The Reverse Review August 2013 by The Reverse Review

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The Mortgage Professor Talks HECMs

JOINING THE AGING-IN-PLACE MOVEMENT PG. 18 SELF-REPORTING ISSUES TO the CFPB PG. 26 + SHERRY APANAY SITS DOWN IN OUR HOT SEAT PG. 16

THE

REVERSE august 2013

review

The Reverse Review August 2013

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The Reverse Review August 2013

From the Publisher in the pot in both houses of Congress. In both the House and Senate proposals,

Fannie and Freddie will no longer exist, at

Senior Publisher

limiting access for many borrowers who

Publisher

though the issues at hand are of historic

Editor-in-Chief

our boutique industry has somehow made

Creative Director

currently participate in its programs. Even magnitude with trillions in the balance,

its way into the congressional cookbook. How did we get here? Is it warranted? Well, it is too late for that. We should be thankful that FHA now has the

If we look back at the year

administrative authority to promulgate

realize it was a pivotal year for our

preventive and curative, helping to avoid

2013 10 years from now, I think we will industry. I believe we are finally facing the music and Bob Dylan’s tune “The

Times They Are A-Changin’” is playing

on vinyl. Historically, the HECM program has never been a hot topic with broad understanding on Capitol Hill, but

that is not necessarily the case today.

Last October’s actuarial report and the

the changes it has been contemplating

dynamics.

As I write this piece, we are in the

midst of historical financial reform with ingredients of legislation being thrown

Jessica Guerin Traci Knight

Copy Editor

Kersten deck

Marketing Director alycia colacion

Printer The Ovid Bell Press

deep PLF cuts and ensure the long-term

Advertising Information phone : 630.207.3882 email : jessica@reversereview.com

sustainability of our program.

Subscriptions email : information@reversereview.com

So brace yourself, because medicine is

being served. What may taste a little bitter today will help improve our long-term health.

Senior Publisher

{ Reza Jahangiri } Want to talk to Reza? Reach him at reza@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

Erik Richard

t ay ec st onn c

Feedback

Reza Jahangiri

for several years now. These will both be

current mood of the housing and banking

committees in Congress have changed the

Meet the Team

least in their current forms. Additionally, FHA will have to tighten its scope,

A note from Reza jahangiri

FACEBOOK AND LINKEDIN

Table of Contents 18 | Originating

TRR 8.13

There’s a Movement Taking Shape in America A collective mission to help seniors age in place is gaining steam. Michael J. Weltman

In this issue... 25 ralph rosynek

Underwriting

20 | Originating A Bowl of Rocky Road One reverse professional reflects on business past and present. Mehran Aram

23 | Marketing Google Plus: What and Why How Google’s new networking site can enhance your online visibility Scott Gordon

26 haydn j. richards, Jr. Legal

29 | HMBS Violent Price Action in HMBS

Marty Bell

15 | Roundup

Reverse Mortgage Daily

A collection of recent facts and surveys affecting the reverse market

11 | Top Lenders Report

16 | Hot Seat

Reverse Market Insight

Managing director and head of sales for Urban Financial Group

Jack Guttentag discusses the unique appeal of the reverse mortgage product and how he aims to help consumers understand them better.

32 | Servicing HECMs

The business and challenges of servicing reverse mortgage loans

38 john larose

Last Word

Want the online version? reversereview.com/magazine

Jessica Guerin august 2013 W IE

E TH

E REVIEW THE VERS RE R

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INSIDE this issue

TH E

E RS

The Mortgage Professor Talks HECMs

HE REVERSE REV IE W

JOINING THE AGING-IN-PLACE MOVEMENT PG. 20 EXAMINING THE TRUE STATE OF THE MMI FUND PG. 18

+ SHERRY APANAY SITS DOWN IN OUR HOT SEAT PG. 16

W THE RE REVIE VE

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cover WT VIE RE

A look inside the business of reverse mortgage servicing

“As a loan designed for a protected class of borrowers, reverse mortgages require a heightened level of sensitivity and attention when it comes to servicing the loan... In this environment, reverse mortgage servicers must continue helping senior borrowers manage their loans post-closing, while artfully navigating the complicated rules surrounding a program in flux.

THE

FEATURE

Sherry Apanay

30 | Spotlight TRR Talks With The Mortgage Professor

June year-to-date volume for top reverse lenders

Darren Stumberger

EVIE

Headlining stories of the past month

Read about the association’s current initiatives.

R SE

09 | Industry Update

12 | NRMLA News

ER EV

The latest developments in companies across the reverse space

08 | Movers & Shakers

An update of events in the secondary market

THE

REVERSE AUGUST 2013

reversereview.com

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The Reverse Review August 2013

Contributors

John K. Lunde

Marty Bell

J ohn K . L und e

Ma rty B e ll

s h e r ry apanay

11 | Top Lenders Report g John K. Lunde is president and founder of Reverse Market Insight, Inc., a performance data analysis and consulting firm specializing in the reverse mortgage industry. RMI clients include eight of the top 10 reverse mortgage lenders, plus investors, servicers and vendors to the industry. rminsight.net 949.429.0452

12 | NRMLA News g Marty Bell is NRMLA’s senior vice president of communications and marketing. This is Bell’s professional Act III after careers in books, journalism and the Broadway theater. Bell is the author of two novels and four nonfiction books, and his writing has appeared in publications including Playboy and New York magazine. Bell wrote and produced the awardwinning documentary film The Boys of Summer and produced 15 Broadway shows (including Ragtime, Fosse and Dirty Rotten Scoundrels) that won 27 Tony Awards.

16 | Hot Seat g Sherry 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.

M i cha el j . w e lt ma n

me h r an ar am

s c ott gordo n

20 | A Bowl of Rocky Road g Mehran Aram is president and CEO of The Aramco Group. A 1984 graduate of the University of San Diego School of Business, he founded Aramco Mortgage in 1998 after five years in the industry. Aram is a Certified Reverse Mortgage Professional with more than 20 years of industry experience and serves as a mortgage analyst for several San Diego radio stations.

23 | Google Plus: What and Why g Scott Gordon is the founder and CEO of Open Mortgage, LLC, in Austin, Texas. Gordon is also a serial entrepreneur, investor, board member and author. Gordon is passionate about business mentoring, social media, mortgage marketing, senior finance and idea sharing.

h ay d n j. r i c h ar d s , jr .

d ar r e n STUMB ERGER

26 | To Self-Report or Not to Self-Report, That Is the Question g Haydn J. Richards, Jr. is a member at Dykema and is the director of the firm’s national Financial Institutions Group. Richards advises the financial services industry on state and federal regulatory matters and counsels financial services companies regarding CFPB preparedness and implementation strategies for the CFPB’s new regulations. He has extensive experience with the SAFE Act and has been deeply involved with the development and testing of the NMLS.

29 | Violent Price Action in HMBS g Darren Stumberger, managing director at Stifel Nicolaus & Co., heads mortgage trading and is responsible for HMBS/HREMIC, HECM and Jumbo reverse loan trading, distribution and risk management. Prior to Stifel, Stumberger held mortgage trading and finance positions at Goldman Sachs, Morgan Stanley and BofA Merrill Lynch. stumbergerc@stifel.com

Sherry Apanay

Michael J. Weltman

Mehran Aram

18 | There’s a Movement Taking Shape in America g Michael J. Weltman is a sales manager for FirstBank. Weltman, who has 12 years of experience in the reverse mortgage business, is treasurer of the Mortgage Bankers Association in Tallahassee, Florida. He has also served as president of a local real estate board in Wakulla, Florida; holds a broker license and real estate instructor license; and has a license with the Florida Department of Financial Services.

Scott Gordon

r al p h r os y ne k

Ralph Rosynek

Haydn J. Richards, Jr.

Darren Stumberger

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25 | Weathering My Ability and Willingness g Ralph Rosynek is the vice president for National Correspondent Production at Reverse Mortgage Solutions. RMS is a premier provider of reverse mortgage servicing, a Ginnie Mae seller/servicer and offers mortgage banking support to the reverse mortgage industry. Rosynek is currently a member of the NRMLA board, co-chair of the Professional Development Committee and holds HUD HECM Direct Endorsement credentials. rrosynek@rmsnav.com

Contributors

Jessica Guerin

JESSICA GUERIN

Joh n l a r os e

32 | Servicing HECMs g Jessica Guerin is the editor-in-chief of The Reverse Review. She has worked on the editorial teams of Chicago Home & Garden, Chicago magazine and Time Out Chicago. Prior to joining the magazine, Guerin managed the marketing efforts for a commodity brokerage firm in the Chicago Board of Trade. She has a master’s degree in magazine publishing from Northwestern University and a B.S. in journalism from Boston University.

38 | Gifts from Gettysburg g John LaRose is the chief executive officer of Celink, the nation’s largest reverse mortgage subservicer. LaRose also serves on the board of directors of the National Reverse Mortgage Lenders Association and is the cochair of its Compliance Subcommittee.

Do ha you it t ve w ak hat es?

John LaRose

before we begin pg.9

Senators Agree on Plans to Drive FHA Solvency and Stabilization

Read a recap of this news in Industry Update.

Be a part of the conversation.

Write for us!

We are looking for new contributors.

Share your thoughtful commentary with our readership today.

Email jessica@reversereview.com to learn more.

HOW CAN REVERSE PROFESSIONALS JOIN THE AGING-IN-PLACE MOVEMENT? PG.18

page 30

comments we loved

“Most seniors are confused about how reverse mortgages work, which is not surprising… [But] I hasten to add that their lack of understanding about reverse mortgages is not really the central problem. Most seniors don’t know how automobile engines work either, but that doesn’t prevent them from learning how to drive one. Seniors don’t need to understand how reverse mortgages work to use one effectively. What they need to understand is the various options that the program provides, the combinations of options available to them and how those options might be used to meet their needs.” - Jack Guttentag, “The Mortgage Professor”

There’s no such thing as a stupid idea. What do you want us to write about? Tell us! info@reversereview.com

Want to write for this magazine? 2 Email jessica@reversereview.com for more information. reversereview.com

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The Reverse Review August 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?

