The Reverse Review March 2013 by The Reverse Review

Reverse

Mortgage Lenders

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this issue

INSIDE

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HOW WILL THE H4P FARE WITHOUT THE FIXED RATE? PG. 16 CONCERNS ABOUT FHA VIABILITY SPARK DEBATE ON CAPITOL HILL PG. 38 + JOHN MITCHELL SITS DOWN IN OUR HOT SEAT PG. 14

THE

REVERSE march 2013

review

Barney Frank talks about

the HECM, and Dodd-Frank life after Congress

The Reverse Review March 2013

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The Reverse Review March 2013

From the Publisher accompanied our editor, Jessica Guerin, to Arizona for the interview. Brisk and businesslike, Frank kindly answered our questions about the reverse mortgage program and the legacy of his push for financial reform, flashing subtle signs of his trademark wit. Whatever your personal opinions of him may be, it’s hard to deny that Frank’s work in Congress will have a lasting impact, and it was an honor to talk with him about his experiences on Capitol Hill.

A note from erik richard

As a publisher for

The Reverse Review, I am fortunate to be part of the team that brainstorms possible contributors and story concepts for the magazine. In January, we created a list of interview ideas for 2013 that we thought might be interesting for our readers, and one of those was an interview with longtime industry ally Barney Frank. As many of you may know, Frank retired from the House of Representatives at the end of the last congressional session. Despite his busy schedule, TRR was able to secure time with the former congressman following a speech he gave in Scottsdale, and on February 12 I

{ Erik Richard } Want to talk to Erik? Reach him at erik@reversereview.com.

Senior Publisher Reza Jahangiri

Publisher

Erik Richard

Editor-in-Chief Jessica Guerin

Creative Director Traci Knight

Copy Editor

Kersten Wehde

Marketing Director alycia colacion

Advertising Sales Rep. Brianna Conlon 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 © 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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Feedback is very important to us here at The Reverse Review. Send us your thoughts on past articles or something that is on your mind and we will publish it in this section. information@reversereview.com

Publisher

Meet the Team

t ay ec st onn c

Feedback

As I reflect on the interview, I feel grateful for the contribution Frank has made to the industry as a pioneer for the Home Equity Conversion Mortgage. He has been and continues to be a passionate supporter of the program, even though he no longer has a vote. It is very clear that with his departure from Washington, we must continue to build new alliances in the halls of Congress to help protect and advance the reverse mortgage program so that we can continue to provide this valuable service to our nation’s seniors.

FACEBOOK AND LINKEDIN

Table of Contents 35 | Tech

TRR 3.13

The Weak Link in Cybersecurity How human error can lead to digital crime

In this issue... 18 Alain Valles Originating

Stu Sjouwerman

37 | Legal Leveling the Playing Field for Mortgage Loan Originators 08 | movers & shakers

The latest developments in companies across the reverse space

09 | Industry Update Headlining stories of the past month Reverse Mortgage Daily

11 | Roundup

A collection of recent facts and surveys affecting the reverse market

12 | NRMLA News

Read about the association’s current initiatives. Darryl Hicks

14 | Hot Seat

16 | Originating Will Losing the Traditional Fixed-Rate HECM Affect the H4P? How the Purchase product will fare without the fixed-rate Michael Banner

Founder of Reverse Mortgage USA

Haydn j. Richards, Jr.

38 | Legislative Trouble in the House

H. West Richards

Why We Do What We Do

41 | HMBS It’s Always Darkest Before the Dawn

When you focus on the value of our service, the rest is just noise in the background. Joe Morris

25 | Marketing

The secondary market lags in the wake of product change, but the future still looks bright. Darren Stumberger

Community Connections How partnering with local leaders can help build your business

26 BRITANY Luth Underwriting

Concerns about FHA viability spark debate on Capitol Hill.

22 | Originating

Ed Frankel

John Mitchell

Uniform loan originator tests and new LO compensation rules will alter the rules of the game.

42 | Spotlight Charitable Ventures

54 Sherry b. Apanay Last Word

Reverse mortgage lenders give back.

29 | Appraising It’s a Deep Subject How to deal with private well water and septic sewage systems

Rhiannon Behnke Lauren Willis Tracy Milligan Colin Cushman

John Golden

jessica guerin

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HOW WILL THE H4P FARE WITHOUT THE FIXED RATE? PG. 16 CONCERNS ABOUT FHA VIABILITY SPARK DEBATE ON CAPITOL HILL PG. 38

+ JOHN MITCHELL SITS DOWN IN OUR HOT SEAT PG. 14

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Barney Frank talks HECM with TRR.

“I like things that break through artificial barriers. Sometimes people say, ‘Well, you have to be this or that; either you own your house or you sell your house.’ This is an example of how you can get the best of both worlds… It’s a perfectly sensible way to deal with life cycle and economic needs.

march 2013

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The controversial Democrat from Massachusetts sits down with The Reverse Review to talk about the HECM, Dodd-Frank and life after Congress.

Want the online version? reversereview.com/magazine

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46 | Barney Frank

FEATURE

THE

REVERSE MARCH 2013

review

Barney Frank TALKS ABOUT

the HECM, Dodd-Frank and life after Congress

reversereview.com

8 TRR

The Reverse Review March 2013

Contributors

Darryl Hicks

John Mitchell

Michael Banner

Alain Valles

Joe Morris

Ed Frankel

Britany Luth

John Golden

Frank Howard

| TRR

Da r ry l H i ck s

joh n mi tc h e ll

mi c h ae l b anner

12 | NRMLA News g Darryl Hicks serves as vice president of communications for NRMLA. Before joining the association in 1999, he spent three years writing for National Mortgage News, where he covered politics, regulatory changes impacting the financial services industry and niche mortgage products. At NRMLA, Hicks writes membership communications, contributes articles to Reverse Mortgage magazine, responds to questions from consumers, oversees the Certified Reverse Mortgage Professional program and helps organize conferences and other events.

14 | Hot Seat g John Mitchell, CPA, is the founder of Reverse Mortgage USA. The company is the seventh-largest reverse mortgage company in the country. It is based in Austin, Texas, and originates in 10 states. In 2011, Mitchell authored a 58-page study showing that the reverse mortgage program saves $5 billion a year in Medicaid dollars.

16 | Will Losing the Traditional Fixed-Rate HECM Affect the H4P? g Michael Banner, founder of the American C.E. Institute and national education director for Security One Lending, has been in the mortgage industry for more than 30 years. Banner has held workshops and education classes for more than 3,500 financial advisors on the subject of reverse mortgages. He is certified to teach financial planners, CPAs, LTCI agents and attorneys about the product and has been featured in the Wall Street Journal, on the Fox Business Network and in various regional publications.

A l a i n va l l e s

joe mor r i s

e d f r an k el

18 | Why Meet in the Home? g Alain Valles, CRMP, is president of Direct Finance Corp. in Hanover, Massachusetts, one of the leading reverse mortgage brokers in the country. Valles received a master’s in real estate from MIT and an MBA from The Wharton School, and graduated summa cum laude from the University of Massachusetts. Valles’ mission is to improve the quality of life through responsible financing. 781.878.5626 av@dfcmortgage.com

22 | Why We Do What We Do g Joe Morris is the senior vice president of reverse lending at Open Mortgage. He was responsible for introducing his former company, Unity Mortgage, to the reverse industry in 1991. Unity was then sold to Lehman Brothers, which merged in 2000 into Financial Freedom, where Morris served as principal and COO until 2003. Morris was also the founding president and CEO of Generation Mortgage. He has recently joined Open Mortgage, a privately held company based in Austin, Texas.

25 | Community Connections g Ed Frankel has been in the reverse mortgage business since 2003, when he began with Charter Funding in California. He currently works with Security One Lending near Portland, Oregon. In his previous work in the insurance and annuity business, Frankel founded United Economic Services Inc., a marketing company now owned by Metropolitan Life. Frankel is an active member of several nonprofit groups and has degrees from NYU and the New York Institute of Finance.

b r i ta ny l ut h

joh n gold e n

f r an k h oward

26 | Property Value g Britany Luth is the vice president of operations for Urban Financial Group, Inc., based in Tulsa, Oklahoma. She oversees Urban’s underwriting team and has Direct Endorsement underwriting authority. Prior to joining Urban nearly six years ago, Luth managed a nationwide title company. She obtained a B.S. in business management with a minor in marketing from Oklahoma State University.

29 | It’s a Deep Subject g John Golden is the national quality control manager for Landmark Network, Inc., an appraisal management company that services clients nationwide. Golden, a former certified 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. 888.272.1214 ext. 718 jgolden@landmarknetwork.com

30 | Title Tip g Frank Howard is president and CEO of eTitle Express, Ltd., one of the leading originators of reverse mortgages in the Washington metropolitan area. With more than 35 years of experience in the mortgage and title industries, he has closed more than 3,500 reverse mortgages and authored one of the first adjustable-rate mortgages in the country. Howard has also served on Fannie Mae’s advisory board of directors.

Contributors s t u s j ouw e rman

Stu Sjouwerman

Haydn J. Richards, Jr.

H. West Richards

35 | The Weak Link in Cybersecurity g Stu Sjouwerman is the founder and CEO of KnowBe4, LLC, which provides Web-based Internet security awareness training to small and mediumsized enterprises. A data security expert with more than 30 years in the IT industry, Sjouwerman was the co-founder of Inc. 500 company Sunbelt Software, an anti-malware company that was sold to GFI Software. Sjouwerman has written four books, including Cyberheist: The Biggest Financial Threat Facing American Businesses Since the Meltdown of 2008. knowbe4.com

da r r en s t umb er g er Darren Stumberger

Rhiannon Behnke

41 | It’s Always Darkest Before the Dawn g 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 and finance positions at Goldman Sachs, Morgan Stanley, Merrill Lynch, Standard & Poor’s and KBC Group NV. dstumberger@knight.com

Lauren Willis

Tracy Milligan

Colin Cushman

Sherry B. Apanay

h ay d n j. Ri c h ar d s , jr . 37 | Leveling the Playing Field for Mortgage Loan Originators g Haydn J. Richards, Jr. is a Member at Dykema and works in the firm’s Financial Services Regulatory and Compliance practice. Richards advises the financial services industry on state and federal regulatory matters. He has extensive experience with the SAFE Act, has been deeply involved with the development and testing of the Nationwide Mortgage Licensing System and is a member of the NMLS Industry Development Working Group.

h . w e s t r i chards 38 | Trouble in the House g H. West Richards, executive director of the Coalition for Independent Seniors, served in the U.S. House of Representatives and held the distinction of serving as the youngest chief of staff in Congress. Richards worked in association with the law firm of Troutman Sanders, LLP and later headed up Business Development for Arthur Andersen Business Consulting in Atlanta.

r h i an n on b e h n k e

lau r e n w i llis

42 | Charitable Ventures g Rhiannon Behnke is senior vice president at Security One Lending. She began her career shortly after high school, working her way from entrylevel positions to management. Behnke has a reputation for facilitating significant corporate growth. As the managing director of S1L’s nonprofit division, Community One, Behnke raises and manages funds for several charities. She was recently nominated to serve on the Army and Navy Academy Patrons Association board and the Special Olympics fundraising board.

42 | Charitable Ventures g Lauren Willis is the appraisal manager at American Advisors Group. She started her career in reverse mortgage appraisals in 2002 and joined AAG in 2008. She has watched the company grow from 20 employees to a staff of more than 400. Willis is the chair of AAG’s Give Back campaign, organizing the company’s various charitable ventures both locally and nationally through strategic planning and fundraising.

t r a cy mi l l i g an

c oli n c u s h man

s h e r ry B. apanay

42 | Charitable Ventures g Tracy Milligan is the vice president of operations at One Reverse Mortgage, the nation’s largest retail-only provider of reverse mortgages. Milligan has more than 12 years of mortgage experience with the last 10 years exclusively in reverse. Prior to her employment at One Reverse Mortgage, Milligan managed the underwriting department in Financial Freedom’s California office.

42 | Charitable Ventures g Colin Cushman is the president and CEO of Generation Mortgage Company and a member of the NRMLA board of directors. Prior to GMC, Colin served as the FHA’s director of portfolio analysis and was responsible for developing valuation models to support product development, premium pricing, risk management and operations. He also led the design of the HECM Standard and Saver products.

54 | Last Word g Sherry B. Apanay is the managing director of sales for Urban Financial Group. Apanay has worked in the industry for more than 20 years and has been instrumental in developing broker and correspondent business, working with some of the industry’s most respected individuals. Apanay worked closely with FNMA and FHA during the program’s infancy and has been a member of NRMLA since its inception. She currently serves on the NRMLA board of directors and helped develop its CRMP program. reversereview.com

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The Reverse Review March 2013

Movers & Shakers Read about the latest developments in companies across the reverse space.

Hav e a c o mpan y u p dat e y o u w ou ld lik e t o s e e p u b l i s h e d?

