W
EW THE EVI ER
VE
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VERSE R EV E RE
Financial planning and reverse mortgages
TH
RE
VE
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INSIDE THIS ISSUE | Jamie Hopkins on the Value of HECMs
THE
REVERSE review AP RIL 2016
HOT S EAT
FAR Sales All-Star Ryan Wall PG. 20
ORIG INAT ING
What the top 20 MSAs reveal about the market PG. 22
SERVICING
LEGAL
PG. 26
PG. 30
Behind the scenes of repair administration
RESPA’s impact on broker compensation
The Reverse Review April 2016
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8 TRR | 3
The Reverse Review April 2016
You are their face of
security.
Financial security and peace of mind—that’s what a reverse mortgage can mean. Which is why you should count on your own security and peace of mind with Celink as your reverse mortgage servicer.
celink.com | (844) 228-2101
4 | TRR
From the editor RE
V IE
E REVE W TH RS
RS VE
RE
A NOTE FROM JESSICA GUERIN
W
VE
IE
RS
VERSE R EV E RE
Financial planning and reverse mortgages
TH
EW THE
RE
EW
EVI ER
E
VI
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INSIDE THIS ISSUE | Jamie Hopkins on the Value of HECMs
THE
REVERSE review A PRI L 2016
HOTHEAT
FAR Sales All-Star Ryan Wall PG. 20
ORIGINATING
What the top 20 MSAs reveal about the market PG. 22
SERV IC IN G
But our coverage would be incomplete without participation from our readers. We’d like to thank the many dedicated members of this industry who have been actively involved in the TRR community. Your editorial contributions and thoughtful feedback have given this magazine a strong voice that is deeply rooted in the reverse space.
Behind the scenes of repair administration PG. 26
APRIL 2016
COVER
What we can do to spread the word about the H4P.
This month marks The Reverse Review’s seventh anniversary. These past several years, our team has worked hard to bring you in-depth analysis and insightful commentary about the reverse market. We’ve spoken to government officials, economists, retirement planning experts, industry leaders, and hardworking originators about the current state and the future potential of the HECM market.
L EG AL
RESPA’s impact on broker compensation PG. 30
As an industry publication, our goal is to help our readers further their product knowledge, enhance their skills and ultimately grow their business. Help us achieve this by participating in the conversation. Share your experience and insight so that we as an industry can work together to expand the reverse mortgage market for the next seven years and beyond.
JESSICA GUERIN Connect with me about how you can participate. Reach me at jessica@reversereview.com
GET THE LATEST ISSUE DELIVERED DIRECTLY TO YOUR INBOX
Feedback 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.
Meet the Team 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 Editorial Content email : jessica@reversereview.com © 2016 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
SIGN UP FOR THE NEWSLETTER AT REVERSEREVIEW.COM
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in reversereview . com
8 TRR | 5
The Reverse Review
PRC HAS BEEN
April 2016
FIRST IN REVERSE 15 YEARS RUNNING
We are proud to be the first national title and Settlement Company to specialize in reverse mortgages. Our dedicated team of professionals offers the experience and knowledge to smoothly close reverse transactions—correctly. Having closed more than 150,000 reverse mortgage loans, PRC understands the importance of comprehending all HUD and lender guidelines.
Experience | Excellence | Commitment | Pride 6 | TRR
TOLL FREE: (800) 542-4113 | www.PRClosings.com
table of contents
TRR 4.16
12 / STATS
26 / SERVICING
REVERSE MARKET INSIGHT
The essential ingredients for a satisfactory property repair
February top lenders and HECM endorsement stats through January
14 / NRMLA NEWS
24
A Recipe for Successful Repair Administration
SYDNEY GODBEHERE
Read about the association’s current initiatives.
29 / TITLE TIP
Frequently Asked Questions at Closing
17 / ROUNDUP
A collection of recent facts and surveys affecting the reverse market
Facts to help prepare your borrower for the loan’s final steps
18 / TRR TURNS 7!
30 / LEGAL
Take a look at this past year’s coverage as we celebrate another anniversary.
