THE
REVERSE J U LY / A U G U S T 2 0 1 1
review
JOHN LEVONICK
Putting Reverse Lending on the Road Map INSIDE this issue
3 prevalent misgivings of reverse mortgages By Jonathan Neal
a problem affecting seniors nationwide By John Smaldone
The Industry Without Wells and BofA By Dave Bancroft
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TRR 7&8.11
26
28
38
34
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the Essentials
Are You Keeping Up With Changing Perceptions?
26
A look at the most prevalent misgivings of reverse mortgages.
Jonathan Neal
Dodd-Frank: Putting Reverse Lending on the Road Map
28
The industry awaits the implications that Dodd-Frank will have on reverse lending.
John Levonick
Transitions: A Reverse Mortgage Professional’s Experience 34 Losing a job can allow for positive change and personal growth.
Sarah Hulbert
A Financial Problem Affecting Seniors Nationwide 38 One senior’s experience sheds light on the amount of government aid available for those seniors struggling to keep their homes.
John Smaldone l
the
Core
The Report 9, 11
The Conversation
20
The Response 7
The Hot Seat
22
Ask the Underwriter
12
The Perspective 14
The Industry Roundup 24 The Opinion
41
The Advisor 16 The Resources 42 4
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reversereview.com
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Meet the Team Publisher
Aman Makkar “Some of the best ideas are inadvertent.”
Letter from the Editor l
e
Editor-in-Chief
Emily Vannucci “You’re trying too hard ... try less.”
National Sales Rep. & Marketing Coordinator
Our industry recently received
light on it once again. While I don’t
exit of Wells Fargo, like the exit of
her (I’ll stop before I give away any
Kate Sheehan “Love what you do. Do what you love”... Done and done.
sharing her inspiring story with all of
Copy Editor
some very significant news. The
BofA, came as a shock to many in
the industry, leaving many asking questions and scrambling to keep
up with the changes. Be sure to keep
want to rewrite Sarah’s article for
more details), I want to thank her for
a close eye on reversereview.com,
We’ve put together a great double
the latest breaking news.
two months. Be sure to check out the
where we will keep you abreast of all
On this topic, I want to turn the
attention to an article Sarah Hulbert put together for this issue. With the
recent exit of multiple large lenders,
I feel as if this article is coming at the perfect time. Sarah faced some hard
issue for you to peruse for the next
summer activity for those beachgoers out there, or those of you who just
need a quick break from your busy workweek.
News Editor
year and many employees are most
summer trips, but mainly for the
position Sarah once was. I love this
article because it delves into the many scary and sometimes open-ended
questions one must ask themselves
purpose of planning our three biggest issues of the year. Stay tuned for a great fall lineup that begins in September.
Please enjoy all of the hard work that
In addition to discussing the steps she
The Reverse Review. Have a fabulous
upon the idea of embracing change. I feel as if every month I mention change in my letter to you. The
concept is so apparent in our industry and Sarah confirms it by shining a 6
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Brett G. Varner “He who spends too much time looking over their shoulder, walks into walls.”
this break for, yes, a couple of
when standing at a crossroads.
made to move on, she also touches
Traci Knight Spell check got the best of me.
created. Hopefully this will be a fun
We at The Reverse Review are using
likely finding themselves in the same
Creative Director
crossword puzzle Ralph Rosynek
decisions when her employer decided to exit the reverse space earlier this
Kersten Wehde I can’t read a menu, text or wedding invitation without proofreading it.
our readers.
Printer The Ovid Bell Press Advertising Information phone : 858.832.8320 e-mail : kate@reversereview.com Subscriptions e-mail : information@reversereview.com
went into our July/August issue of
Editorial Content e-mail : emily@reversereview.com
summer!
© 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
Until next time,
Editor-in-Chief { emily
vannucci
}
The Reverse Review July/August 2011
the Response THE
JUNE 2011
the
review
Industry’s Message to Washington, D.C.
As the executive director of the
ability to live financially secure
mortgages and the financial freedom
am writing in response to an article
organization is focused on doing
seniors. Though the article in
Coalition for Independent Seniors, I in the June 2011 issue of The Reverse Review entitled “The Industry’s
John Mitchell, CPA
Message to Washington, D.C.” by INSIDE this issue
EFFECTS OF THE NEW COMPENSATION GUIDELINES
John Mitchell.
By Joshua shein
PR TIPS ON A BUDGET By Justin Meise
5 WAYS TO BUILD YOUR NETWORK By tiMothy a. sherMan, esq
Feedback is very important to us here at The Reverse Review. Send us your thoughts on past articles or something that is on your mind and we will publish it in this section, the Response. information@reversereview.com
The Coalition for Independent
lives in the homes they own. The the right thing for those members of our society who have lived
fiscally responsible lives and want to continue to do so in the comfort of their homes.
Seniors (CIS) is a nonpartisan,
This year, we’re lobbying Congress
dedicated to preserving the
third-party counseling requirement,
nonpolitical, public policy coalition opportunity for seniors to stay in their homes and protecting their ability to live financially
independent lives. CIS is dedicated to communicating on behalf of senior homeowners to those
who can have an impact on their
they can provide to qualifying
the June issue was written by a
CIS board member, CIS did not
commission the study outlined in it. The study does not in any way
represent the public policy positions of our organization.
to preserve the consumer-friendly
Our organization is committed
the HECM Saver and other
reverse mortgage as a financial tool
consumer-friendly protections in the federally-backed program.
Additionally, we will continue
to work to educate members of
Congress and federal regulators about the benefits of reverse
to promoting the benefits of the
for seniors and to building a solid
reputation for the industry among policy makers in Washington. To
learn more about what we do, visit our website at www.cforis.org. - H. West Richards, Executive Director, Coalition for Independent Seniors
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the Contributors Dave Bancroft
1
Feature Article l
John Levonick
1
Dodd-Frank: Putting Reverse Lending on the Road Map, pg 28
The Opinion, pg 41
David Bancroft, former Executive Vice President and board of director member at Security One Lending, is an industry expert in the origination of reverse mortgages. Bancroft was the Founder and President of Omni Reverse Financing Inc, specializing in Government lending. Omni Reverse was one of the largest originators of HECM Mortgages in the country and was acquired by Security One Lending in 2009. davebancroft@cox.net | 949.355.4653
Kevin Brown
2
2
Tax Tip, pg 21
Kevin Brown is the Vice President of Sales and Marketing at Industry Consulting Group, Inc. (ICG) and is responsible for all marketing, customer service and sales activities. He also serves as a Business Development Executive where he leads corporate product development relating to the reverse and forward mortgage industries. Kevin has over 20 years of experience in the tax service and mortgage space.
Sue Haviland
3 33
John Levonick is responsible for identifying and managing compliance risk. He has focused on working creditors, servicers, secondary market participants and technology vendors in providing guidance on consumer finance laws. Levonick’s experience as Chief Compliance Officer, Regulatory Counsel and Associate General Counsel in the mortgage lending industry has given him the ability to provide the guidance and direction necessary navigate the challenges of a constantly changing regulatory environment. 8 | TRR
The Advisor, pg 16
Sue Haviland is Co-founder of ReverseMortgageSuccces.com. Haviland has been in the mortgage industry more than 25 years. Unlike many others Haviland originates reverse mortgages each and every day and has earned her Certified Reverse Mortgage Professional designation. If you would like to profit from the largest niche to ever hit the mortgage industry, grab the free course and profit-producing tips at www.reversemortgagesuccess.com.
Sarah Hulbert
4 4
Sarah Hulbert is the Retail Business Development Manager at 1st Reverse Mortgage USA®, a division of Cherry Creek Mortgage Company, Inc. With nearly 20 years of industry experience covering most aspects of the reverse mortgage business, Hulbert served four terms as co-chair of NRMLA’s Board of Directors. She is a current board member (ex-officio) and co-chair of NRMLA’s Standards and Ethics Committee. 425.200.0753 | shulbert@1strmusa.com
Reza Jahangiri
5 5
6
Transitions ... , pg 34
The Hot Seat, pg 22
Reza Jahangiri is Founder and CEO of American Advisors Group, a private national reverse mortgage lender. Since AAG began in 2004, the company has grown to become one of the largest originators in the country with a national marketing campaign backed by former Senator Fred Thompson. Jahangiri sits on the board of CIS (Coalition for Independent Seniors) and has also served as CEO and President of several successful healthcare services companies prior to entering the reverse mortgage business.