Accenture Acquires Mortgage Cadence Global consulting and technology company Accenture has acquired Mortgage Cadence, a loan origination software company. Under the agreement, Mortgage Cadence will become part of Accenture and its software will be incorporated into Accenture Credit Services, a sector of the company’s financial services operations that provides consulting, technology and outsourcing to financial institutions. Accenture says it plans to use Mortgage Cadence technology as a core loanorigination platform to process mortgages on behalf of its outsourcing clients, and will also provide the software to lenders on a standalone basis through its banking technology division, Accenture Software.

Moneyhouse Grows Puerto Rico and U.S. Hispanic Markets, Hires Bud Curley Reverse mortgage lender Moneyhouse has grown its lending operations, establishing a wholesale office in Tulsa, Oklahoma, and a retail origination office in Orlando, Florida, that are focused on serving the Hispanic population. The company has purchased more than 600 wholesale loans and, in less than a year, has become the eighth-largest wholesale purchaser for reverse mortgages in the U.S. Moneyhouse is approved to originate mortgages in Florida, Oklahoma, Texas, Tennessee and Puerto Rico, and is currently waiting for license approval from California and Illinois. It plans to expand to new states in the third quarter of 2013. Sandy Tennekoon, the company’s SVP for U.S. sales, will leave the company for Brean Capital; former Urban Financial Director and CFO Bud Curley will take her place. 8

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Email it to Jessica@reversereview.com.

Open Mortgage Announces a Back-to-School Special for Teachers

TRR Contributor Mercedes Kelley Tunstall Named Partner at Ballard Spahr

As part of its 10-year anniversary celebration, Texas-based Open Mortgage has announced a back-to-school mortgage special for teachers and school administrators. The special includes a $500 lender credit at closing for applications taken from August 1 through September 30. “I believe in those who educate, their institutions, and the behind-the-scenes school administrators who make both elementary and higher learning possible,” says Open Mortgage CEO Scott Gordon.

Mercedes Kelley Tunstall has been named partner at the law firm Ballard Spahr. Tunstall is a longtime legal contributor of The Reverse Review who works in the firm’s business and finance department in Washington, D.C. Ballard Spahr also elected six other attorneys to its partnership, including Charley F. Brown, Michael R. Carroll, Cristina Coronado, Mary Croft, Gregory L. Seltzer and Abran Vigil. “Our new partners embody the Ballard Spahr hallmarks of legal excellence and remarkable alliances with clients, and we extend our congratulations to them,” the firm said in a statement.

Liberty Home Equity Solutions Hires Bill Thomas as National HECM for Purchase Manager Bill Thomas has joined Liberty Home Equity Solutions as the lender’s national HECM for Purchase manager. Thomas will execute an aggressive growth strategy in the emerging HECM for Purchase segment, leading Liberty’s sales efforts with builders and real estate agents. Prior to joining Liberty, Thomas was the national HECM for Purchase manager for MetLife Bank, where he helped the company lead the market share for HECM for Purchase loans. “We’re very happy to have a leader of Bill’s caliber join our business,” says Tim Frederick, Liberty’s retail manager. “His 30-plus years of real estate and financial service expertise, practical experience in growing a strong H4P franchise and involvement in the builder community will further accelerate Liberty’s growth plans in this area. Our well-established inside and field sales teams will be further strengthened by the increased focus, additional support and proven strategies to win more H4P business that Bill brings with him.”

Generation Mortgage Company’s nu62 App Enhances Market Penetration Since the introduction of nu62sm at NRMLA’s New York conference, Generation Mortgage Company has received great feedback from industry participants. CEOs and reverse mortgage professionals are excited about how nu62sm can be used as both a marketing tool to tap into a broader marketplace and as a sales tool to close more loans. Whether it’s marketing or sales, nu62sm is broadening the industry’s penetration into the prospective market. Generation Mortgage Company is currently welcoming feedback and using it to fine-tune marketing and sales collateral. For more information, please contact Nancy Armour at 404.995.5527 or nancy.armour@ generationmortgage.com.

Industry Update

August 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.Reverse Mortgage Program Shows Growth Under FHA in Q2

The number of HECM loans insured by the FHA is rising throughout the fiscal year, leading to a positive recovery for the FHA’s Mutual Mortgage Insurance Fund. According to a quarterly report to Congress, the subsidy rate for the HECM program has remained at -.92, which indicates that the program is generating a positive cash flow. Furthermore, the HECM endorsement count showed a 35 percent increase to 15,830 loans during the quarter, which equates to a 40 percent dollar increase to $3.8 billion. The second quarter also saw a shift away from the Standard fixed-rate product, which was placed under moratorium on April 1. Although capital resources declined by $1 billion during the quarter, the capital reserve account rose by $3.9 billion. // July 18, 2013

2.Senators Agree on Plans to Drive FHA Solvency, Stabilization

Senate Banking Committee members said they have reached a bipartisan agreement on legislation designed to ensure the solvency of the FHA. Members have long discussed ideas for shoring up the FHA’s Mutual Mortgage Insurance Fund after projections indicated the agency would need a near-billion-dollar bailout this year. “Earlier this year, we agreed that the committee would first address the issues facing the solvency of FHA before turning to comprehensive housing finance reform legislation,” Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) said in a joint statement. While they were

mum on the details of the agreement, they indicated they are optimistic about moving the legislation forward in order to provide the FHA with the tools it needs to recover losses and regain “stable footing.” Committee members said they are in the process of finalizing the bill and plan to make the details public soon.

$3 billion in the first half of this year, compared with $2.55 billion in the same period of 2012, according to New View.

// July 12, 2013

The number of states that have implemented the uniform mortgage loan officer test is now 30, with 10 more states recently adopting the exam. According to the Conference of State Bank Supervisors (CSBS), the states that have adopted the National Secure and Fair Enforcement (SAFE) test for mortgage loan originations include: Alabama, Alaska, Indiana, Kansas, Montana, Nebraska, New Jersey, Tennessee, Vermont and Wyoming. First made available on April 1, 2013, the SAFE test combines both the national and state testing requirements for originators seeking licenses in multiple states. According to CSBS, an additional five state agencies are scheduled to adopt the test by January 2014.

3.Senate Confirms Cordray’s Role as CFPB Director

After an extensive battle over the leadership structure of the CFPB and the man appointed to head the bureau, the Senate voted to confirm Richard Cordray as director of the 2-year-old agency. The 7129 vote was deemed significant by multiple media outlets, which heralded the decision as a sign that tensions were cooling between the two parties. “The Senate’s reported readiness to take unprecedented steps to change the chamber’s rules governing presidential appointees came after nearly all 100 senators spent more than three hours late Monday huddled in a rare bipartisan, closed-door caucus,” the Washington Post reported. Cordray’s nomination was opposed by Republicans, who contested the leadership structure of the bureau and called into question Cordray’s recess appointment by President Obama. // July 16, 2013

4.Reverse Mortgage Investor Market Sees HREMIC Issuance Up 17%

The issuance of HREMICs, or the real estate mortgage investment conduits comprising reverse mortgage securities, saw an uptick of 17 percent during the first half of 2013, according to the latest Ginnie Mae data compiled by New View Advisors. Use of the HREMIC for reverse mortgage investments has been on the rise, totaling

// July 2, 2013

5.Ten More States Adopt

Uniform Mortgage LO Test

// July 1, 2013

6.House Spending Bill

Extends Reverse Mortgage Limit Suspension

The House Appropriations Committee passed a spending bill that would extend a suspension on the cap placed on the allowed number of government-insured reverse mortgages. The cap, which was initially set at 2,500 loans under the Home Equity Conversion Mortgage statute in 1987, was revised in 2006 to allow for 275,000 loans. The cap has not been increased since 2006, but it has been suspended repeatedly. The House Appropriations bill was approved by a 2820 vote, according to NRMLA, and would extend the suspension of the cap through September 30, 2014. // June 30, 2013 reversereview.com

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The Reverse Review August 2013

Ms. Smith

Use our versatile nu62sm app to demonstrate to your clients how a reverse mortgage can be structured to meet their financial goals.

The next generation in retirement planning tools. Reverse mortgages were designed to be a valuable financial tool for seniors allowing them to age-in-place. The nu62sm technology makes it easy to explain how a reverse mortgage can be used as a financial resource with many options. This technology has introduced the reverse mortgage to a whole new audience by allowing the user to quickly and easily demonstrate the features to a perspective borrower on the spot. For more information contact: Laura Troy • Wholesale Division Coordinator • Toll-Free 866-790-6151 • laura.troy@generationmortgage.com

Proud member of: © 2013 Generation Mortgage Company, 3565 Piedmont Road NE, 3 Piedmont Center, Suite 300, Atlanta, GA 30305 — 866-733-6090. NMLS #1319. For our state(s) legalese, visit: www.generationmortgage.com/statelegalese. 10ID| TRR

