
equipment are located in a SFHA. Flood
insurance premiums must be included
in the escrow along with taxes and
hazard insurance
Weather related events coupled with an already economically impacted housing market will no doubt
also affect the ability for many seniors to remain in required for those their homes as we move items, and evidence into summer. Particular of satisfactory attention is needed when coverage in effect with considering the subject premiums paid must property flood zone be provided prior to determination and the closing. The actual existence of a federal cost of obtaining flood disaster declaration. zone determination only if escrow is
Generally, for appraisal reports that have been
completed, lender appraisal policies for properties
located in Federal Disaster Areas where assistance to
individuals and households is being provided by
FEMA require a “Property Inspection or Condition Report� with photos
(interior and front/back
exterior) if the property is
located in a new or existing Federal Disaster Area prior to closing.
Mortgagees and servicers must assure
While sources for the property inspection or condition report may vary by lender typically, the inspection may be provided by any reputable source such as:
insurance during the life of the mortgage.
8 A ppraiser
services may be
passed on to the borrower.
the borrowers maintain adequate flood Insurance must be obtained if the
mortgagee or servicer becomes aware
that the building involved subsequently
becomes part of an SFHA due to a Flood Insurance Rate Map (FIRM) revision.
Mortgagees are required to force place
flood insurance if the borrower allows the policy to lapse or if the coverage is found to be inadequate.
8 Licensed contractors 8 Home & building inspection services 8 Insurance inspectors 8 F lood service damage verification report services 8 B ank attorney/title closing agent (if closing held in borrowers home)
The inspector must certify the following:
For more detailed information on flood
zones and flood insurance requirements, consult Mortgagee Letter 2010-43.
8 The property is free from damage and (if re-inspection or re-certification) is
in the same condition as previously appraised. 8 The property maintains the same marketability and value as originally appraised. The declaration of a Federal Disaster
Area may remain in effect for months
after the actual occurrence of the event. It is important to be aware of prior
declarations when reviewing appraisal reports.
New appraisal reports completed after the disaster declaration should be
reviewed in detail to determine any
damage or repairs needed resulting from the disaster as well as appraiser specific
comments relating to the existence of the disaster declaration.
Key to the acceptability of the appraisal
report and property is the pairing of the life of loan flood zone certification, the appraiser comments, the overall effect
the disaster had on the marketability and value of the subject property.
A common mistake is to assume that condominium units above the first
floor are not subject to flood insurance
requirements or, in the case of a federal disaster declaration, subject to re-
inspection guidelines. The additional measures undertaken to ensure the
property has not been damaged by the
effects of the disaster is both a borrower safeguard and safety and soundness measure for the lender and FHA.
Our hearts and thoughts go out to those individuals affected by weather related and natural disaster events. g
reversereview.com
8 TRR
| 13
The Reverse Review June 2011
the Perspective pervasiveness of adversarial relationships has always surprised me. Over the years, I have heard many rants from originators about how a loan didn’t get closed because the appraiser’s valuation, or the underwriter’s excessive scrutiny over irrelevant details killed the loan.
This has nothing to do with the
After reviewing the files, more often
of the subject property. It goes without
than not, I would find the reasons that the file failed to close were not due to
the efforts of those providing services or processing the file, but were the
direct result of the originator’s failure to properly evaluate the file and available supporting data in accordance with
underwriting standards. In other words, the originator would ignore information that put their deal at risk in the hopes
that others would too, because the rest of the file was “clean.”
Respecting the Process
Drives
Originator
Success Brett G. Varner
As I have evaluated the lending process, the 14
| TRR
I refer to this as a l g
originator’s ability to evaluate the
available information. For example, I have conducted trainings with
originators where they are provided
with details of a subject property and a
list of sales that occurred in the subject’s area. The originators are tasked with
reviewing the comparable data, selecting what they determine to be the most
supportive, and then estimating a value saying that this is not an exact science, but an exercise in estimation. A vast
percentage of originators succeed in
providing a reasonable estimation that falls in line with the actual appraised value.
In practice, however, some of these
same originators then base their quotes on exaggerations of value estimation
and then become frustrated when the appraisal comes in much lower. By
&
Policy of Wishful Thinking.
The policy takes a hold of a person who, for one reason or another, wants to get a deal done even though they are aware of issues that would likely prevent it from being possible. In some cases, it is related to a personal need, such as needing that commission this month, and in others it is more
noble, such as wanting to help a client with a dire need. However, the result is the same; important details get
overlooked in the hope that others will see the need and move the file along.
ignoring the data, they are wishing for a different result, a Policy of Wishful Thinking. This also disrespects the
responsibilities of appraisers who are
dealing with increased scrutiny on the strength of their valuations.
Underwriters face an even greater
challenge because too many originators fail to truly understand what the
underwriters’ responsibilities truly are. Since everyone in the lending
process, from the originator up to the
investor, receives revenue from closed loan volumes, underwriters do have a vested interest in helping loans to
get closed. However, at the same time,
O
A former colleague used to tell me that “the mortgage business is the only business where you can go from the heights of ecstasy to the depths of despair on the same day, on the same file.”
they must serve as a risk manager for
over certain details may
are complete and salable. They do not
over having another loan in
their companies and make sure that files make the rules or establish the investor guidelines, but they are tasked with
diligence to ensure that each file meets the requirements.
Originators will express frustration because an underwriter called for
additional information, be it to support occupancy, or further review of a
property condition issue. However,
the pipeline.
A former colleague used to tell me that “the mortgage
business is the only business where you can go from the heights of ecstasy to the
depths of despair on the
same day, on the same file.” I never bought into that
conveniently do not ask their clients
me it stemmed from the
about them in the hopes that they will not come up during underwriting.
Additionally, a point of contention
between underwriters and originators can stem from differences between regulatory guidelines and investor guidelines. The investors that lenders sell their loans to
often will have more stringent guidelines than the regulators based upon the risk
profiles that are acceptable to the sources of capital. In cases where an underwriter
rejects a file due to an investor guideline,
originators may argue that it goes beyond
light later on.
drive a certain exuberance
just like with valuation, originators are often aware of these situations, or they
delays if the problem came to
philosophy because to
Policy of Wishful Thinking. Undoubtedly, there are
occasional situations that an originator could not have
foreseen or expected. At the same time, I have always
been confident that the vast majority of problems could
be identified and addressed early in the process if the
The secret to success lies within this respect for time. By understanding and respecting the roles and responsibilities of each person in the loan origination process, along with the rules and guidelines that define those responsibilities, originators can cultivate more respect in return.
originator was asking the
right questions and looking into potential red flags.
I think most originators would
admit to being influenced by the Policy of Wishful Thinking. The
most successful are able to quell
the impulse most of the time and acknowledge challenges that a
file faces. This is due to a strong respect for their time and the
time of others who work on a file during its processing.
The secret to success lies
within this respect for time. By understanding and respecting the roles and responsibilities of each person in the loan
origination process, along with the rules and guidelines that define those responsibilities,
originators can cultivate more respect in return. Striving to
make sure that a file is complete and prepared to move on to
the next stage streamlines the
process and earns the appreciation of those along the way. Creating a track
record of overlooked details bogs down the system and frustrates everyone.
the regulatory requirement, but investors
The question I always asked was, “if a
loans they are willing to purchase.
when would you want to know?” By
Originators are, in essence, the
group of people work on a file that isn’t
Everything starts with them and how
do have the right to establish standards of
With a government insured product, such as the HECM, underwriters have the
added responsibility of ensuring that the
file will be acceptable for FHA insurance.
A whole new source of problems occurs if the FHA rejects a file for the government-
problem with a file is insurmountable, overlooking issues, not only does a
going anywhere, but the borrower is also getting their hopes up. It is a situation where no one wins and ultimately is disrespectful to everyone involved.
backed insurance.
Conversely, if there is a problem that
Originators are generally well versed
to know about it early in the process?
in the guidelines of the lenders they
work with and know how to compile a complete and insurable file. Skipping
can be addressed, wouldn’t it be better This provides the opportunity to find a solution during the normal processing
of the file without adding unnecessary
quarterbacks of the origination process. they create and prepare a file to be
processed. It is a simple scenario that the higher quality of the file going in, the
higher the likelihood that it will proceed relatively smoothly through the process. Granted, these days, it does seem that every file faces significant challenges
along the way, but the more originators avoid the trap of a Policy of Wishful
Thinking, the better the process will be
for all, most importantly, the borrower. g reversereview.com
8 TRR
| 15
The Reverse Review June 2011
the Advisor scores of family photos, souvenirs of
vacations, etc. It was instantly apparent that the owners were proud
different perspective on life than today’s senior. I am just now starting my family; there is no shame in that
of their home and their
for me. In years past, it was
family. However, when
customary for men half my
I first uttered the phrase
current age to be starting
“reverse mortgage”, one
of the owners immediately moved his index finger in
front of his lips and shushed me. In hushed tones, he
indicated he didn’t want
his neighbors to know he was obtaining a reverse mortgage. Within 30
seconds, the pride I sensed
in the borrower had turned to shame.