The Reverse Review July/August 2011
the Report
May 2011 Wells Fargo MetLife Bank, N.A. Bank, N.A. Endorsement Endorsement 1092 932
Top Lenders Report One Reverse Bank of Mortgage, LLC America, N.A. Endorsement CHARLOTTE 430 Endorsement 332
Urban Financial Group Endorsement 280
12345 Lender
Endorsements
Lender
Endorsements
GENWORTH FINANCIAL HM EQUITY
199
NATIONWIDE EQUITIES CORPORATION
16
GENERATION MORTGAGE COMPANY
155
SUN AMERICAN MORTGAGE CO
16
AMERICAN ADVISORS GROUP
124
PRIMELENDING A PLAINSCAPITAL
15
SECURITY ONE LENDING
95
PLAZA HOME MORTGAGE INC
15
GUARDIAN FIRST FUNDING GROUP
82
GATEWAY FUNDING DIVERSIFIED
15
NEW DAY FINANCIAL LLC
63
VIG MORTGAGE CORP
14
SENIOR MORTGAGE BANKERS INC
55
CHERRY CREEK MORTGAGE CO INC
13
SUNTRUST MORTGAGE INC
50
MAS ASSOCIATES
13
REVERSE MORTGAGE USA INC
50
HARVARD HOME MORTGAGE INC
12
MONEY HOUSE INC
49
REVERSE MORTGAGE SOLUTIONS INC
12
FINANCIAL FREEDOM ACQUISITION
48
WEBSTER BANK
12
PNC REVERSE MORTGAGE LLC
39
SIDUS FINANCIAL LLC
12
GREAT OAK LENDING
32
UNITED NORTHERN MORTGAGE BANK
11
M AND T BANK
31
HOME SAVINGS OF AMERICA
11
EQUIPOINT FINANCIAL NETWORK
29
ENVOY MORTGAGE LTD
11
SUN WEST MORTGAGE CO INC
25
CHRISTENSEN FINANCIAL INC
10
ASPIRE FINANCIAL INC
23
AMTEC FUNDING GROUP LLC
9
LIVE WELL FINANCIAL INC
22
FIRST EQUITY MORTGAGE BANKERS
9
THE FIRST NATIONAL BANK
22
FIRST SECURITY MORTGAGE INC
9
ROYAL UNITED MORTGAGE LLC
21
IREVERSE HOME LOANS LLC
9
AMERICAN PACIFIC MORTGAGE
17
LIBERTY BANK
8
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the Contributors John K. Lunde
6
6
The Report, pg 9, 11
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
7
Mark A. Sisco
9
Mark Sisco is the RSD with West Star Reverse Mortgage and is the driving force of the retail sales and the training group of the Reverse Mortgage division. He holds a California Broker’s license and several other origination licenses and is an accomplished speaker, with over 18 years in the mortgage industry. 949.922.7859
Jonathan Neal
7
8
Jonathan Neal is a Senior Partner with CCGCapital Consulting Group, LLC marketing and sales consulting firm located in Atlanta Georgia. CCG’s primary focus is built around their (TPM) Third Party Marketing program. TPM is based on the belief that in order to be successful in the senior market place professionals selling financial/insurance services and products must build and maintaining relationships with highly respected centers-of Influence. jneal@ccgcap.com
9
11
12 10
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John Smaldone
A Financial Problem Affecting Seniors Nationwide, pg 38
10
John Smaldone, Founder of Taylor, Bean and Whitaker and former Senior Vice President of TransLand Financial Services Reverse Mortgage Divisions is the Executive Vice President of Hanover Financial Services, a consulting firm primarily in the reverse mortgage industry. With 42 years of mortgage banking experience and 10 years in reverse mortgages, Smaldone intends to remain in the reverse mortgage industry taking on long-term consulting assignments. johnsmaldone@charter.net
Ralph Rosynek
8
10
Are You Keeping Up With Changing Perceptions?, pg 26
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
The Conversation, pg 20
Brett G. Varner
11
The Perspective, pg 14
Brett G. Varner is the News Editor for www.ReverseReview.com. Varner has served the mortgage industry for 10 years in leadership capacities in sales, marketing and operations. His unique and knowledgeable perspective is focused on developing useful content and strategies in a forum of open and lively debate.
Alain Valles, CRMP 12
The Advisor, pg 17
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
The Reverse Review July/August 2011
the Report
INDUSTRY SUMMARY Retail Endorsement Growth
-17.96%
April Endorsements Retail and Wholesale Volumes
Wholesale Endorsement Growth
-13.29%
- Reverse Market Insight
Total Endorsement Growth
-16.18%
* Figures Above Reflect Change from Prior Month
Trailing Twelve Month Endorsements
TPO loan volume continued to grow in April, but it wasn’t enough to keep wholesale endorsements from declining -13.3 percent. Retail was down -18 percent, and it will be important to see if TPO volume is growing the business (through non-FHA-approved brokers) or just migrating FHA brokers to TPO producers. Last month we showed a chart that illustrated the impressive growth of TPO loans and the clear lead of a few sponsors in this channel. The updated chart shows continued growth as TPO loans made up 30 percent of all wholesale loans in April. Competition has also increased as many sponsors race to catch up. HECM TPO Endorsement by Sponsors HECM TPO Endorsements by Sponsor
800
10,000
MEMBERS TRUST COMPANY FSB GRAYSTONE TOWER BANK
700
DOVER MORTGAGE COMPANY
8,000
MCM HOLDINGS INC
600
6,000
JAMES B NUTTER AND COMPANY NATIONWIDE EQUITIES CORPORATIO
500
CHERRY CREEK MORTGAGE CO INC NATIONWIDE EQUITIES CORPORATION
400
4,000
FINANCIAL FREEDOM ACQUISITION LIVE WELL FINANCIAL INC PLAZA HOME MORTGAGE INC
300
SECURITY ONE LENDING
2,000
SUN WEST MORTGAGE CO INC
200
0
WELLS FARGO BANK NA BANK OF AMERICA NA CHARLOTTE
100
5 6 7 8 9 10 11 12 1 2 3 4 Retail
GENWORTH FINANCIAL HM EQUITY A
Wholesale *Numbers Represent Months
RETAIL UNITS CHG%
WHOLESALE UNITS CHG%
TOTAL UNITS CHG%
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%
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%
-0.71%
7,300
6.1%
4
3,704 -17.96%
TOT
43,763
2,547
10.4%
24.0%
6,551
2,207 -13.35%
6,550 -0.02%
9.33%
6,462 -1.34%
2,413 2,785
2,415 -13.29%
29,720
6,119 -16.18%
GENERATION MORTGAGE COMPANY
0
73,483
URBAN FINANCIAL GROUP
1/1/2011
2/1/2011
3/1/2011
4/1/2011
MetLife ran out to a big lead in March but grew slower in April, while Urban, Genworth, Generation, BofA and Security One all grew significantly to more than double TPO business from 360 to 735 loans. In the future, we’re hoping to analyze just how much TPO business is coming from originators new to the industry, but for now it’s clear that the sponsor side is becoming a much more competitive market. This month’s report also raises a point in the discussion about industry consolidation, as the table illustrates that some of the largest lenders declined much faster than the industry in April. We don’t put too much stock in any one month’s results, but it’s startling to see that 88 percent of the industry’s decline this month came from just two lenders: Wells Fargo and MetLife. The two lenders were 44 percent of the industry in March, so their decline is far larger than their market share. The smallest originators didn’t catch a break though: Top 10 lenders Urban and One Reverse both saw 12-month highs and Security One came in just one loan shy of its recent peak. g
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The Reverse Review July/August 2011
ask the Underwriter
The Ultimate Reverse Mortgage Crossword Puzzle Ralph Rosynek
Tired of those endless sudoku puzzle? Tuck this edition of The Reverse Review into your beach bag and take a moment to play with words and numbers in this unusual crossword puzzle. While your Underwriter is taking a few deserved days for basking in the sun and visiting favorite ports of call, I would be remiss in not giving you the usual midsummer wake-up call: Summer is almost halfway over and fall is rapidly approaching! Have you reviewed your strategy?
Answers will be published in the next edition of The Reverse Review. Have a safe and productive summer!
across down i 1 Provides mortgage insurance on loans made by approved lenders 2 Added to an index to calculate a rate 3 Limit for period or term 4 Agent for the borrower(s) 5 No change in rate 6 Index definition 7 Payment plan type 8 Form of communication 9 Reverse mortgage trade association 10 Not the initial 11 HUD value or loan limit 12 Underwriter type 13 Accrual method 14 All must be cleared with proceeds 15 Acronym for 11 down 12 | TRR 16 Regardless of age 17 Interbank city
g
1 Borrower permission or desire 2 Reverse mortgage 4 Actuarial determined term associated with a reverse mortgage 6 Reflects changes to the 100-year floodplain 7 Life estate component 8 Included in monthly payment calculation 9 One for the lender, one for HUD 10 Includes fees and charges 11 Ended 12 Generally an attachment to a legal document that can be used to insert language or signatures 13 Payments and interest calculation change 14 Survives incapacity 15 Final may be a “short form” 16 The average yearly combined cost of a reverse mortgage 17 Not a complete report for determination 18 Attorney … 19 No debt deficiency passed on to heirs 20 Once the HECM lender forecloses 21 Facility to handle repairs 22 Licensing authority
1
1
2
1
3
2
4
boxes requiring numbers
7
2
5
6
4
3
12
1 Index for monthly LIBOR 2 Swap index for expected rate 3 Floodplain years for manufactured home foundation 4 Minimum co-borrower age 5 Oldest year of manufactured home eligibility 6 HECM maximum claim amount 7 Residential loan application for reverse mortgages 8 HUD/VA addendum to URLA 9 Manufactured home appraisal report 10 Uniform residential appraisal report 11 Maximum number permitted FHA HECM loans to borrower 12 Multiplier for minimum title insurance coverage 13 July 1, 2011, monthly servicing fee amount 14 Additional guidance, minimum origination fee 15 Percentage over $200M in value 16 $185,000 value origination fee amount 17 Small residential income property appraisal report 18 Number of days appraisal report is valid 19 Condo appraisal form 20 DE form used to modify value or for comments 21 Individual condo appraisal report 22 HUD HECM handbook 23 HUD HECM program code 24 Number of days updated appraisal report is valid 25 Maximum lender paid comp in borrower-paid scenario
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The Reverse Review July/August 2011
the Perspective experienced a fairly detailed cross-section of the faces and personalities that define us as an industry. Last month, I had the unique opportunity to spend an aweinspiring evening at the Mount Wilson Observatory in the San Gabriel Mountains. While viewing the universe through their 60-inch telescope, accompanied by members of their passionate staff and Tyler Nordgren, an energetic professor of astronomy and physics at the University of Redlands, I was irritated to find my thoughts drifting to the reverse mortgage industry. However, I realized that the perspectives opened up by the observatory, combined with the dedication of those associated with it, was reminding me of some important lessons about leadership, passion and commitment.
Truth in a Telescope Brett G. Varner
Over the past few months, I have spent a considerable amount of time thinking about the people that make up the reverse mortgage industry. Through my involvement in different capacities, I have 14
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I experienced a very ethereal dichotomy that evening, feeling both at one with the universe and immensely insignificant. It was very difficult to understand how in a universe populated by millions upon millions of galaxies, stars and planets that intergalactic objects could exist with harmony and consistency. My thoughts found their way to the reverse mortgage industry as I realized that my experience that night, albeit on a very different scale, was similar to my experience with the industry and its makeup. What makes the industry unique is not the product, but the people who are professionally drawn to it.