Report June 2013

Top Lenders Report

S1L / RMS

American Advisors Group

One Reverse Mortgage

Urban Financial Group

Endorsement

12345 Liberty Home Equity

Endorsement

536

Endorsement

618

Lender

517

Endorsements

459

365

Lender

Endorsements

GENERATION MORTGAGE COMPANY

284

PEOPLES BANK

PROFICIO MORTGAGE VENTURES LLC

283

SUN AMERICAN MORTGAGE CO

REVERSE MORTGAGE USA INC

238

WHOLESALE CAPITAL CORP

MAVERICK FUNDING CORP

127

VAN DYK MORTGAGE CORPORATION

NEW DAY FINANCIAL LLC

AMERICAN PACIFIC MORTGAGE

ASSOCIATED MORTGAGE BANKERS

FULTON BANK NA

CHERRY CREEK MORTGAGE CO INC

HOMESTREET BANK

SUN WEST MORTGAGE CO INC

UNIVERSAL LENDING CORPORATION

OPEN MORTGAGE LLC

ROYAL UNITED MORTGAGE LLC

GREENLIGHT FINANCIAL SERVICES

MORTGAGESHOP LLC

GMFS LLC

MANN MORTGAGE LLC

NET EQUITY FINANCIAL INC

AMERICAN NATIONWIDE MORTGAGE CO

M & T BANK

AMERICA FIRST FEDERAL CREDIT UNION

MONEY HOUSE INC

DAS ACQUISITION CO LLC

HIGH TECH LENDING INC

EVOLVE BANK & TRUST

FIRSTAR BANK

PRIMARY RESIDENTIAL MORTGAGE INC

ASPIRE FINANCIAL INC

THE FEDERAL SAVINGS BANK

TOWNEBANK

VANGUARD FUNDING LLC

SENIOR MORTGAGE BANKERS INC

VALUE FINANCIAL MORTGAGE

CONTINENTAL HOME LOANS INC

FINANCIAL FREEDOM ACQUISITION

FIRSTBANK

GATEWAY BANK MORTGAGE

NATIONWIDE EQUITIES CORPORATION

GATEWAY FUNDING DIVERSIFIED

TOP FLITE FINANCIAL INC

DIRECTORS FINANCIAL GROUP

LEADER ONE FINANCIAL CORP

HOMESTEAD FUNDING CORP

ATLANTIC BAY MORTGAGE GROUP

UNITED SOUTHWEST MORTGAGE

VIG MORTGAGE CORP

UNITED NORTHERN MORTGAGE BANK

YADKIN VALLEY BANK AND TRUST

SUCCESS MORTGAGE PARTNERS INC

MORTGAGE SERVICES III LLC

PLAZA HOME MORTGAGE INC

Reverse Market Insight - Logo October 9, 2009

Brought to you by:

PANTONE COLORS

REVERSE MARKET INSIGHT

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The Reverse Review August 2013

NRMLA News

On the Docket If you attend NRMLA conferences, you have probably heard us say, “Before you pull that lever in the voting booth, make sure you know where your candidate stands on the HECM program and FHA.”

On July 11, House Financial Services Committee chair Jeb Hensarling (R-TX) released his proposal for a Federal Housing Administration reform bill that would in effect wipe out the agency as we know it, including eliminating the HECM program two years after passage. Just a couple of months prior, Hensarling publicly endorsed providing HUD the legislative authority to make program changes at a committee hearing. Meanwhile, the leaders of the Senate subcommittee on Banking, Insurance and Community Development, chair Robert Menendez (D-NJ) and ranking member Mike Crapo (R-ID), issued the following statement: “Earlier this year, we agreed that the Committee would first address the issues facing the solvency of FHA before turning to comprehensive housing finance reform legislation. After months of hard work we have reached bipartisan agreement on a path forward to give the FHA the tools it needs to get back on stable footing. We are in the process of finalizing the text of our bipartisan bill and plan to release details publicly next week. We believe we have found solid common ground and are optimistic that we will be able to move this bipartisan legislation forward expeditiously.” It appears doubtful that Hensarling’s proposals will make it through the Senate or be signed by the President, but they do demonstrate a discouraging political point of view.

In Committees

The NRMLA Board of Directors has unanimously adopted Ethics Advisory Opinion 2013-02: Full Draw HECM Loan Repayment Considerations, which clarifies that NRMLA members may not advise consumers to draw, at closing, the full amount of loan proceeds available under a HECM Standard ARM with the intent of repaying those proceeds promptly after closing. “Planned repayments of the type described above can impede the

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NRMLA Members Rally Around Aging in Place Susan Pomfret of Liberty Home Equity Solutions has been leading a Rhode Island chapter of the National Aging in Place Council (NAIPC) for three years. Brandy Edwards, also of Liberty, is the new chair of the Orange County, California, chapter. Richard Cashman of Generation Mortgage is the new chair of the Long Island chapter. Galen Call of Treehouse Mortgage has begun organizing a chapter in Monterey, and Colleen Moore of Golden Equity Mortgage has begun organizing in San Diego. The National Aging in Place Council, a trade association comprising service providers who help seniors remain in their homes for as long as they would like, is attracting widespread support from NRMLA members. In June, 25 of them from 13 different companies attended NAIPC’s first meeting in Washington, D.C. Among the initiatives proposed at that gathering is a guide to all available funding sources, including reverse mortgages, for aging persons. You can learn more about NAIPC and become a member at

ageinplace.org

development and vitality of the secondary market for HECM loans,” says the advisory. “Repayment/ prepayment expectations play an important role in determining the secondary market value of HECM loans, and unexpected planned repayments of drawn funds has a negative impact on the development of an effective, robust secondary market—something that is needed to help assure that the HECM product remains competitive and viable in the long term.”

Members are urged to bring to NRMLA’s attention any concerns they may have about potential violations of unethical full-draw HECM loan repayment practices, or other concerns related to or arising under the Code of Ethics & Professional Responsibility. To read Ethics Advisory Opinion 2013-02 in its entirety, download a copy of the Ethics Complaint Form or to review the complete list of Ethics Advisories, please visit nrmlaonline.org.

NRMLA News

brought to you BY MARTY BELL: reverse mortgage lenders association

Be Visible

The largest and most popular industrywide gathering all year, NRMLAâ&#x20AC;&#x2122;s 15th Annual Meeting & Expo, returns to the beautiful Roosevelt Hotel in New Orleans on November 4-6.

Sponsorship for this yearâ&#x20AC;&#x2122;s event will go on sale shortly. To get the best price and the best space, reserve early. This year we are offering a number of new, creative sponsorship opportunities inspired by the Big Easy. For information, contact Sarah Aaronson. sarahaaronson@comcast.net

The number of unique visits to reversemortgage.org in June.

NEWS FROM NRMLA

One of the great features of the Roosevelt Hotel is the large and grand exhibit hall with doors that open right into the general session room.

New members - Bay Equity, LLC San Francisco, California

NRMLA member

- Florida Choice Mortgage Corp. Pembroke Pines, Florida - Resource Solutions, Inc. (a lead generation company) Oldsmar, Florida - Take Charge America, Inc. (a HECM counseling agency)

New CRMPs - Alina Passarelli, Marketplace

Phoenix, Arizona

Home Mortgage Minnesota

A nationwide title and settlement company servicing the reverse mortgage industry. H

A BEtter choice! Our dedicated team of professionals has the experience and knowledge to smoothly close reverse transactions. Through years of experience, FNC has gained valuable knowledge by building strong relationships with reverse mortgage lenders and brokers, as well as the borrowers we service. We firmly believe that our clients deserve the best treatment, and that is why FNC is where reverse mortgages take center stage.

240-864-4844 fnctitle.com

reversereview.com

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The Reverse Review August 2013

Put Your Career on Track

• Continuing Education for FPAs and RE Agents • Credit Union Partner Program

• Quality Branded Marketing Materials • Top Compensation Plan

“At Security One Lending our Success is Measured by your Success.”

| TRR

Security One Lending | 3131 Camino Del Rio North, Suite 1400 | San Diego, CA 92108 NMLS ID 98161. S1L391112

Roundup

Here is a look at the latest

this month

news and stats

affecting the market.

{

Get up-to-date retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.

H E C M T ren d s

H ome prices

HECM endorsements rose slightly in June.

Nationwide home prices see the largest year-over-year gain since 2006.

HECM endorsements rose 0.4 percent to 5,372 loans in June, finishing 3.6 percent above June 2012 levels with seven out of the 10 regions showing increases.

Reverse Market Insight - Logo October 9, 2009

PANTONE COLORS

REVERSE MARKET INSIGHT

H o u sing Data

Foreclosure rate declines to lowest level since 2006. U.S. foreclosures in June dropped 14 percent from the previous month, down 35 percent from the year before and reaching the lowest level since 2006. Foreclosures are down 23 percent from the first half of 2012 to the first half of 2013, according to RealtyTrac.

n u m b er cr u nch

2 out of 3 Americans are retired by the time they reach their mid-60s, either voluntarily or because they’re unable to keep or find a job.

3005C

Process Blk C

the senior agen d a

As more retirees flock to the Sunshine State, Florida remains a hot spot for real estate investment. Florida ranked the highest on RealtyTrac’s list of the top 15 retirement hot spots for real estate investment in the U.S., with seven cities on the list ranking among the top 15. The state has the most cities with high senior populations—meaning at least onethird of residents are over age 65—and has seen home prices rise, making it a prime location for real estate investments. The study also factored in such things as the cost of living, average temperature and average chance of sunshine to determine the best retirement locations. “These popular retirement cities will very likely be an area of growth in the housing market over the next 15 years as baby boomers retire in greater numbers,” RealtyTrac’s vice president said upon the list’s release. Florida’s top cities are:

1. Dunnellon 2. Naples 3. North Fort Myers 4. Punta Gorda 5. Sun City Center 6. Venice 7. Orange City

Home prices across the country increased 12.2 percent in May from last year’s levels, signaling the largest gain since February 2006, according to the CoreLogic Home Price Index. Month-overmonth, home prices rose 2.6 percent from April to May, representing the 15th consecutive month of gains in national home prices. The states with the highest annual home price appreciation for May were:

Nevada 26% California 20.2% Arizona 16.9% Hawaii 16.1% Oregon 15.5%

n u m b er cr u nch

9 out of 10 1.

Americans are out of the labor force by 75.

center

for

retirement research

5. 6. 4. 3.

at boston college

reversereview.com

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The Reverse Review August 2013

THE HOT SEAT

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

the hot seat From her hidden talent and her favorite book to her thoughts about the future of the reverse mortgage industry, we get the personal and professional facts from Sherry Apanay, managing director and head of sales for Urban Financial Group, in our monthly edition of The Hot Seat.

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Sherry Urban Financial Group Managing director and head of sales

P E RSO N AL >

You can’t always be right.

Something nobody knows about me is that I used to have my own cake and catering business and I’ve created some pretty cool wedding cakes.

My favorite vacation was a family vacation with our teenage boys in Hawaii.

My celebrity crush is Angelina Jolie.

My first car was a 1967 VW Beetle—the original.

My favorite recent movie is Trouble With the Curve.

I never miss an episode of Sons of Anarchy.

When I was younger I wanted to be a flight attendant… wonder if that’s why I’m always on a plane these days!

I’ll never forget giving birth to my three sons.

My parents taught me how to be a responsible adult.

My favorite time of the day is the morning.

