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Changing the Public’s Perception
HE REVERSE REV IE W
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SELLING THE ADJUSTABLE-RATE HECM PG. 26 ELEVATING YOUR BUSINESS THROUGH LINKEDIN PG. 29 + SUE HUNT SITS DOWN IN OUR HOT SEAT PG. 18
TH
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REVERSE J U LY 2 0 1 3
The
review
Model As originators seek more avenues to connect with borrowers across the country, the centralized call center is helping some seniors complete the loan process over the phone.
The ReveRse Review July 2013
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The ReveRse Review July 2013
From the Editor publication and express an interest in participating in the conversation. This willingness to be a part of the discussion highlights the fact that there is a multitude of reverse professionals out there who are deeply invested in the success of the HECM product. With the
Meet the Team Senior Publisher REZA JAHANGIRI
Publisher ERIK RICHARD
Editor-in-Chief JESSICA GUERIN
A NOTE FROM JESSICA GUERIN
The July edition of The Reverse Review is full of thoughtful and thought-provoking content about the reverse mortgage business. Some highlights include tips for selling the adjustable-rate HECM; advice on how to build your network using LinkedIn; thoughts on why it’s important to stay connected to past clients; and a look at what we as an industry can do to elevate the public’s perception of the product.
it is perhaps more important than ever that people get involved in the discussion about how we as an industry can help advance the reverse mortgage product so that it can continue to help thousands of
4
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KERSTEN WEHDE
ALYCIA COLACION
So, if you are a reverse professional and you care about the future of this business, join in the conversation. Tell us your thoughts on what can be done to elevate the HECM. Reach out to me about how you can play an active role in the evolution of your industry.
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
Editor-in-Chief
{ Jessica Guerin }
Want to talk to Jessica? Reach her at jessica@reversereview.com.
© 2013 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 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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Copy Editor
T AY EC ST ONN C
Feedback
TRACI KNIGHT
Marketing Director
This issue also features a record number of articles from new contributors—seven, to be exact—who are sharing their ideas pages of TRR. Never before have we had so many people reach out to our
Creative Director
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Table of Contents
TRR 7.13
22 | Originating Doing the Right Thing, One HECM at a Time
Working in the best interests of our seniors PhiliP e. liPP
IN THIS ISSUE... 24 MICHAEL J. WELTMAN Originating
26 | Originating Selling the Adjustable-Rate HECM Tips for explaining the ARM’s features to clients MaRk o’neil
29 | Marketing Making Use of LinkedIn
08 | Movers & Shakers
15 | NRMLA in Irvine
How using the social networking site can help build your business
The latest developments in companies across the reverse space
Reverse professionals gather on the West Coast to talk industry happenings.
31 | Appraising
09 | Industry Update Headlining stories of the past month ReveRse MoRtgage Daily
Spotlight
seaMus Mckeon
When a Property Falls Short
17 | Roundup A collection of recent facts and surveys affecting the reverse market
Completing a report even when a property is clearly ineligible John golDen
10 | Top Lenders Report
18 | Hot Seat Sue Hunt
33 | Title Tip Avoiding the Roadblocks
latest HECM stats. ReveRse MaRket insight
Director of reverse mortgage counseling at CredAbility
12 | NRMLA News
20 | Originating
How to prepare for potential title barriers that could affect loan closing Megan haFenstein
Read about the association’s current initiatives.
The Importance of Keeping in Touch
35 | HMBS
MaRty Bell
How regularly connecting with former borrowers can expand your network
A rundown of events in the secondary market
Rick schluteR
FEATURE
36 RICHARD WILLS
42 BART JOHNSON Last Word
An Update From Wall Street
DaRRen stuMBeRgeR
38 | The Call Center Model As originators seek more avenues to connect with borrowers across the country, the centralized call center is helping some seniors complete the loan process over the phone.
@
Want the online version? reversereview.com/magazine
JULY 2013
Jessica gueRin
“Just as technology has invaded nearly all aspects of our lives, so too has it altered the way reverse mortgages are originated. Now, many leading lenders are operating call centers from which they engage potential borrowers in discussions about the HECM.
COVER Reverse mortgage call centers alter the origination landscape.
Changing the Public’s Perception
PG. 26 PG. 29 PG. 18
INSIDE this issue
THE
REVERSE review
The
Model As originators seek more avenues to connect with borrowers across the country, the centralized call center is helping some seniors complete the loan process over the phone.
REVERSEREVIEW.COM
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The ReveRse Review July 2013
Contributors
John K. Lunde
Marty Bell
J OHN K . L UND E
MARTY BE LL
SUE HUNT
10 | Top Lenders Report John K. Lunde is president and founder of Reverse Market Insight, Inc., a performance data analysis and consulting
12 | NRMLA News 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
18 | Hot Seat As the director of reverse mortgage counseling at CredAbility, Sue Hunt has more than 15 years of experience
mortgage industry. RMI clients include eight of the top 10 reverse mortgage lenders, plus investors, servicers and vendors to the industry. rminsight.net 949.429.0452
his writing has appeared in publications including Playboy and New York magazine. Bell wrote and produced the awardThe Boys of Summer and produced 15 Broadway shows (including Ragtime, Fosse and Dirty Rotten Scoundrels) that won 27 Tony Awards.
Sue Hunt
Rick Schluter
Philip E. Lipp
Michael J. Weltman
Mark O’Neil
Seamus McKeon
John Golden
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R I C K S CH L UT ER
P H IL I P E . L I P P
20 | The Importance of Keeping in Touch Rick Schluter is located in New Jersey and has been exclusively originating reverse mortgages for the past eight years. He currently works at Nationwide Equities and has previously worked for Financial Freedom, Countrywide, Bank of America and MetLife. He hopes that one of his employers will eventually remain in the business for more than two years. Previously, Schluter
22 | Doing the Right Thing, One HECM at a Time Philip E. Lipp is the president of Allwest Mortgage and a founding director of the California Association of Mortgage Brokers. Lipp has worked in the mortgage business with his wife, Ilene, for 29 years, helping low-
counseling and education. She is a recognized industry spokeswoman and an effective manager with expertise in a variety of counseling programs, teams and management positions. Hunt has worked with HUD and other national groups to develop policies and procedures for reverse mortgage, pre-purchase and other housing counseling programs.
MI C HAEL J. W ELTMA N 24 | Sometimes, the Answer Can Still Be Yes Michael J. Weltman is a sales manager for FirstBank. Weltman, who has 12 years of experience in the reverse mortgage business, is treasurer of the Mortgage Bankers Association in Tallahassee, Florida. He has also served as president of a local real estate board in Wakulla, Florida; holds a broker license and real estate instructor license; and has a license with the Florida Department of Financial Services.
physics instructor, nuclear utility vendor and a corporate software salesperson.
supporting initiatives to prevent predatory lending and assisting homeowners in foreclosure. Lipp has a B.A. from Antioch College and an MBA from Pepperdine University. He has a general contractor license and a real estate broker license.
MA R K O’NEI L
S EAMU S M C KE ON
JOH N GOL DEN
26 | Selling the AdjustableRate HECM Mark O’Neil’s 11-year career in the reverse mortgage industry includes work as a settlement
29 | Making Use of LinkedIn Seamus McKeon is a freelance social media consultant based in Los Angeles. He currently oversees Landmark Network’s social media presence, generating content for the AMC’s corporate blog.
31 | When a Property Falls Short John Golden is the national quality control manager for Landmark Network, Inc., an appraisal management company that services clients nationwide.
account executive. While working as an account executive for MetLife, O’Neil was a threetime recipient of the President’s Club Award for top third-party production. O’Neil holds a B.S. and a B.A. from the University of Massachusetts, and a J.D. from Boston College. He currently works as an independent consultant based in North Carolina.
residential and FHA appraiser, is currently on the HUD 203k consultant roster. He relies on a 13-year background in valuation and inspection in dealing with quality control matters. jgolden@landmarknetwork.com 888.272.1214 ext. 718
Contributors ME G A N H A F EN S TE I N 33 | Title Tip Megan Hafenstein is the assistant VP of sales at Premier Reverse Closings (PRC), a national reverse mortgage title and settlement company based in Rocklin, California. Hafenstein manages accounts in 22 states from the company’s headquarters and works closely with operations to ensure
Megan Hafenstein
Darren Stumberger
accurately. Prior to joining PRC six years ago, Hafenstein worked in the California Legislature after receiving her B.A. in political science from Cal Poly, San Luis Obispo.
DA RREN S TU MB E R GE R
R I C HAR D WILLS
35 | An Update From Wall Street Darren Stumberger, managing director at Knight Capital Group, heads Agency MBS trading and is responsible for HMBS/ HREMIC trading, distribution and risk management. Prior to Knight, Stumberger held mortgage trading Sachs, Morgan Stanley, Merrill Lynch, Standard & Poor’s and KBC Group NV. dstumberger@knight.com
36 | Changing the Public’s Perception Richard Wills is the co-owner of Retirement Life Funding, LLC. A licensed attorney, Wills was a law professor at George Washington University and has conducted legal and consumer seminars for the Maryland Bar Association, Neighborhood Legal Services and various other associations. A member of NRMLA and NAMB, Wills volunteers at the Baltimore Bar Association’s Senior Legal Aid on an academic project about
Richard Wills
Jessica Guerin
Bart Johnson
page 26
J E S S I C A G UE RI N
B ART JOHNSON
38 | The Call Center Model Jessica Guerin is the editor-inchief of The Reverse Review. She has worked on the editorial teams of Chicago Home & Garden, Chicago magazine and Time Out Chicago. Prior to joining the magazine, Guerin managed the marketing efforts
42 | Change the Game, Transform the Industry! Bart Johnson is the CEO of Premier Home Equity. He previously served as the president of Financial Freedom, overseeing the company during the time it earned unprecedented market
in the Chicago Board of Trade. She has a master’s degree in magazine publishing from Northwestern University and a B.S. in journalism from Boston University.
was a co-chair of NRMLA and remains an active board member. He is a career “intreprenuer,” building ventures into valuable businesses with large corporate sponsors. Johnson has held executive positions in virtually every important area of mortgage banking.
comments we loved
“The recent and upcoming changes to the HECM will ensure that there is a healthy, sustainable program for years to come. It is incumbent upon those of us on the production side to make sure that we fully understand all of the tools at our disposal so that we can consistently offer the most appropriate loan to our borrowers. This will in turn make you more competitive in your marketplace and further cement the tool.” - Mark O’Neil
Be a part of the conversation.