Despite efforts by many government officials, regulators and the media to depict the product as a complicated financial instrument, reverse mortgages, specifically HECMs, are really just government-insured deferred payment equity loans. For many, that statement will be construed as an oversimplification, but it is essentially true and does not undermine the necessity for consumers to understand the product and carefully weigh options. Plus, reverse mortgages are but a tiny percentage of the housing finance industry and are largely overlooked as a product that can have significant impact on the larger market. This is a perception that corresponds with the feelinginsignificant aspect of my experience at the observatory. The industry is similar to a distant solar system that scientists have not yet been able to learn much about. There is some intrigue and curiosity about it, but there are many other aspects of the housing market that distract people’s attention. When the surrounding noise of the housing market is filtered to focus on the reverse mortgage industry, like a telescope aimed at a particular object, fascinating aspects of the participants’ interworkings come to life. That night, I viewed two objects in particular that informed this analogy. Looking through the telescope to observe M13, a globular cluster in Hercules, it struck me that on the surface, the industry is dominated by the top producing organizations,
A great team is usually made up of great individuals, and in the most successful teams, no individual is greater than the whole, either in image or reality.
but is also made up of hundreds of different organizations of varying size. Those organizations comprise the tens of thousands of individuals who serve the reverse mortgage community in one capacity or another. It is the individuals who define the industry and its role in serving the older American population. In dealing with people at all levels of hierarchy and involvement, I have learned very important lessons about why this industry is special. Many people who are drawn to this industry are driven by a true affinity for the product and demographic and appreciate the duel compensation of financial opportunity and personal fulfillment. A globular cluster, like M13, is a colossal cluster of stars that orbit a galactic core and are tightly bound by gravity. M13 is made up of at least 100,000 stars, possibly as many as 10 times that amount. As I observed the cluster, there appeared to be a certain geometry about how the stars interacted. Professor Nordgren noted that what I observed was related to the fact that the cluster was indeed in a precise orbit, maintaining harmony and keeping each star in its position and maintaining the distances between them, without collisions. When a team within the industry functions like a globular cluster (and I define “team” in this respect as broad enough to include origination, production, third-party service providers, secondary, investors, etc.), then each person is fulfilling his role and sustaining the harmony of interactions that lead to the highest levels of satisfaction for the seniors they serve. It is their dedication to what they do that drives this passion. Unfortunately, there are also those whose egos try to place them above
Turning away from the telescope, the the industry. Through selfishness or final lesson of the evening came from hubris, they strive to elevate themselves Observatory Superintendent Dave above others and project an air of selfJurasevich. We were fortunate to have importance. Amazingly, I have seen this him as our guide for much of the occur at all levels and evening. A retired mechanical roles within the industry. engineer, Dave’s passion for The compensatory feature astronomy led him to a role in of these types is that they which he oversees the operation are similar to the Ring My thoughts of the observatory and the Nebula. found their maintenance of the telescopes. As he spoke to us about the history The Ring Nebula is way to the of the observatory and showed considered to be a reverse us its inner workings, his passion planetary nebula that mortgage and commitment shone through. appears as a bright ring. He acknowledged that although This type of nebula is industry as I he was not responsible for created when a dying star realized that my providing a guided tour to us, he is rapidly expanding a experience that felt obligated since he was at the shell of gas that is being night, albeit on observatory when we arrived. explosively burned off. a very different Essentially, the star will scale, was similar Dave appeared as a leader burn bright for a period to my experience who commands respect and of time before dying commitment from the staff, with the industry completely. The planetary not because of his position, but nebula that I viewed and its makeup. because of his own commitment appeared to me as a red What makes and dedication to the observatory. ring with a core that was the industry He portrayed a humility and not visible. unique is not the reverence for the responsibility product, but the his position has for the I’ve always believed people who are observatory, to those who work that those who place professionally there and for those who support themselves in greater it. importance than the drawn to it. industry they serve or From my experience at Mount Wilson the people they work with are doomed Observatory, it was clear that I will never to fizzle out or lose support needed to fully comprehend the expansiveness sustain them. They may fool or intimidate of the universe, but by observing the others for a while, but eventually they interactions and interrelations of different will alienate those they need the most types of objects, I was left with a sense and, like the Ring Nebula, they will of wonder. In all aspects of our lives, run out of resources and fade away. A we are a part of a much larger whole. great team is usually made up of great In business, just as in life, our success is individuals, and in the most successful predicated upon not only the team with teams, no individual is greater than the which we align, but the type of teammate whole, either in image or reality. we choose to be. g
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The Reverse Review July/August 2011
the Advisor same 24 hours in a day. Have
day. Those projects are normally off my
mortgage pipeline is shrinking, you seem
and before I look at email. Schedule your
that you’re worried about your production?
an hour at a time. I find that I work best
there is more to it than that. The timing for
I actually set up these time blocks and
you noticed, though, when your reverse
to-do list before the phones start ringing
to be able to get less done in the day? Is it
time in blocks. Your best block may be
That seems like the easy answer but I think
in about 45-minute increments. And yes,
this article is interesting – we just finished
use a timer!
the first half of the year. Are you where you want to be?
Indulge me here for a moment. Go back and look at your calendar. How are
you scheduling your time? Is the focus on productive activities
take a look around your office Go head, do it now. What distractions are in front of you right now? Your
phone (landline), your cell/
smartphone, your computer,
that bring in loans, or
other people? Don’t let the
have you fallen victim to
time vampires get in your
busywork? Personally,
I normally have several
How are you
different projects going at
one time. It’s just the way I
work best. Between writing, loan origination, coaching, committee work with
No Time to Work on the Loans I Don’t Have… Sue Haviland
You’ve heard it said many times before: We all have the 16
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NRMLA and personal and
family interests, there’s a lot
going on … BUT it’s all very structured. This did not
second
scheduling your time? Is the focus on productive activities that bring in loans, or have you fallen victim to busywork?
happen overnight and it did not happen without a plan.
first
think about this:
way and cause you to lose focus. If you have a door,
shut it. Turn off the phone, etc., if you are working
on a marketing piece or a
presentation. Whatever is on your calendar for that
time slot, let nothing stand in your way. Think about this: If you had a reverse mortgage application
scheduled right now, and you knew
it was going to be a slam-dunk loan – borrower and the kids are on board, house is in beautiful condition, you
Are you a morning person or are you at
are confident about the value – what
your activities around that time. For
I venture to say almost nothing. Treat
at least two publications each week: a
project list as though it were that reverse
Reverse Fortunes (find me under Lead
this message is the time we spend on
Review. Over the years I have learned
potential distractions get in the way of
your peak in the afternoon? Structure
would keep you from that appointment?
example, I am an early bird. I write for
everything on your calendar and your
senior-oriented magazine in Maryland,
mortgage application. Another tie-in to
Central) and of course The Reverse
email and other outlets. Don’t let these
that I need to do my writing early in the
your productivity. Don’t get me wrong;
social media is extremely important and
sharing your thoughts and ideas with your peers, customers and prospects should be part of your overall plan,
but don’t get sidelined. Book the time
for this activity the same as you would any other. When you see the latest
shiny object, don’t allow yourself to be pulled off course. Stay with your
plan. Often, when I am consulting with Reverse Mortgage Success members, this becomes the topic. Keeping that
laser focus and eliminating distractions is sometimes tough to do, but it is necessary.
third
look in the mirror This may sound a bit odd, but how is your mindset? When you look in the
mirror can you say that you are focused and on schedule, or just floundering
and waiting for a loan to drop in your lap? Mindset and time management can go hand in hand. When you are
busy writing loans, you are on your
game and you just seem to get things
done. Keep that momentum going … surround yourself with like-minded achievers, not the time vampires I
structure their time. Are you doing
$10-per-hour work? Consider hiring an assistant. Can’t afford to pay someone? Check with your local colleges.
Students often need to gain some realworld experience. Need someone to
hold your feet to the fire? Get a coach. My timer is about to go off, so I need
to bring this article to a close. Look at
your calendar, prioritize your time, and structure your day the way it works
best for YOU. Now get out there and help some seniors! g
referred to earlier. Study the habits of
successful originators and see how they
?
Need assistance from the Advisor?
Send your question to advisor@reversereview.com and it may be addressed in the next issue.
How’s Your “Love-OMeter”? Alain Valles, CRMP
The secret to a smooth reverse mortgage transaction and consistent referrals is to ensure you don’t meet your client’s expectations. You must exceed
them. Your client can’t just like you, they must love you.
it unless you can measure it. So I have
Actually, they do. Studies show that reverse
manage expectations and overcome the
developed a reverse mortgage “Love-O-
Meter” to help loan officers learn how to
mortgages generated an amazing 80 percent
reluctance to ask for referrals.
loan officers, always seeking to improve
The first chart on the following page depicts
of thinking that everything is going wrong.
reverse mortgage transaction. The bottom
The senior borrower expects the loan to
to closing. The vertical axis is your “Love-
and beyond the simple process of closing
1, the borrower loves you, otherwise they
goodwill and referrals. But how can you tell
Unfortunately, as the process goes on, the
they love you enough to say yes when you
is getting frustrated or concerned about
approval rating from senior borrowers. But
their own performance, can fall into the trap
the typical loan officer’s perception of a
axis is the number of days from application
close. So as a loan officer you must go above
O-Meter” scale, from Love to Hate. On Day
the loan in order to stand out and generate
wouldn’t move forward with the process.
if your customer really loves you? And if
loan officer begins to feel that the borrower
ask for a referral?
their loan. Their affection drifts downward
Like anything else, you can’t manage
an appraisal issue and the next thing you
on the “Love-O-Meter” scale. Add a title or know, >>
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| 17
their feelings drop from Love to Hate. But, after 60-plus days,
A classic example is when a loan officer promises to call the
upward bounce.
the loan officer remembers and then assumes the borrower is upset
the loan finally closes and the borrower’s emotions have a slight
borrower with an update and forgets to do so. A few days go by and that they didn’t receive the update. The next thing you know the
4 Chart One 3
loan officer is avoiding calls and dumps everything on the processor
Typical Loan Officer Perception of the Transaction
Y
when the fact of the matter is the borrower still loves you.
It’s only when time goes by without a response or update that the borrower’s attitude drops to meet our perception. Chart Three shows the loan officer’s perception relative to the borrower’s
perception. If the loan officer begins to assume the borrower is not happy, sooner or later that assumption will become true.
4 Chart Three 3 Loan Officer’s Perception vs. Borrower’s Perception
The first challenge is that many loan officers don’t ask for referrals
Y
from the borrower at all! They simply hope that by doing a good
job the senior will automatically become an advocate after the loan
closes. But you should start asking for referrals on Day 1, when the customer loves you! You can’t risk waiting until the loan closes. The second chart highlights when you should be asking for
referrals. Don’t wait until the loan closes or you’ll be behind the curve.
