June 2009
THE
REVERSE review
Values & Reverse Mortgages Sarah Hulbert page
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As a mortgage rep, your clients have entrusted you with helping them make the right decisions for their futures. This month, Sarah Hulbert focuses on the necessity of all industry participants to educate and dispel myths of the reverse mortgage product by understanding our clients’ core needs and values and ensuring that these are consistent with yours.
Excuse
pro-cras-ti-nate (pro-kras’t -nat) e
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1. delay or postpone action; put off doing something 2. play for time.
877-229-7799
AppraiserLoft.com
50 States
Reverse Mortgage Appraisals
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Objective
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val-ue (val’yoo) 1.a principle, standard, or quality considered worthwhile or desirable. 2. (values) a person’s principles or standards.
What’s your excuse? appraiserloft
THE INDUSTRY STANDARD SINCE 1995 The Industry Standard is not just a slogan. Six of the top 10 reverse mortgage originators use Ibis Software for their websites, retail and wholesale businesses.
Publisher Aman Makkar Editor-in-Chief Erica English Copy Editor Harpreet Makkar Production Jason Westbrook
Those lenders are using:
Layout & Design Guenthoer Design
Ibis RMO:
Printer The Ovid Bell Press
Loan origination modules include CRM, Quick Quote, Proposal, Application, Underwriting, Documents, Closing, Pipeline Reports, and Cost Templates. Plus Broker and Correspondent Management. Full state specific application and closing packages can be stored, printed, and emailed.
Ibis Quick Quote:
Bilingual consumer calculators, already in use at: • www.rmaarp.com • • www.wellsrm.com • and many other websites Ibis also provides:
Ibis RMA:
Advertising Information
Rates, specifications, and deadline information available. phone : 858.217.5332 e-mail : advertising@reversereview.com
Subscriptions and Editorial Content phone : 858.217.5332 e-mail : information@reversereview.com website : www.reversereview.com
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A complete counseling package for HUD-Approved reverse counselors. For more information, visit
www.ReverseMortgageHomePage.com
Or call (800) 566-5077
© 2009 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, 11440 W Bernardo Ct, Ste 220, San Diego, CA 92127
editor’s note
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the spirit of brilliance; it will do you well in the long run of business. It’s time to get back to the basics and remember what is important. The need to conduct business in an ethical and moral manner, while keeping the best interest of our clients at heart. It never ceases to amaze me that the over arching theme every month for the magazine tends to be the necessity to survive in a constantly changing and growing industry. In the end those who are able to set themselves apart and connect with their clients the best will be the ones to succeed.
s the editor of TRR, a magazine founded on the idea of thought provoking, practical advice and solutions to help make your business a success, I spend nearly everyday thinking about how content can be posed in a positive manner. In our cover story this month, Sarah Hulbert focuses on values & Reverse Mortgages and writes about how senior clients trust their mortgage representative(s) to help them make the right financial decisions for their future. In addition, education is key along with understanding. You must understand the values of your client and ensure that you follow their same principals. Sometimes this requires you to out do yourself. Become brilliant with your clients and not do the same ole, same ole. This is the perfect time to be the best in your field and embrace
Erica English Editor-In-Chief
May 2009
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CONTENTS
12 To Be Or Not To Be – A Question Looming Large For Fannie Mae & The Reverse Mortgage Industry
Weiner Brodsky Sidman Kider, PC
18 FEATURE: Values &
Reverse Mortgages Sarah Hulbert
22 Have I Got A Lead For You!
26 Tell A Story, Make A Sale:
Marketing To Baby-Boomers & Seniors Requires A Different Way Of Thinking Valerie VanBooven
Sam Collins
ESSENTIALS 5 Note From the Editor
7 Ask the Underwriter
31 Ask the Servicer
33 Directory
34 The Last Word: The 8 Rules Of Engagement
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10 Industry Snapshot
ask the underwriter
“reJUNEvenating” Ralph Rosynek There is nothing better to recharge and invigorate our motivation and focus than a vacation. With the summer months soon upon us, before we hit the beaches, board that cruise liner, or hike to that summit top, take a moment and review, renew, and resurface some of those “will get to” items you have been “post-it noting” for the past few months. Quality time spent before you go will compliment your charged up return to get back to business! Have you updated your quality control policy?
Guidance – Property and Underwriting Eligibility into the cover. It is hot off the presses and needs your review. The manufactured and modular housing property types are one of the most confusing aspects of the HECM transaction. This Mortgagee Letter provides guidance on manufactured housing eligibility requirements for Federal Housing Administration (FHA) mortgage insurance under Title II of the National Housing Act. Changes to manufactured housing requirements for new and existing construction were made by the Housing and Economic Recovery Act of 2008 (Public Law 110-289, approved July 30, 2008) (HERA). This mortgagee letter addresses those changes that can be implemented immediately. Are your state/licensing authority disclosures current? Many HECM Lenders provide complete application package systems for your use – however, many of these packages may not be state specific or include your required state or licensing authority mandated consumer disclosures. When is the last time you visited your HECM application kit to make sure all required disclosures are included? Have you reviewed your advertising and marketing materials? Many times we pull from other sources or create on the fly marketing or advertising pieces under time pressure. Have you gone back to check for compliance on these items – appropriate licensing information, required disclosure language and notations. What is the status of your lead generation list?
Mortgagee Letter 09-11 paved the way for HECM Purchase transactions. Time to dust off that QC program and update your review procedures for this new transaction. Have you provided sufficient testing strength for the specific forms, prohibitions, contract and processing requirements?
When is the last time you checked if your lead generation phone list was scrubbed with the Do Not Call Registry? If you are purchasing leads have you checked how these leads are scrubbed prior to your use?
While you are digging around, is there a new form, process or activity which needs to be updated in your policy regarding declining market values, increased property flipping or borrower eligibility requirements?
Is your processing area checking for the completeness of the counseling certificate, getting the original, and not ordering the FHA casefile prior to the certificate issuance and execution?