My iPod go-to is Pink, Rihanna, Tori Amos and Andrea Bocelli.

I’ve never lived with regret.

I always live in the moment.

The best lesson I’ve ever learned was not to hold a grudge.

The worst purchase I’ve ever made was uncomfortable designer shoes!

The best purchase I’ve ever made was my Benz SL55 AMG hardtop convertible.

Currently, my favorite nonfiction book is Lean In by Sheryl Sandberg.

Professional >

The biggest challenge in the reverse mortgage industry is navigating through

Something nobody knows about me is that I used to have my own cake and catering business and I’ve created some pretty cool wedding cakes.

all the compliance and regulatory issues we face. >

People should seek a career in the reverse mortgage industry because it’s great to feel good about what you do every day.

I am optimistic about the reverse mortgage industry because the industry over the past 20-plus years has proved to be very resilient and the demographics prove the product will be needed.

I never miss an episode of Sons of Anarchy. reversereview.com

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The Reverse Review August 2013

originating

There’s a Movement Taking Shape in America Mich a e l J . W e lt ma n

here’s a movement taking shape, and whether you know it or not, you’re already part of it.

I discovered the movement this year, in my 12th year in the reverse mortgage business. I was sitting in a classroom with a group of builders from the National Association of Home Builders (NAHB), taking some courses to obtain

my CAPS (Certified Aging-in-Place Specialist) designation. When I first read about this course in my local paper, I thought, “How does one age in place without the right kind of financing?” Hoping the CAPS classes might help me uncover the answer to this question, I promptly registered. I was the only reverse mortgage

The NAIPC is a 501(C)6 not-for-profit senior support network founded on the belief that the

overwhelming majority of older Americans want to remain in their homes for as long as possible, but lack the

awareness of home- and community-based services that make independent living possible. The council’s motto is “Education and collaboration to keep your loved ones safe.” The NAIPC aims to create a widespread awareness among America’s seniors about the aging-in-place alternative and the services available to them.

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lender in the room. I figured I would sit back, take it all in and learn a thing or two. And then, when the time was right, I would explain what it is I do as a reverse mortgage professional. I would explain to these homebuilders, remodelers, home modification experts, occupational therapists and others how I too help those looking to age in place. So as we are working our way through the course book during class, I see what I had been looking for in Chapter 4: “Affordability Considerations—funding sources for aging in place clients.” And right there in black and white: reverse mortgage funding! It was my aha moment. The discussion went around the room, with each person taking a few minutes to share their thoughts on the topic. When my turn came, it was like the sun shined on me. It was my moment! I stood before my 25 classmates and explained how a senior can afford to age in place and make home modifications through the use

originating of a reverse mortgage. It was a very exciting moment for me, sharing this knowledge, as you can tell. For me and for you, and this is why: It was confirmation that we, as an industry, are recognized for our contribution to the aging-in-place movement. It was evidence that the financial tool we offer seniors can be instrumental in helping them achieve their goal to remain in their homes.

ONE Marketing & Communications for Aging and Accessibility

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spotlight

In the upcoming months, I will talk more about designation groups and associations that will increase your audience and exposure as you teach reverse to those who need to know. x

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And the NAHB is with us. Its CAPS designation course is a huge step toward connecting professionals who are working in their various fields to support this venture. The NAIPC is with us too. Its conference promises to bring together professionals across industries to guide the conversation about helping seniors achieve the comfort and security they deserve

Look up the NAHB chapter in your town and consider joining the association or taking a CAPS class. The folks you will meet in that classroom are all working to aid the aging-inplace movement, and they should have your contact information.

underwriting

As I read more information about the conference, wrapping my head around this whole new/old idea, I half expected eerie sci-fi music to play in the background. First CAPS and now NAIPC. I felt like all the planets were aligning. The roster of invited groups included us, “reverse mortgage professionals.” Well, it was like having an epiphany. We are not just part of the aging-in-place movement, we are helping to lead and shape the movement. This is our movement. We are initiating the conversation, looking to find better solutions for our senior clients. It is very exciting.

There are builders all over the nation who are achieving their CAPS certification so that they can elevate their knowledge about how to create homes that are suitable for the elderly. Lowering light switches and HVAC controls, raising electrical outlets, widening the doorways, adding the hardware for grab bars in the bathrooms—all of these things go a long way to help make a senior more mobile in their home. These new CAPS grads, whom you can look up in your city and town, need to know you, their local reverse mortgage professional. You can help these builders connect with a senior looking to make their home more senior-friendly with funds from their reverse mortgage, or looking to build a new home through a HECM for Purchase.

Want to be CAPS certified? To achieve this designation, you must pass three courses:

marketing

Then, back at the office, I received an email from NRMLA, out of the blue. “The First National Aging-inPlace Conference is being held in Washington, D.C., on June 13-14,” it read. An organization, the National Aging in Place Council (NAIPC) was spearheading the conference with the help of our friends at NRMLA.

So now that we are armed with this information, what’s next? For me, the answer is simple: Get involved. You and I are on the streets daily, teaching the benefits of reverse mortgages and how they can serve the needs and goals of those in retirement. But now that we’ve heard about this new movement, perhaps we can modify our message, or expand it, and place it in the context of the bigger picture. It’s not just about money; it’s about the emotional and physical comfort of aging in your own home.

originating

I wanted to learn more; I saw the light. I was pouring and drinking the Kool-Aid. This was how we could further explain the need for the HECM program—it is an important tool to help seniors age in place.

in retirement. As more and more boomers retire in the coming years, this conversation is perhaps more important than ever.

Design/Build Solutions for Aging & Accessibility

THREE Business Management for Building Professionals

Learn more at nahb.org/education. reversereview.com

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The Reverse Review August 2013

originating

A Bowl of Rocky Road Meh ra n Ara m

nyone who knows anything about the reverse mortgage industry is well aware of the storm of changes upon us. From the suspension of the Standard fixedrate HECM and significantly lower commissions to additional changes potentially down the road, we have all been scared, overwhelmed and generally left frustrated by a heavyhanded government that has elected to enter the operating room with a chain saw and garden shears to fix the FHA’s minor stomachache. After scouring through numerous articles, studies and personal reflections regarding these latest changes, I confidently arrived at one conclusion: I’m tired. I’m tired of one article implying that only a fool would enter this industry in this climate, another article seemingly writing off these changes 20

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as “just a bump in the road,” and yet another making a sound mathematical argument against all these changes that, unfortunately, is seemingly ignored by government officials. Yes, these articles are important, for the most part quite factual, and are admittedly essential to grasp the environment we are working within. But it’s the summer, we have our health, our families and we still have some freedoms left, so I’ll let those more intellectual than myself digest these mammoth changes while I try to take a step back from the chaos of the markets, the stress of our businesses and the daily grind to focus on a more lighthearted subject. Business owners must always focus on their bottom line, with profit being a gauge for success. While any successful businessperson does not sacrifice customer service, employee satisfaction and integrity for profit,

the money a company makes dictates its future. That being said, a 2 a.m. discussion prompted by a craving for fruit on my part and my son’s obsession with ice cream found me talking shop with my son in our dimly lit kitchen a few weeks ago. First of all, have a son. Actually, have two. One to tell you you’re Einstein and the other to remind you how dumb you actually are. (It truly is a fantastic business strategy of checks and balances.) But in all seriousness, there are few things in life more rewarding than an argument-free brainstorming session with your two boys. Just don’t forget to have a girl to soften things up a bit. During our impromptu meeting in the kitchen, I bounced some ideas off my son about how we would remain profitable during the current reverse mortgage environment. After a healthy

originating

Are we at a turning point in the reverse mortgage industry? Absolutely: Major changes are upon us. But whether these changes are debilitating, or simply bumps in the road that will only make this industry stronger, a great part is dependent on us as the decision makers. More than ever we must navigate through these perilous waters in order to continue the growth of this powerful product and ensure the continued prosperity of our employees and their families for years to come. x

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It’s true though. While our San Diego corporation is but a fraction of some of the larger reverse mortgage players,

By the same token, the success of any company is directly attributable to its employees. Employees will make or break any business and it is vital to captain your corporation and its employees with a humble confidence, being open to fresh ideas and advice no matter who it may come from but also confident in your final decisions. So, at the end of the month when you analyze your profitability, take a few

moments to thank the very people who made it possible to attain such success, and if, in the future, our bottom line is not quite as black as one would like, perhaps take solace in the “profit” of your employees, their well-being and the well-being of their families.

marketing

One can only imagine what the philosophers of old would have come up with if only given a bowl of ice cream.

it’s important to take a step back and realize what your business means to your employees and their families. Many of you are at the helm of very large firms who have hundreds of employees with hundreds of husbands, wives, sons and daughters who are directly affected by your company’s success. This should be our motivation to succeed; this should be our incentive for profit. How rewarding it is to go home at the end of the day knowing that your efforts, your strategizing and your integrity have helped in some way provide for so many families.

originating

discussion (minus the heaping bowl of ice cream), my son reminded me of something I think most businesspeople may be subconsciously aware of but don’t take enough time to focus on. “Dad, you’ve owned a business almost 20 years, you’ve put me through college and have always provided for our family. And think of all your employees! So many families have been changed because of this business. Our employees’ children are attending good schools, live in comfortable houses and are provided for in some way because of the daily operations of our business. Bottom line: In the overall grand scheme of things, that to me is lasting profit no matter what these changes do to our business.”

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We just added QuickCert as one of our local HECM counseling agencies because they have great service and do telephone counseling NATIONWIDE!

spotlight

What’s everyone celebrating?

BRILLIANT 888.383.8885 ops@quickcert.org Telephone counseling nationwide reversereview.com

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The Reverse Review August 2013

LOOK. TOUCH. GO.

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Appraisal Management when and where you need it. Voted #108 in overall ranking and #3 in the Real Estate Category.

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connect

Google Plus: What and Why

Sc ot t G o rd o n

originating

e all have to decide which social media platforms we are going to use and how much time we want to commit to them. Many originators avoid Google Plus because they aren’t sure what it is or why they should bother using it. Allow me to jump to the punch line and say, “You need to be using Google Plus!”

marketing

Yes.D

Different networks have different types of people, and not everyone is everywhere. If you have already done a profile for Facebook, it’s easy to do one on G+, so why not?