4 Chart Two 3 When to Ask for Referrals
Y
The key is to make sure both the borrower’s and loan officer’s perceptions match and fall in the Love zone.
How can you raise the Love-Hate line to all Love, all the time? Start by doing a better job explaining the details of the loan transaction; highlighting the different players involved, from the appraiser
to the closing attorney or settlement agent; and staying in touch throughout the transaction.
The fourth chart highlights the objective of the borrower loving you from beginning to end, which makes for more opportunities to ask for and receive referrals and introductions to new referral sources. This can be accomplished by weekly phone updates, handwritten notes, stopping by with a small token of your appreciation (a Now comes the tricky part. The first chart depicting the downward slide to Hate is rarely the borrower’s perception of the transaction,
box of chocolates always goes a long way), and emailing timely information.
but rather the loan officer’s.
Studies show that reverse mortgages generated an amazing 80 percent approval rating from senior borrowers. But loan officers, always seeking to improve their own performance, can fall into the trap of thinking that everything is going wrong. 18
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4 Chart Four 3
4 Chart Five 3
Constant Love = More Referrals
The Goal Is to Have the Borrower’s Love for You Grow!
Y
Y
But if you want to truly excel in the reverse mortgage business
the goal should not be getting the borrower to love you evenly
throughout the process. Chart Five shows you must work to get the
borrower to love you more and more as the process goes on. If you set that as the goal and miss it by a bit, you’ll still be winning! When this
happens you’re building tremendous goodwill and creating advocates who will go out of their way to refer you.
Besides the obvious necessities of explaining the process better and
keeping the senior informed, I actually describe the “Love-O-Meter”
to my borrower at time of application. I explain where we are on the chart and that my goal is that they will learn to love me even more. It may sound silly, and you can imagine the teasing I get. During the loan process I ask the borrower how I’m doing and let them know it’s OK to let me know if I’m slipping toward Hate. This gives me a chance to correct any issues and get back on track. We all know that we must do better than just closing the loan. We must exceed the senior’s expectations. Test your own “Love-O-Meter” to help ensure that you “feel the love” from your borrowers and generate goodwill and referrals. g
“I want a tax service company that understands the Reverse Mortgage Market.”
At ICG, we know the key to an effective Reverse Mortgage product is all in the details. Conventional tax service models merely report delinquent accounts to their customers. ICG goes beyond the conventional model and embraces proactive, loss mitigation and industry best practices into our tax service products to provide clients an end-to-end solution specifically designed for the Reverse Mortgage market. We understand your industry, investor guidelines, regulatory requirements and more importantly your client base. We welcome the opportunity to design a solution exclusively for you. Industry Consulting Group, Inc. is committed to helping Reverse Mortgage companies overcome the challenges related to tax defaults.
Call us at 972-991-0391 or visit www.icgtax.com today. Tax Monitoring / Exemption Information
|
Tax Payment / Borrower Notification
|
Full or Partial outsourcing models
reversereview.com
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| 19
The Reverse Review July/August 2011
the Conversation down, big-ticket items are no longer being
more time-consuming for the loan officer
additional staff. For more than six months,
Remember, in most cases, a senior does not
bought and employers do not need to hire
6.2 million Americans have been without a job. This is not a bump in the road; this is America facing terrible times.
Baby boomers near the age of retirement are being let go from their current
employment due to their age. As sad as
it is, they are being replaced with a new,
younger workforce for half their income.
Jobs are in demand and employers know
they can hire for less money. This is not to
say it is the employers’ fault. The financial and economic issues these companies
face make it difficult for them to stay in business if changes aren’t made.
enough about the options and advantages
of a reverse mortgage to help them through this process; this is where education must come into play.
I truly believe that the reverse mortgage program will survive and in fact get
stronger in years to come. The bottom line offer a solution to this problem providing that these seniors have equity in their
homes, as most of them do. On the other
never have been an option for those who fell behind on their taxes and insurance. Greed most likely took over on the part
of the loan officer and the lender, and the new qualifying counseling protocol was not what it is today. As long as we have the right reverse mortgage educators, salespeople need not apply.
for these bad loans when in fact it was were offering these products based on
the investors’ guidelines, which were met
through the underwriting procedure. Why
is the investor protected when most people lost their investment portfolio due to bad paper loans and financial institutions
collapsing? I say: Too bad, Mr. Investor, but your investment went south. Embracing new industry mandates has been a
challenge but has helped weed out the
unethical loan officers, lenders, appraisers and title reps (the list goes on) that fueled the greed.
2015. Even then, they will be slow to gain
their homes as ATMs and many cashed out
(except for Washington, D.C., and Seattle,
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purchase. A reverse mortgage should
boom, some of these baby boomers used
have this same equity. During the refinance
Finding the right scenario for someone
20
downsizing with a new reverse mortgage
I do not expect home values to begin
U-6 is more than 16 percent and property
Washington). Consumer confidence is
One should consider selling and perhaps
hand, 62-year-old baby boomers may not
on their equity.
values are down in 18 of the top 20 markets
a reverse mortgage is not the answer.
the investors, bankers and lenders who
is seniors need help and reverse mortgages
Statistics official unemployment rate of the
If they can’t pay these obligations then
his investments to survive and make
retirement. Many seniors do not know
Long-term unemployment figures are at 9.1 percent. Where does this fit in with the reverse mortgage scenario and lending in general? The Bureau of Labor
be able to provide for taxes and insurance.
I remember the media blaming the brokers
ends meet years ahead of his scheduled
Mark A. Sisco
need to have a job to qualify but needs to
This creates a situation where the 62-yearold baby boomer has to draw upon
Tick Tock, Tick Tock
in terms of marketing and planning.
to take out a reverse mortgage is perhaps
to return to their previous levels until momentum. One way to stabilize the
housing market – and granted, this is only a start – would be a program designed to forgive the homeowner of any amount owed above the value of their home. It
would also set in place a new loan for 100
have the manpower to spend the money
was on the hook and the homeowner had
with a new rate of around 5 percent over a
vagrants. The association also loses as the
they could qualify), they may continue to
percent of the market value of the home
30-year fixed-rate mortgage. For instance, if
a homeowner had a first mortgage of $300K and a second of $200K, and the property
was valued at $300K, the $200K would be forgiven.
policing these empty properties against property deteriorates with
I have witnessed asset managers receive the
homeowners live in their homes for
The real estate agent
foreclosure goes into effect. Homeowners
also at risk of walking
years without making a payment before facing foreclosure on an underwater
property neglect the property and refuse to pay their mortgage. The homeowner
in some cases will rent out the property, only to walk away without ever paying the mortgage while cashing in on the
tenant’s rent payments. Homeowners will
damage and sell off everything imaginable in the house, leaving the bank with a
shell of a house and causing values in
the neighborhood to drop. Banks do not
A topic for the closing table? In 2005, AARP conducted a national study of homeowners over the age of 65 and found that only 31 percent of the respondents were aware of property tax relief programs available to them in their state and only 3 percent of these respondents had actually applied for relief.
into a dangerous situation upon home review. The
banks go as far as paying the squatters to leave the the original owner have a chance to see if they
can qualify for the new
loan program? With the
situation, we will never get through the bad housing
representing the REO is
property, so why not let
situation would rebound
With the current
the offer.
it becomes for all concerned. Many
this scenario, the housing
physical obsolescence.
and still refuse to accept
property sits on the market, the worse
take care of the property. In
overgrown vegetation and
asking price on a REO
The real scenario is that the longer a
a chance to keep their home (providing
inventory. If the investor was on the hook and the homeowner had a chance to keep their home (providing they could qualify), they may continue to take care of the property. In this scenario, the housing situation would rebound much faster.
current situation, we will never get through the bad housing inventory. If the investor
So you might ask, why are there so many older Americans not taking advantage of these valuable programs? The hard truth is that people listen better than they research. In most transactions, you have a title company or a real estate agent that is steering the homeowner and advising them on the more common exemptions. Tax relief programs generally highlight areas that may be taboo in
much faster.
Leveling the playing field
with loan forgiveness and
implementing the new loan program is a step in the
right direction. The biggest challenges for the reverse
mortgage program are value and education. Those of
us in this for the long haul have been dealt our hand
of mandates and wait to see the changes in the industry.
You must truly be passionate for our industry’s cause
to understand the reverse mortgage program and
have a real dedication to stay on course and provide a true benefit for the client. g
conventional transactions, such as income, age, overall assets and disabilities. Based on these factors, the closing and/or real estate agent may be less likely to broach the subject or may lack the detailed knowledge to communicate the options to a prospective client. Today, 35 states offer tax relief programs and 15 others offer equivalent exemptions for older Americans. We recommend to our clients that they expand their closing
process or implement a post-closing routine to include a road map to tax relief programs and other exemptions for each homeowner. As an industry we may not be able to stop tax defaults, but with a little extra effort at the closing table we can help homeowners reduce their tax burden, which can only lead to fewer tax defaults and/or a reduction in the amount of funds advanced in tax default situations.
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hot
Seat U
C
C
20 questions - things you need to know or may have been wondering -JULY/AUGUST 2011
the
hot seat 22
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From the best job he has ever had to his most memorable moment, we get the personal and professional facts from Reza Jahangiri, CEO of American Advisors Group, in our monthly edition of The Hot Seat.
reza PERSONAL
American ADvisors Group CEO >
>
You can’t always be crazy, but you should try.
>
Ten years from now I want to have a footprint in the music or food biz.
>
My favorite website is the Drudge Report … I’m a news junkie, even if the stories are a bit junkie!
I never miss an episode of Six Feet Under. Oh wait, that was five years ago … I guess I don’t watch much TV.
The most memorable moment in my life was when I got to jam with Elvis Costello by chance in Prague.
>
The best job I’ve ever had: No-brainer: It’s AAG.
>
The worst job I’ve ever had was valet parking, although it taught me how to be a good tipper.
>
My favorite time of the day is dusk. It’s beautiful in Southern California as the sun is setting into
>
Right now I’m listening to: Wow, this one’s tough. Wilco, M. Ward, Andrew Bird, Josh Ritter, Ryan Adams, Jenny
the ocean.
Lewis, Elvis Costello and Paul Simon. I like Muzak.
>
I’ve never lived outside of Newport Beach, which is kind of sad. I want to spend at least a few years in NYC before I grow up.
