W
EW THE EVI ER VE
IE
RS
VERSE R EV E RE
Engaging a borrower’s children
TH
RE
VE
W IE
INSIDE THIS ISSUE | The Benefits of Including the Kids
THE
FACTS ABOUT + LONG-TERM CARE
What you need to know about funding this daunting expense
AAG SALES ALL-STAR ALINE SIMON PG. 18
BEYOND THE PITCH PG. 20
THE FOUR Ps OF MARKETING PG. 22
LIVING TRUSTS AND THE HECM PG. 24
The Reverse Review
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March 2016
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FAR’s HomeSafe reverse mortgage is a proprietary product of Finance of America Reverse LLC, and is not affiliated with the Home Equity Conversion Mortgage (HECM) program. Currently available in AZ, CA, CO, CT, FL, HI, IL, NJ, OR, PA, SC and TX. NMLS #2285 (www.nmlsconsumeraccess.org); Corporate Office: 8909 South Yale Avenue, Tulsa, OK 74137. Not all products and options are available in all states. Terms subject to change without notice. ©2016 Finance of America Reverse LLC. All Rights Reserved. FAR271 [Exp 1/2017] reversereview . com 8 TRR | 3
The Reverse Review March 2016
4 | TRR
From the editor RE
V IE
E REVE W TH RS
E
RE
EW THE EVI ER
A NOTE FROM JESSICA GUERIN
W
VE
IE
RS
VERSE R EV E RE
Engaging a borrower’s children
TH
RE
VE
EW
RS
VI
E
INSIDE THIS ISSUE | The Benefits of Including the Kids
THE
FACTS ABOUT + LONG-TERM
In the pages of this magazine, we often talk about the various ways a reverse mortgage can be used to bolster one’s retirement income plan. But one specific application we had yet to address was the use of a HECM to fund long-term care.
CARE
Surveys reveal that an overwhelming 70 What you need to know about funding percent of Americans 65 and older will this daunting expense need some form of long-term care. But while the odds are high that one will encounter this need, many fail to plan for the expense. This is problematic, as the costs of long-term care can be astronomical—reaching into the hundreds of thousands of dollars—possibly wiping out an individual’s entire retirement savings. And Medicaid assistance, which many assume will MARCH 2016 help shoulder the cost, is not only hard to obtain, but can also COVER limit the type and quality of care available.
AAG SALES ALL-STAR ALINE SIMON PG. 18
BEYOND THE PITCH PG. 20
THE FOUR Ps OF MARKETING PG. 22
How a HECM can support long-term care
LIVING TRUSTS AND THE HECM PG. 24
For those who own their home and qualify, a reverse mortgage can be a smart solution. Not only can it allow you to take control of your care by self-funding the services you need, it can ensure that you are able to remain in your home. Funds from a reverse could support renovations to accommodate limited mobility, and pay for a home health aide to provide assistance with daily living activities. By allowing seniors to independently manage the cost of their own care and avoid moving to a facility or nursing home, this option could be a saving grace.
JESSICA GUERIN Connect with me about how you can participate. Reach me at jessica@reversereview.com
Meet the Team SENIOR PUBLISHER
Reza Jahangiri PUBLISHER
Erik Richard EDITOR-IN-CHIEF
Jessica Guerin
CREATIVE DIRECTOR
Traci Knight
COPY EDITOR
Kersten Deck MARKETING DIRECTOR
Alycia Greer
Printer The Ovid Bell Press Advertising Information phone : 630.207.3882 email : jessica@reversereview.com Subscriptions email : information@reversereview.com Editorial Content email : jessica@reversereview.com © 2016 Reverse Publishing, LLC All rights reserved. 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, Reverse Review Publishing, 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, 3800 West Chapman Ave., Orange, CA 92868
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8 TRR | 5
The Reverse Review March 2016
6 | TRR
table of contents 09 / MOVERS & SHAKERS
The latest developments in companies across the reverse space
12 / STATS
January top lenders and HECM endorsement stats through December REVERSE MARKET INSIGHT
TRR 3.16
22 / MARKETING
34
The Four Ps of Marketing How Jerry McCarthy’s monumental marketing approach can help you examine your business and elevate your strategy JASON McNAMARA
24 / UNDERWRITING
Living Trusts and the HECM
14 / NRMLA NEWS
Read about the association’s current initiatives. MARTY BELL
How these agreements impact the loan process BRITANY LUTH
27 / HMBS
17 / ROUNDUP
A collection of recent facts and surveys affecting the reverse market
18 / HOT SEAT: SALES ALL-STARS SERIES Aline Simon
Rough Waters In the Secondary Market So far, 2016 is off to a tumultuous start. DARREN STUMBERGER
28 / SPOTLIGHT
27
22
Including the Kids
AAG
Why it’s beneficial to engage the children of prospective borrowers
20 / ORIGINATING
Beyond the Pitch
Tips for effectively explaining your business TABATHA ADDISON
34 / LAST WORD Sustainability
One strong word with three very important meanings in the reverse industry
24
ED O’CONNOR
FEATURE
30 / FEATURE The Facts About Long-Term Care What you need to know about funding this daunting expense JESSICA GUERIN
“When establishing a plan for the future, it is essential that we consider the potential cost of the care we may need in our old age—and that we explore ways to fund those expenses.
IN EVERY ISSUE...
11 / INDUSTRY NEWS Headlining stories of the past month REVERSE MORTGAGE DAILY
YOU CAN DO IT!
REACH OUT TO US ABOUT WRITING FOR TRR. INFO@REVERSEREVIEW.COM reversereview . com
8 TRR | 7
The Reverse Review March 2016
contributors JOHN K. LUNDE
MARTY BELL
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. 949.429.0452 rminsight.net
Marty Bell is NRMLA’s senior vice president of communications and marketing. This is Bell’s professional Act III after careers in books, journalism and the Broadway theater. Bell is the author of two novels and four nonfiction books, and his writing has appeared in publications including Playboy and New York magazine. Bell wrote and produced the award-winning documentary film The Boys of Summer and produced 15 Broadway shows (including Ragtime, Fosse and Dirty Rotten Scoundrels) that won 27 Tony Awards.
12 | Stats g
John K. Lunde
Marty Bell
Aline Simon
TABATHA ADDISON
20 | Beyond the Pitch g
Tabatha Addison
Jason McNamara
Tabatha Addison is VP of training and performance for AAG’s wholesale division. With a passion for people and more than 20 years of experience in leadership and professional development, Addison has traveled the world facilitating, coaching and delivering training to a variety of audiences. Addison is a certified hypnotherapist and a certified practitioner and coach with the American Board of NeuroLinguistic Programming.
14 | NRMLA News g
Aline Simon is a HECM specialist with AAG. She has been in the reverse mortgage industry since 1998.
BRITANY LUTH
Jason McNamara is the chief executive officer of Celink, the nation’s largest reverse mortgage subservicer. McNamara is also a principal at Peer Advisors, an investment group focused on the senior housing finance market, and he serves on the Board of Directors of the National Reverse Mortgage Lenders Association.
Britany Luth is the vice president of Best Practices for Finance of America Reverse, overseeing efficiencies throughout the organization. She has more than 12 years of experience in the financial services industry and has DE underwriting authority. Prior to joining Urban eight years ago, Luth was the director of a nationwide title company. She holds a B.S. in business management with a minor in marketing from Oklahoma State University.
22 | The Four Ps of Marketing g
DARREN STUMBERGER
Ed O’Connor
18 | Hot Seat: Sales All-Stars g
JASON McNAMARA
Britany Luth
Darren Stumberger
ALINE SIMON
27 | Rough Waters In the Secondary Market g
Darren Stumberger is an executive VP at LiveWell Financial and a leading expert on reverse mortgage securitization. He has more than 15 years of experience in residential mortgage trading and securitization, and chairs the NRMLA HMBS Issuer Committee. Stumberger has worked in New York City as a mortgage trader and banker for some of the nation’s leading investment banking firms, including Goldman Sachs, Morgan Stanley and Bank of America Merrill Lynch.
24 | Living Trusts and the HECM g
ED O’CONNOR
34 | Sustainability g
Edward O’Connor, CRMP, is a reverse mortgage professional with more than 15 years of experience. He was previously the owner of Advanced Funding Solutions in Long Island, and prior to that he owned an accounting and tax practice for 16 years. O’Connor maintains his status as a licensed IRS Enrolled Agent and is the co-founder of the Long Island chapter of the National Aging in Place Council. O’Connor has a finance degree from NYIT and is a retired Nassau County police detective. edward.oconnor@icloud.com 516.984.3731
Be a part of the conversation. Share your ideas with your colleagues and be a part of the solution. Reach out to us at info@reversereview.com. 8 | TRR
movers & shakers READ ABOUT THE LATEST DEVELOPMENTS IN COMPANIES ACROSS THE REVERSE SPACE.