Generation Mortgage Company (GMC) Announces Colin Cushman as New CEO, Hires Cheryl MacNally as Chief Sales Officer, Launches New WebBased Origination Platform

Generation Mortgage Company announced Colin Cushman will serve as the firm’s new president and CEO. Cushman, who joined the company in July 2012, previously served as chief risk and strategy officer for the Atlanta-based lender. Prior to that, Cushman worked as the director of portfolio analysis for the FHA, where he was responsible for developing valuation models to support product development, premium pricing, risk management and operations. GMC hired Cheryl MacNally to be the company’s new chief sales officer. A former reverse mortgage executive at Wells Fargo, MacNally has more than 25 years of mortgage banking experience. Finally, GMC also announced the launch of its new cloud-based origination software, Orchestrator, by Mortgage Cadence, which will enhance services for GMC’s wholesale partners. The new software offers a variety of cutting-edge features and a training interface to help familiarize new users.

Put your business on the map.

TRR wants your company news!

Send us your company’s latest initiatives, programs, hires, acquisitions and more, and be a part of our Movers & Shakers column. Email jessica@reversereview.com

| TRR

Email it to Jessica@reversereview.com.

Mortgage Information Services Releases Online Fee Quote Program Mortgage Information Services (MIS), a nationwide provider of title insurance, settlement services and valuations, has launched a new Web-based fee quote program called QuotelinkTM. Available to all MIS clients nationwide for free, the advanced software allows users to log in to the MIS website and enter a minimal amount of information to receive an instantaneous quote for title, settlement or recording fees for a refinance transaction on a property located anywhere in the country.

Patrick Naughton Joins the Underwriting Team at FNC Title Services

FNC Title Services, a Maryland-based title insurance provider that is licensed nationwide, welcomes Patrick Naughton, Esq., to its underwriting team. Naughton has more than 20 years of experience providing legal counsel for all aspects of

commercial and residential settlements, underwriting and real property issues. He has served previously at Chicago Title Company, First American Title Insurance Company and Stewart Title Guaranty Company. In his new role, Naughton will focus on underwriting HECM transactions. “FNC is very happy to welcome Patrick,” said CEO Ali Farahpour. “We are very pleased to have such an experienced underwriter join the FNC team.”

1st Financial Reverse Hires Dennis Loxton as Regional Executive, Targets Growth Michigan-based 1st Financial Reverse has hired Dennis Loxton to spearhead the firm’s expansion of its reverse mortgage division in the Southeast and Midwest regions. As part of this initiative, 1st Financial will be recruiting reverse mortgage consultants to fill numerous positions in the next several months. The initial phase of the company’s expansion will focus on the Florida market, but licensing applications are in the works for Georgia, Indiana and Alabama.

Legacy Reverse Mortgage’s Ken Keranen Celebrates 20 Years in the Industry This month marks Ken Keranen’s 20th year in the reverse mortgage industry. Keranen, who works as an originator for Legacy Reverse Mortgage, first became a full-time loan officer in 1993 with ARCS Mortgage in Seattle, Washington. He later moved on to Seattle Mortgage, where he helped established the company’s servicing department and managed its retail operations. Keranen, who was also an original member of NRMLA’s board of directors, now originates loans throughout California, Oregon and Washington for Legacy Reverse Mortgage.

Industry Update

March Edition

Brought to you by:

an update of this past month’s breaking news

News direct to you: The industry’s headlining stories at your fingertips Want even more up-to-the-minute news? Visit reversemortgagedaily.com.

headlining news 1.FHA to Halt Fixed-Rate Standard HECM Starting April 1

The FHA announced its plans to institute changes to the HECM in order to limit risk to the agency’s finances, which include the consolidation of the Saver fixed-rate and the Standard fixed-rate HECMs. The change will take effect for case numbers assigned on or after April 1, 2013. “These are essential and appropriate measures to manage and protect FHA’s single-family insurance programs,” said FHA Commissioner Carol Galante. “In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers.” // January 30, 2013

2.CFPB Lays Plans to Take New Mortgage Rules Live

The CFPB has established plans for implementing new mortgage rules, most of which are set to take effect by January 2014. Among those rules are the abilityto-repay rule and the new mortgage servicing rules, as mandated under Dodd-Frank. The agency said it will work with the industry to ensure that the rules are implemented in a timely and effective manner. // February 13, 2013

3.Eleven States Now

Suing Over Dodd-Frank Constitutionality

The number of states now challenging the constitutionality of Dodd-Frank has risen to 11, as eight more claim the entity has worsened the idea of “too

big to fail.” Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas and West Virginia oppose Dodd-Frank’s rule of Orderly Liquidation Authority (OLA). With minimal accountability to Congress, the president or the courts, OLA has the authority to liquidate financial companies without advance warning. The states join Oklahoma, South Carolina and Michigan in the lawsuit. // February 15, 2013

4.HUD: With Budget

Sequester, Housing Counseling Will Have New Battle

Limiting funds for housing counseling programs as a result of the budget crisis will have a damaging effect on families, HUD Secretary Shaun Donovan said before the Senate Committee of Appropriations. A sequester that would lead to budget cuts across the board is set to begin in March, barring a deficit reduction agreement in Washington. “From HUD’s perspective, the March 1 sequestration would also have even broader harmful effects on middle-class families, on communities and on the economy across the nation. Specifically: Sequestration would result in 75,000 fewer households receiving foreclosure prevention, pre-purchase, rental or other counseling though HUD housing counseling grants,” Donovan said. // February 18, 2013

5.CFPB Names Steven

Antonakes New Acting Deputy Director

Steven Antonakes will serve as acting deputy director of the CFPB until a replacement can be found for departing Deputy Director Raj Date, the agency announced. Before joining the CFPB in November 2010 as the assistant director of large bank supervision, Antonakes served as the commissioner of banks from 2003 to 2012. Antonakes

was also the first state voting member of the Federal Financial Institutions Examination Council, vice chairman of the Conference of State Bank Supervisors and a founding member of the governing board of the Nationwide Mortgage Licensing System. // January 31, 2013

6.HUD Issues Warning on Conflicts of Interests in Reverse Mortgage Counseling

HUD released a notice to reverse mortgage counseling agencies reminding them of anti-steering protections that prohibit a lender from pointing a borrower to a specific counseling agency and also prevent a counselor from directing a borrower to a particular lender. The agency said it had received complaints about steering and reminded lenders that they are to provide clients with a list of counseling providers. // February 5, 2013

7.CBS News: Boomers

Rethink Leaving Legacy to Heirs

Leaving a legacy for heirs is looking less likely for older Americans who are facing a dire financial future, said a report by CBS News MoneyWatch. According to the article, boomers should be less concerned about leaving a legacy and more concerned about saving resources such as home equity, which could come in handy via a reverse mortgage. Barely more than a quarter of Americans with more than $250,000 in investable assets felt confident they could leave a financial inheritance to their children, according to a Merrill Lynch survey quoted in the story. Additionally, the vast majority of baby boomers have much less than $500,000 in retirement savings. // February 24, 2013 reversereview.com

8 TRR

The Reverse Review March 2013

Report January 2013

Top Lenders Report

Y e a r - t o - D a t e E n d o r s eme n t V o l u me

12345 Liberty Home Equity

Endorsement

764

Security One Lending

American Advisors Group

One Reverse Mortgage

Generation Mortgage Company

Endorsement

646

Lender

540

Endorsements

458

244

Endorsements

URBAN FINANCIAL GROUP

226

OPEN MORTGAGE LLC

PROFICIO MORTGAGE

172

SUCCESS MORTGAGE PARTNER

REVERSE MORTGAGE USA INC

157

HOMEOWNERS MORTGAGE

CHERRY CREEK MORTGAGE CO

111

UNIVERSAL LENDING

NEW DAY FINANCIAL LLC

FULTON BANK NATIONAL

M & T BANK

MCM HOLDINGS INC

SUN WEST MORTGAGE CO INC

MORTGAGE SERVICES III

ASSOCIATED MORTGAGE BANK

INTEGRATED FINANCIAL

MAVERICK FUNDING CORP

ADVISORS MORTGAGE GROUP

REVERSE MORTGAGE SOLUTIONS

NORTH AMERICAN SAVINGS

HIGH TECH LENDING INC

AMERICAN PACIFIC MORTGAGE

SENIOR MORTGAGE BANKERS

PEOPLES BANK

PLAZA HOME MORTGAGE INC

ROYAL UNITED MORTGAGE LLC

NET EQUITY FINANCIAL INC

MANN MORTGAGE LLC

NATIONWIDE EQUITIES CORP

LEADER ONE FINANCIAL COR

CONTINENTAL HOME LOANS

GATEWAY FUNDING DIVERSIF

FIRSTBANK

ASPIRE FINANCIAL INC

MONEY HOUSE INC

CONTOUR MORTGAGE

UNITED NORTHERN MORTGAGE

SOUTHERN TRUST MORTGAGE

GMFS LLC

PINNACLE CAPITAL MORTGAGE

FIRSTAR BANK NA

HOMESTREET BANK

TOWNEBANK

NETWORK FUNDING

SUN AMERICAN MORTGAGE CO

UNITED SOUTHWEST MORTGAGE

MORTGAGESHOP LLC

VANGUARD FUNDING LLC

ATLANTIC BAY MORTGAGE

GREENLIGHT FINANCIAL

MAS ASSOCIATES LLC

AMERICAN NATIONWIDE

TOP FLITE FINANCIAL INC

STERLING SAVINGS BANK

VAN DYK MORTGAGE

| TRR

October 9, 2009

Lender

Reverse Market Insight - Logo

Brought to you by:

PANTONE COLORS

REVERSE MARKET INSIGHT

3005C

Process Blk C

%%%%% Looking for more statistics? Go to rminsight.net for all of the industry’s latest stats and rankings.

Roundup Here’s a look at the latest

n e w s a n d s tat s affecting the market.

THE SENIOR AGENDA

Boomers Remodeling to Age in Place There is increasing demand among the boomer generation for home improvements that would allow them to age in place, said a study released by the Joint Center for Housing Studies at Harvard University. The report noted that homeowners over the age of 55 now account for more than 45 percent of all home improvement spending, and that the demand for “aging-inplace retrofits” is expected to continue its upward trajectory as “echo boomers,” the generation behind the boomers, follow suit.

HECM TRENDS

The product gets a strong start in 2013 The first report of 2013

looks promising for HECM endorsements. Data from Reverse Market Insight

indicates that endorsements were up 32.6 percent to

5,189, the highest level the

industry has seen since last February. RMI notes that this might be due in part to a catch-up from prior

months that were held back due to FHA system issues.

Either way, it’s a great start for the new year.

All 10 regions were up from last month. These three

showed the highest jump:

Southeast/Caribbean: 36% Rocky Mountain: 32% Mid-Atlantic: 45%

THE CONSENSUS

Boomers Delay Retirement, Earn More Money The money America’s seniors earn from working has nearly doubled in the past 20 years, according to a study released by the Retirement Research Consortium. The report shows that the money seniors acquire from employment rose in the past two decades from 18 to 31 percent of their total income. The primary reason was that more seniors are working longer and delaying retirement, which is attributed to better health, more education and, for many, growing financial insecurity. The report also points out that the portion of a senior’s income that is derived from Social Security, employer pensions and government aid has hardly budged, while income from investments have declined.

housing stats

SENIORS:

New database launched by Census Bureau and HUD reveals interesting facts about American homeowners Of the 115 million occupied homes in the U.S. that were considered in the 2011 American Housing Survey:

* Most were built in 1974. * T he median size of a single-family detached home was 1,800

square feet. Newly constructed units had a larger median size of 2,200 square feet.

* 2 1 percent of primary mortgage holders noted a change in their mortgage payments in the last year, the main reasons being a change in property taxes and homeowner’s insurance.

*O n average, households pay $927, or 24 percent, of their

income on housing. The cost for residents of new construction is higher, totaling an average of $1,340 per month.

SOURcE OF INCOME 1990

2010

25.5% 18.4% EARNINGS FROM EMPLOYMENT INCOME FROM INVESTMENTS SOCIAL SECURITY PENSIONS GOVERNMENT PAYMENTS NOTE: All sources of income for Americans age 65 and older. SOURCE: Brookings Institution.

11.3%

31.2% reversereview.com

8 TRR

| 11

The Reverse Review March 2013

NRMLA News

On the Docket The reverse mortgage business is fueled in large part by capital market professionals in New York City who trade and invest in mortgage-backed securities (MBS), including HECM MBS.

We are offering two conferences for the price of one. The Eastern Regional Meeting includes:

Last March, NRMLA hosted the very first Reverse Mortgage Securitization Forum in New York City to educate members about the HMBS program. The forum was held in conjunction with our Eastern Regional Meeting and the turnout far exceeded our expectations, attracting more than 300 members, non-members and Wall Street professionals.

* A panel of CRMPs discussing how

Based on the success of that event, NRMLA is returning to the Big Apple from March 19-20, when we host the 2013 Eastern Regional Meeting and Finance & Investment Forum at the Intercontinental New York Times Square.

After the Eastern Regional Meeting concludes late Wednesday morning, the Finance and Investment Forum begins with a series of discussions on preparing your company for equity investment, an in-depth analysis of the HMBS securities market and HMBS issuer trends.