Here is the most valuable part: Having a G+ page identifies you to Google. It gives you a base level of “authorship” since you are the author of the G+ page. You can then make your G+ identity the author of your blog. Then Google knows and trusts you, making you more likely to show up when someone does a relevant search in your city. We can talk a lot more about the power of authority in future articles. But for now, get out there and create a G+ account if you don’t already have one; it’s a key part of being found! x reversereview.com

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spotlight

Do you need G+ if you already use Facebook?

Now, the real reason you should be on G+ is to help you be findable by potential clients looking to engage a trusted professional in a discussion about reverse mortgages. To be found, you need to have a website or blog. Your blog is your “home base.” It’s the place where YOU control everything that is said about you. It’s where you show the world your picture, your contact info and your hometown, so they know who you are and where to find you. You want the world, or at least the world of your future clients, to find you. Google has search algorithms it uses to decide who to show in the results when someone searches. If you are a loan originator in Austin, Texas, you want your blog to show up when someone in Austin searches for “mortgage.”

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G+ has “circles,” which are lists of people you follow who all have something in common. When you follow someone, you place them into one or more of your circles. For example, I have a circle called “Open Mortgage” and one called “Motorcycles.” If I follow a fellow employee of Open Mortgage, I would put them in the Open Mortgage circle. If they were also bike nuts like me, I’d put them in the Motorcycle circle too. Circles allow you to group your connections so you can post to specific groups. Circles allow you to be more relevant to your connections.

Also, the network’s user base is growing rapidly. With Google behind it, you know it will be huge. And finally, the people who first adopted G+ are techies and professionals—that’s a great group to connect with!

legal

Google Plus (G+) is a social networking site very similar to Facebook, and yet very different. On G+, users create a profile that shares who you are with the world. On G+ you can post comments, photos, updates, links to articles, etc., much like on Facebook. One difference is that on Facebook, when you connect, both people see each other’s posts. On G+ you don’t connect with someone, you follow them. You see the posts of people you follow. In this sense, it is similar to Twitter.

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Before I explain what it is or why you should use it, let me remind you of a simple truth: People use social media to be found, become known and gain the trust of potential clients. The key piece of that is being found. If potential clients find you on the Web and reach out, you are given the opportunity to interact with them, educate them about your services and earn their trust. But in order to initiate any of that, you must first be findable.

The Reverse Review August 2013

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PREPARE

underwriting Weathering My Ability and Willingness Ral p h R o s y n e k

3 A m I familiar with calculating debt ratios? 3 Do I need to revise my prequalification checklist? 3 I n matters of income, credit and living expenses, what are the second and third questions I need to ask my borrowers? 3 W ill my marketing perspective and the resources I currently use require updates or change? 3 W hat do I really know about the Saver’s features and benefits? 3 Do I know how to educate ARM Margin, floor, ceiling and PLF attributes? 3 Can I explain principal limit lock? 3 What and how will I communicate with my referral network regarding program changes?

3 H ow will I implement the changes with my sales force?

3 H ow will I implement the changes with my operations staff? 3 W hat technology, job aid and matrix resources do I need to provide to take my team to a more granular approach to prequalification? 3 W hat support can I access from my investors? 3 H ow will my consumer marketing materials need to be updated? 3 H ow will the company communicate changes to the current HECM program?

spotlight

So how do we “underwrite” our ability and willingness to weather the current and anticipated events that will play

3 Do I know how to review a credit report?

3W hat specific team weakness have I identified to direct company resources toward?

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Add the looming uncertainty that surrounds Congress’ pending determination on whether or not to grant HUD full authority to make HECM changes, and it looks like the usual relief fall brings may just be an extension of more hot summer days.

3 How prepared am I to engage financial assessment?

3 What is the product education level of my team?

legal

However, I am concerned that this summer, ability and willingness is edging toward gloom and doom for some. The stress of what appears to be long-term market volatility is upon us. Unlike volatility in the past, this longterm event is fueled by overall changes in product mix combined with an uncertainty regarding the health and longevity of the HECM program.

As a loan originator:

3D o I need one large plan or a separate plan for sales and operations?

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One can hardly lie on a beach without wondering what current market volatility is doing to your pipeline. While we have all experienced minor rate fluctuations in the last few years, most were anticipated as the result of industry events that came and went. Admittedly, these fluctuations temporarily raised our stress levels and tested our ability and willingness to adjust to change. As professionals, we fortified our resolve to continue assisting seniors.

As a manager or owner:

marketing

From a HECM industry perspective, the shapes and sizes of summer fun haven’t been so relaxing.

out over the next few months? With the anticipation of a mortgagee letter (indicating granted authorities to make changes) before this August issue of The Reverse Review hits the street, let’s reaffirm our resolve to continue assisting seniors and review a helpful checklist of “to do” items that will aid us in this goal.

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thought summer was supposed to be full of exotic vacations, special memories with family and friends, blissful laziness and the general pursuit of stress relief. Did we miss something this year?

3 How do I protect my pipeline? As an industry, we are not adverse to change. To date there has been little rally to discontinue the program, but rather to seek a level of health and stability to continue to provide the senior with an option to remain in their home and attain financial stability. Unfortunately, the forecast is for continued heat and hopefully minor storms for some time going forward. Luckily, preparing for good and bad weather is something we do well. x reversereview.com

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The Reverse Review August 2013

protect

legal of worthy investigations with its finite resources, provide important evidence in enforcement investigations and cases, and help more consumers in more matters promptly received financial redress and additional meaningful remedies for any harm they experienced.” In short, the CFPB notes that self-reporting will better enable it to conduct its enforcement activities.

To Self-Report or Not to Self-Report, That Is the Question Hay d n J . R ic h a r ds , J r .

n June 25, 2013, the CFPB issued Bulletin 2013-06, which discussed responsible conduct among financial services institutions. In the bulletin, the CFPB said it intends to consider a number of factors when determining whether or not to exercise its enforcement discretion, including: 2 The nature, extent and severity of the identified violations 2 2 Any actual or potential harm from the violations 2 2 2 Whether there is a history of past violations on the part of the financial services company 2 2 2 2 The financial services company’s effectiveness in addressing violations Notwithstanding these four factors, the bulletin suggests that a financial services company that proactively self-polices 26

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for potential violations, promptly reports to the CFPB when it identifies potential violations, and affirmatively cooperates with any investigation above and beyond what is required, may receive favorable consideration in the event that the agency considers moving forward with enforcement action. Specifically, the bulletin suggests a party that “meaningfully engages in these activities… may favorably affect the ultimate resolution of a [CFPB] enforcement investigation.” In the bulletin, the CFPB generally refers to meaningful self-reporting as “responsible conduct” on the part of a financial services company. The CFPB identifies responsible conduct as action that helps the agency to “promptly detect violations of federal consumer protection laws, increase the effectiveness and efficiency of enforcement investigations, enable the [CFPB] to pursue a larger number

The CFPB takes care to note that it believes that prompt and complete self-reporting of significant violations is worth special mention and special consideration. The bulletin explains that “self-reporting substantially advances the [CFPB’s] protection of consumers and enhances its enforcement mission by reducing the resources it must expend to identify potential or actual violations that are significant enough to warrant an enforcement investigation and making those resources available for other significant matters.” Such self-reporting “also represents concrete evidence of a party’s commitment to responsibly address the conduct at issue.” Throughout the bulletin, the CFPB emphasizes that any favorable consideration in the context of an enforcement action will only be extended if an entity goes above and beyond what would be expected under the law that governs the party’s interactions with the CFPB. In fact, the agency emphasizes that for it to forgo disciplinary action, “a party’s conduct must substantially exceed the standard of what is required by law in its interactions with the [CFPB].” The bulletin signals a new approach to enforcement by emphasizing the fact that the agency expects entities subject to its regulation to perform their responsibilities by participating in a comprehensive self-reporting mechanism. A general fear of significant penalties brought by the CFPB forces financial services companies to

legal

Going to the source

The CFPB emphasizes that any favorable consideration in the context of an enforcement action will only be extended if an entity goes above and beyond what would be expected under the law that governs the party’s interactions with the CFPB.

* 2

012

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VOTED THE

Whether self-reporting is appropriate requires careful evaluation of all facts and circumstances. The CFPB neither expects nor wants financial services companies to report each and every immaterial compliance infraction or violation. However, substantial and severe compliance violations,

particularly those that result in consumer harm and impact multiple files, may warrant self-reporting. To some degree, the CFPB’s future actions as well as the marketplace will dictate the extent and appropriateness of selfreporting. However, it is important to be aware that self-reporting does not eliminate the potential for enforcement action by the CFPB and, in certain circumstances, potentially increases the likelihood for such action. Therefore, companies considering selfreporting should carefully weigh all of the facts relating to the incident that may warrant self-reporting and should engage internal or external counsel to be certain that any self-reporting activities place the company in the best position possible to lessen the CFPB’s desire to undertake an enforcement action. x

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Also, consider the fact that the CFPB has limited resources, which may mean that infractions that are not selfreported may not be subject to scrutiny by the CFPB, particularly if financial services companies self-correct the issue that resulted in the infraction and ensure that any potential harm is corrected to the benefit of the consumer. Moreover, consider that as financial services companies

increase the degree to which they self-report infractions, the CFPB will be less likely to distinguish between “extraordinary” conduct deserving of its special consideration so as to avoid enforcement action. Because parties will increasingly self-report, the CFPB will be less inclined to grant financial services companies any benefit and may be more inclined to move forward with enforcement proceedings, even if a company has already taken appropriate measures to self-correct any practices that resulted in potential violations.

originating

make difficult choices concerning reporting compliance infractions. Notwithstanding guidance in the bulletin, the CFPB does not make any assurances that self-reporting will result in avoidance of enforcement action. In fact, the agency carefully notes that only conduct above and beyond what is required will result in favorable consideration and, moreover, such favorable consideration still may result in enforcement action.

PRC WILL SAVE THEM! reversereview.com

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The Reverse Review August 2013

AAG Wholesale.

