The Reverse Review Dec. 14/Jan. 15 by The Reverse Review

New Year, New HECM INSIDE

REVERSE REVIEW THE TH ER

THE

EW VI RE

this issue

RSE REVIEW THE RE EVE VE ER RS TH E

E REVERSE RE W TH VIE VIE W RE SE ER

THE H4P POTENTIAL PG. 20 HOW TO BETTER CONNECT WITH SENIOR CLIENTS PG. 22 + KARIM HATATA SITS DOWN IN OUR HOT SEAT PG. 18

REVERSE review De ce m be r 201 4 / J a n u a ry 2 0 1 5

New FHA guidelines tighten underwriting requirements for reverse mortgage loans. How will your business be affected?

The Reverse Review

December 2014 / January 2015

2 | TRR

Help your clients with higher-value homes unlock more home equity Introducing HomeSafe, a powerful new jumbo reverse mortgage option, exclusively from Urban Financial of America, LLC (UFA) • Loan amounts of up to $2.25 million • No mortgage insurance premium • No initial disbursement limitation • Condos appraised at $500,000 or more do not require FHA approval • Fixed rate, lump-sum draw

Put the power of the nation’s #1 wholesale lender* behind you. • Call 855-77-URBAN (855-778-7226) • www.ufawholesale.com/HomeSafe

UFA154 [Exp 09/2015] * Since December 2011. Based on trailing 12 months’ endorsement volume. Source: Reverse Market Insight. The HomeSafe reverse mortgage is a proprietary product of Urban Financial of America, LLC, and is not affiliated with the Home Equity Conversion Mortgage (HECM) program. For business and professional use only. Not for consumer distribution. NMLS #2285 (http://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/2285); Corporate Office: 8909 South Yale Avenue, Tulsa, OK 74137. Not all products and options are available in all states. Terms subject to change without notice. ©2014 Urban Financial of America, LLC. All Rights Reserved. CALIFORNIA BUSINESS NAME: URBAN FINANCIAL GROUP OF AMERICA, LLC. NEBRASKA BUSINESS NAME: REVERSE IT! LLC. reversereview . com

8 TRR | 3

The Reverse Review

December 2014 / January 2015

From the Editor

A note from jessica guerin

For many in the industry,

2015 will start with a bang. Reverse professionals across the country will likely hit the ground running after the New Year as they work to prepare for the March implementation of Financial Assessment. FHA’s new underwriting guidelines will no doubt impact HECM operations, and professionals on all sides of the business will need to review the new guidelines and modify their processes accordingly. While it may be a tough adjustment at first, reverse veterans are no strangers to change and have proved to be resilient. This time, I’m certain, will be no different.

Senior Publisher

Reza Jahangiri Publisher

Erik Richard Editor-in-Chief

Jessica Guerin Creative Director

Traci Knight Copy Editor

Kersten Deck Marketing Director

Alycia Greer

Printer The Ovid Bell Press Advertising Information phone : 630.207.3882 email : jessica@reversereview.com Subscriptions email : information@reversereview.com

{ J essica G uerin }

Editorial Content email : jessica@reversereview.com

Editor-in-Chief

Share your ideas with your colleagues and be a part of the solution. Email jessica@reversereview.com to get involved.

© 2014 Reverse Publishing, LLC All rights reserved. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, Reverse Review Publishing, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 3800 West Chapman Ave., Orange, CA 92868

Feedback is very important to us here at The Reverse Review. Send us your thoughts on this issue or comment online for a chance to see your perspective in print.

In the meantime, I wish you a calm and peaceful holiday season. Take some time to enjoy your loved ones and recharge your batteries before work picks up in 2015.

Meet the Team

ay ec st onn c

Feedback

For many in the space, maybe the toughest part of Financial Assessment has simply been waiting for it. Now that the other shoe has finally dropped and we know what we’re up against, perhaps the industry as a whole can move forward and embrace the change. Yes, underwriting standards will be stricter and the process will be more cumbersome, but there are still thousands of seniors out there who could use our help. The method might have changed slightly, but there is still great work to be done.

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4 | TRR

table of contents

TRR 12.14 / 1.15 22

| Originating

How to Effectively Communicate With Your Senior Borrower Tips for better connecting with your clients

IN THIS ISSUE... 25 Spencer Shiffman Origination

Carol Ann Dujanovich

| Spotlight

New Year, New HECM A handful of reverse professionals share their goals for 2015.

Industry News

Headlining stories of the past month Reverse Mortgage Daily

| Stats

The industry’s latest stats and rankings

NRMLA News

THE about the association’s current Read initiatives.

26 Scott Sambucci Tech

Let’s educate ourselves on the new rules so that we can continue to help our seniors. George Lagarde

Karim Hatata Senior counsel at Ocwen Financial Corporation

29 Aaron Anderson Tax Tip

| Originating

The H4P Opportunity VIEW THE REV E RE ER RS SE VE RE RE VI HE

Why we need to double up on our New Year, New HECM efforts to promote the HECM for INSIDE Purchase this issue

H4P

14 |

Embracing the New Financial Assessment Program

RSE REVIEW THE RE EVE VE ER RS TH

HOW TO BETTER CONNECT WITH SENIOR CLIENTS PG. 22 + KARIM HATATA SITS DOWN IN OUR HOT SEAT PG. 18

| Hot Seat

| Last Word

Reverse Market Insight THE H4P POTENTIAL PG. 20

E REVERSE RE W TH VIE VIE W RE SE T ER

11 |

| Roundup

A collection of recent facts and surveys affecting the reverse market

The latest developments in companies across the reverse space

REVERSE REVIEW THE TH ER

Movers and Shakers

EW VI RE

09 |

Mark O’Neil

REVERSE review

Let’s talk about how we can work together to promote the H4P.

Marty Bell

p.20

DE C E M B E R 2014 / JA NUA RY 2015

Financial Assessment Is Here

VIEW THE REV E RE ER RS SE VE RE RE VI HE

THE H4P POTENTIAL PG. 20 HOW TO BETTER CONNECT WITH SENIOR CLIENTS PG. 22 + KARIM HATATA SITS DOWN IN OUR HOT SEAT PG. 18

New Year, New HECM INSIDE this issue

New FHA guidelines tighten underwriting requirements for reverse mortgage loans. How will your business be affected?

“This last program change further solidifies the concept of a ‘new reverse mortgage,’ the one that industry leaders have been touting as a way to engage the public in a new conversation about the loan… It’s a chance for lenders to revitalize the dialogue about HECMs and potentially expand the market.

cover How Financial Assessment will impact the reverse space

RSE REVIEW THE RE EVE VE ER RS TH

Jessica Guerin

DEC. 2014 / jan. 2015

New FHA guidelines tighten underwriting requirements for reverse mortgage loans. How will your business be affected?

@ Want the online version? reversereview.com/magazine

E REVERSE RE W TH VIE VIE W RE SE T ER

| Feature

REVERSE REVIEW THE TH ER EV

EW VI RE

feature

THE

REVERSE review D E C E M B E R 2 0 1 4 / J A N U A RY 2 0 1 5

New FHA guidelines tighten underwriting requirements for reverse mortgage loans. How will your business be affected?

reversereview . com

8 TRR | 5

The Reverse Review

December 2014 / January 2015

contributors

John K. Lunde

Marty Bell

John K. Lunde

Marty Bell

Karim Hatata

12 | Stats g

14 | NRMLA News g

18 | Hot Seat 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

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

Karim Hatata is senior counsel for originations compliance at Ocwen Financial Corporation. Prior to this role, Hatata was compliance leader for Liberty Home Equity Solutions. He has worked as an attorney and compliance professional in the mortgage industry for more than 10 years and is licensed to practice law in Connecticut and New York. Hatata holds a J.D. degree and a bachelor’s degree in psychology from Hofstra University.

Mark O’Neil

Carol Ann Dujanovich

Spencer Shiffman

20 | The H4P Opportunity g

22 | How to Effectively Communicate With Your Senior Borrower g

25 | The Benefits of Lead Managament g

Karim Hatata

Mark O’Neil

Carol Ann Dujanovich

Mark O’Neil is a regional account manager at Reverse Mortgage Funding, LLC. He has worked in the reverse mortgage field for the past 13 years, serving in roles as a closing agent, originator and wholesale account representative. While working for MetLife, O’Neil was the first account executive certified to deliver HECM courses to financial planners. 919.494.2255 moneil@reversefunding.com

Carol Ann Dujanovich is the underwriting director for Proficio Mortgage Ventures, a wholly owned subsidiary of Proficio Bank. Prior to joining Proficio, Dujanovich was AVP/wholesale operations manager for Urban Financial Group. With more than 36 years in the mortgage industry, Dujanovich brings a wealth of knowledge and experience to the reverse mortgage arena.

Spencer Shiffman joined LeadMailbox.com in 2006. For more than 8 years, he has handled all sales for the company. Shiffman’s sales background spans over 30 years, starting at age 20. He is an avid golfer in his spare time.

Spencer Shiffman

Scott Sambucci

Aaron Anderson

Ralph Rosynek 6 | TRR

Scott Sambucci

Aaron Anderson

Ralph Rosynek

26 | Rethinking HECM Processing g

29 | Tax Tip: Does “Who Paid” Matter? g

36 | Financial Assessment Checklist g

Scott Sambucci is a VP of customer success and sales at Blend, a Silicon Valley software company focused on the residential mortgage industry. Previously, he was an executive at CoreLogic and the chief operating officer of Altos Research. Sambucci has authored several white papers and articles, and has been featured on CNBC, NPR, The Financial Times, the Wall Street Journal and HousingWire.

Aaron Anderson is the CEO of Accumatch, a property tax servicing company dedicated to servicing tax portfolios across the country through the use of automation. Since Anderson joined Accumatch in 2013, the company has rolled out multiple new product offerings, including a tax lien tracking database, an online tax payment approval module and a tax certificate program. Anderson has spent his career focused on improving customer service, automation and accuracy-driven processes. aaron.anderson@accumatch.com

Ralph Rosynek is currently a reverse mortgage consultant and seasoned HECM DE underwriter. He has written for The Reverse Review since the magazine’s launch as an underwriting column contributor and has held many leadership roles in the reverse mortgage industry for the past 15 years. rrosynek@hecmondemand.com

contributors George Lagarde

38 | Embracing the New Financial Assessment Program g George Lagarde has been in the mortgage industry since 1984. The former owner of New York-based Island Mortgage Consultants Inc., Lagarde now works with The Federal Savings Bank in Las Vegas. He holds a mortgage agent’s license in Nevada and loves to help seniors evaluate their specific situations and decide whether a HECM reverse mortgage is a viable solution for them. His motto: Changing lives, One Senior at a Time.

George Lagarde

page 38 -

Do yo have wu it take hat s?

Be a part of the conversation.

comments we loved

“I urge HECM loan officers to seek out all available educational opportunities between today and March 2 to learn as much as possible about FHA’s new directive… Like the changes of last year, we need to embrace these recent regulations in order to conquer whatever obstacles they present.”

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

—George Lagarde

Want tips to help you communicate with senior clients? Check out some ideas on page

22.

We asked. > You answered. pg. 30

What are your professional goals for 2015?

