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The Reverse Review February 2014
From the Editor By answering these questions and others included in our survey on page 32, you can help us learn how we can be most helpful to you and your team as the industry adjusts to the new guidelines. To participate, visit reversereview.com/ survey and submit your answers by March 10. Check back in with TRR to read the results of our survey and learn what your colleagues in the space said
A note from jessica guerin
With the implementation
of Financial Assessment looming, we’ve joined forces with our expert underwriter, RMS’ Ralph Rosynek, to discuss how we can provide our readers with the resources and advice they need
about preparing for this latest wave of change.
be to seek information from the readers
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{ Jessica Guerin }
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ARE YOU READY FOR FINANCIAL ASSESSMENT? PG. 32 A LOOK AT RMF’s NEW HECM CHOICE PRODUCT PG. 22 + ERIK RICHARD SITS DOWN IN OUR HOT SEAT PG. 18
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24 | Originating
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What you can do to contribute to the campaign
22 | Originating Why Do You Do What You Do? Reverse professionals assess their passion for their work in light of recent change. LANCE r. CANADA
The secondary market feels the impact of HUD’s program changes. darren stumberger
36 | Spotlight Breaking Down the Barriers Financial planning expert Michael Kitces talks about what reverse originators need to do to get through to the advisor community.
Tech
42 | Last Word
Read about the association’s current initiatives.
Doing Great by Doing Good
Marty Bell
Bart Johnson
Joining in the mission to help seniors
38 | Reaching a Broader Audience
Reverse professionals reassess their marketing approach in light of HUD’s new guidelines.
@
Want the online version? reversereview.com/magazine
jessica guerin february 2014 W IE
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INSIDE
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Connecting with Financial Planners
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ARE YOU READY FOR FINANCIAL ASSESSMENT? PG. 32 A LOOK AT RMF’s NEW HECM CHOICE PRODUCT PG. 22
+ ERIK RICHARD SITS DOWN IN OUR HOT SEAT PG. 18
W THE RE REVIE VE
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Reverse professionals reassess their marketing strategies.
SE
“When HUD released new guidelines for the HECM program last fall, the industry braced itself for yet another wave of change. Many have agreed that, in order to adapt, the industry will have to broaden its reach to engage a larger portion of the senior population. The challenge now becomes how to reach a larger audience and educate them about the possibilities afforded by a HECM.
THE
FEATURE
29 Rick Waaramaki
W
14 | NRMLA News
35 | HMBS
EVIE
Reverse Market Insight
Ralph Rosynek
A Year of Transition
An Update on the Extreme Summit
Otto Kumbar
December year-to-date volume for top reverse lenders and HECM endorsement stats through November
Originating
R SE
12 | Report
review
ER EV
Reverse Mortgage Daily
20 | Update
27 michael j. weltman
R
Headlining stories of the past month
EVIE
FEBRUARY 2014
R SE
11 | Industry News
A collection of recent facts and surveys affecting the reverse market
Take our survey to contribute to the conversation about pending FA.
ER EV
The latest developments in companies across the reverse space
17 | Roundup
R
09 | Movers and Shakers
32 | Underwriting Preparing for Financial Assessment, Part 1: Surveying Your Readiness
review
FEBRUARY 2014
UARY 2014
this issue
E
WALT CARTER
THE
TH
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Planners How Generation’s nu62 technology can help advance the HECMINSIDE
THE
REVERSE FEBRUARY 2014
reversereview.com
review
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The Reverse Review February 2014
Contributors
John K. Lunde
Marty Bell
J ohn K . L und e
Ma rty B e ll
e r i k r i c h ard
12 | Industry Stats 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. 949.429.0452, rminsight.net
14 | 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.
18 | Hot Seat g Erik Richard is the CEO of Landmark Network, an appraisal management and compliance company serving the reverse mortgage industry. Richard is also co-publisher of The Reverse Review. Prior to founding Landmark, Richard accumulated more than 10 years of industry experience within the lender services and real estate valuation sectors. Richard most recently served as CFO for One Reverse Mortgage.
ot t o k umba r
LANCE r . CANADA
e d war d o’co nno r
20 | An Update on the Extreme Summit g Otto Kumbar is the CEO of Liberty Home Equity Solutions. Kumbar, who worked previously as business leader for Liberty, has been in the mortgage industry since 2001, working as Genworth’s managing director for Latin America, CEO of Australia and managing director for mortgage insurance in Europe. Kumbar also worked for General Electric, where he held various positions in GE Plastics, Industrial Systems, Global Exchange Services and GE Mortgage Insurance. Kumbar attended Rensselaer Polytechnic Institute.
22 | Why Do You Do What You Do? g Lance R. Canada, CRMP, is a 17-year veteran of the mortgage industry and has spent the past nine years educating seniors about reverse mortgages. He is currently an originator and branch manager with Generation Mortgage Company. Canada comes from an entrepreneurial background, having owned and operated several businesses for more than 20 years. He recently finished his first book, Recognizing the Laws of Failure, Changing Attitudes.
24 | Will the New Changes Make Your Job Harder? g Edward O’Connor, CRMP, is a reverse mortgage professional with more than 15 years of experience. He was previously the owner of Advanced Funding Solutions in Long Island, and prior to that he owned an accounting and tax practice for 16 years. O’Connor maintains his status as a licensed IRS Enrolled Agent and is the cofounder of the Long Island chapter of the National Aging in Place Council. O’Connor has a finance degree from NYIT and is a retired Nassau County police detective. 516.984.3731, edward.oconnor@icloud.com
mi cha el j . w e lt ma n
Ri c k Waar amak i
walt c arter
29 | The Work of a Title Officer g Rick Waaramaki is the senior advisory title officer at Premier Reverse Closings. In addition to advising and clearing title issues, his responsibilities include the reviewing of trusts, powers of attorney, conservatorships, etc. Waaramaki began his career as a title insurance trainee with Safeco Title in San Bernardino, Riverside and Sacramento. He began working with reverse mortgages in their infancy with PRC’s predecessor, Alliance Title, in 2000. A Chicago native, Waaramaki has a bachelor’s degree from Cal Poly, Pomona.
30 | Closing the Knowledge Gap g Walt Carter is chief information officer for Generation Mortgage Company. He has more than 25 years of experience in technology leadership roles. Carter began his career as a technical officer in the U.S. Air Force and has served in a variety of technology leadership roles with companies such as Fidelity, Gannett Corporation, TRW, Spherion, Ajilon Consulting and RM Battle. Carter has a B.S. in physics from Guilford College and a master’s degree in public and private administration from Central Michigan University.
Erik Richard
Otto Kumbar
Lance R. Canada
Edward O’Connor
Michael J. Weltman
Rick Waaramaki
Walt Carter
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27 | Looking Back to Plan Ahead g Michael J. Weltman is assistant vice president/sales manager for Urban Financial of America. Weltman, who has 13 years of experience in the reverse mortgage business, has an MBA in finance and is treasurer of the Mortgage Bankers Association in Tallahassee, Florida. He holds a broker license and real estate instructor license, has a license with the Florida Department of Financial Services, and is SRES-, CAPS- and CSA-certified.
Contributors
Ralph Rosynek
Darren Stumberger
r al p h r os y ne k
d ar r e n s tu mbe r ge r
ba rt joh n so n
32 | Preparing for Financial Assessment, Part 1 g Ralph Rosynek is the vice president for National Correspondent Production at Reverse Mortgage Solutions. RMS is a premier provider of reverse mortgage servicing and Ginnie Mae seller/servicer, and offers mortgage banking support to the reverse mortgage industry. Rosynek is currently a member of the NRMLA board and co-chair of the Professional Development Committee, and holds HUD HECM Direct Endorsement credentials. rrosynek@rmsnav.com
35 | A Year of Transition 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
42 | Doing Great by Doing Good g Bart Johnson is the CEO of Premier Home Equity. He previously served as the president of Financial Freedom, overseeing the company during the time it earned unprecedented market share, profits and value. Johnson was a co-chair of NRMLA and remains an active board member. He is a career “intreprenuer,” building ventures into valuable businesses with large corporate sponsors. Johnson has held executive positions in virtually every important area of mortgage banking.
Bart Johnson
page 42
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The Reverse Review February 2014
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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?
ReverseVision Adds Landmark Network Appraisal Services to its Integrated Technology for Reverse Mortgage Lenders
Reverse mortgage technology provider ReverseVision has added appraisal services from Landmark to its Reverse Loan Origination System (RLOS) platform. The addition of Landmark’s appraisal service enables users to simply order an appraisal with the click of a button from their RLOS, and to view automatic updates applied to the loan record with details on the appraisal status. Through the Landmark Network integration, RLOS users can avoid the impact of appraiser scarcity, high costs and delayed turnaround time.
Celink Successfully Passes Reverse Mortgage Servicing Compliance Exam Celink, the nation’s largest reverse mortgage servicer, has completed its first exam affirming its compliance to reverse mortgage servicing standards. Named the Statement on Standards for Attestation Engagements (SSAE) No. 16 Service Organization Control (SOC) 1, Type II, the exam assesses a company’s internal controls over processes and procedures relevant to reverse mortgage servicing. Issued by the American Institute of Certified Public Accountants (AICPA), the exam also tests the company’s information technology department’s critical functions. “This report affirms our commitment to providing a stable, sound, and secure environment through financial strength and ongoing investments in compliance, legal, audit, technology and vendor management practices,” Celink President Ryan LaRose said.
Email it to Jessica@reversereview.com.
Urban Financial of America Hires Graham Fleming as Chief Administrative Officer Mortgage banking executive Graham A. Fleming has been appointed to the new position of managing director and chief administrative officer of Urban Financial of America, LLC (UFA), reporting to company President Steve McClellan. With more than 15 years of experience in the consumer lending business, Fleming was formerly president of Icon Residential Lenders, LLC, a wholesale and retail mortgage lender that funded more than $2.5 billion per year and was recently sold to Rushmore Home Loans. Fleming, a fellow of the Chartered Institute of Certified Accountants, previously served as COO of Finance America, a Lehman Brothers company. “Graham’s extensive track record of strategic leadership in financial services management and business development is a tremendous asset. We are delighted to have him as part of our team as UFA begins an exciting new era, with new ownership and plans for continued growth and enhancement of our best-in-class sales and operations platform,” said UFA President Steve McClellan.
Generation Mortgage Company Continues Retail Sales Expansion, Promotes Shirlene Nordé Generation Mortgage Company (GMC) continues expanding and strengthening both its retail and wholesale divisions. Recently, GMC announced two new hires to its retail team: Sharon Falvey as business development specialist and Sue Winters as pacific retail manager. Other
recent hires include branch managers Evan White (Calif.), Gail Hawkins (Mo.) and Chuck Byler (Az.); and loan officers Bill Niehus (Colo.), Blake Pavlich (Wash.), Kathy Rutkowski (Ill.), John Martin (Ore.) and Peggy Stout (Ut.). On its wholesale team, GMC has promoted Shirlene Nordé to the role of wholesale account executive.