Is your counseling procedure and disclosure updated? Lenders are required to provide every client with a list of no fewer than ten (10) HUD-approved counseling agencies that can provide HECM counseling, five of which must be in the local area and/or state of the prospective HECM borrower with at least one agency located within a reasonable driving distance for the purpose of faceto-face counseling. The lender must provide a list of HUD-approved counseling agencies in the prospective borrower’s geographic area so that he/she can choose and receive face-to-face counseling. The other five agencies must be: • • • • •
National Foundation for Credit Counseling (NFCC) – 1-866-6986322 Money Management International (MMI) – 1-877-908-2227 Consumer Credit Counseling Service of Atlanta - (CCCS of Atlanta) – 1-800-251-2227 AARP –1-800-209-8085 National Council on Aging (NCOA) A toll-free number will be available on HUD’s website at http://www.hud.gov/offices/hsg/ sfh/hcc/hccprof18.cfm
These national intermediaries and multi-state organizations have exam-qualified counselors who can provide telephonic counseling to clients nationwide. A great idea for a book marker…. Take a diversion from that thick novel you intend to pack and slide a copy of Mortgagee Letter 09-16, Manufactured Housing Policy
Counseling Certificate/Casefile Quickcheck….
How’s your education calendar? One of the best ways we keep ourselves current and knowledgeable, is to network with our peers (or commiserate as some would say). Check the calendar now for late summer and fall education and training classes to keep yourself current. Renew your referral sources… There are many differing thoughts on the seasonality or cyclicality of the reverse mortgage market. The referral sources on your list may benefit from a quick note of your brief lack of availability (a great extra touch point) or you may also want to take the opportunity to reach out to some additional new referral sources which may be looking to add information to their resources as their business reacts to the summer slow down. Programs, pricing, margins keep changing… Who is your back-up while you are gone? Do your customers know how to reach you for information. How will a significant program, rate or margin change impact your customers? Whatever your strategy to get out the door and on the vacation, remember your checklist is waiting for you upon your return and there will probably be a few additions. The ability to robustly multi-task is probably what causes us to need that vacation. One final thought, Murphy’s law would probably say that the first inquiry you will address upon your return is for a manufactured home in a condominium association! In other words, 12 pages from Mr. Montgomery or War and Peace - safe travels. May 2009
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contributors Ralph Rosynek - Ask The Underwriter, page 7
Ralph Rosynek is President and CEO of 1st Reverse as well as a HECM DE Underwriter. Mr. Rosynek has been involved in mortgage lending for over 30 years with the last 5+ years exclusively providing reverse mortgage lending solutions. To contact Mr. Rosynek or to learn more about 1st Reverse Financial Services, Please visit www.1streverse.com or call 877.574.1000.
John Lunde - Reverse Market Snapshot, page 10 John Lunde is President and founder of Reverse Market Insight, the premier source for market intelligence and analytics services in the reverse mortgage industry. RMI clients include five of the top ten reverse mortgage originators, both lender and independent servicers, as well as some of the largest financial services firms in the world. Find out more at www.rminsight.net or call 949.281.6470.
Joel Schiffman - To Be Or Not To Be – A Question Looming Large For Fannie Mae & The Reverse Mortgage Industry, page 12 Joel Schiffman is a member with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. Mr. Schiffman can be reached at schiffman@wbsk.com or by telephone at 949.798.5570. Sarah Hulbert - Values & Reverse Mortgages, page 18
Sarah Hulbert is CEO of Senior Financial Corp. With over 17 years of experience covering every aspect 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. Hulbert may be reached at 425.525.2050 or by e-mail at Sarah@SFCReverse.com.
Sam Collins - Have I Got A Lead For You!, page 22
Sam Collins is the President of Sam Collins Reverse Marketing, LLC and Founder of REMALO, the Reverse Mortgage Association for Loan Officers. REMALO is a web based National sales, marketing, training, and full service center, created exclusively for Reverse Mortgage Loan Officers, Correspondents, Branch Managers, and key executives, and brokers. www.remalo.org or 877.262.7656
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contributors To Be Or Not To Be – A Question Looming Large For Fannie Mae & - Fed Kamensky The Reverse Mortgage Industry, page 12 Fed Kamensky is an associate with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. Mr. Kamensky can be reached at kamensky@wbsk.com or by telephone at 202.628.2000. Tell A Story, Make a Sale: Marketing To Baby-Boomers & - Valerie VanBooven Seniors Requires A Different Way Of Thinking, page 26 Valerie VanBooven RN BSN is a Senior Service Marketing Expert and the National Marketing Director for Next Generation Financial Services, a Division of 1st Mariner Bank. She is a professional speaker and the author of the books “Aging Answers” (2003) and “The Senior Solution” (2007). She can be reached at valerie@nextgenfinser.com. Please visit her website at www.NGFSRecruiting.com Ask The Servicer, page 31 - Ryan LaRose Ryan LaRose is the Executive Vice President of Celink, an independent reverse mortgage subservicer. Ryan has over 12 years of servicing experience; exclusively in reverse mortgage servicing since 2005. In addition, Ryan is an active member of the NRMLA servicing and technology committees. Visit his website at www.CeLink.com or contact him directly at 517.321.5491. The Last Word: The 8 Rules Of Engagement, page 34 - Monte Rose Monte Rose has helped hundreds of seniors obtain a reverse mortgage during the past 17 years. He is an accomplished speaker and widely quoted industry expert, appearing in financial publications and nationally syndicated media. He was head of national retail sales for Financial Freedom Senior Funding Corporation. Monte is a Certified Senior Advisor and a Certified strengths Coach with Gallup University. For more information, call 800.516.0545 or e-mail info@monterose.biz.
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reverse mortgage industry snapshot Statistics Provided by Reverse Market Insight - April 2009
Top 10 Rankings by Region
10 Regions, ranked by HECM unit volume YTD. Including rank change from prior YTD, as well as growth rates. Also includes active lenders and growth
Lender Distribution by YTD Growth Rate
Lender distribution graph and table, showing number of lenders growing at various growth rates YTD vs. prior YTD, including volume attributable to each group of lenders. Client Notices 1)
Help improve data quality in the Reverse Mortgage industry. If you believe your company’s numbers on this report are inaccurate, please e-mail us (support@rminsight.net) and we will review your feedback promptly. Please include your name, company and contact information along with a thorough description of the suspected inaccuracy. Thanks!
2)
If you received this report as a trial or sample and would like to purchase this report or future reports for your company, please visit: www.rminsight.net/MICreports.php
3)
If you’ve been looking for a source for Reverse Mortgage intelligence beyond MIC endorsement numbers, we’ve got just what you need.
Find out more at www.rminsight.net/rmarket.php
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24 Month Penetration and Unit Volume
2 year trend graph of monthly HECM unit volume and industry penetration against 62+ homeowner households nationally.