* One-on-one interviews between reporters and industry leaders they assist clients through the new HECM product mix

A “bonus” session open to all registrants will take place from 3:45 to 4:45p.m., featuring Dr. Stephanie Moulton, the lead researcher on a new three-year study on reverse mortgages funded by a grant from the John D. and Catherine T. MacArthur Foundation. The $427,000 study, in which NRMLA member CredAbility is a research participant, focuses on a better understanding of whether, and under what circumstances, reverse mortgages lead to increased financial security, well-being and independence.

* A panel of CEOs talking about sustaining profitability in an everchanging marketplace

* Four breakout sessions each morning (eight in total, many of them approved for continuing education credits) that will cover new CFPB rules, creative uses for reverse mortgages in financial planning and processes for gathering essential information from clients to ensure a smooth application process

We hope you can join us in New York. To learn more, please visit nrmlaonline.org.

connecticut

in the states State legislatures are convening for the 2013 legislative session and some of them are already introducing bills aimed at the reverse mortgage business. NRMLA members can download a tracking chart by logging into nrmlaonline.org and visiting the State Legislation section.

oregon

The following is a summary of some of the bills NRMLA is watching carefully: 1. Connecticut House Bill 5565

prohibits any creditor who enters into a reverse mortgage transaction with a married borrower from requiring that the older spouse be the sole individual obligated under such transaction. The purpose of the bill is to reduce the rate of defaults on reverse mortgage transactions and prevent the eviction of a surviving spouse from the residence. The bill was referred to the Joint Committee on Banks on January 23 and has not appeared to move since then.

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2. Illinois Governor Pat Quinn signed House Bill 5019, which delays an exemption for closed-end reverse mortgages from the state’s High Risk Home Loan Act until January 10, 2014. 3. Missouri House Bill 271, which

delays loan repayment until 15 years after the borrower’s death, was introduced on January 23 and read a second time on January 24.

new york illinois missouri

4. New York Assembly Bill 2276 would subject FHA-insured loans, including HECMs, to New York laws.

5. Oregon Favored bills (H.B. 2489 and H.B. 2510) will delay or repeal last year’s enacted law on the prohibition or limitation of reverse mortgages in connection with tax deferral programs in that state.

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10,800 unique visitors a month utilize nrmlaonline. org, NRMLA’s website for members and other mortgage professionals who want to stay informed about industry updates and other marketplace trends. 12,000 to 14,000 consumers a month visit reversemortgage.org, NRMLA’s website for seniors and their trusted advisors who want to learn about reverse mortgages and locate a lender in their state.

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Look for Jessica and Alycia from the TRR team at NRMLA’s Eastern Regional Meeting in New York City! We love to hear from our readers, so be sure to say hello!

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NEWS FROM NRMLA

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The Reverse Review March 2013

THE HOT SEAT

things you need to know or may have been wondering march 2013

the hot seat From his favorite book and his most memorable moment to his optimism about the future of the HECM, we get the personal and professional facts from John Mitchell, founder of Reverse Mortgage USA, in our monthly edition of The Hot Seat.

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John reverse mortgage usa P E RSO N AL >

founder

Ten years from now our country will see that re-electing Obama was a devastating mistake.

My favorite vacation was taking the beautiful and sensuous Gingette to Lake Como in Italy, and staying for a month in a house on the lake, close to George Clooney’s house.

If I were a professional athlete I would be a quarterback for the Dallas Cowboys.

My favorite movie is a movie about heaven and hell, What Dreams May Come.

Every morning I make a conscious decision to be happy that day. As Abe Lincoln said, people are as happy as they make up their mind to be.

I’ll never forget the day I got my CPA certificate.

I’ve never undervalued the importance of ongoing confidence, but always disdained arrogance.

I always try to think differently. I rebel against the status quo and “normal.”

The best lesson I’ve ever learned was: “What you envision in detail on a daily basis is what will show up in your life.” So envision what you want in detail every day!

The most memorable moment in my life was when I got married for the first time at 59 to the most wonderful, amazing, “ideally suited to me” girl in the world, Gingette.

My favorite book is Think and Grow Rich.

Professional >

If I were a professional athlete I would be a quarterback for the Dallas Cowboys.

The biggest challenge in the reverse mortgage industry is properly marketing the product. Until that changes, the industry is stuck at 2.5 percent penetration.

The future of reverse mortgages is off-the-charts good. Connect the dots: People are ill-prepared for retirement and their houses are their biggest (and usually only) asset.

The greatest setback for our industry is the lack of ongoing, direct education for members of Congress about the benefits of our product.

Ten years from now the reverse mortgage industry will have quadrupled the 2.5 percent penetration it has today.

The most fascinating thing about the reverse mortgage industry is how, in a 20-minute conversation, you can get a stranger to trust you and how you can change that person’s life in just 45 days.

The most memorable moment in my life was when I got married for the first time at 59 to the most wonderful, amazing, “ideally suited to me” girl in the world, Gingette. reversereview.com

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The Reverse Review March 2013

originating

Will Losing the Traditional Fixed-Rate HECM Affect the H4P? Mich a e l Ba n n e r

ust a few months ago I wrote an article stating that the HECM for Purchase, or “H4P” as many have come to call it, was the “sleeping giant” of both the reverse mortgage and the real estate industries. I have believed in this product since its inception, although its performance these last few years has been anything but impressive. There is no way to deny that the limited volume of H4Ps is entirely dominated by the traditional fixed-rate product. By definition, the Purchase product demands the entire lump sum up-front to close the transaction. So, now that we know the traditional fixed-rate will soon become a thing of the past, the question becomes: Is this a knockout punch to this sleeping giant? Is it a gut punch that really hurts, or is it just like my favorite boxer, Rocky Balboa, said: “It ain’t about how hard you’re hit, it’s about how hard you can get hit and keep moving forward”? So as surprised as many will be, here is the answer: We are going to keep moving forward! The elimination of the traditional fixed-rate HECM will have little to no effect on the

going to the source

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growth potential of the H4P product. And while I’m at it, take this: The elimination of the traditional fixed-rate HECM will have little to no effect on the entire reverse mortgage industry! Remember, we still have a fixed-rate option with the Saver product, and with today’s record low rates, which are expected to be around for quite a long time, the difference between the principal limit on the traditional fixedrate and the LIBOR product is either zero or negligible. The truth is, the client will probably not be affected as far as the amount of money received up-front goes, and if rates do remain low (as they are projected to), the senior will ultimately save a considerable amount of interest over the life of the loan. Make no mistake about the long-term benefits of the LIBOR program versus the traditional fixed. In addition to the lower rate, all of our clients will now have an automatic increase in the availability of their credit line. This option, which was created as an “inflation hedge,” is truly a staggering addition to this loan and has never really been given the right amount of

attention from our industry or from our adoring friends in the press. Sometimes an industry excels because it chooses to, and sometimes it does because it is forced. In this case, it seems to be a little of both. The option between a traditional LIBOR program and the fixed-rate Saver product will help ensure that our senior clients meet their financial goals and are still able to keep up with other obligations like taxes and insurance. We’re being told that statistics prove borrowers who secured the fixed rate are much more likely to default. Removing the traditional fixed-rate HECM from the equation should cut the default rate greatly. In addition, if a borrower chooses the only fixed-rate option available, the Saver, they are probably a more affluent borrower and much less apt to default. I guess the problem is solved… Yeah, right! Until this industry stops portraying its product as a needs-based product of last resort, we will always be looked at as the bottom rung of the financial

So, now that we know the traditional fixed-rate will soon become a thing of the past, the question becomes: Is this a knockout punch to this sleeping giant? Is it a gut punch that really hurts, or is it just like my favorite boxer, Rocky Balboa, said: “It ain’t about how hard you’re hit, it’s about how hard you can get hit and keep moving forward”?

originating ladder. We will always be the industry to blame.

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It’s amazing how longer life spans have presented us with a doubleedged sword. We get to be on this earth a lot longer, but now we have to figure out how to pay for it. I think time will show that a reverse mortgage can be a very large part of the answer. x

appraising

And make no mistake about it: The HECM is needed. Many would say I

Today, longer life spans and record low return rates on the financial vehicles have been compounded by one of the most volatile market environments this country has seen in decades. The current economic climate demands that home equity be an option for the great majority of retirees.

underwriting

By the time you read this, it is very possible that the traditional fixed-rate

Every time we take a step toward making this great product safer for seniors, regardless of whether or not we all agree with that step, we make great strides in guaranteeing the longevity of the reverse mortgage.

marketing

The fact that these large organizations are recognizing the reverse mortgage as a viable option is a great sign that this industry is joining mainstream America’s financial community. But, admittedly, we still have a long way to go.

With the traditional LIBOR product, the LIBOR Saver and fixed-rate Saver, we truly have a menu of offerings that can satisfy the needs of a wide variety of senior consumers. The traditional product is a fine option for the needsbased segment, and the Saver products can be an excellent fit for the more affluent client.

am heavily biased in this opinion, as I make my primary living from this industry and, well, there really is no way to argue that point. But quite frankly, like so many of you, I did pretty well in life before I entered the reverse mortgage industry. This is the way I have chosen to make my living and, also like so many of you, it has become my passion.

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Now, in all fairness, we have come a very long way in a very short time. The Financial Planning Association now recognizes a reverse mortgage as a valid option when considering a comprehensive retirement plan. The product has been endorsed by the National Long Term Care Network, and Realtor University and The Learning Library, the National Association of Realtor’s online education platforms, are now marketing my H4P class on a national level.

HECM has already been deemed a thing of the past. It’s time to expand your knowledge of the LIBOR index; you’ll see how stable it has been over the last 25 years. It’s also time to educate the consumer about the stability of the LIBOR and the huge advantage of a growing line of credit.

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The Reverse Review March 2013

learn

originating Why Meet in the Home? Al a in va l l e s

oan officers who meet with senior clients in their homes can have a distinct advantage, as the effort can expedite the decision process, reduce competition, assist in product education and increase referrals. Meeting first will accomplish a form of imprinting commonly seen in nature. According to a scientific definition that refers to birds, imprinting is “a rapid learning that occurs during a brief receptive period, typically soon after hatching, and establishes a long-lasting behavioral response. [Birds] are predisposed to form a strong attachment with the first object they see, which is typically the parent, and [this] allows the bird to quickly absorb the lessons they need to learn to survive.”

To be clear, I’m absolutely not calling seniors birds, but I do want to be the first person seniors see when learning about reverse mortgages. I want to be the one who educates them about the pros and cons of the program and earns their trust as an advisor. This helps ward off competition, build good will and prepare them for counseling. The goal of the initial appointment is to educate the senior so that he or she is fully informed about reverses, which allows for an educated decision about whether or not to move forward. Never try to sell a reverse or tell a senior which reverse option he or she should take. I start off with two basic questions:

According to alain: Meeting in person and in the borrower’s home is critical as it gives clues about how the transaction may progress. From an appraiser’s perspective, I’ll learn if there are property condition issues, such as peeling paint or an illegal second kitchen. It should be no surprise that seniors who refuse to meet in their home quite often have significant issues. 18

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two questions:

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reversereview.com

appraising

One sensitive topic with no clear-cut guideline is cognitive issues. Meeting in person allows me to gauge if the borrower is fully competent and able to understand the implications of the loan. In some cases, a spouse or adult child will try to hide the fact that the borrower has early dementia or Alzheimer’s disease. Just as troubling are elder abuse situations in which an adult child is coercing a parent to take out a reverse for their monetary 8

underwriting

No matter the answers, I always go over all facets of a reverse. The key reasoning for asking these initial questions is to hear the senior’s voice. I want the senior to become engaged in a conversation, which builds our relationship, rather than just giving a presentation. This is when I’ll talk about the role of HECM counseling and what will be required of them. I will tell the senior about how critically important counseling is and then jokingly say that I want counseling to be the most boring conversation of his or her life, because that will mean I did a great job explaining everything. If the counseling is exciting and everything the senior heard seemed brand-new, then I did a terrible job and would ask the prospective borrower to give me a second chance to explain everything. By meeting first with the

Meeting in person and in the borrower’s home is critical as it gives clues about how the transaction may progress. From an appraiser’s perspective, I’ll learn if there are property condition issues, such as peeling paint or an illegal second kitchen. It should be no surprise that seniors who refuse to meet in their home quite often have significant issues. Though I try, sometimes I don’t get into the home, which is why I wasn’t shocked when, in one such situation, hoarding issues came to light that required a form of egress from the bedroom to an exterior door and an order demanding all rodents be exterminated. My personal favorite was the woman who refused to let me into her home until the attic was cleaned out. I repeatedly told her that was not necessary, but she was adamant. Finally, after six months, she called to move forward and again I told her that emptying the attic was not a requirement. She laughed and said she had known that all along, but had told her husband that they couldn’t get the reverse until he cleaned it out. I knew this transaction was going to be a fun one.