HAVE A COMPANY UPDATE YOU WOULD LIKE TO SEE PUBLISHED? Finance of America Reverse LLC Announces Susan Anthony as COO
Finance of America Reverse (FAR) has named Susan Anthony chief operations officer. Previously, Anthony served as vice president of project management, a role she has held since July 2014. She has more than 30 years of executive experience in the mortgage industry, and worked previously as the SVP of service management at Icon Residential Lenders (Rushmore Home Loans). “Sue is an incredibly strong leader who is committed and aligned to our core values and cares deeply about the people with whom she works. We strongly believe that her depth and breadth of experience coupled with her compassionate leadership style will be a huge asset to FAR as she steps into this new role,” says FAR President Kristen Sieffert.
AAG Unveils New Commercial Featuring Noted Academics
AAG has launched a new television commercial featuring noted academics discussing how a reverse mortgage can be a flexible financial tool. The 120-second commercial, the lender’s first since the passing of spokesman Fred Thompson, stars David W. Johnson, Ph.D., associate professor of finance at Maryville University, and Barbara Howard, MBA, finance, MA, gerontology and adjunct professor at University of Bridgeport. Johnson and Howard emphasize the value offered by a reverse mortgage during a time when traditional sources of retirement income may not provide enough financial stability for today’s retirees. “The new AAG commercial sheds light on how reverse mortgage loans are becoming widely R
email it to jessica@reversereview.com
accepted by academics and experts as a versatile financial solution to help seniors achieve retirement security,” AAG Chief Creative Officer Teague McGrath says. The ad will run across cable and national networks, including ABC, NBC and CBS.
Reverse Mortgage Funding Hires Pamela Boyer
RMF announced that Pamela Boyer has joined the company’s third-party originations team as southwestern regional account manager. Boyer, who is based in Colorado, has more than 15 years of mortgage industry experience. Previously, she worked as a reverse mortgage specialist for Gershman Mortgage, where she became the first person in Missouri to earn the Certified Reverse Mortgage Professional designation. “Having one of the longesttenured account executive teams in the industry provides RMF with a unique competitive advantage, and adding Pamela and her 10 years of experience in reverse mortgages further strengthens our already dynamic TPO sales channel,” RMF National Sales Leader Mark O’Neil says.
Home Point Financial Hires Steven Sless
Home Point Financial has hired Steven J. Sless to be the branch manager of its Towson, Maryland, office. Sless will manage the day-to-day operations, hold local events and connect with potential borrowers by expanding on his innovative seminar series. “Steven brings both management and tactical experience to help expand our footprint
quickly. With his successful track record and community roots, he adds an important piece to our growing program,” says Joshua Shein, senior director of reverse lending. Sless worked previously as a managing partner at Bayshore Reverse Mortgage and an originator with Maverick Funding’s Reverse Mortgage Network.
VP of National Association of Appraisers Joins Landmark Network as Chief Appraiser
Landmark Network has hired John Dingeman as chief appraiser. A Certified Residential Appraiser in California, Arizona and Nevada, Dingeman is currenly VP of the National Association of Appraisers. He has also served as the president and lobbyist for the Coalition of Arizona Appraisers. Dingeman has extensive experience in the appraisal of singlefamily residential dwellings, small income producing properties and vacant land. He has assisted in the development of continuing education course materials approved by the Arizona Board of Appraisal and is a faculty member and continuing education instructor for the Columbia Institute. “We’re excited to have John join the Landmark team. He brings a solid reputation and years of appraisal industry experience to the position and we look forward to him strengthening both our client and vendor relationships,” says Hunter Gorog, COO of Landmark Network.
reversereview . com
8 TRR | 9
The Reverse Review March 2016
I
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R
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IVER N S U
T
F
Come learn with us.
est 5 . 201
877-721-3847
#nofilter #integrity #loyalty #diligence #compassion www.rfslends.com 10 | TRR
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industry news
March Update AN UPDATE OF THIS PAST MONTH’S BREAKING NEWS
The industry’s headlining stories at your fingertips UP-TO-THE-MINUTE NEWS? Visit reversemortgagedaily.com
NEWS DIRECT TO YOU: WANT EVEN MORE
HEADLINING NEWS 1. HUD: DESPITE
CHALLENGES, HECM PROGRAM FUNDAMENTALLY SOUND The HECM program continues to prove itself a fundamentally sound component of the FHA’s MMI Fund, according to one top-ranking HUD official. Recent audits and other financial indicators of the fund have shown an improvement in FHA’s position to serve both forward and reverse mortgage borrowers. HUD Principal Deputy Assistant Secretary Edward Golding testified before the House of Representatives Committee on Financial Services’ Subcommittee on Housing and Insurance, noting that significant improvements to the overall HECM book of business helped drive the fund past its congressionally mandated 2 percent capital ratio for the first time since 2008. “In recent years, it has become clear that the future health of the fund also depends on the progress of the HECM portfolio,” Golding said. “FHA is looking forward to working with Congress and its industry partners to make progress on better understanding the benefits and risks of the HECM program.”
// February 15, 2016
2. HUD OFFERS $40 MILLION IN HOUSING COUNSELING GRANTS
HUD plans to award $40 million in grants to support hundreds of housing counseling organizations nationwide, including those focused on reverse mortgages. The grants will be awarded to housing counseling services provided by national, regional
and multistate organizations, as well as state housing finance agencies and more than 200 housing counseling agencies that assist low- and moderate-income families. HUD also announced it is making $2 million available in FY2016-2017 Housing Counseling Training Grant Program funds to support basic and specialized training for housing counseling agencies.
// February 21, 2016
3. FORMER FHA CHIEF
GALANTE JOINS OCWEN BOARD OF DIRECTORS
Ocwen Financial Corporation has appointed former FHA Commissioner Carol Galante to its board of directors, effective the day after Ocwen files its 2015 Annual Report with the SEC. Galante, 61, is currently the I. Donald Terner Distinguished Professor in affordable housing and urban policy, the faculty director of the Terner Center for Housing Innovation, and the co-chair of the Policy Advisory Board of the Fisher Center of Real Estate and Urban Economics at the University of California, Berkeley. Previously, Galante served as FHA commissioner and assistant secretary for housing from July 2011 to October 2014. Under her leadership, FHA made some of the most significant changes to the HECM program, including the passage of the Reverse Mortgage Stabilization Act of 2013, changes to principal limit factors and the early pioneering of the Financial Assessment.
// February 22, 2016
4. FHA GIVES EXTRA
GUIDANCE ON REVERSE MORTGAGE ASSIGNMENTS TO HUD
Once again, FHA has issued additional guidance related to the Mortgagee Optional Election (MOE) assignment for HECMs. In Mortgagee Letter 2016-05, HUD states mortgagees may now request an extension of 30 days to the 120-day assignment requirement provided the sole reason a mortgagee is unable to submit the assignment request within the 120-day requirement is due to the state’s statute of limitations.
// February 15, 2016
5. FHA SETS DATE FOR
HERMIT SERVICE PROVIDER TRANSITION
FHA has announced that it will transition its Home Equity Reverse Mortgage Information Technology (HERMIT) system to a new service provider, Reverse Market Insight, on March 21, 2016. HERMIT is HUD’s system of record for all HECMs to handle the endorsement of loans, collection of mortgage insurance premiums and processing of claims. Last year, HUD announced it had chosen RMI to help manage the HERMIT system alongside Mortgage Asset Systems, a wholly owned subsidiary of Reverse Mortgage Solutions, Inc. To complete the transition, FHA says the HERMIT system will be unavailable from 7 p.m. EST on March 16, to 8 a.m. EST on March 21. There will not be any changes to the HERMIT system’s functionality as part of the transition to the new host data center, and access user IDs and passwords will not change.
// February 18, 2016 reversereview . com
8 TRR | 11
The Reverse Review March 2016
stats January 2016
Top Lenders Report
12345 American Advisors Group
RMS/S1L
Endorsements
356
Endorsements
826
Finance of Liberty America Home Reverse Equity
One Reverse Mortgage
Endorsements
Endorsements
Endorsements
323
291
287
Lender Endorsements
Lender Endorsements
LIVE WELL FINANCIAL INC
REVERSE MORTGAGE FUNDING LLC
FIRSTAR BANK 10
163
150
UNIVERSAL LENDING CORPORATION
SYNERGY ONE LENDING INC
141
TOWNEBANK 10
HOME POINT FINANCIAL CORPORATION
110
THE MONEY STORE
NATIONWIDE EQUITIES CORPORATION HIGH TECH LENDING INC
10 9
64
FRANKLIN FIRST FINANCIAL LTD
9
55
LAND-HOME FINANCIAL SERVICES
9
44
FIRST PRIORITY FINANCIAL INC
9
41
COMMUNITY FIRST NATIONAL BANK
8 8
OPEN MORTGAGE LLC PEOPLES BANK
SUN WEST MORTGAGE CO INC
37
GATEWAY BANK MORTGAGE
ADVISORS MORTGAGE GROUP LLC
37
SOUTHERN TRUST MORTGAGE LLC
8
UNITED NORTHERN MORTGAGE BANKERS LTD 36
VANGUARD FUNDING LLC
8
THE FEDERAL SAVINGS BANK
VIP MORTGAGE INC
7
FIRSTBANK 35
SIMONICH CORPORATION
7
PLAZA HOME MORTGAGE INC
30
RESIDENTIAL HOME FUNDING
7
26
WILLOW BEND MORTGAGE
7
26
GEORGETOWN MORTGAGE
7
7
7
RESOLUTE BANK
UNITED SOUTHWEST MORTGAGE CORP
35
CHERRY CREEK MORTGAGE CO INC
26
MANN MORTGAGE LLC
REVERSE MORTGAGESCOM INC
25
EVOLVE BANK & TRUST
PROFICIO MORTGAGE VENTURES LLC
25
M & T BANK
21
SUN AMERICAN MORTGAGE
20
MCM HOLDINGS INC
19
LENOX FINANCIAL MORTGAGE
19
LONGBRIDGE FINANCIAL LLC
18
FAIRWAY INDEPENDENT MORTGAGE
18
AMERICAN PACIFIC MORTGAGE
14
MONEY HOUSE INC
14
BANK OF ENGLAND
12
BANC OF CALIFORNIA NA
10
AMERICAN NATIONWIDE MORTGAGE COMPANY 10
12 | TRR
Brought to you by:
%%%%% LOOKING FOR MORE STATISTICS? Go to rmsinsight.net for all of the industry’s latest stats and rankings.