Reverse Mortgage Funding Releases New HECM Choice Product to Principal Agents and Brokers Reverse Mortgage Funding LLC (RMF) has announced that HECM Choice—its new partial-draw, fixed-rate HECM product—is now available to principal agents and brokers. When the product was launched in December, HECM Choice was available only to approved correspondent lenders with a phased approach to launch to wholesale and principal agents in January. “The introduction of HECM Choice to the industry has been successful, the launch has gone as planned, and the product is available today to all lenders,” said RMF President David Peskin. “We are pleased to bring HECM Choice to a broader base of homeowners through the addition of principal agents and brokers.”
TRR wants your company news! Send us yo’sur
company latest initiatives, programs, hires, acquisitions and more, and be a part of our s Movers & Shaker column.
Email jessica@ reversereview. com reversereview.com
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The Reverse Review February 2014
Reverse Mortgages have changed. Shouldn’t your business?
Let AAG help you navigate the upcoming changes by partnering with the industry leader. Utilize updated training and support, join in on informative webinars, and access non-branded marketing materials to ensure your business’s success.
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For more information and to learn more about we can help you in 2014, contact Kimberly Smith, Senior Vice President of Wholesale Lending.
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Industry Update
February 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.FINRA No Longer Describes Reverse Mortgages as “Last Resort Loan”
Research conducted by Security 1 Lending’s Funding Longevity Task Force convinced the Financial Industry Regulatory Authority (FINRA) to no longer describe the reverse mortgages as a “loan of last resort.” FINRA, which is a regulating body for the financial sector, removed that statement from its published investor alert. The task force says this decision was based on a review of recent research. The Funding Longevity Task Force’s goal is to eliminate reverse mortgage misconceptions among financial planners and regulators in order to benefit retired homeowners and the reverse mortgage industry as a whole. Task force participants reviewed recent findings from academic investigators, which presented growing proof that housing wealth, when used conservatively early on in retirement, can sustain cash flow. // January 22, 2014
2.Four More Agencies Add
Uniform LO Test, Tally Reaches 39
More bodies continue to adopt uniform tests for mortgage loan originators, as four additional state and U.S. territory agencies have now brought the tally to 39. Those who have most recently adopted the National SAFE MLO test include the Nevada Department of Business & Industry, the New Mexico Financial Institutions Division, the Puerto Rico Office of the Commissioner of Financial Institutions, and the U.S. Virgin Islands Division of Banking
& Insurance. The test has been gaining ground since its launch April 1, 2013, when it was immediately adopted by 20 states. It combines both the national and state testing requirements of the Secure and Fair Enforcement for Mortgage Licensing Act of
2008 (SAFE Act) and streamlines the license application process for MLOs seeking licenses in multiple states. // January 7, 2014
3.New Appraisal Rule Could Cause Reverse Mortgage Delays
A CFPB rule regarding appraisals that took effect January 18 is set to impact all mortgage lenders, both forward and reverse. The rule requires lenders to provide borrowers with their home appraisal as well as materials that were used in completing the appraisal, from comps to calculations. By law, lenders will be required to provide this information before three days prior to the loan closing and within a “reasonable” time period within the loan closing. While many appraisal management companies say they are equipped for the change, even those with automated systems designed to handle the new requirement could experience delays as the rule goes live. // January 20, 2014
4.NRMLA Launches Borrower Outreach With New Consent Form
NRMLA is launching a borrower outreach effort through the distribution of a new consent form, which the organization encourages lenders to include in loan closing packages. The form requests contact information for the borrower if he or she chooses to share it; the collection of this information will be protected by NRMLA
and used only for purposes specified by the association in an email to members. “NRMLA is frequently contacted by news reporters who want to interview consumers who have gone through the process of getting a reverse mortgage,” NRMLA writes in the email. “In order to build a repository of borrowers who are willing to share their positive experiences with reporters, the association, in consultation with counsel, has created a new consent form that members are encouraged to distribute in their closing packages.” // January 12, 2014
5.California Judge Dismisses Wells Fargo, FNMA Reverse Mortgage Lawsuit
A proposed class action representing heirs of reverse mortgage borrowers was dismissed by a California judge without leaving the plaintiff an opportunity to appeal. The suit, brought by AARP against Fannie Mae and Wells Fargo in 2011, was the second reverse mortgage lawsuit brought by AARP in 2011 following a suit brought against HUD that is being decided in a court of appeals. The claims allege the bank and Fannie Mae wrongfully interpreted the HECM statute when they foreclosed on the plaintiff’s home without offering him the opportunity to purchase the home at 95 percent of its appraised value. A U.S. district judge dismissed the proposed class action suit, stating the plaintiff’s home title did not back his claims. // January 7, 2014
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The Reverse Review February 2014
Report December 2013
Top Lenders Report
12345 S1L / RMS
Endorsement
676
American Advisors Group
One Reverse Mortgage
Urban Financial Group
Liberty Home Equity
Endorsement
Endorsement
Endorsement
Endorsement
621
Lender
367
Endorsements
211
175
Lender
Endorsements
PROFICIO MORTGAGE VENTURES LLC
143
GMFS LLC
38
REVERSE MORTGAGE USA INC
137
PEOPLES BANK
35
CHERRY CREEK MORTGAGE CO INC
122
SENIOR MORTGAGE BANKERS INC
33
GENERATION MORTGAGE COMPANY
116
PLAZA HOME MORTGAGE INC
27
MAVERICK FUNDING CORP
108
AMERICAN PACIFIC MORTGAGE
24
HIGH TECH LENDING INC
104
DOLLAR BANK FSB
20
ASSOCIATED MORTGAGE BANKERS INC
91
FIRSTBANK
19
OPEN MORTGAGE LLC
84
FIRSTAR BANK
18
SUN WEST MORTGAGE CO INC
64
MORTGAGE SERVICES III LLC
17
NATIONWIDE EQUITIES CORPORATION
56
TOWNEBANK
17
NATIONSTAR MORTGAGE LLC
54
UNIVERSAL LENDING CORPORATION
15
MONEY HOUSE INC
52
UNITED SOUTHWEST MORTGAGE CORP
14
M & T BANK
46
SOUTHERN TRUST MORTGAGE LLC
13
NET EQUITY FINANCIAL INC
45
HOMESTREET BANK
13
UNITED NORTHERN MORTGAGE BANK
42
ASPIRE FINANCIAL INC
13
HECM Endorsement Stats Through November 2013 Trailing Twelve Month Endorsements
Retail Endorsement Growth
6,000
8.92%
Wholesale Endorsement Growth
4,000
16.41%
2,000
Total Endorsement Growth
0 12 1 2 3 4 Retail
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INDUSTRY SUMMARY
5 6 7 8 9 10 11
Wholesale *Numbers represent months
11.92%
*Figures above reflect change from prior month
RETAIL
WHOLESALE
TOTAL
UNITS CHG% UNITS CHG% UNITS CHG%
Dec
2,250 -16.82%
Jan
3,033
34.8%
Feb
2,818
-7.09%
2,017
Mar
3,318
17.74%
2,494 23.65%
Apr
3,145
-3.94%
3,906 -11.81%
2,151 29.89%
5,184 32.72%
1,656
-6.23%
4,835
-6.73%
5,812 20.21%
-5.21%
2,568
2.97%
5,713
-1.7%
May 2,823 -10.24%
2,498
-2.73%
5,321
-6.86%
Jun
3,002
6.34%
2,335
-6.53%
5,337
0.3%
Jul
3,232
7.66%
2,511
7.54%
5,743
7.61%
Aug
3,125
-3.31%
2,248 -10.47%
5,373
-6.44%
Sep
2,735 -12.48%
1,782 -20.73%
4,517 -15.93%
Oct
2,510
-8.23%
Nov
2,734
8.92%
TOT
34,725
1,676
-5.95%
1,951 16.41%
25,887
4,186
-7.33%
4,685 11.92%
60,612
Saver market share
hecm endorsement trends
2%
%%%%%
0%
Looking for more statistics? Go to rminsight.net for all of the industry’s latest stats and rankings.
11/1/13
9/1/13
7/1/13
3/1/13
1/1/13
20%
16%
14%
12% $800.0
$700.0
$600.0
$500.0
$400.0
$300.0
$200.0
$100.0 4/1/13
3/1/13
2/1/13
1/1/13
10/1/12
9/1/12
8/1/12
7/1/12
6/1/12
5/1/12
4/1/12
3/1/12
2/1/12
1/1/12
12/1/11
October 9, 2009
10/1/13
9/1/13
8/1/13
7/1/13
6/1/13
reversereview.com
11/1/13
10/1/13
9/1/13
8/1/13
7/1/13
6/1/13
$900.0
5/1/13
$1,000.0 5/1/13
ARM
4/1/13
3/1/13
2/1/13
1/1/13
12/1/12
11/1/12
10/1/12
9/1/12
8/1/12
7/1/12
6/1/12
5/1/12
4/1/12
3/1/12
2/1/12
1/1/12
12/1/11 Fixed
11/1/12
9/1/12
7/1/12
5/1/12
3/1/12
11/1/11
{ FIGURE }
02
1/1/12
11/1/11
Fixed Rate Percentage
hecm endorsement trends
01
11/1/11
{ FIGURE }
03 in the millions
initial principal limits
hecm endorsement
Report { FIGURE }
70%
60%
50%
40%
30%
20%
10%
Reverse Market Insight - Logo
PANTONE COLORS 3005C
8 TRR
Process Blk C
Brought to you by:
18%
REVERSE MARKET
INSIGHT
10%
8%
6%
4%
| 13
The Reverse Review February 2014
NRMLA News
2014 Off to a Good Start
After last year’s prolonged battle to encourage passage of the Reverse Mortgage Stabilization Act and wait out the resultant changes created by HUD, 2014 arrived with a flourish of encouraging activity for the reverse mortgage industry on a number of fronts.
HECM Insurance Portfolio Improves Significantly
fundamental changes to the
The annual report to Congress
stakeholders, Assistant
on the financial health of the
Secretary for Housing/Federal
Mutual Mortgage Insurance
Housing Commissioner Carol
Fund showed, “Based on
Galante said the MMI Fund’s
the independent actuary’s
overall value (pertaining to
assessment, the HECM
forward mortgages and
HUD Appeals NonBorrower Spouse Case
portfolio’s economic value
HECMs) improved by $15
The U.S. Department of Justice filed a Notice
from last
of Appeal on behalf of HUD Secretary Shaun
year’s
$1.3 billion.