Sometimes with two borrowers, one spouse is much more dominant. By meeting in person, I’m able to make sure the quiet spouse has the opportunity to express his or her concerns and ask questions. Perhaps the person has hearing issues or other physical limitations. I’ve worked with people experiencing an array of devastating ailments, helping process loans for those who are deaf, blind, severely crippled and fighting cancer. I believe I can show more empathy by meeting in person than just talking by phone. I’ve cooked, cleaned, moved furniture and even found a missing cat on one appointment. I’ve also had situations in which the borrower doesn’t speak English or is illiterate, which obviously changes my course of action.

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Question number two: “What do you know so far about reverse mortgages?” This will clue you in if the senior has done any initial research, is starting from scratch, or perhaps has misinformation that needs to be corrected, such as the common misconception that they must have no current mortgage.

One example of this was when a borrower needed all of the reverse proceeds to pay off a current mortgage. There was going to be little room for a line of credit. However, the borrower became very confused because the counselor said she would be able to have a large line of credit. Because I had met with her first and had earned some good will, she called me to let me know she thought I had misled her. After speaking with the counselor, it turned out that the senior became confused when the counselor asked if she had a lien on the property. She had said no because she did not know her large mortgage was a lien. Once the misunderstanding was cleared up, the loan proceeded smoothly.

By gaining access to the home, you’ll obtain clues about what is important to the senior. Quite often there are religious items on the wall, pictures of grandchildren, a case displaying a folded American flag of a child lost in war, pets running around or sometimes grandchildren with no parent to be found. These are examples of important things you can learn about your borrower that would be difficult to glean from a telephone conversation or mail-away application. I always chuckle when I’m sitting at the senior’s kitchen table and see two or three of my competitors’ glossy reverse folders, knowing I’m the only one who offered to visit in person. Because of my in-person interaction, it’s rare that I lose out to the competition.

originating

Question number one: “If I had a magic wand, which I don’t, what is the ideal scenario that you would like to accomplish?” This helps rank what is of most importance to the senior, whether it be the need for additional cash flow, home repairs or leaving equity to the children.

senior, in those situations in which counseling went astray, I now have the opportunity to resurrect the deal.

The Reverse Review March 2013

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legislative

reversereview.com

legal

Another tip for discussing family matters: Sometimes I’ll playfully say, “Reverse mortgages are 5 percent math, 85 percent Dr. Phil, and 10 percent Jerry Springer. Almost every family has a Jerry Springer moment.” Invariably, the senior quickly chuckles and proceeds to tell me their Jerry Springer situation, which will help me explain how a reverse might help them and also expedite processing. And if a family outburst occurs during loan processing, I can usually diffuse the situation by

tech

That said, involving the family can be key, and I always encourage the senior to invite any and all family members to our appointment. This allows others to voice their ideas and fears about the best course of action. It also enables me to ask family members an essential question: “If a reverse is Plan A, what is Plan B? A new mortgage, liquidating assets, monetary contributions from family members, moving...?” I do highlight that “decision by indecision” usually leads to more stress and not an optimal solution. Sometimes, children or other family members are willing and able to contribute financially every

appraising

Meeting in person will also flush out any potential silent assassins: the cynical relative who thinks we’re all in it for the money, that there won’t be any equity (for them) at the end of the day, and that Mom and Dad should just hang in there. When I can meet with these people, I can convert many of them into advocates of reverse mortgages and can alleviate their apprehensions. Nothing is more rewarding than getting referrals from those who were initially against me.

My last tip for the initial appointment is to be explicit about expectations. Try to have the senior agree to what will happen next. The best answer is a “yes,” of course, but a firm “not interested” is also productive, while an “I’ll think it over” is not. When someone says they need to mull it over, it usually means the loan officer has not done a complete job in explaining the mechanics of a reverse or asking enough questions about the senior’s need for cash flow, home goals or external family factors that the senior is not yet comfortable sharing. Or sometimes they aren’t the true decision-makers and we need to uncover who is. But one point is clear: You wouldn’t be sitting with them if there wasn’t some need or at least a casual curiosity. In that case, I always recommend those who need more time think it over, and if they’re still not sure if a reverse makes sense, I encourage them to commit to attending a HECM counseling session. A different perspective from someone who is independent and unaffected by the outcome could help the senior decide if obtaining a reverse mortgage today will be the best option to ensure the highest quality of life. x

underwriting

The point here is that as loan officers, we must be aware if a borrower is not capable of understanding the terms of a reverse and involve other family members in the process, and we must not be naive about the fact that family members and even seniors themselves can commit fraud. Meeting in person will minimize these risks.

saying, “Oh, I guess we’re having our Jerry Springer moment...”

marketing

month to the senior to avoid or delay obtaining a reverse, or in situations in which a reverse won’t work because of a lack of equity or insufficient cash flow. Alternatively, these borrowers will have to consider downsizing or moving in with family. Again, my job is to educate everyone about a reverse mortgage, not push one. I can better accomplish this by meeting everyone in person.

originating

going to the source

gain. In one instance, I had met with a borrower’s husband and gave my condolences about the recent passing of his wife. I became concerned though after repeated requests for a death certificate were ignored. Then one day I called the home and the wife, who was very much alive, said she was very confused about what was going on. Needless to say, that loan did not move forward.

The Reverse Review March 2013

originating

Why We Do What We Do Joe M o rris

ith all the new regulations, departing institutions, call centers, TV ads, lead generators and financial assessments, do we really remember why we originate reverse mortgages in the first place? Or are we just holding on to what we do while going through the motions? Are we merely trying to earn a living? When Jeff Taylor, a true pioneer, was trying to lure me into the reverse mortgage business in 1991, the origination cap was $1,500. Regardless of the size of the loan, there was no premium, the SRP was maybe $400 and all reverses had to be underwritten by HUD (there was no DE at the time). Frankly, I didn’t think it was worth the time and effort. I finally agreed to give it a shot and hired someone to head reverse production. Four months later, we closed our first loan for Ms. Mitchell. She was an 82-year-old African American woman who was confined to a wheelchair. The loan officer came back from the closing with bloodshot eyes and disheveled clothes. When I asked what happened, she said, “Joe, Ms. Mitchell cried the entire time, holding my hand. When it was over Ms. Mitchell said that she knew that I was an angel sent to help her. And then she said, ‘Is it OK if I buy that dress now?’” I almost cried myself when I heard this story because I knew that we had changed Ms. Mitchell’s life for the better. Wow! What a glorious feeling! I was hooked. There

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was no turning back for me. I had finally found something that made me feel really good about myself down to my core. I felt like a hero or even a white knight sent to help these senior adults, some of whom are widows. Now, when people ask me what I do, I tell them, “I change seniors’ lives for the better.” I tell them why I do what I do. Their eyes get big as I relate to them how these people’s lives are improved through reverse mortgages. One of the greatest reverse originators I’ve ever been associated with told me that he wakes up every morning with an urgency to find the people who are in need of his services: “They are out there, Joe, and I need to find them before it’s too late.” This attitude

originating

Over the years,

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spotlight

I’d like to close by saying that at the end of my career, when I reflect on what I’ve accomplished, I know that I will get the most pleasure and gratification not from the positions I’ve held or from the money I’ve made, but from the many seniors I have helped achieve financial security. I’m sure it will be the same for you! x

secondary market

One of the most revealing things I learned in managing a call center is that the more a loan officer got seniors to talk about themselves and their personal struggles, genuinely responding and showing concern, the more likely seniors would be to choose that person to help them with a reverse mortgage. Most salespeople feel they have to do the majority

It’s critical that you keep in the forefront of your mind and heart why you do what you do. You should keep a picture nearby of some of the seniors you have helped, or post a list of the names above your desk. Better yet, post a written goal declaring how many seniors you aim to help this year. This will keep you grounded through the day should business and distractions close in on you.

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Over the years, I have discovered that people do business with you because they respect the reasons you do what you do. I’ve always said that the first trustworthy person who cares for the senior will be the one to get the business. Seniors are savvy. They are able to discern who really cares about them versus someone who’s simply trying to make a sale. They can tell if you love what you do and have a passion for helping them.

to help change people’s lives. Your fellow workers need to know what your last closing did for that senior. It will make them feel so much better about themselves.

legal

For instance, when NRMLA was recently battling negative press, what did it do? It got testimony after testimony from seniors about how the reverse mortgage process helped them. This reframed the picture and put reverse mortgages back in a positive light.

tech

“That knowledge and experience of what happens to the senior after their reverse mortgage is closed turns their position from an ordinary job into an extraordinary ability to help change people’s lives.

appraising

Additionally, it’s very important to surround yourself with people who have the reverse mortgage “bug,” who understand what a difference they are making in these seniors’ lives. It is such an added value to their position. That knowledge and experience of what happens to the senior after their reverse mortgage is closed turns their position from an ordinary job into an extraordinary ability

underwriting

For a while, when there was a lot of negative press about our industry, I heard from several loan officers who no longer felt like the good guy and were embarrassed by what we do. We must be determined to not let any negativity distract us from our motivation for being in this industry.

But there has to be a balance to all this. I’ve seen people who were just out to make money and they didn’t last. I’ve seen originators who were out to help the world on every loan and they didn’t last either.

marketing

we originators have been beguiled by the press, ripped by the regulators and scorned by some in Congress. But if you know why you do what you do, all that is just white noise in the background. Deep inside, you know that what you are doing is improving the lives of seniors.

Over the years, we originators have been beguiled by the press, ripped by the regulators and scorned by some in Congress. But if you know why you do what you do, all that is just white noise in the background. Deep inside, you know that what you are doing is improving the lives of seniors.

of the talking, when in fact the opposite is true! If you really want to make a positive difference in the lives of seniors, you have to understand why they are considering a reverse mortgage so that you can be sure it is the right fit for them.

originating

according to joe morris

struck me as both amazing and refreshing, and I think it should be the norm. What a paradigm shift from the way most of us operate, starting our day thinking we have to get out and sell reverse mortgages.

The Reverse Review March 2013

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spotlight

reversereview.com

secondary market

This is where the importance of partnership comes into play. I recommend that HECM specialists adapt a rigorous program that

legislative

( Major players in the industry have contracted and consolidated.

Once you have identified these leaders, you must find a way to connect with them. One way is to uncover a common interest between you and the leader you are aiming to reach. Find out what service organizations they support and join them. Become a visible volunteer. Getting involved in your community through charitable outreach programs is an excellent way to meet like-minded people looking to help the greater good, and it’s a great way to build business connections.

legal

( The volume of closed loans has been shrinking since 2006.

Let’s look at the upside: The reverse mortgage market is not going away—we still have more than 10,000 individuals turning 62 years old every day, and the needs and aspirations of these individuals have not changed. Many still have unfunded retirement accounts and individual or spousal medical needs, which can include in-home care or prolonged rehab stays. We also have very active boomers who want to downsize their living situations. The point is, the market has not changed, but the way you do business will.

Now, as a dedicated member of your service group, you can personally connect to other active members of your community and cultivate partnerships with these thought leaders. Take the opportunity to talk to them about the work you do. Explain the many ways in which a senior can benefit from a reverse mortgage, including how the work you do can help a senior age in place. By focusing your efforts on building your network of personal and professional acquaintances through community activities and other service-oriented endeavors, you can effectively spread your message about how reverse mortgages can help seniors achieve financial security in retirement. x

tech

( The CFPB is in the process of issuing new regulations and mandates.

The first step is to research who your local “thought individuals” are. These are influential people working in business disciplines that deal directly with the senior demographic, such as community bank or credit union executives, attorneys who specialize in elder law, Realtors with an SRES designation and respected investment advisors.

Keep in mind that this strategy requires a substantial investment of time and effort on your part. We are not looking for immediate rewards; we are looking to cultivate a long-lasting partnership that will grow into a viable lead source for your business.

appraising

( The Standard fixed-rate product will soon be eliminated.

I call “environmental development.” This strategy will require a serious effort to develop spheres of influence within your community.

underwriting

First, let us review what is happening in the reverse mortgage industry:

ll of the events listed to the left have created turmoil in our market. So the question remains: How does one combat these perceived negatives? Clearly, if you focus solely on the negative, you won’t see the opportunities in front of you. Change is constant and you must adapt or perish.

marketing

Ed Frankel

originating

Community Connections

The Reverse Review March 2013

learn

Underwriting Property Value:

How It’s Determined and Its Role in Industry Sustainability Br i tan y Lu th

s a Direct Endorsement (DE) underwriter and the vice president of operations at Urban Financial Group, I’m often asked by reverse mortgage brokers and loan officers about appraisals—in particular, how property value is determined. For sales professionals, having a good understanding of this aspect of underwriting can actually help you improve customer satisfaction and contribute to a smoother loan process. The Appraiser and Underwriter’s Responsibilities Both the appraiser and the underwriter have a responsibility to the FHA to provide a quality appraisal report. The appraiser performs an on-site 26

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inspection of the property and compares it to nearby sales (called “comparables” or “comps”), adjusting for any differences in amenities. The appraiser then determines an estimate of the property’s current market value, based on the adjusted sales prices of the comparables. Upon receiving the report, the underwriter is required to review and confirm that all FHA requirements have been met, the value is supported and well documented and the property is marketable.

research that’s readily available. If, based on these sources, it appears that the market value is lower than the appraiser’s determination, or that better comparable sales may be available, the underwriter will question the appraiser further and possibly require additional comparable sales. The DE underwriter may ultimately determine that the appraisal supports a value that’s different from the initial appraisal.