Such emotion saddened
me. The man has absolutely no reason to be ashamed or embarrassed. It is not
his fault that our nation’s
Building Your Network Timothy A. Sherman, Esq.
economy has fallen upon these hard times. It is not
his fault it costs $70 to fill
his car’s gas tank. It is not
his fault that property taxes
However, when I first uttered the phrase “reverse mortgage”, one of the owners immediately moved his index finger in front of his lips and shushed me. In hushed tones, he indicated he didn’t want his neighbors to know he was obtaining a reverse mortgage. Within 30 seconds, the pride I sensed in the borrower had turned to shame.
have risen dramatically,
as our towns have to throw more and
more money at under-performing school systems.
Instead, I think the couple’s decision
to obtain a reverse mortgage should be
I recently conducted a closing at a lovely townhome condominium. It was impeccably maintained and beautifully decorated. Looking
around the home, I saw tremendous
evidence of lives well lived. They had 16
| TRR
applauded. They were able to get past
the stigma of taking a reverse mortgage and instead were able to see it as a tool
to maintain their lifestyle that they were so proud of.
Before I continue, I should point out
that I am 36 years old. I perhaps have a
a family, but America has
changed. For the better or worse, our country, and
indeed our world, is not
the same place as it was 40 years ago.
It is “normal” in today’s day and age for a man to begin
a family at 36. And it should be “normal” for a senior to choose to obtain a reverse mortgage without being embarrassed by it.
It has taken all of my
36 years to gain a true
appreciation for everything my parents have done
and continue to do for me. They spent half of their
lives providing for me and another good portion of
it caring for their parents. They are entitled to take
advantage of any economic
weapon at their disposal in order to best enjoy their later years in life.
Do not be ashamed of a reverse
mortgage. Like it or not, the four-
letter word “debt” is now a key factor that permeates American life. But
instead of using that four-letter word, I prefer “tool.” Whether it is being
used to describe a reverse mortgage, a
student loan or a traditional mortgage, borrowing money can be an economic tool.
?
Need assistance from the Advisor?
Send your question to advisor@reversereview.com and it may be addressed in the next issue.
So while a reverse mortgage can be an
And in doing so, developing
should involve a few more tools in the
attorneys should prove to be very
important tool, proper life planning tool belt.
And this is where the reverse mortgage professional can use relationships
with professionals such as attorneys,
relationships with estate planning beneficial in finding candidates for reverse mortgages.
accountants For many Americans, personal
specialists such as contractors to build
personal financial coach. However,
their network.
These relationships can be two-way
streets and help everybody involved, especially the senior.
accountants often take on the role of overcoming the reverse stigma with
accountants proves to be a significant obstacle. This is easily overcome by
educating a few of the top local CPAs.
With the common question, “Do I have
to pay taxes on the money I take from a
I will now address each individually:.
reverse mortgage?”, the referral stream should flow.
mber three nu
mber one nu
attorneys
financial planners
Clearly, every senior should consult
I don’t think I can say anything about
estate planning. No matter the size of
said. Keep in mind that you should
with an attorney who specializes in
the estate, there are numerous ways an
experienced attorney can offer valuable assistance. However, many seniors do not have a trusted attorney to turn to.
In becoming a trusted advisor, a reverse mortgage professional can provide a
credible referral to an attorney. Whether
the senior could use a simple will, trust,
this category that hasn’t already been
prompt your financial planner network to educate their clients as early on as possible about the pros and cons of reverse mortgages. And you don’t
need to be connected to every financial
planner in town; focus on a few quality referral sources and not quantity.
health care proxy or durable power of
realtors
In theory, a reverse mortgage is a
Realtor’s nightmare. A Realtor wants
homes to turn over. They want seniors
mber two nu
accountants, financial planners,
Realtors and even home improvement
mber fou r nu
to “downsize”, as long as they get the listing. Educating Realtors as to the
power of reverse mortgages in order to allow seniors to purchase a home
would be music to their ears. The sales volume of Realtors is actually readily
available to date, so ask your local title company or real estate attorney for a list of top-producing targets. mber five nu
home improvement specialists
Let’s face it, maintaining a home and a yard as a senior ages becomes a
substantial task. Whether it is a leaky roof, the need to install rails, a ramp
in the home or simply the landscaping
service that shovels or mows the lawn, home improvement specialists often play a key role in a senior’s life. In
all likelihood, owners of businesses like these are less in demand as a
reverse mortgage referral partner. Take
advantage of this by educating a few of
these professionals and see if it makes a difference. g
attorney, it’s just another way the Reverse Mortgage Professional can help.
Number
81%
Percentage of householders 65 and older who owned their homes as of . 4th quarter 2010.
reversereview com
8 TRR
Source: www.census.gov/hhes/www/housing/hvs/hvs.html
| 17
The Reverse Review June 2011
ask the Appraiser If you have any appraisal-related questions,
look like things will get better anytime
reversereview.com and we will address
Freddie hold 218,000 REO properties as
please email the appraiser at information@ your question in an upcoming issue.
QUESTION
What kind of impact, if any, do short sales and foreclosures in the area have on the value of a home? This is a great question and one that has certainly become more relevant over the past several years. Not too long
ago, during the mortgage boom years, the inventory of foreclosures and the
availability of short sales were few and far between. As such, under normal
circumstances, considering these sales in the market approach was unnecessary. Most of these distressed properties
were “rough around the edges” and wouldn’t normally be considered a
Impact of Short Sales and
reasonable alternative by the typical
Foreclosures
different. Freddie Mac sold roughly
residential buyer. Customarily, these
homes were purchased by investors with the intent of cleaning them up, making a few renovations and then listing and
selling the property at a higher price for entrepreneurial profit.
Bill Waltenbaugh, SRA
However, today’s market is much 31,000 previously foreclosed and
repossessed homes in the first quarter, a new record for the company as both government-sponsored enterprises
We recently received a question for our knowledgeable appraiser, which is addressed in this month’s column.
shed inventory from the end of last
year . To make matters worse, it doesn’t 1
soon. Combined, both Fannie Mae and of the end of the first quarter1 and the Federal Housing Administration
held 60,739 properties repossessed through foreclosure on its books as of December 20102, up 47
percent from the year before.
With so much distressed inventory
and sales available, the question
remains; how do these properties affect
the values of neighboring homes?
The Uniform Standards of Professional Appraisal Practice (USPAP) is the
standard appraisers must adhere to
when completing an appraisal for a
federally related mortgage transaction. This standard requires appraisers to consider all relevant transfers and
determine which sales they should use in their analysis to arrive at a credible
opinion of value for the subject property. To do this, the appraiser needs to
investigate the circumstances of each
transaction to determine if any atypical motivations or sales concessions were
involved in the transaction. If a transfer involves atypical seller motivations, it probably shouldn’t be used as a
comparable sale. However, just because a property is bank-owned, doesn’t
mean the transfer didn’t involve typical motivations. These days, many bankowned properties are in similar, if
not better, condition than competing
properties in the neighborhood. Given adequate market exposure, the typical
buyer in the neighborhood would also
Freddie Mac sold roughly 31,000 previously foreclosed and repossessed homes in the first quarter...
1 Jon Prior, “Freddie Mac sells record number of REO in 1Q”, HousingWire, The LTV Group, May 13, 2001 http://www.housingwire.com/2011/05/06/freddie-mac-sells-record-number-of-reo-in-1q.
18
| TRR
2 Jon Prior, “FHA REO inventory up 47% from one year ago”, HousingWire, The LTV Group, May 13, 2001 http://www.housingwire.com/2011/02/22/fha-reo-inventory-up-47-from-one-year-ago.
Have a question for the Appraiser?
?
Email questions to information@reversereview.com and look for your answer in an upcoming issue.
consider these properties when in the
considering distressed sales could get
Although USPAP requires appraisers to
Despite which side you fall on in regards
market for a home.
consider these types of sales, some states are fixing to make
them in trouble with the state.
typical buyer of the subject would
Maryland, Missouri
would prohibit or
neighboring non-
These days, many bankowned properties are in similar, if not
greatly restrict the
better, condition than
distressed transfers
in the neighborhood. Given adequate market exposure, the typical buyer in the neighborhood would also consider these properties when in the market for a home.
consideration of
in an appraiser’s analysis and
estimation of market value. Legislation like this can very
easily put appraisers
competing properties
between a rock and a
distressed homes. One of the main
tenets of appraisal
theory is the principle of substitution that
dictates that a buyer
will not pay more for a property than the
price of an equivalent substitute property.