Write for us! YOU T DO E WHA A H V AKES? IT T
We are looking for new contributors. Share your thoughtful commentary with our readership today.
Email jessica@reversereview.com to learn more. REVERSEREVIEW.COM
TRR
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The ReveRse Review July 2013
Movers & Shakers READ ABOUT THE LATEST DEVELOPMENTS in companies across the reverse space.
H AV E A C O M PA N Y U P D AT E Y O U WOULD LIK E T O S E E P U B L I S H E D?
Urban Financial Group and Knight Capital Group Launch Relief Effort for Oklahoma Tornado Victims
EMAIL IT TO JESSICA@REVERSEREVIEW.COM.
Celink Sponsors Center for Grieving Children
Urban Financial Group and parent company Knight Capital Group have launched a campaign to raise funds for those affected by the devastating tornados that struck Oklahoma on May 20. The OK Relief campaign raised $50,000 to aid in the relief of the storms’ victims. The donations will be distributed through AmeriCares, American Red Cross and The Salvation Army. “As the CEO of Knight’s Oklahoma-based subsidiary, I am proud that our company, parent company, employees and Knight teammates have enabled us to give back to our Oklahoma neighbors in this time of need,” said Steve McClellan, president of Urban Financial Group.
Reverse mortgage servicer Celink has become a leading sponsor for Ele’s Place, a center for grieving children in Lansing, Michigan. Celink has sponsored the construction of the center’s “teen zone” and nearly two dozen employees have volunteered their time to help paint the new addition. “I couldn’t be prouder of the generous outpouring of time and energy to public service that our people have demonstrated,” said Celink President and COO Ryan LaRose.
One Reverse Surprises Senior Contest Winner with $10,000 Check As part of its Boost Your Retirement Giveaway sweepstakes, One Reverse Mortgage has awarded contest winner Pamela Esenwine from Gilford, New
Hampshire, a $10,000 check. Two runnersup received $5,000 each. The Boost Your Retirement Giveaway sweepstakes received 120,000 entries from across the country. “There is no greater satisfaction than knowing we can help the winners enjoy the retirement they dreamed of or burdens,” said One Reverse CEO Richard Mandell.
New View Advisors Assists Waterfall Asset Management in Reverse Mortgage Securitization New View Advisors was Financial Advisor to Waterfall Asset Management on its $140 million securitization of proprietary reverse mortgage loans, Senior Homeowner Assistance Program, Reverse Mortgage Loan Trust 2013-RM1. The MortgageBacked Notes transaction closed May 10, 2013.
CFPB PG. 33
INS IDE issue this
PG. 29
PG. 14 PG. 30
PG. 27
RSE REVE REVER PG. 14
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Send your news to jessica@reversereview.com. 8
| TRR
Industry Update
July Edition
Brought to you by:
AN UPDATE OF THIS PAST MONTH’S BREAKING NEWS
NEWS DIRECT TO YOU: WANT EVEN MORE UP-TO-THE-MINUTE NEWS? Visit reversemortgagedaily.com.
headlining news 1.HOUSE PASSES REVERSE
MORTGAGE STABILIZATION BILL
The U.S. House of Representatives passed the Reverse Mortgage Stabilization Bill of 2013, authorizing HUD to make changes to the HECM program by mortgagee letter. The bill, which was passed on the House’s suspension calendar, awards HUD the program in order to protect borrowers and shore up the HECM portion of the FHA’s insurance fund. Next, the Senate will need to pass a bill with the same or similar language in order for the bill to become law. The bill was co-sponsored by Reps. Michael Fitzpatrick (R-PA) and Denny Heck (D-WA), and a companion bill has been introduced in the Senate by Senator Robert Menendez (D-NJ). “This is one major step down, with one more to go,” said NRMLA President and CEO Peter Bell. // June 12, 2013
2.HUD AWARDS $40 MILLION TO
COUNSELING FUNDING, INCLUDING REVERSE MORTGAGES
HUD has awarded $40 million to housing counseling agencies and intermediaries nationwide, including those who offer reverse mortgage counseling. Recently, the agency changed the way it allocates funds, now including all counseling funding under a single grant rather then separating programs. The grants were awarded to 334 counseling providers with the intent of helping more than 1.6 million households. “The HUD-approved counseling agencies this funding supports are crucial in helping families manage their money, navigate the homebuying process and secure their
Shaun Donovan. “The evidence is clear that housing counseling works. These grants are a smart investment to help families and helps promote neighborhood stability in the long term.” // June 18, 2013
3.SENATORS SEEK ANSWERS ABOUT REVERSE MORTGAGE PROGRAM, CHANGES
materials in an effort to support rule implementation and ensure that the mortgage industry is ready to comply with new borrower protections. The page allows visitors to view a table listing each new mortgage rule and access downloadable compliance guides and video overviews. // June 13, 2013
5.HUD UPDATES NON-RECOURSE
LANGUAGE IN REVERSE MORTGAGE HANDBOOK
questions before two senators about the HECM program and how it can be improved in order to be viable in the long term. Sens. Robert Menendez (D-NJ) and Jerry Moran (R-KS) asked representatives from NRMLA, AARP and the National Council on Aging questions regarding non-borrowing spouse issues and proposed program changes in order to determine the best course of action for sustaining the HECM program. “There are real concerns about HECM and its portfolio and how it could lead to the Federal Housing Administration having to draw on the Treasury,” said Sen. Menendez. “How do we get a handle on this problem, and what can we do to promote long-term sustainability for seniors as well as the Mutual Mortgage Insurance fund?” The Senate has yet to vote on a bill that would grant HUD the authority to modify the program.
Following changes to the language regarding the non-recourse nature of reverse mortgages under the FHA’s HECM
// June 18, 2013
National home values have continued to trend upward, rising 5.4 percent on a year-over-year basis this May, prompting Zillow to predict a 4.1 percent increase in appreciation across the nation by May 2014. According to Zillow’s Real Estate Market Report, home values will rise in the span of one year from $159,000 to $165,448. Home value appreciation is expected to slow down, however, even though economists believe that housing recovery will remain strong.
4.CFPB LAUNCHES WEBPAGE ABOUT MORTGAGE RULE COMPLIANCE
The CFPB launched a new page on its website to help mortgage lenders comply with Dodd-Frank’s mortgage reforms and the bureau’s own rules. The new Regulatory Implementation webpage consolidates all of the CFPB’s 2013 mortgage rules and related implementation
language in its handbook for counselors reverse mortgage loans are non-recourse, meaning that a borrower and his or her heirs or estate will only be responsible for repaying 95 percent of the appraised home value, rather than the loan balance if that balance is greater than the home’s worth at the time of sale. In April, the agency rescinded guidance issued in 2008 to clarify its non-recourse policy on reverse AARP against HUD regarding the policy. // June 17, 2013
6.ZILLOW: HOME VALUES WILL RISE 4.1% BY NEXT MAY
// June 21, 2013 REVERSEREVIEW.COM
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The ReveRse Review July 2013
Report May 2013
Top Lenders Report
Liberty Home Equity
Urban Financial Group
One Reverse Mortgage
Proficio Mortgage Ventures
Endorsement
Endorsement
Endorsement
Endorsement
12345 S1L / RMS Endorsement
615
510
Lender
Endorsements
TRAILInG TWELVE MOnTH EndORSEMEnTS
478
Lender
4,000
Retail
| TRR
Wholesale *Numbers represent months
UNITS CHG% UNITS CHG%
TOTAL
UNITS CHG%
2,587
-1.03%
2,821
9.05%
2,361 28.32%
5,182 17.05%
-5.21%
Jul
2,143 -24.03%
1,704 -27.83%
3,847 -25.76%
Aug
2,415
12.69%
1,705
0.06%
Wholesale Endorsement Growth
Sep
2,147
-11.1%
1,536
-9.91%
3,683 -10.61%
Oct
2,246
4.61%
1,498
-2.47%
3,744
1.66%
Nov
2,705
20.44%
1,724 15.09%
4,429
18.3%
Dec
2,250 -16.82%
Jan
3,033
34.8%
Feb
2,818
-7.09%
2,017
Mar
3,318
17.74%
2,494 23.65%
Apr
3,145
-5.21%
2,568
-1.7% 5 6 7 8 9 10 11 12 1 2 3 4
WHOLESALE
Jun
Total Endorsement Growth
0
RETAIL May
-2.97%
2,000
319
Endorsements
IndUSTRY SUMMARY Retail Endorsement Growth
6,000
10
499
TOT
31,628
1,840
-7.02%
4,427
4,120
-3.61%
7.1%
-3.94%
3,906 -11.81%
2,151 29.89%
5,184 32.72%
1,656
-6.23% 2.97%
23,254
4,835
-6.73%
5,812 20.21% 5,713
-1.7%
54,882
savEr markEt sharE
hEcm EndorsEmEnt trEnds
2%
%%%%%
0%
LOOKING FOR MORE STATISTICS? GO TO RMINSIGHT.NET FOR ALL OF THE INDUSTRY’S LATEST STATS AND RANKINGS.