Donovan in the HECM non-borrower spouse
result.”
She said
case.
Both
In October, a federal district court
HUD
judge held that HUD’s “non-borrower
staff and
spouse” regulation was not valid and sent
industry
the matter back to the department to “fashion appropriate relief.” The judge’s ruling, among other points, noted that the HECM loan
than $9 billion
sustainability.” In an email to FHA
billion since last year and is currently valued at negative
this
participants had anticipated significant
change represents a 92 percent improvement in the capital
improvement due to product
reserve ratio, rising from a
adjustments. “All of these
negative 1.44 percent to a
changes and adjustments
if, as in the two HECM loans involved in the
negative 0.11 percent. The
have resulted in a HECM
independent actuary now
case (Bennett v. Donovan), such spouses were
portfolio with a significantly
estimates that the fund will
higher balance of capital
reach the required 2 percent
than in prior years,” the
reserve ratio in 2015, two
report said. “This gives the
years faster than predicted in
program the needed stability
last year’s report.
obligation needs to be deferred until the death of both the homeowner and the spouse—even
not also HECM loan mortgagors or borrowers.
The case proceeds to briefing and oral
argument before the U.S. Court of Appeals for the District of Columbia Circuit, which will likely hear the case sometime next summer. 14
improved by more
HECM program for long-term
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to permit FHA to make more
NRMLA News
A pair of stories in the press immediately following implementation of the program adjustments indicated the wind was starting to blow in a better direction. National Mortgage Professional reported in its November issue that recent programmatic changes to the Home Equity Conversion Mortgage may not only help improve product performance, but also the public’s perception of reverse mortgages.
Journal of Financial Planning Publishes Reverse Mortgage Articles
The Journal of Financial Planning
continued its coverage of reverse
mortgages with two articles in the
December 2013 issue that provided
further justification for using reverse
mortgages as part of a comprehensive retirement plan.
In his article, “The 6.0 Percent Rule,” Jerry Wagner,
Senior Editor Phil Hall wrote that the “problems (both real and perceived) associated with reverse mortgages have trailed the product for decades and have kept it from reaching its fullest potential. A great deal of the difficulty stems from bad publicity.”
Ph.D., president of IBIS Software, explains how the
Efforts to reform the program, which include eliminating fixed-rate, full-draw HECMs and Congress passing the Reverse Mortgage Stabilization Act, may result in less money for potential borrowers, but nonetheless translate into more consumer confidence about the product.
increased to 6 percent when fixed monthly payments from
“The changes should help drive consumer behavior,” Peter Bell, president and CEO of NRMLA, told Hall. “People will be able to take out the actual amount they need upfront and leave the balance in a line of credit. It will be better for everyone.” Meanwhile, MarketWatch published an article suggesting that consumers’ attitudes about reverse mortgages could shift in the coming years as longer life expectancies will force people to look at their home equity as a resource to pay for medical costs and offset stock market losses. “By using a HECM as a standby cash reserve, drawing on it during peak demands for cash, other assets can be retained until maturity or recovery,” MarketWatch editor and columnist Amy Hoak said, quoting Peter Bell. “The net result is a greater amount of wealth preserved to fund longevity.” Hoak also surmised that recent programmatic changes “could make [a reverse mortgage] a safer option for retirees.”
traditional 4 percent rule—which refers to the percentage of funds from an investment portfolio that could be
accessed on an annual basis so that an individual or couple can sustain themselves for a period of 30 years—can be a reverse mortgage are added into the retirement plan.
Shaun Pfeiffer, Ph.D., and financial planners John
Salter, Ph.D., CFP, AIFA, and Harold Evensky, CFP, AIF,
contributed their second article on reverse mortgages, this one titled “Increasing the Sustainable Withdrawal Rate
Using the Standby Reverse Mortgage.” The findings from this research suggest that using a reverse mortgage as a
last resort could be a huge mistake in a rising interest-rate
environment where a retiree waits to set up a line of credit in the future.
HECM Loan Limit Stays at $625,500
The Department of Housing and Urban Development announced in Mortgage Letter 2013-43 that it will maintain HECM loan limits at the current $625,500 level through December 31, 2014. The same limit applies to high-cost areas, such as Alaska, Hawaii, Guam and the Virgin Islands. reversereview.com
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NEWS FROM NRMLA
Programmatic Changes Could Help IMPROVE Public Perception
brought to you BY MARTY BELL: national reverse mortgage lenders association
The Reverse Review February 2014
NRMLA News
NRMLA Announces First 2014 Event—Join Us in New York March 18 & 19 The changes being implemented to the HECM program are going to change the way we do business. Our clientele will be altered, our message to them will be revised, we have new procedures to learn to explain—and all this while we plan to launch a new nationwide educational campaign. Join us on March 18 and 19 for “New HECM, New York: Educating Consumers & Investors,” where we will discuss presenting the new HECM to aging Americans and their children as well as investors and traders. Replicating the successful, well-attended events of the past two years, once again we are presenting a unique two-in-one conference: our Eastern Regional Meeting and our Investor Forum, all in two days in one location, the beautiful Intercontinental New York Times Square Hotel. To register for both events at one discounted rate, go to nrmlaonline.org.
NRMLA member
NRMLA Welcomes New Members NRMLA welcomes the following companies that recently joined the association. They include: • Burr & Forman, LLP Birmingham, Alabama (associate member) • Liberty Title & Escrow Warwick, Rhode Island (associate member) • Hometown Mortgage Group, LLC Lees Summit, Missouri (lender member) New CRMPs NRMLA congratulates the following individuals for achieving the status of Certified Reverse Mortgage Professional (CRMP):
Book Your Hotel Stay Today The Intercontinental New York Times Square is now accepting reservations for our March event. Book your room now at our special group rate by calling 866.875.1978. You won’t find a lovelier or more convenient hotel location in New York. The Intercontinental sits on the corner of Eighth Avenue and 44th Street, kittycorner to the home of The Phantom of the Opera and surrounded by all of Broadway’s theaters and many of the city’s finest restaurants. Celebrity chef Todd English’s restaurant is just off the lobby and an entrance to Shake Shack, the most successful restaurant chain in America, is around the corner. All the rooms provide panoramic views of either uptown or downtown Manhattan. 16
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• Lynn Wertzler, Greenleaf Financial, LLC Portland, Oregon • Pete Mendenhall, North American Savings Bank Kansas City, Missouri • J aime Girard, Reverse Mortgage Funding Melville, New York •P hil Stevenson, PS Financial Services, Inc. Miami, Florida •T im Nelson, V.I.P. Mortgage, Inc. Scottsdale, Arizona •M ark Clark, North American Savings Bank Kansas City, Missouri Seventy-four individuals have earned the CRMP designation since mid-2010 and every one of them is prominently listed on the NRMLA consumer website, reversemortgage.org.
Roundup
Here is a look at the latest
news and stats
affecting the market.
this month
{
Get up-to-date retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.
H o u s i n g R e c o v e ry
M a r k e t Up d at e
The national housing market is almost back to normal. The housing market is now 86 percent back to normal, according to the National Association of Home Builders (NAHB), which considered current building permits, home prices and employment data to reach its conclusion. In its report, NAHB said it found that 54 out of 350 metro areas across the U.S. had either returned to normal or exceeded what was previously normal economic and housing activity. “This index shows that most housing markets across the nation are continuing a slow, gradual climb back to normal levels,” NAHB’s chairman said.
The Consensus
Most Americans still value homeownership. Two-thirds of Americans still value homeownership and consider it part of the American dream despite the damaging impact of the housing market crash, according to a survey by NeighborWorks. Of the survey’s 1,000 respondents, 88 percent said owning a home is an important part of the American dream.
New View Advisors releases stats on reverse mortgage issuance for 2013. According to the report, HECMbacked securities reached their highest level of volume in three years in 2013; the total of 1,023 pools issued far outpaced 2012’s 628 pool record. Here are some details on the key players and the percentage of share they had in the $9.6 trillion market.
the senior agenda
More older Americans are logging on to Facebook.
According to the Pew Research Center, 45 percent of Internet users over age 65 use Facebook as of December 2013, a number that rose 10 percent in just one year. The study also revealed that six out of 10 Internet users between ages 50 and 64 use Facebook.
HECM t r e n d s
Reverse Market Insight rounds up HECM stats from 2013. While HECM endorsements for 2013 dropped 10 percent in December, total loans for the year rose 15.3 percent to 61,122 loans, according to a report from RMI. All 10 regions grew from 2012 to 2013, with six showing increases greater than 10 percent. Other compelling facts from 2013’s stats:
•
Pacific/Hawaii increased 39.2 percent
•
Rocky Mountains increased 20.7 percent
•
Las Vegas was the fastest-growing city by volume, up 68.7 percent
•
Phoenix was the second fastest, showing 65.3 percent growth
•
Los Angeles was once again the highest-volume city in the country at 2,884 loans, displacing New York
30% $2.9 trillion 25% $2.4 trillion 12% $1.1 trillion number crunch
By 2030, the 65-plus population will double to about 71.5 million. By 2050, this population will grow to 86.7 million people. -U.S. Census
reversereview.com
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The Reverse Review February 2014
the
THE
REVERSE
hot
review
seat
february 2014
Erik
From his first job and his most memorable moment to his thoughts about the reverse mortgage industry, we get the personal and professional facts from landmark network, inc CEO
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Erik Richard, CEO of Landmark Network and co-publisher of The Reverse Review, in this month’s edition of The Hot Seat.
P E R SO N A L >
>
for a day, I would choose Sir Richard
You can’t always be right and be in a
Branson because, really, who doesn’t want
successful relationship of any kind. >
Something nobody knows about me is that I am from Mexico… Mexico, Maine,
to own a private island? >
My favorite vacation was in Aruba.
>
My celebrity crush was Alyssa Milano,
>
If I were a professional athlete, I would be a baseball player for the Boston Red Sox. Go Sox!
>
My first car was a Hyundai Excel.
>
If I had three wishes they would be to have longevity, prosperity and happiness.
>
My favorite movie is The Social Network.
>
My favorite website is LinkedIn.
>
I never miss an episode of Scandal or Revenge.
>
I can’t go without my iPhone.
>
I’ll never forget how much colder it is in New England, and I’m grateful that I chose
bunch of money ready to invest in “the Facebook.”
Professional >
My first job was as an administrative assistant at a property management
integrated concept in retirement and financial planning. >
massive growth potential over the next decade. >
>
of helping senior citizens. >
Industry growth is dependent upon a long-term commitment from its investors and financial regulators.
>
In shaping appropriate regulation of the reverse mortgage industry, understand that sometimes it costs a little
I’ve never been to China. But I plan to
bit of money now to save a lot of money
change that in the near future.
down the road.