>
I always try to stay away from coffee, but it’s difficult.
>
The best lesson I’ve ever learned was to not be judgmental; life is more gray than black and white.
>
The most memorable moment in my life was when I got to jam with Elvis Costello by chance in Prague.
>
A good friend is one who loves you for who you are, but is willing to call you out when you are not being yourself.
>
The worst purchase I’ve ever made was commercial real estate in 2005!
>
The best purchase I’ve ever made was a J-45 Gibson.
PROFESSIONAL >
The future of reverse mortgages is excellent. Why else would we all be reading this mag? Only the tip of the
iceberg has been exposed in connection with our industry. As product awareness increases, the housing market settles and the senior population continues to grow, the market will take off.
>
The greatest setback for our industry was the global financial crisis. Not only did it eat into home equity, I think it had a negative impact on the mindset of many seniors in connection with financial products.
>
The most fascinating thing about the reverse mortgage industry is how it has been around for more than 20
The future of reverse mortgages is excellent. Why else would we all be reading this mag? Only the tip of the iceberg has been exposed in connection with our industry. As product awareness increases, the housing market settles and the senior population continues to grow, the market will take off.
years (FHA-insured) and is still so misunderstood.
>
If I could change one thing about the
reverse mortgage industry it would be to increase awareness.
>
The ideal characteristics of leaders in the
industry are: Passionate, determined, systemsdriven, creative and willing to fight.
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The Reverse Review July/August 2011
the Industry
Roundup
a roundup of this past month’s breaking news:
industryround up edition
Who moved where; why a company closed its doors; WHO is new to the industry?
July/August
Find it here m ov er s k sh a k e rs First National Bank:
Hired Joe Hansler as National Reverse
Mortgage Manager. Joe will be responsible for expanding retail volume by recruiting
AAG:
Took client testimonials to a new level with a booklet of testimonials, called In Their
Own Words, highlighting a variety of ways
reverse mortgages have impacted its clients.
production centers and loan officers nationwide.
U p- k- C o m e r s
FDIC:
President Obama announced his intent to
Launched in 2010, announced plans to
Gruenberg to the Chairman post of the FDIC. RMS:
Standard & Poor’s Rating Services raised its ranking of the company from “above average” to “strong.”
HECM Activity:
After crossing over to positive year-over-
year growth in March, endorsement volume declined for two consecutive months. Home Prices:
The S&P/Case-Shiller Home Price Indices
America’s Reverse Title:
nominate current Vice Chairman Martin
W h at Hap p e n e d ?
expand in the reverse mortgage market.
announced that the national index fell by 4.2 percent to reach new lows since the recession began. Wells Fargo:
Announced its decision to exit the 1st Reverse Mortgage USA:
Leveraging the large retail footprint from the forward division of parent company Cherry Creek Mortgage, 1st Reverse
announced plans to expand retail reverse mortgage production.
reverse mortgage industry, closing their retail division due to concerns about unpredictable home values. Vicki Bott:
The Deputy Assistant Secretary for Singlefamily Housing at HUD resigned her
Urban:
Third-Party Originations:
Officially finalized its deal to acquire
As the industry in general declined,
rebranding the marketing campaign
doubled to 735 units.
Guardian First Funding Group and began featuring Robert Wagner.
endorsed loans from third-party originators
Bay Docs, Inc: Mortgage Cadence:
Spun off its compliance and document preparation services to create a new
company, Finale Document Services.
Launched Reverse Express product to
enable Reverse Mortgage USA users to
run pre-qualification scenarios and order applications documents CFPB:
Hired Christopher Haspel to an undisclosed senior leadership post. He was formerly with Ginnie Mae as their Director of
Mortgage-backed Securities Monitoring Division. 24
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position effective June 24, 2011, to tend to personal family matters.
the
E
Essentials
The Essentials | i’sen sh l | - your monthly source of in-depth information, industry updates, highly opinionated views and at-your-fingertips news. S a r a h H u l b e rt J o h n L e vo n i c k J o n at h a n N e a l John Smaldone
It takes a lot to create an attention-grabbing, informative article and The Reverse Review is very fortunate to have worked hand in hand with industry leaders over the past couple of years. We are always searching for new writers and industry-related articles. If you are interested in contributing your views and have what it takes to intrigue our readers, we would love to hear from you! Email emily@reversereview.com to start the conversation.
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The Reverse Review July/August 2011
the Essentials
tax reduction
financial planning Reverse Mortgage perceptions
LTC life insurance
Are You Keeping Up With Changing Perceptions? A look at the most prevalent misgivings of reverse mortgages. Jonathan Neal
I 26
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n 2008 when I first started writing about reverse mortgages, the prevailing perception of the product in the financial/ insurance world was primarily negative. That negativity was overwhelmingly rooted in the belief that costs associated with a reverse mortgage were unjustifiably high. Âś Like most negative perceptions, on its face this misunderstanding appeared to be impossible to overcome. Fortunately, perception is not reality, but rather nothing more than what seems to be reality from a specific point of view. The problem with perception is that there is no rule that insists it be based on fact.
In this case, once people started taking a step back and asking the question, “Too expensive compared to what?” people
were able to prove mathematically that compared to other financial planning tools, reverse mortgages were very
competitive. Hence, perception was
In any event, over the past three-plus years those of you working with reverse mortgages have done a very good job at dispelling that once enormous hurdle because today the cost feature is not the automatic deal killer it once was. pay, almost universally gets a positive
Personally, I don’t think specific objection
trumped by reality, except for those
reaction from planners and clients alike.
science.
One example might be a senior couple
In any event, over the past three-plus
and no debt. They aren’t what we would
The last negative perception I want
mortgages have done a very good job at
and really don’t need any additional
economic and market upheavals
because today the cost feature is not the
tax tables they will pay $6,650 in federal
who choose to consider math a pseudo-
with an adjusted gross income of $50,000
to reverse mortgages will ever go away as long as the term “mortgage” is part of the product name.
years those of you working with reverse
consider rich, but they are comfortable
dispelling that once enormous hurdle
income. Based on the 2011 federal income
may have started to dispel. Basically
automatic deal killer it once was.
tax this year. If they replace $12,000 of
of leaving a legacy. For many people,
Today, when I talk to financial planners and insurance advisors – those with concerns about including reverse mortgages in their senior client planning process – mention totally different reasons for their misgivings.
a reverse mortgage they would still have
The three most prevalent reasons I hear are as follows: Their retired clients are already in
a comfortable position financially,
with incomes more than adequate
to meet their monthly needs, and they see no need for any additional income.
This is a viable argument, and if you are going to promote the virtues of math
when they work in your favor, you have to accept them when they work against
you. However, another issue might not be taken into consideration: taxes. The idea
that a person can maintain their income,
yet reduce the amount of income tax they
their income with money generated from an annual income of $50,000, but their
taxes would be $1,800 less, a reduction
of 27.07 percent in taxes paid. They may not need the money, but I would bet
that given the choice they would find something they’d rather do with that
$1,800 than write a check out for taxes. Having said that, let me give a warning to the wise: Venturing into this arena
without being well versed can be a career
killer. It is not that hard to learn what you need to know, and it doesn’t take much
to keep abreast with changing issues, but if you are not willing to put in the time and effort I strongly suggest you don’t venture into this field.
Making the last payment on a
mortgage is one of, if not the most,
significant and rewarding financial
accomplishments in the lives of most
Americans. As such, it is understandable that for many seniors the idea of putting any type of mortgage on the home
they worked so hard to own outright
far exceeds their comfort level. Even in
cases where a reverse mortgage may be a sensible alternative, this objection is
to comment on is one that recent
what we are dealing with here is the idea passing assets to family, friends and charities is an attractive idea, and in
some cases, this idea grows beyond any rational expectation. Over the years I
have known a number of retired people
who were making unnecessary personal sacrifices in order to pass on assets to
people and organizations. Because this
idea is often extremely personal it can be
a touchy topic to broach. >> continued on pg 42
3 planners and advisors don’t include reverse mortgages in their client planning process ONE4The senior is comfortable with his/her current financial position and has no need for additional income. TWO4The senior is uncomfortable putting a mortgage on a home he/she worked hard to own. THREE4The senior feels as if they can’t pass on their legacy and assets.
almost always too strong to overcome. reversereview.com
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THE iNDuSTry awaiTS THE impLiCaTioNS THaT DoDD-FraNK wiLL HaVE oN r EVErSE LENDi NG.
28
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Putting Reverse Lendi
$ JOHN LEVONICK
ng on the Road Map reversereview.com
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The current federal regulatory landscape for reverse lenders is in a “wait and see” mode.
The CFPB and the Office of Older Americans
imposed upon the mortgage lending
was historically spread among seven
The broad obligations and implications industry by the Wall Street Reform
The newly formed CFPB, a federal
agency that was established under DoddFrank, is dedicated to the protection of
consumers from predatory practices and
of Older Americans). The Office of
Older Americans is to be created to
focus on financial products and deceptive practices that will
affect older Americans. This Office of Older Americans shall be ultimately responsible for providing the
other abuses in the lending industry. With
development, implementation and evaluation of the CFPB’s
effectually consolidates into a single
programs, policies and systems necessary to address the needs of older Americans with respect to financial products.
the creation of the CFPB, Dodd-Frank
agency, (with its authority commencing on July 21, 2011), an accountability that
different federal agencies. The primary
and Consumer Protection Act of 2010
(Dodd-Frank) are currently focused on the forward and secondary markets. Dodd-Frank has clearly put reverse
lending on the road map by specifically
focus of this agency is consumer protection and shall have both rulemaking and enforcement authority that will help to better
impact on reverse lending, there have
protect seniors from predatory lending and what may perceived as banking and securities practices that, in their determination, have led to many elderly consumers losing their homes.
affected reverse lending originators based
As a mandate issued within Dodd-
concerns about steering.
2012, shall create the Office of Financial
identifying and earmarking reverse
lending as subject to future study and
potential regulations that may result from the study, which will be conducted by a special office within the newly created
Consumer Financial Protection Bureau (CFPB). While Dodd-Frank has not
had much of an immediate and direct been indirect implications that have
upon changes to LO compensation and
Frank, the CFPB prior to January 21,
Protection for Older Americans (Office
SEC. 1076 oF THE DoDD-FraNK WaLL STREET REForm aND
CoNSumEr ProTECTioN ACT oF 2010. Subtitle G, Section 1076 of the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010 provides two
directives for reverse lending: a reverse lending study and possible resulting regulations.