Warm wishes for the Holiday Season.

.............. and a prosperous New Year from everyone at QuickCert!

Thank you for adding us to your HECM counseling list in 2014.

888-383-8885 ops@quickcert.org reversereview . com

8 TRR | 7

The Reverse Review

December 2014 / January 2015

SETASIDES

LOSS DRAFT

LACK OF EXPERTISE

CHANGING DEMO FINANCIAL LIABILITY ELDERLY NEEDS

HUD RULES

OCCUPANCY

ERRORS!

REPAIRS

COMPLEXITY

REPUTATION DEFAULT

ISSUES WITH COMPLIANCE GNMA REPORTING

NEW TALENT

TRAINING SERVICING PLATFORM

FRAUD PREVENTION

REGULATORY CHANGES

Bypass the pitfalls. Rely on the most experienced team, completely dedicated to reverse mortgage servicing. Find out more at avoidthemaze.com Or contact us at (844) 228-2101. 8 | TRR

PRODUCT CHANGES

movers & shakers read about the latest developments in companies across the reverse space.

have a company update you would like to see published?

Celink Hires Compliance and Reverse Mortgage Experts Celink has hired two additions to its reverse mortgage servicing team. Debra Taylor will serve as a compliance officer and Becky Cotter will serve as project manager for the information technology department. Taylor will oversee Celink’s state licensing, manage the internal quality control process, and will be responsible for overall compliance with servicing regulations, while Cotter will assist with the continued development of Celink’s reverse mortgage servicing platform, ReverseServ.

Accumatch Hires Dennis Gassoway Property tax servicer Accumatch has hired Dennis Gassoway as director of national sales. As such, Gassoway will lead the company’s continued initiative to grow its property tax services nationwide. Gassoway brings 28 years of property tax servicing knowledge to Accumatch. He has specific experience in property tax servicing, reverse mortgages, tax certificates, and most importantly, an unrelenting focus on customer service and product excellence.

ReverseVision Announces New Title Integration with Mortgage Information Services

email it to jessica@reversereview.com

ReverseVision has announced that title servicer Mortgage Information Services (MIS) has integrated with RV Exchange (RVX)—ReverseVision’s flagship reverse loan origination system (RLOS) platform. Reverse mortgage lenders use RVX for the full lifecycle of the loan—from initial proposal through application, underwriting, closing and postclosing. Now, lenders who need to order titles from MIS will be able to trigger the request with the click of a button. Not only will MIS receive the request electronically, but also as each step of the title process is completed, the loan record in RVX will be automatically updated. The MIS integrated title service is now available to all RVX users. “Partnering with vendors like MIS empowers our clients to improve their workflow and be more successful,” said ReverseVision President and CEO John Button.

Reverse Mortgage Funding Names Jean Noble Chief Marketing Officer Reverse Mortgage Funding (RMF) has hired leading marketing strategist Jean Noble as its chief marketing officer. In this role, Noble will report to RMF President David Peskin and will develop and lead all national marketing efforts. Noble has a strong history in the reverse mortgage and financial services industry, with broad experience across all marketing disciplines. By implementing thorough training programs, incorporating new technology and optimizing workflows, Noble has improved conversion

rates and reduced costs for multiple companies. She will leverage that experience as RMF finalizes its national sales team and expands its initiatives to garner additional market presence. “We are thrilled that Jean has chosen to join the RMF team,” Peskin said. “She is a true talent who possesses a very forward-looking view on marketing strategy. We were looking for someone who, through skill and tenacity, could make an impact on the strong momentum we have built since our founding in 2012.” Prior to joining RMF, Noble served as director of marketing and call center sales at Urban Financial of America. Before that she consulted for MetLife Bank was was executive vice president at Senior Lending Network.

FirstBank Hires Reverse Wholesale Manager FirstBank has hired Bob Garczewski as its HECM correspondent manager. As such, Garczewski will head the bank’s wholesale reverse division and affinity partnerships, leveraging its internal account executives on the forward side, along with current third-party correspondent accounts, to grow the bank’s reverse network. FirstBank is a 107-year-old FDIC-insured bank and is dedicated to the reverse mortgage industry. It is looking to recruit and hire reverse mortgage professionals nationwide.

reversereview . com

8 TRR | 9

The Reverse Review

December 2014 / January 2015

You Deserve Life, , and ... Innovative Technology When you partner with Liberty, you gain access to the information you need 24/7. We are consistently investing in technology to help you grow your business.

Discover Liberty’s Technology • User Friendly Portal for Loan Docs • Comprehensive Partner Website • Industry Updates & Product Alerts • Web-based Training & Marketing

Learn more, call 866.871.1353 www.LibertyHomeEquity.com/partner LenderSupport@LibertyHomeEquity.com

© 2014 Liberty Home Equity Solutions, Inc. 10951 White Rock Road, Suite 200, Rancho Cordova, CA 95670. NMLS # 3313 www.nmlsconsumeracces.org, (800) 218-1415. For a complete list of licenses, visit www.libertyhomeequity.com/licensesnmls 10 | TRR

industry news

Dec./Jan. Edition an update of this past month’s breaking news

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

headlining news 1.

FHA Keeps Loan Limits Unchanged for 2015 FHA is keeping reverse mortgage loan limits unchanged through 2015, with maximum claim amounts set to remain at $625,500 based on “property value, borrower age and current interest rates,” according to the agency. Loan limits for HECMs have been elevated for several years, with the heightened $625,500 maximum claim amount applying at 150 percent of the national conforming loan limit of $417,000. The new limits will be in effect for case numbers assigned from January 1, 2015, through December 31, 2015. FHA has set “floors” and “ceilings” for forward loan amounts depending on region and whether an area is deemed “high cost” or “low cost.” The national lending limit of $625,500 will remain, as well the loan limits for the highest and lowest cost areas.

//December 5, 2014

2. Senate Names Former

CFPB Exec New HUD Secondin-Command Nani Coloretti, a former CFPB CEO, has been named the deputy secretary of HUD. The Senate confirmed President Obama’s nomination of Coloretti, who is now the second most senior official at HUD. As deputy secretary, Coloretti will manage the department’s day-to-day operations, including a $45 billion annual budget and approximately 8,500 employees. HUD is undergoing “significant change”

as it works to support the nation’s housing recovery and improve the way it serves communities nationwide, Coloretti said. “I’m looking forward to working with the department’s outstanding employees and continue a data-driven approach to help make HUD’s operations run as efficiently as possible,” she said. Prior to joining HUD, Coloretti served as an assistant secretary at the U.S. Department of the Treasury, where she advised the secretary on the development and execution of the department’s budget, strategic plans and the internal management of the agency and its numerous bureaus. In July 2012, President Obama appointed Coloretti as a member of the Government Accountability and Transparency Board. Following the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, Coloretti helped establish the new CFPB as acting chief operating officer.

//December 3, 2014

3. Awareness Grows

for Reverse Mortgage Retirement Benefits The Center for Retirement Research at Boston College has been garnering considerable press for a recent report on how retirees can supplement their assets with home equity. The report recommended that seniors consider using a reverse mortgage or downsizing to a smaller residence. A Morningstar article about the report included commentary from Alicia Munnell, director of the Center for Retirement Research.“[Reverse mortgages] are not a last-ditch-effort product,” Munnell said. “But for those for whom it’s right or who can afford

it, it will be a very valuable product over time because people are going to need to add their home equity to other sources of retirement income to get by.” Munnell, who also has a book coming out titled Falling Short: The Coming Retirement Crisis and What To Do About It, even likened reverse mortgages to annuities in the role they play in terms of asset allocation. “So, if you take [a reverse mortgage] in terms of a steam of income over the rest of your life, it is very much like an annuity in terms of how the payments seem to you,” Munnell said. “They continue for as long as you live, and then the money is paid back out of the sale of your house. So, it’s a stable, predictable source of income that would allow you to take risks with the other part of your portfolio.”

//December 9, 2014

CFPB Sets Sights On Mortgage Rulemaking Changes, Agenda Reveals Revisions intended to streamline and improve certain mortgage procedures are among the CFPB’s top priorities in 2015. The bureau’s fall 2014 rulemaking agenda revisits its July proposal to amend Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The proposal, now in the final rule stage, aims to simplify the process for financial institutions and gain more insight into consumers’ access to mortgage credit. The proposal also suggested revising its regulations to bring about changes to institutional and transactional coverage, modifications of reporting requirements, and clarifications of other existing regulatory provisions.

//November 25, 2014 reversereview . com

8 TRR | 11

The Reverse Review

December 2014 / January 2015

stats September 2014

Top Lenders Report

12345 American Advisors Group

Endorsement

RMS/S1L

Endorsement

454

1,208

One Reverse Mortgage

Liberty Home Equity

Endorsement

443

314

Lender Endorsements

UFA

Endorsement

297

Lender Endorsements THE FEDERAL SAVINGS BANK

PROFICIO MORTGAGE VENTURES LLC 143

SENIOR MORTGAGE BANKERS INC

LIVE WELL FINANCIAL INC

107

SOUTHERN TRUST MORTGAGE LLC

GENERATION MORTGAGE COMPANY

100

MORTGAGESHOP LLC

CHERRY CREEK MORTGAGE CO INC

100

VANGUARD FUNDING LLC

MAVERICK FUNDING CORP

ATLANTIC BAY MORTGAGE GROUP LLC 10

NET EQUITY FINANCIAL INC

CIRCLE MORTGAGE CORPORATION

UNITED NORTHERN MORTGAGE

AMERICAN PACIFIC MORTGAGE

M & T BANK

360 MORTGAGE GROUP

SUN WEST MORTGAGE CO INC

FULTON BANK NA

NATIONWIDE EQUITIES CORPORATION 41

GATEWAY BANK MORTGAGE

HIGH TECH LENDING INC

GATEWAY FUNDING DIVERSIFIED

OPEN MORTGAGE LLC

EVOLVE BANK & TRUST

GMFS LLC

YADKIN VALLEY BANK AND TRUST

VIP MORTGAGE INC

FIRSTBANK 32

SIMONICH CORPORATION

MCM HOLDINGS INC

PACIFIC RESIDENTIAL MORTGAGE LLC 7

REVERSE MORTGAGE FUNDING LLC

ADVISORS MORTGAGE GROUP LLC

220

TOWNEBANK 28 PLAZA HOME MORTGAGE INC

FIRSTAR BANK

PEOPLES BANK

UNITED SOUTHWEST MORTGAGE CO 18 UNIVERSAL LENDING CORPORATION

SUN AMERICAN MORTGAGE CO

GEORGETOWN MORTGAGE

Brought to you by:

SUCCESS MORTGAGE PARTNERS INC 16 NEW AMERICAN MORTGAGE LLC

VAN DYK MORTGAGE CORPORATION 14 MONEY HOUSE INC

HOMEOWNERS MORTGAGE ENT

AMERICAN NATIONWIDE MORTGAGE

12 | TRR

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

stats HECM Endorsement Stats Through September 2014 INDUSTRY SUMMARY

Trailing Twelve Month Endorsements

UNITS CHG%

-8.23%

15.64%

2,734

8.92%

2,594

-5.12%

2,789

7.52%

2,265 39.04%

5,054 19.68%

2,614

-6.27%

2,545 12.36%

5,159

Wholesale Endorsement Growth

15.93%

2,358

-9.79%

2,256 -11.36%

4,614 -10.56%

2,362

0.17%

1,806 -19.95%

4,168

2,651 12.24%

1,842

1.99%

4,493

7.8%

2,413

-8.98%

1,747

-5.16%

4,160

-7.41%

Total Endorsement Growth

2,319

-3.9%

1,772

1.43%

4,091

-1.66%

1,944 -16.17%

1,306

-26.3%

3,250 -20.56%

2,248 15.64%

1,514 15.93%

3,762 15.75%

4,000

2,000

15.75%

10 11 12 1 2 3 4 5 6 7 8 9 Wholesale *Numbers Represent Months

* Figures Above Reflect Change from Prior Month

4,223

-16.5%

1,629

-7.33%

4,685 11.92%

1,951 16.41%

29,536

TOT

4,186

-5.95%

1,676

22,309

-9.86% 2.08% -9.67%

51,845

70%

{ figure }

60% 50%

fixed rate percentage

40% 30% 20%

9/1/14

8/1/14

7/1/14

6/1/14

5/1/14

1/1/14 1/1/14

4/1/14

12/1/13 12/1/13

3/1/14

11/1/13 11/1/13

2/1/14

10/1/13 10/1/13

8/1/13

7/1/13

6/1/13

5/1/13

4/1/13

3/1/13

2/1/13

9/1/13

arm

{ figure }

1/1/13

12/1/12

11/1/12

10/1/12

10% 9/1/12

hecm endorsement trends

TOTAL

2,510

Retail Endorsement Growth

Retail

WHOLESALE

6,000

fixed

$1,200.0 $1,000.0

$600.0 $400.0 $200.0

9/1/14

8/1/14

7/1/14

6/1/14

5/1/14

4/1/14

3/1/14

2/1/14

8/1/13

7/1/13

6/1/13

5/1/13

4/1/13

3/1/13

2/1/13

1/1/13

12/1/12

11/1/12

10/1/12

$0 9/1/12

in the millions

hecm endorsement

$800.0

initial principal limits

RETAIL

reversereview . com

8 TRR | 13

The Reverse Review

December 2014 / January 2015

nrmla news Miami Beach

Additional HECM Program Actions for Coming Year

“You are now in the only room in America in which everyone understands what you do,” said NRMLA President and CEO Peter Bell in his opening remarks at the association’s 2014 annual Meeting & Expo in Miami Beach. The comment was both an acknowledgment of industry camaraderie and a call to action. In the year since last year’s meeting, the 500-plus reverse mortgage professionals gathered at the beachside Loews Miami Beach Hotel had to share patience and adaptability as HUD implemented changes as a result of the Reverse Mortgage Stabilization Act—which, according to the department’s senior policy advisor, Karin Hill, “gave us the ability to control risk.” Over the same time, the Extreme Summit test pilot alerted us that we need to do a whole lot more educating. In an opening general session, leaders of four companies discussed the “reset” required by the changes. AAG’s Reza Jahangiri expressed concern about “mass marketing on day 366” as we approach the 13th month following implementation by HUD of first-year draw limitations. During a HUD staff presentation, Hill said, “We are starting to see results from the changes. They are moving us in the right direction. We certainly hope borrowers will stick with the lower withdrawal patterns and not be encouraged to take out the balance of funds.” Much of the three-day conference focused on methodology of implementation of the changes, as well as sales and marketing approaches inspired by them. Financial planner Rick Miller of Sensible Finance drew attention to unexpected costs to aging Americans of their adult children, a factor generally not considered in retirement planning. Michael Gordon of BNY Mellon, which has recently entered the market, showed how even the moderately wealthy who have responsibly saved can benefit from utilization of home equity in their retirement planning. Chris Herbert of Harvard’s Joint Center for Housing Studies presented results of a recent report on senior housing that showed vastly increasing mortgage debt amongst a sector that historically has paid off these obligations earlier. Evaluating the summer-long Extreme Summit effort in Denver, Philadelphia and Seattle, Otto Kumbar of Liberty Home Equity Solutions showed that the media buys have not moved the perception needle among consumers, but national and local press have turned much more favorable in the wake of the product alterations. A brainstorming session on the future of this effort called for an industrywide, boots-on-the-ground educational effort. Over the course of the conference, loan officers were able to obtain all eight of their annually required NMLS continuing education credits. CRMPs, representatives of community banks and new NRMLA members gathered to discuss with staff how the association can best serve them. The beautiful and roomy Expo Hall looking out on the beach remained crowded and chatty. (Some companies built exhibits almost homey enough to qualify for reverse mortgages.) Everyone seemed to relish the business on the South Beach streets and the variety of fine food nearby, and the background music for the week was predominantly Cubano. In her keynote address, HUD Deputy Assistant Secretary Kathleen Zadareky thanked NRMLA for the leadership role it played over the past year and a half during the time of change. She then told the gathering, “My team is committed, I am committed and the secretary is committed to the HECM program.”

At NRMLA’s Annual Meeting, HUD Deputy Assistant Secretary for Single Family Housing Kathleen Zadareky said the program changes “are probably not quite over yet. We have a few more things to finish.” Additional actions in progress include:

Distinguished Service // NRMLA’s Annual Meeting in Miami Beach was

Upcoming Events

Industry Looks Ahead, HUD Reconfirms Commitment

an opportunity to honor those individual members who have provided unique service to the association for the benefit of all the member companies over the past year. Distinguished service awards were presented to outgoing Board co-chair George Lopez of James B. Nutter & Company as well as to four members—Dan Hultquist (Generation, now with Open Mortgage), Lorraine Geraci (UFA), Craig Barnes (RMF) and Judd Lyman (Liberty)—who collaborated on restructuring and administering the CRMP Ethics training workshop. 14 | TRR

* Publishing and implementing a revised HECM financial assessment and property charge set-aside guide * Addressing policies regarding treatment of ineligible nonborrowing spouses * Issuing proposed rules codifying all regulatory changes made under HECM Stabilization Act authority * Drafting and publishing a new HECM Handbook to clarify and simplify rules

Professionals Achieve CRMP Status NRMLA congratulates loan officers Rick Sweeney and Beth Patterson for achieving the status of Certified Reverse Mortgage Professional. Rick is a loan originator with Open Mortgage in Incline Village, Nevada, while Beth is based in St. Paul, Minnesota, and works for Reverse Mortgages SIDAC, a division of Greenleaf Financial, LLC. Eighty-eight individuals have now earned the CRMP designation since mid-2010.

March 26-27, 2015 New York City, NRMLA Eastern Regional Meeting & Expo November 16-18, 2015 San Francisco, NRMLA Annual Meeting & Expo

nrmla news

In its 2014 Annual Report to Congress on the Financial Status of the FHA Mutual Mortgage Insurance Fund, HUD reported an impressive two-year gain of $21 billion, from a 2013 negative value of $16.3 billion to a 2014 positive value of $4.8 billion. In his foreword, Housing Secretary Julian Castro wrote, “This year’s report shows FHA has successfully strengthened the fund while continuing to deliver on its core mission of serving responsible buyers.” The increased economic value now represents a capital reserve of 0.41 percent, though a 2 percent reserve is required by law. In last year’s report, HUD estimated the reserve would return to 2 percent by next year. It now estimates reaching 1.5 percent in 2015 and continuing to grow subsequently as long as there is not another recessionary event that diminishes home values. “The performance of FHA’s portfolio in FY 2014 continued trends seen in recent years, as newer books of business continued to vastly outperform those insured in prior years,” the report says. “Active loans that were endorsed in FY 2006 through the first half of FY 2009 continued to place substantial strain on the MMI Fund while books of business since 2010 show progressively better performance for each origination year.” The report states that the “HECM portfolio is facing less positive momentum than the forward portfolio.” While the forward portfolio finished with an economic value of more than $6 billion, the HECM portfolio’s economic value declined to negative $1.2 billion. HUD states that changes made to the HECM program late in 2014 show improvements, as was also reported by HUD staff at NRMLA’s Annual Meeting. They expect 2015 improvements (including Financial Assessment) will also contribute to improved economic value. “FHA will continue to monitor progress of the actions taken to date and continue to make further adjustments to the program as needed, just as we have in 2013 and 2014.”

Brought to you by marty bell: national reverse mortgage lenders association

Presenting NRMLA 2015 Board of Directors

• Paul Fiore American Advisors Group

Election of the NRMLA Board of Directors for 2015 took place at the association’s annual business meeting, held last week in conjunction with the Annual Meeting & Expo. The following individuals will serve as directors for one-year terms:

• Michael Gordon BNY Mellon

• Joe DeMarkey Reverse Mortgage Funding—cochair

• George Lopez James B. Nutter & Company

• Reza Jahangiri American Advisors Group—co-chair • Sherry Apanay Urban Financial of America, LLC—vice chair • Mark Browning HomeChex—vice chair • Jason McNamara Celink—treasurer • Steve McClellan United Financial of America, LLC—secretary • Jeff Birdsell ReverseVision • Nick Buscaglia M&T Bank • D. Scott Clarke Reverse Mortgage Solutions, Inc. • Jim Cory Live Well Financial, Inc. • Colin Cushman Generation Mortgage Company • George Downey Harbor Mortgage Solutions, Inc.

• Dave Hickey Nationstar/Champion Mortgage • Michael Hild Live Well Financial, Inc. Otto Kumbar Liberty • Home Equity Solutions, Inc.

• Chris Mayer Longbridge Financial, LLC • Bob Sivori Reverse Mortgage Funding, LLC • Gregg Smith One Reverse Mortgage, LLC • Mary Smith Liberty Home Equity Solutions, Inc.

news from nrmla

On the Docket: MMI Fund Sees Strong Two-Year Recovery

NRMLA member

In addition, the following individuals, who have all served previously as chairmen of the association, will serve as ex officio members of the Board: • Sarah Cavanaugh 1st Reverse Mortgage USA Bart Johnson Premier Home Equity • James Mahoney Celink • Joe Morris Open Mortgage, LLC • John Nixon Bank of America • Jeff Taylor Wendover Consulting

Consumer Website Continues Surge

4 The number of unique visitors to NRMLA’s consumer site, reversemortgage.org, exceeded 30,000 for

the fifth consecutive month, according to October statistics.

4 Unique visits in October totaled 30,803, compared to 30,801 in September. They hit a record 33,066 in

July.

4Nearly 400,000 unique visitors will have visited the site containing your lender listings by year’s end. reversereview . com

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The Reverse Review

December 2014 / January 2015

BOOK REVIEW Simplifying the New Reverse Mortgage

A new book on HECMs addresses common questions about the loan. If you’re looking for a comprehensive and up-todate guide to reverse mortgages, there’s a new book out that offers just that. Understanding Reverse—Answers to 30 Common Questions— Simplifying the New Reverse Mortgage by Open Mortgage’s Dan Hultquist provides detailed answers to common questions and descriptive examples about how the loan works.

Dan Hultquist is a branch manager with Open Mortgage. He is also a Certified Reverse Mortgage Professional and serves on NRMLA’s Independent Certification Committee. Hultquist is a Penn State graduate and earned an MBA from Kennesaw State University.