Appendix 1) All statistics based on retail originations from HUD’s Monthly HECM MIC reports 2) Loans are in unit volume, based on HUD reported mortgage insurance certificate issuance 3) Lenders are aggregated using HUD’s lender identification numbers and unique lender names, along with feedback from reporting lenders HUD Regions and Corresponding States/Territories Region 1 - New England Connecticut Maine Massachusetts New Hampshire Rhode Island Vermont
Region 3 - Mid-Atlantic Delaware District of Columbia Maryland Pennsylvania Virginia West Virginia
Region 5 - Midwest Illinois Indiana Michigan Minnesota Ohio Wisconsin
Region 7 - Great Plains Iowa Kansas Missouri Nebraska
Region 8 - Rocky Mountain Colorado Region 2 - New York/New Jersey Region 4 - Southeast/Caribbean Region 6 - Southwest Montana New York Alabama Arkansas North Dakota Louisiana South Dakota New Jersey Florida New Mexico Utah Georgia Wyoming Oklahoma Kentucky Texas Mississippi North Carolina Puerto Rico South Carolina Tennessee U.S. Virgin Islands
May 2009
Region 9 - Pacific/Hawaii Arizona California Federated States of Micronesia Hawaii Nevada Region 10 - Northwest/Alaska Alaska Idaho Oregon Washington
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To Be Or Not To Be A Question Looming Large For Fannie Mae & The Reverse Mortgage Industry Weiner Brodsky Sidman Kider, PC
I
n several of our prior articles in The Reverse Review, we focused on some of the exciting changes in the Home Equity Conversion Mortgage (“HECM”) program stemming from the Housing and Economic Recovery Act of 2008 (“HERA”). Among other developments, HERA’s establishment of a single national mortgage limit and its creation of the HECM for home purchase program both promise to have a long term impact on the reverse mortgage industry. However, one change wrought by HERA, receiving scant attention within reverse mortgage circles, but promising to have an even greater impact within the industry, is a mandate requiring Fannie Mae and Freddie Mac (collectively referred to as government sponsored entities or “GSEs”) to reduce the size of their mortgage holdings. In this article we examine the GSEs, the centrality of Fannie Mae’s role as a source of liquidity for reverse mortgages, why the role of the GSEs is being reexamined and how these changes might serve to either curtail or promote the market for reverse mortgages.
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The GSEs & the Federal Housing Finance Agency Fannie Mae and Freddie Mac were each chartered by Congress for the primary purpose of establishing secondary market facilities for residential mortgages. Specifically, the mission of the GSEs has been to provide ongoing assistance to the secondary market for residential mortgages by (i) increasing the liquidity of mortgage investments and improving the distribution of capital available for residential mortgage lending, (ii) promoting access to mortgage credit, and (iii) supporting the financing of affordable housing to low- and moderate-income households. The GSEs have traditionally advanced this mission by (i) buying mortgage backed securities that they, or Ginnie Mae, have guaranteed, or private label mortgage backed securities issued by large lenders or Wall Street firms, and (ii) purchasing whole loans from lenders. The portfolio holdings of the GSEs grew rapidly beginning in the 1990s through the early part of this decade. By the end of June 2008, their combined holdings of mortgage assets totaled nearly $1.6 trillion or approximately 13% of all residential mortgage debt outstanding. Given the size of these holdings, and the concern that the GSEs held insufficient capital to support the inherent risks they posed, law and policy makers have long debated whether the GSEs created an unacceptable level of systemic risk to the mortgage credit markets and the economy as a whole. And then the unthinkable occurred, on September 6, 2008, the Federal Housing Finance Agency (“FHFA”), created by HERA on July 30, 2008, and charged with supervision and oversight of the GSEs, placed Fannie Mae and Freddie Mac into conservatorship. In order to prevent their capital from being exhausted, FHFA, after appointing itself conservator for the two GSEs, entered into Senior Preferred Stock Purchase Agreements (“Stock Purchase Agreements”) with the Department of the Treasury. Under the Stock Purchase Agreements, the ability of Fannie Mae and Freddie Mac to issue new guarantees of mortgage backed securities and to maintain and grow their mortgage portfolio holdings was enhanced through the Treasury Department’s commitment to acquire up to $100 billion of senior preferred stock of each GSE.
“
After growing their portfolios through the end of this year, the Stock Purchase Agreements require Fannie Mae and Freddie Mac to reduce their mortgage asset portfolio by ten percent (10%) every year until each portfolio is reduced to no more than $250 billion. The bottom line is that the GSEs will collectively reduce their mortgage holdings from approximately $1.8 trillion to $500 billion.
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Fannie Mae and Freddie Mac were also permitted to increase their mortgage asset investments up to $850 billion by December 31, 2009. As a side note, on February 18, 2009, President Obama’s foreclosure alleviation program, the Housing Affordability and Stability Pan, was announced. Under that plan, the mortgage portfolio holdings limit for the GSEs was increased by $50 billion each, to $900 billion. But what Uncle Sam gives with one hand, he oftentimes takes away with the other. After growing their portfolios through the end of this year, the Stock Purchase Agreements require Fannie Mae and Freddie Mac to reduce their mortgage asset portfolio by ten percent (10%) every year until each portfolio is reduced to no more than $250 billion. The bottom line is that the GSEs will collectively reduce their mortgage holdings from approximately $1.8 trillion to $500 billion. FHFA estimates that the mortgage assets of Fannie Mae and Freddie Mac will reach the target level around the year 2020, at which point no further reduction will be required. (Incidentally, President Obama’s Housing Affordability and Stability Plan did not alter the mandate to reduce the GSEs’ mortgage asset portfolios.)
May 2009
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To implement HERA’s mandate, on January 30, 2009, FHFA issued an Interim Final Rule. The Interim Final Rule adopted the existing criteria for portfolio holdings in the Stock Purchase Agreements under which the GSEs currently operate (discussed above). Thus, under the Interim Final Rule, each GSE may grow its mortgage assets up to $900 billion by December 31, 2009. However, starting on December 31, 2010, the GSEs must hold ten percent (10%) less mortgage assets in their portfolio than at the end of the preceding year until those assets reach a level of $250 billion. The FHFA has requested comments concerning the Interim Final Rule, and may amend the rule after it receives and reviews all comments. The deadline for written comments is June 1, 2009. As this article went to press, NRMLA was working in concert with its members to develop the industry’s statement in response to FHFA’s request for comments on the Interim Final Rule. The industry’s response to the Interim Final Rule could lead to changes in the rule, and also could influence the implementation by FHFA, as Fannie Mae’s conservator, of the planned ten
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The end result of the mortgage portfolio reduction by Fannie Mae could be challenging for the reverse mortgage industry. The reduction in Fannie Mae’s portfolio holdings could mean a decrease in capital available to reverse mortgage lenders and less liquidity for reverse mortgage investments.