stats HECM Endorsement Stats Through December 2015 INDUSTRY SUMMARY
MO. 1
2,874
Retail Endorsement Growth
2
2,557 -11.03%
3
2,772
8.41%
4
2,597
-6.31%
1,895
5
2,477
TRAILING TWELVE MONTH ENDORSEMENTS 6,000
Wholesale Endorsement Growth
9.79%
2,000
Total Endorsement Growth
5.2%
0 Wholesale *Numbers Represent Months
01
UNITS CHG%
4,936
-0.08%
4.7%
4,716
-4.46%
1,862 -13.76%
4,634
-1.74%
1.77%
4,492
-3.06%
-4.62%
1,793 -5.38%
4,270
-4.94%
6
2,971 19.94%
2,324 29.62%
5,295
24.0%
7
2,694
-9.32%
0.3%
5,025
-5.1%
8
2,929
8.72%
2,820 20.98%
5,749 14.41%
2,159
2,331
9
2,589 -11.61%
2,080 -26.24%
4,669 -18.79%
10
2,427
-6.26%
1,901 -8.61%
4,328
-7.3%
11
2,467
1.65%
1,553 -18.31%
4,020
-7.12%
12
2,524
2.31%
1,705
9.79%
4,229
5.2%
* Figures Above Reflect Change from Prior Month
TOT
31,878
24,485
56,363
60% 50%
FIXED RATE PERCENTAGE
40% 30% 20%
12/1/15
11/1/15
10/1/15
9/1/15
8/1/15
4/1/15 4/1/15
7/1/15
3/1/15 3/1/15
6/1/15
2/1/15 2/1/15
5/1/15
1/1/15 1/1/15
11/1/14
10/1/14
9/1/14
8/1/14
6/1/14
5/1/14
12/1/14
02
12/1/14
ARM
{ FIGURE }
4/1/14
3/1/14
2/1/14
10% 12/1/13
HECM ENDORSEMENT TRENDS
UNITS CHG%
0.24%
70%
{ FIGURE }
1/1/14
Retail
TOTAL
2,062 -0.53%
7/1/14
1 2 3 4 5 6 7 8 9 10 11 12
WHOLESALE
UNITS CHG%
2.31%
4,000
RETAIL
FIXED
$1,200.0 $1,000.0
$600.0 $400.0 $200.0
12/1/15
11/1/15
10/1/15
9/1/15
8/1/15
7/1/15
6/1/15
5/1/15
11/1/14
10/1/14
9/1/14
8/1/14
7/1/14
6/1/14
5/1/14
4/1/14
3/1/14
2/1/14
1/1/14
$0 12/1/13
IN THE MILLIONS
HECM ENDORSEMENT
INITIAL PRINCIPAL LIMITS
$800.0
reversereview . com
8 TRR | 13
The Reverse Review March 2016
nrmla news BROUGHT TO YOU BY MARTY BELL
IN THE NEWS In January, Yahoo! Finance published a series of articles about reverse mortgages:
2 Seniors Explain: Why We Got a Reverse Mortgage, by Marcie Geffner, profiles a couple and a single borrower, who both explain why they got a reverse mortgage and how it has benefited them. 2U sing a Reverse Mortgage to Pay Off First Mortgage, by Polyana da Costa, explains how a reverse mortgage that is used to pay off a conventional mortgage can be a good option for some people. 2 Reverse Mortgage and Telling Your Adult Kids, by Marcie Geffner, offers advice on when to involve adult children in the reverse mortgage discussion. 2 Reverse Mortgage: Better Than Other Options?, by Don Taylor, Ph.D., weighs the pros and cons of reverse mortgages in response to a question submitted by a couple who wanted to know whether they should consider one as part of their retirement plan. 2R everse Mortgage: A Step Forward for Some Seniors?, by Donna Fuscaldo, offers general background information on reverse mortgages and advice from NRMLA President Peter Bell. 2 Should You Use a Reverse Mortgage to Buy a Home?, by Janna Herron, describes the benefits of using a reverse mortgage to purchase a new home and how the process works.
14 | TRR
O N T H E D O C K E T:
Golding to Congress: HECM Reforms Working
A POSITIVE CHANGE TO THE MMI FUND
Edward L. Golding, principal deputy assistant secretary for the Office of Housing at HUD, testified before Congress that extensive reforms to the HECM program over the past two years have had the desired effect of minimizing losses to the Mutual Mortgage Insurance Fund. “Now, with the benefit of two years of data, FHA can see that these changes appear to be having positive results,” Golding informed lawmakers on the Subcommittee on Housing and Insurance during a public hearing on the health of FHA, held February 11. In his testimony, Golding said less risky adjustable-rate loans accounted for 84 percent of HECM endorsements in 2015, that more people are withdrawing less money at closing, and that borrowers are not making large withdraws after the first 12 months but are instead preserving their equity for future use. Despite the good news, Golding cautioned that challenges remain and HUD continues to further examine how to reduce the negative effects of tax and insurance defaults.
HIGH REVERSE MORTGAGE S AT I S F A C T I O N L E V E L S A new survey of seniors who were counseled for a reverse mortgage shows that homeowners who went on to obtain a reverse mortgage rated their overall life satisfaction higher than those who didn’t. A team of researchers from the Ohio State University, led by Dr. Stephanie Moulton, interviewed more than 1,700 seniors and found that on average, reverse mortgage borrowers are significantly more satisfied with particular areas of their lives than nonborrowers, including
ACCORDING TO D R . M O U LT O N
the condition of their inhabitance, their daily life and leisure activities, family life and their present financial situation. The study also examines the primary reasons consumers considered a reverse mortgage. Covering everyday, non-health-care expenses tops the list.
HELPING OUR CLIENTS AGE IN PLACE As we age, the ability to remain active and independent requires a steady stream of services. Threequarters of Americans will need in-home care at some point in their lives. That’s according to Sherwin Sheik, owner of Sacramento, California-based Carelinx, the largest caregiver marketplace in the United States, who served as a panelist during the 2015 Annual Meeting and Expo in November. “In-home care is one of the biggest expenses in retirement. Many of these people are potential reverse mortgage clients, because Medicare only pays for 100 days of in-home care, which means people are paying out of pocket if they don’t have other forms of coverage,” he said. Sheik was among several experts who discussed the benefits of using reverse mortgages to finance aging in place at the Annual Meeting & Expo. Caregiving is becoming a more widely discussed topic and much of the conversation focuses on the need for methods to pay for it.
nrmla news AT N R M L A :
LENDER SEATS Randy Davis Dollar Bank Bethel Park, Pennsylvania
Sixteen reverse mortgage industry veterans were unanimously appointed to serve on the Independent Certification Committee for the 2016 term. A Nominating Committee Report prepared by a small subgroup of existing ICC members was circulated for ratification to all 114 Certified Reverse Mortgage Professionals.
Sue Haviland iReverse Home Loans Jarrettsville, Maryland
Subject Matter Experts Appointed to ICC
Larry Wolf Strategic Funding, LLC Marlton, New Jersey
Brett Kirkpatrick, ICC Chairman Harbor Mortgage Solutions Braintree, Massachusetts
ALTERNATE Dennis Loxton Liberty Home Equity Solutions Fort Wayne, Indiana
SERVICING SEAT Mike Gruley 1st Financial Reverse Mortgage Plymouth, Michigan Saint
ALTERNATE Burgess Kegan Retirement Funding Solutions Michaels, Maryland
COUNSELING SEAT Tony Lopes Reverse Mortgage Funding Agawam, Massachusetts
ALTERNATE Sue Brown Retired Roswell, Georgia
OPERATIONS SEATS Jane Harrington M&T Bank Buffalo, New York
Teresa Maines Homeowners Reverse Mortgage Center Hickory, North Carolina
Early registration is now open for the 2016 Eastern Regional Meeting and Finance & Investment Forum, April 4-5, at the InterContinental New York Times Square. Join us as Wall Street, Washington and the reverse mortgage community come together to discuss current market trends and issues. Be on the lookout for the opening of registration for our 2016 Western Regional Meeting, May 10-11 at the Hyatt Regency Hotel in Huntington Beach, California.