An analysis of the supported value then falls to the underwriter. This typically includes reviewing third-party valuation systems (Automated Valuation Models, or AVMs), county records and other online

I’m also frequently asked, “Why is the value on the initial appraisal often decreased by the underwriter, and hardly ever increased?” For the most part, property values nationwide have been steadily dropping

Reconsideration of Value

or staying stable in recent years. So, for a product that’s so dependent on value, it’s hard for an underwriter to justify increasing the appraised value unless there’s very strong evidence of higher market value. If you or the borrower feel that the property has been undervalued and have additional comparable sales data or other information to provide, the DE underwriter or AMC can communicate directly with the appraiser to have the new information reviewed. If the appraiser then feels the original value was understated, he or she can revalue the property. However, the FHA looks very closely at any value increases, and there would need to be substantial evidence to indicate

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Tips for Originators

While loan originators don’t have much control over the appraisal process, there are some key things you can do to facilitate a smooth process.

HUD Requirements for Failing to Comply

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Both the appraiser and the underwriter are equally responsible for the quality of the appraisal. The FHA may pursue appropriate enforcement actions against either the appraiser or the underwriter for lack of quality appraisal reports. This includes removing appraisers from the FHA roster, choosing not to insure the loan or requiring the lender to indemnify the FHA from any liability on the loan. x

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HUD Mortgagee Letter 09-09 introduced additional appraisal requirements for declining markets, defined as those in an area “that

In addition to protecting the HECM mortgage insurance fund, these additional requirements help safeguard the lender from future losses. In most instances, a HECM lender will be able to file a salesbased claim and be made whole by the FHA through the Mutual Mortgage

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With HECMs, appraisers and underwriters must be especially careful to perform adequate due diligence in valuing properties in a declining market, since the loss to the FHA (and potentially the lender) on any future claims will be heavily dependent on declining markets and/or overvaluations. This is why it’s so important to make sure marketability, value, area and declining markets are thoroughly vetted at the time of the initial loan review.

Insurance (MMI) fund. However, if the property doesn’t sell within a certain timeframe, the process changes to an appraisalbased claim, and the lender is only reimbursed at the new appraised value.

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Unfortunately, it’s more common for the underwriter to question value. This is especially true with unique properties that have hard-to-locate comparables, properties in areas of declining markets or properties in areas where the appraiser must travel outside the normal market area. In these instances, adjustments, distances or timing of sales often fall outside of normal FHA guidelines. The underwriter must review the appraisal and make a case to the FHA for why value is supported despite these factors. If the underwriter finds that a strong case cannot be made, he or she may have

Overvaluations and Declining Markets

demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times.” First, the appraiser must provide two comparables that sold within 90 days of the effective date of the report, and adjust for comparables that sold over the 90-day mark. The appraiser must also provide two active or pending sales that have been market-tested.

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to reduce value.

that’s approved by your company can streamline the process and usually costs no more than a normal appraisal report. The AMC not only provides compliance with HUD Mortgagee Letter 09-28 regarding appraiser independence, but also takes on a lot of the responsibility that formerly fell on the loan officer or processor. The AMC will accept the appraisal order, select the best appraiser for the job, negotiate a fee, place the order, monitor progress, audit the appraisal report once received, field any questions and pay the appraiser for the report.

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that the initial report undervalued the property and the new value is better supported.

( Using an Appraisal Management Company (AMC)

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for anything that may need to be discussed with the borrower, such as items that must be repaired prior to closing, additional access for the appraiser in order to complete the report (attic, crawl space, etc.) or photographs suggesting that the property isn’t occupied by the borrower. If value is discussed with the borrower at this time, make sure to explain that the figure may change and is not final until the underwriter signs off on it.

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your customers a positive experience. Inform each prospective borrower up-front that an appraisal will take place, explain the process and let them know how the appraised value will dictate the amount of money they’re eligible to borrow. Make sure they know the appraisal may come in above or below their expectations and that the underwriter will determine the final appraised value so there are no surprises.

( Review the appraisal report

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( Managing borrower expectations is essential to giving

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HUD-published FAQs | Mortgagee Letter 2005-48

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Housing Handbook 4150.2 | Valuation Protocol – Frequently Asked Questions

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There are several related requirements for which HUD provides guidance for dug wells, shared wells, springs and vacant properties. This guidance is available through these HUD sources:

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There are several requirements surrounding the availability of public or community water and sewer connection. If these public or community services are available and the property is not connected to them, hook-up is required if the connection costs are considered financially feasible (typically 3 percent or less of the estimated value for the subject property). It is the responsibility of

Presuming that connection to public or community water and sewer facilities is not available or feasible, there is another set of requirements associated with individual (private) water supply, such as well and spring sources, and sewage disposal systems, such as septic and lagoon systems. These individual systems must meet local jurisdictional requirements. In the event that there are no local requirements, the specific requirements established by the Environmental Protection Agency will apply. It is the appraiser’s responsibility to note any obvious or readily observable signs of system failure with these individual systems, such as foul odor or seepage, and to require inspection to ensure that the system is functioning properly if such signs exist. Aside from obvious or

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The three basic HUD requirements related to water supply and sewage systems that every property must contain are: domestic hot water, continuous and sufficient supply of potable water, and sanitary facilities with a safe method of sewage disposal. It is from these basic requirements that the web begins to entangle.

the appraiser to verify and report the availability of public or community water and sewer services. However, it is the responsibility of the lender to determine whether connection is feasible. If it is, the appraisal report should indicate the situation as “repaired subject to the connection.” There is much confusion on the part of lenders regarding the appraiser’s role in the determination of feasibility.

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n recent weeks, I have been involved in several situations surrounding the treatment of private well water and private septic sewage systems within HUD-related appraisal reports. The confusion appears to be fairly widespread among appraisers, loan officers and underwriters, and let’s face it: The tightly tangled web of information and guidelines is often difficult to navigate, even for the sharpest of individuals. Because of this, there are a number of misconceptions related to this topic. However, HUD provides direct and effectual guidance on these matters in Chapter 3 of the Housing Handbook 4150.2: Valuation Analysis for Single Family One- to Four-Unit Dwellings, as well as in the frequently asked questions under Valuation Protocol.

The circumstances that I find cause the greatest confusion are related to the presence of both individual wells and septic sewer systems, in terms of distance requirements and the information the appraiser is required to report. It is important to note that all distance requirements in this scenario are related specifically to the individual well. Individual wells must be located at a minimum distance of 10 feet from any property line. If an individual septic sewer system is also in place, a well must also be at a minimum distance of 50 feet from the septic tank, and at a minimum distance of 100 feet from the septic drain field. The appraiser is responsible for showing the location of both the private well and the septic system on the applicable site sketch. While the exact distances between the well, septic tank and drain field are not required to be reported by the appraiser, he or she should be mindful of the minimum requirements and, if discernible, comment on them. If the location of the well, septic tank or drain field cannot be determined, the appraiser is to request a copy of a survey in order to meet the requirement. Furthermore, there are no specific HUD guidelines related to distances for septic systems alone. This is a regular misconception for appraisers. Such distance requirements related to septic systems alone will fall under local jurisdictional regulations. x

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It’s a Deep Subject

readily observable signs of failure, the decision to require inspection, testing or certification is to be made by the lender.

The Reverse Review March 2013

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title tip How the Legalization of Same-Sex Marriage Can Impact Property Titles Fr a n k H o wa rd

On January 1, 2013, Maryland joined Washington, D.C., Massachusetts, Connecticut, Iowa, Vermont, New Hampshire and New York in allowing same-sex marriages.

While many herald this move as a progressive step toward acceptance, it has given rise to a number of practical questions for gay couples in these states, and this includes title concerns with regard to property ownership. Typically, cohabitating couples hold title as tenants in common or as joint tenants with the rights of survivorship. However, married partners have the additional option of holding title as tenants by the entirety. With the legalization of samesex marriage in several states, married couples of the same gender now have this option. Why is this important? When you elect to take title as tenants in common, both tenants share a percentage of interest in the property, the advantage being that both co-owners can bequeath their interest in their wills. The disadvantage, though, is that a creditor can attach the co-ownerâ&#x20AC;&#x2122;s interest in the property to satisfy their claim. Joint tenants with the right of survivorship each own their pro-rata interest in the property. If there are two joint tenants, both are deemed to own 50 percent of the interest in the property. The problem is that by taking title as joint tenants with the right of survivorship, one tenant cannot bequeath his or her interest. When one joint tenant dies, their interest automatically transfers to the surviving joint tenant.

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In the past, this seemed to work best for same-sex couples, ensuring that upon the death of one partner, that individualâ&#x20AC;&#x2122;s interest would pass on to the surviving partner and he or she would become the sole owner. However, the main drawback is that property held in a joint tenancy is vulnerable to claims against either joint tenant. For example, if one of the joint tenants received a judgment against them, that judgment would attach to his or her interest in the property as a lien. The strongest way to hold title is as tenants by the entirety. This allows for an undivided interest in the property between the parties and because of this, in most cases, a judgment lien levied against one of the parties would not attach to the other (although a federal tax lien would be an exception). However, tenancy by the entirety is only available to married couples. As is the case with joint tenants, when one partner dies, the surviving partner would be the sole holder of the title and 100 percent of the interest in the property. In states where same-sex marriage is legal, couples currently holding title by tenants in common should consider retitling their property and taking title as tenants by the entirety to better protect their interests.

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The Reverse Review March 2013

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The Weak Link in Cybersecurity stu s jo u w e rm a n

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The Upshot

Compare that with fraud statistics of Automatic Clearing House (a company in charge of electronic fund transfers and credit card payment processing). The recent arrests connected with notorious Zeus malware accounted for some 390 reported cases, in which $70 million was stolen from accounts. The criminals had attempted to steal

The bad guys are bypassing antiviruses on your workstations by making users click on something that will infect the PC with malware. Then, they can hack into your network. Human error can be the weak link to a seemingly sound cybersecurity plan. Train your staff and take the extra steps to make sure your accounts are secure. x reversereview.com

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I strongly recommend that you instruct your company’s bank not to allow outside transfers without a hard-copy of written authorization signed by an account signatory for any transfer request. In addition, I recommend a formal Internet security awareness training program for all employees.

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Digital crime now outpaces real-world bank robberies in terms of losses. In 2009, there were 8,818 bank robberies netting criminals an average of $4,029— a total of about $35.5 million, according to the FBI’s Uniform Crime Reporting program. However, 60 percent of bank robbers were caught, often very quickly.

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Computer consultants told Graus that the malware on her system most likely came in the form of an email phishing attempt that she clicked on. The malware was able to capture passwords and logins and took over her accounts, despite the presence of standard antivirus software.

If you are a business doing online banking and are only relying on the bank’s security and safeguards, you may be bound for major trouble. Commercial accounts do not have the same FDIC insurance as personal accounts. Before you use online banking, read the rules carefully. Check all online accounts daily, and make sure your corporate defense-in-depth is in good shape.

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And Graus was lucky that the previous Friday morning, she had wired $400,000 to pay off client mortgages. The hackers struck in the late afternoon; otherwise they might have gotten a much bigger haul and potentially bankrupted her practice.

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According to her bank, her own IP address was the source of the wire transfer orders and after further study by computer forensic experts, the culprits were found. The criminals had made four wire transfers from Graus’ trust account. Fortunately, Kimberly spotted it fast enough that she could notify Superior Bank and they were able pull back three of the orders, but the fourth, for $9,500, had already been transferred to Ukraine and cashed.

some $220 million. The investigation mainly netted the lowest ranks of the criminal network—the so-called money mules that remove stolen funds from their accounts and transfer the money to international accounts abroad. In general, the money mules are people who are duped into believing they are working for a legitimate company processing payments.

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However, a little while ago there was nothing typical about Monday morning for Bradenton attorney Kimberly Graus. It might have started out bright and sunny, but that Monday turned out to be a dark day for one of the trust accounts she administers—$35,000 was missing and she could not account for it. Her computer had been hacked and the money was winding its way to Eastern European criminals.

Not only did Graus lose $9,500, but there were other expenses arising from this incident, including a new laptop to be used for banking purposes only and the cost of the forensic investigation, not to mention the time spent closing and setting up new bank accounts. There is also the potential loss of trust from her clients and other business associates, including her bank. Superior Bank is adamant that it bears no responsibility for the theft, but recent case law has changed some of that. You should Google the case of Patco Construction in Maine.

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o you think you know the ins and outs of money transfers over the Internet. You make up strong passwords and you even remember to change them once in a while. You have “normal” security in place (last Monday you hid the sticky note with your bank’s password and login on it—it’s no longer on your monitor).