3/1/13
1/1/13
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9/1/12
7/1/12
$800.0
$700.0
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20%
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14%
12% October 9, 2009
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REVERSEREVIEW.COM
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Fixed
2/1/12
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6/1/11 ARM
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{ FIGURE }
02
7/1/11
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FixEd ratE PErcEntagE
hEcm EndorsEmEnt trEnds
01
5/1/11
{ FIGURE }
03 in thE miLLions
initiaL PrinciPaL Limits
hEcm EndorsEmEnt
Report { FIGURE }
80%
75%
70%
65%
60%
55%
50%
Reverse Market Insight - Logo
PANTONE COLORS 3005C
TRR
Process Blk C
Brought to you by:
18%
REVERSE MARKET
INSIGHT
10%
8%
6%
4%
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The ReveRse Review July 2013
NRMLA News
On the Docket Reverse Mortgage Stabilization Act of 2013 Introduced In this column last month, we reported on NRMLA’s effort, with the support of our Capitol Hill lobbying team, to pursue legislative authority for HUD so that the department can make the changes to the HECM program needed to bolster the Mutual Mortgage Insurance Fund. On May 23, H.R. 2167, a bill with bipartisan sponsorship “to authorize the Secretary of Housing and Urban Development safety and soundness of the home equity conversion mortgage insurance program,” was introduced in the House of Representatives by Rep. Denny Heck (D-WA) and Rep. Mike Fitzpatrick (R-PA). The introduction followed a hearing of the House Financial Services Subcommittee on Housing and Insurance on May 16, at which the two congressmen announced the proposed legislation and emphasized the importance of providing (September 30). HUD Deputy Assistant Secretary Charles
Texas H4P Resolution Clears Legislation Hurdle The Texas House of Representatives approved legislation that will allow registered voters to decide on November 5 whether the state constitution should be amended to allow HECM for Purchase loans. The legislature voted 139 to 1 in favor of Senate Joint Resolution (SJR) 18, which only a few weeks before unanimously passed in the Senate. “This was a critical piece of legislation for homeowners in Texas,” says Scott Norman of Sente Reverse Mortgage, who serves on NRMLA’s Board of Directors and has played an instrumental role in getting SJR 18 introduced and passed. “Today’s vote by the House was clearly supportive of reverse mortgage lending and the goal to provide enhanced consumer disclosures for all borrowers.”
this September 30 goal, we hope the bill can be considered promptly on the House of Representatives “Suspension Calendar.” Legislation slated for the Suspension Calendar is considered under special rules and is primarily reserved for noncontroversial bills. Under the procedure, with two-thirds of the votes of all voting members, the House rules are suspended and the legislation is passed.
IN THE STATES New Hampshire Legislation Addresses LO Compensation A New Hampshire bill amending the state’s general consumer laws, which strikes out a phrase prohibiting yieldspread premiums on a reverse 12
| TRR
H4P
mortgage transaction (NH HB 594), has passed in the state house and is now in the state senate. The amendment replaces the prohibition with: “In a reverse mortgage transaction, any credit derived from offering an interest rate higher than the par rate shall only be paid to the borrower or used to pay the borrower’s costs, and shall not be used as an additional source of compensation.”
This might not be the total solution, however. “This proposed provision is problematic,” says NRMLA counsel Jim Milano of Weiner Brodsky Kider, “because it does might be.” The New Hampshire legislature is scheduled to adjourn on June 28. The state Senate has hundreds of bills to tackle and this one may or may not make it
New Branding Effort Over the past few months, under the leadership of Otto Kumbar of Liberty Home Equity Solutions, a group of member companies has been exploring a new national branding effort for reverse mortgages. At NRMLA’s Western Regional Meeting in Irvine in May, Mary Smith, marketing director at Liberty, reported that we initially engaged 12 advertising agencies of various sizes from around the country to assess the market and offer recommendations for a fresh campaign. Eight of the 12 companies submitted proposals and a review team
We’re starting to plan the events for NRMLA’s Annual Meeting & Expo, our 15th annual event and the largest single gathering of reverse mortgage professionals each year.
Due to your enthusiastic response two years ago, we’re heading back to the Roosevelt Hotel on the edge of New Orleans French Quarter on November 4 to 6. If there are topics you would like to see included in the agenda, please let us know by contacting Darryl Hicks at dhicks@dworbell.com.
NEW MEMBERS
NEW CRMPS
- Preapproval.com
- Janine Atamian, Premier
Huntington Beach, California
session, audience members were invited to comment on some of the observations made by the advertising agencies, which sparked some animated discussions. For example, the ad agencies observed that “we try too hard to sell” and “we have created buyer’s paralysis.” In other words, our explanations are too complicated and our message needs to Final presentations, including creative marketing samples, are due to be delivered at the end of June.
BROUGHT TO YOU BY MARTY BELL: REVERSE MORTGAGE LENDERS ASSOCIATION
Title & Escrow
- Reverse Mortgage Institute Colorado Springs, Colorado
Providence, Rhode Island - Clayton Behm, Liberty Home Equity Solutions Palm Springs, California
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NEWS FROM NRMLA
NRMLA Ethics Course Revisited in Discussion
A BIG GATHERING IN THE BIG EASY
NRMLA News
The ReveRse Review July 2013
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NRMLA’S 2013 WESTERN REGIONAL CONFERENCE
WHO CAME TO IRVINE FOR THE NRMLA CONFERENCE?
MAY 14-15 HYATT REGENCY IRVINE, CA
In May, NRMLA members gathered for the seventh straight year in Southern California for the association’s Western Regional Conference. More than 250 attendees heard numerous presentations related to the HECM business, including an overview of NRMLA’s proposed recommendations to HUD regarding
BY INVITATION ONLY
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assessment guidelines. Other panels included an update from the FHA’s senior HECM manager; talks about look at the impact of state licensing requirements; and a lively discussion concerning suggestions from ad agencies on how to improve industry marketing.
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4 1. Robert Scott (RMS), Brandy Edwards (Liberty Home Equity Solutions) and Jonathan Scarpati (Reverse It) 2. Reverse Mortgage Associates’ Rob Wyatt with AAG Wholesale’s Cheryl Chargin 3. NRMLA President Peter Bell with Knight Capital’s Darren Stumberger 4. Christopher Russow and Amanda Sievert of Urban Financial Group 5. Generation Mortgage Company’s Nancy Armour and Laura Bihuniak 6. West Richards (CIS), Carl Rojas, John Yedinak (Reverse Mortgage Daily) and Steve McClellan (Urban Financial Group) 7. TRR’s Jessica Guerin with Reverse Mortgage Daily’s Elizabeth Ecker 8. PRC’s Heather Moulden, Cheryal Meyer, Shelly Fisher, Tina Meilinger and Krystal Lilly 9. Beryl Shreve (North American Reverse), Ryan Menerey (Reverse It), Kevin Pierce (preapproval.com) and David Guelff (American Capital Corporation) 10. Deborah Nance (iReverse), Jonathan Scarpati and Ken Klawans (iReverse) 11. Attendees listen to a presentation from Jim Milano on the CFPB’s new mortgage servicing rules.
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The ReveRse Review July 2013
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Roundup Here is a look at the latest
NEWS AND STATS
AFFECTING THE MARKET.
THIS MONTH
{
GET UP-TO-DATE retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.
HECM TRENDS
HOME EQUITY
The ARM loan dominates the market while overall volume continues to slump.
Senior home equity increases for the fourth straight quarter.
While HECM endorsements were down 7.2 percent in May, year-to-date volume is up 12.4 percent. After the moratorium on the HECM, the ARM loan has dominated with 95 percent of the market share, a trend that some predict will continue for the foreseeable future. -Reverse Market Insight
HOME PRICES
Recent housing data is the most positive report in seven years. quarter of 2013 at the pace not seen since before the recession, according to the Case Shiller Home Price data. The index reported a 10.9 percent increase in values over the past year, with prices rising in all 20 cities tracked by the index.
THE SENIOR AGENDA
Baby boomers lost a substantial portion of their retirement savings during the recession. On average, baby boomers approaching retirement lost $117,000 in retirement savings during the recession. According to a survey by Ameriprise Financial, 90 percent of boomers who had at least losses. The most detrimental factor, according to those surveyed, was low interest rates, which 63 percent said adversely affected the growth of their retirement assets. Other contributing factors were lower-than-expected home equity, job loss and the need to support grown children or grandchildren.
American seniors have more equity in their homes now than at any time in the last four years, according to recent data released by the NRMLA/RiskSpan Reverse Mortgage Market Index (RMMI). According to the report, the senior home equity index rose by 1.5 percent 2013 to 155.0, its highest quarter of 2009. The aggregate home equity held by Americans age 62 and older grew 6.4 percent of the past year to $3.25 trillion.
R E T I R E M E N T FA C T S
Retirement costs three times more than boomers expect. Middle-aged Americans greatly underestimate the expense of long-term care, according to a survey by Nationwide Financial. While most survey respondents correctly estimated the cost of nursing homes to be about $67,000 per year, many underestimated by more than half —$111,507 versus $265,000. “Nursing home costs have increased more than 4 percent annually since 1974,” said Nationwide Financial COO John Carter. “What a year of nursing home care costs today will not even come close to the actual cost when boomers really need it.”
65%
Of respondents said having enough money to cover long-term care costs was a top concern. REVERSEREVIEW.COM
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The ReveRse Review July 2013
THE HOT SEAT
things you need to know or may have been wondering JULY 2013
the hot seat From the craziest thing she’s ever done to her thoughts about the challenges facing the reverse mortgage market, we get the personal and professional facts from Sue Hunt, director of reverse mortgage counseling at CredAbility, in our monthly edition of The Hot Seat.