Lombard, Illinois
Valley West Corporation dba Valley West Mortgage Las Vegas, Nevada
Resolute Bank Maumee, Ohio
Silex Financial Group, Inc.
Hawthorne, New Jersey
4
EASTERN REGIONAL MEETING ON SALE
BBMC Mortgage, LLC
4
EDUCATION/TRAINING Craig Barnes Reverse Mortgage Funding New Windsor, New York
NRMLA welcomes the following new members.
4
ALTERNATE Janine Atamian Premier Title & Escrow Providence, Rhode Island
4
TITLE/ATTORNEY SEAT Karen Keating Tradition Title Bay Shore, New York
NEW MEMBERS
4
The ICC, which oversees the CRMP designation, comprises subject matter experts from a diverse set of backgrounds, such as loan origination, title/legal, operations and counseling. We had more applicants than we had seats for, and the strength of all the applicants was impressive and gratifying. We thank everyone who submitted an application.
Mario Martirano Agency for Consumer Equity Mortgages Elmsford, New York
Lakeland Bank
Oak Ridge, New Jersey NEW C R M P s Leonard (Pudge) Erskin Banc of California NA dba Reverse Mortgage Works Beverly Hills, California Cory Williams Springwater Capital Salt Lake City, Utah George Vrban PS Financial Services Saint Augustine, Florida
IF YOU’D LIKE TO JOIN US in
our effort to promote the facts about reverse
mortgages as a member of NRMLA’s Blog Squad, please email Jenny Werwa at JWERWA@DWORBELL.COM.
Jim Schwegman Liberty Home Equity Solutions Irvine, California reversereview . com
8 TRR | 15
The Reverse Review March 2016
The Leading AMC for Reverse Mortgages What makes us the best? We know reverse and follow the industries best practices for working with your seniors. P
Borrower outreach and visit preparation
P
FHA Expertise
P
Order-hold for FHA eligibility concerns
P
Direct integration with FHA Connection, Reverse Vision, and Bay Docs
P
Dedicated rebuttal and value appeal coordinators
Call today or visit us online and see why we are leaders in reverse. 888.272.1214 landmarknetwork.com
Follow us @LandmarkAMC 16 | TRR
Š 2015 Landmark Network, Inc. All rights reserved.
roundup
THIS MONTH RETIREMENT FACTS
A LOOK AT THE NEWS AND STATS AFFECTING THE MARKET GET UP-TO-DATE retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.
SE NI O R S TA TS
{
{
The best places to retire
H O ME EQUIT Y
RATIO OF ELDERLY TO WORKINGAGE POPULATION TO NEARLY DOUBLE FROM 1990-2050
AMERICANS ARE USING THEIR EQUITY.
Wallethub survey lists the best states for retirement based on health care, quality of life and affordability.
-U.S. Census Bureau
89.2
87.9
E L D E R LY YOUTH
70.5
68.4
21.3
37.6
22.3
1. FLORIDA
Americans accessed more of their home equity in 2015 since the recession. According to Black Knight Financial Services, people tapped $64 billion in equity through cash-out refinances, the highest dollar amount over a 12-month period since 2008-2009.
37.9
49.2
46.1
50.3
51.3
1990
2012
2030
2050
DEFINED BENEFIT
MON EY M A TTER S
2. WYOMING
3. SOUTH DAKOTA
4. SOUTH CAROLINA
RETIREMENT ACCOUNT
Without pensions, workers are saving more in employee-based retirement accounts. 45% 40%
5. COLORADO
35% 30% 25% 20% 15% 10% 5% 0% 1930-39
1940-49
1950-59
1960-69
1970-79
1980-89
1990-99 reversereview . com
8 TRR | 17
The Reverse Review March 2016
MARCH
2016
MY FIRST CAR WAS a tornado red Volkswagen Cabriolet.
TO READ MORE ONLINE VISIT U S @ R E V E R S E R E V I E W. C O M
THE
HOT SEAT
Sales All-Stars IN THIS SPECIAL SERIES, WE HONOR OUTSTANDING HECM ORIGINATORS AT
LEADING LENDER COMPANIES. WE GET THE SCOOP ON THEIR PERSONAL FAVORITES AND LEARN THE SECRETS TO THEIR PROFESSIONAL SUCCESS.
Aline
R
Simon
HECM specialist - NMLS #962490
18 | TRR
>
I never miss an
episode of Dateline,
FUcNts
WORST PURCHASE EVER
fa
Survivor or The Big Bang Theory. >
>
purchase I’ve ever
I can’t live without
made was a food
love, my husband
dehydrator.
and two kids, raw cashews, laughter,
>
sleep, concealer,
PERSONAL >
Something nobody knows about me is I met my husband in court.
>
views of the wide-open country. Ahh…
I will accomplish
>
up early enough.
My parents taught
>
deathly afraid of
more important than
look at him!)
>
My favorite book is Anna Karenina
Time,” with dance moves and all.
enthralling, inspiring
both my Labradors,
by Leo Tolstoy—it’s
My favorite movie is Forrest Gump. The message is powerful: No matter what, if you set your mind to do something,
The best purchase
I’ve ever made was
My most embarrassing moment was
singing karaoke to “Hit Me Baby One More
heights.
being right! >
I’ve never been skydiving. I am
me that being kind is
My celebrity crush is Derek Jeter. (Well, just
and ultimately breaks your
Mel and Roy. >
For success I have sacrificed time. I’ve
heart.
learned it’s not about having enough time,
anything can be accomplished!
but about using your time wisely.
PROFESSIONAL >
>
The best advice I could
can about your business.
give a fellow HECM
trusted expert.
listener!
potential clients
by empathizing and sympathizing. >
To be successful in selling
ABOUT ALINE
is powerful. Become the
be to be a good
I try to connect with
Simon has been in the reverse mortgage industry since 1998.
Stay informed; knowledge
originator would
>
My biggest sales tip is to learn everything you
>
>
I find my work rewarding people a new lease on life. It
you can see how impactful
helps their ideas of what they
this financial tool can be for
thought retirement life would
our seniors. It is a complete
be come to fruition.
retirement game-changer for >
The most challenging
HECM loans you need to
part of my job is dispelling
your competitors in a positive
preconceptions that exist out
differentiate yourself from way.
The MOST IMPORTANT thing seniors should understand about reverse mortgages is that it is a safe and secure financial tool that allows one to convert a portion of their home value into tax-free money! It’s a solution to help seniors achieve their short- and longterm economic goals.
because it genuinely gives
I love my job because
the majority of them.
My iPod go-to is rather eclectic: Coldplay, Michael Jackson, U2, Alicia Keys, Ed Sheeran, Adele, Queen, Rihanna, Taylor Swift, Imagine Dragons…
something if I just get
No idea why.
heaven!
>
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>
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>
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shopping. >
My favorite time of the day is
my iPhone 6, and
I FOUND LOVE... IN THE COURTROOM!
The worst
all the misconceptions and there.
KEEP AN EYE OUT FOR MORE OF OUR S A L E S A L L - S TA R S IN TRR’S HOT S E A T. D I S C O V E R W H AT M A K E S THESE LEADING O R I G I N AT O R S SUCCESSFUL IN THEIR FIELD.
reversereview . com
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The Reverse Review March 2016
ORIGINATING
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CONSIDER
RR
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Beyond the Pitch By Tabatha Addison
Tips for effectively engaging people in a conversation about your business
If you ask someone what it is they do for a living, and they say they are a financial planner, the conversation might just end there. Most people have a general understanding of what a financial planner does and what their work entails. But when it comes to reverse mortgages, few people have a true understanding about the loan. Even worse, many people have negative misconceptions about the product and its value. So how do we explain what we do in more detail without using terminology that may cause a person to lose interest? And further, how is that possible in just over a minute? Let’s assume that the individual in the elevator is a complete stranger (as opposed to someone of significant importantance), and that you know nothing about them. What could you say that would capture their attention regardless of who they were or what their current situation was that would motivate them to want to engage in conversation?
The “Elevator Pitch” is a short summary that quickly and simply defines a product, service or organization and its value proposition. Webster’s English Dictionary defines it as “a short description of a product or business idea, especially one given to a possible investor.” The term was coined by Ilene Rosenzweig and Michael Caruso (while he was editor at Vanity Fair) and is derived from a scenario in which one finds themselves in an unexpected meeting with an important contact in an elevator. If the conversation inside the elevator in those few minutes is interesting and impactful, the conversation will either continue after the elevator ride, or end with an exchange of business cards or a scheduled meeting. Most professionals have experiened this situation in some form. Sometimes our “elevator” is a restaurant, the waiting room of a doctor’s office, a cocktail party or a grocery store line. Wherever it is, it can be nervewracking for many to clearly summarize their services in about 90 seconds. And if you’re trying to explain the potential benefits of a reverse mortgage… well, that’s a tall order. 20 | TRR
There is no clear answer. Elevator pitches, once promotedly fervently as essential among business advisors in the 80s, have a tendency to pigeonhole you. It is a presentation rather than a conversation, and as a result, it prevents you from learning about your contact to help you establish a connection. In the reverse mortgage business, where the focus is on advising rather than selling, this is particularly important. So, my advice is to focus on a response rather than a pitch. Craft a compelling way to describe your work when asked about it, and do so in a way that encourages discussion. To do this, first create an opening hook. Consider something catchier than simply saying, “I sell reverse mortgages.” Something like, “I’m a solutions consultant” would be more
ORIGINATING
“Remember to pause to give your contact the opportunity to ask questions or respond to your information. Listen carefully, as they may reveal things that allow you to alter your discussion to better suit their perspective.” attention-grabbing. This kind of opening hook might prompt your contact to ask what kind of solutions you offer, opening the door to further questions, which is your chance to engage the contact on a deeper level.