The most memorable moment in my
>
The most important influence
life was when I was elected to the school
technology will have on reverse
board in Portland, Maine. I was 21 at the
mortgages will be the evolution of
time and the youngest elected official in the
the borrower’s application experience. I
state’s history.
envision a time when borrowers will be able
The worst purchase I’ve ever made
to manage their loans online from start to
goes, my best day was the day I sold it. My favorite book is Fish! by Stephen C. Luden, Harry Paul and John Christensen.
I can’t go without my iPhone.
government officials need to
finish.
was a 32-foot Sea Ray and, as the saying
>
I entered this industry because I saw how rewarding it was to make a career out
real estate industry since.
>
The most fascinating thing about the reverse mortgage industry is the
company when I was 16. I haven’t left the
>
Ten years from now, the reverse
If I were a professional athlete, I would be a baseball PLAYER for the Boston Red Sox. Go Sox!
mortgage industry will be a fully
to live somewhere warmer. >
If I could time travel right now, I would be at Harvard University in 2004, with a
when I was 15. >
For success I have sacrificed a sizable portion of my sanity.
that is. It’s a real place! >
If I could trade places with someone
>
The ideal characteristics of leaders in this industry are the ability to be forwardthinking and technology-oriented, and to operate with a sense of integrity.
My favorite movie is The Social Network. reversereview.com
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The Reverse Review February 2014
news
update An Update on the Extreme Summit Otto Ku m ba r
T
he Extreme Summit is designed to get all industry participants to help more seniors. In other words, it’s designed to grow volume. As 2014 gets rolling, this article can serve as an outline to help you decide how to take advantage of this opportunity. With education and outreach, 20 million or more senior households will take a fresh look at reverse mortgages. The HECM program has changed dramatically to be more consumerfriendly and new products that can fit more seniors are rolling out. It’s time to get everyone to take a fresh look. Although the Extreme Summit is intended to be a five-year program, it’s also designed to demonstrate success in the first year. One key to that is getting everyone involved in one of the pilot programs. This article will lay out how you can take advantage of these industry-wide efforts in your pursuit of growth. The Extreme Summit has three major elements in 2014. The 3-to-1 ratio of positive to negative press is designed to turn around product reputation and dispel myths that have plagued the industry for years. Geo-targeting is designed to help everyone in the industry target the greatest areas of opportunity. And finally, our rebranding efforts are
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a focused experiment to drive community understanding of the product. 3:1 Positive Press An effort to generate three positive impressions for every negative impression is already underway. You’ve likely seen the positive stories in The New York Times, Wall Street Journal and other major outlets. These impressions accumulate like water in a bathtub, and they’re needed to overcome years of negative, sometimes inaccurate impressions. You can contribute to the effort by sending positive stories and testimonials to NRMLA. Local papers often appreciate help picking up on a local angle to these national stories. That local angle is one from your customers. Local stories that pick up on these national themes will strengthen positive impressions. You can benefit from this by getting reprints of the major positive stories to share with consumers. Where there are objections from consumers, family members or other critics, you’ll have a wealth of facts and circumstances that can help seniors make a more informed decision.
Geo-Targeting My next article will focus on the opportunity to maximize return on investment. In short, Reverse Mortgage Insights has done detailed analysis that shows which areas have the greatest opportunity for future sales. It will demonstrate where your marketing and sales efforts can pay off the most. In addition, the research found that as penetration increases in an area, it becomes easier to penetrate. You can contribute to this effort by targeting resources on the focused geographies. This should lower your costs and increase close rates. All six major industry firms (AAG, Generation, Liberty, OneReverse, RMS and Urban) support the Extreme Summit financially. They may offer special programs in the target areas. We’ll be monitoring success and finetuning the research, but the initial pilot program will run March through July.
originating Rebranding
i
Learn and Adjust We all want to help more seniors. The Extreme Summit is designed to run pilot programs, study them and adjust. Some of these ideas will likely fail, while others will point the way to a bigger industry. If you’re looking for more information, please contact your representative at one of the sponsoring firms: Urban, RMS, OneReverse, Liberty, Generation or AAG. x
tech underwriting
If you’re in one of these markets, you can contribute by helping us get the story out. The main campaign will be substantial TV advertising, local influencer outreach, local press and seminars. Your local contacts and presence in the community will make a big difference.
*
originating
We’d like to shift from a “need” product to one that is a part of everyone’s financial plan. We also need to start thinking about the younger demographic. The project team’s best crack at striking this “old vs. new” balance should roll out in three pilot markets from May through September.
You can take advantage of the marketing materials that will be produced for the effort. You’ll be able to co-brand with the main messages being delivered on TV. This should also substantially raise awareness and education, making the sales process easier.
update
The Extreme Summit is a multiyear, multimilliondollar educational effort created to help more seniors understand the benefits of a reverse mortgage.
Shifting the industry by creating a new impression of the product is the trickiest of the initiatives. While there’s a strong desire to get away from the “reverse mortgage” or “HECM” name, it would be too expensive to start from scratch. The project team here is balancing how to lean toward the industry we want to create, while keeping grounded in the reality of today’s consumers.
The Extreme Summit marketing team is planning a formal “launch session” in the pilot markets sometime in March to explain the campaign elements and timing to local reverse mortgage lenders, so stay tuned.
HMBS
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spotlight
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The Reverse Review February 2014
EVOLVE
originating
Why Do You Do What You Do? la n c e r. c a n a da
A
s an attendee at November’s NRMLA conference in New Orleans, I found myself asking one question of everyone I had the opportunity to speak with, from a Utah-based HECM advisor in the taxi to the reception at the National World War II Museum, to two local ladies who worked at a small bank in town: “Why do you do what you do?” Although last year’s changes to the HECM program made this question particularly poignant, I have been presenting this inquiry to my colleagues in the industry since 2003. At that time I was doing forward mortgages and selling long-term care insurance. I was constantly confronted with seniors who waited too long to get long-term care and were at a point in their lives when they realized the benefit of taking such protection.
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I found long-term care insurance was one of the easiest sales to make. Clients knew they needed and wanted it, and I was there to sell it to them. There was only one persistent problem: They often did not have the money in their budget for an additional $300 to $500 per month for the insurance. This led me on a search for a product that could help seniors purchase what they felt they needed, especially in regard to health and long-term care. While engaged in this research, I stumbled upon the reverse mortgage product. NRMLA was having an educational forum at the National Hotel in Miami that April, and I made plans to attend. I was interested in the product’s potential but I was also skeptical and wary of its negative reputation. I planned to learn more at the conference, and perhaps glean insight from experienced reverse
professionals by asking, “Why do you do what you do?” My plan was to get to know some of the attendees over drinks. I wanted to connect with them and try to uncover the downside of this reverse mortgage business. But instead, I came away from Miami a little dumbfounded. Everyone I spoke with at the conference was excited to be part of the reverse mortgage business. The people I spoke with relayed stories about how this program had helped so many seniors and how they hoped it could be used to help more in the future. Not long after that, I left behind the forward market and entered the reverse mortgage business. Now fast-forward to NRMLA’s 2013 convention in New Orleans. There have been many changes to the program in just 10 years, but the
g t oin so o theg ur ce
“There have been many changes to the program in just 10 years, but the same question seemed to apply more than ever. At the conference, I asked everyone I spoke with, ‘Why do you do what you do?’ It seems to me that many people have been asking themselves this exact question lately. “
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reversereview.com
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underwriting
You're going to like the way you're counseled. I guarantee it.
*
tech
How does one decide what is best for them? You start by asking yourself why you do what you do. You may find that your answer is not compelling enough, that it’s time to jump ship. Or, you may discover that your conviction to help seniors is as strong as ever, and that motivation is enough to convince you to weather the storm. In the end, the reverse mortgage industry may be better off, as those who remain in the space will have shown their unwavering commitment to the product and its potential, and these people will be the best advocates for their senior clients. x
originating
For some of us, our love of the program and our desire to help seniors is just not enough. We also love our families and the lifestyle that we have come to enjoy, and perhaps we struggle with the idea that our lifestyle may be adversely impacted, at least in the short term, by the recent changes. For others, the changes have simply been too much. Good, hardworking reverse mortgage professionals have exited the business because they’ve decided they no longer have the desire to keep up. For those of us left, we’re faced with the dilemma of whether to hit the brakes or the gas. Some businesses and individuals will embrace these changes and make the necessary adjustments to thrive in this business, while others will choose to move on.
update
same question seemed to apply more than ever. At the conference, I asked everyone I spoke with, “Why do you do what you do?” It seems to me that many people have been asking themselves this exact question lately. Recent changes threaten to make it harder for those in the business to make a living, but despite this, there remains a very real need to provide seniors with access to this useful financial tool. The challenges facing the industry these days have forced many of us to evaluate why we do what we do, so that we can ultimately decide if the answer to this question is pressing and motivating enough to stick with it despite the tough road ahead.
There is a saying, “You can’t change the direction of the wind, but you can adjust your sails to reach your destination.” We must certainly admit that this has been a stormy year for the HECM program, and the winds of change are still blowing steadily. The manner in which we adjust our sails in this tempestuous climate is crucial to our ability to remain in this business.
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The Reverse Review February 2014
originating
Will the New Changes Make Your Job Harder?
Ed wa rd O ’ C o nnor
O
K, so the recent HECM changes make it harder for whom? Do they make it harder for the originator, the client, your professional referral partner, the loan processor or the underwriter? Here’s the good news: You, the originator, control the answer to this question. Let’s evaluate each one. The Underwriter Until the specifics of Financial Assessment are refined and released, it’s hard to tell if the new rules will make the underwriter’s job harder. That said, it is likely that their work will be more complicated at first, especially considering that they will now have to carefully examine borrower files while everyone adjusts to the new Financial Assessment guidelines. Now comes the time when an underwriter who has forward experience will have a leg up. The Processor I am going to go with definite “maybe” here. Processors tend to be
caught in the middle of the loan flow and starting soon, they will have to figure out “what’s what” in a file as the evaluation process changes. Newer processors may have a tougher time trying to evaluate the unknown at first. The Professional Referral Partner No, your partners will not be affected. They will continue to refer business as in the past, but we do need to make sure they are informed about the basics of the new changes. Remember, you just want them to present the idea of a reverse mortgage to their clients as a viable option; you don’t want them pre-screening the client for
qualifications and potential benefits. That’s your job. The Client Well, these changes might be hard on the client for various reasons. They have more to understand, more to be confused about, more paperwork to collect and turn over, and possibly more complicated choices to make. They will also have more work to do with counselors, especially if the counselors expand their sessions to include information about the rule changes. Some will have information from before the program changes, and that may
“The good news is that all the other people involved in the loan process will benefit, and possibly not be too affected, if the LO is properly trained, understands the process and truly details everything to the senior without leaving any room for surprises. If that happens, then the rest of the people involved in the loan process, including the clients, will definitely benefit.” 24
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originating increased in terms of time and effort. We have a little less money to offer the senior and more documentation, which could lead to fewer borrowers. But I say “could,” because it all boils down to how you do your job.