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Sue CREDABILITY DIRECTOR OF REVERSE MORTGAGE COUNSELING PERSONAL >
Ten years from now I will be enjoying my mountainside retirement home.
>
My favorite vacation was in Kauai, Hawaii. Love the mountains, the birds, the foliage—and eating outside for every meal!
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My celebrity crush is Sir Paul, of course!
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If I were a professional athlete, I would be a basketball player.
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a 1954 Chevy Station Wagon.
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The craziest thing I’ve ever done was jump out of a perfectly good airplane— twice!
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My favorite movies are The Lord of the Rings trilogy.
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I never miss an episode of
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When I was younger I wanted to be older.
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Every morning I thank God for another day!
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I can’t go without my morning cup of coffee.
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I’ll never forget giving birth to my three sons, the three best days and gifts of my life.
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My parents taught me how to love my family and friends.
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My favorite time of the day is just as the sun sets behind the trees; I love the shadows.
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My iPod go-to is Fresh Air.
PROFESSIONAL >
The future of reverse mortgages is great! Baby boomers will be looking to use the equity in their homes as a part of their retirement plan.
>The
THE CRAZIEST THING I’VE EVER DONE WAS JUMP OUT OF A PERFECTLY GOOD AIRPLANE—TWICE! I can’t g o wIthout my morning c up of coffee.
greatest setback for our industry is the current problem with tax and
insurance defaults, which has created an atmosphere of fear and distrust about reverse mortgages. I look forward to HUD’s ongoing response to this issue (including >The
most fascinating thing about the reverse mortgage industry is the
diversity of the people engaged in a common mission to help older Americans age in place.
my iPod go-to is Fresh air. REVERSEREVIEW.COM
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The ReveRse Review July 2013
ORIGINATING
ENGAGE
The Importance of Keeping in Touch R ICK S C H L U T E R
H
ow many of you loan
your managers to get the application, put it in the hands of the processing team and then move on to the next prospect? That’s been my universal experience in the eight years that I’ve been in the reverse mortgage business. And while it’s understandable why management doesn’t want us to get bogged down in processing details, I think that we may be missing out on a valuable opportunity to stay engaged with our customers, both during processing and after closing.
If they’re getting cold feet, ask
The hardest part of our sales process is usually getting the homeowner to the point of signing the application.
dispel any lingering misconceptions and, most importantly, remind them of whatever “pain” prompted them to
assume that the customer is now fully convinced of the merits of our wonderful product, and can’t wait to get to closing. That’s true for many of them, but unfortunately, that isn’t always the case. Many of the applicants lie awake at night
place. If they don’t move forward with you, will their painful situation get better or worse?
paperwork they just signed, worrying if they’ve just made a huge mistake. As the days go by, any bad press regarding reverse mortgages jumps off the page or screen at them, and they get more anxious as time goes on. But you can help alleviate your borrower’s concerns by being proactive, by staying in regular contact and addressing any fears that might be giving them pause. Take advantage of the “touch points” that are available to you: appraisal results, title report, etc. Don’t go more than one week at 20
a time without reaching out to the homeowner for some reason. Even if you’ve got nothing new to report, you can say something like, “Everything is going smoothly. I just wanted to tell you that I have nothing to tell you.” That usually elicits a chuckle; they appreciate hearing from you, and you can take that opportunity to ask them if they have any worries at this point. Addressing concerns early, before they’ve had a chance to fester, can sometimes make the difference between losing and closing a loan.
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Also, if possible, try to attend the closing. Hold the borrower’s hand dozens of documents. For LIBORs, focus on the incredible increasing line of credit on that scary amortization table. Explain why the recorded mortgage value is 50 percent more than their appraised value (which usually comes as a big surprise, if you haven’t already addressed that). Laugh together as you point out the mortgage due date: their 150th birthday. (For example, “If you live that long, we’re going to put you in all of our commercials!”). In short, make the closing an upbeat, educational through all of this. The whole idea is to make the loan process, from start to
journey that will enable the homeowner to solve some of their major problems. If you can remain engaged and ease the process, the homeowner will be much more likely to recommend you to others.
of setting expectations, keeping their customers informed during processing and attending their closings. But I see the biggest lost opportunity in postclosing contact. You hope that after the who will refer other prospects to you. But you can do much better than that. You have additional reasons to reach out to your customers, if you want to improve your relationship with them, encouraging them to be more than just who will actively promote you. Most customers will go out of their way for you if you go out of your way for them. One obvious way they can help you is by recommending you customers who have bonded with you may be more inclined to take that extra step. This might include inviting you to speak to their senior church group or local senior club to give a presentation on reverse mortgages. might agree to be interviewed about their experience for the local newspaper or television station, or tell their story at a seminar that you’re putting on. That takes guts, and you’d have to be much more than just a happy customer to go the extra mile for your reverse mortgage specialist.
ORIGINATING
So, how do you convert happy customers to actively supportive advocates? here are some suggestions. every Four days after closing Call to ensure that they received their lump sum.
Birthdays There are software packages that let you print customized cards that show who else was born that day, famous events that took place, etc. Consider sending such a thoughtful card to your best prospects, too.
addressing birthday or holiday cards is an hour that you’re not able to prospect or network. But I think you’ll
packs) with a large blank space on the back. You can then customize them with whatever message you want to convey. Big snow/hot days Call 10 customers and ask them how they’re doing. They’ll be amazed that you care.
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closing, your efforts will be rewarded in the long run. And you are in this for the long run, aren’t you? x
aPPRaising
If you’re like most originators, closing a few loans each month, you have the time to cultivate your existing customer base. Granted, every hour that you spend printing and
Every December Send your family holiday card, not something off the shelf.
Every spring Mail seeds. Burpee sells “promotional seed packs”
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Two months after closing Ask if they have any questions about their monthly statement. Remind
Three months after closing Ask them how the reverse mortgage has changed their lives. This is extremely important and will help you cement your relationship with this customer by giving you the opportunity to share in their joy. You also get real success stories that you can
relate to future prospects (“There’s a woman in Greenville who faced similar challenges...”).
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One month after closing Ask what they’ve used the money for, so far. They’ll be thrilled to tell you, because they’ve likely eliminated their biggest pain point, and it will remind them of the person who helped them to do it.
them that they can tap their growing line of credit (if applicable) without having to justify to anyone what they want to use it for.
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The ReveRse Review July 2013
ORIGINATING
run was more important, or that the best interests of the borrower were Did originators even understand the product for the client’s situation? Despite whatever factors may have contributed to its rise, the fact is that
its portfolio was in trouble from full-draw HECMs and ordered a halt
Doing the Right Thing, One HECM at a Time PH ILI P E. L I P P
T
en years ago, I went to my
conference, I met a number of folks in the industry who had weathered the early adoption of the product. I could tell by talking to the attendees that there was a great deal of care in the room for the general plight of the reverse mortgage borrower. The stories about how borrowers’ lives were positively changed and improved were numerous. At that time, there was really only one product available: the FHA adjustablerate reverse mortgage. It came in two
from Fannie Mae, but it carried a much higher interest rate and also much lower loan amounts. I don’t believe there was ever much production with this product. The industry was just starting to take off and the big player at the time was Financial Freedom. Proprietary introduced by Financial Freedom areas. We considered the proprietary programs to be jumbo reverse mortgages—they provided higher loan amounts based on higher lending limits. 22
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Soon, more proprietary loans followed. Some even lowered the eligible borrower age to 60. But the thought on everyone’s mind was, “When will mortgage?” The thinking was that if will sign up for the program in droves. One of the key complaints voiced by seniors at that time was they wanted to adjustable-rate loan. Well, we got our wish. The FHA came forth with guidelines for a new believed we were off to much higher volumes. Oddly, coinciding with the new program was a drop in reverse mortgage volume, from which we have not yet recovered. On the bright side, due to high investor interest in HECMs in general, we could make more money per loan. In particular, we could make a lot more per loan when
Fixed-rate HECM production grew to become 70 percent of all reverse loans produced. In our production, one-third of all loans originated. Was something that different about our clients, or was something else going on in the industry? Could it be that
mortgage. Now, the only choice for a Early anecdotal evidence suggests that the adjustable loan is now making up 90 percent of all production. Seniors
So where does my unease lie in all of this? Did we do right as an industry by helping so many seniors take question when too many folks were sold the option-ARM loans, loans with ultra-low starting payments that would eventually escalate into an unaffordable and much higher mortgage payment. The last mortgage crash was fueled by greed at all levels of the mortgage business. This greed ran from the loan originator to the secondary market to the rating agencies blessing the portfolios. To use a gambling term, the mortgage industry went all in on a very bad bet. I would say that we were fortunate that the FHA stopped us in our tracks at this point. The FHA took the judicious step to halt a product that was worrisome. This program jeopardized the entire HECM program and could have created much larger losses for the agency if left running in its current form. Fortunately, we didn’t kill the goose, but we did lose one of the golden eggs.
this article. Rather, let’s learn some lessons from the past. The reverse mortgage is more than just another
ORIGINATING
According to philip “The reverse mortgage is more than just another loan program. It is a
that can help folks live out their lives
advisors who would recommend that a client withdraw all of their savings from their retirement accounts. If all HECM funds are withdrawn at closing, the result will be a diminution
industry goodwill we might have in the future. I am going to take a stab at suggesting some commonsense rules that might help us keep this program on the right track so that we can better serve the senior demographic. ONE || Look carefully at the borrower’s stream or a line of credit will provide
TWO || If the payoffs on existing mortgages are less than 70 percent,
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Frankly, I like reverse mortgages and their ability to help folks. I feel like I am doing good and important things for society. By working ethically, we can do the right thing for our clients and their families and still earn a good living. The choice is ours to make or break. I would be interested in knowing where you stand. x
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out to the borrower.