Hultquist said he was inspired to write the book while managing training operations for Generation Mortgage. “The book started with about 50 questions that I got on a weekly basis,” he says. “I was training so many different people— closing agents, underwriters, processors, brokers and call center people—and everyone had the same questions. And so I would develop answers for those questions, knowing what the next question was going to be.”

Hultquist says he arranged the questions in order of complexity, “so if you read the book straight through as a senior, you’re going to have a pretty comprehensive understanding of a reverse mortgage by the time you get done,” he says. With an entire chapter dedicated to defining essential reverse mortgage terms like maximum claim amount and principal residence, the book aims to educate its readers. Hultquist says it can be a valuable resource for borrowers who are on the fence about taking the loan. “Seniors don’t want to be sold to; they want to be educated and then make the decision on their own. This allows them to do that.” While the book is perfect for a senior consumer looking for information, it can also serve as a reference guide for reverse professionals

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Understanding Reverse is available now on Amazon in soft cover and on Kindle.

who want quick access to FHA documentation. By including a section at the end of each chapter that provides specific documentation from HUD handbooks and mortgagee letters, Hultquist intended to create a resource for professionals seeking specifics.

Check out Hultquist’s blog, understandingreverse.com, where he posts up-to-date information about the HECM program.

“The changes we have seen over the last two years may have strengthened the HECM program and added more consumer protections, but they also weakened everyone’s understanding of how a reverse mortgage works,” he says. “Many in our industry are still confused about mandatory obligations and initial disbursement limits. Imagine how homeowners feel. That is one of the primary reasons I felt this book was necessary. I have not only attempted to simplify the answers to the most common questions, but I have also documented the appropriate government regulations.” x

roundup Here is a look at the

THIS MONTH

NEWS AND STATS

affecting the market.

{

GET UP-TO-DATE retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.

The Senior Agenda

Quick stat Number Crunch

Retirement by numbers.

The average retirement age

Hawaii named top state for retirement.

A new survey by moneyrates.com ranked states according to their appeal to retirees, listing economics, the size of the senior population, weather, crime and life expectancy as key factors.

Coming in at No. 1, Hawaii scored high because of its climate and life expectancy.

18 years

Average length of retirement

$43,797

Average savings of a 50-year-old: $43,797

$215,000

idaho

Iowa

Total cost of medical treatment for a couple older than 65 over a 20-year span

Vermont

florida

No. 1 Hawaii No. 2 Iowa No. 3 Idaho hawaii

No. 4 Florida No. 5 Vermont

Money Matters

Most Americans having trouble saving for retirement.

Nearly 70 percent of middle-class Americans say

saving for retirement is harder than they expected. According to a study released by Wells Fargo, 61 percent of middle-class Americans admitted that they are not sacrificing “a lot” to save for retirement, and 72

percent wished they had started saving earlier.

35%

Number of Americans older than 65 who rely completely on Social Security

Aging in place remains a priority.

According to AARP, more than 90% of seniors wish to stay in their homes as they age.

90%

wish to stay at home

Market Update

HECM issuance rebounds in October.

HMBS issuers sold $690 million in new pools in October, an uptick from previous months that have seen volume drop after January’s $711 million total. Issuance in October included 106 pools, the most ever, consisting of 59 original issuances and 47 tail pools.

36%

Percentage of Americans who don’t save anything for retirement *Statistic Brain Research Institute

reversereview . com

8 TRR | 17

The Reverse Review

December 2014 / January 2015

THE

REVERSE review

Dec.2014/ Ja n.2015

Karim From his favorite movie and his worst purchase to his thoughts about the Senior Counsel Ocwen Financial Corporation

18 | TRR

reverse mortgage market, we get the facts from Karim Hatata, senior counsel for originations compliance at Ocwen Financial Corporation.

personal > >

You can’t always be right.

I’ve never been to the moon.

The best lesson I’ve ever learned was to always trust your instincts.

Ten years from now I would love to retire.

born.

me is… if I told you, it wouldn’t be >

anymore. >

with rice) in NYC that gave me food poisoning.

honeymoon in the Cayman Islands. My first car was a Chevy Eurosport.

The craziest thing I’ve ever done was skydive (twice).

The worst purchase I’ve ever

The craziest thing I've ever done was skydive (twice).

made was the street meat (chicken

My favorite vacation was my

s t c a f

my life was when my children were

Something nobody knows about something nobody knew about me

The most memorable moment in

fun

The best purchase I’ve ever made was my house.

If I could time travel, I would go into the future to see how the world would be in 200 to 300 years.

If I had three wishes they would be no more disease in the world, no more cruelty to animals or children, and justice on earth.

If I could meet anyone, past or

professionAl >

present, it would be Jesus Christ. >

My favorite movie is Major League.

My favorite website is

the reverse mortgage industry rewarding. Baby boomers have seen their wealth shrink as a result of the financial crisis, just at the time when they’ve got to think about retirement.

When I was younger I wanted to

The people who work in this industry

be a pilot. >

really care about seniors and provide a service that can have a very

Every morning I get my daughter

positive impact on people’s lives.

out of bed and give her a hug. >

When I was a kid I took for granted how much fun it is to be a kid, and I only knew that once I became an adult.

I’ll never forget the night I met my wife.

My parents taught me how to

I am optimistic about the reverse mortgage industry because I know that the majority of people who get a reverse mortgage are happy with that decision. Their experiences will drive curiosity among others engaged in retirement planning. As more people begin comparing reverse mortgages to forward mortgages, they will

speak, walk, eat, drive… basically

quickly see that a reverse mortgage

everything important.

can be a viable and smart option in

My favorite time of the day is coming home to my family.

My favorite movie is Major League.

because it is challenging and

amazon.com. >

People should seek a career in

their financial plan.

Reverse mortgage professionals can best support the public image of reverse mortgages by doing the right thing by the seniors they deal with. Take the time to answer questions, follow up with borrowers, keep promises, and be straightforward about both the benefits and requirements of a reverse mortgage. reversereview . com

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The Reverse Review

December 2014 / January 2015 RR

originating

DISCUSS

The H4P Opportunity By Mark O’Neil

refinance using the HECM. But this two-step process was cumbersome and expensive. Fortunately, Congress recognized this burden and made the H4P program available. The social benefits of the H4P program are clear to see. We have millions of seniors in or nearing retirement in this country. Many are in homes that are larger than they need and that are not suited to aging in place. What Congress did when it passed HERA was bridge the gap and make the already very flexible HECM financial planning tool even more flexible and even more valuable for those older American homeowners who want to downsize, but who need an alternative way to finance their relocation.

ow do we effectively expand markets and increase profits? That’s a common question for most businesses. For a growing cohort of reverse mortgage practitioners, the answer lies in the HECM for Purchase (H4P) program, and the case for including H4P in your marketing efforts is now stronger than it has been in the history of the program. This is why many in our industry are redoubling efforts to both train and market H4P as we gear up for what we see as a huge opportunity in the coming years. It’s hard to believe that it has already been six years since Congress passed the Housing and Economic Recovery Act of 2008 (HERA). Among other things, HERA authorized HUD to develop a HECM product that could be used for purchase money

according to mark 20 | TRR

transactions. Within a few months of the law’s passage, FHA had issued its initial guidance in the form of Mortgagee Letter 2008-33. Some tweaks were needed, so FHA followed up the next spring with Mortgagee Letter 2009-11. Before 2008, borrowers who were interested in using a reverse mortgage to finance a purchase had few options. Proprietary loans, such as Fannie Mae’s Home Keeper program, could be used as a purchase money mortgage. However, the product never realized wide market acceptance and was dropped during the credit crisis. Meanwhile, the HECM was being leveraged by older Americans who wished to move and wanted a reverse mortgage. Borrowers had to first buy the new property with a purchase money loan or cash, then

Over the past six years, a number of reverse mortgage companies and loan officers have carved out a niche for themselves specializing in the H4P product. But the program has not lived up to its potential and we’re still far behind the projections made in 2008. This stunted development is mostly due to the housing and credit crises. It is also due, however, to a product that is still largely unknown outside of our industry. I believe this is about to change. Background If you’ve never worked with the H4P program, it can be a bit daunting at first. The good news is, with some exceptions, the guidelines are not much different from the traditional HECM refinance business. And there are excellent resources available to train both sales and operations staff on the program.

If you’ve never worked with the H4P program, it can be a bit daunting at first. The good news is, with some exceptions, the guidelines are not much different from the traditional HECM refinance business. And there are excellent resources available to train both sales and operations staff on the program.

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Builders, meanwhile, will find the H4P allows their buyers to afford a new home with more upgrades. Since upgrades are where builders make their largest margins, you will want to hone in on this point early on in the conversation. Developments catering to the 55-plus age group are natural targets for H4P business and many originators have successfully

From the start, H4P loans have been great business for a lot of reasons. These are, by in large, higher-dollar loans made on higher-value homes. We are also dealing with fewer property repair issues, since most of these homes were fixed up prior to being listed, or are new construction. For those that need repairs, the H4P program requires that the seller complete the work before closing. In my experience, the H4P transaction is more like a business decision and can be far less emotional than refinancing the home where a borrower might have lived most of his or her life and raised a family. I know this is generalizing, but H4P borrowers seem more comfortable leveraging their equity and less concerned about leaving the home as a legacy to their children. Early in 2014, something happened that gave H4P business an unexpected boost. The ATR and QM rules went into effect in January and, overnight,

Conclusion An estimated 300,000 retirees are buying homes every year. If we could tap just 10 percent of this market, it would increase the current HECM volumes by 60 percent on a unit basis, even more on a UPB basis. Several top investors in the HECM space recognize the opportunity here and are pouring unprecedented resources into marketing and training for the business. If you are so inclined, this would be a very good time to think about leveraging this opportunity by adding H4P to your lineup. For those of you already making the loans, keep up the good work. The rest of the real estate industry is on the cusp of finding out what you already know about this great product. n

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spotlight

The H4P program is something you are going to want to pitch directly to real estate agents, builders and other financial professions. When trained on the program, real estate agents should quickly grasp that the borrower who was planning on buying a new home with cash will be able to buy more house when he or she uses the H4P, and still have no mortgage payment. This, of course, means higher commissions.

Why is now a very good time to be familiarizing yourself with the H4P program?