Given this principle, the value of a
property, or any other goods or services for
hard place. On one hand, appraisers are
that matter, is limited by its competition.
of USPAP. Yet on the other, doing so and
enough distressed properties, those
required to adhere to the requirements
o
$
p
TAX TIP
the neighborhood.
distressed properties have an affect on
legislation that
of the rest of the competing properties in
I like to explain it this way: a good
in my mind that
Four states – Illinois,
currently considering
properties will have an affect on the value
to the legal wrangling, there is no doubt
it more difficult.
and Nevada – are
aa
In other words, if any given market has
To reduce cost, mitigate risk and shift liability for loss, consider outsourcing property tax and insurance management to a third-party servicer. As property tax regulations grow more complex nationwide, in-house servicers are faced with the difficult task of tracking property
comparable property is one the
also consider when in the market for a home. Essentially, these properties
are considered reasonable alternatives. They are similar with respect to
location, condition, utility and appeal. For the most part, the owner of the property doesn’t matter; a similar
turnkey conditioned property from a lender is just as appealing as a
turnkey conditioned property from the average-Joe homeowner. At the end of the day, it comes down to availability and competition. If there are enough
reasonably alternative similar properties available at a lower price, the price of
the competing properties will need to be lower in order to compete. g
taxes and insurance. Tax collectors must replace reduced revenue streams and are under pressure to put delinquent taxes out to bid sooner than ever for tax deed or lien sale. In-house servicers are finding it harder to keep pace with the constant change in tax rules and shortened timelines.
Making this move will provide protection to you, your customers and your investors with minimal impact on staff and operations. You have the ability to better manage and track cash, assets and expenses by leveraging the best practices that a tax and insurance specialist has to offer.
Property Tax & Insurance Tip Dennis G. Gassoway Heather Amick
reversereview.com
8 TRR
| 19
hot
Seat U
C
C
q&A - things you need to know or may have been wondering - JUNE 2011
the
hot seat 20
| TRR
From his favorite magazine to the best job he has ever had, we get the personal and professional facts from Peter Bell, CEO of NRMLA, in our monthly edition of The Hot Seat.
peter PERSONAL
Dworbell, Inc. CEO of NRMLA >
>
My favorite website is NYTimes.com. There is so much to read about so many topics. Politics, business, international relations, the arts, cuisine, every topic you can imagine and more.
>
My favorite magazine is The Economist.
I never miss an episode of certain HBO series. I’m not much of a TV watcher, but I do enjoy a few HBO series like
Entourage, Boardwalk Empire, Treme. I also love watching Bill Maher’s show. Creating humor out of political irony is amusing to me.
>
I can’t go without music. I try to get out to hear live music at least one night a week.
>
The best job I’ve ever had is what I do today. Association management is a fascinating field. You get to do so
many things. It’s the intersection of policy and business. It’s where concepts are born and ideas are germinated. You
get to work with so many interesting people. Travel. See. Write. Speak. Beats sitting in the office all day, if you’re a hyperactive sort of guy, like me. >
My parents taught me how to put myself in the shoes of the other person when discussing an issue. You’ll come up with much more persuasive arguments that way, then if you were to only look at things from your own perspective.
>
My favorite time of the day is right now, my morning read, think and write session.
>
Right now I’m listening to Anat Cohen, a top-of-the-trade NYC-based female saxophone and clarinet player.
PROFESSIONAL >
The biggest challenge in the reverse mortgage industry is to manage the integrity of all who participate and
keep out the riff raff. The biggest obstacle to growth in the reverse mortgage business is the public’s perception of it. Every time something untoward happens it casts aspersions upon our entire industry, not just the perpetrators. We all pay for their misbehavior.
>
The future of reverse mortgages is very bright, if you look at the demographics. There’s the age wave, the lack
of financial preparedness for funding longevity and the fact that housing wealth is often the largest component of personal wealth means.
>
The greatest setback for our industry was the aggressive marketing of annuities with reverse mortgages a few years ago. It was not only outreach directly to consumers that drew the public and regulators’ wrath, but also the aggressive promotion to mortgage and insurance brokers that they could earn big fees by doing this double sell.
>
The most important thing financial advisors can learn about reverse mortgages is how they fit into a comprehensive personal finance strategy that aims at funding longevity.
>
Industry growth is dependent upon the integrity of those involved in the reverse mortgage business and earning the public trust.
>
The development of a proprietary market for reverse mortgages will require stability in home values. I don’t see how it will happen until then.
>
The ideal characteristics of leaders in the industry are broad-minded, socially aware, straight-talking, politicallyastute, diplomatic, consumer-centric and respectful of others.
reversereview.com
8 TRR
| 21
The Reverse Review June 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 m ov er s k sh a k e rs CFPB:
The Consumer Financial Protection Bureau continued to fill out their senior leadership team by adding Sendhil Mullainathan as Assistant Director for Research and
Patrice Ficklin as Assistant Director for Fair Lending.
Kenneth Austin:
Austin has joined Wendover Consulting, Inc. as Managing Director for Loan
Administration. Austin was previously with RMS where he served as President.
Axia Financial:
The company has acquired Stay In Home Reverse Mortgage based in Bellevue, Washington.
Generation Mortgage:
Generation Mortgage became the first top
10 reverse mortgage lender to open a retail
office in Puerto Rico. Luis Alberto De Jesus was hired to lead the new branch office
located in San Juan. He previously served as a senior executive at Senior Mortgage Bankers.
Up - k- C o m e r s
June
First Century Bank, N.A:
First Century has added Bruce Diaddigo, Pam Martin and Dennis Loxton to lead
their reverse mortgage division expansion in the Southeast. They plan to add 30-50 originators in the next 6-12 months.
W h at H a ppe n e d ? Retail Production:
After finally crossing over to positive
year-over-year growth in March, retail
production fell by 16.2 percent in April. Home Values:
In their Home Value Index, Clear Capital reported that home values fell in March
to 0.7 percent below prior lows reached in March 2009, indicating a double dip.
HomeStreet Bank:
RMCA:
They have expanded their reverse mortgage
The Reverse Mortgage Counseling
Barnes, Mike Broderick and Gayle Woodruff
new program designed to connect reverse
Bair has resigned from her post as
promote the reverse mortgage industry.
Corporation, effective July 8, 2011. Her exit
Reverse Mortgage Solutions hired Kyle
SunWest:
and she previously stated she would not
team. He will be responsible for developing
retail platform with goal of being 30 percent
business in Washington by adding Chris to their origination team.
Association announced plans to launch a
Sheila Bair:
mortgage borrowers and other services to
Chairman of the Federal Deposit Insurance
RMS:
corresponds with the expiration of her term
Bradford to lead its Southeast regional sales
They have announced plans to launch a new
seek a second term.
retail originations in the Southern and Mid-
of their origination business.
AARP:
Sarah Hulbert:
over the federal budget and potential
Atlantic regions.
Hulbert joined 1st Reverse Mortgage USA
restructuring of entitlement programs such
She will be responsible for developing their
to presenting testimony to congressional
as Retail Business Development Manager.
as Social Security and Medicare. In addition
retail sales channel.
committees, AARP launched a national
TPO Originations:
programs.
HECM originations by non-FHA approved Third-Party Originators jumped in March 22
| TRR
AARP publicly jumped into the battle
to about 400, roughly 5.5 percent of all originations.
advertising campaign defending the
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. Justin Meise J o h n m i t c h e l l , CPA J o s h ua S h e i n A l a i n V a l l e s , CRMP
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
8 TRR
| 23
The Reverse Review June 2011
the Essentials
HECM Counseling as a Marketing Tool By understanding how HECM counseling works, you are able to increase loan production and boost referrals. Alain Valles, CRMP
H
24
| TRR
UD requires every prospective reverse mortgage borrower to complete a reverse mortgage counseling session. We should all be in agreement that counseling is critical to the success of the Home Equity Conversion Mortgage (HECM) program. Unfortunately, some loan officers have not invested the time to understand the role of the counselor, and believe the counseling requirement slows the mortgage process and even discourages seniors from obtaining a reverse mortgage.
As usual, I look for the silver lining. And what I have discovered is this: If you understand how HECM
If the participant answers more than five
of these questions incorrectly, a counselor
Understanding the Counseling Process is Key
counseling works and are able to
There is an urban legend floating around
the process, you can increase loan
“knowing” the counseling protocol. That
is unable to provide a counseling
certificate. Therefore, it is important
that we do the best job in explaining the intricacies of reverse mortgage prior to
properly guide your borrower through
that loan officers are prohibited from
production and boost referrals.
is false. In fact, the more you know about
My conversations also brought up several
While doing research for this article, I
were more than happy to discuss the
borrower’s experience, and make for a
counselors. I must admit that with all
counseling and
I thought I knew everything about
make all of our lives
it, the better. The counselors I spoke to
had the pleasure of speaking with several
challenges of HECM
of my reverse mortgage experience,
offered insights to
counseling. However, my conversations
easier.
several misconceptions and filled in
The new face of
yielded information that cleared up
knowledge gaps about the counseling
HECM counseling
soon you will be as well.
education and
The History
many things in life,
process. Now I’m better informed, and
is now rooted in
suitability. As with
you get out what you
the counseling session.
points that would greatly enhance a
smoother counseling session.
Not only would the adoption of these practices better
prepare your borrower, but the
There is an urban legend floating around that loan officers are prohibited from “knowing” the counseling protocol. That is false. In fact, the more you know about it, the better.