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Upon its initial release in April 2013, 20 regulatory agencies will have agreed to accept results from the uniform test as an adequate substitute for their statespecific examination. An additional four regulatory agencies have agreed to accept the results on and after July 1, 2013. Before the development of this Uniform State Examination, a mortgage loan originator seeking to conduct business in various jurisdictions would need to successfully take and pass a

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In April, the Conference of State Bank Supervisors will make available a new National SAFE Act Mortgage Loan Originator Examination through the Nationwide Multistate Licensing System. That examination will include a Uniform State Component that will provide reciprocity among participating jurisdictions. If an individual successfully passes the National SAFE Act Mortgage Loan Originator Examination, he or she will have met the minimum applicable state testing requirements in each jurisdiction that has agreed that the uniform test is an acceptable alternative to their respective state examinations. For a one-year period, candidates who have already met their stateâ&#x20AC;&#x2122;s current testing requirements can take a component exam that will allow them to take advantage of the reciprocity feature of the new National SAFE Act Mortgage Loan Originator Examination without having to complete the entire test.

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Uniform State Mortgage Loan Originator Examination

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wo recent key regulatory developments will bring about important changes for state-licensed and federally registered mortgage loan originators. The first, the announcement of the development of a uniform state mortgage loan originator examination, will ease licensing burdens on state-licensed mortgage loan originators. The second, revisions to Regulation Z promulgated by the CFPBâ&#x20AC;&#x2122;s discussion of mortgage loan originator compensation matters, imposes new requirements on financial institutions employing mortgage loan originators. When considered together, both of these measures will increasingly bring uniformity to mortgage loan originator operations, whether those operations occur at a bank or at a non-depository institution.

With its recent issuance of the final rule on mortgage loan originator compensation under Regulation Z, the CFPB will bring significant changes to the way depository institutions and other entities that qualify to register mortgage loan originators handle background-related matters. Of note, institutions whose employees are registered mortgage loan originators must provide those employees continuing education annually, similar to the obligation that licensees now have. In addition, effective January 10, 2014, the updated regulation will require all employers of mortgage loan originators that are not licensed or required to be licensed to obtain criminal background checks, a credit report and information relating to any administrative, civil or criminal determinations by a governmental jurisdiction on such employees. The requirement to perform these background checks applies to all individuals hired after January 10, 2014. It also applies to all mortgage loan originator employees who were hired prior to that date, when there were no statutory or regulatory background standards in effect. This regulation will serve to minimize the impact of the existing gap under the federal SAFE Act that prevented certain individuals convicted of felonies from working as a mortgage loan originator for statelicensed institutions but who were eligible to qualify for federal registration when employed by a financial institution. x

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Loan Originator Compensation Regulation

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different state examination in any jurisdiction in which he or she sought a license. Once this uniform test comes into play, those who successfully pass it could avoid taking at least 24 separate state examinations. Many expect that additional regulatory agencies will agree to accept the Uniform State Examination in the future.

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Leveling the Playing Field for Mortgage Loan Originators

The Reverse Review March 2013

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Want to comment on this article? Comment online at reversereview.com.

Trouble in the House h . w e s t r i c h ar d s

n February 13, 2013, FHA Commissioner Carol Galante testified in front of the full House Committee on Financial Services. Her testimony came amid growing concerns by Republicans that the FHA will require a taxpayerfunded bailout and that the agency has strayed too far from its historical mission of helping first-time homebuyers, low- and moderateincome families, and high-risk borrowers who are otherwise creditworthy. This comes on the heels of a hearing held on February 6, 2013, when the House Committee on Financial Services received testimony from a panel of experts voicing concerns about the solvency of the MMI Fund and the expansion of the FHA beyond its historical mission.

K The FHA was established to provide stability and liquidity in the market. Its creation fostered the 30-year, fixedrate mortgage and led to standardized mortgages. The FHA is intended to be self-funded: Premiums paid by homeowners for FHA mortgage insurance are used to cover losses when loans default.

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“The FHA is broke. The FHA is flat broke. And I fear soon the FHA will prove to be bailout broke.” Rep. Jeb Hensarling (R-TX), Chairman, House Committee on Financial Services

“The FHA currently has enough reserves to pay off its expected claims for seven years.” Rep. Michael Capuano (D-MA), Ranking Member, House Financial Services Subcommittee on Housing

“Do you [FHA Commissioner Galante] actually know where you all are? I question whether you even know what reserves you need.” Rep. Randy Neugebauer (R-TX), Chairman, House Financial Services Subcommittee on Housing

“Please let me remind everyone that shutting down the FHA during the financial crisis would have led to a 25 percent greater decline in home values.” Rep. Brad Sherman (D-CA), House Financial Services Subcommittee on Housing

Others serving on the House Financial Services Committee took the opposite position, emphasizing that the FHA has not strayed from its mission and insisting that it has indeed helped save America’s housing sector. They asserted that the agency is on the road to stability and claimed that GSE reform without a strong FHA was impossible. “I refute claims that FHA is crowding out the private market. FHA makes up 15 percent of the market, not more than 50 percent, as some have claimed.” Rep. Maxine Waters (D-CA), House Committee on Financial Services

“FHA is designed to deal with lower-worth borrowers, and it is appropriate for us to take different kinds of risks than the private market would do. That is the point of FHA… never has FHA’s ability to act counter-cyclically been more important than during the recent housing crisis, when FHA played a very prominent role in stabilizing the housing finance system and averting a total collapse of the housing market.” FHA Commissioner Carol Galante

legislative With these comments in mind, let’s review some of the background, examine what was said and draw some rational conclusions.

Commissioner Galante’s written testimony reflected several salient points: “While FHA has enacted substantial reforms under the current administration, this year’s actuarial review makes clear that loans made prior to and at the outset of the recent

4 Establish an incentive policy for housing counseling 4 Stabilize and strengthen the HECM program

FHA market share has dropped from a crisis high of nearly 40 percent in 2009 to 15 percent in 2013. While the 2007, 2008 and 2009 books of business were certainly a disaster and reflect the overall existing burden on the FHA, the books of business from 2010 onward look very strong and are likely to strengthen as the overall housing market continues to pick up. All of this speaks to a fiscal and regulatory trend that is going in the right direction. If the FHA is successful in making the changes they deem necessary in an expeditious manner, and if the housing economy continues on its current path and the private sector continues to increase its market share, the outlook for reaching sustainability should be positive. x reversereview.com

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The Road to Recovery

4 Change future credit policy and pricing

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4 The FHA will issue new incentives for estate executors of HECM borrowers to dispose of properties themselves rather than conveying them to HUD.

4Increase the MIP

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4 In administrative guidance dated January 30, 2013, the FHA consolidated the fixed-rate Standard product with the fixedrate HECM Saver product, resulting in a reduction of the maximum withdrawal funds.

4 Revise the premium cancellation policy

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According to the FHA, the federal mortgage insurance program currently

4 The FHA is set to implement mandatory set-asides to protect the FHA from borrower defaults due to the nonpayment of property taxes and insurance.

4 Further strengthen the quality and impact of new endorsements

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During the recent housing boom, the FHA’s share of the mortgage market fell to less than 2 percent of mortgage originations at the end of 2006. As housing prices began to decline, lenders tightened their underwriting criteria and the FHA began playing a larger role in the mortgage market. The Congressional Research Service has reported that during fiscal year 2010, the FHA guaranteed nearly 40 percent of mortgages originated or refinanced. However, it is important to note that this number has dropped to nearly 15 percent.

Immediate Steps to Reduce HECM Program Losses in the Near Term:

4 Reduce the losses from legacy books of business

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The 2008 Financial Crisis

In particular, the FHA Actuarial Report puts significant focus on the HECM program as it represents almost $2.8 billion of the $16.3 billion noted above. The following outlines specific changes to the HECM program most pertinent to this readership that will be required to strengthen the program:

The testimony outlined several steps that will be taken to strengthen the FHA, including:

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The FHA was established to provide stability and liquidity in the market. Its creation fostered the 30-year, fixedrate mortgage and led to standardized mortgages. The FHA is intended to be self-funded: Premiums paid by homeowners for FHA mortgage insurance are used to cover losses when loans default.

The 2012 Actuarial Report noted that the MMI Fund’s economic value was negative $16.3 billion, which is the projected amount the FHA would lose if it stopped insuring new mortgages and covered its projected losses.

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First, let’s take a look at what led to the creation of the FHA and the FHA’s original charter. The National Housing Act of 1934 established the FHA with a mission to provide federal mortgage insurance in order to broaden homeownership, protect lending institutions and stimulate the building industry. It is interesting to note that before the FHA was established, home mortgages did not exceed 50 percent of home values and were short term, lasting no longer than five years. At the end of the fifth year, homeowners had to pay their mortgages in full or roll them over. During the Great Depression, lenders were unable or unwilling to roll over loans that came due, causing an enormous decline in housing values.

crisis continue to weigh heavily on the health of the MMI Fund. Therefore, building upon the significant efforts already undertaken to protect and preserve the MMI Fund, FHA is implementing a series of additional actions to continue improving the Fund’s trajectory over both the short and long term. Using the Actuary’s model, collectively, these changes are projected to provide billions of economic value for the MMI Fund in fiscal year 2013.”

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The Background

insures more than $1 trillion worth of mortgages on more than 7 million loans. The MMI Fund fell below the required 2 percent for the first time in fiscal year 2010, to 0.5 percent. By statute, the FHA is required to maintain the MMI Fund’s capital reserve ratio at 2 percent.

The Reverse Review March 2013

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HMBS

secondary market

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It’s Always Darkest Before the Dawn

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Da r re n S t u m b e r g e r

endorsements down 25 percent in fiscal year 2012 versus 2011, and down for the third consecutive year, there isn’t much to lean on in 2013 to stem this trend. Past policy changes, the downstream shifting of the originator landscape, congressional scrutiny about the viability of the FHA and prospective changes to the program should keep volume in line with 2012 (55k units). The industry should expect more announcements from the FHA in 2013, as the agency is currently seeking legislative authority to amend the program to ensure its long-term viability. Guidance on financial assessment, limitations on initial draws at origination, and tax and insurance set-asides are all expected this year, which should continue to pressure origination volume. Additionally, the FHA is working on an incentive plan for estate executors at the time the loan is due and payable to help mitigate losses for the program.

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As unpleasant as it is with all of these current and prospective changes, coupled with the FHA “viability” debate happening between Republicans and Democrats, there’s no disputing the fact that every day for the next 19 years 10,000 baby boomers will turn 65 years old. The 79 million members of the baby boomer generation account for roughly 26 percent of the total U.S. population. According to Pew Research, economically, boomers are the most likely among all other age groups to report a greater loss of money on investments since the Great Recession began. According to Pew Research, 57 percent of boomers say their household finances have recently declined. Entitlement programs are under intense stress in the U.S., and one can hope members on the Hill will see the reverse mortgage loan as an essential tool to alleviate the growing pressure. Over time, originators will increase penetration rates and the market will grow much larger, but until then, the resolve of industry participants will continue to be tested. x

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HUD released Mortgagee Letter 2013-01, which specified that fixed Standard loans must close by July 1, 2013. I’d expect full pools of fixed Standard to be brought to market through the end of the summer and the origination mix to begin to shift and be dominated by fixed Saver and floating Standard. With HECM

According Past policy changes, the downstream shifting of the originator to darren landscape, congressional scrutiny about the viability of the FHA and prospective changes to the program should keep volume in line with 2012 (55k units).

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The split of fixed versus floating was roughly 75 to 25 percent. Current levels for fixed-rate Standard HMBS are roughly 60 to swaps for new production, mid-50s to swaps for four- to five-year average life secondary paper, high 30s to swaps for three- to four-year paper, low to mid-20s to swaps for two- to three-year paper, and low- to mid-teens to swaps for less than two-year average life HMBS. Floating Standard has been trading in the low 40s discount margin for March settle.

appraising

Deal execution has kept spreads for HMBS well bid, with originators hedging their pipelines with March settlement bonds. January HMBS issuance topped $800 million with Reverse Mortgage Solutions at $283 million and Urban Financial Group at $281 million of issuance respectively, comprising 70 percent of the market share. Generation Mortgage, Livewell Financial, Nationstar, Sunwest Mortgage, Bank of America and One West also issued during January.

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n January, HREMIC deal issuance was $436 million, slightly higher than December 2012’s total of $400 million. Knight Capital Group, Bank of America Merrill Lynch and Royal Bank of Scotland brought deals of $171 million, $146 million and $118 million respectively. More than $6 billion in HREMIC issuance was brought to market by securities firms in 2012, and I would expect continued robust issuance in early 2013 given the superior execution levels.

The Reverse Review March 2013

spotlight article march

Reverse mortgage professionals donate their time and money to help others in need.

on editi

community one

Security One Lending Community One By Rhiannon Behnke Community One is an organization created by Security One Lending (S1L) that is dedicated to supporting charitable causes in several of our local communities. When I joined the company, I met with Torrey and Tyler Larsen, S1L’s CEO and CFO, and we decided to create an entity within the firm that would be devoted to serving the various nonprofit organizations that the three of us supported, effectively organizing our efforts under one umbrella with the hope of encouraging our partners and staff to get involved. What do you and your co-workers do to support Community One?

Charitable Ventures Reverse Mortgage Lenders Give Back

he job of a reverse mortgage professional requires great compassion. Every day, these people help seniors concerned about their financial security, listening to their worries and guiding them toward potential solutions. It’s no surprise that the sensitivity and empathy required to do this job extends beyond the workplace. With the support of their lenders and in the spirit of giving back, many reverse professionals are actively contributing to a variety of charitable causes. Here are some of the charitable ventures supported by leading lenders in the space.