Not to be overlooked, the new HECM 60 structure makes the H4P business more attractive for the originator. By definition, mandatory obligations in an H4P transaction are 100 percent. So, at a time when average principal limit utilizations have fallen dramatically, H4P business continues to see very high utilization rates. This, of course, means higher margins for originators. And the recent increase in PLFs, along with continued home price appreciation, paints a brighter future for the pogram.

tax tip

Marketing

Since you are (hopefully) in their offices already, donâ&#x20AC;&#x2122;t forget to educate your financial planners, CPAs and elder law attorneys as well. A large percentage of pre-retirees and retirees are planning on moving at least one more time during their lifetimes, and many are planning on paying cash for their new homes. Not only does paying all cash for a new home deplete savings at a critical juncture, but it also shrinks the portfolios of their planners. Show a financial planner a way to assist their clients with their new home purchase, while at the same time preserving their assets under management, and you will have a great new referral source.

these guidelines made it harder for lots of people to qualify for purchase loans, especially those on fixed incomes. This tightening of credit has left many seniors, who had planned on purchasing a home with traditional financing, unable to qualify for a conventional mortgage. Ask any H4P practitioner and you will probably find they have had at least one, if not several, H4P closings already this year that were for borrowers who had not originally planned on utilizing a reverse mortgage. It is likely that ATR and QM will continue to push business in our direction. We have to make sure that real estate professionals know we are here with a tool that can help.

tech

Documenting an H4P is a bit different than a HECM refinance and there are some pitfalls that originators need to be aware of. Things like FHA purchase contracts, restrictions on seller concessions, restrictions around certificates of occupancy, and proper sourcing of funds are all critically important to understand and can be pitfalls for the unprepared. But these pitfalls are manageable if you are willing to put in the work upfront and attend training.

penetrated this market.

originating

One of the main adjustments for many HECM originators, especially those who have not written purchase loans in the past, is the multiple parties to the transaction. Most of the time, a Realtor will be involved in the transaction in addition to the buyer and seller. And in some cases, if your borrower is buying new construction, there might be a builder involved in the process. All of these additional parties, each with a vested interest in the transaction, will increase the demands on the originator. It is critically important that the originator set reasonable timeframes and expectations at the outset.

The Reverse Review

December 2014 / January 2015

originating

How to Effectively Communicate With Your Senior Borrower By Carol Ann Dujanovich

or a product that has seen minimal guideline changes since its creation in 1987, the HECM has seemingly changed overnight. The pitches our niche industry has relied on need a tuneup, and now that we have an increasingly technology-savvy consumer, so do our basic communication skills. To enhance our approach, it may be worthwhile to explore some of the many challenges facing originators in today’s market. Perhaps a closer look can help us redefine an ever-growing and evolving demographic: the “senior” citizen. What Is a Senior? Let’s begin by defining (or redefining) the senior borrower. Many people have a different definition of the term “senior,” but most organizations define the category as an age group that spans at least 40 years starting at the age of 50. Some dictionaries describe widespread usage of “senior citizen” for retired people over the age of 65, however, with the average age of retirement creeping toward 67 according to the 22 | TRR

AARP, even basic assumptions are evolving to meet the economic strains of recent years. Age is no longer a defining characteristic, but rather merely qualifying; our definitions of a 62-, 72and even a 92-year-old are as outdated as the life expectancy tables used to calculate the TALC. Now more than ever the reverse mortgage is the tool that allows “senior” citizens to remain in their homes, live economically independent lives or even knock off one or two items from a remaining bucket list. For any originator who’s recently found success with Internet leads, recognizing the increasingly savvy senior client has proven to not only be lucrative, but also a requirement to remain competitive in an environment of case transfers and competing offers. So how do you redefine the idea of a senior? Take everything you know and believe simply expand it. Acknowledge the senior with an active social media presence, but be prepared to arrange a notary or

overnight delivery to pick up that last incorrectly signed disclosure for the clients who still don’t have a working Internet connection. The best way to communicate with a senior is to eliminate assumptions and stereotypes and build a relationship based on their terms and comfort levels. This is where the reverse mortgage professional comes in. Key Elements of Communication Some key elements for communicating with seniors who are thinking about a reverse mortgage are:

No.1 Listen & Encourage questions

No.2 Validate No.3 Respect No.4 have Patience No.5 Don’t make assumptions No.6 Keep communications

brief, clear and direct

originating While these elements are not all inclusive to the process of communicating with senior borrowers, they can form a good foundation for reverse mortgage professionals to build upon. We’ll tackle a few of the items below. No.1 Listen & Encourage questions

No.2 Validate

When reading this, if your first inclination is, “I always listen to my borrowers!” then this section is most certainly for you!

Successful communication involves establishing common ground: Speakers and listeners must agree that information is mutually understood and accepted as relevant to shared goals.

One of the primary complaints expressed by seniors is that today’s professionals do not listen to them. Some studies have suggested that even when they (or we) do listen, we have a tendency to interrupt within 18 seconds.

This style of speech may be based on a desire to express caring or sympathy for the older person; conversely, it may be based on a stereotype that all older people are mentally impaired in some way. In either case, this style of speech is viewed negatively by the majority of older adults,

Also called “elderspeak,” this type of communication may make some older adults feel disrespected and powerless and can lead to actual physical health consequences. Among older adults with Alzheimer’s disease or other forms of dementia, being addressed with baby talk can result in more resistance to care and more aggressive behaviors. * Avoid using terms of endearment (e.g., “honey,” “darling”). It is true that these terms can convey affection, but communication scientists agree that there are other ways of expressing affection and caring that convey the same emotion while not infantilizing the recipient. One example is to use a person’s name while smiling and expressing caring content: “Mr. Smith,

would you like me to bring you a cup of coffee?” Addressing a person as “Mr. Smith,” “Mrs. Jones,” etc., is usually a safe approach. Using the person’s first name can be acceptable if you have frequent contact with the person and ask his or her permission (“May I call you James?”). * Avoid using high and variable pitch. High pitch is more difficult for older adults to comprehend because of hearing problems, and extremely variable pitch produces an irritating tone. * Avoid using simplified vocabulary. As a general rule, older adults maintain their existing vocabulary or continue to improve it. They have no greater problem understanding complicated words than do members of other age groups, so there is no need to simplify the words you use. 8 reversereview . com

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spotlight

Younger people sometimes address older adults in a style of speech characterized by the use of simplified vocabulary (e.g., only using short words), endearing or diminutive terms (e.g., “sweetie,” “cutie”), and exaggerated intonation (e.g., unusual stress on certain words, singsong pitch variation).

who equate such “baby talk” with being treated like a child.

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No.3 Respect

For example: “I imagine you’re a little worried about this financial process. I’ve given you a lot of information. It would be helpful to me to hear your understanding about your reverse mortgage application.” This approach is preferable to a yes/ no approach (“I’ve given you a lot of information. Do you understand?”) or a directive teach-back approach (“It’s really important that you do this exactly the way I explained. What do you understand?”).

tech

Asking seniors open-ended questions has the potential to elicit useful information, assess the level of reverse mortgage literacy, create an active dialogue between the loan officer and senior (rather than a monologue from an active professional to a passive senior), and ultimately improve outcomes.

Verifying comprehension is especially important when communicating with older adults. Older listeners may be reluctant to interrupt a conversation to indicate that they do not understand.

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Older adults have valuable information to offer, but this information may not be shared if the loan officer appears to be uninterested or too busy, or fails to request the information. Concerns, questions or misunderstandings about financial information, insurance plans or processing instructions may not be raised and addressed, thus contributing to subsequent complications and miscommunications.

Common ground is more likely to be achieved when the speaker seeks—and the listener provides—explicit evidence that presented information is understood. Actively seeking verification of listener comprehension affords the speaker an opportunity to clarify the intended message if needed and tailor the information to the listener.

The Reverse Review

December 2014 / January 2015

originating No.4 Have Patience

No.5 Don’t Make Assumptions

Remember the saying, “Patience is a virtue.” A financial transaction can be complicated even to the most businesssavvy individual. When discussing the HECM process, be patient and understand that this is a transaction most seniors may have thought they would never had to do.

Stereotypical beliefs about older adults—especially concerning diminished abilities—can lead to inappropriate, perhaps even demeaning, responses toward them. On the other hand, assuming your clients are readily mobile and have access to a printer, scanner or fax can also lead to frustration and damage the rapport you’ve built.

Take disclosures, for instance—or, more specifically, re-disclosures. Regulations require that we re-disclose at all valid change circumstances, which can include value, age or even a changing interest rate (i.e., principal limit locks). Receiving multiple disclosures during the transaction can upset the senior in what may be otherwise considered a smooth and painless transaction. It’s always critical to preface the necessity for re-disclosures at the time of application, explaining the reasons why and how this protects them and keeps them informed about any changes throughout the reverse process.

I believe that no two homes are the same (even in a PUD), and that’s even more so the case when dealing with our senior clients. Try to recognize your own stereotypic beliefs about older adults and acknowledge the possibility that you might be relying on initial perceptual cues to guide your interaction. Adapting your style of communication to the actual, not stereotyped, abilities of the individual will provide a foundation for more effective interactions.

Long and complex sentence structures challenge memory because understanding the entire sentence involves simultaneously holding a number of “pieces” of information in short-term memory. Extensive published research demonstrates that older adults have an especially difficult time processing sentences with multiple embedded clauses.

View our digital version... Reverse Review articles (present and past) are available on our website. Access a wealth of content about the business of HECMs online.

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Brief, Clear and Direct Although many aspects of functioning are well preserved into late adulthood, short-term (working) memory does decline. Short-term memory is critical in processing complex sentence structures, particularly sentences with embedded clauses. Older and younger adults are equally good at understanding a sentence such as, “The brown dog sat on the rug.” Older adults have a more difficult time with a sentence such as, “The brown dog that I saw running away from the car yesterday sat on the rug.”

Another common occurrence, especially for originators newer to the industry, is selling “time”—explaining the process in terms of days rather than milestones. When working with seniors and in many situations over the telephone, an originator’s word is truly their bond. Explaining the reverse mortgage process in terms of milestones (i.e., the completion of the appraisal) rather than in terms of time (i.e., the appraisal will be completed within 48 hours of ordering) ensures that you as the originator don’t violate the trust and rapport you have built with your borrower.

www.reversereview.com

No.6 Keep Communication

* When conveying critical information, chunk individual pieces of information into separate sentences. * However, balance your sentences; don’t make them too short. If the sentences are too short, they can provide information in a disjointed and fragmented manner that actually makes it more difficult to tie the pieces together. n

originating

The Benefits of Lead Management By Spencer Shiffman

without human assistance and inevitable human error. With lead routing, analysis and optimization, a well-designed program will maximize your salespeople’s time spent following hot leads and buying trends, meaning more time selling and less time chasing and coldcalling. An effective lead management system is an essential element for reaching and engaging new prospects in today’s market. Lead management, coupled with marketing automation, can offer innumerable benefits and

Companies that automate lead management see a 10 percent or greater increase in revenue in 6-9 months. Source: Gartner Research

measurable results. Are you ready to boost sales and take your business to the next level? Lead management may be the answer you’ve been looking for. Some lead management services offer a no-contract month-tomonth service without a large investment so you can see what an effective system can do for your bottom line. It’s time to integrate technology with the power of your sales force. You’ll be amazed at the results. n

Companies with mature lead generation and management practices have a 9.3 percent higher sales quota achievement rate. Source: CSO Insights reversereview . com

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spotlight

An effective system can also save you time and money. With better, faster, cheaper systems than the labor-intensive manual processes of the past, lead management systems offer the ability to complete several steps

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Research shows that 35-50 percent of sales go to the vendor that responds first. Source: InsideSales.com

Through in-depth sales histories and analyses you will be able to easily track what your customers are interested in and effectively manage your next steps. All data is uniform; every client, sale and contact is documented and managed the same way. With the added ability to access the data from any location, your salespeople are able to track where the potential buyer is on the path, laser-focus their meeting and ensure that your budding clients get the attention they want and need without overlap or oversight. By taking the time to identify genuine prospects and nurture them to closing, you will ensure that your competition isn’t stealing your customer and closing the deal.

tech

DID YOU KNOW

Businesses of all sizes can benefit from a good lead management system. It can greatly increase sales opportunities by successfully collecting, managing and tracking new, existing and prospective customer data. The best lead management programs also offer automated and personalized marketing tools to nurture and maintain budding relationships. Lead nurturing has proved critical in closing the sale. By cultivating, educating and encouraging those who may not be ready to take the leap today, you begin to build the trust of

the buyer. This results in a deeper understanding of a buyer’s preferences and level of interest, making your contact more beneficial and resulting in accelerated returns.