HECM counseling underwent significant
put in, meaning that
of a new HUD protocol in 2009.
for the counseling
study conducted by the Government
efficiencies and preparing seniors for
care you take in cultivating an understanding of the reverse
mortgage product and process could lead to referrals.
Have the Numbers! By far, the number one
challenge faced by both the
counselor and loan officers is
changes with the implementation
preparing your clients
These changes resulted from the
session can go a long way in creating
officers get frustrated when counselors
Accountability Office (GAO), which is the
what they will experience.
different rates, costs and fees. This can
Congressional investigative arm.
For instance, a counselor is unable to
One item that stood out in the GAO
provide a certificate to those that do not
all required reverse mortgage topics, and
as to the specifics of the product in
The GAO presented its critical findings to
people understand the commitment
counseling process.
counselors are required to pepper
One example of the changes that were
counseling session. These questions range
is now mandatory for all counselors. This
reverse mortgage?” to “Are you required
rate for first-time takers, leading many
lender?”
report was that few counselors covered
understand the product, or are confused
fewer still covered the topic adequately.
which they are interested. To ensure
HUD, which then revamped the HECM
and provisions of a reverse mortgage, qualifying questions throughout the
made is the arduous counselor exam that
from, “Who owns your home after a
extensive test has over a 90 percent failure
to make monthly payments to your
reviewing loan estimates. Loan
use different HECM programs with
lead to the feeling that the counselor
is suggesting that the borrower shop
elsewhere or should attempt to negotiate fees. Counselors, on the other hand, get frustrated when they don’t have the
figures the loan officer used to explain the various programs. The counselor is then forced to use generic HECM
scenarios, which results in confusion for
the borrower and diminishes the impact of the counseling session. The good
news is that these problems can be easily avoided. >>
counselors to drop out of the program, but resulting in a more beneficial experience for senior borrowers.
3
The new face of HECM counseling is now rooted in education and suitability.
reversereview.com
8 TRR
| 25
The key to solving the numbers challenge
process works to every borrower. I share
client if she had any liens on the property
properly explain the pros and cons of a
most boring conversation you’ve ever
to explain to my borrower that she had
is for the loan officer to invest the time to reverse mortgage so seniors can make an educated decision before the counseling session. Once the senior has selected a
that, “I hope the counseling session is the had. If it is, then I’ve done a wonderful job explaining everything.”
and she said “no.” This led the counselor the options of a large line of credit or monthly check.
counseling agency, I forward the HECM
Once I explained that there was a large
to the counselor. Though this is part of
me that the only likely option was a lump
scenarios we presented to the borrower
first mortgage, the counselor agreed with
the new HECM protocol not all lenders
sum distribution. Several lessons here:
are doing so. This results in additional
work and less accuracy on the part of the counselor.
Technology can help lenders and HECM
counselors share the exact loan scenarios. Web based systems such as Reverse
Vision’s SmartClient® or Ibis’ Sandbox® programs generate client specific file
numbers that permit a counselor to see the lender’s figures.
Be the One to Explain the Process Counseling sessions last an average of
90 minutes. Throughout the session the counselor is educating the participant and gauging product suitability. Your
borrower will be asked pointed questions about their finances, needs and the
loan products you have presented for consideration.
The counselors I spoke with emphasized that loan officers should prepare their borrowers for how long the average
session takes. Let them know that many questions will be asked, suggestions
will be given, and that they might feel the counselor is prying just a bit too personally into their lives. I always
explain to my clients that the counselor is doing his/her best job to educate and protect them.
You should explain the details of the loan specifics and how (and why) the counseling 26
| TRR
I share that, “I hope the counseling session is the most boring conversation you’ve ever had. If it is, then I’ve done a wonderful job explaining everything.” If counseling is an eye opening event,
explain uncommon terms in different
ways (lien, mortgage, equity line, second mortgage, owe any money if you sell);
invest the time up front to educate your client so that you’ll get a second chance if something goes off track; and call the counselor if confused.
then I’ve done a poor job explaining or
Disclose the Counseling Fee
to talk through. The loan officer has the
counselors I spoke with say they are often
there is a misunderstanding that we need
This should be obvious. But the
opportunity—even the responsibility!—
the first to tell the senior that there is a fee
to thoroughly explain the counseling session. By doing so, your closing
percentage will improve. I’ve found
that, as long as I explain the counseling
process up front, I get a “second chance” with the borrower if the counseling does not go well for any reason.
Here is an actual example. I recently followed up with a borrower to see
how her counseling session went. The woman said, “Not so well.” She was
upset that I had not explained how she had the option of a very large line of
for counseling. All loan officers should
fully disclose any and all upfront fees as well as the overall cost of a HECM. The fees are the fees, and by not properly
disclosing or discussing them, you can
only hurt your legitimacy and reputation. Although some agencies are able to offer
HECM counseling at no cost, the recently passed 2011 federal budget eliminated
over $88 million of funding to housing
counseling agencies. As a result, it will be more common for seniors to be charged for counseling services.
credit or monthly check. I had not done
so because the hoped for appraised value would barely cover her current mortgage
Include the Family
at best.
family members get involved. My
balance, leaving the other options remote
The saving grace was the fact
that I had built some goodwill with her and she agreed to a conference call with the
counselor. The problem arose
when the counselor asked my
Some loan officers hate it when other attitude is the more the merrier! Every
borrower has a “trusted advisor circle”
and none is closer or more trusted than kin. Invite everyone to take part in
counseling. I always ask the borrower if there are any other people they will be
talking with about their decision and let
them know that I’d be happy to meet with them as well.
Nothing is more frustrating than to have
status, etc., are just some of the special
shared that some seniors are told by loan
HECM counseling session.
be able to live in their homes “for free” or
situations that may crop up during the
a long lost relative (a silent assassin when
I always suggest to the senior that they
the day of closing and say they “heard”
the counselor, no matter how trivial
it comes to a reverse mortgage) arrive
reverse mortgages are “terrible.” I’m very proactive about meeting as many family members as possible and welcoming
their comments about any other financing options.
The fact that taxes and insurance must
it may seem or how overwhelming it
in some situations the borrower may
may appear. In some cases it may be
appropriate (even advisable) to have an attorney or accountant involved. The
key is not to give advice outside of your
Inviting the family often prompts the
I’ve had examples where a borrower
the kids,” which is a common question
minutes; was not aware a senior was
asked of the counselor. Believe it or not,
getting the family involved also generates new referral sources!
repeatedly asked my name every 15
drinking straight vodka until her speech
became slurred; had to call an ambulance due to a diabetic seizure; and had a
borrower admit he could not read after
he signed all the forms. I’ve even had one
Tell Them Everything I was surprised that counselors
mentioned that some seniors don’t
realize they must continue to pay real
estate taxes and hazard insurance. It’s
very amorous 85-year old woman become very disappointed to learn I was married! (In good conscious, I felt it necessary to
warn the unmarried counselor once she had scheduled her in-person session.)
imperative to the future of the HECM
These are examples where a borrower
much information about how a reverse
counseling call. However, it’s incumbent
program that the loan officer discloses as mortgage works as possible. You can’t
assume that the borrower knows all the
details that you know. Make it a point to
over inform the borrower so that there are no surprises.
with “no payments” ever.
share their particular situation with
expertise.
discussion about “will anything be left to
officers that they will be “all set” or will
could have faked their way through a upon all loan officers to take the
appropriate steps of reaching out to
family members if one feels a senior
does not fully comprehend the HECM explanation.
be paid; the home must be maintained; out live a line of credit or lump sum
distribution; and the fact that there might not be enough money for the senior’s
next chapter of life must be discussed
with the senior at the time of application. A more fully informed senior leads to a
more meaningful counseling session, and
will afford the senior the best opportunity to make an educated decision on whether or not a reverse mortgage is the best
solution for them. Though my company’s mission statement is to “improve the quality of life through responsible
financing,” I use a custom loan disclosure that ends with the statement that I can’t guarantee their future happiness.
Why More Business For You? My business approach is to become the
“trusted advisor to the trusted advisors.” By investing the additional time to
explain to prospective HECM borrowers about the nuances of a reverse mortgage and the required counseling session, the client becomes better informed and will be able to make a decision in a shorter period of time. The senior will have a
smoother counseling experience and will become an advocate for your service.
Handling Curve Balls
No Guarantees
Power-of-attorney, guardian, non-
It is important to acknowledge that a
spouse during processing, incompetence,
properly, a reverse mortgage is a fantastic
borrowing spouse, trusts, death of a
deaf, illiterate, physical limitations, under the influence, life estate, occupancy
1
HECM is not a magic cure all. When used financial tool to improve the retirement
security of seniors. However, counselors
The key to solving the numbers challenge is for the loan officer to invest the time to properly explain the pros and cons of a reverse mortgage.