The Study The CFPB, most likely
be necessary to protect
mortgages that are ultimately
specifically “Risk Retention
Americans, shall conduct a
s econ dly, the study
annuities, and other
the Qualified Residential
through the Office of Older study on reverse mortgage lending practices prior to
July 21, 2012. The purpose
of this study appears to be threefold. f i r st , it will attempt to identify any
potential unfair, deceptive or abusive practices in
the origination of reverse mortgage that would 30
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unsuspecting seniors.
may address circumstances surrounding a potential
used to fund investments, investment products.
product suitability standard
A portion of the study
it applies to the individual
reverse mortgages as
for the reverse product as borrower’s circumstance. t h i r d , the study will
attempt to address potential issues that may exist in the
practice originating reverse
focuses on the use of
investment collateral.
This is consistent with the overarching theme of the other mortgage lending
provisions of Dodd-Frank,
and the categorization of
Mortgage.” Dodd-Frank is
clearly attempting to create
more responsible mortgage products and lending
practices by putting pressure and risk on the secondary market investors.
The REGULATIONS Integrated Disclosure
examples as part of the Know
undertake the creation of
suitable for potentially
According to Section 1076,
the industry for comment.
described in Section 1076
And finally, should there
with Model Disclosures.
the bureau shall provide
for an integrated disclosure standard and model
disclosures for reverse mortgage transactions
that combines the relevant
disclosures required under the Truth in Lending Act
(15U.S.C. 1601 et seq.) and the Real Estate Settlement Procedures Act, with the disclosures provided to
consumers for Home Equity
Conversion Mortgages under section 255 of the National Housing Act. On May 18, 2011 the CFPB submitted two prototype disclosure
Before You Owe Project to These two prototype
disclosures combined
the Good Faith Estimate
the model disclosures as
separately for the reverse products.
R esults f rom the
Procedures Act (12 U.S.C.
what the Office of Older
the Real Estate Settlement
Study . Depending on
2601 et. seq.) and the Truth
Americans finds in its
as required by the Truth in
Lending Act (15U.S.C. 1601 et. seq.). While it was not
explicit, these disclosures were clearly intended to
apply to the forward lending market, as they did not
specifically address reverse mortgages. It is currently
assumed that the CFPB will
be a nexus between the
investment products that the reverse loans fund and any
disclosure, as required by
in Lending Act Disclosure
qualified borrowers.
reverse lending study, the
CFPB may issue regulations
that remediate any potential unfair, deceptive or abusive practices that would be
identified. Also, there is a chance of guidelines that may attempt to
define suitability, and the
potential abusive practices
and/or suitability concerns, be confident that there will be proposed requirements that address this as well. Effectively, Dodd-Frank has set the stage for a
potential overhaul of reverse lending requirements, from disclosure requirements to
underwriting practices and product guidelines.
circumstances where a
reverse mortgage may be
8the earliest that the bureau may seek to promulgate any rules anticipated by
this section 1076 of Dodd-Frank will be in late 2012 or early 2013.
ability to compete with larger retail
reverse lending, depending on the
DoDD-FraNK’S NEGaTiVE ImpaCT oN REVErSE LENDiNG – LoaN OriGiNaTor CompENSaTioN
study conducted by the Office of Older
Effective April 6, 2011, reverse mortgage
Appropriations Act (H.R. 1473), cutting
strapped HECM borrowers by offering
of Housing and Urban Development’s
Loan Originator Compensation
a result, reverse mortgage counseling will
So, there should be no surprise from
the CFPB in subject matter of the first round of rulemaking as it applies to
results of the research provided by the
Americans. Note that the earliest that the
bureau may seek to promulgate any rules anticipated by this section 1076 of DoddFrank will be in late 2012 or early 2013,
giving the industry
plenty of time for commentary,
and preparation in anticipation of the final
regulations.
entities that can absorb origination costs. Coincidentally, the deal Congress struck to avoid a governmental shutdown in
April included the FY 2011 Continuing
brokers could no longer assist cash-
off $88 million from the Department
closing cost credits. The Dodd-Frank
budget for loan counseling programs. As
requirements effectively eliminated the
lose its funding starting in fiscal year >>
ability of brokers to offset expensive closing costs, crippling the brokers’
Joh n
S ay s :
DoDD-FraNK
has clearly put reverse lending on the road map by specifically identifying and earmarking reverse lending as subject to future study and potential regulations that may result from the study, which will be conducted by a special office within the newly reversereview .com 8 TRR | 31 created Consumer Financial Protection Bureau (CFPB).
2012 (October 1, 2011), negatively
who seek to downsize and sell their
no longer afford to waive the counseling
under today’s strict credit
impacting counseling agencies that can fees for HECM applicants, thus forcing the borrower to pay even more closing costs. This combination of the Dodd-
Frank Loan Originator Compensation limits, with the loss of funding for counseling, may severely impact
borrowers that need to access equity in
their property and do not have the cash to cover closing costs.
DoDD-FraNK’S INDirECT CoNTribuTioN To REVErSE LENDING - TITLE XIV aND INSTaLLmENT SaLES RESTriCTioNS It is not all bad news on the reverse
lending front when it comes to Dodd-
Frank. Another indirect result of DoddFrank that has a potentially positive
impact on the reverse lending market is
the new restriction on an owner-financed sale or installment sale. Dodd-Frank is
not merely targeted to reel in the practices of banks and lenders; Dodd-Frank is bold enough to restrict how private property owners can finance the sale of their
home to a borrower that may not qualify guidelines by using owner financing, a 30-year, (or in some cases a 20-year) full amortization term is not
really practical because the equity realization will not
be timely for the senior, as it might have been with a balloon note.
So as a result, in this slow
real estate market, a senior
may be forced to stay in their oversized home while they try to sell it, or mark down the price and lose valuable equity. The positive here is that a reverse loan would be a valuable way for the
the qualified residential mortgage. By
the time the Office of Older Americans is obligated to submit its
reverse lending study, DoddFrank may look significantly different. Once the CFPB director is appointed
and confirmed, the CFPB
officially takes its authority, has the opportunity to respond to comments
submitted on behalf of the proposed regulations, and finally promulgates the
regulations, there might be a considerable amount of
distractions that push the attention away from the
reverse lending industry,
potentially adding further delays to any impact.
seniors to subsidize their cost
As of this exact moment,
so patiently for the market
significant impact on reverse
of living while they wait ever to rebound and for credit
guidelines to loosen, but as
with everything else in life, time is money.
Dodd-Frank has not had a
lending, but there have been some indirect implications that are not overly
burdensome. This does not
mean the reverse market can
own home. Title XIV Section 1401(2)(E)
IN CoNCLuSioN
effectively restricts private property
While reverse lenders eagerly
property using owner financing through
reverse lending study and the resulting
practices” compliance model in full effect.
line is that the industry has time on its
uses as an example that will reflect poorly
Mortgage Loan Origination Standards, owners who want to sell their own
an installment sale. Dodd-Frank requires any homeowner who sells their property using owner financing to fully amortize
the installment sale note, eliminating the
ability for a balloon note to be negotiated between the buyer and seller. For seniors Joh n
S ay s :
THE BROaD
await the impending CFPB
potential regulatory impact, the bottom side. The broad and sweeping obligations and implications imposed on the
mortgage lending industry by the Wall
Street Reform and Consumer Protection
Act of 2010 may be whittled down as the mortgage lending and banking industry
focus their energies on risk retention and
breathe a collective sigh of
relief. It is the responsibility of every single reverse
lender to have their “best
Do not be the bad actor that the CFPB
on the industry and create burdensome
obligations for those who have done their best to provide the seniors of our nation
with a means of affordably accessing the
equity in what might possibly be the single largest asset they have ever owned. g
and sweeping obligations and implications imposed on the mortgage lending industry by the Wall Street Reform and Consumer Protection Act of 2010 may be whittled down as the mortgage lending and banking industry focus their energies on risk retention and the qualified residential mortgage. By the time the Office of Older Americans is obligated to submit its reverse lending study, Dodd-Frank may look significantly different. 32
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The Reverse Review July/August 2011
the Essentials
Transitions: A Reverse Mortgage Professional’s Experience Losing a job can allow for positive change and personal growth.
A 34
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Sarah Hulbert
t some point in our lives, most of us find we need to change jobs (whether by choice or not). Losing a job is a significant life stressor, and depending on how we manage it, the related stress can contribute to major illness and loss of well-being. Earlier this year, I was faced with exactly that situation: My employer decided to exit the reverse mortgage business altogether. Âś While not unexpected at the time the decision was announced, it still created a great deal of anxiety in my life. I had never been in a position where I faced the loss of a job. Against my wishes, I had to seek out and determine what career path I would take going forward.
To say that the reverse mortgage industry
What’s going on around here?
It is so true; I have yet to meet a person
several years is an understatement.
I first suspected change
has been challenging during the past
Nearly every day brings news of new
licensing requirements, inaccurate media coverage, program changes or the exit of yet another large reverse mortgage
lender. It seems the only thing we can count on these days is change.
Yes, these are difficult times, but I have always found great strength in my
commitment to this industry. After nearly 20 years of focusing solely on reverse
mortgages, I am as passionate as ever
about the product and the tremendous amount of good it offers senior
homeowners and their families. This
commitment gives me strength; earlier
this year, however, it did little to lessen the stress of facing a job change.
I have always been a firm believer
in managing stress through positive
thinking and planning. I recently ran
across an interesting quote attributed
to the late neurologist, psychiatrist and
author Viktor Frankl, M.D., Ph.D. Frankl, who was imprisoned at Auschwitz during World War II, wrote:
“Everything can be taken from a man but one thing: the last of human freedoms to choose one’s attitude in any given set of circumstances, to choose one’s own way.” Life has a way of throwing curveballs, but nothing is insurmountable as long as you make a conscious decision to approach the situation in a constructive and
positive manner. That was the decision I
made when I learned it was time to start looking for new opportunities.
who doesn’t struggle, on one level or
another, to embrace change.
was in the air about three
Yet in nearly all circumstances,
I continued to go to work
opportunity for reflection and
change becomes an
months before it occurred. as usual every day, but
my mind was constantly running with thoughts
such as “What’s going to happen?”, “When is
it going to happen?”
and “What should I do
about it?” Oh, it was an
To say that the reverse mortgage
challenging during the
exhausting time! I was still day responsibilities – and
understatement. Nearly every day brings news of new licensing requirements, inaccurate media coverage, program changes or the exit of yet another large reverse mortgage lender. It seems the only thing we can count on these days is change.
very busy with day-to-
my work did not suffer – but I was definitely distracted.