REDEFINING how business is done.

AAG Provides: 3 Superior Customer Service 3 Customized Reverse Mortgage Training 3 Expert Marketing Support 3 Competitive Pricing 3 Processing and Underwriting Support 3 Access to the Reverse Mortgage Industryâ&#x20AC;&#x2122;s BEST Leads 28

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Re-define how business is done with AAG Wholesale. For more information and to learn how we put you and your business first, contact Kimberly Smith, Senior Vice President of Wholesale Lending at:

866-964-1109 KSmith@aagreverse.com AAGwholesale.com

HMBS

secondary market

Want to see more stories like this? Visit reversereview.com.

Violent Price Action in HMBS Da rre n S t u m b er g er

originating

“What the HECM program will look like come October 1 is anyone’s guess, but many market participants are preparing for a 100 percent Saver marketplace.”

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spotlight

In any event, House Republicans have introduced a bill to eliminate the HECM program and there’s still the ongoing effort to get the bill passed in the Senate to allow for the FHA to introduce Financial Assessment. So what to expect here? Continued stress coming from D.C. as FHA reform, GSE reform and the HECM program remain in focus. You can also anticipate a lack of conviction in spreads as we’ll see near tightening off the recent lows, but summertime malaise will keep that tightening capped. Expect directionless flows and the origination landscape to continue to turn over as platforms trade into new hands, recent market participants drift away into other initiatives, and recently completed mergers and consolidation/ integration take place. Oh and don’t forget, the SEC/GNMA true sale accounting problem will be 2 years old in August! x

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Spreads on the fixed-rate Standard and Saver jumped 35 basis points with Libor Standard and Saver jumping 40 to 45 basis points. Dealers and originators were massively caught off guard with the swift re-pricing of the sector, but spreads have stabilized at wider levels as rates have retraced most, if not all, of the directional move. I expect some tightening back to previous levels, but it will be slow and methodic.

What the HECM program will look like come October 1 is anyone’s guess, but many market participants are preparing for a 100 percent Saver marketplace. There are also discussions of creating a new product PLF table and eliminating the Standard and Saver products entirely with a “brightline” utilization line, which will dictate if the 2 percent MIP will be charged or not.

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MBS spreads swung violently wider after the Fed meeting in mid-June. Dollar prices gapped out just above two points overnight as the market came to the conclusion the Fed would begin tapering bond purchases sooner than expected. Liquidity got crushed across all mortgage products and spreads continued wider after the June employment report came in stronger than expected.

Originators are originating almost exclusively Libor Standard product now and hedging pipelines with August settle deliveries. We’re seeing mostly 100 percent drawn line-of-credit product hit the Street, with dribs and drabs of Saver. Issuance volumes will continue to plunge from the local highs we saw in April (roughly 1 billion); Issuance dropped to 850 million in May and 700 million in June. July will be well under the 700 million mark and you can expect the trend to continue to lower through the end of September.

underwriting

In terms of flows, we saw clear differentiation in seasoned, fixed-rate paper trades in relation to spread, but those demarcation lines are currently absent from the market. Two- and three-year average life paper trades at the same spread as recently issued five-year fixed Standard paper, which has created great relative value trading opportunities.

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Additionally, there’s been some dealer turnover as new dealers have emerged while others back out of the space. This recent turnover aggravated the liquidity crunch and dealt a blow to large buy-side investors who tested market liquidity and came up unimpressed. (Dealers in this sector continue to shoot themselves in the foot!)

The Reverse Review August 2013

spotlight article

THE MORTGAGE PROFESSOR TALKS ABOUT THE BENEFITS OF A REVERSE MORTGAGE.

TRR Talks With The Mortgage Professor B y J e s s i ca G u e r i n

In month’sthis edition,

jack talksguttentag a uniq bout the of thue appeal e re mort verse g produage ct.

Jack Guttentag, the selfproclaimed “Mortgage Professor,” talks about the how he aims to help consumers understand teh reverse mortgage product.

s a faculty member of the University of Pennsylvania’s Wharton School of Business, Jack Guttentag spent nearly 40 years in academia researching financial markets and institutions, monetary policy, real estate finance, housing economics and mortgage instruments. But in 1998, as the Internet began to change the way people accessed information, Guttentag decided to shift his focus and direct his research toward consumers, launching a website called The Mortgage Professor (mtgprofessor.com) to help the general public better understand the various home loan products available to them. With a mission to provide “free and disinterested advice to consumers on mortgage-related issues,” The Mortgage Professor offers information on a variety of financial instruments, including reverse mortgages. In his syndicated newspaper column, “Ask the Mortgage Professor,” Guttentag frequently fields questions about the reverse mortgage product, prompting him to stress the value of this loan as a unique tool for seniors looking to achieve financial security and remain 30

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in their homes. TRR sat down with Guttentag to hear his thoughts on the HECM program, including how pending FHA changes might improve the product and how to better educate consumers about the options afforded by this type of loan. zTRR You dedicate an entire page on your website to reverse mortgages. Do you receive a substantial number of inquiries from consumers about the product?

JGy We get lots of questions. Most

seniors are confused about how reverse mortgages work, which is not surprising because what they usually know about are standard mortgages, and reverse mortgages are very different. So they don’t come into the picture with any background or knowledge that would help them understand reverse mortgages. I hasten to add that their lack of understanding about reverse mortgages is not really the central problem. Most seniors don’t know how automobile engines work either, but that doesn’t prevent them from

learning how to drive one. Seniors don’t need to understand how reverse mortgages work to use one effectively. What they need to understand is the various options that the program provides, the combinations of options available to them and how those options might be used to meet their needs. It also helps if they understand the ability under the program to shift from one option to another in the future as their needs change… The whole focus of the reverse mortgage section of the site is to provide an easy way for [consumers] to understand what their options are and how those options might help them. We are in the process of making a lot of changes to [the site] to make it even simpler and to provide ways to give people with a limited ability to follow the complexities the information they need to make a decision. zTRR You’ve been an outspoken advocate for the use of a reverse mortgage under the right circumstances. Why do you find value in the product?

spotlight article JGy There are millions of seniors

more commonplace, I think, only if we meet a lot of the challenges. The challenge is to create more confidence and knowledge on the part of seniors. They have to have more confidence in where they go to get information and the integrity of the source of that information. We’re trying to do our bit in that by providing information on the loan options available. x

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The challenge is to create more confidence and knowledge on the part of seniors. They have to have more confidence in where they go to get information and the integrity of the source of that information.

JGy I hope so, but it will become

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Guttentag, the selfproclaimed “Mortgage Professor,” talks about how he aims to help consumers understand the reverse mortgage product.

zTRR Considering the troubling statistics about the retirement savings of the boomer generation, do you expect this product to be more commonplace in the future?

legal

premise that the media looks for newsworthy stories. Allowing a thousand seniors to remain in their homes with additional income, which is what a reverse mortgage has the capacity to do, is not a news story. Evicting a senior’s spouse who is not

which lenders are compensated, and the FHA can’t change that. I think this is a change that would involve Ginnie Mae, because it’s very much connected to the servicing process and the securitization process, so Ginnie Mae would need to play a major role in that. As far as taxes and insurance payments are concerned, escrows should have been required for those right from the get-go. Whatever got into the minds of the early developers of the program to let that go I have no idea, but better late than never. The cure for that is pretty straightforward: They have to find ways to set aside odd amounts so that they get paid. The problem of the non-borrower spouse, that doesn’t seem to be anything very difficult to deal with either. It seems to me that all you need to do is require any spouse who is not a party to the contract acknowledge in writing that they understand that they must leave the house when the contracting spouse dies, or moves out permanently, so they cannot claim afterward that they didn’t know this. But of course, they’ll claim it anyway. I don’t know that it would cure the problem completely, but it would certainly help.

underwriting

JGy You have to begin with the

JGy The major flaw is the way in

marketing

zTRR Why do you think reverse mortgages get such a bad rap?

zTRR The FHA is in the process of revising the HECM program. Are there any changes that you would like to see made?

originating

who spend the last years of their lives impoverished and leave behind an asset with great market value to their heirs who often don’t need it. The reverse mortgage is an instrument that allows a senior to consume the equity in their house without incurring a repayment obligation while they continue to occupy the house. Now, you get a lot of flap about alternatives to reverse mortgages; counselors are supposed to stress alternatives and many loan officers stress alternatives. But there really are no alternatives that allow the combination of equity depletion without a monthly payment obligation while retaining continued occupancy. The reverse mortgage is absolutely unique in providing that capacity. It’s folly to talk about a credit line, for example, as an alternative, because a credit line, although it’s useful for a lot of purposes, has to be repaid while you’re still in your house. You can consume the equity in the house by selling the house, but then you don’t have the house to live in. All the various so-called alternatives to reverse mortgages are not really substitutes for the combination of functions that the reverse mortgage provides. The reverse mortgage is really unique in that regard.

a party to the HECM contract when the senior dies is a potential story or can be fashioned into one. So the various kinds of problems associated with the industry, like the noncontracting spouse who has to leave when her husband dies, or the hassles connected with delinquent payments, are news stories. The media might also be influenced by the negative aura that surrounds the industry. You remember that in years past, before the enactment of rules that prohibited this, seniors were encouraged to take out HECMs and purchase various kinds of financial instruments and, in some horrible cases, deferred annuities, which couldn’t be drawn on for 10 years or so. Some of the negative aura of those years is still around. And then you have the current marketing practices of reverse mortgage lenders. Lenders do nothing to dispel that aura; lenders don’t make any effort to help seniors understand their options. Some individual loan officers may do that and I know some who do a great job in that, but the practice of the industry in general is not to explain options because that gets too complicated and complexity doesn’t sell. So their standard marketing principal is based on simplicity and the simplest message pertains to how much cash a senior can draw, which is unfortunate because it encourages the most short-sighted of the seniors, and it encourages the others to become short-sighted. And of course, once you start talking about the cash draw issue, it doesn’t help that they make more money in cash draws than in credit line or monthly payment plans… Though I hasten to add that every lender I know is hyper-scrupulous and does not try to influence borrowers’ choices.