20 / HOT SEAT: SALES ALL-
STARS SERIES Ryan Wall
FINANCE OF AMERICA REVERSE
22 / ORIGINATING
A Message in the Numbers What the top 20 MSAs reveal about the health of the market KIRK O’CONNOR
MEGAN HAFENSTEIN
Doubling Down RESPA’s impact on reverse mortgage broker compensation JIM MILANO
32 / SPOTLIGHT
Jamie Hopkins Talks HECMs
30
The retirement planning expert on what it will take for advisors to embrace the product
38 / LAST WORD
Changing Lives, One at a Time The powerful impact of a reverse mortgage loan
24 / ORIGINATING
22
MICHAEL D. KENT
26
Reversing Our Emphasis Building a successful business model to achieve sustainable growth RICHARD WILLS
FEATURE
34 / FEATURE The H4P Why this product hasn’t taken off and what we can do about it JESSICA GUERIN
“Despite its limited success to date, the H4P is a tremendously valuable tool that can help seniors purchase a new home using their existing equity, possibly downsizing into residences that better suit their needs as they age. The premise makes sense, and as more and more baby boomers reach retirement age in the coming years, there could be a sizable demand for this product.
IN EVERY ISSUE...
11 / INDUSTRY NEWS Headlining stories of the past month REVERSE MORTGAGE DAILY
YOU CAN DO IT!
REACH OUT TO US ABOUT WRITING FOR TRR. INFO@REVERSEREVIEW.COM reversereview . com
8 TRR | 7
The Reverse Review April 2016
RFS WE WANT YOU.
The RFS platform is built for the originator by the originator. STRATEGIC INITIATIVES Proven models that deliver repeatable results.
SALES COACHING Cultivation and development with Builders, Real Estate Agents and Financial Advisors.
TURNKEY MARKETING PLATFORM Robust library of unique collateral to support your B2B and direct consumer efforts.
877-721-3847
#integrity #loyalty #diligence #compassion 8 | TRR
www.rfslends.com
NMLS #1025894
contributors JOHN K. LUNDE
12 | Stats g
John K. Lunde
Ryan Wall
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
RYAN WALL
KIRK O’CONNOR
Ryan Wall has worked for Finance of America Reverse (formerly Urban Financial) since 2013. Previously, the Southern California native worked in the insurance industry.
Kirk O’Connor has pursued market growth in the reverse mortgage industry since 2004. With a broad focus on marketing, retail and wholesale, sales leadership and direct origination, O’Connor helps others grow their business at every turn. This expertise, coupled with what he jokingly refers to as a “threeand-a-half-year sabbatical” in the market research industry, has made him a valued member of the team at Reverse Market Insight.
20 | Hot Seat: Sales All-Stars g
22 | A Message in the Numbers g
Kirk O’Connor RICHARD WILLS
24 | Reversing Our Emphasis g
Richard Wills
Sydney Godbehere
Megan Hafenstein
Richard Wills is an attorney and former law professor at George Washington University. He has written articles and held seminars on HECMs for the Maryland Institute of Continuing Professional Education for Lawyers, the National Business Institute and others. Wills, who was named Volunteer of the Year for the Baltimore Bar Association’s Senior Legal Services, is a branch manager for Open Mortgages’ Maryland, Virginia, and Washington, D.C., office.
SYDNEY GODBEHERE
26 | A Recipe for Successful Repair Administration g
Sydney Godbehere is the vice president of loan operations for Celink. She has worked at Celink for 10 years and is passionate about providing the highestcaliber service to clients and borrowers. She credits her team and Celink’s mission, vision and values with inspiring her work every day.
JIM MILANO Jim Milano
Michael D. Kent
BE A PART OF THE CONVERSATION.
30 | Doubling Down g
Jim Milano is a partner with the law firm of Weiner Brodsky Kider. Milano’s practice focuses on regulatory compliance for the financial services industry, particularly with respect to reverse mortgage issues. Milano is nationally recognized as one of the leading lawyers in the area of reverse mortgage law, and is a frequent speaker on topics of interest to industry members at various trade association conferences and webinars.