Finally, when I couldn’t
stand the waiting game for
another moment, I decided to be more proactive: I
went to the key decision-
maker in the company and got straight to the point, asking: “What’s going
on? Where do we go from here?” Unfortunately, 24
growth.
Keeping that in mind, I
industry has been allowed myself one day to
past several
made sure the quality of
for personal and professional
years is an
have the requisite “pity party,” complete with sadness, anger, self-loathing, a glass of wine
(or two) and many “woulda, coulda shouldas.” Not only
was my life going to change, I was faced with having many difficult conversations with
my employees, whom I was responsible for laying off. It
was not an easy few days, but
then again, the day it becomes easy to lay off employees is
the day I need to hang up my manager’s hat.
I owe a debt of gratitude to
my husband, children, friends and family for putting up
with me and providing me with a strong foundation
hours later, I got the answer I feared: The
and much patience, understanding and
company had decided to exit the reverse
encouragement during this time. It was
mortgage business.
not easy on any of us.
Oh no!
Hmmm…
OK. Now I knew change was upon me.
Change was upon me; it was time to step
one of my favorite quotes comes to mind:
to me as a professional in this industry, as
Whenever I enter such a period in my life,
“The only people who like change are wet babies.”
back and re-evaluate what was important
well as what was necessary for my family and me. I knew the decisions I made
going forward would dictate the future
of my career, and my family’s happiness and well-being. I had a big job ahead of me! >>
Yet in nearly all circumstances, change becomes an opportunity for reflection and for personal and professional growth. reversereview.com
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I remember plugging in my iPod and
Where to go? My next step was designed to evaluate my options. Writing has always been one of my escapes, a way for me to sort through my thoughts. I began composing answers to some of the following questions:
Fergie. Even though the song is about a
relationship gone sour, some of the lyrics
were particularly relevant and poignant: I needed “…to be with myself and center /
Clarity, peace, serenity.” I know, it sounds a bit corny, but it’s so important to take the time and reflect on your needs and
ONE . What do I enjoy doing,
SIX . How will I relate to and
career-wise?
communicate with the people I will be
some thoughts
playing “Big Girls Don’t Cry,” by
working with?
TWO . What do my ideal workday SEVEN . Is it important to me
and workweek look like?
what will be best for you and your family.
that my new employer be based close
THREE . How do my answers to the
Without a doubt, I knew I wanted to stay
in the reverse mortgage industry. Having spent so many years in this business, I couldn’t imagine doing anything else. Fortunately, quite a few opportunities
presented themselves, so I didn’t have
to worry about whether an opportunity
would arise – I simply had to make sure I selected the right one.
to me geographically?
questions above relate to the areas in EIGHT . Will this position allow me
which I excel?
to maintain my work/family balance?
FOUR . In what sort of environment do I thrive? Large corporate office?
NINE . What are the opportunities
Home office? Satellite office?
for growth within the company?
FIVE . What sort of corporate
TEN . Will I be able to continue my
culture appeals to me? Formal?
outside, industry-related efforts and
Relaxed? Small or large
responsibilities?
organizations?
Clarity Answering these questions as honestly as possible was critical as I went through this exercise, and helped me identify needs and values important to me. I learned quite a bit about myself in the process, including:
g
g
I needed to work with a
to a more collaborative
rather, I was looking
team who not only “gets
work environment. I
for an opportunity that
it,” but who have already
needed to make sure my
allowed me to contribute
begun building a solid
new employer agreed
to other areas of the
foundation to facilitate
with this philosophy.
company in addition to
g g
I realized I thrived in the more entrepreneurial
management team,
work environment
enabling me to lend
continue as an active
a mortgage banker
my experience and
member of NRMLA,
business have been:
provides, even if it
knowledge to the
both as a board member
(a) working with seniors,
meant I would be
team as a whole while
and as co-chair of the
(b) mentoring originators
faced with individual
simultaneously benefiting
Ethics Committee.
and helping them grow
and state licensing
from the knowledge
their business, and
challenges (which are
and experience of my
(c) creating and scaling a
not as significant under
teammates.
business as it grows.
a federally pre-empt
My greatest joys in this
g
g
I needed to be able to
Finally, I wanted to be challenged at work, enjoy the people I
g
Opportunities for
worked with and to have
personal growth are
FUN! I needed to feel
Strong, regular
essential, much more
a solid fit with my new
who have a strong
communication is
so than the status of an
employer’s corporate
commitment to serving
imperative to the
“impressive” job title. I
culture.
success of any
didn’t want to be boxed
organization and leads
into one specific role;
I wanted to be a part of a team of individuals
seniors.
36
responsibilities.
I needed to be part of my new employer’s
organization).
g
my primary day-to-day
future growth.
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g
Choice Keeping my goals in mind, I took a fresh
environment and culture in which we work.
look at the options at hand, making a
Looking ahead
was evaluating. As I mentioned earlier,
As I said previously, the only thing any
possibilities come my way (particularly in
Rest assured the reverse mortgage
companies who had a lot to offer.
years to come. Being aware of these
but the insights resulting from my earlier
adapt to a changing environment is
about my requirements, and ultimately
organizations and individuals
list of pros and cons for each position I
I count myself lucky to have had many
of us can count on these days is change.
today’s economy), all from very reputable
industry will continue to evolve in the
Narrowing down the list was difficult,
changes and being able to constantly
exercises provided me with greater clarity
something every industry participant –
helped me narrow down my list to the
alike – needs to be aware of and capable
final three prospects.
of doing.
Now in my fourth month with 1st
None of us knows
Reverse Mortgage USA®, the reverse mortgage division of Cherry Creek
Mortgage Company, Inc., I am pleased to say I have settled in and couldn’t be happier with my decision to join
the company. I am “up-to-here busy”
ramping things up, but I am enjoying the challenge and the team I work with.
what the future holds for reverse
mortgages, but I am certain of two things:
1
Corporate culture is an integral facet
of any company. Fortunately, my new
employer’s culture is a perfect fit for me.
The company is filled with hard-working, knowledgeable individuals and we
operate in a collaborative environment. We always make sure to maintain our sense of humor, be kind to each other and have fun in the process. After all, in any
given month we
spend the majority
2
everse mortgages are a R fantastic product and there will always be a need. he extra effort I put into T my job search resulted in a position with a company that is an excellent match.
Interestingly, each position I evaluated resulted from a proactive search,
Rest assured the reverse mortgage industry will continue to evolve in the years to come. Being aware of these changes and being able to constantly adapt to a changing environment is something every industry participant – organizations and individuals alike – needs to be aware of and capable of doing.
I made it a point to be straightforward in presenting my skill set, strengths,
weaknesses, personal goals and concerns. I took my time, knowing this was an
important, long-term decision—not just for me, but for my future employer as well.
And with that, I will leave you with one final quote, this time from Franz Kafka:
“All human errors are impatience, a premature breaking off of methodical procedure, an apparent fencingin of what is apparently at issue.”
where I spoke with key decision-
The decision-making process was not
I paid no mind to whether or not
and effort to approach the task in a
makers within select organizations.
easy, but I am thankful I took the time
of our waking
job openings were posted. Instead,
thoughtful, methodical manner. As a
it is important
our conversations.
I found my new “home” with a company
hours at work, so to enjoy our
opportunities were created as a result of
result of these efforts, I am pleased to say that suits me perfectly. g
jobs and the
Life has a way of throwing curveballs, but nothing is insurmountable as long as you make a conscious decision to approach the situation in a constructive and positive manner.
reversereview.com
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The Reverse Review July/August 2011
the Essentials
A Financial Problem Affecting Seniors Nationwide One senior’s experience sheds light on the amount of government aid available for those seniors struggling to keep their homes.
38
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T
John Smaldone his true story highlights a financial problem that seniors are facing all over the country. This story brings to light the struggle my client endured when faced with foreclosure. I worked on this case for seven months, during which I could not find one program or subsidy available for seniors in a position similar to my client’s.
When seniors are facing foreclosures or
to someone in the loss mitigation
to assist her, I went to the Associated
available for their aid. I discovered this
and had it underwritten so we knew
covering this story.
shortfalls on their homes, little funds are through a grueling experience and was
greatly disappointed in discovering what were obviously some mistaken priorities. Our government’s priorities lie not with the American people but with what our politicians find most beneficial to them
and our country’s standing in the world order.
I got involved with one of my loan
officer’s clients for whom we tried to
obtain a reverse mortgage to pay off her existing loan but ultimately it ended
in a shortfall. Our senior was 73 years
old at the time, lived in her home for 36 years and had lost her husband eight
department. We had processed the loan the exact amount we could guarantee
this lender for a settlement. However,
After investigating the scenario, they
at this point. The loan was in a security
Other newspapers around the country
the lender was only servicing the loan
so the lender had to take the initiative to negotiate with
be the stumbling
block; it appeared that the servicer put forth very little effort in
order to work out a settlement.
degenerative disease. To add to that,
of negotiations
only means of support is Social Security and money from a part-time job her son holds.
She had a forward loan that, after five
years, adjusted to a rate that more than
doubled her monthly mortgage payment. The adjustment put her in a position in
which she could no longer afford to make
the mortgage payments, which ultimately led her to apply for a reverse mortgage. Following the appraisal, the loan was
calculated with a $26,000 shortfall. I set out to negotiate a settlement with the bank on her behalf; by this time, she
was five months behind in her mortgage payment.
picked it up, including local publications, as did NBC,
ABC and CBS.
This seemed to
After almost
her handicapped son lives with her. Her
printed an article about the situation.
higher powers.
years earlier. This woman is unable to work because she suffers from a bone
Press to see if they would be interested in
three months with the loss mitigation
department,
the settlement request was
rejected and
the bank told our senior to
apply for a loan modification.