The Reverse Review August 2013

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! Servicing HECMs

mortgage servicing department oversees the life of a loan after closing, managing the account from the disbursement of proceeds until the matured loan is paid in full.

On the forward mortgage side, loan servicers handle tasks like monitor monthly payments, field borrower inquiries, oversee tax and insurance payments, and manage account delinquencies. While some of these tasks are also essential to reverse mortgage servicing, the business of servicing a HECM loan requires a distinct set of processes and presents a unique set of challenges.

have an advantage,” Helm says. “Anytime you originate a loan, you put it into a security and have to have a third party take care of it; you’re not in complete control. You’re depending on that third party to handle your business for you. We stay in touch with our loans so we can monitor the quality of the loans we buy from other people and better manage the quality of the loans that we originate.”

As a loan designed for a protected class of borrowers, reverse mortgages require a heightened level of sensitivity and attention when it comes to servicing the loan. Furthermore, today’s HECM servicers are facing unprecedented scrutiny and uncertainty as the CFPB tightens its regulatory authority over the financial services sector and HUD debates pending changes to the HECM program. In this environment, reverse mortgage servicers must continue helping senior borrowers manage their loans post-closing, while artfully navigating the complicated rules surrounding a program in flux.

Relatively new to the HECM scene is mortgage servicing giant Nationstar. Headquartered in Lewisville, Texas, Nationstar has been a major entity in forward servicing since 1997, only entering the HECM sector recently when it purchased the reverse mortgage servicing rights of Bank of America and MetLife. With those acquisitions in hand, the company created an impressive portfolio that has propelled it to a place among the top reverse servicers in the country. Unlike RMS, Nationstar does not have an origination channel, instead focusing solely on the servicing side. It does, however, have Ginnie Mae approval; the company came in fifth for HMBS issuance in the first half of 2013. According to Nationstar’s first quarter report, its outstanding reverse mortgage interests totaled $978 million as of March 2013, a number that increased by more than $220 million in just three months as the company continued its buy-up in the space.

The Servicing Landscape While lenders like Financial Freedom, Bank of America and Wells Fargo dominated reverse mortgage servicing in years past, today the market mainly comprises four companies: RMS, Nationstar, Celink and Generation Mortgage Company. Each entity approaches the business of HECM servicing with its own system and corporate philosophy. RMS’ role as a major player in reverse mortgage servicing was further solidified when the Texas-based company was purchased by Walter Investment Management Corporation last year. RMS is unique because, in addition to being one of the largest HECM retail originators and HECM servicers in the country, it is the nation’s largest issuer of Ginnie Mae securities. According to a recent report by New View Advisors, RMS issued more than 35 percent of all HMBS pools in the first half of 2013, coming in at No. 1 for Ginnie Mae issuance so far this year. According to CEO Mark Helm, the company’s status as an issuer enables it to better manage its operations. “We definitely

Celink, on the other hand, does not issue its own securities and focuses solely on reverse mortgage subservicing. Based in Lansing, Michigan, Celink first began as a data processing, support and services company in 1969. It wasn’t until 2005 that the company began servicing reverse mortgages. “We looked at the reverse mortgage space and decided to jump in feet first, into the deep end of the pool,” says Celink CEO John LaRose, adding that the company’s reverse division began with his son Ryan and just two other employees, who managed a portfolio of about 5,000 loans purchased from Wendover Financial. The company has since abandoned other types of loan servicing, dedicating all of its efforts to subservicing reverse mortgage loans for lenders in the space. Today, LaRose says, Celink employs about 190 people who manage the8

Marc Helm CEO, RMS

“The servicing of a reverse mortgage is not for the faint of heart. If you get into this business in this servicing environment, you’ve got to really, really know what you’re doing... These borrowers need a little helping hand to figure it out; this is the nature of the business we’re in… We’re dealing with the protected class of senior citizens.” reversereview.com 8 TRR | 33

The Reverse Review August 2013 ! Servicing HECMs

company’s portfolio of more than 200,000 loans. Like RMS, Generation Mortgage Company is a lender that operates both retail and servicing divisions. Colin Cushman, Generation’s president and CEO, says the fact that the Atlanta-based company services its own loans rather than handing them off to a third party can be an advantage for its borrowers. “The fact that we don’t transfer servicing to a third-party is very comforting to many of our borrowers, and the fact that they will have a single contact for both origination and servicing can limit confusion,” Cushman says, adding that the company’s 48-person department services a portfolio of 33,765 loans. “That said, the few servicers in this space are all experts in servicing reverse mortgage loans and so borrowers are in good hands wherever their loans are serviced.” Learning to Service HECMs Servicing HECM loans is a different endeavor than servicing traditional, forward mortgages. While both types manage loans post-closing, a reverse mortgage is a government-insured loan designed for a protected class of citizens, and as such it has unique characteristics that dictate the manner in which the loan should be serviced. As Generation’s VP of servicing Mary Ann Rutledge points out, one of the major differences is that HECM borrowers do not make payments on their loans like borrowers of a traditional, forward mortgage would, meaning that HECM servicers don’t deal with loan modifications like their counterparts do on the forward side. Because of this, Rutledge says there is little a reverse servicer can do to assist a distressed borrower. “One of the main differences is that we’re not afforded as many options as they are given in the forward world,” Rutledge says. “We only have three things we can work with: We can offer to refinance the home if the value is there; we can offer the borrower HUD 34

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counseling to help them work through their issues and get back on track; or we can put them on a repayment plan and then monitor that plan.” Helm points out another key difference. “In our business, foreclosure is not a dirty word,” he says. “The vast majority of our loans will probably not foreclose because of T&I default; they foreclose because the last remaining borrower died and the state had no interest in the property and had an opportunity to sell it.” Cushman says this final stage in the life of the loan is what makes the servicing process so complicated. “The complexity of reverse mortgage servicing is primarily with the due and payable process,” he says. “This is a time when heirs are often stressed and the borrowers or their estates don’t fully understand the process.” LaRose stresses the fact that the product’s complexity demands a hightech platform to properly manage the loan. “I think many others outside of the industry look at it as a relatively simple task of accounting—keeping track of how much funds the borrower has available, distributing funds when they want them and keeping track of it. Nothing could be further from the truth,” he says. “It is an incredible, highly complex, almost esoteric loan product and it requires the most complicated mortgage servicing platform I’ve seen in 28 years.” Helm echoes these sentiments. “The servicing of a reverse mortgage is not for the faint of heart,” he says. “If you get into this business in this servicing environment, you’ve got to really, really know what you’re doing.” Indeed, HECMs are in many ways more complicated than traditional, forward mortgage loans, so servicing a HECM loan requires a special kind of training. For RMS and Generation, this means locating skilled servicers from the forward side and training them to adjust their processes to accommodate the special needs of a HECM loan.

“We hire very educated forward mortgage people and convert them to reverse mortgage people, because a lot of the basics—the way payouts are handled, the way investor accounting is handled, the way the loans are boarded—are the same as in the forward world,” Helm says. Helm does admit that despite some basic similarities, the nuances of a HECM create a learning curve for those who are used to forward mortgage processes. “The program has a lot of bells and whistles. HUD has some very tight timelines and foreclosure processes and things like that.” Rutledge says Generation also hires servicers from the forward side. “The majority of our staff has a servicing background from the forward world, because there just aren’t that many reverse servicers out there.” To get them up to speed with reverse servicing processes, Rutledge says the company hosts an orientation and then pairs new employees with a mentor for one-on-one training. “We also give them an opportunity to sit and observe other people within the servicing department so they can see how their work fits in with what other people in other areas are doing,” she says. “We try to educate those in our servicing department about the entire picture of the loan, not just the little portion that each person does. We want them to understand how it all fits together to make a puzzle and how they’re an intricate part of it.” Celink, however, typically trains people without any sort of servicing background. “We pretty much train people without any experience at all,” LaRose says, adding that the company’s Michigan location means there aren’t a lot of trained mortgage servicers in the area. “We do two and half weeks of classroom training and then very close mentoring, monitoring and supervision. There’s also a lot of ongoing training that occurs, particularly when there’s some sort of regulatory change.” LaRose says 8

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Helm says part of the reason the calls last so long is because senior borrowers require extra attention. “We spend a lot of time re-educating borrowers, sometimes telling them numerous times how the program works to make sure they understand it,” he says. “These borrowers need a little helping hand to figure it out; this is the nature of the business we’re in,” he says, adding that RMS currently has 114 borrowers who are past age 100. “We have a lot of seniors who have us on a speed dial and they call us just when they want to talk,” he says. “Sometimes they call us to tell us about their aches and pains, sometimes they call to tell us what their children are doing, and sometimes they actually call us for business reasons.” Helm says a certain amount of sensitivity is required on the part of the servicer to field these calls. “We want really caring, concerned, compassionate people… We want them to treat our customers just like they would their own grandmother or grandfather.” Cushman agrees that a heightened level of sensitivity is required to properly assist a senior borrower. “We are servicing loans for a protected class of senior citizens who face many unique challenges during this phase of their lives. The time and care needed to service greatly exceeds the general

Average call times according to Helm: Average call time for a forward operation can be about 2 ! minutes, 45 seconds.

a short call compared with...

An essential element to training at companies across the board is teaching staff how to engage seniors over the phone. According to Helm, this is especially true because the average call time between a borrower and a reverse servicer is much longer than a typical servicing call in the forward world. Helm says that the average call time for a forward operation can be about 2 minutes 45 seconds, a short call compared with RMS’ average of 4 minutes, 30 seconds.

the company is launching Celink University this fall, which will be a “much more robust and extensive” training program for Celink staffers.