MEGAN HAFENSTEIN
29 | Frequently Asked Questions at Closing g
Megan Hafenstein is the vice president of business development at Premier Reverse Closings (PRC), a national reverse mortgage title and settlement company based in Rocklin, California. Hafenstein manages accounts nationwide from the company’s headquarters and works closely with operations to ensure that clients’ files are closed accurately. Prior to joining PRC eight years ago, Hafenstein worked in the California Legislature after receiving her B.A. in political science from Cal Poly, San Luis Obispo.
MICHAEL D. KENT
38 | Changing Lives, One at a Time g
Michael D. Kent is president of Liberty Home Equity Solutions. Kent, who has 34 years of mortgage banking experience, previously served as executive VP and president of loan origination at RMS. He is chairman of the board of directors of Community Technology Alliance, a 501(c)3 organization that provides technology solutions for ending homelessness. Kent is also president of the board of directors of the Nancy Yeary Women’s Cancer Research Foundation, a nonprofit specializing in gynecological cancer research.
Share your ideas with your colleagues and be a part of the solution. Reach out to us at info@reversereview.com.
-
reversereview . com
8 TRR | 9
The Reverse Review April 2016
10 | TRR
industry news
April Update AN UPDATE OF THIS PAST MONTH’S BREAKING NEWS
The industry’s headlining stories at your fingertips UP-TO-THE-MINUTE NEWS? Visit reversemortgagedaily.com
NEWS DIRECT TO YOU: WANT EVEN MORE
HEADLINING NEWS 1. STUDY: REVERSE
MORTGAGE BORROWERS REPORT HIGH SATISFACTION LEVELS Reverse mortgage borrowers report a high level of satisfaction with the loan, citing its ability to foster independence and improve well-being, according to the results of a recent survey conducted by The Ohio State University and funded by the MacArthur Foundation and HUD. According to the results, 83 percent of seniors who participated in HECM counseling and decided to follow through with the loan said they were “satisfied” or “very satisfied” with their decision. Of the 1,761 people who participated in the survey, 68 percent obtained and retained their reverse mortgage; 6 percent obtained a reverse mortgage and then later terminated the loan; and nearly one-quarter of respondents decided against getting a reverse mortgage after counseling. The average age of survey participants was 70 years old at the time of counseling. Approximately one-third of them were women living in single-person households and 17 percent had a four-year college degree.
// March 13, 2016
2. SEASONED REVERSE
4. FHA CLARIFIES POLICIES
In February, HMBS issuers created approximately $769 million in new HMBS pools, an increase largely driven by a big issuance of seasoned HECM loans, according to New View Advisors. February saw nearly $175 million in new HMBS pools with “very seasoned” HECM collateral, as well as a strong tail issuance totaling about $176 million. These values helped push February’s total HMBS issuance beyond both January’s $651 million and February 2015’s $635 million. Without the seasoned loan pools, New View Advisors notes that HMBS issuance would have been a “lackluster” $593 million during the month. In total, 97 pools were issued in February, consisting of 52 original issuances and 45 tail pools. Of February’s total HMBS issuance, tail issuances accounted for about 23 percent.
FHA updated its loan-level and annual lender-level certifications in an effort to provide clarity to lenders as they comply with agency policies and regulations. In a memo issued March 15, FHA announced the completion of its Uniform Residential Loan Application (Form 92900-A LoanLevel Certification), effective for use with FHA case numbers assigned on or after August 1, 2016. Concurrently, the agency also published a 30-day solicitation of public comments in the Federal Register, which is the next step toward FHA finalizing its proposed revisions to the Lender Initial and Annual Certifications (Lender-Level Certifications). In this final loan-level certification, FHA reinforces its position that lenders should not be penalized for minor mistakes, clarifying that the agency is only interested in errors that would have altered a decision to approve the loan. For the annual lender certification, FHA’s primary revision remains the addition of language requiring lenders to certify that they have not been involved in fraud or other serious criminal or civil violations.