FOUR || If the reverse is an adjustable loan, discuss with the borrower how making periodic payments on the loan could work to their advantage in the long run.
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Ideally, it would be best for senior borrowers and their heirs if the HECM was structured to provide income streams over the long term through the use of a line of credit. Generation Mortgage Company has developed a tool to demonstrate the future capability of an untapped line of credit. Examples show that folks taking a line of credit early in their 60s could have $1 million available to use in their early 80s. That, my friends, is
The future of the reverse mortgage market will depend on how well senior customers are treated today. If we shortchange folks today for fast
THREE || Put yourself in the borrower’s shoes. Ask yourself, “What would be best if I were the one taking out this loan?” How might you like the loan to be set up?
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available by the product.
a decent cushion to have available at that point in life.
provide examples on how the reverse mortgage can be used without taking all of the funds at closing.
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The ReveRse Review July 2013
ORIGINATING
Sometimes, the Answer Can Still Be Yes MI C H AEL J. W ELTMAN
S
ome of us in this business are seasoned veterans, and others are new to the product. Regardless, one thing is for certain: Every company has its own way of doing business. I believe that it is part of our job to know who does what and how well, to know our peers in the business, and to be willing to ask for help when a client’s need surpasses our personal expertise or our company’s set of offerings. Sometimes, the answer can still be yes, even when our company says no. We all know the reverse mortgage business is an ever-changing, shapeshifting industry. We have an alphabet soup of government entities regulating us and rewriting guidelines and documents for us, always adding layers of new protections for the consumer, because the bad guys did something bad, and the alphabet soup does not want it to happen again. I have been in reverse for 12 years now and I have experienced numerous changes in this space. But one thing always remains the same for me: the need to treat the customer like my own mom and dad. I work hard every day to help my clients through this process. With skill, diligence and great customer service, I guide them toward the right program and plan to help them support their retirement. And if your company does not offer the plan they want or need, perhaps you should think about who does. If you know it exists out there in the reverse world, offered by your friends down the street, then hand them off with grace and dignity, and continue to help that client through the process, even if you aren’t doing their loan. The most important thing is to ensure that that senior gets the expert help they need. 24
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Five years ago, a senior manager told me that this business is a social mission, and I believe that to be true. We have a certain agenda that no one else in the mortgage industry has: Our main goal is to assist seniors looking to support their retirement. In order to best complete this social mission and service our senior clients, it is sometimes necessary to recognize what we can and cannot do. Sometimes, this means passing a client off to a colleague at another company that might be able to better assist that particular senior. For example, not all companies are licensed to do business in every state. In other situations, your company’s underwriting policies prevent loan approval for borrowers with certain circumstances (e.g., borrowers with mobile homes, log homes, new construction homes, or those seeking reverse for Purchase loans).
As originators, we must work within the parameters that our company has instituted. But if we are working in the best interests of our client, perhaps we can connect them with a colleague who may operate under a different set of parameters that can better meet the client’s particular need. Sometimes, there are others in this business that can say yes when we must say no, and I feel that person so they can still get the help they need. Why, you ask? Well, because it’s the right thing to do. To me, this type of situation is comparable to a referral one receives that does not offer any type of reverse mortgage. Often, a bank, credit union, a client to a reverse mortgage lender so that their client can get the help they need. In these situations, those folks are
ORIGINATING
GOING TO THE SOURCE
We have a certain agenda that no one else in the mortgage industry has: Our main goal is to assist seniors looking service our senior clients, it is sometimes necessary to recognize what we can and cannot do. Sometimes, this means passing a client off to a colleague at another company that might be able to better assist that particular senior.
coming to us because we are the experts capable of helping them obtain
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them to someone who could say
you were looking for, even if it was not in their store? And wouldn’t you tell your friends and family what great service you got? You would remember that they went above and beyond the call of duty for you, and that is what excellent customer service is all about.
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And remember, they have friends and family, they have neighbors and acquaintances, and perhaps they will tell them how helpful you were. Perhaps they will tell them that instead
After all, don’t all of us expect to be treated this way? If you were shopping for something at a specialty store and they did not have what you wanted, wouldn’t you appreciate the salesperson who directed you to the right place? Wouldn’t you want the merchant to tell you, since they are the
To be sure, we know which lenders can handle the special circumstances— non-borrowing spouse cases, mobile homes built before 1990, and all the other unique stuff we tend to come across and can’t help with. Let’s make that referral with a smile and a handshake, and help the client anyway. By doing so, we can elevate our business and the reverse industry in general to a new level of customer service. We are the experts, and even when the loan can’t be done through our employer, we can make sure the senior client gets the help they need. After all, isn’t that what it’s all about? x
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when our company is unable to assist a client, we can let them know that some lenders have asset types and borrower conditions that prevent them from approving the loan, but that perhaps those restrictions aren’t upheld by all companies. But because we are the experts who care, we can direct them to a lender who may be able to help them in their unique circumstance.
yes. You went through the trouble of helping them, even though that meant that you were not going to be doing their loan.
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The ReveRse Review July 2013
ORIGINATING
Selling the AdjustableRate HECM M A RK O ’ N E IL
I
t’s July, and the last of the HECM
closed. Early indications suggest that our industry is taking this latest change in stride and is making the transition back to an adjustable-rate mortgage (ARM) market. Change can this change will lead to a healthier, more sustainable HECM program, which will lead to more business opportunities for those of us who weather the storm. To compete and be successful in this new ARM-dominated HECM market, it’s crucial for reverse mortgage professionals to understand and master the features of the ARM product. If you are new to the industry, or have not done many ARM HECMs in the past several years, there is no better time to make sure you and your staff are fully conversant in the The Features of an ARM Loan An important feature of the adjustablerate HECM is an open-ended line of 26
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credit. This means that funds may be drawn, paid back and then redrawn at HECMs, which are generally offered as closed-end credit, where prepaid funds may not be redrawn. This is an important distinction, because the adjustable-rate HECMs owe much market appeal—to the fact that it functions as a revolving line of credit. Another important feature of the ARM HECM is the availability of different payment plan options, which include a growing line of credit, tenure payments (monthly payments for life), term payments (monthly payments
combination of monthly payments with a credit line). These payment options add to the utility and appeal for borrowers who are considering the well as their trusted advisors. When selling the ARM loan, it is crucial to understand how expected rates determine principal limit. While
by the investor and are typically the same as the note rate, ARM expected rates are based on the average 10-year swap rate, plus the applicable margin. The ARM note rate, meanwhile, is based on the average one-month LIBOR, plus the applicable margin. Anytime the expected rate is at or below 5.06 percent, the borrower will receive the maximum principal limit. When the expected rates are above 5.06 percent, principal limits begin to drop remember that the quote you give a prospective borrower today could be different next week. The good news is, upon application, most lenders will lock in the principal limit for 120 days. Check with your manager or account executive for details. Sales Ideas The adjustable-rate HECM is really a
different payment plan options and open-end credit features make the
ORIGINATING
THINGS TO KEEP IN M IND Borrowers who close with a line of credit generally will not be able to access those funds for several weeks. Make it a point to discuss this with borrowers so they can ask for adequate cash at settlement to see them through.
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Once borrowers are more comfortable with the HECM ARM concept, it is easy to show the many ways that a HECM is superior to a HELOC. Features such as the growing credit line, the FHA insurance, the lifeterm and the fact that the loan is not callable, should all elevate the borrower’s comfort level. And don’t forget: HECM borrowers may make a prepayment, at any time, in any amount, without penalty. For those concerned about the negatively amortizing loan balance, sell them on the ability to make payments, along whenever they want. Personally, I believe that the greatest feature of the HECM ARM is the growing line of credit, but it never ceases to amaze me how unknown and underappreciated this feature really is. Especially in the current economy, looking for yield, the growth rates will astound people. Find a CPA who caters to retirees and tell them you can offer a credit line with a growth rate in the 3 to 4 percent range. You will have a referral source for life.
easily sold feature of the ARM is the monthly tenure or term payment plan. If you are still working, it might be hard to conceptualize, but for everything. You can show a borrower who is barely scraping by on Social Security a way to safely add hundreds At that point, your biggest problem will likely be explaining to them and their children how this is not a gimmick. Conclusion There are a lot of reasons to be excited about the future of both the HECM ARM program and reverse mortgage products in general. The demographics are undeniable and, going forward, retirees will tap home equity in greater numbers to help maintain their standard of living. The recent and upcoming changes to the HECM will ensure that there is a healthy, sustainable program for years to come. It is incumbent upon those of us on the production side to make sure that we fully understand all of the tools at our disposal so that we can consistently offer the most appropriate loan to our borrowers. This will in turn make you more competitive in your marketplace and further cement the reverse mortgage as a legitimate, mainstream x REVERSEREVIEW.COM
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sPotlight
Back when I was still originating HECMs, I found it enormously helpful to compare the HECM ARM to a Home Equity Line of Credit. Both are open-end credit, both are mortgages secured by liens against the property, and both allow borrowers considerable
their proceeds. Explaining the product in these terms helped demystify the product for borrowers who, in most cases, had favorable opinions of the HELOC.
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Let’s face it, it isn’t rocket science, but HECMs can be daunting to the average homeowner. Much of the mystery surrounding the program is based on a lack of understanding or, worse yet, misinformation from the media or some other trusted source. It’s going to be necessary in most cases to spend some time demystifying the product for your client.
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The HELOC Alternative
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is motivating the borrower before making a recommendation, you run the risk of confusing the client. At worst, you may lose the sale, as people tend to not act when they are confused.
Because the originator compensation rules are different for openend and closed-end credit, brokers may be able to pay some of the borrower’s closing costs. Ask your account executive for details.