”
percent (10%) mortgage asset portfolio reduction. To begin to appreciate what this might mean for the reverse mortgage industry, it is helpful to share two interesting facts. Based on Fannie Mae’s Quarterly Report for the period ending March 31, 2009, Fannie Mae’s market share of reverse mortgage loans was approximately 90%. Consider further that, based on the same Fannie Mae Quarterly Report, HECM loans accounted for approximately 90% of the total reverse mortgage market as of December 31, 2008. While Fannie Mae’s charter allows it to invest in various types of reverse mortgages, including proprietary reverse mortgages, we understand that Fannie Mae’s current reverse mortgage purchases are limited to HECMs and overwhelmingly these purchases have been on a whole loan basis. Given these circumstances, the importance of Fannie Mae’s continued ability and willingness to purchase HECM loans can hardly be overstated. Undoubtedly, then, the rules prescribing how the GSEs will reduce their mortgage portfolio holdings will significantly impact our industry. The Effect of Planned Reductions in Mortgage Holdings by the GSEs on Reverse Mortgages Decreased Funding The end result of the mortgage portfolio reduction by Fannie Mae could be challenging for the reverse mortgage industry. The reduction in Fannie Mae’s portfolio holdings could mean a decrease in capital
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available to reverse mortgage lenders and less liquidity for reverse mortgage investments. The FHFA stated that it expects the mortgage asset reduction to be achieved largely through natural run-off of the GSEs’ existing loan assets. However, presumably, Fannie Mae will be required to reduce its purchases of mortgage assets, which could include reverse mortgages, to accomplish the required overall reduction of its mortgage portfolio.
Strategically thinking...
It remains to be seen what share of Fannie Mae’s reverse mortgage purchases will be affected by the portfolio holdings reduction. Assuming a ten percent (10%) pro rata reduction across Fannie Mae’s broad portfolio of mortgage assets, reverse mortgages could see a corresponding ten percent (10%) drop in secondary market financing. Such ten percent (10%) reduction could occur each year, well into the future, until Fannie Mae’s portfolio reaches the projected $250 billion goal in the year 2020. Moreover, HECM loans, quite possibly, could be more severely impacted than other mortgage assets. This is so because other mortgage loans, such as traditional “forward” mortgages, are currently more easily securitized and can be delivered and sold to Fannie Mae and Freddie Mac, as well as to other secondary market investors. With a “thinner” securitization market and Freddie Mac currently not purchasing reverse mortgages at all, Fannie Mae’s decisions on how it meets FHFA’s mandate to lower its mortgage holdings could have a greater impact on HECM lenders than the overall reduction in GSE purchases of conforming “forward” mortgage loans will have on forward mortgage lenders. Increased Pricing As many reverse mortgage industry participants undoubtedly are aware, Fannie Mae recently changed its pricing policies for the HECM loans it purchases. These recent price changes have generally resulted in higher margins that lenders utilize with the HECM loans they originate. Many industry participants believe that Fannie Mae is encouraging higher margins to attract new investors to the HECM secondary market. This, in turn, is consistent with the mandated loan portfolio reduction that Fannie Mae must accomplish under HERA and the Interim Final Rule issued by the FHFA. While attracting new investors to the reverse mortgage
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May 2009
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secondary market is clearly in the long term interests of the industry, higher margins do have an immediate and detrimental impact on HECM borrowers in the form of reduced principal limits. The borrower’s initial principal limit under a HECM loan is based in part upon the expected interest rate. Because the expected interest rate generally increases with higher margins, the principal limit, or the loan proceeds available for disbursement to the senior borrower, may correspondingly decrease as a result of rising HECM margins. What’s Next: Possibility of New Secondary Market Players According to Fannie Mae’s Quarterly Report for the period ending March 31, 2009, the outstanding unpaid principal balance of reverse mortgages in Fannie Mae’s mortgage portfolio was $41.6 billion as of December 31, 2008 and $45.9 billion as of March 31, 2009. As described above in this article, beginning in 2010, Fannie Mae must reduce its mortgage assets by ten percent (10%) each year. Of note, also, is that reverse mortgage assets on the books of investors do not necessarily experience the same level of runoff as traditional “forward” mortgages due to the fact that there is no debt service (i.e., no monthly mortgage payments by the borrower) with reverse mortgages and the loan balance of a reverse mortgage increases over time. As a result of such negative amortization and the growing balance of its current portfolio, Fannie Mae’s ability to invest in new reverse mortgages will necessarily be constrained. The question on everybody’s mind is what will happen if Fannie Mae scales back on its purchase of whole loan HECMs. Under a doomsday scenario, the reverse mortgage market becomes more constrained and lives or dies with Fannie Mae as its single investor. However, a different result is possible based on three strategies. The first, as we’ve already noted, is Fannie Mae’s upward trend in pricing conceivably designed to spur broader investor interest. As credit markets stabilize, we are likely to see more investors pursue the FHA insured HECM product. Also, in the long run, the return of secondary market investors could then drive down HECM margins by increasing competition.
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While attracting new investors to the reverse mortgage secondary market is clearly in the long term interests of the industry, higher margins do have an immediate and detrimental impact on HECM borrowers in the form of reduced principal limits.”
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Another positive trend in the reverse mortgage space is the emergence of Ginnie Mae’s program to securitize FHA-insured HECMs (known as the Home Equity Conversion Mortgage Backed Security program or “HMBS”). With this relatively new securitization program, the FHA-insured status of the underlying HECM loans helps protect the investor against the risk of loss on the underlying HECM loan (i.e., the credit or collateral value risk). In addition, the Ginnie Mae guaranty protects investors against the issuer risk, i.e., the risk of default by the issuer of the HMBS security. The first HMBS issuance took place in 2007. The Ginnie Mae HMBS program has its own unique rules, ample opportunities, and a few challenges. With the possibility of Fannie Mae scaling back on its whole loan purchases of reverse mortgages, the increased popularity of Ginnie Mae’s HMBS program could become an important source of additional liquidity for reverse mortgage markets.