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our busy office throws numerous leads at your sales team each day. While they will do their best to make the contact, develop interest and send a proposal out in a timely manner, often the buyer isn’t quite ready and needs more time. With a fresh batch of leads generated daily, it’s easy for those existing leads to die on the vine—or worse, be plucked by your competition. Without a proper lead management system in place, your salespeople are less likely to effectively manage the growing number of prospects.

The Reverse Review

December 2014 / January 2015 RR

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CONSIDER

Rethinking HECM Processing By Scott Sambucci

call or notification informing the borrower of their default status is made in accordance to CFPB, HUD and investor delinquency notification guidelines? I’ve observed many manual processes over these past nine months, and maybe they don’t need to stay that way… Why isn’t more customer information automated?

embedded myself with a reverse mortgage servicer this year— voluntarily. After spending the last nine months deep in the throes of the business, it feels like the more I learn, the more questions I have about standards and processes. So I’d like to ask a few of those questions to everyone in the industry, because it sure seems like we have an enormous opportunity to build a better process. Sitting with a servicing analyst recently, I wanted to learn how delinquency status codes were changed in a default reverse mortgage portfolio. Yes, this is what I do at work sometimes. She manually entered a number of data fields that were read from a scanned document, that were sent to her via an email queue, that were scanned into a TIF document by a document department that exists somewhere in the same building, received via fax from the customer. Then she logged into a system called HERMIT to manually re-enter the same information into that system. I asked her why she had to enter the

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same data, manually, into two different systems. She didn’t know, and she didn’t know what HERMIT was either, or why she had to enter data there, and she’s been in her role for more than a year. Her manager then educated us about HERMIT, and that the data is entered manually because that’s how their system is set up. OK, OK, all you reverse industry veterans are snickering that I didn’t know what HERMIT was, but think about it: Here’s a person entering critical information into the reverse mortgage servicing machinery, manually entering data into systems because that’s what she’s told to do, yet she has no idea why she’s doing it. Oh boy... What happens when that manual process breaks down, and a servicing analyst calls a borrower who actually sent in their occupancy certification documents, under the supposition that this now-active borrower is in default? Or worse, what happens when an active loan doesn’t get marked delinquent, and then no

Think SnapTax for reverse mortgages. Documents filed by the borrower could be pushed through an OCR process, with the data automatically placed into a servicing platform. Utility companies like PG&E have established APIs that enable access to customers’ data. Why couldn’t the borrower grant their mortgage servicers access to this account data, effectively automating the occupancy certification process? How is the industry standardizing data? I talked with a manager this week after her two-hour conference on datamapping for the transfer of a reverse portfolio. The seller didn’t track half of the fields that the purchaser tracks. So does the new servicer deploy their established servicing process when only half of the data they usually have is available? MISMO is growing for most other areas of the mortgage industry: servicing rights, appraisals, eMortgages and others. Yet there’s not even an active MISMO reverse mortgage workgroup. Can you imagine an inactive originations group at MISMO? Could there be a single origination and servicing platform, designed and built specifically for the reverse industry?

tech

What about a single technology platform built as part of a consortium?

What about an automated library of origination and compliance rules engines that could be plugged into this platform? Every company grapples with interpreting and adhering to investors and regulatory guidelines. Building on the universal data model and a single platform, could the industry work with HUD to establish an automated rules engine that informs every market player exact how to originate and service a reverse mortgage? Right now, I have to go to HUD’s website and remember which of its updates informs on each important detail. For example, if I need to review

the time limits for setting up a repayment plan, I need to remember or somehow find page three of their 2011-01 release for this information. It just seems to me that many of these rules could be automated into a workflow library of some kind. There you have it—my questions after nearly a year thinking about and processing reverse mortgages every day. My hope is that these are new questions that stimulate new thinking. If not, then shame on us as an industry for focusing on what is, instead of what could be. n

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What about a single technology platform built as part of a consortium? The platform could enable data to pass from originators to investors to servicers in a uniform way, and where modern software applications that we need to run the industry are built

and hosted—like Salesforce for reverse mortgages.

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The platform could enable data to pass from originators to investors to servicers in a uniform way, and where modern software applications that we need to run the industry are built and hosted—like Salesforce for reverse mortgages.

The reverse industry suffers from an overall lack of technology, in large part because of lower volumes compared with the forward side. Of course there’s probably an easy debate that the forward side doesn’t have much access to technology either. Many reverse lenders and servicers have built their own homegrown systems, or have no real system at all aside from spreadsheets and basic databases.

Want to respond to this piece? Email us at reversereview.com.

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December 2014 / January 2015

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Does “Who Paid” Matter? By Aaron Anderson While it is easier to obtain reliable property tax status data from taxing authorities than in the past, it is still hard to find out who did, in fact, pay the borrower’s property taxes. This presents an issue as a lender’s ability to identify the “who factor” when reviewing the mortgagor’s property tax history could be crucial when reviewing the mortgagor’s direct experience paying taxes.

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Homeowners are eligible for a reverse mortgage at the age of 62, however, they are eligible to enter into a tax lien transfer with little to no restrictions until the age of 65, and even after the age of 65 the limits placed on homeowners are not very restrictive. This opens a significant window of

Reverse Review readers help thousands of seniors find financial security. Let’s talk about how we can help thousands more.

risk for the two years prior to a reverse loan and beyond. The reverse loan covenants state very clearly that the mortgagor shall not permit any liens to be recorded against the property. But, astonishingly enough, tax lien lenders are not required to notify existing mortgage holders before they complete the tax lien transfer, because the states have failed to force this requirement. As a result, a borrower’s decision to take a loan for their delinquent taxes moves the first position mortgage lender into a riskier second position, facing the loss of property through foreclosure by a tax lender if the borrower does not meet the terms of their new tax loan. n

Get involved. info@reversereview.com your monthly publication for reverse mortgage news reversereview . com

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spotlight

on a tax collector to return phone calls can easily be skipped in an effort to meet closing deadlines and SLAs. But filling in that gap to know who paid the taxes is critical, especially when considering the latest HUD regulations enacted for reverse mortgages, which go into effect in March 2015 and require a two-year tax verification before closing.

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While it is easier to obtain reliable property tax status data from taxing authorities than in the past, it is still hard to find out who did, in fact, pay the borrower’s property taxes. It seems like an easy question, but in reality most county tax collectors are simply happy to get paid and do not record that information anywhere in their systems. As a result, they show a paid status for the taxes due on their website and in bulk public data extracts used by professional mortgage servicers for payment verification. Even if a lender takes additional steps to reach out and request who paid the taxes, many tax collectors lack the resources to comply with the request in a timely fashion, or at all. Waiting

originating

n the past, reverse and traditional mortgagees have been comfortable seeing a simple “paid” status on last year’s property tax reports. However, who paid the taxes has become a critical question, as states like Texas and Nevada have passed laws permitting borrowers to pay their real property tax with a highinterest loan from an institution that is then rewarded with first lien position. The lender’s ability to identify the “who factor” when reviewing the mortgagor’s property tax history will be crucial when reviewing the mortgagor’s direct experience paying taxes.

The Reverse Review

December 2014 / January 2015

spotlight

is th

m o nt

h’

ition

reverse professionals share their goals for 2015.

New Year, New HECM

12 / 2014 01 / 2015

want to see more articles like this?

See them at reversereview.com.

t’s a new year, and apparently, it’s a new reverse mortgage. To help us start off on the right foot in 2015, we asked a handful of reverse mortgage professionals about their goals and hopes for the HECM in the year ahead.

uJeremy Shadrick

uBart Johnson

QuickCert Counseling

Premier Home Equity

“We have big plans underway for 2015. We will be opening our second branch location offering HECM counseling services in Puerto Rico in January, and our third branch in North Carolina by late spring. Agencies in these areas are overloaded. We are excited to take an active role in these areas and relieve some of the burden on the existing agencies while assisting clients who are in desperate need of services. We have also identified other locations around the country and will be exploring additional branch opportunities in 2015.”

“My goal is to begin to transform the industry by bringing two innovative proprietary home equity release products to market in 2015.”

To SHARE YOUR PROFESSIONAL goals for 2015, visit us at reversereview.com AND COMMENT ON THE ONLINE VERSION OF THIS ARTICLE.

uMichael Kent American Equity Management LLC

“Over the past eight months, I have spent a great deal of time talking to and visiting with dozens of small- to mid-size mortgage bankers. Their growth and success stories have been educational and inspiring. A common concern I have heard from these companies is in the area of the increasing levels of regulatory compliance and the potentially high cost of implementation. My goal for 2015 is to re-enter the industry with the hopes of bringing cost-effective solutions to the small- and mid-size mortgage banker in the area of regulatory compliance management. I am also looking forward to reconnecting with my industry friends.” 30 | TRR

spotlight

uShelley Giordano

Security One Lending’s Funding Longevity Task Force

Quicken Loans

“My professional resolutions for 2015: Cultivate healthy business relationships that drive new opportunities in the secondary market and challenge our industry’s traditional thinking through creativity and innovation.”

uGlenn Wallace Nationwide Equity Corporation

“Having been in the mortgage industry for more than 36 years, I have seen the wild swings of prosperity and scarcity. I expect 2015 to be the beginning of a new age for the reverse mortgage world. While I once thought I would try to phase out of the business, I have been rejuvenated by the opportunity I see on the horizon. Consequently, I plan to work harder and smarter, to learn new ways to reach borrowers and continue to build Nationwide Equities.”

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“In 2015, I want to buy a new house. Exercise more (anything would be an improvement). Drink more (water). Improve my penmanship. Apologize to everyone whose feelings I have hurt or whom I have offended in 2014. Have as much enthusiasm as Otto Kumbar, the perseverance of Peter Bell, the humor of Jim Brodsky, the wardrobe of David Peskin, the insight and judgment of Joe Demarkey, the diplomacy of George Lopez, be as good-looking as Reza Jahangiri, acquire a fishing boat better than Jason McNamara’s, and sound as intelligent as Joe Kelly when engaged in public speaking.”

uMark Acchione

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WEINER BRODSKY KIDER

“My goals for 2015 include continuing to share and demonstrate a positive message and facts about the benefits of reverse mortgages to homeowners, professionals and referral sources, sharing with them how this wonderful product can make a difference in the lives of so many. Through my blog and work with the media, I want to improve the product’s image so seniors can make a decision based on facts, not misconceptions. I’m looking forward to 2015 being an exciting year.”