The Originator
Here’s the good news: You control this process of information delivery. It’s true, we might have people who owe too much, but that has always been the case. Back in 2000, the lending limit was only $219,849. We had plenty of people we could not help then because of their debt. That situation will never go away.
*
tech underwriting
The intent of the changes was to shore up the MMI Fund. But in doing so, we have created a process whereby the application stages have greatly
Gone are the days of “no income or credit check.” And while you can still use the money for anything you want, you won’t be able to use it all right away. Now we have a longer explanation process, more documents to collect, more calculations to be made, and more time involved with each file. As of the writing of this article, FHA has postponed the
So, it appears that the qualified LO will have the tougher job, at least initially. The good news is that all the other people involved in the loan process should not be too adversely affected and possibly not be too affected, if the LO is properly trained, understands the process and truly details everything to the senior without leaving any room for surprises. If that happens, then the rest of the people involved in the loan process, including the clients, will definitely benefit. An informed resource, which is what all of us should strive to be, will be of the most service to our senior clientele. x
originating
Now we come to the originator. If you didn’t understand the product in its totality before this past October, please put this article down now and go back to studying the basics. The days of saying to a client, “So, you want a reverse? Please sign here,” passed us quite a while ago. Technically, that should never have happened anyway, but I’m sure it did when the program was simpler. The current changes will eliminate the “sign and drive,” and rightfully so.
January 14 implementation date for Financial Assessment for more evaluation.
update
require further explanation. That said, a knowledgeable originator who has taken the time to understand the changes will be able to explain the program just as before. It may simply take a little longer.
HMBS spotlight
reversereview.com
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The Reverse Review February 2014
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originating
Looking Back to Plan Ahead Mic h a e l J . W e lt ma n
A
s we contemplate the new year’s potential, it’s important to reflect on the previous year in order to create goals for the year ahead. By looking back on the success and failures of our business in 2013, we are able to learn from and take advantage of the knowledge we gained from the mistakes we made or the opportunities we missed.
Take a look at the ones you did and the ones that got away. Each year I prepare a list of organizations or communities that I would like to get in front of. Now is a good time to reflect on how those efforts paid off. If you didn’t schedule any speaking commitments last year, consider making a list of each county you do business in and research opportunities
3 The ratio of applications and closings 3 The cities in which your clients were located 3 The average size of your closed loans 3 The type of loans you closed: Purchase vs. refis, debt-free vs. homes with mortgages, fixed rate vs. LIBOR 3 Your average client: marital status, gender, age If you can set aside some time to assess the nature and success of your past business, you will know more about how you can advance your business in the future. By knowing where you came from, you can find out where you’re going. I wish you a productive and successful 2014. x reversereview.com
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spotlight
Speaking Engagements
Analyze
HMBS
Did you join any clubs or organizations to advance your business in 2013? Did you join the Rotary, the Lions Club, the builders’ association or the local board of Realtors? Did you make regular appearances at their lunches and meetings and share with them how you help folks plan for retirement? If so, the start of a new year is time to evaluate the success of your efforts. How many of your applications and closings came from connections made through the organizations you joined? Conversely, are there other groups you did not join last year that you would like to try? Now is your chance. Decide where your success came from, and where you should spend your effort and membership dollars in 2014.
Finally, closely review the applications you took and the loans you closed. Look at how many applications you collected and how many you closed per month to determine the frequency of your production. Set a goal for your production in 2014, and think about how to enhance your exposure in the coming year to achieve that goal.
underwriting
Clubs and Organizations
Each year in my market there is a home show, an event called Legislative Days at the Capital, a builders’ convention, and an active living senior expo. The home show, hosted by my local builders’ association, hosts an annual parade of homes showcasing builders and new homes in my market. Such events provide an opportunity to get involved, join the committee, meet builders who may be interested in your services, and teach the public about the HECM for Purchase program. If you can venture a little farther from home, there’s also the MBA convention and the Insurance and Financial Planners Convention. Think of all the places you can set up a booth, hand out literature and meet folks who serve customers with similar needs and interests.
tech
Create a spreadsheet listing every loan closed. Make a notation next to each loan indicating where it came from. Potential referral sources might include another mortgage banker, a past client, an attorney, a Realtor, or a friend/ community connection. This will help you determine where to focus your energy and marketing efforts in 2014. Are you spending your resources in places that yield low results? Have you put effort and time into a membership that has not produced any results? In the coming year, should you allocate your time elsewhere?
*
Conventions, Trade Shows and Parade of Homes
originating
Referral Partners
update
Let’s start with a list enumerating the important building blocks of our success last year, and noting how you utilized those building blocks to generate each prospect and close each loan. The list should include referral partners, speaking engagements, civic and association memberships, trade shows, community events and peer groups, with an adjoining column for closed loan production statistics.
to participate in that community in some way. Perhaps the chamber of commerce hosts a community marketing meeting, or a senior center holds classes on topics of interest to its members. Look for meetings for local Realtors, or check out the events at the builders’ association.
The Reverse Review February 2014
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title tip 8
The Work of a Title Officer
By Rick Waaramaki
What sometimes is perceived as proceeding in an overly cautious manner is not the case. Yes, we are protecting the integrity of our title insurance and settlement product, but more importantly, we are protecting and assuring the integrity of our seniors and their assets. That is my accepted responsibility, and I will continue to make that my primary motivation in my duties as a title officer.
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There is a propensity for abuse when a senior holds financial assets. The reverse mortgage industry is sensitive to that issue and sitting at a desk trying to make decisions that affect the final outcome is sometimes a daunting task. Our requirements do not always make the process easy or make everyone happy, but they exist in order to ultimately lead to a successful closing and no postclosing surprises.
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As a title officer, I take the protection of the borrower’s interest in their most important asset very seriously. We are dealing with a senior population that sometimes cannot make decisions without the assistance of others. That includes family members, lender representatives and us as settlement and title personnel. Retaining our role as impartial, neutral agents is not always easy. As a senior myself, it is sometimes a difficult task not to get emotionally involved in particular issues. Of course, we want to close the transaction and get the borrower on their course to financial comfort. However, I take great steps to see that it is done with the
borrower’s best interest in mind.
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With regard to powers of attorney, we are careful to review and determine the various factors that make a power of attorney valid. The prescription of validity varies from state to state as the statutory requirements vary. In addition, and most importantly, we have to determine that the principal was competent at the time of execution of the power of attorney, or in cases where the principal is physically or mentally incapacitated, we require proof of their inability to act. That determination of incapacity is generally set forth in the power of attorney. Absent that, we normally
require a statement from a physician to attest to that fact.
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A great deal of my time as a title officer is spent reviewing trusts, powers of attorney, conservatorships and guardianships. The review process for trusts varies depending on the lender’s requirements with regard to HUD guidelines. Some require a full review, which
includes a determination of revocability and beneficial interests held in the trust, while others require nothing more than a determination of the powers of the trustee.
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The responsibility of a title officer has evolved significantly over the years, from company to company. Certainly, the main tenet of any title insurance employee is to protect the integrity of our product. From the issuance of a title commitment to the completion of a final title, policy can be a simple, cookie-cutter process or a very involved and complicated ordeal involving tough underwriting decisions and risk analysis. In some cases, discussing title insurance can be as exciting as watching paint dry. If you do not think so, just join one of my webinars and try to stay awake.
update
When I was first asked to contribute to this column, I was somewhat hesitant. Attempting to discuss title issues that differ so dramatically from state to state in a single article seemed an enormous task. However, the more I thought about my everyday duties and what I could discuss, the more I thought about how those duties have changed since I became involved exclusively with reverse mortgages.
The Reverse Review February 2014
ADVANCE
tech a presentation layer. Our first nu62 application allowed the loan officer to input some basic values and select products for comparison, which then generated a few simple graphs showing projections over time. Our initial design theme was “simple and clean.” Our sales team was impressed, but they were not satisfied. Now they wanted to use this application to drive a conversation with a real borrower. We circled the wagons with our legal and compliance experts and came up with ways to make the technology work within the rules and guidelines, and we drafted disclosures and launched the application for our sales portal right before NRMLA’s New York conference in March 2013. But our vigorous conversation was really just getting started. Open and Transparent
Closing the Knowledge Gap Walt Cart e r
A
bout 15 months ago, a vigorous conversation started at our company about ways that technology could help educate our sales teams on how the home equity conversion mortgage program really works. It was not a simple problem. We started with the idea of just showing our internal sales team graphs within defined scenarios; this way a homeowner’s use of the various HECM products could be seen unfolding over a range of years and compared in a realistic way. We chose to take advantage of industry forecasts so we would not be injecting any local bias into the output. For example, we used Moody’s Analytics forecast to project interest rates and house price appreciation over time. Working within Excel, we showed our sales team what we had come up with in order to get some feedback. Our sales team’s initial reactions stressed the need for us to take this to another level and provide ways to make some simple inputs for defining custom scenarios—our goal was to really define a particular borrower’s situation. This would allow the loan officer to see and understand how the various offerings compared for that customer. We moved away from Excel and started building data tables and connections to
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The logical next step for us was to “mobilize” the conversation. By NRMLA’s Irvine conference in May 2013, we were able to debut our iPad version of the application. The postconference feedback from our partner community and from our industry peers encouraged us to continue the drive toward transparency and make the leap from educating just our sales teams to educating the much broader stakeholder groups of potential borrowers, their children and their financial planners. So, against the backdrop of the broader changes in the industry and the product mix, we built and deployed nu62.com in November 2013. Our intent for the site was to start an open conversation, but also to put the stakeholder in the driver’s seat. The website houses the equivalent of a doctoral thesis in conversion mortgages (thanks to many contributors and our own “Doctor of HECM,” Colin Cushman), but puts the controls firmly in the hands of the stakeholders so that they can go where they want to get information that is customized for each consumer.
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update
At nu62.com, users are offered four utilization strategies to choose from, with graphs that populate to show how their financial situation would be affected by employing each option. It is incredibly difficult to explain with just words how these complex strategies actually play out over time, but with the technology-enabled visualizations and interactive controls, our stakeholders can quickly and clearly see the value of the conversion mortgage. This allows them to engage with a loan officer from a position of strength and knowledge, and allows our loan officers to confidently move the subsequent conversations into active, engaged discussions of the senior’s personal financial goals. Confident and Ready
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Over the course of nu62’s development, we witnessed firsthand a change in perception of conversion mortgages with all the various stakeholders. This has given us tremendous confidence that through technology, transparency and proper education, conversion mortgages will soon become a mainstream product utilized by the vast majority of seniors to meet a plethora of retirement objectives. We believe only technology and transparency can close the knowledge gap between current public opinion of our loan product and the stellar opposite reality. x
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A BETTER CHOICE!