MaRketing
product highly adaptable, allowing you to customize a solution for the individual borrower’s situation. At the same time, all of these options can be confusing to borrowers. Because of this, it’s important to know your client and fully understand their individual situation, biases, wants and needs before discussing loan features. If you
Don’t forget to let your borrowers know that after the loan closes, for a nominal fee, payment plans can be changed.
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Avoid the temptation to refer to the growth in the line of credit as “interest.” This is not accurate and will confuse borrowers. Growth in the line is nothing more than an increase in the amount of funds the borrower may access, similar to when the credit card company increases your borrowing limit.
The ReveRse Review July 2013
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CONNECT
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n February of this year, The Wall Street Journal described LinkedIn as “the ugly duckling of social media.” This is true in many ways, but it’s important to realize that the ugly duckling eventually grew up to be far better than its peers. One of LinkedIn’s greatest successes is within human resources, where the site has become one of today’s biggest sources for job candidates, career pages and job ads. But what use is LinkedIn for marketing purposes?
STEP ONE
Have your employees register for LinkedIn accounts and link with your company. Their professional contacts will be the start of your company’s fan base, much like Twitter. They don’t need to “like” your
The ideal use of LinkedIn within the mortgage
of the contact’s name with your company’s name that will grow your
LinkedIn is an entirely different beast than Twitter or Facebook, but in the end, the game is still the same; it’s all about combining your marketing efforts with positive feedback from your custumers to encourage potential clients to engage with you. Following these easy steps is a great way to begin to garner the momentum you need to grow your reverse mortgage business. x
to outsiders. Encourage employees to join groups related to your industry. Have a few designated employees contribute to discussions by sharing, posting links, answering questions and otherwise participating in conversations. Also, be sure to launch a group page for your own company and encourage employees to join.
STEP THREE
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in discussions and groups. They’re management for a number of reasons, primarily because they’re intelligent and trusted to do a good job. These are the best people to showcase, as they will put your company’s best foot forward.
Join groups. Groups are one of the best ways to expose your company
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Management must be involved in getting employees registered on LinkedIn. They should
STEP TWO
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your face online next to a request for how to actively generate the best leads does nothing good for your reputation. Instead, it’s all about connections and how you work them. The more active employees a company has on LinkedIn, the stronger its presence will be, the greater its network of contacts will be and the larger the company’s potential to be seen as an industry expert becomes. This yields trust and attention, and both of those things contribute mightily to sales.
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industry?
When employees register, be sure that their
they have. The more employees a company has on LinkedIn, the merrier, but the smart and Internet-savvy employees are the ones whom you want to invest the most energy into showcasing. If that means working 25 to 35 minutes of social networking into their workday tasks, so be it.
STEP FOUR
List services that your company offers. Companies need an overview tab and a services tab where they can list all of the products and services that they provide. This is how former clients can recommend a particular service and enhance your company’s reputation. Nothing matters more to potential consumers than the opinions of their peers, especially their immediate contacts. Collecting positive feedback for your services in one place showcases this to maximum effect. Don’t be afraid to ask those who give you positive feedback to post it on your company’s LinkedIn page.
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The ReveRse Review July 2013
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APPRAISING When a Property Falls Short JOH N GO L D E N
HUD’s minimum property standards and requirements, the appraiser should move forward with a report that is conditioned Or, the appraiser should note that further required if the issue is outside of the expertise of the appraiser (if there are structural issues, for example). Other issues that prevent the appraiser from stating that the property meets HUD’s minimum requirements should be clearly described and left in the hands of the underwriter, who then must address additional requirements of the borrower and make the ultimate determination of the property’s eligibility. A pivotal point that I think is often missed is that the appraisal report is a key component in the determination of eligibility for the loan. As such, even in cases where property characteristics fall far outside the guidelines, it is necessary for the appraiser to report factual information for inclusion in the loan
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bad and ugly) in accordance with industry regulations and guidelines. Further, a failure to complete an appraisal report based on the
uses that go against local zoning ordinances. If the property has conditional
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noticed that it is becoming more frequent for appraisers to overstep their bounds on the basis that they believe certain circumstances will not allow loan approval for the property in question. In certain cases, appraisers have gone so far as to deny writing up reports on the basis that “this property will never get approved.” This is troublesome to me in that eligibility is NOT the responsibility of the appraiser, but that of the underwriter. The appraiser is charged with inspecting the property and deriving value based upon market data, costs and income potentiality,
to the property’s condition, or other circumstances related to unpermitted
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understand the concerns of both sides, lean on industry regulations and guidelines, and help create a solution that allows all parties to come together toward an effectual median.
This situation arises most often on HUD-
In certain cases, appraisers have gone so far as to deny writing up reports on the basis that “this property will never get approved.” This is troublesome to me in that eligibility is NOT the responsibility of the appraiser, but that of the underwriter. The appraiser is charged with inspecting the property and deriving value based upon market data, costs and income potentiality, then reporting all of these findings (good, bad and ugly) in accordance with industry regulations and guidelines.
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underwriters, or sometimes a combination of all three. In some cases my advice is sought to help handle an atypical circumstance. In other cases, I need a black and white striped shirt and a whistle as I play referee in a contentious situation between an appraiser and another party involved in the loan transaction. During
industry regulatory requirements.
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A
s the quality control manager for national appraisal management company Landmark Network, I deal with myriad escalated valuation matters
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ACCORDING TO JOHN GOLDEN
x
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The ReveRse Review July 2013
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1
SETTLEMENT ROADBLOCKS
Incomplete or missing Statement of Information (S of I)
2
TITLE ROADBLOCKS
Trust and Power of Attorney (POA):
Missing or incorrect payoff information
with the trust and the POA, this would eliminate the need for a second review. IRS Liens:
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incapacitated or incompetent, a review of the trust will determine how many doctors’ letters will be required. In most cases, this normally conditions for two doctors’ letters.
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Missing documentation
Foreclosure of the property
that the original POA is recorded in each transaction if it is not already of record.
When there is an IRS lien, obtaining a payoff can take up to 30 days. Deceased Parties on Title:
*
2 0 12
2 0 11
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BEST
Please provide deceased party information. This helps eliminate last-minute surprises, especially if a probate or a formal proceeding is required.
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VOTED THE
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have a question for this column? Email info@reversereview.com.
borrower is no longer competent, there should be language within the POA regarding doctors’ letters. This will need to be submitted for review. Please note that it is required
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The ReveRse Review July 2013
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HMBS
SECONDARY MARKET
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An Update From Wall Street D ARRE N S T U M B ER G ER
percent of the market, with Urban Financial Group and Livewell Financial next in line at $220 million (22 percent) and $209 million (21 percent) respectively.
LIBOR Standard production to dominate origination statistics until ECM spreads have stayed remarkably resilient over the last several months.
(15 to 20 LOAS) in recent weeks, driven largely by extension and convexity reasons. New
seasoned CMT.
HMBS volumes were just shy of $1 billion in April with three HMBS issuers comprising roughly 80 percent of issuance. Reverse Mortgage Solutions issued $365 million or 37
* treatment upon the pooling and sale of HMBS to a third party. Talk of this issue has been quiet in recent months, and it’s mainly because the industry convenient!) We can talk about the important need to get FHA authority to implement underwriting guidelines via mortgagee letters all we want, but without HMBS issuers getting sale accounting treatment upon securitization, the industry is not sustainable in its current form. This must we’re going on year two with no resolution. What else to expect? There’s been chatter about loan limits dropping at year end, initial and periodic caps, along with lower lifetime caps being lowered again from 5.06. Seems like a lot of medicine to be taking at once
H.R. 2167, it has a massive amount of work to do on the Hill in terms of education and buy-in for the program. CIS and NRMLA are critically important in this endeavor, particularly as the FHA reform bill gets traction. That being said, proprietary products will return to the market sooner than one may have expected six to eight months ago, and it will be due to necessity. x REVERSEREVIEW.COM
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sPotlight
spreads have tightened considerably from roughly 150 to swaps to 120. LIBOR Saver spreads have tightened a tad to inside of 100 DM. While I don’t expect much tightening for Standard, Saver has room to tighten, but directionally the story remains that new issue HMBS continues to be well bid on Wall Street. Seasoned paper and IOs also remain well bid across vintages. We’ve seen large blocks of IOs and IIOs trade very well along with 2008
Away from spreads and volumes, the same basket of hot topics remain, the largest of which is the true sale accounting issue that’s reaching its
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currently trading at 56 to interpolated swaps, while new issue LIBOR Standard HMBS trades at 40 discount margin (DM).
say, “if this is rolled out”—at press time H.R. 2167 has not been brought to
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Additionally, as expected, we’ve seen the front-loading effect from the origination community, with many getting a high number of borrowers
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June and the market shifts to 90 to 95 percent LIBOR Standard. Utilization rates are hovering around 75 percent for LIBOR loans, so even without losing any originations on a unit basis, industry dollar volumes will be considerably lower.
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In May, issuance dropped to $840 million with RMS, Urban and Livewell issuing 77 percent of the month’s HMBS. RMS issued $295 million, Urban $215 million and Livewell $147 million. I expect monthly volumes to
The ReveRse Review July 2013 coRRecting the PuBlic’s MisPeRcePtions aBout ReveRse MoRtgages
SPOTLIGHT ARTICLE
Changing the Public’s Perception BY RICHARD WILLS
w
IN MONTH’STEHIS DITION,
richa taLksrd WiLLs aBout ELEva t indusing thE try’s imagE .
H
ello, my name is Richard and I am a reverse mortgage originator.