MORTGAGES DRIVE FEBRUARY HMBS TO $769 MILLION
// March 17, 2016
3. WSJ: DON’T HATE REVERSE MORTGAGES, HATE THEIR FORMER SELF
After a wave of program change, criticism of reverse mortgages should not be directed at the product itself, but at their irresponsible use, says an article published by The Wall Street Journal. New safeguards in recent years have begun to slowly change the perceptions of reverse mortgages in the financial planning community, says the article, written by Retirement Weekly editor Robert Powell. “Over time, these changes may encourage larger banks to re-enter the market, further increasing the credibility of the product and potentially lowering costs.”
ON ANNUAL LENDER CERTIFICATIONS
// March 15, 2016
// March 21, 2016 reversereview . com
8 TRR | 11
The Reverse Review April 2016
stats February 2016
Top Lenders Report
12345 American Advisors Group
Liberty Home Equity
RMS/S1L
Endorsements
Endorsements
917
490
Endorsements
406
Finance of One America Reverse Reverse Mortgage
Endorsements
Endorsements
368
330
Lender Endorsements SYNERGY ONE LENDING INC
154
Lender Endorsements
13
LIVE WELL FINANCIAL INC
130
GATEWAY BANK MORTGAGE
13
96
MANN MORTGAGE LLC
12
NATIONWIDE EQUITIES CORPORATION
95
TOWNEBANK 12
HOME POINT FINANCIAL CORPORATION
88
UNIVERSAL LENDING CORPORATION
HIGH TECH LENDING INC
FIRST PRIORITY FINANCIAL INC
12
FIRSTBANK 51
EVOLVE BANK & TRUST
11
OPEN MORTGAGE LLC
50
VIP MORTGAGE INC
10
49
VANGUARD FUNDING LLC
10
45
YADKIN VALLEY BANK AND TRUST
9
36
SOUTHERN TRUST MORTGAGE LLC
9 9 9
CHERRY CREEK MORTGAGE CO INC THE FEDERAL SAVINGS BANK
PEOPLES BANK
ADVISORS MORTGAGE GROUP LLC
33
SUCCESS MORTGAGE PARTNERS INC
PLAZA HOME MORTGAGE INC
31
BROKER SOLUTIONS INC
30
COMMUNITY FIRST NATIONAL BANK
9
29
GEORGETOWN MORTGAGE
8
27
MORTGAGE BROKERS SERVICES
8
UNITED NORTHERN MORTGAGE BANKERS LTD 27
WILLOW BEND MORTGAGE CO
8
UNITED SOUTHWEST MORTGAGE CORP
26
UNIVERSAL AMERICAN MORTGAGE
8
PROFICIO MORTGAGE VENTURES LLC
26
LONGBRIDGE FINANCIAL LLC
26
AMERICAN PACIFIC MORTGAGE
26
25
REVERSE MORTGAGESCOM INC
FAIRWAY INDEPENDENT MORTGAGE CORP MCM HOLDINGS INC
RESOLUTE BANK
SUN WEST MORTGAGE CO INC
25
WHOLESALE CAPITAL CORP
25
BANC OF CALIFORNIA
19
SUN AMERICAN MORTGAGE
17
MONEY HOUSE INC
17
LAND-HOME FINANCIAL SERVICES BANK OF ENGLAND
16
14
AMERICAN NATIONWIDE MORTGAGE COMPANY 13 M & T BANK
12 | TRR
13
Brought to you by:
%%%%% LOOKING FOR MORE STATISTICS? Go to rmsinsight.net for all of the industry’s latest stats and rankings.
stats HECM Endorsement Stats Through January 2016 INDUSTRY SUMMARY
MO.