Referral sources will have more trust and confidence in you. And, just like
underwriters recognizing the quality
of your files and moving them along,
HECM counselors will recognize your name the next time a senior calls, and
will appreciate that you took the time to properly educate them. g
Special thank you for contributing information from Cambridge Credit Counseling Corp. (Thomas Fox, Justin Lally and Steve Willett). reversereview.com
8 TRR
| 27
the
Industry’s
28
| TRR
Message
to Washington, D.C.
save billions of Medicaid dollars Reverse mortgages
a year.
John Mitchell, CPA reversereview.com
8 TRR
| 29
I’ve got some good news and I’ve got some bad news. The bad news first: The federal government and members of Congress control our
the
say it all Financial Tipping Point:
current Washington, D.C. environment. That message is that reverse the facts to prove it.
United States debt is
Now the good news:
For the first time ever, the reverse mortgage industry has the
opportunity to craft a simple and clear message that resonates in the mortgages save Medicaid dollars. Additionally, we know we have
is now a part of the solution to our country’s fiscal problems.
debt equal to its annual output, the annual cost of interest on the debt is likely to be greater than the annual growth of the economy. To illustrate this, the interest rate on the national debt approximates 4 percent. If the
economy is not growing by a similar amount, a country can slide toward a hopeless debt spiral; this is what is happening in the United States
today. Our formal debt is $14.1 trillion and our gross domestic product
for 2011 is estimated at $14.7 trillion—about the same. We are already at the flashpoint. The United States economy certainly isn’t
growing at a rate close to the interest rate on the national debt. Accordingly, the country is at a tipping point. If that news wasn’t bad enough, consider this, as
mentioned above, the United States’ formal debt is
$14.1 trillion, but that does not include our informal debts. What are informal debts? They are promises of future benefits—payments—embedded in the
entitlement programs like Social Security, Medicare and
Medicaid. They may not be treasury bonds, but most of us 30
| TRR
and unfortunately these unfunded liabilities
are gigantic. For Social
Security, Medicare and
Medicaid, the unfunded liability exceeds $70
trillion. Add that to the $14.1 trillion formal
debt and now you get
a real sense of the dire economic reality the
In the United States, the three major entitlement
The central focus in Washington, D.C. today (and for the near future) is
and services (GDP). This is not an arbitrary measure. When a nation has
with promises like these
The Primary Solution – Reign in the Entitlements
Our Country Has a Serious Problem is in trouble when its formal debt exceeds its annual output of goods
renege or even fiddle
2011.
magnitude, you’ll also see the opportunity; the reverse mortgage industry
country is at a financial tipping point. Most economists agree that a nation
governments default,
United States faces in
But first, let’s appreciate the problem our country is in. As you grasp its
fiscal responsibility and reducing government spending. Here’s why: Our
as very strong promises. Citizens riot when
Most economists agree that a nation is in trouble when its formal debt exceeds its annual output of goods and services (GDP).
industry’s fate.
regard these programs
programs (Social
trillion. United States gross domestic product for 2011 is estimated at $14.7 trillion.
The most serious problem with regard to
Medicaid is the eligibility side of the equation. Medicaid eligibility rules are very loose and that’s the fundamental problem. Today, there is a thriving industry within the legal community that helps people shift their assets so they can qualify for Medicaid and have their long-term care paid by the government rather than themselves.
Security, Medicare and Medicaid) account
for approximately 58
percent of the annual budget. Other than
national defense, these entitlements dwarf the
other components of the budget. Accordingly, the solution to the
national debt problem of the United States
noted above can only be found in scaling back and finding savings in those big three
entitlements. Again, the math doesn’t lie; this
is the only path to get
the national debt under
control and restore fiscal
responsibility to our
government’s finances.
Medicaid: The Problem and the Reverse Mortgage Industry’s Opportunit y
The 3 major entitlement programs (Social Security, Medicare and Medicaid) in the U.S. account for approximately
with the states being
2014, the Obama Care rules will add about 20 million people to
Medicaid all at one time according to Medicaid’s chief actuary, Richard Foster. This is a 39
percent increase from
the existing 53 million
people already covered.
percent of the annual budget.
term care primarily for
By promoting the value proposition that reverse mortgages save
Medicaid dollars, we become part of the solution. And as they say, if you’re not part of the solution, you’re part of the problem.
Medicaid’s annual cost:
billion billion billion billion
$98 billion a year on
this with the majority
spent on nursing home care. Further, it’s been well documented that when people
are institutionalized
overmedicated and Medicaid dollars are wasted. Few would
challenge the claim that
the Medicaid
community that helps people shift their assets so they can qualify for
has evolved from its intended purpose of being the provider of quality long-term care for the genuinely needy into the role it actually plays
today: protecting people’s inheritances. This role is contributing to the
The most glaring problem in the Medicaid eligibility rules is that
Medicaid allows a person to exclude their personal residence, regardless of value, from the means test to determine if he or she qualifies
for Medicaid. The effect of this is that there is no incentive for people to take responsibility for paying for their own longterm care with their biggest asset: their home. This is why
today, Medicaid is the primary payer of nursing home care
in the United States instead of individuals taking financial
responsibility for their own long-term care.
In the past, the reverse mortgage industry has not had a clear and
articulate message that resonates with the entity that controls our destiny (Congress); now we do! The changes that we have seen in this country beginning in November 2010 with the midterm elections create a new
opportunity for our industry in the coming years. Fiscal responsibility has clearly become the dominant theme for the next five years. It will be the
central topic of discussion in 2012 because of the presidential campaign, which all plays well for the reverse mortgage industry. By promoting
the value proposition that reverse mortgages save Medicaid dollars, we become part of the solution. And as they say, if you’re not part of the
and put in a nursing often over treated,
fundamental problem. Today, there is a thriving industry within the legal
Our Industry Has a Unique Opportunit y Regarding Our Value Proposition
the elderly. We spend
home, they are
of the equation. Medicaid eligibility rules are very loose and that’s the
bankruptcy that the United States is facing.
The biggest expense of Medicaid is long-
The most serious problem with regard to Medicaid is the eligibility side
the planning techniques allowing this. It is for this reason that, Medicaid
responsible for about half of it. Starting in
only growing as the baby boomer generation evolves into old age.
than themselves. To make matters worse, Medicaid has codified into law
covers 53 million
cost of $373.9 billion
nation’s spending problem under control. But, this Medicaid problem is
Medicaid and have their long-term care paid by the government rather
Medicaid currently people at an annual
program is poorly run, inefficient and is a huge obstacle in getting this
Reverse mortgages could save
3.3 billion 5 billion to
annually in Medicaid expenses.
solution, you’re part of the problem. Our industry has never had a better opportunity than we have today; in the next few years we can craft a
message that resonates and ensures our industry’s long-term viability.
Our Message to Washington, D.C. Should Be: Reverse Mortgages Save Medicaid $3.3 billion to $5 billion a Year Increased use of reverse mortgages for long-term care could result in
savings for Medicaid, ranging from about $3.3 billion to almost $5 >>
reversereview.com
8 TRR
| 31
billion annually, depending
on the future market
penetration of reverse
mortgages from its current 2-3 percent. These savings result from the additional
cash available to borrowers
that would delay or eliminate the need for Medicaid.
Support for This Position:
Home: Expanding the Use of
thoughts and ideas of the top
Term Care” was done a few
reverse mortgage industry.
A New Industry Study
was the foundational part of
So How is This Message Likely to be Received in Washington, D.C.?
owes a debt of gratitude to
I’ve seen the future. In
she did and updated it with
board members of CIS, I
In the first quarter of 2011,
One of the keys to increasing
I created a 59-page study
in the future is to eliminate
that reverse mortgages save
Medicaid eligibility. This is
study because I felt like the
the hemorrhaging Medicaid
industry with regard to the
of whether or not we, as an
that reverse mortgages save
the use of reverse mortgages
to support the contention
the home exemption rule for
Medicaid dollars. I did this
definitely going to happen as
value proposition for our
program is fixed, irrespective
federal government had to be
industry, support this or not.
Medicaid dollars. To me, this was the obvious message in the evolving Washington,
D.C. environment of fiscal As previously noted, under
responsibility. It was also
a person can qualify for
going to be the priority in
a home of unlimited value.
next five years. In light of
the use of reverse mortgages
needed some support for this
shift the responsibility for
for my study was really done
seniors off the government’s
with the National Council on
shoulders of the individuals.
“Use Your Home to Stay at
the Medicaid rules today,
clear to me that this was
Medicaid but still have had
Washington, D.C. for the
Changing this will increase
this undeniable fact, we
and will fundamentally
concept. The heavy lifting
the future long-term care of
by Barbara Stucki, Ph.D.
shoulders and back onto the
Aging. Her landmark study,
32
| TRR
Reverse Mortgages for Longyears ago and really fleshed out in detail the size of the
Medicaid savings. Her study my study and our industry her. I took the great work
what is happening today and where the country is headed in the future.
My study, “Medicaid Cost
Solutions 2011 and 2012 … Reverse Mortgages” was
released April 2011, but that
only started the conversation. Now a new version of my study is coming out in
10 movers and shakers in the
early April, as one of the accompanied other board members to Washington,
D.C. to meet directly with
Congressmen and Senators. Our agenda was to present the message that reverse
mortgages save Medicaid dollars. From doing this,
I saw the effect firsthand; it was very encouraging.