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Currently, we are hosting an in-office food drive for The Angel’s Depot, and many of us also volunteer at the charity’s warehouse to help pack meal boxes. We also hold various fundraisers for The Good Samaritans Children’s Home, which supports deprived children in Malawi. Finally, S1L employees volunteer in the area near the annual NRMLA conference, typically for a community improvement venture, and we ask other members of the industry to join us. Last year we worked on homes through Habitat for Humanity in San Antonio. This year, in New Orleans, we will be participating in another Habitat for Humanity event on November 2. What does your involvement in the organization mean to you? It touches my heart to see our employees get involved and work together as a team to help serve local communities and charities. It’s also great to see all the individuals who are willing to come together to help during the annual NRMLA event; it just brings a tear to my eye because you

spotlight article

originating

can’t do it alone and without all our friends in this business, we would never be able to achieve these amazing goals in helping others. Even if you cannot afford a financial contribution, just giving time and seeing the gratefulness in return from the people you are helping is an amazing feeling.

marketing

! Visit

community-one.org

underwriting

to learn about how you can get involved.

3American Advisors Group, By Lauren Willis: Kwagala Project

appraising

Kwagala Project is dedicated to rescuing, restoring and empowering women and children who have been victimized by trafficking and gender-based violence, and who are living in abject poverty. In addition to providing counseling and trauma therapy, Kwagala Project helps survivors cross the bridge into self-sufficiency through education and practical aftercare programs such as skills training, entrepreneurship and job placement. Each area of study is designed to equip graduates with the tools and informed choices needed to build their newly empowered futures.

tech legal

visit kwagalaproject.org In August 2011, the AAGives Back committee met with AAG CEO Reza Jahangiri to hear about his recent trip to Gulu, Uganda, and this amazing organization he came across that helps struggling young women and children in that area. During his trip, Reza visited a rehabilitation residence in Gulu that is sponsored by another American firm. Inspired, the committee called a companywide meeting to talk about how the AAG family can get involved.

We raise money through different fundraisers to help support the house where the girls live. We’ve done many different fundraisers in the office, including bake sales, salad bars, raffles and jewelry sales. Soon we’ll have an automatic withdrawal program set up for employees who’d like to donate per paycheck. We also Skype as often as possible to catch up with the girls in Uganda, fostering a connection between them and AAG staff. Last year, AAG sent me to visit the girls in Gulu and Kampala as a representative for the company. All of the money AAG raises is

pooled to provide microloans for these women, giving them the ability to start their own business and invest in their futures. Why do you think this is an important cause for your company to support?

It provides the opportunity for team building through company activities and fundraisers. The employees also get to witness firsthand where our fundraising is going and how it is being utilized to change lives. AAG’s mission is not only to be an industry leader but also a leader in the community, and I believe we are accomplishing this through the example of giving back. 8 reversereview.com

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What do you and your co-workers do to support the charity?

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How did AAG first get involved with Kwagala Project?

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The Reverse Review March 2013

spotlight article

One Reverse Mortgage

The Angel’s Depot By Tracy Milligan The Angel’s Depot works directly with seniors in San Diego County who are living in poverty and are at risk for malnutrition. They provide a free midmonth meal box to eligible seniors containing a full week of meals. These boxes help fill the gap when finances are the tightest.

Learn more about 44

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How and when did your company first get involved?

What does your involvement in the organization mean to you?

One Reverse Mortgage first became involved with The Angel’s Depot in 2012. We’ve always been involved in charity work, but when we were introduced to The Angel’s Depot we knew we had found a charity that matched our company’s mission to help seniors in our community. After hearing about the charity through a friend in the reverse mortgage industry, we immediately reached out to offer our assistance.

There are approximately 50,000 seniors living in poverty in San Diego County. While a reverse mortgage can help ease financial stress for some of them, there are many more seniors whom we cannot help. This organization reaches out to seniors whom our company may not be able to assist and eases some of their stress. As surprising as it sounds, the No. 1 reason seniors are forced to move from their homes into assisted living facilities is malnutrition. The simple yet effective concept of providing food directly to the seniors who need it most picks up where reverse mortgage companies leave off.

What do you and your co-workers do to support the charity? We help set up for its annual gala event; one of our team members and her spouse even worked as the photographers for the evening. We pack meal boxes at the charity’s warehouse for delivery and we are currently hosting a food drive at our office. Our food drives have been incredibly successful because of the competitive nature of the team here in San Diego. We end up overwhelming our space with food and have had to have The Angel’s Depot send its truck to pick up everything!

Do you think the charitable work impacts workplace morale? I have no doubt about the positive effect this charitable work has on the morale of our team. Every team member has committed to help in one way or another, sparking individual competitions, friendly taunts and constant requests for more ways to help. One Reverse Mortgage offers eight hours of paid volunteer time to each of its team members, but so many of our members do much more. The feelgood energy it creates in the workplace is infectious.

The Angel’s Depot at theangelsdepot.org or find it on Facebook.

FIND US ON:

FACEBOOK AND LINKEDIN

spotlight article

3Generation Mortgage Company, By Colin Cushman: Senior Connections

seniorconnectionsatl.org

to learn more.

In 2009 our VP of human resources researched various charities that GMC could support and came across Senior Connections. We felt it was a great fit for our company’s vision and mission. Since then, our chief operating officer, Mark Sohl, has been an active member on the Senior Connections board of directors.

We participate in many different events. Several times a year we send teams of volunteers to help prepare and deliver hot, nutritious meals to homebound seniors. These volunteers also assist in making homes handicapaccessible. We help with the annual senior prom event and also sponsor an annual golf tournament. We also participate in an event called the Meals on Wheels Mayor’s March, where we deliver meals with 16 local mayors to constituents in their districts.

The mission of Senior Connections aligns with the philosophy of our organization. Generation Mortgage Company’s mission is to provide senior clients with the opportunity to maintain independence in their own home while aging with grace and dignity. Spending time with local seniors while delivering meals helps all of us keep a clear focus on the importance and value of the products and services we provide our customers.

Yes, very much. Everyone truly enjoys the opportunity to be of service to the senior community and to be able to make a difference by directly jumping in and providing a helping hand. We enjoy the time spent together doing activities that help create stronger relationships. It gives us a healthy sense of mission that helps heighten morale in the workplace. x

tech

Do you think the charitable work impacts workplace morale?

appraising

What does your involvement in the organization mean to you?

underwriting

What do you and your coworkers do to support the charity?

marketing

How and when did your company first get involved in Senior Connections?

originating

Senior Connections is an Atlanta-based charity whose mission is to provide essential home- and community-based care that maximizes independence for the elderly.

Visit

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The Reverse Review the HECM, Dodd-Frank and life after Congress

March 2013 barney frank

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Barney Frank talks about

the HECM, Dodd-Frank and

life after Congress By Jessica Guerin

Mention the name Barney Frank and you’re bound to get a strong reaction—people either love him or they love to hate him. The outspoken, liberal Democrat from Massachusetts is revered by some as a brilliant champion for the underdog and despised by others as the driving force behind the financial reform that crippled Wall Street. Recently retired after 16 terms in Congress, Frank is in the process of launching a new phase of his career, one that the 72-year-old says will be less demanding—and more profitable—than the time he spent politicking on Capitol Hill. I met up with him in Phoenix, where he had just finished the last leg of a speech circuit, and we sat down to talk about his thoughts on the reverse mortgage program as a longtime advocate for affordable housing.

The outspoken,

liberal Democrat from Massachusetts is revered by some as a brilliant champion for the underdog and despised by others as the driving force behind the financial reform that crippled Wall Street.

Whether you love him or hate him, it’s hard to deny that Frank’s story is impressive. Born to a working-class family in Bayonne, New Jersey, Barnett Frank graduated from Harvard College and was elected to the Massachusetts House of Representatives, where he served while attending Harvard Law. In 1980 Frank was elected to the U.S. House of Representatives, winning re-election 12 times during his 22-year tenure with at least 67 percent of the vote. A fierce debater, Frank is known for his quick wit and sharp tongue, earning him the nickname “saber tooth” by former President George W. Bush. His biting, combustible remarks during House debates have produced several YouTube hits, prompting The New York Times to call him the “master of the one-liner” and leading to a published collection of his colorful commentary titled Frank Talk: The Wit and Wisdom of Barney Frank. 8

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The Reverse Review the HECM, Dodd-Frank and life after Congress

March 2013 barney frank

Frank is straightforward and unapologetic, and he’s often called out in the press for his crankiness and impatience. The man is simply not afraid to say what he thinks, and he saves very little time for niceties (a fact that was not lost on me during our interview). But even those who dislike Frank’s brisk demeanor or disagree with his politics can’t help but respect him for his work ethic and intelligence. In an annual survey of Capitol Hill staffers by Washingtonian magazine, he was repeatedly voted brainiest, funniest, most eloquent and biggest workhorse by his peers. As the first openly gay member of Congress, Frank is passionate about his support of gay rights and other minority causes, and was crucial to the passage of antidiscrimination legislation. “I’m a left-handed gay Jew,” he famously said. “I’ve never felt, automatically, a member of any majority.” Frank served as chairman of the House Committee on Financial Services from 2007 to 2011 and was a critical part of the nation’s $700 billion bailout of financial institutions. But much of his career was spent advocating for affordable housing.

“The problem in politics is this: You don’t get any credit for disaster averted.”

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He was instrumental in aiding the passage of housing reform and antipredatory lending acts, and he was one of few in Congress who urged the Treasury to help troubled homeowners modify the terms of their mortgages, pushing the American Housing Rescue and Foreclosure Prevention Act to protect homeowners from foreclosure. The law, which passed in 2008, is one of the more notable accomplishments of Frank’s career and led some to deem him the “smartest man in housing.” But Frank also has his critics, and they would wholeheartedly disagree with that praise. They claim that by promoting policies to boost affordable housing, Frank and other Democrats contributed to the subprime mortgage crisis by enabling Fannie Mae and Freddie Mac to back exceedingly risky loans. They assert that he failed to foresee the trouble that lay ahead for Fannie and Freddie, and point to an unfortunate comment he made to The New York Times in 2003 denying that these government agencies were headed toward any sort of crisis. True to form, Frank responded to his critics with sarcastic humor, noting that the idea that he had the power to stop the housing crisis was “flattering in a bizarre way” and pointing out that his minority status in the House prevented him from passing any sort of meaningful legislation that would have put a stop to it. In a press release issued in response to these claims, Frank said, “If that had been true, I would have used that power to block the impeachment of Bill Clinton in the House, the war in Iraq, large tax cuts for the very wealthy, the intrusion into the sad case of Terri Schiavo, and appropriations bills that badly underfunded important social priorities.” Frank’s most impactful legacy is likely to be his role in leading the crackdown against Wall Street. A staunch supporter of financial reform,

Frank and former Connecticut Senator Chris Dodd co-wrote the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law in 2010 and is just now beginning to take effect on Wall Street. Intended to regulate the financial markets and tighten lending standards, this sweeping legislation has ignited criticism from members of the financial sector who claim the bill’s stringent regulatory standards unfairly stifle business. Frank defends the bill, stating that without it, things would be worse. “The problem in politics is this: You don’t get any credit for disaster averted,” Frank said in an interview with 60 Minutes, adding that you can’t go to the voters and say, “Boy, things really suck. But you know what? If it wasn’t for me, they would suck worse.” In light of the exhausting controversy he seems to inspire, it would be no surprise if the former congressman wanted to retire to a quiet life in his vacation home on the coast of Maine. But Frank seems to have grander plans. He retained famed Hollywood agent Ari Emanuel to search out new projects, and recently made his Broadway debut in the Pulitzer Prizewinning musical Fiorello!, in which he played an outspoken senator. It was an ironic role for Frank, who in January publicly announced his desire to fill John Kerry’s Senate seat during the interim in order to participate in fiscal cliff talks, but he was passed up for the job. During our interview, Frank laughed at the irony. “I can now say, like they say in commercials, ‘I’m not a senator, I just play one,’” he said. Whether he’s on stage or, more likely, making guest appearances on cable TV shows to comment on the political drama of the moment, there’s no doubt that we haven’t heard the last of Barney Frank.

Barney Frank

sit s do wn t o t alk with

The Reverse Review.

JG // When you announced your retirement, many people in the reverse mortgage industry lamented the loss of a great champion of the HECM program. Why have you been such a supporter of the product?

( BF // It’s sensible, it’s logical. I like things that break through artificial barriers. Sometimes people say, “Well, you have to be this or that; either you own your house or you sell your house.” This is an example of how you can get the best of both worlds. You continue to own your house, and you have all the physical and psychological pleasures of being the owner of the house that you live in and being the boss of that house, but you also have the financial benefits. It’s a perfectly sensible way to deal with life cycle and economic needs. And so that’s why it makes perfect sense to me. JG // A November audit revealed that the FHA’s Mutual Mortgage Insurance Fund was negative $16.3 billion. Any thoughts on what should be done to address this issue?