HMBS
A nationwide title and settlement company servicing the reverse mortgage industry. 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 February 2014
prepare
underwriting Preparing for Financial Assessment, Part I: Surveying Your Readiness With the implementation of Financial Assessment still pending— and concerns about the potential impact of the guidelines still lingering—we’ve asked our expert underwriter, RMS’ Ralph Rosynek, to put together a three-part series to help our readers better understand and prepare for the challenges that lie ahead. Part One of this series is a survey designed to help us get a better understanding of your training preferences and knowledge level. Your answers will help us determine how we can be most helpful to you as you navigate HUD’s new guidelines.
/ Tell us a little bit about yourself: 1. What is your current reverse mortgage role? a. Loan originator b. Support (i.e., processor, underwriter, funder, closer) c. Manager or officer d. Third-party vendor e. Other (please briefly describe)
2. How long have you originated reverse mortgage loans? a. Less than 1 year b. 1-3 years c. 3-5 years d. 5-10 years
To complete this survey, please visit reversereview.com/survey or find a link directly on our homepage.
e. More than 10 years f. I do not originate.
3. Do you originate forward mortgage loans? a. Yes, my primary focus is forward mortgage loans.
We ask that you submit your response by March 10.
b. No, my primary focus is reverse mortgage loans. c. I focus on mortgage loans based on the borrower’s need.
/ Tell us about your reverse mortgage skills and knowledge level:
Ral p h R o s y n e k
H
UD’s Financial Assessment of reverse mortgage borrowers provides additional safeguards designed to ensure the strength and longevity of the HECM product for future senior homeowners. As we move toward the implementation of these new guidelines, we anticipate changes that will require reverse professionals to update their skill set in order to properly adhere to the rules. The survey below is intended to sample our readers to determine the key areas that require further explanation to strengthen your ability to “right fit” prospects for the reverse mortgage loan product. We expect the results will shed light on what is required to help reverse professionals adapt to the new rules. Your participation is critical for this survey to be a success. I urge you to go online today to complete the survey below so that your voice can be heard. Now is the time to assess your skills and knowledge in order to identify the areas that need a little touch-up. Make sure your input contributes to the final results!
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1. With regard to reverse mortgages, your initial training and education was acquired through: (Select one or more responses)
a. One-on-one mentor training b. Webinar training c. Printed materials (i.e., training and underwriting manuals) d. Classroom or course attendance e. Company-provided training f. Self-paced online training g. Other (please briefly describe)
2. With regard to reverse mortgages, your continuing education and training is acquired through: (Select one or more responses)
a. One-on-one mentor training b. Webinar training c. Printed materials d. Classroom or course attendance e. Conference sessions f. Teleconference sessions g. Company-provided training h. Self-paced online training i. Other (please briefly describe)
underwriting 3. When was the last time you participated in a reverse mortgage training or education activity?
5. What is your preferred training and education resource? a. One-on-one mentor training
a. Within the last 90 days
b. Webinar training
b. Within the last 6 months
c. Printed materials
c. Within the last year
d. Classroom or course attendance
d. More than 1 year ago
e. Conference session f. Teleconference session
4. What training and education format was utilized for your last participation?
g. Company-provided training h. Self-paced online training
a. Webinar
i. Other (please briefly describe)
b. Classroom or course attendance
update
c. Conference session d. Teleconference session
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/ Tell us about your education and training needs:
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g. Other (please briefly describe)
upp
ble
f. Printed materials
o rt
e. Self-paced online training
3. Please rate your comfort level with calculating a preliminary borrower debt and expenses to income eligibility.
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2. Please rate your comfort level with reviewing borrower tax returns for income determination purposes.
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1. Please rate your comfort level with reviewing information contained in a credit report.
4. My three greatest needs for additional training are: HMBS
1. 2. 3. 6. Based upon your knowledge of the Financial Assessment information HUD has released to date, what impact do you anticipate the implementation of the final program will have on your volume? 1. Significant impact 2. Some impact 3. Little or no impact 4. Unable to determine
7. From a sales and marketing perspective, what types of resources do you think you will need to assist with the implementation of Financial Assessment? 1. 2. 3. 8. Is there anything further you’d like to add regarding the implementation of Financial Assessment and how it might impact your work?
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5. How familiar are you with the Financial Assessment information HUD has provided thus far? 1. Very familiar 2. Somewhat familiar 3. Not familiar 4. Waiting for the final version before I familiarize myself
The Reverse Review February 2014
CHANGING PERCEPTIONS ABOUT CONVERSION MORTGAGES.
Anyone can talk about the advantages of strategic home equity use, but only nu62 actually demonstrates how your clients can put their home equity to work to support a better retirement. nu62.com is the only public website that provides you the tools SM
to allow your prospective borrowers to plan their optimal use of home equity over time and understand the impact of their utilization decisions. It’s your new resource to open minds about the conversion mortgage – and close more loans.
nu62 is the only financial tool of its kind, and it is available only from SM
Generation Mortgage Company. To learn more, please contact us at 1.800.560.2394, or visit us at www.nu62.com/rr2
©2014 Generation Mortgage Company. 3565 Piedmont Rd. NE, 3 Piedmont Center, Suite 300, Atlanta, GA 30305. NMLS ID#1319. All rights reserved.
62 is a service mark of Generation Mortgage Company. Patent Pending. For state(s) legalese, and restrictions visit www.generationmortgage.com/statelegalese and www.nu62.com | TRR 34nu
learn
secondary A Year of Transition Da rre n S t u m b e r g e r
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originating tech
In December, as the last wave of the front-loading effect was realized, the industry saw a total of $811 million of HMBS issuance among the 10 active issuers, with Urban Financial of America leading the pack at $228 million. This was down slightly from November’s total of $873 million, and the books closed on the fourth quarter at just over $2.4 billion. With no HREMIC deals brought to market in December, January saw two transactions totaling $330 million, with Stifel Nicolaus coming to market with $183 million and Bank of America Merrill Lynch bringing $147 million. I recently returned from the annual Asset Securitization conference, which was
attended by numerous issuers and investors, and the overwhelming questions regarding the industry included expected volumes in 2014; the proliferation of new fixedrate HECM products; and what to expect in terms of non-conforming reverse mortgage origination and securitization. I can’t say I’m overly bullish on any of these, as I expect volumes to be closer to $400 million than $600 million a month, although I hope I’m wrong. That being said, I do think originators are working feverishly to rebrand the product and break into new channels to increase penetration. I also think many originators are hard at work crafting nonconforming guidelines that pick up where the newly designed HECM left off. So again, we shall see how this plays out, but most if not all would agree this is a year of transition. x reversereview.com
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It is HUD’s wish, and in speaking with several senior members of NRMLA, it seems to be the hope, that borrowers will draw upon their remaining line of credit according to darren responsibly over time. We do not “I think originators are want to see a working feverishly to situation where rebrand the product and borrowers break into new channels to are being told increase penetration. I also to draw the think many originators are remaining line hard at work crafting nonof credit at day conforming guidelines that 366 and HUD pick up where the newly feels like they designed HECM left off.” need to put life-
of-loan restrictions in place. We shall see how this plays out.
HMBS
(discount margin) and as wide as 115 DM. The average life profile is a bit longer than the fixed-rate collateral and falls in the low to mid-seven-year context. One key variable with floating rate is how to model the draws given the new restrictions postclosing.
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Given the principal limit factor reduction, the average life extends out to seven years at 100 percent of the HECM prepayment curve and trades at a low to mid-3 percent yield to the investor base. Fixed rate issuance has been running about 15 to 20 percent of the market. Floating-rate securities have traded in a similar range, trading as tight as the low 80s DM
update
everse mortgagebacked securities spreads tightened into the end of January after an expected and dramatic year-end widening. The lowervolume landscape is dominated by the HECM 60 product, which is what originators are calling the new program loans. Fully drawn fixed-rate HMBS have traded as tight as 80 to swaps and as wide as 100 to swaps for 30- to 45day settlement.
The Reverse Review February 2014
spotlight article
Tips for connecting with financial advisors
Breaking Down the Barriers
F i nanc i al plann i ng e xp e r t M i c h a e l K i t c e s t alk s abou t w h a t r e v e r s e o r i g i na t o r s n e e d t o do t o g e t t h r oug h t o t h e ad v i s o r commun i t y. By Jessica Guerin
property, do they want to refinance that into a reverse mortgage?”
w
In month’stehis dition,
Micha el talks Kitces H strat ECM egy.
W
hile many in the reverse space have been talking for years about the need to connect with financial advisors to promote the HECM product as a retirement planning tool, the reality is that capturing their attention is a difficult task. Originators who have focused their efforts on establishing this channel have reported substantial pushback from advisors who, either because of compliance condemnation or personal prejudices, are unwilling to consider the reverse mortgage as a product that could be strategically leveraged for their clients’ benefit. Michael Kitces is one of a handful of financial advisors who is vocal about the benefits afforded by the strategic use of the HECM. Kitces, a partner at Pinnacle Advisory Group and a practitioner editor of the Journal of Financial Planning, is a well-known industry commentator. On his blog, Nerd’s Eye View, he has published articles that dissect the various uses of the HECM, including the standby reverse mortgage strategy outlined
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by Texas Tech’s Harold Evensky and Charles Salter. At NRMLA’s convention in New Orleans last November, Kitces’ panel discussion with Security One Lending’s Shelley Giordano drew a sizable crowd of attendees who listened with rapt attention to what the financial expert had to say about the HECM’s perception in the advisor community. TRR connected with Kitces to get more on his thoughts about how originators can break down the barriers to connect with financial planners. While he admits that the recent changes to the HECM program might, in some cases, make the program less appealing to advisors because the costs are higher, Kitces says the loan is still a valuable financial tool. He says the easiest opportunity for originators is to target those who are already considering traditional financing options. “If people are buying a retirement property anyway, they may want to finance it with a HECM for Purchase instead of using traditional loan financing,” he says. “And someone who has an existing mortgage on their
Kitces says introducing the loan to people who have no debt can be an uphill battle, especially if they have strong feelings about not carrying debt into retirement. Therefore, he says, originators should “start by talking to people who are already [open to] the productive use of debt.” Kitces said this type of consumer is far more likely to consider the benefits of a reverse. “I think it’s a much more appealing conversation for [these consumers], because you’re talking to people who already have an inclination toward using mortgages.” Kitces says the key is explaining to these consumers that they can incur less debt through the use of a HECM. “You can tell the client that this is a lower debt solution. ‘Instead of going out and financing 80 percent of your house, why don’t you just do a reverse mortgage for 30 or 40 percent? You’ll reduce the debt loan on your house, you’ll have more equity that you can use in the future if you need it, and we’ll take all of the payments off of your shoulders because it’s a reverse structure.’ And so, rather than going out and trying to talk to people who have [little to] no debt into incurring more, you should talk to people who already use debt about how to use less.” Kitces says that before originators approach the financial planning community, they should understand the various types of professionals who fall into this category. “The broad acknowledgement is the term ‘financial advisor’ is not actually regulated in any way, so everyone—from investment managers to people who sell stocks to people who sell insurance to people who
spotlight article
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If the industry can overcome this problem and find a way to connect with a new, planning-oriented market segment, Kitces says he thinks the HECM can find its niche in retirement planning. “It’s a very good tool to have in the tool kit [when it comes to making] decisions about managing retirement income.” x
Kitces also says he thinks Financial
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“If you have any interest and desire to work with RAs,
you have to take a consultative approach. You have to function as a member of the team. You should have at least three reasons why reverse mortgages are bad for every [good] reason you put forth. If you can’t demonstrate a balanced view, you will have no chance of doing business with an RA.” reversereview.com
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Kitces says that if originators can break down the barriers preventing advisors from considering the benefits of a reverse mortgage, they get them to see that HECMs have a place in retirement planning. “I think it’s a very good product to have out there,” he says, although he admits that the cost of the loan does concern him.