The message that reverse
July 2011. The 2.0 version
mortgages could play a vital
wisdom of the top 10 leaders
along the path of greater
will include the input and in the reverse mortgage industry. Each has been
distributed a copy of the
study and each has a unique
perspective that can improve
the study. The goal of coming out with a 2.0 version is to
evolve a study done by one person into one that the
entire industry can support because it incorporates the
role in reforming Medicaid fiscal responsibility for the
country lit up people’s eyes.
For most, it was a refreshing
change to meet with someone that had a solution rather
than asking for something and being part of the
problem. More often than not, we heard, “this is something new we hadn’t heard of
before.” The message was very well received.
The other thing that we
discovered is how valuable
change this if we are going to
benefactors in Congress.
There is an available
long-run.
initiative in the second half of
situation our country is in
protect our industry for the
Congressman and Senator
A Radical Solution with Regards to the Media That Distorts Reverse Mortgages
and puts them in categories.
As an industry, we are not
letters are to Congressmen and Senators. Each
takes the letters they receive
Senator Kay Bailey Hutchison from Texas, told us about the positive effect the letters she
received last year had on her. It caused her to learn more about reverse mortgages
and appreciate the positive benefits. This happened because my company,
Reverse Mortgage USA,
made a concerted effort to
get our past clients in Texas
to write Senator Hutchison
in 2010. While this was good for the Senators to see, our
eyes were also opened to a significant problem. Most
Senators, Congressmen and
their staff don’t really know what a reverse mortgage
is, they don’t understand
our value proposition, and
because people haven’t been
writing to them about reverse mortgages, it’s not on their radar. Clearly we have to
going to change the sound bite driven media; we will never win that battle. But
there is a way to win the war. As an alternative to thinking we can win over the media, let’s create security for our industry by having the
presence of mind to have a
simple and clear message that resonates with Washington, D.C.: simply that reverse
mortgages save Medicaid dollars. Then, with that
message, as an industry, let’s develop a long-term, monthin-and-month-out letter
writing campaign directed to members of Congress. Today more than ever, members
of Congress are listening to
their constituency. The take
away is that we need to have an aggressive letter writing campaign on an ongoing basis that influences our
I intend to spearhead that
2011 on behalf of the industry with the help of many of my competitors.
Summary Can you connect the dots?
First, the United States is at
a financial tipping point. We have a $14 trillion annual
economy and a $14 trillion
national debt. Additionally, we have a $70 trillion plus
unfunded liability from the
entitlements: Social Security,
Medicare and Medicaid. The growth rate of the
solution to the financial
that will save $3.3 billion to $5 billion annually
in Medicaid expenses;
that solution is reverse
mortgages. The beauty of the reverse mortgage Medicaid savings proposition is that it is easy to understand. If
people are incentivized and encouraged to take out a
reverse mortgage to pay for their future medical needs, fewer people will go on
Medicaid and be a burden on the US government and its taxpayers. Not hard
to understand, is it?
It’s this simplicity
economy over the
next few years is projected to be at about half the interest rate on the national debt.
Accordingly, we are starting a downward spiral, which will pick up momentum
with each coming year as
the entitlements’ unfunded liabilities come even more
into play with the increased
that provides so
much strength and staying power to our message,
and that’s what we need to
promote. Let’s get behind a
clear message that resonates, coupled with an ongoing
letter writing campaign that influences the people that
directly control our industry’s destiny. g
aging of the overall population.
reversereview.com
8 TRR
| 33
The Reverse Review June 2011
the Essentials
Leveling the Playing Field The effects of the new compensation guidelines.
T
he new compensation guidelines for loan officers have sent shockwaves through our industry. We spent months getting ready for it, attending meetings, conference calls and webinars to learn how to best make the transition. Yet there was no way to know the full impact until the guidelines went into effect last month. Âś To a large degree, the changes have leveled the playing field. We are more in-tune with what our competitors are doing and everyone is earning their compensation the same way. The upshot is that success for the originator will now boil down to just one thing: customer service.
34
| TRR
Joshua Shein
Gone are the days of big money on a single loan; the originator now has to focus on volume of loans and service, not fees on any single transaction. The incentive has shifted to closing a higher volume of loans, and it’s an adjustment for some of the successful loan officers in the reverse mortgage industry who were used to the high premiums of the past. As we move to implement and adjust to this new way of doing business, the shock of change has been slightly less significant in our niche of reverse mortgages than in other areas. Still, it has been a major adjustment for everyone. For larger banks, the transition was somewhat easier because many already had a pay scale similar to the one required by the new rules; salary and bonuses were tied to the volume of loans that originators were generating. Also, many big banks started implementing the new guidelines in March to get ahead of the game. For direct lenders like Great Oak, much of March was spent talking to compliance attorneys, re-reading the guidelines, discussing with our peers and educating ourselves about the new changes, then putting together a plan on the best way to implement the changes within our business.
It wasn’t easy getting ready for the shift: The rules are not black and
white, so there was constant modifying and tweaking as it came down to the wire. Even as the weeks have progressed since the implementation date, many continue to make adjustments and changes as unforeseen scenarios and circumstances arise. That said, smaller lenders like us have the advantage of being more nimble. With fewer layers to go through as we put our plan into action, we are able to make adjustments as necessary. Now that everything is in place, our challenge will be to help our loan officers adjust to the new way of doing business and what it means for their income. The days of big money on a single loan are
gone; the originator now has to focus on volume of loans and service, not fees on any single transaction. The incentive has shifted to closing a higher volume of loans, and it’s an adjustment for some of the successful loan officers in the reverse mortgage industry who were used to the high premiums of the past.
competitors are operating. In the long run, the guidelines may make it easier to retain talent as well.
Now, it all comes down to customer service. We can honestly
tell our customers that we aren’t making money off of the fees they pay and that we just get paid for closing loans. This allows borrowers to rest a little easier and choose a lender based on where they will get the best service.
We are just now starting to see the effects of this, with April loans closing and the first round of paychecks under the new guidelines being handed out. As loan officers see their new paychecks for the first time, they are starting to understand the long-term implications of the changes. Some of these originators may still be in for a surprise as they crunch numbers moving into the summer months. With this in mind, some loan officers have left the industry and many smaller brokers and lenders have closed because they have determined that the new pay scale will not be financially viable over the long term. However, there is still money to be made in this industry, and these new guidelines put us all on the same level. Big or small, we are all paid the same way now. Everyone is much closer together in terms of earning power, and we all have a better sense of how our peers and
In the end, the new guidelines will allow lenders to focus less on fees and more on customer service and customer relationships. It’s a game-changer for the industry and a win for our customers. g
HECM Saver Fixed LIBOR Mortgagee Things Letter FHA HUD are Compliance Marketbetter looking ing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed THE THE LIBOR Mortgagee Letter FHA HUD E H T w vi ew Compliance Marketing Lead Improve iere rev Grow Debate Discuss RESPA TILA r v iew HECM Saver Fixed LIBOR eMortgagee Letter FHA HUD Marketail”of s GrCompliance y l o ie H as “ ome securit ing Lead Improve Grow Debate Disinc fixedcuss RESPA TILA HECM Saver Fixed REVE RSE LIBOR Mortgagee FHA HUD AN O Letter M RIGI ORTGA NAT G ers OLead R’S T ES: custom Compliance Marketing Improve ALE T S MU Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Advertise with TheGrow ReverseDebate Review Diskate@reversereview.com | 858.832.8320 cuss RESPA TILA HECM Saver Fixed
always
ESE EEV SR RV RRE E VER RE SE APRIL 2011
RY RUA FEB
SE PT EM BE R 2 010
1 201
HMBS
RMS: REFeqOuences for cons
ORS
INAT
ORIG
H . N WIT SATIO KELLY NVER ’ JOE A CO DVISORS A W VIE NEW MU GBA E E. A ATAR
ETSS Sim CRRR ple a AL SERE FE nd for your easy ma r cred ibilit keting str G: IN y in STATU TE AND HUD POLICIES G NCILE HECM RS g H A NLESUIT the r ate CAARP NDE SEEKS TO RECO ever ies can im WHAT se m do ortg prove age fi eld Sue
3
Havila
nd
IN REVERSE. reversereview.com
8 TRR
| 35
The Reverse Review June 2011
the Essentials
Visibility on a Budget Understanding the fundamentals of PR can help you generate visibility on a limited budget.
Justin Meise
F 36
| TRR
requently, I’m asked by all types of financial professionals—from reverse mortgage specialists to investment advisors to accountants—“How can I better position myself in my market? Oh, and we’re a small shop with no budget to hire a PR firm or consultant.” ¶ Well, I have good news. While nothing in life is free, there’s a lot of PR that can be had on the cheap or, more correctly, by committing the time and using some basic tactics.