S E N D Y O U R N E W S T O J E S S I C A @ R E V E R S E R E V I E W. C O M
g
Opening hook
g
olution you offer S to your target market
g
nique value U proposition you provide
UNDERWRITING
When you master a clear and concise description of your work, you will be properly prepared to present your services to any passing contact, effectively building a business network everywhere you go. n
Here’s a compelling way to describe your work and engage your contact in conversation:
MARKETING
While this may seem like a lot of information to pack into a short conversation, it can be done if your language is succinct and your key points are refined through practice. Remember to pause to give your contact the opportunity to ask questions or respond to your information. Listen carefully, as they may reveal things that allow you to alter your discussion to better suit their perspective.
ACCORDING TO TABATHA
ORIGINATING
Then, offer a simple explanation as to how reverses can help solve this problem for a specific type of person. This is where you describe your target audience—who exactly stands to benefit from your services (i.e., a person over 62 who has equity in their homes, wishes to age in place and is not concerned with leaving their house to their heirs). Offer a practiced, concise definition of what a reverse mortgage truly is (stressing that the bank does not retain title of the home). Pause to answer any questions they may have. End your response with an emphasis on the value your solution can
provide millions of house-rich, cash-poor Americans facing retirement.
R E V E R S E R E V I E W. C O M HMBS
THE
SPOTLIGHT
REVERSE review
there is nothing more exciting than moving and shaking The Reverse Review wants your company news! Be a part of our new Movers & Shakers column, where you can read about the latest company initiatives, programs, hires, acquisitions and more. Send us your company’s press releases or email us news of your latest venture, and we’ll consider printing it in the next issue.
NEW HIRES
DEVELOPMENTS
ACQUISITIONS
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The Reverse Review March 2016
MARKETING
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ASSESS
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The Four Ps of Marketing By Jason McNamara
How Jerry McCarthy’s monumental marketing approach can help you examine your business and elevate your strategy If you ask someone to name their favorite Michigan State University celebrities, you might hear the names Earvin “Magic” Johnson, Kirk Gibson, Steve Garvey, James Caan, or possibly Draymond Green, if you ask my favorite Golden State Warriors fan Al Benedetti.
In 1960, Jerry McCarthy authored the book Basic Marketing: A Marketing Strategy Planning Approach, which introduced the “Four Ps of marketing”: product, price, place and promotion, commonly referred to as the “marketing mix.” That book, now in its 19th edition, has since been distributed in classrooms worldwide.
But one name you probably won’t hear is Jerry McCarthy. For decades, E. Jerome McCarthy was a distinguished MSU marketing professor who, in my opinion, left a legacy more significant than anyone else.
Jerry McCarthy passed away peacefully at age 87 in his East Lansing home on December 3, 2015. McCarthy is survived by his eight children and Joanne, his loving wife of 66 years, who served as lead copywriter
and editor of his legacy masterpiece. McCarthy lived his life with passion and purpose; he created a career path doing work he loved and made bold innovations to strengthen his field. McCarthy worked hard and played hard, especially with his family. He was a teacher to all of us in every way. McCarthy saw marketing from a different perspective than most. He believed the Four Ps could be applied to much larger economic and social issues. Almost 50 years ago, he wrote some essays that were recently published by Notre Dame in a book
THE FOUR Ps OF MARKETING PRODUCT
PRICE
PROMOTION
PLACE
“In 1960, Jerry McCarthy authored the book Basic Marketing: A Marketing Strategy Planning Approach, which introduced the “Four Ps of marketing”: product, price, place and promotion, commonly referred to as the “marketing mix.” That book, now in its 19th edition, has since been distributed in classrooms worldwide.” 22 | TRR
called Marketing and the Common Good. In the book, McCarthy writes, “There is little question that a basic dissatisfaction with business is showing itself in the United States today. This attitude is especially strong among the young, who consider the “American Dream” of earlier decades a sort of nightmarish joke. They speak disdainfully of the corporate ‘establishment,’ many identify with the antibusiness and ‘consumerism’ movement.” The book continues, talking about “Washington Gridlock” and how that creates opportunity for private business to lead. It describes the macromicro economic dilemma our market-driven economy creates where an individual’s seemingly “good” action may or may not benefit the macro-level system and consumer, and how important it is that business and policy leaders understand both the macro- and micro-level consequences if we are to be “socially responsible.” McCarthy provides a list of 16 common antibusiness gripes, among them: Advertising creates false needs and manipulates the consumer. This was written 50 years ago, but reads like one of today’s headlines! Who knew that being socially responsible was retro? In short, McCarthy utilizes the Four Ps as a framework for how socially responsible, marketdriven economies operate, or should operate. I look at our industry and think how McCarthy would use the Four Ps to help us solve our problems. What would he tell us? What questions would he ask? I examined his book to glean some insight.
ONE PRODUCT: A tangible good
or an intangible service that seems to meet a specific customer need or demand
TWO PRICE: The actual amount the end user is expected to pay for a product
THREE PROMOTION: Marketing
communication strategies and techniques, which may include advertising, sales promotions, special offers and public relations
FOUR PLACE: How the product will be provided to the customer (placement) COMPLAINT CONTACTS
Whatever channel is used, it is necessary for it to be suitable for the product, the price and the end user to whom it is being marketed. It is important to differentiate between marketing and promotion. Promotion is just the communication aspect of the entire marketing function.
Distribution is a key element of placement. A placement strategy helps assess what channel is the most suited to a product. How a product is accessed by the end user also needs to complement the rest of the product strategy.
EXAMINE:
EXAMINE:
EXAMINE:
EXAMINE:
l What does the customer want from a reverse mortgage?
l What is the value of a reverse mortgage to the borrower?
l Where do borrowers look for your product or service?
l Are there any key features the loan is missing?
l Are there established price points for products or services in this area?
l Where and when can you get across your marketing messages to your target market?
l How and where will the borrower use it?
l Is the customer price sensitive? Will a small decrease in price gain you extra market share?
l How will your price compare with your competitors?
l How do your competitors do their promotions? And how does that influence your choice of promotional activity?
l What do your competitors do, and how can you learn from that and/
or differentiate?
Throughout my career, I’ve used McCarthy’s Four Ps as a business framework. Our adaptation of McCarthy’s Ps has helped us create Celink’s Five Ps of Reverse Mortgage Servicing: People, Platform, Process, Partners and Passion. Thank you, Jerry McCarthy. Your legacy lives on in Lansing and all over the world. n reversereview . com
8 TRR | 23
SPOTLIGHT
l How is it different from other retirement solutions?
l When is the best time to promote? Is there seasonality in the market? Are there any wider environmental issues that suggest or dictate the timing of your market launch, or the timing of subsequent promotions?
l Do you need to use a sales force? Or attend trade fairs? Or make online submissions?
HMBS
l How is it being branded?
l What discounts should be offered to trade customers, or to other specific segments of your market?
l Will you reach your audience by advertising online, in the press, on TV, on the radio or on billboards? Would it be effective to use a direct marketing mailshot? Would a public relations campaign be useful?
l How can you access the right distribution channels?
UNDERWRITING
l How will the borrower and their heirs experience it?
MARKETING
How a product is priced will directly affect how it sells. This is linked to what the perceived value of the product is to the customer rather than an objective fee for the product. If a product is priced higher or lower than its perceived value, then it will not sell. Price may also be affected by distribution plans, value chain costs, markups and rival products.
ORIGINATING
According to McCarthy, it is key to understand the problems that a product is attempting to solve. The benefits offered by the product and all its features need to be understood and the unique selling proposition of the product needs to be studied. In addition, the potential buyers of the product need to be identified and understood.