Kitces says the main issue impeding the growth of the HECM market is the perception problem. “The reality right now is the reverse mortgage industry is trying to shift from being a defensive product of last resort into a planning tool, while the industry has spent years creating a [different] perception,” he says. While he says rebranding will be a challenge, he admits that it needs to happen in order to change market segments. “It’s not just about saying, ‘Oh, well, we’re going to work with a different group of people.’ They have to be willing to work with you, and unfortunately, I think the reverse mortgage space has a very uphill battle right now. I don’t think it’s insurmountable, but it’s uphill.”
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The second group, FINRA-regulated representatives of broker-dealers, might be a better match, Kitces says. Still, there are some hurdles to overcome on this front. “FINRA went through a rather severe crackdown against stock brokers and registered representatives in general combining together the investment products that they sell with mortgage strategies,” he says. “While it’s not banned for registered representatives to work with reverse mortgage professionals, many brokerdealer compliance departments are highly restrictive of it.” Kitces says getting through to the compliance department in this case is key. “You can break those walls down a little by trying to push some education to the advisor
The third group comprises RAs, whose business model includes the general management of a client’s assets. Kitces says this group is fairly well-aligned with the reverse industry in terms of business interests. “Unlike the other groups, which are encouraged to give advice to the extent it sells their products, RAs are more holistically focused around comprehensive advice, because their incentive is to give clients good advice so that they retain those clients.” Kitces says the RA community presents the greatest opportunity, but it also comes with its challenges. “Because they tend to be very client-centric in what they do and what they’re required to do, they are very, very, very wary of salespeople. And so if you have any interest and desire to work with RAs, you have to take a consultative approach. You have to function as a member of the team. You should have at least three reasons why reverse mortgages are bad for every [good] reason you put forth. If you can’t demonstrate a balanced view, you will have no chance of doing business with an RA. RAs are an advisory community, and you have to come to the table as an advisor. If you come to the table as a salesperson, their walls will go up and they will become very defensive.”
Assessment is actually a bonus. “I know the industry is very concerned about Financial Assessment and the potential that people will have most or all of their line of credit crowded out by the fact that they have to wrap their property taxes and homeowner’s insurance into the reverse mortgage if they don’t meet the threshold, but from a planning perspective, I would sell that as a positive,” he says. “The goal at the end of the day is to use a reverse mortgage to free up cash flow, so if the cash flow I free up is the property taxes and homeowner’s insurance that I otherwise pay, I still freed up money.”
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Advisors who sell insurance typically work with fixed annuities and life, health and long-term care insurance. Kitces says these types of consultants are not likely to be great partners for reverse originators, because their business model is transactional, meaning they get paid for the policies and annuities they implement. “While they won’t necessarily be antagonistic toward reverse mortgages, they may or may not be constructive toward them either, because their business model is [based on] selling their products, and reverse mortgage professionals selling theirs wouldn’t really have a lot of synergy.”
and encouraging them to push it up to the compliance department to help them understand what reverse mortgages are and how they actually work.”
update
just purely give advice—uses this label,” he says. “So first and foremost, you need to talk to advisors and understand what their business model actually is, because the sheer terms ‘financial advisor’ or ‘financial consultant’ or ‘wealth manager’ basically say nothing constructive.” Kitces says there are three main types of advisors: those who focus on insurance, those who work for broker-dealers, and registered investment advisors (RAs).
The Reverse Review February 2014
Reaching a Broade Reverse professionals reassess their marketing approach in light of HUD’s new guidelines. By Jessica Guerin
When HUD released new guidelines for the HECM program last fall— limiting upfront draws, reducing principal limit factors and instituting a financial assessment of borrowers— the industry braced itself for yet another wave of change. In effect, the new rules largely cut out the needsbased borrower, whose situation often required access to substantial cash upfront to alleviate debt. Many have agreed that, in order to adapt, the industry will have to broaden its reach to engage a larger portion of the senior population. To accomplish this, some originators are reassessing their marketing approach and creating strategies to help them connect with more financially savvy seniors interested in utilizing their home equity. While this shift in focus may upset volume at first, the good news is that the reverse mortgage remains a flexible financial tool that can be leveraged strategically to support a sound retirement plan, and there are still a substantial number of seniors who could benefit from this loan. The challenge now becomes reaching a broader audience and educating them about the possibilities afforded by a HECM.
Shifting the Focus The old marketing strategy embraced by many lenders in the industry largely focused on helping seniors 38
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tap their equity to access a lump sum of tax-free cash, and this message appealed most strongly to a needsbased audience. Now, lenders are examining how they can revise their message to connect with a more planning-oriented senior. Jean Noble, head of marketing for Urban Financial of America (UFA), says her company has been taking sizable steps to shift its focus. “We’re really trying to change the conversation with the borrower and trying to cast a wider net,” she says. “We’re talking about retirement and about strategies that delay taking Social Security by utilizing home equity.” “We just did an overall upheaval of all of our marketing messages, whether it went to our call center distribution channel or to our feet-on-the-street folks,” Noble says. “We’re redescribing the product’s features so it better relates to customers who are not as needs-based.” AAG’s chief marketing officer, Teague McGrath, says they’ve also revised their marketing materials to account for the new rules. “With the most recent round of changes, we’ve had to go through all of our collateral and update it according to the new PLF changes and utilization guidelines,” he says. “We had to go back and redo everything we were producing to make sure it’s up to date. But that’s not
that unusual for us; we’re constantly updating our materials.” McGrath says the lender is reassessing its message as well. “Our strategy is changing slightly with the new guidelines because they’ve moved the sweet spot in a different direction,” he says. “It’s both a sales and a marketing issue.” But McGrath says aiming for a broader audience isn’t anything new for the lender. “We are such a highvolume driver that we [have always gone] after a broad range of seniors, not one specific target market.” Industry analysts throughout the reverse space agree that HUD’s program revisions demand the industry What the change the way industry is it approaches saying consumers. Shannon Hicks, vice president of We’re really trying to change the industry training conversation with the and technology borrower and trying company to cast a wider net. Reverse Focus, We’re talking about retirement and about says talking strategies that delay about successful taking Social Security professionals who by utilizing home have leveraged equity.” their home equity with a reverse would go a long way to elevate the conversation.
the buzz
jean noble head of marketing, Urban Financial of america
er Audience “I think our new strategy, at least on a macro level, needs to focus on how a reverse mortgage is a flexible retirement planning tool, and how people from all walks of life have utilized a reverse mortgage, not just John and Betty Homeowner, who don’t have much means. We need doctors, we need attorneys, we need nurses, we need CEOs, we need corporate officers who are retired and got a reverse mortgage. People need to know that there are successful individuals [using HECM loans] and that getting a reverse mortgage is not a sign of failure, but quite the contrary: It’s a sign of successful planning and strategizing,” Hicks says. “If I were to choose a tag line, it would be: ‘I’m a success and I chose a reverse mortgage.’”
Pursuing Partner Channels As part of the strategy to reach a broader audience, originators are looking to connect with financial advisors and Realtors to develop referral channels. Successfully partnering with either group, though, is not without its challenges. Hicks, whose blog, HECM World, offers educational videos on topics such as this, says reaching out to financial advisors is an important part of the equation. “Originators need to become skilled in communicating with financial professionals, learning to ask good questions, learning not to
talk about product, but to talk about possible solutions,” he says. “I would be remiss not to mention the need to seek and build relationships with financial advisors.” Noble agrees that connecting with the advisor community is important, but she admits that planners may be slow to come around. “The financial advisor market is totally the future, but that’s going to be a slow and steady race,” she says. McGrath agrees that the advisor community may be tough to access. “I think the financial planning market is very difficult to penetrate for a variety of reasons,” he says, adding that the outreach to Realtors about the HECM for Purchase product might be met with less resistance. “I think the Purchase market is probably a little easier, although smaller. But, certainly, that’s where we have to go.” Noble also says the Realtor community might be more open to working with originators. “The Purchase market will have the highest stickiness factor,” she says. “Because Realtors are more aggressive; they’re used to mortgage
lending; they have a pretty vast client base; they’re in their markets and communities perpetually; and in core areas where people want to move out of the snow in the Northeast and head to Florida or Arizona, there’s a really nice niche for right-sizing for retirement, as we call it.” Noble says UFA has been focusing on developing this niche. “We spent much of last year building out an elaborate platform for the Purchase business. It’s a product that we really, really like. We’re going to launch different educational platforms to educate Realtors, doing webinars and things like that,” she says. “We’re seeing a lot of movement from the Realtors. They are very eager to understand all the nuances of the program.” Hicks points out that there’s another segment of the real estate market that might be interested in a partnership. “I think developers are really a great target market, not just Realtors alone,” he says. “I think it requires a two-pronged approach: builders/developers and real estate professionals.” But Hicks says working this channel successfully requires a 8
RE-MARKETING THE HECM THEN LUMP-SUM CASH ASAP
NOW STRATEGIC FINANCIAL TOOL TO SUPPORT A SECURE RETIREMENT reversereview.com
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+the buzz
The Reverse Review February 2014
What the industry is saying
I think our new strategy, at least on a macro level, needs to focus on how a reverse mortgage is a flexible retirement planning tool, and how people from all walks of life have utilized a reverse mortgage, not just John and Betty Homeowner, who don’t have much means. We need doctors, we need attorneys, we need nurses, we need CEOs, we need corporate officers who are retired and got a reverse mortgage.”
shannon Hicks VP of Communications, NRMLA
I think we have to get away from the DR ‘call now for a DVD’ message and stop talking about the product features. We have to make it more about retirement planning and explain how it’s another [tool] to help build security and longevity into your retirement plans. We’ve got to get there for the credibility for the industry and for all of our brands.”