A professional or a small firm seeking
Further, despite the industry’s best
starting with their adult children
(which they know well) and to a specific
media about reverse mortgages, these
care and helps parents make decisions.
to raise its visibility in a specific market audience (which they understand) can
generate quite a bit of visibility without having to make a major spend on
consultants or advertising. Also, if your target audience is limited to a relatively small geographic area—say within
efforts to educate consumers and the
complicated products continue to receive mixed reviews and are frequently
impugned. As a result, seniors are slow
to make decisions and take a long time to think about the decision.
Frequently, it’s a daughter who provides Beyond family, there’s a wide range of
possible influencers that includes friends, attorneys, accountants, financial advisors and organizations they respect such as AARP.
several counties or a portion of a state—it
Like all large demographic groups, it’s
The point is that there are multiple
most cases.
generalize too much about seniors. For
a strategy. The primary audience is
won’t be cost effective to hire a firm in
To build a good strategy and plan
for the small, local firm let’s focus on
three key elements: Audience, content and distribution. (Yes, it can be more
complicated, but we’ll keep it simple.) Let’s examine each…
Audience Experienced reverse mortgage
professionals know that the sales cycle for a reverse mortgage is long—really long. The primary audience—senior homeowners—is very cautious and rightfully so.
The home represents, for most borrowers,
their single largest asset and one that they probably spent their lifetime purchasing. For their generation, home ownership was the pinnacle of the American
dream and a truly special achievement. Their mindset was that it wasn’t truly
owned until it was paid off. This varies significantly from the mindset of baby
difficult, or even a mistake, to attempt to example, it may surprise some people
to learn that seniors’ use of the Internet
has been increasing steadily. According
to a 2010 Neilsen Company report, more seniors are using the web and spending more time on it than ever before.
obviously the senior homeowner who is
eligible for a reverse mortgage. However, the communications approach needs
to include tactics that will reach all of
these other influencers or advisors – the secondary audiences.
While people 65 and older still make up
Content
universe, their numbers are on the rise. In
Last year, I wrote a piece for The Reverse
actively using the Internet has increased
the challenging topics to address with
less than 10 percent of the active Internet the last five years, the number of seniors by more than 55 percent, from 11.3
million active users in November 2004 to 17.5 million in November 2009. Among
people 65+, the growth of women in the
last five years has outpaced the growth of men by 6 percentage points. Not only are
more people 65 and older heading online, but they are also spending more time on the Web. Time spent on the Internet by
Review (June, 2010) discussing many of
reporters. I was optimistic that NRMLA’s current effort to develop new messaging and content would reap benefits for
all members. Well, it has. The Marttila
Strategies research piece, The Retirement
Abyss: America’s Seniors’ Search for Security is a veritable treasure trove from a PR perspective.
seniors increased 11 percent in the last
The challenges and the surrounding
per month in November 2004 to just over
review but let’s also see how the new
five years, from approximately 52 hours 58 hours in 2009.
boomers and gen-X-ers who are very
We also know from a mix of research and
from homes to home appliances.
quite an extensive group of advisors they
comfortable carrying debt on everything
audiences to consider when developing
personal experiences that seniors have
issues raised last year are worthy of
content makes it easier so you can handle the tough issues. >>
f
turn to for help making major decisions,
h
In the last five years, the number of seniors actively using the Internet has increased by more than 55 percent, from 11.3 million active users in November 2004 to 17.5 million in November 2009. reversereview.com
8 TRR
| 37
Tip!
Scams To combat an image that reverse
u
mortgages are a scam, credible, third
issue include:
Take on the issue of cost upfront and be prepared to disclose and explain
party data is crucial. Critics typically
the different fees, especially as they
attack reverse mortgages for its sales
are required by HUD. Make a clear
practices, suggest that seniors are taken u
Incorporate information on newer products and product enhancements
Thankfully, the industry has produced
into your discussion. For example,
these types of arguments.
of the MIP, discuss the value back
Standpoint data points include:
product changes:
very useful survey data for addressing
u
when addressing a topic like the cost to the consumer when discussing
g In October 2010, FHA introduced
Seniors with reverse mortgages give
the HECM Saver, which charges
the financial product exceptionally high ratings.
u
On a 10 point scale, 43 percent rated More than 50 percent of seniors with a
choice and lowers costs of obtaining a reverse mortgage.
90 percent of all seniors with a reverse u
Be sure to reinforce the value seniors
More than half of seniors with a reverse
derive from a reverse mortgage using
mortgage could not cover their monthly
survey data:
g 48 percent of reverse mortgage
expenses without one.
borrowers need it to stay in their homes.
These are just a sample; the study
g 45 percent of reverse mortgage
includes many great data points for combating this criticism.
borrowers live in the home in which
High Cost
percent for non-borrowers.
they raised their children vs. 35
g M ore than half of seniors with a
reverse mortgage could not cover
The cost of reverse mortgages will likely
their monthly expenses without one.
always be an easy topic for critics to
target. Product enhancements, such as
options that lower upfront costs and the
u
Also, reinforce the national data by
new HECM Savers product are just two
injecting real borrower stories from
criticism.
benefits.
examples that can be used to handle this
8 38
| TRR
distribute that content to your audiences. Since most reverse mortgage people I’ve met are adept at using events, seminars and other similar activities, I’ll focus
on the press, social media and the web.
Purists may cringe at my characterization, but these are simply forms of distribution. Each has its nuances, so the basic concept is to adapt your content for the audience and the method of distribution.
Novices should maintain a healthy fear
mortgage felt no pressure to proceed u
to explore the most effective ways to
for the Saver and Traditional
g Such options offer the senior more
one to a family member or friend.
with a reverse mortgage.
and you have good content., it’s time
Working with the Media
HECM was raised to 1.25 percent.
reverse mortgage would recommend u
So now that you know your audience
an upfront premium equal to 0.01 percent. The annual MIP charged
their reverse mortgage a “10”. u
Distribution
connection between cost and value.
advantage of and suggest that seniors would be better without them.
Tips to use locally on this
your market to illustrate the value and
of the press. A poorly chosen phrase or analogy may seem innocuous in
conversation but can be horrible to see in print. Also, reporters, despite their
best intentions, get things wrong. With a topic like reverse mortgages, expect that
they will rehash past information run by national news outlets.
On the plus side, effective use of the
media can improve perceptions not only of the product, but also of you or your
firm. After all, positive press is essentially a de facto endorsement by a third party. The key is to help the reporter do his or her job by presenting organized, easyto-understand information and being responsive to their needs.
There are likely anywhere from a handful to over a dozen print publications that are potential targets for the kinds of
information you will provide. What you
Not only are more people 65 and older heading online, but they are also spending more time on the Web. Time spent on the Internet by seniors increased 11 percent in the last five years, from approximately 52 hours per month in November 2004 to just over 58 hours in 2009.
are looking for are editorials that cover
senior issues, personal finance, retirement planning, real estate or local business activity.
u
Local daily papers
u
Community business papers
u
Community senior papers
u
Weekly community papers
u
Community news websites
Working with seniors to sell reverse
mortgages is probably a good parallel for handling media outreach. It’s a bit of a sales process, but as with reverse
mortgages, it’s a trust and relationship based sell. Your goal is to become a
reliable, credible source of information for the reporter. Achieve that and you will begin to see results.
Tip! u
Some additional tips for outreach include:
Focus on what is of value to the accurate story that is interesting and helpful to the publication’s readers. Learn and understand the publication’s news cycle—don’t expect to reach Be conscientious about returning calls, following through and providing promised content.
u
Learn reporters’ preferred method of interaction, which might even include LinkedIn or Facebook.
u
Be patient—it takes time to build
presents the most
Novices should
exciting and interesting
maintain a healthy
Social Media & the Web
fear of the press. A poorly chosen phrase Social media, blogs and or analogy may seem other community sites innocuous in conversation present an opportunity but can be horrible to see to reach a portion of the in print. Also, reporters, senior audience directly despite their best intentions, and indirectly (via adult get things wrong. With a children/caregivers/ topic like reverse mortgages, advisors to seniors). The expect that they will rehash numbers and diversity of past information run by people using these sites national news outlets. are mind boggling and can therefore help you
opportunities. As
defined, Facebook
is a communication tool that enables
conversation and the efficient transfer of
information, images
and other content. But to the avid user, it’s
much more. Facebook
is the primary interface through which they
experience the internet and the lens through which they view
all news and information local to the
of influencers around seniors.
global. It’s a playground filled with silly
Facebook is particularly intriguing
validation, and as a result, well-packaged
million people use Facebook, depending
speed to millions of people. All of these
are women and the fastest growing
and connection with your primary and
games, it’s a forum for debate and for
because somewhere between 400-500
information can spread at lightning
on the source. Roughly 56 percent
vehicles can be used to create visibility
demographic on Facebook (reported
secondary audiences.
through the end of 2009) are women over
Tip!
the age of 55. YouTube offers less precise
reporters at deadline time. u
phenomenon and
months to see press
establish a personal brand with the circle
reporter and his/her mission to write an
u
a fascinating
take weeks or even coverage.