I am borrowing this introduction style from Alcoholics Anonymous because we in the reverse mortgage industry must accept that we have a perception problem, and that we have to take ownership of this problem in order to correct it. We have all heard many damaging, erroneous beliefs that feed the negative perceptions people have about the reverse mortgage industry. Former General Electric CEO Jack Welch appropriately summarized the importance of public perception in a letter to The Wall Street Journal: “One thing I learned during my years as a CEO is that perception matters. And trust have been shaken, I’ve learned the hard way that perception matters more than ever.”
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HERE’S A LIST OF SOME OF THE MOST PREVALEnT MISCOnCEPTIOnS AbOUT REVERSE MORTGAGES: OnE You are giving your home away if you take a reverse mortgage. TWO The reverse mortgage industry preys on the elderly. THREE The reverse mortgage company is just trying to steal your home. FOUR The reverse mortgage is a niche product and only to be used as a last resort. FIVE SIx Reverse mortgage originators, especially brokers, cannot be trusted to give accurate advice and information to seniors. They are only after the commission and they are not concerned about the needs of the seniors.
SEVEn Reverse mortgages are expensive. EIGHT Reverse mortgage originators are scam artists. people in Congress, the CFPB, state regulatory agencies, consumer groups and even consumers themselves have cultivated and spread these negative perceptions about the reverse mortgage industry. NRMLA and other industry leaders have worked tirelessly to promote the positive aspects of the program and refute
these ideas. They have developed programs to educate consumers and reverse mortgage specialists alike. NRMLA has crafted ethical lending practices for its members and demands that they be followed. There are many positive indicators that point to potential growth for the industry, including but not limited to:
SPOTLIGHT ARTICLE slowly rising home prices, low interest rates, a growing potential client base planners. But despite all of this effort, perceptions persist, and if they are allowed to continue they will seriously impede the growth of our industry.
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*
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Talk to your friends in the business. Share your ideas. Take action. Send your suggestions and comments to The Reverse Review. Let’s all get involved and discuss ways that we can help
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the negative perceptions. I disagree. I believe that individual actions, coupled
I recently received an award from the Baltimore Bar Association’s Senior Legal Service for Volunteer of the Year. I did not do all the hard work for recognition. I did it because I believed it
received.
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borrower’s children. We are the ones engaged in long discussions with the borrower concerning an integrated retirement plan. We have acquired relevant insights over the years that will hopefully assist us in overcoming the negative stereotypes. Some people believe that it is naïve to think that
to be working with want to know you are ethical and professional. One of the easiest ways to accomplish this is to tell people what you have done in the community. I know this sounds simple, but for numerous people it will be extremely hard. For many, performing charitable acts is a very private and personal action that they believe should not be made public; they believe that making your charitable acts public demeans the acts themselves. Others think it is naïve to believe that making your civic awards and charitable actions public will assist in correcting misperceptions about reverse mortgages and the individuals who work in the industry. I disagree. We work in an industry that is incorrectly judged as harmful to seniors. Our personal integrity is being questioned. We need to get out of our comfort zones and announce our good works to the community. We need to put a human face on our industry.
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INDIVIDUALS WORKING IN THE INDUSTRY NEED TO TAKE ACTION NRMLA, although essential to the industry, cannot resolve the problem by itself. We are the ones in the kitchen
TELL PEOPLE ABOUT YOUR WORK IN THE COMMUNITY AND YOUR ACHIEVEMENTS To overcome these negative perceptions, you need to create awareness that these misconceptions are far from reality. If people in the community are suspicious of you and reverse mortgages, working in an ethical and professional manner
WE MUST BE EFFECTIVE ADVOCATES FOR THE HECM PROGRAM. WE MUST PRESENT OUR STORY ABOUT REVERSE MORTGAGES TO PEOPLE IN OUR COMMUNITY Mr. Bart Johnson, a prominent individual involved in the development of the reverse mortgage program, told me, “Reverse mortgages present an easy target. After all, who doesn’t want to help and protect seniors? But our industry is as much an advocate as a business, and we have to tell our story rather than just responding to theirs. We must play offense as well as defense. NRMLA has effectively undertaken the challenge. We are making progress, but it will take time.” I believe that in addition to joining NRMLA’s mission, we as individuals have to be effective advocates of our program. One way to do this is to gather positive, reallife stories from our clients. Get it in their words, do not write it for them. Then distribute these positive reverse mortgage stories throughout your business community. Post them on your website, send them to neighborhood newspapers or radio stations. I emphasize that we as individuals can be much more effective by sticking to a positive message and accentuating
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ENCOURAGE PEOPLE TO JOIN AND SUPPORT NRMLA NRMLA is well aware of this problem and is gearing up for an extensive publicity campaign and other initiatives to set the record straight. We need to lend our support to NRMLA. The more people who join and work with the association, the stronger it becomes.
ACT LOCALLY Our individual actions will be much more effective if they occur in the communities in which we work and live. Some of you may not like his politics, but President Obama organized a dazzling community-bycommunity grassroots campaign that built the foundation of his successful national campaign. We can learn from that.
was the right thing to do. Previously, I have tended to keep my charitable and civic work to myself and my family. Not anymore. I now tell people about my work in the community. It works. It helps break down suspicions about you and the product you are selling.
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There is no easy solution to our problem. The most damaging misperceptions are the ones that attack the integrity of the program and the people who work in the industry. Unfortunately, those perceptions are the hardest ones to change. My purpose in writing this article is to get the people working in the trenches to start talking about this problem. I want individuals to share their thoughts with others about what we can do as reverse professionals to overcome, or at least mitigate, the effects of these misperceptions. I am offering the following suggestions and observations as a starting point for what will hopefully become an ongoing discussion.
with our association’s extensive national program, will garner the best results.
The ReveRse Review July 2013
The
Model As originators seek more avenues to connect with borrowers across the country, the centralized call center is helping some seniors complete the loan process over the phone. By Jessica Guerin When the Home Equity Conversion originated in a face-to-face interaction at the so-called kitchen table. There, details of the loan to a potential circumstances and discuss whether or not a HECM loan would be a sound solution for this particular client. But just as technology has invaded nearly all aspects of our lives, so too has it altered the way reverse mortgages are originated. Now, many leading lenders are operating call centers from which they engage potential borrowers in discussions of a HECM. In many cases, the entire conducted over the phone. While the traditional, feet-on-the-street approach is still the foundation of many successful reverse mortgage operations, some are watching the
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notable rise of the centralized call center model with interest.
The Rise of the Call Center Reverse mortgage call centers began to appear about a decade ago. Aided by an increase in TV advertising and working from one central location began reaching out to targeted leads interested parties around the country looking for more information about the loan. But it wasn’t until 2007 that a borrower could complete the entire loan process over the phone. In April of that year, HUD issued a mortgagee letter allowing HECM borrowers to engage with a reverse mortgage originator and a HECM-approved counselor over the phone. Previously, borrowers were required to make every effort to meet with either an originator or a counselor in person. But acknowledging that a face-to-face meeting could be
problematic to arrange for some seniors, HUD essentially ruled that the entire process could be conducted over the phone. Now, no matter where they are located, seniors can pick up the phone and call an 800 number to talk directly to a reverse mortgage specialist, and that specialist can see them through the entire loan process, distributing information about overthe-phone counseling, arranging for a property appraisal and overseeing the loan through closing. The reverse mortgage call center—where loan management operate together under one roof—began to thrive. Effectively adding one more channel by which lenders can connect with senior borrowers, this centralized model has altered the origination landscape for HECM lenders. Today, leading lenders like One Reverse Mortgage and AAG rely mostly on their call centers for
P
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actually able to look at how they perform throughout every stage of the sale to see if they’re converting things the way they should be to achieve the right conversion numbers. Because the sale is not a one-call close, there are many parts to it, and we have to make sure that people are doing every part properly.”
e
au
American Advisors Group
retail origination. Others, like RMS, supplement their branch businesses with call centers in order to accommodate all types of borrowers.
Volume Proponents of the reverse mortgage call center point to the fact that this centralized model lends itself to greater loan volume. Inarguably, an LO operating from a call center can potentially connect with a dozen senior clients in a day, whereas an originator pounding the pavement is limited by geographic location as he or she travels from appointment to appointment. But just because LOs can connect with more borrowers over the phone doesn’t necessarily mean that loans are closed in speed-of-light fashion. According to Paul Fiore, senior vice president of AAG’s retail lending operations, originating loans over the phone still takes time. “What we stress is not to be too fast with the client. Some people may think a call center is just about getting out as many applications as you can and high volume… but we don’t teach a one-call sale. We really want more of a consultative sales approach,” Fiore says. “The goal of the call center is to
“We all work together—from our mortgage bankers to our client-care specialists to our insuring team. We are all committed to the same thing. That is probably the No. 1 reason for our success,” says One Reverse President Gregg Smith. “We don’t have employees; we have team members, and that’s how we approach it daily.” With technology in place to track sales calls made over the phone, management can also monitor staff lead volume and call time to determine the cost per lead. For AAG, the ability to track an LO’s
For Fiore, having his team nearby is essential to successfully managing his operations. “I give credit to the people who run a large feet-on-thestreet business effectively,” he says. “I couldn’t imagine running an outside model effectively, because I wouldn’t have my team near me. What I like about having a call center is that I have team leaders or sales managers who report directly to me, and everything is centralized. It makes it much easier for me to have a handle on what’s going on in the business.”
Training
uncover what aspects of the process
With all LOs operating from one central location, management can easily oversee the training and continued education of its staff.
someone is being with leads—if they’re taking too many, if they’re not taking enough, if they’re making the right amount of phone calls on a daily basis, and if they’re following the sales process,” Fiore says. “We’re
According to Smith, this centralized model lends itself to a hands-on teaching approach. “We are in a constant state of training, coaching and revisiting the things that we have already trained on,” Smith
many people as you can, while still providing great customer service.”