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ujIM MILANO

Reverse Mortgages SIDAC

originating

“At last the 2015 Financial Assessment impels our industry to attract a broader market. My hope is that the average American retiree will be better served by the people they pay for financial advice. Many advisors have ignored, or have been prohibited from discussing, how a Standby HECM Line of Credit is a spectacular hedge against market returns, housing appreciation and rising interest rates. All of which begs the question: Who doesn’t need a backup in retirement?”

uBeth Paterson

uMike McCully New View Advisors

“Ginnie Mae’s efforts to provide loan level data has been terrific, and we plan to continue working with both HUD and Ginnie Mae in 2015 to expand that mandate. My hope for 2015 is that there are no further modifications to the HECM program after FA is implemented. The industry needs a multiyear stretch without change.”

uDon Currie HighTechLending

“HighTechLending made it into the Top 10 Reverse Lenders in the nation by specializing in converting reverse mortgage brokers into branch partners. This provides them with all the tools necessary to compete on a banking level in the reverse industry. We also cater to mortgage brokers/bankers who want to break into the reverse market without any reverse experience. In 2015, we will continue to aggressively expand our branch platform while also educating brokers on a wholesale level.” reversereview . com

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The Reverse Review

December 2014 / January 2015

CREDIT REPORTS

NON-BORROWING SPOUSE INCOME

DISCUSSION OF MITIGATING FACTORS

LIFE EXPECTANCY SET-ASIDES

New FHA guidelines tighten underwriting requirements for reverse mortgage loans. How will your business be affected? By Jessica Guerin

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ASSET EVALUATION

Financial Assessment has finally arrived. The long-anticipated move by FHA will tighten underwriting standards for HECM loans, requiring lenders to evaluate a borrower’s credit history, income and debt to determine if they are capable of meeting the obligations of the loan. The value of Financial Assessment has generated endless chatter in the past year among reverse professionals, as many speculated how such a move would impact potential borrowers. While some were incensed by the idea, certain that it would exclude those who needed the loan most, others were confident that it would encourage lenders to connect with a more financially savvy client and help make the program more sustainable for the long term. Opinions aside, Financial Assessment is here to stay. In effect, this last program change further solidifies the concept of a “new reverse mortgage,” the one that industry leaders have been touting as a way to engage the public in a new conversation about the loan. With these latest guidelines in place, reverse mortgages will take on a new shape. It’s a chance for lenders to revitalize the dialogue about HECMs and potentially expand the market to reach thousands of seniors who stand to benefit from this financial tool.

Determining Ability and Willingness FHA announced its intent to make substantial changes to the HECM program last fall, following the passage of the Reverse Mortgage Stabilization Act of 2013. The agency issued a mortgagee letter that detailed, among other changes, new principal limit factors and utilization restrictions. The letter included some information on a pending financial

assessment of borrowers, but it was not until 14 months later, after sorting through feedback from the industry, that the agency released the final details of this new mandate. FHA’s final Financial Assessment includes nearly 90 pages of specific criteria that a lender must consider when assessing a borrower’s “ability and willingness” to meet the loan’s financial obligations, specifically, to continue to pay their property taxes and insurance. As part of the new assessment, FHA has stated that lenders must “take into consideration that some mortgagors seek a HECM due to financial difficulties, which may be reflected in the mortgagor’s credit report and/ or property charge payment history. The mortgagee must also consider to what extent the proceeds of the HECM could provide a solution to any such financial difficulties.” In order to accomplish this, lenders will need to institute a new kind of underwriting, one that more closely resembles requirements on the forward side.

Under Financial Assessment, lenders must take the following into account:

L Credit history using credit reports from all three national credit bureaus

L Income from retirement accounts, Social Security, employment or investments

LAssets L Payment history on property taxes, insurance and homeowner’s fees

L Debt, including medical

If a borrower’s analysis appears weak, lenders can consider any extenuating circumstances that might have contributed to their troubles, such as an illness. But those who still fall short will be denied or required to set aside a portion of their loan proceeds to ensure the payment of property taxes and insurance. Following the new rule’s release, HUD hosted two conference calls for industry participants to explain specifics and address questions. HUD Director Karin Hill expressed the agency’s willingness to help lenders adapt to the changes. “We certainly are aware that [these new rules] have a significant impact on your operations and systems— affecting originators, affecting HUD, counselors, quality assurance,” Hill said. “We want to make sure you’re prepared internally and externally to support the new policies.” While the agency has done its best to answer ambiguities, some questions remain. In particular, originators are concerned about a new stipulation calling for Seasoning Requirements for non-HECM liens, something that has not been required for HECM loans in the past. On a conference call with the industry, Hill said HUD will evaluate the issue and release a response via mortgagee letter in the coming months. (For more details on Seasoning Requirements and how it could impact borrowers, see Richard Wills’ article on reversereview.com.)

Encouraging Long-Term Sustainability The move toward Financial Assessment is one that many industry analysts called essential to the program’s viability. A 2012 report revealed that nearly 10 percent of all HECMs that year ended in foreclosure because borrowers were failing to make tax and insurance payments. The defaults caused a significant drain on FHA’s Mutual Mortgage Insurance Fund, requiring an unprecedented $1.7 billion bailout from the Treasury. 8

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The Reverse Review

December 2014 / January 2015

The need for some sort of financial assessment was discussed even before the program’s drain on the Treasury came to light. In 2011 MetLife led the charge, asking its originators to examine borrowers’ credit histories. The move caused backlash as originators, upset that the guidelines prevented a number of borrowers from qualifying, moved their business elsewhere. MetLife finally suspended the program before leaving the space all together. Genworth, now Liberty Home Equity Solutions, also attempted to institute its own assessment, but its industry partners failed to catch on. Now, by instituting a mandatory, industrywide Financial Assessment, FHA is taking steps to prevent riskier borrowers from entering into the loan. It’s an idea that is supported by recent research from Ohio State. Led by economic professors Stephanie Moulton, Donald Haurin and Wei Shi, the study analyzed the credit history of hundreds of reverse mortgage borrowers to determine that those with lower credit scores are more likely to end up in default. According to Moulton, a financial assessment is a smart move on FHA’s part. “The findings from our research suggest that the recent changes incorporated in the Financial Assessment—specifically, minimal credit-based underwriting criteria combined with property tax and insurance set-asides for those not meeting the criteria—can significantly reduce the occurrence of technical defaults without substantially restricting access to the product.” Moulton says. “These changes are important to ensure the long-term viability of the program.” Those opposed to the institution of Financial Assessment have expressed concern that stiffer requirements will turn away a large portion of low-income seniors whose situations could be significantly improved by the loan. In 2012, AARP and the National Council on Aging (NCOA) stated their support for some sort of financial assessment, but both

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expressed concern that an overly restrictive policy would shut out too many borrowers.

according to OHIO UNIVERSITY’S STEPHANIE MOULTON

Ramsey Alwin, vice president of economic “The findings security at from our research NCOA, says suggest that the recent changes the council incorporated is confident in the Financial that the new Assessment— guidelines specifically, will ensure the product’s use as a long-term financial planning tool. Alwin says NCOA will do what it can to help lower-income seniors take advantage of the loan. “As we navigate the details of Financial Assessment and what that will look like from the origination side, we will be watching closely and working with FHA, HUD and NRMLA to try to ensure that our most vulnerable seniors who may be cash-poor and house-rich still have the opportunity to utilize the product in a way that can ensure their financial stability,” Alwin says. “We’ll be looking closely at what it really looks like once credit reports are required and looking at some of the exceptions that are allowable there.” Alwin also says Benefits Check Up, NCOA’s free online screening tool, can play a critical role by giving seniors access to public benefits that can help push the needle in their favor. “We’ll also be looking at the role public benefits can play in helping free up supplemental income to provide enough residual income that the product continues to be a viable option for someone, especially property tax relief programs. We work really hard to make sure our borrowers understand at the counseling phase the full range of community resources available to them, including property tax relief programs that are identified

minimal credit-based underwriting criteria combined with property tax and insurance set-asides for those not meeting the criteria—can significantly reduce the occurrence of technical defaults without

substantially restricting access to the product. These changes are important to ensure the longterm viability of the program.”

on the benefitcheckup.org screening that may impact their budget.” The bottom line for the industry is that some sort of action was needed in order to make the program viable for the long term. Reverse Funding’s Joe Demarkey says Financial Assessment will benefit the industry in the long run. “It helps ensure that a potential HECM borrower can afford their loan and can successfully age in place,” he says. “We don’t want to be in a position where somebody is placed into a loan that they can’t afford, because it usually ends in a very, very bad situation. This is good for everybody.”

Bracing for Impact In the past, it was relatively easy for a senior to get a reverse mortgage. For the most part, interested parties simply needed to be over the qualifying age of 62, have sufficient equity in their homes and be willing to attend a counseling session. Now, with more stipulations in place, reverse professionals are speculating as to how the new guidelines will impact the market. According to John Lunde of Reverse Market Insight, there is not a lot of data available on how many potential borrowers will no longer qualify for the loan, and it’s therefore hard to quantify the impact Financial

Assessment will have. Lunde says assessing the effectiveness of Financial Assessment is a twofold challenge. “First, how many borrowers under FA who wouldn’t have defaulted be denied the loan, a product which might have made a meaningful difference in their quality of life?” he says. “Second, some of our past default data suggests that a substantial portion of defaulted borrowers from prior years did so as a result of circumstances not observable at origination, like the death of a spouse/ co-borrower or significant increases in insurance and/or property taxes. That portion of defaults will be much harder to prevent through Financial Assessment, and we should never expect default rates to go to zero for this product.” “It would seem that the rules form a more defensible position that borrowers won’t be put into the loan if they might be reasonably expected to fail based on their circumstances at origination, and I think that’s a good thing,” Lunde says, adding that the full impact of Financial Assessment

will take some time to determine. “Bottom line is the industry and HUD had to move in the direction of Financial Assessment, but we won’t know for years whether this move is too far or not far enough.” Demarkey also says it’s hard to speculate how the market will be impacted. “No one has ever collected validated origination data and been able to correlate it against performance data, so we just don’t know,” Demarkey says. “We think that the segment of the market that will be impacted most by Financial Assessment will be those borrowers with high mandatory obligations. Most of the high mandatory obligation borrowers today take out fixed-rate HECMs, so that’s the segment of the market that might be most impacted by it.” From a consumer standpoint, some say that little will change. Most consumers have undergone a prequalification process to obtain a forward mortgage and won’t be put off by the evaluation. “Most consumers in the country today who are obtaining mortgage

financing of any kind, whether it’s a traditional mortgage or a HELOC, are used to their lender asking them for information about their income, their expenses, pulling a credit report, so on and so forth,” Demarkey says. “So from a consumer perspective, I don’t see a dramatic change in what happens at the point of sale.”