Some publication categories include:
Facebook is
relationships and it can
statistics, yet hundreds of millions of
videos a day are viewed and their core
u
Here are some quick tips and ideas to consider:
Walk Before You Run – Just as
audience is men and women (evenly
companies weren’t real without a
million users in 2009 and that has climbed
without a social media presence are
split) ages 18-55. LinkedIn had about 55
website as of 10 years ago, companies
to above 100 million.
similarly deemed out of step. But remember: >>
facebook facts ?
Facebook (‘feis,b k):
a communication tool that enables conversation and the efficient transfer of information, images and other content.
400-500
million
out of the 400-500 million people on facebook, Approx.
people use Facebook, (depending on the source).
percent are women.
The fastest growing demographic on Facebook (reported through the end of 2009) are women over the age of 55.
reversereview.com
8 TRR
| 39
g It’s about conversations not
g E ngage – For example, LinkedIn
presentations.
Groups and Answers in particular,
g I t takes time and lots of it to develop
offer terrific additional distribution
a meaningful following and to
of content to targeted audiences.
remain engaged with followers.
Join and monitor relevant groups
g Effective use requires a continuous
and find opportunities to showcase
stream of activity.
u
Social Networking Sites – Facebook
your knowledge. u
YouTube, et al – Video is one of
and LinkedIn are points of engagement
the fastest growing content delivery
and communication.
methods on the Internet.
g Facebook, LinkedIn – Create a
g C onsider creating video versions of
profile and get in the conversation.
the content you provide.
g Share Content – Become a source
of valuable information. Don’t post sales pitches, but do post helpful
information for local seniors that
other people will want to follow and forward.
g Leverage PR – Repost positive media coverage to create more
distribution for good news on the web.
u
Blogging – Blogs can create additional distribution for thought leadership content and are also leveraged through social media sites like LinkedIn and Facebook, where content is easily reposted.
g Establish a blog about your local housing market, issues for local
seniors, etc. Google’s Blogger is
about as easy as it comes to create one.
40
| TRR
g Optimize for Google blog search
through a combination of simple preferences and content.
g Repost and link blog entries to your
social networking site profiles (most can be integrated automatically now anyway).
Most professionals I know have great content in their heads and know
their audiences. Building a personal brand in many cases is really about
taking the time to create effective and efficient distribution. By focusing on knowing their complete audience,
developing great content and being creative with distribution, any
professional can raise their visibility. Just remember, it’s a marathon, not a sprint, and focus on delivering valuable information, not sales pitches. g
The Reverse Review June 2011
the Last
Word face as an industry, for in the last several years we have not only seen housing
values plummet, but also the compounded challenge of reduced lending ratios
(principal limits). It’s in this very crucible that we have the opportunity to reinvent ourselves, our practices and market approach.
Working as a partner for Reverse Fortunes, I have the unique opportunity to speak with hundreds of reverse mortgage
professionals across our great country.
Presently, we find ourselves in a tumultuous market at best and pressed by weak home prices, which affords us the prime opportunity to improvise. By improvising,
speaking with these war-weary veterans of
we are not advocating a haphazard approach but rather the adventurous mindset of testing, evaluating and executing new strategies.
business practices and an overall mindset.
began to shift to other lead sources and
Yes, some have thrown in the towel and
left the business, but others have actually stabilized and even grown their loan
production. This piqued my interest. In
the industry I found some common traits,
Improvise In a static or stable market there tends to
Unique Skill Set Shannon Hicks
be little innovation. What’s the motivation? Times are good, business is ticking along nicely and one tends to focus working in
their business rather than on it. Presently,
we find ourselves in a tumultuous market at best and pressed by weak home prices, which affords us the prime opportunity
to improvise. By improvising, we are not advocating a haphazard approach but
Improvise, adapt and overcome. Those are the traits that comprise
rather the adventurous mindset of testing, evaluating and executing new strategies.
the unique skill set reverse mortgage
For example, several years ago my good
Honestly speaking, no one likes adversity
educational workshops. It was a low
originators must possess to succeed.
yet we find that innovation, creativity
and the new ideas that bring a product to
market are born from the fires of hardship. Case and point; the HECM Saver was
created during the most challenging times and yet opens doors to increase market
share. No one can deny the hardships we
friend and myself hosted bi-monthly
cost effort and the rewards in funded loans were tremendous. Then came
2008; attendance fell sharply along with conversion ratios of attendees to loan applications. Looking at our options,
we stopped the workshops altogether
for over a year and a half. Our emphasis
further development of referral partners. Over time I began to have this nagging thought, “Is it time to try workshops
again?” Looking to stick our toe in the
proverbial water, we scheduled two classes and a modest direct mail campaign. The effort was rewarded with four funded
loans from the first class and two from the second. The lesson learned was that one
may put aside one approach for a season,
but should be willing to test it again in the future.
Adapt I am blessed that while being a teacher of sorts, I find myself learning much from the professionals we serve. In speaking
with one gentleman who has been steadily increasing his production, I asked, “What are you doing differently today than
you were last year?” He began to share
with me his new practice. Each week, he
consistently time-blocks (sets aside time in
his schedule) for customer acquisition. This could be outbound phone calls >> reversereview.com
8 TRR
| 41
to prospects, meeting professionals for
eighty-five percent. What is their magic
over a decade in sales, I have both seen and
clientele. This accounts for eight to ten
of their time acquiring new customers and
self-fulfilling prophecy, both positively
referrals or touching base with his existing hours of his workweek. What did he have
to give up to make room? Not much. In fact, he shared with me the fact that he’s gaining more traction every week and closing an
additional 2-3 loans per month. He adapted
formula? They spend on average one-third keeping in touch with their existing ones.
He mentioned he is using a CRM (customer
relationship manager) to make this task less daunting and with great success.
to the changing market, stepped back from
Overcome
simple solution. A recent study of mortgage
Our greatest challenge today reaches
percent of originators account for seven
perceptions, housing values or interest
what was not producing results and found a professionals found that the top fifteen
times more production than the bottom
experienced first hand the all too common
and negatively. To quote James Allen from his class, As a Man Thinketh, “Act is the
blossom of thought, and joy and suffering are its fruits...” We cannot change the
outside forces that buffet our industry and
economy. We can choose to improvise, and
beyond market conditions, public
rates. It is our own mindset. Having spent
A recent study of mortgage professionals found that the top fifteen percent of originators account for seven times more production than the bottom eighty-five percent.
experiment with new approaches. We can choose to adapt new business practices
and disciplines in place of the old ones.
We can overcome the negative news and
melancholy that challenges us. Our actions
will determine our success and our mindset can give us the opportunity to learn and create in ways that only adversity could bestow upon us. g
l
the Resources Information at your fingertips. A listing of advertisers and contributors featured in this issue. l
Reverse Mortgage Crowds
Celink
The Law Office of Timothy A. Sherman
Reverse Mortgage USA
celink.com 517.321.9002
Direct Finance Corp. dfcmortgage.com 781.878.5626
Great Oak Lending greatoaklending.com 443.901.1775
High Tech Lending hightechlending.net 866.714.2040 X 2611
Industry Consulting Group, Inc. icgtax.com 972.991.0391
| TRR
l
iReverse Home Loans
appraiserloft.com 877.229.7799
42
l
AppraiserLoft
ireverse.com/employment 800.486.8786
timshermanlaw.com 781.930.3103
Mortgage Cadence mortgagecadence.com 888.462.2336
NRMLA
nrmlaonline.org 202.939.1760
Reverse Fortunes reversefortunes.com 800.805.9328
Reverse Market Insight reversemarketinsight.com 949.429.0452
reversemortgagecrowds.com 800.604.6535 rmeducator.com 800.748.1184
Reverse Vision reversevision.com 919.834.0070
River Communications riverinc.com 914.686.5599
RMS
rmsnav.com 888.918.1110
reversereview.com
8 TRR
| 43
Enterprise Lending Solutions, Document Services and Compliance Solutions In every enterprise, there is an underlying rhythm – a cadence – in the execution of mortgage loans. Those companies that have seamless system integration and dynamic data flow across the enterprise are in rhythm and optimize their efficiency at every step. Their business flows in absolute harmony to increase productivity, retain customers, maintain compliance and reduce costs. Now your company can catch the rhythm and reach a whole new level of performance. Mortgage Cadence is orchestrating the ultimate mortgage origination performance by providing a true Enterprise Lending Solution (ELS) that handles both forward and reverse lending, as well as multiple business channels. With the Mortgage Cadence suite of solutions you have access to full end-to-end loan origination functionality, automated underwriting, business rule management,
Mortgage Cadence gives you the flexibility to easily adapt to industry changes and capitalize on new business 44 | TRR opportunities; creating a more efficient, agile and profitable enterprise.
product and pricing, workflow automation, document services, and Web portals within one integrated platform. No other system in the market today can deliver this level of fully integrated performance tools and compliance support to accelerate the tempo of your enterprise.
888.462.2336
mortgagecadence.com