( BF // Yeah, we voted for them to [audit the fund]. Look, that reflects past practices. Within the last few years, when I was recruiting in a bipartisan way, we passed some legislation, for example: Until a few years ago, the FHA did not have the right to bar lenders from participating. They would have a situation where lenders would be abusive, and they couldn’t say, “You can’t come back again.” So maybe the guy could slip on by them. We gave them the power to do that, and we gave them the power to adjust the premiums… This is the federal government we’re talking about, and I think given the terrible problem that happened in the housing market in general, [the fund’s negative status] is not a sign of total wrongdoing. I think [the HECM program] is reputable.

I like things that break through artificial barriers. Sometimes people say, “Well, you have to be this or that; either you own your house or you sell your house.” This is an example of how you can get the best of both worlds.

JG // One proposed solution that would directly impact the reverse mortgage industry is the elimination of the standard fixed-rate HECM, which was the most popular product because it enabled seniors to get the largest lump-sum payout…

( BF // That relates to a very important problem: the Senate filibuster. It really is a serious flaw in our democracy that because of the filibuster one senator can impose all kinds of restrictions. I don’t see any sign that [the fixed-rate HECM] was a major contributor to the [fund’s depletion].

JG // Are you concerned about the FHA’s current exposure to the housing market?

( BF // Sure, but that means that we’d have to remedy things. Although, again, I think the problem reflects more the past rather than current and future [situations]. If those deficiencies were getting bigger and bigger, I’d be more worried. I think if you look at Fannie Mae and Freddie Mac, they cost us a lot of money, but all the 8

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The Reverse Review March 2013

visit our website to read about current issues in the reverse mortgage industry! The Reverse Reviewâ&#x20AC;&#x2122;s website offers complete access to all of the magazineâ&#x20AC;&#x2122;s content in a clean and crisp format. Read the latest issue or peruse the archives and access important stories from past editions.

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cost [was from] pre-2008 activity. I think the business the FHA has done in the last few years is pretty sound. JG // The FHA is coordinating with the industry to find a solid solution for reverse borrowers who can’t pay their taxes and insurance. One proposed solution is establishing set-asides upfront to pay for taxes and insurance. Do you think that’s a sound solution?

( BF // I haven’t looked at it that

specifically, but yeah, I think it is important. People need to understand that there are no magic bullets. There is a danger that people who are not even economically sophisticated but just economically literate [will] get a large amount of money all at once and won’t be equipped to handle it. So I do think

I’ve facilitated some meetings. I was kind of a mediator to some extent between the AARP and Peter [as a representative for] the industry, and I think there’s been a lot of constructive work on it. Specifically, the AARP wasn’t trying to end the program; they were trying to improve it, and I think that worked. JG // What do you think the industry should be doing to build more allies for the program on Capitol Hill?

( BF // Well, I think that you have the beneficiaries talk about it. The problem is the media likes to talk about the bad news. I think you should have them talk about the good news, have them talk to some people who have benefited. Encourage the people

sure people don’t hear only from the minority with bad-news cases; have them hear more about the good-news cases. JG // Moving on to Dodd-Frank, you once said that if you were writing the bill all by yourself it would have turned out a bit differently. In retrospect, what would you have changed?

( BF // First of all, I would have had the financial institutions pay the cost of it. That was $20 million we were going to assess on them. Secondly, I would have improved the anti-pre-emption language, that is, we made some progress. The Bush administration promulgated rules that kept state banking regulators from being able to do consumer things. We ran into a

the most effective thing you can do to influence members of the House and Senate is to have constituents of theirs who have had particular experiences go and talk to them about it. It would help if members of the House and Senate could hear from people who could say, “By the way, I just want to tell you this saved my house. This has been great for me.” [there should be] ways to work with them on that. That’s one reason not to allow the person who gets them the deal to be the one who invests it. JG // You were involved in establishing rules against cross-selling and lowering the fees associated with the product. In the last 17 years there have been a lot of tweaks to the program. What do you think of its evolution?

( BF // I think it was a good idea. Like any program there’s the potential for abuse, particularly because some of the people involved are older and vulnerable, and I think we’ve made substantial progress. I’ve worked closely with Peter Bell. I think he’s been very responsible and

who have benefited to just go out and see their members of the House and Senate and tell them that. And see if you can get the media people to cover it… People misunderstand: Campaign contributions are important—folks will need money anytime they are engaged in a contest—but the most effective thing you can do to influence members of the House and Senate is to have constituents of theirs who have had particular experiences go and talk to them about it. It would help if members of the House and Senate could hear from people who could say, “By the way, I just want to tell you this saved my house. This has been great for me.” Or it doesn’t have to be the people themselves, if their children or other relatives would say this. Make

political problem there. I would have wanted to strengthen the restrictions against pre-emption. State regulation for consumer or other reasons should only be pre-empted if it directly conflicts with federal policy and makes banking impossible. I would have toughened up the derivative situation some. We lost a couple of things on derivatives… I wanted it to be that if you really did a significant business [with derivatives] and were going to be affecting other companies, that would be a problem. I lost to a member who said, “No, only if you’re affecting the whole system.” But I think we got enough of that, so that’s not going to be major. In an ideal world I would have married the 8

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The Reverse Review the HECM, Dodd-Frank and life after Congress

March 2013 barney frank

CFTC and the SEC. Also, I had not noticed some of the things the Senate put in there about the confirmation power—the provision that said the CFPB powers can’t be exercised until there’s a confirmation. That was something the Senate did, I am now more aware of that… I understand the Senate wanted to protect the confirmation power, but when you have the filibuster that just doesn’t work, like with Corker, that filibuster with Galante. So, I would have given the CFPB the power to go into effect right away. I wouldn’t have exempted auto dealers from the consumer bureau, and I would have liked to have made the SEC and the CFTC self-financing… The problem is the Republicans have crippled the derivative regulation to a great extent by substantially underfunding the Commodities Futures Trading Commission, and that slowed things down. JG // There are critics out there who say that Dodd-Frank will stifle liquidity in the markets. How would you respond to them?

( BF // OK. The day the bill passed in the House-Senate conference committee, the Dow Jones industrial average was 9,700. That was about two years and eight months ago. I just saw it hit 14,010. So the stock market, which of course was a major target of [Dodd-Frank], has now increased by well over 40 percent in two and a half years. I think that’s a pretty good argument. There really isn’t any sign [that it’s hurt liquidity]… By the way, in March of 2009, when we first began working on the bill, the Dow was 6,500, so it’s gone up about 120 percent. And the market today is up about 40 points; the Dow and the others are doing well too, led by significant improvement in financial companies.

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JG // Initially you supported Elizabeth Warren for the CFPB directorship. What do you think of Cordray’s tenure so far?

( BF // He’s excellent. I think he’s great. In fact, it worked out well. In February of 2011, I said to President Obama at this democratic issues conference that he should appoint Elizabeth to head the bureau and it would be win-win—either she would be confirmed or they would filibuster her, make her a hero and she could be a senator. And he said, “Do you think she wants to run for the Senate?” And I said, “Well, I think she wants your job, but you gotta start somewhere.” I think it worked out well. Cordray’s been excellent. It’s incredible now that they’re threatening to filibuster him. I think that it’s just hostility. And by the way, if you listen to the criticisms by the Republicans and by the business people [about the CFPB], there are no specific actions taken by the [bureau] that they object to. Their objection is the same one they had before: It’s not financed… It’s not subject to appropriation, but of course neither is the Office of the Comptroller of the Currency or the FDIC or the Fed… They’re just hypocrites about it; I mean, they don’t like consumer protections. But there are no specific objections to anything it’s done. It has worked very well according to people in the industry, and Cordray has been great. I think this could be a major issue now, this filibuster. Now remember, they are trying to filibuster him not because of any negatives about him. They are using the filibuster to try and change the law, because they don’t have the votes to change the law. But I would say there were some concerns about the pace of [Dodd-Frank’s] implementation. That was probably because of businessmen who had every incentive to resist implementation, because they were hoping that Romney would become

president and it would go away. Now that Obama’s been re-elected, I think the business community has changed its position and implementation will be much quicker, because from their standpoint, [even though] they would rather have no rules, having rules that are uncertain is worse. I think by the end of the year it will be very well implemented. JG // Looking back on your career, what would you say was the highlight?

( BF // That’s hard to say. Clearly the progress on LGBT rights is very important. You know, I went from being afraid to be honest about my sexuality when I got elected in ’81, to being the first member of Congress to volunteer that I was gay in 1987 but being worried about it, to serving out my last six months married to a man. So we made good progress there. Helping thwart the effort to throw Bill Clinton out of office in ’98 was a big one, and the Financial Reform Bill was also obviously a big deal. Over time, I worked very hard to try and promote I would say something there were that wasn’t some concerns understood and about the pace ironically I get of [Dodd-Frank’s] attacked [by implementation... people who say], Now that “Well, you were Obama’s been trying to sell re-elected, I think houses to poor the business people.” Actually community has most of what I changed its position and was trying to do implementation [with] a few of will be much my allies was quicker, because to rent houses from their to poor people, standpoint, [even and I’ve worked though] they very hard on would rather trying to promote have no rules, affordable rental having rules that housing. We are uncertain is made some worse.

progress, but not as much as I’d like. That would be another major area.

it be fair to say that you’ve been disillusioned?

And also, in ’95 when the Republicans took over, I helped block some of what they wanted to do. They wanted to end affirmative action all together. Colin Powell made a speech in which he said he’d never have been a general if it weren’t for affirmative action… And then finally, something that’s just coming to fruition now, and I worked on it and worked on it: the recognition that reducing military spending is a very necessary thing if you’re going to have deficit reduction in a socially responsible way.

( BF // No, not at all. I still believe that, and I’m going to write a book about the importance of government and how the public sector should be a partner to the private sector. Two things: The Republicans are in power in the House. In the Senate, a minority member can have more influence. Minority members in the House don’t have a lot of influence. That’s the irony of people saying, “Oh, you Democrats, you made us lend all this money to poor people and caused the crisis.” The Republicans ran the House from ’95 to 2006. When we took over in 2007 we started to box some [of them out].

JG // In reading people’s comments about you, so many mentioned your faith in the system and your belief in the government’s ability to solve problems. But when you announced your retirement, you said that you felt you could be more effective instigating change from the outside, that politics have devolved in such a way that it’s impossible to get things done. Would

don’t have the energy that I had when I started or even that I had 15 years ago. I’m worn out. I think [it will be better] to conserve my energy and focus only on the things that are highpriority for me and high-profile. JG // I read that you recently hired famous talent agent Ari Emanuel. So, what’s next for Barney Frank?

( BF // I’m going to write a book about the role of government. And I get paid a lot of money now to give speeches… If I give 10 speeches this year it will be for some multiples of my congressional salary. I’m looking at doing some writing and commenting for the media, but that’s still being negotiated. And I hope to teach in the fall, probably at Harvard Law School about Congress, but nothing is definite… And then I thought, if it’s meant to be, if Fred Thompson retires, I could be a home equity spokesman. But I’d rather have the Law & Order job. x

I think the media and the public’s skepticism about elected officials means that what I say [in retirement] will be viewed less skeptically… People can’t say, “Oh, you’re just saying that because you’re running for office.” Plus, the other thing is this: I’m going to be 73 years old in a month. I

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The Reverse Review March 2013

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Sh e rry b. Apa nay

rokers, originators, processors, account executives—we’ve all experienced industry growing pains and we’ve all been challenged in this ever-evolving, increasingly scrutinized business.

Today, there’s the added layer of oversight by the CFPB. The level of industry scrutiny—of not only brokers and lenders, but also of the FHA and HUD— is at an all-time high. Everyone is trying to mitigate risk. This is a good thing for older homeowners, the soundness of the Mutual Mortgage Insurance fund and the long-term vitality of our industry. While this is an especially challenging time, let us not lose sight of the opportunities ahead. The demographics speak for themselves. At Urban Financial Group, we believe that the reverse mortgage companies and sales professionals who will flourish are those dedicated to “doing the right thing” and prioritizing the best interests of customers over profit. We respect those who take it upon themselves to promptly understand new regulatory rules and implement them as quickly as possible, and we make every effort to be an advocate for those we serve by helping them make informed decisions. We also have a responsibility to our business partners. This industry was built by local banks, credit unions, field representatives and brokers who were invested in their communities and made a commitment to providing financial solutions for older homeowners. They remain an industry backbone for the personal level of service they provide. We must continue nurturing and supporting these traditional distribution channels. 54

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According to sherry The brokers who will survive and excel are those who embrace and partner with a responsible lender (or two) that really works to help them succeed and epitomizes the local reverse mortgage expert committed to providing solutions for older homeowners.

Brokers, for example, have the least amount of autonomy in this market but are subject to a great amount of oversight. The brokers who will survive and excel are those who embrace and partner with a responsible lender (or two) that really works to help them succeed and epitomizes the local reverse mortgage expert committed to providing solutions for older homeowners. We’re still a small industry, like a “tween” pushing hard to grow up. To get to the next phase in the growth process, a greater level of responsibility is required. x

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