Teague McGrath director of marketing, AAG
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commitment on the part of the originator. “It’s going to take a certain type of loan officer and a type of skill set to really succeed in that market. They’re going to have to schedule their time around a Realtor’s world. That might mean working weekends or in the evening for open houses; you’re not going to be working typical loan officer hours.”
Promoting Flexibility While everyone seems to agree that the advisor and Purchase markets are important channels to aid in the industry’s growth, many say they’re not the total solution. “I think it’s good that we’re focusing on those markets, but if we get too focused on those two markets alone as our saving grace, I think we’re really missing the boat,” says Hicks, who asserts that the key is really promoting the HECM’s flexibility. “I personally think that’s more important overall than just focusing on Realtors and financial planners as a means to increase our volume. I think those are important, but I think it’s even more important for people to understand the flexibility of the program and for originators to be able to explain that flexibility.” Hicks says this includes the benefits of using a deferred line of credit and deferring tenure payments. “A lot of these things have been overlooked, unfortunately, in recent years due to the popularity of the Standard fixed rate. I believe we were a little near-sighted as an industry, because that was kind of the loan du jour. I think collectively, as an industry, we may have missed opportunities to promote the power and flexibility of the program.”
A Place for the NeedsBased Consumer While it seems inarguable that industry marketing needs to broaden its scope, some assert that there is still room for needs-based clients. “There’s always going to be people who are entering retirement with a significant mortgage balance and with home values, there will be an easy way to extinguish that debt through a reverse mortgage. I think that client will always be there, because baby boomers are always leveraging debt and they’ve done it all through their lives and many of them are still going into retirement with it, whether it’s a mortgage or a home equity loan,” Noble says, adding that this needsbased segment will just make up a smaller percentage of the market than before. “Instead of it being 80/20, maybe it will be 50/50. Who knows?” McGrath agrees. “We’re still seeing a needs-based client; there’s no doubt that there’s still a desperate need for [this kind of loan] out there,” he says, although he adds that fewer of these clients will now qualify, so this portion of the market, while it will still exist, is bound to shrink.
Improving Your Strategy As lenders in the space re-evaluate their marketing approach, many are assessing their TV and Web presence. Noble says UFA made a dramatic shift in its advertising strategy in 2012, retiring its TV campaigns and focusing instead on the Web. “Our Internet platform attracts more sophisticated borrowers who are used to leveraging debt,” Noble says, adding that the company now spends about 70 percent of its marketing
budget on Web-based initiatives. “We’re constantly carving out the demographics, carving out the messaging and testing it. I think in the past we were very successful at deploying a one-size-fits-all marketing strategy. But today, there are so many different customers and there are so many different needs, you have to be very specific in how you’re talking to them. The best way to really do that is online.” Other lenders have also embraced digital advertising. McGrath says that while AAG continues to direct a large portion of its ad spending toward television, it has shifted some of its budget away from TV in recent years. “We’ve undergone a huge digital growth. We used to be 90 percent TV and 10 percent Web, and right now we’re 60 percent TV and 40 percent Web.” McGrath says AAG’s digital ads attract a different type of audience. “We’re targeting a younger demographic online. Baby boomers are increasingly using the Internet to access the information,” he says, adding that Web-generated leads typically have a short lifecycle. “Normally, they’re already educated about reverse mortgages and are now shopping you. They want to find out who has the better offer. So you’ll typically be able to close the loan more quickly with a Web lead, and that can also help business.” As for TV marketing, McGrath says the industry needs to reassess its direct response (DR) messaging. “I think we have to get away from the DR ‘call now for a DVD’ message and stop talking about the product features,” he says. “We have to make it
more about retirement planning and explain how it’s another [tool] to help build security and longevity into your retirement plans. We’ve got to get there for the credibility for the industry and for all of our brands.” But McGrath admits that abandoning this “call now” tactic is tough to do because it does generate measurable results. “Unfortunately, DR marketing works in terms of your response rate. So it’s very difficult for businesses to invest in a brand commercial that doesn’t have a measurable response rate like a DR commercial.” Still, McGrath says if lenders can adopt a long-term view and think six months to a year ahead, these types of branding commercials will eventually pay off.
last year, but now it’s even tougher to buy leads.”
at people, but meeting people and building relationships.”
Originators at Open’s branches are encouraged to follow a specific model. “It’s what I consider a hybrid approach: old-school networking— getting in a car every day or every other day and going to see people— and then backing that up with social media,” Gordon says. He adds that while he doesn’t think social media, including the blogs that Open helps its originators create, will necessarily generate leads out of nowhere, he does think they can help establish credibility. “We use social media for authority. So when someone looks you up, they say, ‘Yeah, he’s connected to a lot of people.’”
Changing the Perception
For other lenders, like Open Mortgage, Gordon also says Open provides its the classic feet-on-the-street model is branches with quality marketing the preferred approach. Scott Gordon, collateral to help them educate CEO of the Texas-based lender, says interested HUD’s recent consumers changes haven’t about the loan. impacted the “Our marketing company’s department strategy, because What the industry is saying provides really the focus has good, quality always been digital and print If we can change to get out and flyers and rack the perception it meet seniors, will help us grow cards, which and talk to them our market. People focus on all in person about need to understand kinds of different that it’s more than a how the loan niches, like bank needs-based solution, that it’s more than could meet their a part-time emergency fix. If they can referrals, HECM specific needs. understand some of the things they can for Purchase “It hasn’t really do with it, it will get us a broader market.” through Realtors affected our scott gordon and things like marketing too founder / CEO, Open Mortgage, LLC that,” he says. “So much,” he says. if you’re a loan “It’s made us officer at a branch glad that we’re and you’re getting out and meeting already on the right track.” people, you have this professional material with you, making you look Gordon says the personal networking good.” strategy that defines this approach remains as relevant as before. “The Gordon suggests loan officers who are multiple channels of old-school trying to build their personal networks networking [introduces] you to a focus on being active and verbal in broad group of people, even though their communities, and refining their it’s more work,” he says. Gordon interpersonal skills. “I would say go adds that companies that relied on read How to Win Friends & Influence purchasing leads are more likely People by Dale Carnegie. It was written to have a tougher time. “When the in the 1930s, but it’s still phenomenally products became more restrictive, it true [in its tips] for getting out and was just another nail in the coffin of talking to people—and not talking buying leads generically. It was tough
+the buzz
Whatever marketing approach they embrace, nearly every reverse professional seems to agree that in order to reach a broader audience, the industry has to elevate the public’s perception of the HECM. “We need to dispel this underserved reputation, the stigma that’s attached to someone who gets a reverse mortgage,” Hicks says. “That’s the most important marketing message we could put out this year. It’s not about the proceeds, it’s not about the mechanics of the program, that doesn’t really matter so much. We need to let people know that this is a tool that can and is being used by successful individuals and people of all walks of life.” Gordon agrees. “If we can change the perception it will help us grow our market. People need to understand that it’s more than a needs-based solution, that it’s more than a part-time emergency fix,” he says. “If they can understand some of the things they can do with it, it will get us a broader market.” McGrath also asserts that gaining the public’s acceptance is key to expanding the market. “The real growth [will happen when] we get beyond that 2 percent and it becomes more acceptable to use a reverse mortgage, when people start talking about what they do with a reverse mortgage… how it makes your retirement comfortable. When that idea becomes more mainstream, that’s when our growth will really occur.” “I actually don’t think we’re that far from it right now. I think we’re as close as we’ve ever been. The changes have given us a round of positive press that we didn’t have before,” he says. “There are so many people out there now talking about it… I think we’re getting there.” x
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The Reverse Review February 2014
last word
reflect
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Doing Great by Doing Good B art J o h n s o n
F
irst, let’s get a couple of things straight: I am probusiness! I am proud to be a capitalist! I believe in the profit motive! I support our political system (although right now I struggle to remember why). I believe that there can be too little regulation, or too much, and that we currently have too much. We govern for the exception (the 2 percent “outliers”), and that is never good. But most fundamentally, I believe in the customer! Generally, when the customer is the primary focus, business will prosper. If not, business will almost certainly fail. When I entered the reverse mortgage business at the beginning of 2003, Financial Freedom’s sales force consisted largely of highly principled and passionately dedicated social worker-types. They were always trying to negotiate a better deal for every customer. Knowing that you can’t lose money on every deal and make it up with volume, we stressed economics and the need to be profitable in order to grow the business to help more seniors. We struck a balance that worked for both borrowers and the company, and drove the geometric growth that created a profitable and valuable entity while benefiting many more senior customers. In our profession, we are profoundly attuned to the financial challenges of aging. On a micro-level, real people need our specialized help to live out their longer lives with security and dignity. On a macro-level, we face the huge societal issue of financing longevity, with fewer and fewer workers forced to pay for more and more retirees. The math simply doesn’t work, and many must access home equity to at least partially self-fund their “golden years.” And this is not about ethics. Ethical behavior is an absolute prerequisite to all industry companies. It is the price of admission. This is about conducting business in such a way as to serve the customer, and in so doing, drive excellent business results. Enter the concept of social entrepreneurship, which responds to complex social issues with a focused mission and real business solutions. Huge unmet needs in an already large and rapidly growing senior market constitute a massive societal problem. The government approach should and will be to try to “fix” Social Security, Medicare and Medicaid, etc. But that
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In our profession, we are profoundly attuned to the financial challenges of aging. On a micro-level, real people need our specialized help to live out their longer lives with security and dignity. On a macro-level, we face the huge societal issue of financing longevity, with fewer and fewer workers forced to pay for more and more retirees. The math simply doesn’t work, and many must access home equity to at least partially self-fund their “golden years.”
requires money that isn’t there. Enter private enterprise. We must offer products and services designed to serve individual customers, so that in aggregate across the entire industry we materially and positively impact the social issue. We must do this because it is right, and because it works. The social mission and the profit motive are not at all mutually exclusive. True, we must maintain acceptable margins to survive and prosper. But if we put the dollars first, and allow finances to dictate what and how we sell to customers, those customers will naturally gravitate to other companies (and take their dollars with them). If we put the customers first, more customers and dollars will follow. Bottom line: The social issue is the business opportunity, and how each of us chooses to respond will dictate success or failure. “Do great by doing good” should be more than a motto; it should be our mantra. x With thanks to Jim Mahoney, who converted me from transactions to people!
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The Reverse Review February 2014
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