The news media
In March of last year, she was served with a foreclosure notice and then a date for a trustee sale, which was to be on May 23, 2010. Seeking more effective ways to assist her, I went to the Associated Press to see if they would be interested in covering this story. After investigating the scenario, they printed an article about the situation. Other newspapers around the country picked it up, including local publications, as did NBC, ABC and CBS. The news media portrayed the story about a disabled senior who may be forced out in the street by the bank.
portrayed the story about a
disabled senior who may be
forced out on
the street by the bank. The story also mentioned
that the bank had been contacted for a statement
but declined. The pressure was
now on the bank and this was my opportunity to
push forward at warp speed.
In an effort to
place additional
I had doubts that she would be able to
pressure on the bank, I relayed the story
wanted to move forward anyway. I
Jr., who was able to obtain a one-month
qualify for the modification, but she
assisted her in this process and helped
her with all of the necessary paperwork. After two weeks, what I feared would
happen occurred; my senior was told she
to a friend, Congressman John Duncan
stay of the trustee sale. He also wrote a letter to the bank. The trustee sale was rescheduled for June 23.
did not qualify for a modification.
We also started to have benefit car
I started negotiations with the bank in
In March of last year, she was served with
calling it, “Save (her name) Home from
getting the runaround, I was finally
a trustee sale, which was to be on May
December 2009. After two months of negotiating with them and assigned
a foreclosure notice and then a date for 23, 2010. Seeking more effective ways
washes to raise funds for my senior,
Foreclosure.” The media was all over it. Following the constant media attention and the receipt of the letter >>
When seniors are facing foreclosures or shortfalls on their homes, little funds are available for their aid.
reversereview.com
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from Rep. Duncan, the bank called me
with a problem of this nature. However,
major advantage to the lender is they
could proceed with the reverse mortgage.
all over again.
the shortfall.
with a willingness to settle the loan so she
given the similar situation, I would do it
would only have to come up with half of
On June 8, her reverse mortgage was
The only solution I can see is a program
The funds to get a program like SASH
the home she has occupied for 36 years,
that would provide aid to a qualified
TARP funds and stimulus appropriations
closed. Now, she is once again secure in very happy and looking forward to life.
established by our federal government senior in order to avoid foreclosure.
that have not been used. The dollars that
The Bigger Picture
I proposed an appropriation bill outline
With all of the TARP funds
year ago; unfortunately it fell on deaf
to HUD and to a congressman about a
and other assistance programs
that have developed in order to resolve
the financial crisis of homeowners, none resulted in assistance programs aimed directly at senior homeowners facing
to speak out. We need industry lobbyists
industry serving our senior citizens need
more than most would have done!
to help us promote programs like SASH. A program like this would aid those
situation like my senior’s. The proposed
Vietnam War hero, she worked and paid taxes her whole life, and yet there was
nothing available in the way of grants or subsidies from our government to help her.
There is no way to spend seven months, like I did, on every case like this in the
country. I took it upon myself to help, not
realizing the time it would require to deal
Commitment to the homeowner for a reverse mortgage from a recognized lender.
40
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3
seniors who can qualify, so they will not
provide subsidy funds for seniors in a
program would be a joint effort on the
part of the federal government, the lender who held the existing loan, the borrower and a lender willing to grant a reverse mortgage to the senior homeowner.
save the senior’s home from foreclosure but would give the lender holding the
loan incentive to join the program. The
lender would not have to foreclose on the property and would not have to show
the property on their balance sheet. The
The lender holding the existing loan would have to participate in the settlement with 50 percent of the shortfall between the reverse mortgage proceeds and the remaining payoff of the principal balance of the loan.
lose their only means of personal security. We have many congressmen and senators who would listen to our industry
lobbyist. It is difficult for an individual
alone to be heard, even if the proposal is sound and should be adopted.
I think our seniors have put in their time
A program like SASH would not only
The SASH An initial appropriation of allocated funds in the amount of $250 million.
additional funds for a new program.
avail. I give him credit for that, it was
mentioned tried to present it but to no
Without the help of a close friend, our
help. Her husband was a decorated
a reallocation of funds, not a request for
We as American citizens and as an
Save a Senior’s Home (SASH) would
from a senior who was in dire need of
have already been appropriated would be
ears. The congressman I previously
foreclosures or similar hardships.
government would have turned away
off the ground could come from existing
for their country, their children and their struggles over the decades. We owe
it to our seniors to give them the best retirement years possible. I think we
would all benefit from a program like SASH, don’t you? g
program Requires:
4
The other 50 percent of the funds to make up the shortfall would come from the SASH-appropriated fund program.
5
The shortfall couldn’t be more than 35 percent of the remaining pay off of the principal balance of the loan.
6
The borrower would have to qualify for the grant/appropriation. There would be strict qualifying guidelines and criteria in order for a senior to be eligible. (My senior would have been a perfect candidate.)
7
The senior would have had to be turned down for a home modification program and must have a rejection notice in hand.
The Reverse Review July/August 2011
the Opinion
industryopinion
the latest breaking news reported
by a voice in the industry
will ensure the senior has enough income
Find it here
For Whom The Wells Toll! Dave Bancroft
I will never forget working the morning shift at Lake Mission Viejo back in 1990 when I opened the paper to see the words, “Buster Douglas Shocks the World.” I don’t know if a headline
to cover their taxes and insurance. Social
sunset, but the speed of the exit is not
comforting. Truth be told, if you want to know the future, it lies in the secondary markets and how this
Security income will hopefully be sufficient for most, but if it isn’t, the benefit of the
reverse mortgage will be severely reduced to allow for impounds … sidelining the dough like the servicing fee
product will be perceived
did in the past. This type of
by investors. On the Friday after the announcement, with great anticipation, there were a couple of
trades done and the word
is that they went relatively well.
By the time you read this article the picture should already be much clearer,
restriction could possibly reduce
So tomorrow will bring a new day with two of the industry’s biggest players gone. The sun will rise and shine on MetLife like never before. Snoopy has now been thrust into pole position with Urban right behind, licking its chops. Opportunity has never been larger for these guys and hopefully they will achieve more than their predecessors ever dreamed.
the number of HECMs, but the
alternative is scarier: no investor interest for fear of the growing tax and insurance problem. So tomorrow will bring a new day with two of the
industry’s biggest players
gone. The sun will rise and
shine on MetLife like never
has ever gripped me with such surprise
but unfortunately I don’t
Fargo from the reverse mortgage industry
now. I can only imagine
this mean? Is this the beginning of the
suffer a little, probably
entered the Twilight Zone of small business,
point range, while LIBOR
industry? I have always felt like these
property tax and insurance
scoop and I always watch them closely.
attention and the feeling
character and doesn’t bode well for all of
to foreclose on a senior
last big carrier leave port and now we are
demands it.
protect the mainland.
I have a feeling the next thing coming
for all of us to cross. We are definitely in
I can only speculate why Bank of America
senior. Maybe it won’t be a FICO score, but
faith ... Mike Tyson was just inducted into
since then, but the sudden exodus of Wells
have a crystal ball right
is definitely up there. So what does all
that the fixed rates will
end for reverse mortgages or have we just
somewhere in the 100 basis
something like a new and improved cottage
takes it on the chin. The
mammoth brand names have the inside
situation is getting a lot of
Wells’ recent Houdini act seems a bit out of
is that nobody wants
us in the arena. We may have just seen the
even though the market
left with a couple good-sized battleships to
and Wells Fargo decided to ride into the
down the pike is a credit qualifier for the it will be an underwriting condition that
before. Snoopy has now been
thrust into pole position with
Urban right behind, licking its chops. Opportunity has never
been larger for these guys and hopefully they will achieve
more than their predecessors ever dreamed. I hope there
will be a vacuum effect and
that clients will reach out past
their depository institutions for
assistance in obtaining a reverse mortgage. We need companies that can build a reverse
mortgage platform for the future and create a bridge large enough
some interesting times. Stay strong and have Boxing’s Hall of Fame. g
reversereview.com
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the Resources Information at your fingertips. A listing of advertisers and contributors featured in this issue. l
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1st Reverse Mortgage USA
Reverse Mortgage Crowds
Hanover Financial Services
Reverse Mortgage Success
Industry Consulting Group, Inc.
Reverse Vision
A division of Cherry Creek Mortgage Company, Inc. 1strmusa.com 877.217.0166
American Advisors Group aagreverse.com 800.850.1356
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they can pass on to family members, but
also provide them with an opportunity to pay back something to a person, place or
organization that had a positive effect on their life.
The example I use here comes from a real case that one of our affiliates brought to
my attention last summer. Her client was a
42
| TRR
weststarlending.com 949.922.7859
Reverse Market Insight reversemarketinsight.com 949.429.0452
beneficiaries: 40 percent to each child and 20 percent to her alma mater.
the amount she would leave her two
The result:
a life long-term care policy that provided
Her children end up with at least what
problem.
long-term care coverage that she didn’t have
children. Her insurance advisor showed her
be used to not only increase the amount
RMS
West Star Lending
because if she did, she would be reducing
In many cases a reverse mortgage can
reversevision.com 919.834.0070
Mortgage Cadence
money to her alma mater, but felt guilty
CONTINUED FROM PAGE 27
reversemortgagesuccess.com 410.557.0294
rmsnav.com 888.918.1110
retired schoolteacher who wanted to leave
Jonathan Neal
reversemortgagecrowds.com 800.604.6535
ireverse.com/employment 800.486.8786 mortgagecadence.com 888.462.2336
Celink
celink.com 517.321.9002
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Direct Finance Corp.
her with a very attractive solution to her
Using the proceeds from a reverse
mortgage, she was able to purchase a
$250,000 LTC-life insurance policy that
they would have received initially; she has
before, and she has, at minimum, created an opportunity for her alma mater to receive a sizable donation.
would pay her $5,000 in monthly LTC
OK, so I only have ideas for two of the three
hand, she never needed long-term care,
a reverse mortgage, but give it some time.
benefits if ever needed. If, on the other
the $250,000 death benefit would be paid out as follows: $100,000 to each of her
children and $50,000 to her beloved alma
mater. And if she used part of it, whatever
remained would be distributed to the three
reasons currently given for not considering
Much like everything else, the pros and cons of reverse mortgages will change.
As always, should you have any questions
feel free to contact me: jneal@ccgcap.com. g
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| 43
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