Finally, Fannie Mae can potentially employ another strategy to better support the reverse mortgage industry, namely holding a larger percentage of its reverse mortgage assets as securities rather than as whole loans. In this way, more HECM reverse mortgage loans can bypass the FHFA portfolio restriction as Fannie Mae’s dollar for dollar investment is leveraged over a larger number of reverse mortgage loans. As the Ginnie Mae HMBS program gains
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traction, we are hopeful that Fannie Mae and Freddie Mac will become major investors in these securities. ******************** As should be apparent, the possibility of Fannie Mae portfolio holdings reduction in the near future could have a significant impact on the entire mortgage lending industry. Because of Fannie Mae’s approximate 90% market share of the total reverse mortgages market, that impact might even be greater on the reverse mortgage industry. However, there are several promising developments now afoot, as outlined above, which could promote a healthier, more diverse secondary market for reverse mortgages. For the immediate future however, NRMLA is weighing in and preparing a response to the FHFA’s request for comments on its plans to reduce the mortgage portfolios of the GSEs. We remain hopeful that the baby doesn’t get thrown out with the bath water and reverse mortgages remain broadly available to meet the needs of a growing population of seniors. By Joel Schiffman and Fed Kamensky, of the law firm of Weiner Brodsky Sidman Kider, P.C. The law firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. The firm has offices in Washington, D.C., Newport Beach and Dallas. Additional information can be found at www.wbsk.com or by telephone at 202.628.2000. Messrs. Schiffman and Kamensky can be reached at schiffman@wbsk.com and kamensky@wbsk.com, respectively. This article provides only an overview of some of the federal laws and regulations that may affect reverse mortgage lending and finance matters. Because of the generality of this article, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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L
ately I’ve been thinking and hearing a lot about values as they relate to the reverse mortgage industry. Perhaps it has something to do with the incredible changes we’ve experienced these past few years, or maybe it’s simply due to the maturation of our industry. Whatever the reason, I’ve heard more talk in the past year about values and ethics than I have since I entered the reverse mortgage arena in the early 1990’s. I strongly believe the majority of industry participants are in this business for the right reasons…we were drawn to reverse mortgages because we saw them as a valuable financial tool for senior homeowners, one that could have a significant and positive impact on many lives. We’ve worked tirelessly over the years trying to spread the word, to educate and to dispel myths and misperceptions related to the products we offer.
Here we are today – in many ways we’ve come full circle. Virtually the only reverse mortgage product being offered today is the FHA-Insured HECM. All but one (as of today) proprietary Jumbo reverse mortgage has been shelved, waiting to be dusted off and restored to their previous luster once secondary markets improve and investor appetite for reverse mortgages has resurfaced. The good news is that we have higher loan limits and a broad array of indexes and margins to work with, meaning we’re able to offer our product to more candidates than ever before, but the rapid product changes have impacted every aspect of our business.
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Circling back to my first comment, I decided to look up the definition of values before I sat down to write this article. The most accurate definition I could find (at least from my perspective) was as follows: Values: Beliefs of a person or social group in which they have an emotional investment (either for or against something). Certainly, the reverse mortgage arena is a breeding ground for emotion…the borrowers who are considering the product, the consumer interest groups looking to ensure consumers are properly educated and the reverse mortgage lending community, which is committed to offering the right products for the right reasons with the hopes that they will be providing a valuable financial tool in exchange for reasonable compensation. We all have an emotional stake in the reverse mortgage transaction, and as a result, our core values come into play from several different perspectives: Consumers/Borrowers: Reverse mortgage borrowers, depending upon their age, have had significantly varied experiences throughout their lives. For example, a borrower in their 80’s was born in the 1920’s and probably has distinct memories of the Great Depression, which would have a direct impact on their comfort level with mortgages and financing in general. For these individuals, a key value is to own their home without any encumbrances. They come from a generation that believed in paying cash, and were taught self-discipline early on with regards to purchasing items only when they had the cash to pay for them. Compared with a borrower in their mid-60’s the differences are clear; born in the 1940’s, these individuals came of age during the years of prosperity following the end of World War II. Very family-oriented, they do not want to be a burden to their children; hence it’s very important that they maintain their independence. In most cases these borrowers feel more comfortable using financing options or making major life changes than they do accepting money or assistance from family members. There are a couple of common beliefs at work in our customer’s minds – the value of maintaining one’s independence and the importance of not placing a financial burden on their heirs. Virtually every borrower
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I’ve met with throughout my career has made a point to mention these values. Senior Advocates: Housing counselors, medical professionals, friends and advisors…anyone who finds themselves in the role of “trusted advisor” to the senior may consider themselves a member of this category. Once acknowledged, the role of senior advocate is a weighty one, as you are being trusted to assist the senior in key decisions they’re facing as they try to live out their lives in the manner they’ve always hoped for – with independence, dignity and without too many financial worries. The senior advocate is a unique role to find oneself in, since typically the advocate has no financial interest in the reverse mortgage transaction. However, by definition, it is extremely important to these folks that they provide the support and counsel to individuals facing this important financial decision. Reverse Mortgage Originators: There are more reverse mortgage originators than ever before, and it is impossible to describe in whole the values that set them apart from other mortgage professionals. We come from all different walks of life and each have vastly different backgrounds. Generational, cultural, geographic, familial and educational experiences all come into play when working with prospective borrowers. As an example, let’s look at my personal background. My parents were divorced when I was quite young, and, true to Norwegian custom, my grandparents stepped in and took my mother, sister and me all under their wing. In many ways, my grandparents had a more significant role in my life’s path than any other influencer during my early years. They were my confidants, supporters and cheerleaders; watching them struggle financially throughout their retirement years, they taught me the value of planning for the future. They taught me so much, drawing on their many years of life experience. It was that experience that led to my strongly-held belief that senior citizens are by far the most undervalued segment of our population today. They hold precious wisdom, knowledge and experience we can all benefit from. As a result of this life experience, a core value was developed early on in my life – the need to help
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senior citizens and to respect and learn from their life experience. This belief is what led to my choice of careers, and it also plays a key role every day when it comes to how I conduct myself and relate to others.
fantastic time to take a step back, look in the mirror and give yourself an honest assessment with regards to how you handle yourself versus what your core values and beliefs are.
Again, I am speaking from personal experience and am certain many reverse mortgage industry participants possess similar beliefs. The key is to acknowledge those beliefs and to respect the values to which you subscribe.
It is also important to conduct the research needed to understand where your client and their advisors are coming from. Understand their core values and present the product in a manner that is consistent with both your values and theirs.
How to put your knowledge about values to work for you: At this point, you may be asking yourself “Sarah, what are you trying to get at?” The answer is simple. As our industry grows and we make decisions and face challenges, it is important to acknowledge what is truly important to you, to your customers and to all the various individuals who play a role in the success of our industry. I stated earlier that I believe the majority of people in our industry are in it for positive reasons. However, it’s easy to be led astray as the business grows, the regulators impose increasingly difficult requirements and the products continue to change. As co-chair of NRMLA’s Ethics and Standards Committee I see the results of poor decisions on a regular basis. This is a
Use this information as a guidepost as you navigate your way through the process with your customers. Treat them the way you would want to be treated (or want your parents or grandparents to be treated) in a similar situation. Provide accurate information and be straightforward and honest. This practice will appeal to anyone, from any background, and will ultimately result in increased awareness and acceptance of our program in addition to more business, satisfied customers and quality referrals for years to come.