The Reverse Review March 2016
UNDERWRITING
LEARN
Living Trusts and the HECM By Britany Luth
How these agreements impact the loan process
Today, lenders are seeing more and more HECM borrowers with property held in a revocable or irrevocable living trust. Trusts are created for a number of reasons, but the most notable benefit is that they give borrowers the ability to avoid probate and give a faster distribution of assets to their heirs. However, for borrowers applying for a HECM loan on a property held in a living trust, there are additional considerations to be aware of and requirements that must be met. Basic Considerations FHA will insure HECM loans on property held in the name of a living trust as long as some key guidelines are met. Trust agreement: The trust must be valid and enforceable, and the lender must receive a complete copy of the agreement with all amendments. The trust may be revocable or irrevocable; however, irrevocable trusts come with additional considerations that must be reviewed, such as ensuring the borrower has unrestrained access to HECM proceeds, the proceeds are distributed in accordance with trust requirements, and the trust allows for the borrower’s debts to be repaid. Due to the many different types of trusts and individual state requirements, many lenders require a trust attorney to do a full review of the trust to ensure all FHA requirements are met before closing the loan. 24 | TRR
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Beneficiaries: The primary beneficiary receives the benefit of the trust assets during his or her lifetime. All primary beneficiaries of the trust must be eligible HECM borrowers at the time the loan is originated and until the loan is satisfied, meaning they must occupy the property as their primary residence, and no beneficiaries may be added or removed from the trust. The beneficiary must sign all loan documents. Contingent beneficiaries who receive benefits of the trust only after the primary beneficiary is deceased do not have to be HECM borrowers. Trustees: The trustee has a fiduciary duty to manage the trust assets for the beneficiary in accordance with the terms of the trust. The trustee must sign
ACCORDING TO BRITANY
certain loan documents, including the mortgage, and may be required to sign other loan documents, such as the note. If the trust names multiple trustees, all trustees must sign, unless the trust specifically allows each trustee to act individually on behalf of the trust. The trustee may be the borrower, or it may be another person elected by the borrower in the trust agreement. Non-Borrowing Spouses We are often asked if non-borrowing spouses can be beneficiaries of a trust agreement. Since the non-borrowing spouse is not an eligible HECM borrower, they may not be a primary beneficiary of a trust, if the property will be held in trust. The spouse may be a contingent beneficiary receiving
“Trusts are created for a number of reasons, but the most notable benefit is that they give borrowers the ability to avoid probate and give a faster distribution of assets to their heirs.�
UNDERWRITING benefits of the trust upon the borrower’s death. The borrower must consult with their attorney to decide if they want to revise their trust to include the spouse as a contingent beneficiary, remove their property from the trust and close outside of the trust, or cease proceeding with the HECM loan. Use of a Trust and Power of Attorney
Other Considerations
In summary, trusts can be an important estate planning tool for borrowers. However, if you are not familiar with the different nuances and requirements, it may be difficult to navigate a loan closing in a trust. Learning these nuances will lead to a smoother loan closing for all parties involved. n
UNDERWRITING
Be a part of our conversations or see who is in our network. Join The Reverse Review group on LinkedIn or follow us on Facebook.
MARKETING
Closing in the Name of Two Trusts: In some instances, a property may be vested in two trusts (one for each borrower). For example, a husband and wife may each have their own trust document. This is acceptable if each borrower is the sole contingent beneficiary of the other borrower’s trust and the house is vested into both trusts. This ensures that upon the death of one spouse, the other receives full rights to the property while they are still living and occupying the property.
Transfer in to or out of Trust After Closing: Borrowers may need to deed in to or out of trust after loan closing. FHA does allow a borrower to transfer the property into a trust after closing if the lender ensures that the trust meets all requirements that would have applied when the loan was closed. The property may be transferred out of the trust or the trust terminated during the life of the loan, as long as one or more of the HECM borrowers continues to occupy the property as a primary residence and retain title in fee simple or leasehold interest.
ORIGINATING
Often, a borrower with his or her property held in trust will also utilize a Power of Attorney (POA) due to mental or physical incapacity. In this case, there are additional considerations. Both the trust and the POA may have requirements on how to determine if the borrower is mentally or physically incapable of signing. For example, for mentally incompetent borrowers, letters from two physicians indicating mental incompetency may be required. These documents should be carefully reviewed to ensure all requirements are met.
Since the trust holds legal title and the beneficiary holds equitable title, two signatures are required on some documents. A POA cannot sign on behalf of a trustee, but may sign on behalf of the borrower as beneficiary of the trust. Therefore, where the borrower is the beneficiary and trustee of the trust, the POA will sign on behalf of the borrower as beneficiary; however, a successor trustee appointed in the trust document will sign as successor trustee.
HMBS SPOTLIGHT
reversereview . com
8 TRR | 25
WE KNOCK OUT THE
The Reverse Review March 2016
COMPETITION
Experience | Excellence | Commitment | Pride
PRC has been FIRST IN REVERSE 15 years running. We are proud to be the first national title and Settlement Company to specialize in reverse mortgages. Our dedicated team of professionals offers the experience and knowledge to smoothly close reverse transactions—correctly. Having closed more than 150,000 reverse mortgage loans, PRC understands the importance of comprehending all HUD and lender guidelines.
TOLL FREE: (800) 542-4113 | www.PRClosings.com 26 | TRR
KNOW
HMBS
Rough Waters in the Secondary Market By Darren Stumberger
So far, 2016 is off to a tumultuous start.
MARKETING
“Near term, I expect spreads to leak wider in interest rate rallies driven by negative global economic shocks. We’ve also seen dealer liquidity dissipate, which should pressure spreads in the intermediate term.”
Near term, I expect spreads to leak wider in interest rate rallies driven by negative global economic shocks. We’ve also seen dealer liquidity dissipate, which should pressure spreads in the
DID YOU KNOW? There are now 40 million senior citizens, but that number is expected to increase to 89 million by 2050. Source: USA Today
Prepayment speeds are supposed to benefit from the NRMLA ethical guidance regarding refinances. We’ve seen a very small impact thus far, though we hope to see a more meaningful impact in the February and March numbers. On the heels of the August 2014 announcement that PLF factors were being revised higher, prepayment speeds rocketed to levels never before seen in the history of the HECM program, causing irreversible damage to many investors in the program and broker dealers alike. While the NRMLA announcement was 12 to 18 months too late, let’s hope it works and originators adhere to it. n reversereview . com
8 TRR | 27
SPOTLIGHT
Fixed-rate HMBS (5.05 percent gross rate) is trading in the 113 dollar price area after widening 25 bps (in spread) during the latest interest rally down to 1.65 percent on the 10 year. Twelvemonth indexed Libor, which comprises the largest share (85-plus percent) of originations, trades just shy of 110 dollar price for a 2.75 percent gross margin (85 percent PLU) and one-month Libor around 109 dollar price for a 2.75 percent gross margin (85 percent PLU).
intermediate term. All that being said, most if not all floating-rate HMBS and a large percentage of fixed-rate HMBS are being structured into HREMICs, so end-investor demand for the strips and interest-only classes will be another primary driver of spread directionality amid the atmosphere of chaos in the backdrop.
HMBS
surfacing, we will see more of the same (brief periods of euphoria before more plunges into the inevitable death spiral).
UNDERWRITING
So, while the Federal Reserve raised interest rates 25 basis points in December amid a general calm in the markets, 2016 has been anything but calm. Major stock indices are off 10 percent, with large U.S. banks off anywhere from 15-30 percent (European banks are off 30-40 percent). Financial markets are in a major stage of tumult and upheaval as the market awaits more signaling and messaging from central banks on additional policy accommodation. I personally think the central banks are out of ammunition, and until there are fiscal policy changes and pro-economic-growth candidates
ORIGINATING
After several weeks of tightening spreads in early 2016, the HMBS sector is widening into midFebruary as interest rates plummet and investors move back to the sidelines. Global macro themes, all negative, are putting pressure on spreads and dealer balance sheets. Oil, China, the lack of meaningful economic growth (everywhere), and the Federal Reserve’s focus on normalizing interest rates are among the issues plaguing the market. There’s talk of the United States entering—if it’s not already in—a recession, and Japan recently moved toward NIRP (Negative Interest Rate Policy). Japanese 10year government bonds currently yield zero, and German 10-year government bonds currently yield .23 percent.
The Reverse Review March 2016
SPOTLIGHT IN THIS MONTH’S EDITION
RR
SEASONED ORIGINATORS WEIGH IN ON THE BENEFITS OF TALKING TO A BORROWER’S CHILDREN.
march 2016
Including the Kids Why it’s beneficial to engage the children of prospective borrowers.
WANT TO SEE MORE ARTICLES LIKE THIS?
See them at reversereview.com.
- By Jessica Guerin
T
AKING A REVERSE MORTGAGE IS A WEIGHTY DECISION,
one that requires careful thought and consideration. To help assess the right course of action, some seniors opt to engage their children in the conversation. While some might assume that adding more people to the discussion can complicate matters, many HECM originators find that including a borrower’s children is usually a beneficial move. “Almost all the time, it’s much better to have the children involved, no matter what the outcome is,” says Mike Gruley of 1st Financial Reverse Mortgages. “The children may give us more insight into the borrower’s motivations for taking the reverse mortgage. We can try to approach the borrower from a different standpoint and maybe protect them better by knowing the real story.” Gruley says it’s also helpful to combat misinformation right off the bat. “By personally participating in conversations between the parents and the child, we 28 | TRR
can minimize the misinformation that exists.” Janice Cohen of Retirement Funding Solutions agrees that presenting the facts from the start makes the process smoother for all parties involved. “Personally, I find that if you’re proactive instead of reactive, you’re much better off,” she says. “It all comes back to my desire not to be blindsided at the last minute, or to have a family member feel blindsided. I would rather have the chance to impart accurate information, because a lot of people do have questions as the heirs, and they have a right to know the correct answers.” Still, a good number of prospective borrowers don’t ask their children to participate. “A large percentage of seniors are accustomed to making financial decisions on their own,” says Don Graves of Retirement Funding Solutions. “I always ask and invite, but I would say that less than 50 percent want to have their family present to help make these financial decisions.”