RMS’ average of 4 minutes, 30 seconds. servicing of traditional mortgages across a broader age spectrum,” he says. To stress this point, Generation requires its staffers to take courses designed to teach how to connect with seniors over the phone. “We offer senior-sensitivity training in terms of how to talk to and listen to a senior when you’re on the phone, how not to push the conversation and to give them an opportunity to speak,” Rutledge adds. Helm notes that in some cases, where the borrower’s age is advanced, servicers field calls from their adult child or an individual who has taken over power of attorney. To handle these situations, servicers must be prepared to deal with family members or other interested parties who know little about the loan or who are unhappy about its existence. “These are people who weren’t really involved in the loan process,” he says. “In some cases, the parents are using the money to help their children… and the children don’t know they are taking the equity out of their home.” In other cases, as Rutledge points out, servicers have trouble getting in touch with the borrower. “We have a hard time getting to our borrowers, because the phone numbers provided in the application are not always the same ones that the borrowers keep,” Rutledge says. “Oddly enough, a lot of them use disposable phones, and they don’t have land lines like people did years ago. They use cellphones. In some cases their kids give them

cellphones and they have a limited amount of time with them.” Another essential element to any training program on the servicing side is teaching staffers how to spot signs of fraud. Helm says that in one instance, a borrower called to request a significant cash withdrawal because she was told she won a prize from Publishers Clearing House and needed to prepay the taxes on her prize. Helm’s servicing staff quickly intervened. “Our people are very proactive about trying to stop senior fraud,” he says. Rutledge says her staff is also extravigilant when it comes to requests for cash draws. To ensure that it is actually the borrower requesting the withdrawal and not an imposter, Generation staffers make every attempt to confirm the borrower’s identity and the request for funds. “What we find is that sometimes it’s not the borrower requesting the money; sometimes it’s one of their heirs who has gotten a hold of their paperwork,” she says, adding that confirming the request can often be difficult because of HUD’s stipulation that the funds must be released within five days of the request. “Sometimes our hands are tied. We try to make multiple phone calls in that little window, but if it gets close to the fourth day, we’re going to have to go ahead and release the monies.” 8

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The Reverse Review August 2013 ! Servicing HECMs

The Challenges of HECM Servicing Because of the unique qualities of a HECM loan and the stipulations imposed by HUD on those who service them, the companies in this sector face a distinct set of challenges. One specific development that has been problematic for HECM servicers is the introduction of HUD’s new HERMIT (Home Equity Reverse Mortgage Information Technology) system, a platform designed to monitor and track the life of the loan; an updated and more complex version was released in October of last year. According to Rutledge, adapting the HERMIT system has been a challenge for her department. “It has slowed down our production with regard to filing the claims, and from my conversations with other servicers, I think they are also seeing the same thing,” she says, adding that an increase in the number of transaction codes, from about 80 to more than 200, made filing claims more laborious. Helm echoes Rutledge’s comments about the difficulties of transitioning to the new system, but says that he believes the change will be beneficial in the long run. “The other system was very antiquated. There’s no doubt in my mind that this is a much better system,” he says. “It’s the system of the future. It’s got all the bells and whistles you would want.” Colin Cushman CEO, Generation Mortgage Company “I think the two biggest concerns today for reverse servicers are how long it will take until we see HERMIT as part of the solution, and if and when the FHA will broaden the scope of loss mitigation options for servicing T&I delinquent loans.”

Aided by the establishment of the HUD Advisory Committee, reverse servicers are working with HUD, meeting quarterly to discuss some of the issues they face, including problems with the adaptation of the new HERMIT system. “HERMIT has been a challenge,” Rutledge says. “We’ve made some steps in the right direction, which is outstanding, but we still have a little ways to go.” Another major concern plaguing reverse servicers is the issue of tax and insurance defaults. In the past, when Fannie Mae securitized HECMs, the agency did not enforce foreclosure action against seniors who failed to pay the taxes and insurance on their properties. But when Ginnie Mae took over, some confusion ensued. “Fannie Mae did not proceed to call loans that were in tax and insurance default due and payable,” LaRose says. “When it exited the

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business, there was this gap in understanding as to what exactly HUD wanted us to do.” HUD clarified its position in a 2011 mortgagee letter, directing servicers to proceed with action against properties with tax and insurance defaults by submitting them to HUD for approval to call them due and payable and, in some cases, eventually foreclose on them. “Since that time that’s been a dramatic change,” LaRose says. “We might have had several people monitoring tax and insurance defaults under Fannie Mae, and we now have about 25 people in that department. So our cost of servicing went up significantly when HUD clarified the rules.” Of course, one of the greatest issues facing HECM servicers is that the rules are often changing. The recent moratorium on the fixedrate Standard product, for example, has led to a huge shift toward ARM loans. According to Cushman, adjusting to this shift has been complicated. “Servicing ARM loans is not the same as servicing fixed-rate mortgages due to the requirements around advances and repayments,” he says. “Also, the duration of servicing is extending as we move into an ARM book, which brings challenges.” Further complicating things are the fact that regulatory bodies have tightened their grip. Prior to the housing meltdown in 2008, reverse servicers were largely exempt from regulatory scrutiny related to servicing and licensing approval in most states, because they were approved by Fannie Mae. But all of that has changed drastically in the last five years. Cushman says complying with current regulatory demands is difficult for servicers. “Meeting the regulatory timelines and restrictions in today’s market is very challenging and at times impossible, given that many of the regulations are antiquated, conflicting and out of date,” he says. According to LaRose, state examinations have been the most troubling thus far. “State regulatory issues have become a serious challenge for servicers on any level, because they’ve become a lot more aggressive,” he says. “We probably didn’t have an examination by a state until 2008 or 2009, and now we go through probably about eight or 10 a year.” LaRose says the constant flow of state examinations and audits requires more staff

! Servicing HECMs

and increases the cost of operations, which can be taxing on any business’ bottom line. “It’s a frustrating time from a regulatory standpoint to be in any business related to mortgages,” he says. “The CFPB, in terms of reverse mortgages, has been rather benign thus far, but they’ll soon turn their attention to us, and we’ll have to adjust to that, just like we’re doing with the states.” The Future of Reverse Mortgage Servicing There’s no denying that the reverse mortgage industry has been in a state of flux, and it’s unlikely that things will stabilize to any great degree until HUD finalizes changes to the HECM program, a move set to take place in the coming months. When it comes to servicing the product, this sense of uncertainty has likely prevented the sector from growing, and some have expressed concern about the lack of active participants on the servicing side. But most people,

including LaRose, agree that until the program steadies itself, that’s unlikely to change. “Ginnie Mae has said the concentration of servicing in the industry causes them concern, but until the industry starts growing at 100,000-plus loans a year, I just don’t think other people are going to be willing to take the rather extensive leap into the industry,” he says. “I think there are a lot of people on hold right now, looking at it, thinking about it, but saying it’s just too small of an industry to make that kind of investment, especially with HUD about to make some significant changes.” Helm agrees and says the issue extends beyond just servicing. “I think there are probably people who have backed off from making an investment in the industry and making any sort of origination or servicing deal because of the changes happening,” he says. “Even major players in the industry now are not taking the next steps because they want to see how

this turns out with HUD and with Congress.” Although it may feel like the industry has been stuck in this holding pattern forever, HUD’s changes will come eventually. Many seem to think that once the industry adjusts to whatever these changes are, the future for the reverse sector looks bright. “I think we’ll see positive things happening, assuming positive things come out of HUD and Congress, which I believe they will,” Helm says. “We might not get everything we want, but they’ll keep the product in play, and we’ll go down the road from there.” LaRose also maintains a positive outlook. “The demographics and the retirement needs of the boomer generation are just too compelling to have such a small level of penetration. There is a tremendous need out there,” he says. “I think the future is exciting.” x

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Gifts From Gettysburg Joh n L a R o s e might think. His quick thinking and timing were impeccable. He had no way of knowing that the fate of tens of thousands of Confederate and Union soldiers would be determined by his decision. We in the reverse world are at a critical juncture, or crossroads, as well. Let’s act swiftly and decisively, like Buford, and always take the figurative high ground. Lesson Two . Effective Leaders Park Their Ego

he Fourth of July arrives tomorrow. As a Vietnam veteran my thoughts turn to past and present military personnel who bore arms in defense of this astonishing country we call home. Business has been likened to war, and in the 1990s, there was a movement among business leaders to identify The Art of War by Sun Tzu as the most important business book ever written. This is no small feat given that it was penned more than 2,500 years ago. Though I’ve never read The Art of War, as a veteran of military service, I can attest to the lessons military discipline and intelligence may provide to the business leader. This column is being penned on the 150th anniversary of the last day of the Battle of Gettysburg (July 1-3), widely acknowledged by historians as the turning point of the Civil War. I came across an article titled, “The Top Three Leadership Lessons From the Battle of Gettysburg” in The Guardian. Author Jeffrey D. McCausland believes that there are leadership lessons to be gleaned from this monumental battle. I concur. Lesson One . The Importance of Time and Timing Armed with the information that Confederate troops were amassing and making their way toward them, a Union cavalry officer named John Buford recognized the importance of the town’s crossroads and positioned his troops on the best terrain (the high ground). Buford had no time to ask for counsel and no access to text messaging or cellular communication to see what his superiors or others in charge

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Beloved and brilliant General Robert E. Lee arrived at Gettysburg following decisive victories at Chancellorsville and Fredericksburg. Some historians have suggested that Lee, despite his brilliance as a military tactician, may have suffered from hubris. He believed that the bold army of Northern Virginia could not be defeated and ordered the infamous Pickett’s Charge on July 3. It was an unmitigated disaster for the Confederacy. Every leader in our industry needs to park their ego and give up the belief that our product and our industry are invincible. We must make decisions that are best for our collective well-being and not driven by ego or private interests. Lesson Three . Effective Leaders Articulate and Communicate a Strategic Vision The story of Gettysburg culminates in November with the delivery of the Gettysburg Address, a speech of less than 300 words that rallied a nation in crisis and mourning and continues to inspire people across the world. Abraham Lincoln, arguably one of the greatest leaders in history, acknowledged the enormity of the people’s loss and their grief, recognized their sacrifice and shared his vision of the nation’s future as “a new birth of freedom.” If we are going to be effective leaders for our industry, we have to be willing and able to articulate, communicate and share a collective strategic vision for its future. We have the privilege of living in this great gift of a country and working in an industry that celebrates and facilitates freedom. Lincoln knew that there was so much more that united Americans than divided us. As industry leaders, let’s commit to learning and living the lessons of Gettysburg. There is so much more that unites rather than divides us. Let’s never look for a war with others, or worse yet, among ourselves. x

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