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Have I Got a Lead for YOU!
What is the #1 challenge you currently face in your reverse mortgage business? If you have been watching all the changes taking place in our industry, you might say the #1 challenge is just keeping pace with all the changes that are occurring. If this was your answer, you are correct, at least partially. In most cases you are caught between a rock and a hard place when it comes to weeding through all the governmental and lender changes. Your goal should be to stay informed, keep educated and up to date. This leads me to me our original question. What is the #1 challenge you currently face in your reverse mortgage business? The Answer is: Getting Leads. Now if you had the same answer, give yourself a pat on the back. Leads are the lifeblood of our business. Without leads we have no one to talk to. Without clients to talk with, we are out of business. However, getting enough leads is very challenging. Why? Because the demand for leads far exceed the supply. So, what does this mean to you! More than likely, for every
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Sam Collins
lead you get, someone else has the same lead. This is what I refer to as competition. But, competition is not your only challenge. Defining a Lead As defined by Wikipedia: A sales lead is the first stage of a sales process. Sales leads come from either marketing lead generation processes such as trade shows, direct marketing, advertising, Internet marketing or from sales person prospecting activities such as cold calling. For a sales lead to qualify as a sales prospect, or equivalently to move a lead from the process step sales lead to the process sales prospect, qualification must be performed and evaluated. Typically this involves identifying by direct interrogation the lead’s product applicability, availability of funding, and time frame for purchase. This is also the entry point of a sales tunnel, sales funnel or sales pipeline. Once a qualified lead exists, additional operations may be performed such as background research on the lead’s employer, general market of the lead, contact information beyond that provided initially or other information useful for contacting and evaluating a lead for elevation to prospect, the next sales step.
Bottom line: Junk leads waste your time and money. 2. Possibility. These are leads that appear to be more qualified on the surface. In other words, the respondent led you to believe they were qualified, but when you dig deep into the process, you find they looked good, but don’t qualify today, but may be a possibility some time down the road. You can’t help getting some of these leads. It’s part of our business. What about the possibility lead? These are the leads that might have a chance for an origination, but will take a while to materialize. These leads are inevitable and can compile a very large portion of seniors, who do not qualify today. My suggestion is to not throw these leads away. You probably already have invested money to acquire the lead. Tossing the lead out would mean throwing money down the drain. The reality is you never know when one of the possibility leads may turn around and become an active prospect. Bottom line: Possibility leads are part of doing our business. 3. Qualified. These are the gems you want. These leads are the good stuff. These leads are worth their weight in gold. These are the leads that are:
If a sales lead eventually makes a purchase, this is called conversion and a closed sale. The ratio of sales leads that convert is often referred to as the conversion rate, a way to measure the effectiveness of a sales process, sales team, or sales person.
• • •
I think defining a lead is very important, because there is a lot of confusion as to what a lead really is, as defined by others.
Even a quality lead does not assure an origination because we know seniors are working on their schedule, not yours. However, we know we have a much better chance of an origination when it is considered a qualified lead.
List providers often refer to their list as leads. Forgive me, but a list of senior names is not a lead. I am amazed when I speak with originators who have huge lists and they think their lists are leads. In fact, a list is merely an opportunity to get a lead. This is a struggle for everyone in the reverse mortgage business. I am sorry to say, there is no one answer. If someone says they know the answer, run like heck, because you are about to get burnt. Now here is the really tough part. How do I know the difference between junk leads, possibility leads and qualified leads? I think of leads in the following terms: 1. Junk. Yes, these are leads that you think are leads, but in reality they are junk. Why? Junk leads are those that do not qualify because of age; have no equity; home values are shortfall in order to qualify; or those who respond to your advertorial message, with no intention of ever doing a reverse mortgage, or send your response card back full of confetti. Junk leads often come from sources that call them leads, when they are merely a list compiled by a list provider. These are not leads rather they are junk.
Age appropriate Have equity Have expressed an interest and left contact information for you to call them or send something.
Bottom line: Qualified leads save you time and money. 4. Survey Leads. My experience has revealed survey leads are junk leads. Companies who send out a survey generate these leads. The survey card contains check boxes asking several questions. One question may be, “Have you ever heard about reverse mortgages?” The box gets checked and presto, a survey lead. These leads fall into my junk lead category. I never recommend purchasing survey leads with check boxes and only one question. Bottom line: Survey leads most often waste your time and money. On to our next challenge, (this business is not easy). Getting the leads... There are many ways for you to acquire leads. So many in fact, I can’t address them all here, however, the two basic ways are: 1. Purchase the leads 2. Acquire them yourself Preferably, you want a combination of purchasing and acquiring
leads. Most often purchasing requires a cash outlay. Acquiring leads on your own requires your time. Your time does not always require cash outlay, but it does require your time, which in essence translates into a cost. Some of you may only do one; purchase or your own acquisition. If you are comfortable with one or the other and it is working for you, I suggest you continue. This takes us to the importance of having an appropriate number of leads to work and fill our pipeline. For example, if you are working on 10 leads per month and 9 fall out and 1 has an interest, but is not just ready, you have 0 originations for the month. Now let’s kick it up a notch and say we want to be working on at least 40 qualified leads per month. Having more leads to work with will significantly increase our chances of acquiring more senior prospects who are ready to step up. This also eliminates the up and down swings in monthly originations. Here are some guidelines for you to follow when purchasing leads: 1. 2. 3. 4. 5. 6. 7. 8. 9.
Define the cost per lead with supplier. What are parameters that determine a lead return? How are the leads paid? Are there quantity discounts? How long has the company you will be using been in the reverse mortgage lead business? Have the company give you a definition of what they consider to be a “lead.” Get an example of a lead generation source, so you can respond relative to the senior client’s request. Ask for testimonials. Specific clients who can testify to the lead source effectiveness. Read all agreements thoroughly.