Preparing for Implementation With an implementation date of March 2, 2015, lenders have less than three months to get a handle on the new ruling. First and foremost, they will have to train their sales teams to read credit reports and develop new processes that take into account the prequalification requirements. According to Ralph Rosynek, The Reverse Review’s longtime underwriting expert and a seasoned industry veteran, this may take some time. “Loan originators are going to have to put their head in a processor mode, and the processors are actually going to end up being the underwriters on these things 8

A Better Way Tax Lien Transfer Tracking Three-Year Backsearches Monthly Delinquent Updates Esc Escrow Tax Payments Tax Status Reports (TSRs)

info@accumatch.com

(214) 823-5579 reversereview . com

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The Reverse Review

December 2014 / January 2015

according to REVERSE MORTGAGE FUNDING’S JOE DEMARKEY

“Clearly the biggest challenge for the industry is going to be training. I think that anybody—whether you’re a salesperson, an ops person or an underwriter—anybody with forward mortgage loan experience on their resume is probably going to find this easier because they’ve experienced this before. They’re calling it Financial Assessment, but it’s a form of underwriting. Most people on the forward side have dealt with underwriting one’s willingness and capacity to meet their loan obligations in the past. Anybody with that sort of experience will probably find this easier to adapt to.”

and working together with them,” Rosynek says. “It’s technical.” Some of the assessment guidelines are also rather subjective, another factor that might take originators some time to navigate. “There are hard and fast guidelines and benchmarks, but there are also situations where you’re looking at the performance and you have to determine the willingness and ability based on their present debt structure,” Rosynek says. “There’s a slotting that’s necessary. You’ll have to decide what category they belong in and the rationalization for that. You may wonder, ‘Did I make a good choice and final decision?’” Demarkey says a certain amount of leeway is good. “There is some subjectivity in the final guidelines and there should be, because you can’t predict every fact set that you’re going to see at some point in the future. It’s very similar to underwriting for forward mortgage loans. Everything doesn’t fit neatly into a black box,” he says. “There should be some underwriter discretion.” Many agree that professionals with forward mortgage experience will have a leg up. “The forward underwriter has a stronger background in conditions or stipulation management and compensating factors, and coupling that with actual calculated data,” Rosynek says. Demarkey agrees. “Clearly the biggest challenge for the industry is going to be training. I think that anybody—whether you’re

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a salesperson, an ops person or an underwriter—anybody with forward mortgage loan experience on their resume is probably going to find this easier because they’ve experienced this before. They’re calling it Financial Assessment, but it’s a form of underwriting. Most people on the forward side have dealt with underwriting one’s willingness and capacity to meet their loan obligations in the past,” he says. “Anybody with that sort of experience will probably find this easier to adapt to.” Incorporating the added steps for prequalification will require more than just training staff. “Lenders will have to implement new software or make enhancements to their software,” Rosynek says. “They’ve also got to retool their processes internally from a workflow standpoint, and that’s going to take some time.” Many will also have to reassess their marketing materials. “We have to take a look at a lot of the information on our websites and all the printed collateral that we’ve done and our method of advertising in general, because it’s no longer, ‘Are you 62, do you have equity in your home and are you ready to become mortgage payment free?’” Rosynek says. “How can you use the same collateral and not speak to the fact that the qualification process is a little more cumbersome than it was before? You’re talking about a rebranding of the product from a marketing and advertising perspective. Sound bites are going to be enhanced and augmented; they’re not going to be shortened.”

With just a couple of months to prepare for Financial Assessment’s implementation, lenders will have their plates full as they work to get ready. “The mad rush is going to start in February when everyone realizes the countdown is less than 30 days away,” Rosynek predicts, adding that industrywide cooperation is essential to a smooth transition. “This is really going to have to be a team effort across the industry, because it doesn’t make sense if one area of the transaction excels but others are hindered because they need more time to prepare or to become familiar. It could affect the overall image of the product again.” Demarkey says the lead-time should be enough for industry players to get a handle on things. “I’m very confident that people are going to be able to get themselves adapted to the new way that we have to underwrite loans in time before March 2.” In order to be ready for that March deadline, Rosynek says lenders will need to start lining things up now. “The best message we can send to the industry is: Don’t wait, don’t wait. Waiting is going to create concern for your bottom-line profits, and it could also create some issues with borrowers and nobody wants that. Start preparing now.” n

A Quick Recap of the New Guidelines TRR’s expert underwriter, Ralph Rosynek, breaks down the key elements of Financial Assessment. Here’s what you should look out for when reviewing the mortgagee letters yourself. On November 10, 2014, FHA published “HECM Financial Assessment and Property Charge Changes” in Mortgagee Letter 2014-22. The letter provided additional guidance for mortgagees on various aspects of Financial Assessment. The complete guide is highly detailed. Be aware that the contents of the will significantly impact current HECM pre-qualification, origination and backroom processes. My recommendation to all: You must take the time to read and understand the contents of the guide before originating on March 1, 2015. The information below should not be relied upon solely and is presented as a starting point for key areas that might require extra focus in your complete review of the new rules. Credit Reports A revision indicates a credit report may be pulled prior to housing counseling, but the mortgagor cannot be charged for the report prior to closing. The report does not replace the requirement for Financial Assessment. (ML 2014-21). There is no requirement for a non-borrowing spouse credit report, except where necessary to calculate residual income to be used as a compensating factor or to reduce family size, whether property is in a community property state or not (Guide Section 2.2). HUD has clarified that where a financial obligation, such as a mortgage, is being paid off, that monthly payment need not be included in the mortgagor’s expenses. (Guide section 3.77)

Satisfactory Installment and Revolving Credit

CREDIT REPORTS

NON-BORROWING SPOUSE INCOME

DISCUSSION OF MITIGATING FACTORS

LIFE EXPECTANCY SET-ASIDES

ASSET EVALUATION

HUD has provided revised standards under which mortgagees may assess a mortgagor’s credit history in terms of the type of accounts and the type of derogatory information. Where these standards are not met, the loan is not automatically rejected; it is subject to further analysis to determine the reasons for the derogatory information. (Guide Sections 2.15, 2.16)

Assets HUD has revised the guide to permit 100 percent of the assets to be counted, except where the withdrawals from the asset are subject to federal taxes. Where federal taxes apply, mortgagees may use the lesser of 15 percent or the mortgagor’s actual tax rate as the discount factor. (Guide Sections 3.69, 3.70). Jointly held assets may be counted, provided mortgagor can document unrestricted use. (Guide Section 3.69)

Life Expectancy Property Charges

Extenuating Circumstances and Compensating Factors

Guide Section 5.1 should be reviewed for the definition and formula.

HUD has more clearly described the factors mortgagees must take into account when applying extenuating circumstances to the assessment. (Guide Section 4.1). HUD has revised the guide to provide a specific list of compensating factors and documentation requirements. (Guide Section 4.2)

Credit History for HECM For Purchase HUD has revised the guide to make clear that the credit history of nonborrowing spouses, whether the property is located in a community property state or not, need not be assessed by mortgagees. Additionally, mortgagees are not required to develop a non-traditional credit history for a non-borrowing spouse, whether the property is located in a community property state or not. (Guide Section 2.8)

Non-Borrowing Spouse and Other Non-Borrowing Household Members Review carefully the definitions of both “non-borrowing spouse” and “household member” requirements in Guide Sections 3.5 and 3.6. Note that where a non-borrowing spouse does have a source of income sufficient to meet their financial needs, and is willing to document that income for the purposes of calculating residual income, that income may be used to reduce family size on the Table of Residual Income, or cited as a compensating factor. Treatment of household member income is also provided. Guidance on counting noncash benefits as income when calculating residual income, or as a reduction in expenses is referenced. (Guide Sections 3.68, 3.76). HUD has revised the Guide to provide alternative documentation standards for mortgagors not required to file tax returns. (Guide Section 3.100)

Property Tax Exemptions and Deferrals HUD has revised the guide to permit mortgagees to exclude property taxes where such programs are in place. Where a life expectancy set-aside must be funded, the calculation of the amount of the set-aside would not have to include the exempted charges. (Guide Section 2.26)

Requiring a Property Charge Set-Aside and Determining Partial or Fully Funded Requirement The guide matrix provides additional guidance on when a set-aside must be fully funded, partially funded, or not required. The matrix is not intended to cover every possible set of financial types of risk, but rather to provide guidance on how mortgagees may balance different types of risk, and the strengths and weaknesses of a given financial situation. Further, in all situations, extenuating circumstances and compensating factors must be taken into account. (Guide Section 5.9)

Alternative to Fully Funded Life Expectancy Set-Aside Review the guide information for a partially funded life expectancy set-aside, which provides semiannual payments to mortgagor. The mortgagor pays property charges. (ML 2014-21, Guide Sections 5.5, 5.6, 5.7) reversereview . com

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The Reverse Review

December 2014 / January 2015 RR

last word

examine

Embracing the New Financial Assessment Program By George Lagarde

the public eye when a senior is foreclosed upon.

inancial Assessment is finally here! We have talked about it for months, speculating about its potential effect on the senior population. But all that is behind us now. It’s here and we have to accept it, learn about it and move on so that we can continue to help seniors who could still stand to benefit from this unique financial tool. Since last year’s audit of the MMI Fund, FHA has been trying to lower the potential foreclosure rate of the HECM program. The facts suggest that the foreclosure rate is high because a number of senior borrowers have neglected to pay the real estate taxes and insurance, in some cases because they simply cannot afford them. It’s important to understand that if the real estate taxes are not paid it is the county, not the banks, that starts the foreclosure process. The bank is drawn into this procedure because it has an equity stake to protect. It is the banks, and the FHA, that look bad in 38 | TRR

To remedy this, FHA has determined that some seniors should not qualify for a reverse mortgage because the risk they pose is too great. Financial Assessment will be implemented to determine those who are likely to pay their yearly obligations and therefore at low risk for default. Those who do not pass the assessment will have to look elsewhere for housing assistance. Financial Assessment will take effect March 2, 2015. Are we prepared? The new regulations come with 78 pages of instructions and a four-page Financial Assessment worksheet. As FHA said, “Financial Assessment includes, but is not limited to, credit history documentation, income verification, asset verification, property charge verification, residual income analysis, documentation of extenuating circumstances or compensating factors, and calculations for life expectancy set asides and residual income shortfall set-asides.” It’s hard to deny that these new documentation requirements will have an impact on reverse mortgage processing as we know it, and it may take some time to rework our

“I urge HECM loan officers to seek out all available educational opportunities between today and March 2 to learn as much as possible about FHA’s new directive in order to be in a good position to educate potential borrowers who will be coming to us for guidance. It is up to us to make the process easy and comfortable for them, and we will accomplish this by learning as much as we can about the new guidelines. Like the changes of last year, we need to embrace these recent regulations in order to conquer whatever obstacles they present.”

methods to maintain efficiency. I urge HECM loan officers to seek out all available educational opportunities between today and March 2 to learn as much as possible about FHA’s new directive in order to be in a good position to educate potential borrowers who will be coming to us for guidance. It is up to us to make the process easy and comfortable for them, and we will accomplish this by learning as much as we can about the new guidelines. Like the changes of last year, we need to embrace these recent regulations in order to conquer whatever obstacles they present. The reverse mortgage industry has undergone several radical changes in the past couple of years and we have survived those changes. Although loan officers are reluctant to accept new regulations, and we admittedly stamp our feet sometimes, we know these changes are for the benefit of the program and our seniors. In time, we will see the benefits of Financial Assessment. We will learn that fourpage worksheet until we can fill it out in our sleep, and I believe we will come to see that it is for the best. n

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Look what people are saying about... The Reverse Review

December 2014 / January 2015

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