Graves says he is careful about suggesting that clients include their children. “If I suggest it, that can be offensive. That can backfire and make it seem like I don’t think they can make their own decisions. There’s a strong sense of dignity about financial independence.” Cohen says she is also careful about asking clients to include their children, but that she finds it to be particularly helpful for some clients, especially recently widowed women who might not be accustomed to making financial decisions on their own. “I think that it’s reassuring to them to talk with their children,” she says. “I try not to suggest it in a way that would indicate they shouldn’t trust their own judgment. I’ll say, ‘You know, this is a big decision and it might be good for you to have a family conversation about it.’ I’ll offer my presence at that family meeting or I offer to be available by phone while they’re talking to their children.”
SPOTLIGHT “I won’t make that suggestion, though, if it’s a married couple. But sometimes they’ll say, ‘My son is a CPA,’ or, ‘My son is lawyer,’ and I welcome that opportunity and make the same offer to be present or to be available by phone,” says Cohen, adding that it’s most ideal when the inquiry is made by the child on their parent’s behalf.
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SPOTLIGHT
reversereview . com
HMBS
Gruley says it’s important to discuss why the borrower is seeking a loan, and that bringing the children into this conversation can be helpful. “When we meet with a child advisor, we get to gauge their motivation,” he says. “If we
UNDERWRITING
“I always say in my 16 years I’ve sat with 5,500 people and about 2,300 people have gone forward to do a reverse mortgage, and all that tells you is that as good as reverse mortgages are for many, they’re not always the right thing to do. Together we can determine what the most appropriate steps should be for your mom and dad,” Graves says. “About as many people say ‘no’ or ‘not yet’ to me as they say ‘I will do it.’ That’s fine, because we have integrity in the process.”
MARKETING
“Once we determine what the retirement income pain points are, then I ask their opinion of reverse mortgages,” says Graves. “We’ll discuss the retirement income goals Mom is trying to achieve, and the alternatives. What are the ways Mom could meet these retirement income needs apart from a reverse mortgage? Can she move? Can she move in with you? Would you be willing to send her $250 a month to help her through these next few years with this mortgage payment? Can she apply for welfare, food stamps, take a roommate, go back to work? I frame it in the context of: What are we trying to accomplish? If I’m just selling the product, then I’m just a salesperson, and that’s not what I am. I’m a retirement income consultant.”
ORIGINATING
When engaging the prospective borrower’s children in loan discussions, most originators agree that it’s important to first address their parent’s financial issues before explaining the details of the loan.
Cohen says she also reviews alternatives get the distinct impression that the child when confronted with skepticism. “I wants his parent to do this for reasons try to investigate with them what the that are to his benefit (and not to his alternatives are, though that would parent’s), we can address it. We can’t tell generally involve assistance on their people what to do, but we can certainly part… Usually that advise them in a way will help them come that might mitigate to the conclusion some of the risks of that the reverse that situation for the mortgage is the best borrower. It helps us way for their parents act in an advocacy ACCORDING TO to become financially role.” MIKE GRULEY independent again. “Talking with the children can “We want to make Rather than telling, I sometimes give us information sure that the like to ask questions. that borrowers either leave motivations for the That helps people out or don’t think is any of our borrower and the answer with their business, but it’s in their best children involved own voice and come interest for us to know so we seem to be aligned,” to the conclusion can advise them properly.” Gruley says. “We themselves… You want to establish always want to that this is a good present the fact that solution for the borrower, and since the there isn’t just one option and this may or children have been invited in, establish may not be right for your parents.” that they understand and agree that this Gruley says if children are opposed to is a good solution so that everybody is their parents taking the loan, it is likely on the same page. That’s what we would for one of two reasons. “One: They don’t hope to achieve.” understand the program and so they Cohen says she recommends that the think it’s bad; or two: They understand children take part in counseling. “I always the program and they don’t think it’s a make the suggestion to a senior that if good fit for their parent. Our presumption he is discussing the prospect of doing is, if they understand the product and a reverse with his children, that they be give us a good reason why Mom and on the counseling call,” she says. “I love Dad shouldn’t be doing it, then we think to encourage that. I tell the children that it’s valid to have that discussion with the it’s important because they are going borrower.” to be getting unbiased information. The Gruley says the children can sometimes counselor has no interest in the borrower bring facts to the table they might doing a reverse mortgage; they just want otherwise not know. “Talking with to answer questions, make disclosures, the children can sometimes give us get the facts out.” information that borrowers either leave Inevitably, there are always a few out or don’t think is any of our business, skeptics. But some say a dose of doubt but it’s in their best interest for us to know can be healthy. “I think the family should so we can advise them properly.” be skeptical and concerned. I absolutely Graves echoes this idea. “My goal is not believe that. That’s a good position to to convince them that a reverse mortgage take, particularly if you’re dealing with is the right thing, because I honestly someone over the phone.” don’t know if it is. My goal is to have Graves says it’s important to walk a conversation. The reverse mortgage skeptical family members through the doesn’t need to be the conclusion, but process with patience. “If they seem to let’s make it part of the conversation. be resistant, I’ll say, ‘I understand. Let’s And together, once we’ve looked at the go back through. Is there an alternative alternatives and had this conversation, I’ve missed?’” they’ll tell me.” n
The Reverse Review March 2016
THE
FACTS ABOUT + LONG-TERM CARE
What you need to know about funding this daunting expense By Jessica Guerin
Let’s face it: Getting old is a fact of life. For most, the time will come when we must slow down. We will have to assume a more careful pace, use extra caution when getting around, and accept help when we may not want it.
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While this may be difficult for us to envision, the fact is that most Americans will need some sort of care in their advanced age. And this care, as you might predict, can be expensive. When establishing a plan for the future, it is essential that we consider the potential cost of the care we may need in our old age—and that we explore ways to fund those expenses.
completing daily living activities—such as dressing, bathing or eating—for a period longer than 100 days. People in need of such care typically choose between moving to a nursing home or an assisted living facility and arranging for a family member or aide to provide in-home care.
Approximately 70 percent of people now turning 65 will need long-term care at some point in their lives. Despite this overwhelming statistic, a recent survey revealed that only 22 percent of respondents believe they will actually need such care. In fact, less than one-third of Americans over 50 have begun to save for this expense. Even those who are planning for their care are underestimating the cost. According to a survey by Lincoln Financial Group, 73 percent of respondents said that they had not saved enough. Even those respondents who worked with a financial planner were unprepared, with 40 percent claiming they never even discussed long-term care planning with their advisor. News articles and financial experts extol the need to prepare for this probable expense—which can easily exceed hundreds of thousands of dollars—but their call remains largely unheeded. So why are most Americans so ill-prepared? Wade Pfau, professor of retirement income at The
American College and a well-known retirement research expert, says it could be blind optimism, or simply something people don’t want to think about. “It’s a very uncertain expense,” Pfau says. “People don’t want to think about losing their independence and they may be confident that it’s something that’s not going to happen to them.” Joe Caldwell, director of long-term services and supports policy at the National Council on Aging, says he thinks most people are uninformed about their options when it comes to funding long-term care. “There’s definitely a need for more public education,” he says. “There’s a lack of awareness about long-term care and how it’s funded. Surveys show that people assume that Medicare or private insurance will cover it, and they don’t realize that’s untrue until they reach a point where they need it.”
FACILITY LIVING VERSUS IN-HOME CARE Long-term care refers to the need for assistance
According to the Center for Retirement Research at Boston College, 44 percent of men and 58 percent of women over age 65 will require nursing home care at some point in their advanced age. Still, inhome care appears to be the more popular route, with more than 70 percent of seniors opting to enlist the help of a family member. In-home care with the assistance of a family member typically lasts about two years, with most caregivers providing an average of 20 of assistance a week. Surveys indicate that family members are often saddled with extra expenses to provide this care, with nearly half reporting that they spending an average of $5,000 a year out-of-pocket to help their loved one.
LONG-TERM CARE 70% of Americans 65+ will require long-term care 2 in 10 g Nearly Americans 70+ say
they cannot accomplish daily tasks without assistance from caregivers or community resources, or find it difficult to do so.
Women will need care longer than men.
7.3 yrs women
THE COST OF CARE There are various methods one can use to fund the costs of long-term care, including the purchase of long-term care insurance, Medicaid, assistance from family and self-funding through savings, the liquidation of personal assets or the use of a reverse mortgage. 8
20%
ARE YOU PREPARED?
THE FACTS ABOUT
2.2 yrs men
of today’s retirees will require care for more than five years.
Less than one-third of Americans over 50 have begun to save for long-term care.
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“It’s a very uncertain expense. People don’t want to think about losing their independence and they may be confident that it’s something that’s not going to happen to them.”