A key element to achieving that of a call center operation. With all staff members under one roof, companies are able to create a cohesive approach to selling and processing loans. At One Reverse Mortgage, this setup has given rise to a company culture that revolves around teamwork. REVERSEREVIEW.COM
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says, adding that the company’s mortgage bankers, as One Reverse calls its LOs, are divided into teams that meet daily. “We’ll discuss anything from what just happened in the marketplace today to an example of a great call with a client. Sometimes we meet to simply revisit our rules.”
agencies, is presented in a uniform manner to ensure compliance with federal requirements. “Quality control is huge; compliance is huge,” Fiore says. “Because we are very systematized, it gives us great control over our loan application process. Whether it’s better than what people do on the street, I can’t say, I just know that for us it gives us really nice visibility into what our LOs do on a daily basis.” Smith agrees that compliance is major and the call center model does help monitor quality control. “Anyone who has been in this space for 10 minutes or four years knows that the licensing, the compliance and the oversight are increasing, not decreasing, so you’d best be prepared for that,” he says. “I think that with the centralized model, [compliance] is easier to assess daily than with the other models that are out there.”
Smith says this constant contact is essential to ensure that One Reverse continues to thrive in an ever-evolving industry. “What you know today may not be the solution for tomorrow, so we’re constantly sharing and interacting with each other to discuss our experiences and what we’ve learned.”
In order to comply with FHA licensing requirements, lenders must ensure that a borrower is working with an LO who is licensed in their state. For a call center operation, this means that LOs must be licensed in several states and that routing systems must be adopted to direct inbound calls to the appropriate originator based on the incoming call’s area code.
Fiore says AAG also puts a considerable amount of time into training its staff, a process aided by the fact that management can audit sales calls to determine what
Fiore says AAG’s LOs are typically licensed in four to six states. “We try to license accordingly so we’re not overlicensed in one state and we’re not underlicensed in another,” he said.
In this hyper-regulated world, doing it the “right way” is essential to staying in business. For those operating under the call center model, compliance requirements are easily trackable as management can, for the most part, control the script and monitor adherence. According to Fiore, AAG’s LOs are instructed to present the information the same way every time. Everything, from the explanation of the loan to the details about available counseling 40
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before they get on the phones, but after,” he says. “We continue to work with them, making sure they are doing the right thing by the client, making sure they are saying the right things on the phone, coaching them up. Because if you just put them on the phones and you don’t listen to their phone calls and work with them… then you can never guarantee that they’re doing it the right way.”
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a great deal of time coaching and
ONE REVERSE MORTGAGE together—from our mortgage
our insuring team. We are to the same thing. that the no. 1 reason for our
we have team that’s how we
In any call center operation, technology is key. According to Fiore, AAG’s complex routing system keeps operations running smoothly. “When a call gets routed into the phone system, it will licensed in that state. And if there’s nobody licensed in that state, then we’ll set up a call back for the borrower, so we can always
Building Trust But connecting a potential borrower to an appropriately licensed, well-trained LO is only half the battle. Now, the LO must develop a relationship with the senior, building trust so that they from the loan. Some argue that senior borrowers are more at ease over the phone and are therefore better able to ask questions and offer details about their personal situations. A phone call might also be more convenient than arranging an in-person meeting or inviting someone to your home. But according to Fiore, despite the presumed convenience, selling a loan over the phone has its challenges. “There’s a disadvantage in that you have to overcome the hesitancy of a borrower who never gets to meet with you face to face,” he says. “What we really try to do is build a relationship with the client. Before we go into any kind of sale, we need to understand why they’re interested in the product, we need to build a rapport and an understanding so we can, as best as possible, try to mimic what someone experiences when they meet someone face to face.”
Fiore said hiring LOs who are personable over the phone is essential. “I really try to hire and recruit people who connect with the client. We teach that above everything else. Forget about selling for a moment and try to build a relationship,” he says.
the best experience we can possibly give them.”
The Case for Multiple Channels
RMS’ channels also coordinate to meet the needs of a borrower. For example, if a borrower reaches out to a call center for information about the loan, but isn’t comfortable completing the transaction over the phone, the call center LO can connect the borrower
Because some seniors will never be comfortable with over-thephone origination, lenders like RMS maintain multiple retail
ike Ken
t
M
“But it doesn’t work for everybody. I’ve met with great salespeople who
space; this is a common situation with
RMS are tremendous in a face-to-face sale, but they couldn’t sell over the phone. And I’ve met great phone salespeople who can’t sell face to face. It’s two different sales, trying to accomplish the same thing.”
The Appeal of Meeting in Person While the success of reverse mortgage call centers proves that there are seniors out there who are comfortable completing a loan transaction over the phone, there will likely always be those who prefer to meet with a HECM specialist face to face. Smith acknowledged that not all borrowers are going to be comfortable obtaining a loan over the phone. that would feel more comfortable doing it face to face,” he said, adding that his staff is sometimes able to overcome any initial hesitancy a senior might have about talking over the phone. “Is there a segment of the clients out there who are focused on doing it face to face? For sure. And is there a certain percentage of that population that ends up doing
Still, Smith concedes that not every potential borrower is going to adapt, and those clients will likely seek out a lender who can send an LO to meet them in person. “If you want to see someone face to face, you’re going to seek that outlet, and we know that. It’s not a unique situation to the reverse
channels to accommodate all types of borrowers—a branch model that with local reverse specialists, a call center that connects with borrowers nationwide via the telephone, and an independent, feet-on-the-street model that enables an originator to travel door to door to meet borrowers in their homes. According to Mike Kent, RMS’ president of mortgage lending, maintaining all three channels is key to the company’s success. “I think to have a good, solid, balanced retail presence, you need to offer the borrower what they need, what puts them most at ease. That might mean someone coming to the house and sitting at the kitchen table, or them going into an or transacting the loan process over the phone,” Kent says. “Our goal is to provide them with the avenue that puts them most at ease, so when they walk away from that transaction they feel that they’ve gotten the highest level of education possible in order to make a decision on whether or not they should move forward with the loan.” Kent says the three channels co-exist neatly and operate with a single mission in mind. “We have a pretty good balance between our three retail channels,” he says. “We don’t have a lot of competition. We’re all trying to get to the same place and do the same thing, and that’s giving the borrower
to a local RMS LO. “I think that we might, as an industry, sometimes pigeonhole ourselves into what a call center means,” Kent says. “For me, a call center is just an avenue to make a connection to somebody who wants to learn about reverse mortgages. You may originate that loan through that connection, or you may have to push it through another connection channel for the borrower to really get the customer experience that they’re looking for.” According to Kent, there is no right or wrong model and it mostly comes down to what suits an individual borrower best. “I don’t think there’s a silver bullet of origination in any single design or structure,” he says. “I think that to have a viable retail presence, you have to be accessible based on what the borrower’s preferences are.” But pending program changes from HUD may impact how the industry does business, Kent says, and this could mean we need to reassess our various approaches to origination. “I think going forward with the change in product and some new rules that HUD will be publishing later this year, we’re all going to have to go back and take a look at how we originate loans and what models we use. We’re going to have to be open to adjusting and changing those models as the market dictates,” he says. “But I think all in all, we’re a pretty nimble industry, pretty entrepreneurial, so I’m quite x REVERSEREVIEW.COM
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DISCUSS
LAST WORD
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Change the Game, Transform the Industry! B ART JO H N S O N
But today we are practical and tactical, constantly reacting to market shocks and major industry changes. In truth, ours is a dysfunctional industry, underperforming against the needs of our marketplace. We must become more strategic and break away from business as usual in order to reach the mass market.
THE KEYS Customer segmentation All customers are not the our convenience. We must differentiate among customers different wants, needs and requirements, and therefore each with different solutions. We must understand that those requirements routinely change, as life events naturally move people into different life stages.
W
e’re treading water in the “red ocean.” It’s very small, constricted and crowded. We keep bumping into sharks. Nothing and nobody is safe. We receive too much help, much of it shortsighted, some of it no-sighted. The big companies bailed because it was more trouble than it was worth, and now we have a new leaderboard by default. We are forced to play the same old game, competing within the existing market space, exploiting existing demand. We have become commoditized. We strive to beat the competition and to make the value-cost tradeoff—to choose between differentiation and low cost. We are a one-sponsor industry, and that sponsor seeks to become smaller, not larger. There are too few products, aimed at too small a market niche. We can still build our businesses, but only if we can survive. We remain at less than 3 percent market penetration, despite a 25-year quest to help even more consumers. We must break through to the “blue ocean”! It’s very large, uncrowded and inviting. We must create uncontested market space (the other 97 percent of seniors and older boomers). We must render competition irrelevant, create and capture new demand, break the value-cost trade-off, and pursue both differentiation and low cost. That is the opportunity that exists today: a vast, underserved and underpenetrated market, with huge, pent-up demand. 42
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Product development
The FHA never intended the HECM to be 100 percent of the reverse mortgage market, nor were its products designed for all potential customers. We menu, and begin developing innovative products for our diverse and unique customers. We have done this before. Before the global recession, proprietary jumbos accounted for 6 percent of unit volume and 19 percent of dollar volume. The FHA seeks to return to its original mission: servicing low-income/low-home-value customers with partial draws upfront and the rest in lines of credit or annuities spread over their remaining lives. As the agency works toward this change, its products have become more expensive for less proceeds, which will encourage the entry of proprietary products for the non-jumbo world. Combined with smarter marketing and distribution, these changes will open up the mass market. The industry should dwarf its golden years of 2006 to 2007. We can’t wait for this to happen; we must make it happen! It sometimes seems that in the wrong dialogue. But rest assured, there are many smart people in this business who are already working to transform the industry. x
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