Here are some guidelines for you to follow when you are acquiring your own leads: 1. Make appointments with the decision maker. 2. Send correspondence and make a follow up call to confirm appointment. 3. Join local networking and social groups within your community, be specific what you do. 4. Don’t try to sell reverse mortgages, explain how the use of a reverse mortgage can help others achieve their goals. 5. Send valuable information to other contacts and provide education to them. 6. When holding seminars or educational forums, be sure to capture all names and contact information of attendees. 7. Follow up with a letter and phone call to all contacts after meeting. 8. Set up one on one to get to know your outside sources on a more social, but business level. During this one on one, let them know more about you. 9. Put into place a strong referral program. There you have it or least part of the story. Getting leads and making sure they are qualified leads is an extremely challenging process for us all. A word of caution, there is no one solution to receiving and acquiring leads. You must use all your resources, knowledge, and know how to get as many leads as possible. Once you get the leads, there is another story and one that requires great attention to detail and follow through. Good luck to you with your leads. Remember; keep moving forward to stay ahead in reverse.
Tell a Story, Make a Sale: Marketing to Baby-Boomers and Seniors Requires a Different Way of Thinking
Valerie VanBooven
Recently I found some key information in two very different places, that said almost exactly the same thing about marketing to baby-boomers and seniors. After analyzing both pieces, I found a ton of truth and great ideas for marketing strategy.
It’s Here!
The first is an article on ComingofAge.com by Jim Gilmartin that discusses how older adults minds process information differently than younger adults, therefore, the marketing strategy must change to match that thought process. The second resource is a new book on the market that I hope all of you take the time to read. It’s called Dot Boom: Marketing to Baby Boomers Through Meaningful Online Engagement written by the founding partners at ImmersionActive (www.immersionactive.com). Here’s what you will find in Dot Boom: Marketing to Baby Boomers Through Meaningful Online Engagement : 1. A compelling argument for marketing to Boomers online 2. A method for attracting older consumers without disenfranchising young consumers 3. The keys to getting “landing rights” with a boomer consumer 4. Best practices with regard to online-creative targeting Boomers 5. The first Boomer-specific definition of Engagement as a metric 6. A revolutionary idea in online media planning: Engagement Clusters 7. A framework for replicating successful online campaigns
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Go Sell. Go Serve.
I‘m a business consultant and not a reverse mortgage professional, so when a friend gave me a copy of this book I was a bit skeptical about its relevance to my work. Was I wrong! Monte Rose’s advice, while geared to the reverse mortgage industry is applicable to anyone who sells anything. I sell solutions to my clients and found numerous practical applications in his book. Aside from selling advice, Monte offers tips on a number of other topics, including networking. You’ll love the story about a call he once received on a golf course in Palm Springs - talk about networking magic! Paul Niven - President, The Senalosa Group Inc.
Order your copy now at
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Understanding how a baby boomer’s brain and mind process information is Key to effective communications.
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The ComingofAge.com piece discusses the eight progressive changes in how older minds process information. Here is the summary of those eight changes: 1. Less reliance on reason to determine what is of interest, and more on intuition (which is cued by emotional responses): This means that because they have more life experience, boomers and seniors are more likely to make decisions based on “gut feelings” rather than rationally deduced decisions. 2. First impressions (which are always emotionally based) are more durable and more difficult to reverse than for younger adults: The old saying that you never get a second chance to make a first impression is even more applicable to boomers and seniors! 3. After a matter qualifies for interest and further attention, baby boomers tend to want more information than do younger consumers: Content is king. Provide it willingly, happily, and in droves. 4. Decreasing speed in rational processing of objective information: Content is king. Provide it willingly, happily, and “completely”, don’t leave out anything. 5. More resistant to absolute propositions: You should present information on company and products in a qualified, even deferential manner. 6. More sensitive to metaphorical meanings, nuances and subtleties: Illustrate values that transcend the generic value of the service and expand its perceived attractiveness. Nonverbal symbols are effective in accomplishing this. Show pictures! 7. More receptive to narrative-styled presentations of information, less responsive to information presented in expository style: Tell stories, use testimonials and provide examples. Stories are generally quicker to arouse emotions than straightforward propositions about a product’s features. Storytelling has become an important part of market strategy. Whoever tells the best story and tells it best will most likely win. 8. Perceptions are more holistic. Project an interest in the “whole” person, not just the facet that might need
a particular product or service; also, avoid depicting representatives of target markets in flat, single dimension contexts. Understanding how a baby boomer’s brain and mind process information is key to effective communications. If an ad, TV, radio spot, web site or sales presentation fails to connect with a baby boomer’s idealized image of self, it is more likely to be ignored. Tell stories, use testimonials and examples of how other families and seniors were helped by using your services. In the end, you will have a NEW story and a NEW testimonial to share with the next prospect.
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ask the servicer
Ryan LaRose “I’ve heard that there is a process where a HECM loan can be assigned to HUD. How does that process really work?” ,from a reader of The Reverse Review. Servicing transfers are commonplace in the forward mortgage industry. When my wife and I purchased our first home, our mortgage was transferred four times within the first year! We were intrigued by the first notice of transfer; the second notice piqued our curiosity. The third notice was laughable, and to be perfectly blunt, the fourth notice was flat-out aggravating. Because I am well-acquainted with mortgage servicing, I didn’t take these notices personally, but I did find them irritating. Your borrowers, however, may not understand the servicing transfer process and it’s important for lenders and servicers alike to be ready with a proper and complete explanation of what occurs. To help frame my response to the question, let’s review the basic structure of the HUD assignment option. The Maximum Claim Amount (MCA) is set at the time of closing as the lesser of the appraised value for the property and the HUD lending limit. Once established, the MCA never changes over the entire life of the loan, and is exactly what it sounds like: the maximum amount that would be paid out by HUD if a claim were to be filed. HUD gives the investor the option to assign the servicing of the loan to HUD when the outstanding loan balance reaches 98% of its MCA. Let’s now look at the assignment process from both the perspective of the servicer and the borrower. The Servicer Perspective Servicers are responsible for reviewing their portfolios on
a regular basis (sometimes as frequently as daily) to identify any loans that are approaching, or have reached, the 98% MCA threshold. Most loans reach this level over an extended period of time as interest, mortgage insurance premiums, and monthly servicing fees are capitalized to the loan balance at the end of each month. That said, it is possible that a borrower with a line of credit could take a draw that would – in a single transaction – raise the loan balance up to 98% of the MCA, with little or no “warning” to the servicer. In this scenario, the servicer must act quickly to collect, prepare, and submit the proper documentation to HUD for assignment review. An interesting note: If a borrower requests funds from their loan during the assignment review process, either as a line of credit draw or a scheduled monthly payment, the servicer notifies HUD’s contractor and the contractor disburses the funds directly to the borrower. In either case, when the loan balance reaches 98% of the MCA and the investor elects to exercise their assignment option, the servicer is required to submit a specific set of loan documents and information (known as the assignment review package) to HUD’s contractor. This contractor reviews assignment applications and handles all servicing responsibilities (handling borrower telephone calls, mailing monthly statements, processing draw requests, etc.) for the loan once the assignment has been completed. Currently, the contractor handling these duties for HUD is C&L Service Corporation/Morris-Griffin Corporation. After a thorough review of the loan documents, chain of title, and other pertinent data, HUD’s contractor will either reject or approve the assignment request. Once the assignment request has been approved, a RESPA-required “good-bye” letter is mailed to the borrower. In addition, the servicer removes the loan from their system, and an assignment claim is filed with HUD for the benefit of the loan investor. As long as the loan balance has not exceeded 100% of the MCA, the investor will receive full reimbursement in the amount of the current loan balance. An often misunderstood aspect of this process is that not all HECM loans are eligible for assignment. Specifically, HUD will not accept assignment of a loan if it is currently in a default status, or the borrower has force-placed insurance. In either of these cases, the investor must keep that loan in their portfolio until a maturity event (death of the last surviving borrower, non-occupancy of the property, transfer of title, etc.) occurs.