Average nursing home stay Women: 2.6 years Men: 2.3 years -Genworth Financial 2015 Cost of Care Survey
The value of each option is different for everyone, but it’s essential that all possibilities be considered when putting a plan in place to fund the expense of a person’s needs as they age. The potential cost of long-term care is huge and continues to increase year over year. Some attribute this to the fact that even though more facilities have opened, the demand continues to increase. “Generally, long-term care costs increase faster than inflation, and I would expect that to continue due to the demographics,” Pfau says. “There’s going to be more need for care and there’s going to be fewer people who can provide that care.” Genworth Financial, a large provider of long-term care insurance, publishes an annual Cost of Care Survey that sheds light on the expenses one can expect. With an average of $45,750 a year for a home health aide to $80,300 a year for a shared room in a nursing home, the numbers are staggering.
LONG-TERM CARE INSURANCE To help fund the expense, some purchase long-term care insurance. But
this option is not without its drawbacks. Some people may not qualify due to existing health conditions, and there is a risk that premiums could rise, the cost of care would exceed the plan’s benefits, or that certain expenses would not be covered. Pfau says the industry’s tarnished reputation doesn’t help matters. “For a long time, there was turmoil in the longterm care insurance industry, and it kind of had a bad reputation to deal with,” Pfau says, adding that some insurance providers increased premiums and reduced benefits on their policyholders. “Unfortunately, a lot of people dropped their coverage shortly before they actually would be able to use it.” As a result, Pfau says most people don’t pursue this option. “It’s not all that common. Probably only about 10 percent of the population has long-term care insurance.” Caldwell says the expense is a major deterrent. “Long-term care insurance is really not affordable for most people, especially middle-class people who are trying to save for retirement. The average premium for long-term care insurance is about $2,200 a year, so that’s a pretty significant cost. So I think affordability is an issue for people.” Complexity is another issue, Caldwell says. “Even if people want to buy it, it’s really complicated to understand. People looking to buy a policy can get overwhelmed; they don’t know what to believe and what to look for. We need to simplify the market so people can understand what they are buying a little bit more.”
MEDICAID Medicaid is another source of funding, but it too comes with drawbacks. While it might be the most widely used option for funding long-term care, Medicaid requires its recipients to be nearly destitute to qualify, making it a true option of last resort. “To get on Medicaid, you basically have to have divested pretty much all of your assets, except for the home if you’re living in it. You have to have assets worth less than about $2,000,” Caldwell says, adding that more people will apply for Medicaid in the coming decades, which will put a significant drain on state budgets that fund the program. “I think it’s going to be harder and harder to get Medicaid services.” The quality of care for Medicaid recipients is also a concern for some. Caldwell points out that home- and community-based services can be difficult for Medicaid recipients to receive. “They are optional in states, so sometimes there are waiting lists,” he says. “Even if you qualify for Medicaid, it’s really to get home- and communitybased services.” Pfau points out that Medicaid plans pay less for care services, which can cause a disparity in quality between those on Medicaid and those who self-fund. “I really worry about the quality of Medicaid services. People who can pay for their own care are probably going to receive much better care than people who are forced onto Medicaid.”
“There’s definitely a need for more public education. There’s a lack of awareness about long-term care and how it’s funded. Surveys show that people assume that Medicare or private insurance will cover it, and they don’t realize that’s untrue until they reach a point where they need it.” -Joe Caldwell
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SELF-FUNDING AND REVERSE MORTGAGES Finally, self-funding is another potential solution for some. This option requires an individual to have substantial savings or divestible assets, or financial assistance from family. For some, a reverse mortgage could be a smart solution by allowing borrowers to establish a line of credit that they could draw upon when needed to fund care expenses. Over time, the unused line of credit will increase, and borrowers will only accumulate interest in what they have used. Pfau says this could be a great option for some. “Reverse mortgages are interesting because the line of credit can provide that sort of contingency cushion that could be used to fund long-term care expenses. It’s almost like a form of insurance to have that growing line of credit that would be available for something like long-term care and that can help support in-home care and avoid moving to a nursing home,” he says. Pfau also says a reverse mortgage’s ability to help borrowers age in place is a major bonus. “It can help you receive care in the home and can reduce the need to have to move to a nursing home or some other form of institutional living. A reverse mortgage could also fund home renovations that make it easier to stay in the home longer,” he says. “It’s definitely worth thinking about for people moving into retirement.” Caldwell also sees the potential. “It is one of the biggest assets seniors have, and tapping into that equity to be able to use your home to stay at home could definitely be an option.” Despite the obvious benefits, many people—consumers and financial professionals alike—are unaware or unwilling to consider reverse mortgages. Pfau notices this resistance, but says he expects things to change down the road.
LONG-TERM CARE
2015 MEDIAN COST PER YEAR IN THE U.S.
$91,250
$80,300
Private room in a nursing home
Semi-private room in a nursing home
$44,616
$45,760
Homemaker services
Home health aide services
$43,200
$17,904
Assisted living facility
Adult day health care
“It seems like there’s so much inertia. People who did their due diligence 10 or 15 years ago are very slow to revisit their past positions,” he says. “But the media is increasingly reporting positively about reverse mortgages, so there may be more clients asking their advisors about it. Slowly but surely, advisors will get updated knowledge about how the reverse mortgage world has changed.” “By requiring a financial assessment and updating the rules about non-borrowing spouses, the government has been doing a lot to reduce some of the concerns that existed about reverse mortgages in the past. From the perspective of the financial planning profession, over the last couple of years there’s been an increasing number of research articles showing how integrating reverse mortgages into a responsible strategy can really improve retirement incomes,” Pfau says. “I’m predicting that it’s going to be the next hot area that financial planners are going to be interested in. Social Security has really been the focus for the past couple of years.”
THE IMPORTANCE OF PLANNING When planning for retirement, it’s important to establish a contingency plan should you require long-term care. Whether you choose to enlist the help of family or apply for Medicaid, it’s helpful to be aware of the options available to you and how they could impact your finances and the quality of your care. According to Pfau, the expense could be overwhelming. “It’s one of the big potential shocks to a retirement plan. A long-term care expense could, at the very extreme, exceed a million dollars, so that’s definitely something that needs to be taken into consideration.” Caldwell agrees. “When it happens, the costs are so expensive. It can easily drain all your savings and retirement if you’re unprepared.” n
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The Reverse Review March 2016
LAST WORD
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WORK
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Sustainability By Ed O’Connor
Of course, the notion of sustainability has meaning for us originators on the other side of the table as well. We all need to continue to make loans, support our customers and generate a profit— that is what business is about. While it would be fun to grant loans for free and not worry about the bottom line, it is not reality. We must maintain a margin of profitability so that we can continue to put food on the table.
One strong word with three very important meanings in the reverse industry FHA consistently uses the term “sustainability” in its discussions about the HECM. When we hear this word, we probably think about the longevity of the program itself. It conjures discussions about T&I default and the MMI Fund, and inspires conversation about how recent program changes might cement the HECM as a valuable financial tool for future generations of retirees. But the term has also come to apply to the long-term value a reverse mortgage loan can offer a particular borrower. In this sense, we might see it used in the evaluation of a difficult file (i.e., is this a sustainable option for the borrower?). When we assist a borrower in securing a HECM loan, it is our duty to ensure that the loan is a solid option that the borrower can successfully maintain in the long haul.
In this sense, this powerful word has three applicable and distinct meanings in the reverse mortgage business. We must ensure that the loan’s obligations are sustainable for our borrowers, that the business model generates enough profit to be sustainable for originators, and that the entire program produces enough revenue to make it a sustainable venture for our federal insurers. Recent policy changes have been implemented to help secure the program’s longevity, and many appear to be optimistic about their success. Financial Assessment has been instituted to ensure that borrowers who enter into the loan are able to maintain the terms of the agreement and succeed in the program. Therefore, it would seem that two out of three sustainability factors have been addressed through recent regulatory change. Now, it’s in the hands of originators to make sure that the business is sustainable for them. How do we do this? There’s no simple solution, and the specifics vary by company. But perhaps it will help to ask yourself: Are you a loan officer or a salesperson? I believe you need to be both.
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Most of us who started out in this industry long ago believe that a reverse mortgage is not something you sell. While I still believe this to be true, my opinion has evolved somewhat. I think that in order to be successful in business, we always have to sell, even if we are only selling ourselves to a potential customer. Let’s face it, if a customer cannot relate to you, cannot understand you or doesn’t really care to talk to you, you will never close the deal. Call it what you like, but it is a sale when the customer moves forward to counseling, application and a successful closing. But you could be a fantastic salesperson and still not be able to close a deal. This is where the loan officer shines. You must know every detail and nuance about the product you promote. You must be able to understand your client’s specific circumstances and show how the loan can work for them. If you cannot clearly explain a reverse mortgage and what the benefit to the borrower is in terms that make sense to them, you are only a salesman who is unworthy of a borrower’s trust. In order to see the reverse mortgage product thrive, originators in the field must work hard every day to enhance their knowledge and spread the news about the services they offer. If we can collectively pursue this mission, we will not only advance our businesses, but also propel the product forward and ensure its place as a mainstream financial tool for generations to come. n
You are their face of
freedom.
A reverse mortgage can be the difference between financial stress and financial freedom. Give your reverse mortgage holders the service they deserve with Celink. celink.com | (844) 228-2101 reversereview . com
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The Reverse Review March 2016
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