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The Borrower Perspective As mentioned at this article’s beginning, my mortgage was re-assigned four times in its first year. Because I was knowledgeable of the servicing transfer process, I was bothered, but not traumatized. However, a servicing transfer can be a very traumatic experience for a senior homeowner. Generally speaking, no one likes change they have no control over, and the older adult population is highly suspect of anything they don’t understand. Our experience has taught us that the senior borrower population is highly adverse to change, especially when it comes to anything involving their home. Servicers must therefore, engage in both sensitive and extensive communication with the borrower to help guide them through this assignment process. When the loan balance reaches 98% of the MCA, the borrower receives a letter from their servicer about the forthcoming assignment process. This HUD-required notice provides the borrower with all of the information related to the pending assignment of their loan. Often the servicer will follow up this notice with a phone call to the borrower explaining the letter, taking the appropriate time to answer all of their questions, and hopefully, calming any concerns or fears they may have regarding the transfer. Once the transfer has been completed, the borrower will also receive a “welcome” letter from HUD’s contractor.
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You may be familiar with the quote attributed to Gustave Flaubert, “The devil is in the details”. It means that whatever one does, it should be done thoroughly; details are of critical importance. Competent and professional servicing before, and especially during HUD assignment process, is all about knowing the details of the process. Of equal, and sometimes even greater, importance it’s also about displaying sensitivity to the borrower. I hope I have been able to shed a little light on the HUD assignment process, and it helps everyone understand that whatever the case, a servicing transfer on a reverse mortgage needs to be done with the utmost concern for the senior borrower.
Ordinary people. Extraordinary results.
I look forward to receiving any questions you may have regarding servicing at: ryan@celink.com. If you wish to remain anonymous for my response, just let me know.
Ordinary people. Extraordinary results.
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the last word The 8 Rules of Engagement Monte Rose The fundamental building block of sales success is speaking with a prospect. It matters not whether it’s by phone or in person. The salesperson’s challenge is “how to navigate” through the various sales roles: Confessor, Advisor, Provider, and Dispenser. Confessor • Uncover the prospect’s pain or buying motivation • Determine “what business you’re in” • “I understand your situation, completely.” Advisor • Offer the unique value of your solution • Offer “social proof” • “The RM is a ‘fit’ for you.” Provider • Make it easy and beneficial for the prospect to do business with you. • “I can make this happen for you.” Dispenser • Explain the “fine print” • “I know my stuff.
The venue was a large living room, with furniture arranged around the perimeter of the room. No intimate conversation pit.
The first words he said were, “We received a proposal last night, and we really like it.” I was floored. I had spent so much time with these folks. Sent them stuff, the whole nine yards. And now, they were shopping me. The nerve… He reached toward the hutch, and took the folder, “May I have a look?, I asked. “Sure, he said.” “It’s kind of expensive, but the Mrs. really needs it.” They were talking with a building contractor and were installing a special tub/shower for Nancy.
I received a referral from a refi client. One of her neighbors was thinking about obtaining a reverse mortgage. She sent them my way. Their home was worth $650,000. They had debt of $180,000. The wife is 70 and husband is 65, and looking toward retirement. Small savings…and Social Security was going to be their primary source of retirement income. It appeared that servicing their current mortgage was going to be their greatest retirement challenge. Our first meeting, The husband was complaining about his health. As a machinist, he spends his entire day on his feet on a concrete floor. His joints are shot. He’s in pain. Surgery was on the horizon. The Mrs. is a diminutive lady, who has severe arthritis, and retired some years ago. No complaints, but obviously deteriorating physically. The discussion moved from “if “to “when”. The conceptual sell was made. “A reverse mortgage is the best answer to our financial challenges.” I have progressed from Confessor to Advisor, and am ready to “close” the deal and become their Provider. I begin the “now vs. later” dialogue, and give them a true customer story that mirrored their situation. “Do the RM now. Eliminate the current mortgage payment. Let the line of credit grow until you retire.” What’s not to like about this strategy?
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The setting
They sat in their two chairs across the room. I sat on the couch.
A recent applicant story…
I asked, “How does this sound?” They replied, “Sounds good.”
“Would you like to move forward?” “No, thanks.” They simply weren’t ready to go. So, in… 2 weeks I sent a letter confirming our conversation and their conceptual agreement. 3 weeks I sent the NCOA Reverse Mortgage guide 4 weeks I called: “just checking in”. How’d the doctor appointment go? Surgery? 5 weeks I sent a letter regarding “home values are declining. You’re losing money.” 6 weeks I received a phone message, “Call us.” 10 seconds I set an appointment.
A teachable moment had occurred. But it was not what I expected. I had focused on “his pain” when it was “her pain” that was the motivator. In a matter of seconds, I became the Provider. “How soon can we get this done?” Then, I engaged my Dispenser partner, the counseling agency. Described the process, gave them the required info, and went on my way. By the way, their home value had decreased by $200,000. Provider Following their successful counseling session, they gave me a call. We set a meeting time, and the application was received. Then, I became the Dispenser of the fine print…using the features of the program to build their comfort and confidence. I learned the following Rules of Engagement: RULE #1 Don’t assume anything. RULE #2 Ask and confirm everything. RULE #3 Don’t’ say everything you know. RULE #4 Always answer their question, but… RULE #5 Always follow up with a question of your own. RULE #6 Look for signals of progress. RULE #7 Move on. RULE #8 Always have a call to action in your pocket.
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