RETAIL
2
2,557 -11.03%
Retail Endorsement Growth
3
2,772
8.41%
4
2,597
-6.31%
1,895
5
2,477
TRAILING TWELVE MONTH ENDORSEMENTS 6,000
UNITS CHG%
-12.88%
4,000
Wholesale Endorsement Growth
-0.88%
2,000
Total Endorsement Growth
-8.04%
0 Wholesale *Numbers Represent Months
01
UNITS CHG%
4,716
-4.46%
1,862 -13.76%
4,634
-1.74%
1.77%
4,492
-3.06%
-4.62%
1,793 -5.38%
4,270
-4.94%
6
2,971 19.94%
2,324 29.62%
5,295
24.0%
7
2,694
-9.32%
0.3%
5,025
-5.1%
8
2,929
8.72%
2,820 20.98%
5,749 14.41%
9
2,589 -11.61%
2,080 -26.24%
4,669 -18.79%
10
2,427
-6.26%
1,901 -8.61%
4,328
-7.3%
11
2,467
1.65%
1,553 -18.31%
4,020
-7.12%
12
2,524
2.31%
1,705
9.79%
4,229
5.2%
2
2,199 -12.88%
1,690 -0.88%
3,889
-8.04%
* Figures Above Reflect Change from Prior Month
TOT
2,331
31,203
24,113
55,316
60% 50%
FIXED RATE PERCENTAGE
40% 30% 20%
1/1/16
12/1/15
11/1/15
10/1/15
9/1/15
5/1/15 4/1/15
8/1/15
4/1/15 3/1/15
7/1/15
3/1/15 2/1/15
6/1/15
2/1/15 1/1/15
12/1/14
11/1/14
10/1/14
9/1/14
7/1/14
6/1/14
1/1/15
02
12/1/14
ARM
{ FIGURE }
5/1/14
4/1/14
3/1/14
10% 1/1/14
HECM ENDORSEMENT TRENDS
UNITS CHG%
2,159
70%
{ FIGURE }
2/1/14
Retail
TOTAL
4.7%
8/1/14
2 3 4 5 6 7 8 9 10 11 12 1
WHOLESALE
FIXED
$1,200.0 $1,000.0
$600.0 $400.0 $200.0
12/1/15
11/1/15
10/1/15
9/1/15
8/1/15
7/1/15
6/1/15
5/1/15
11/1/14
10/1/14
9/1/14
8/1/14
7/1/14
6/1/14
5/1/14
4/1/14
3/1/14
2/1/14
1/1/14
$0 12/1/13
IN THE MILLIONS
HECM ENDORSEMENT
INITIAL PRINCIPAL LIMITS
$800.0
reversereview . com
8 TRR | 13
The Reverse Review April 2016
nrmla news BROUGHT TO YOU BY NRMLA STAFF
IN THE PRESS: 2 “Reverse Mortgages Get a Makeover,” published in the April issue of Kiplinger’s Personal Finance magazine, explains how with lower costs and less risk, reverse mortgage loans can be a flexible source of retirement income. 2 “Take your pick: Reverse mortgage, HELOC or cash-out mortgage?”, published on bankrate.com, features senior living adviser Dr. Don Taylor, who compares the pros and cons of reverse mortgages with other funding options, including home equity lines of credit and cash-out conventional mortgages, for a couple in their late 60s struggling to make ends meet. 2 “7 Moves for Retirees to Survive a Market Swoon,” published on nasdaq. com, summarizes different strategies to help retirees and near-retirees recover from recent stock market losses, including a “home-equity line of credit or reverse mortgage that can provide income for living expenses while you wait for stocks to recover.” 2 “3 Ways You Can Get More Money in Retirement,” published by The Motley Fool, recommends reverse mortgages as one of three options to stretch your retirement dollars further and open up new opportunities for income. 2 “Reverse mortgage: After spouse’s death, can you keep home?”, published by the Houston Chronicle, explains to non-borrowing spouses how the Mortgagee Optional Election, or MOE, assignment process works. 2 The Chicago Tribune published an article entitled “Have you planned to take care of your parents?”, which recommends reverse mortgages as a possible resource to help cover the cost of in-home aides and reduce the burden on family caregivers.
14 | TRR
REVERSE MORTGAGE
Education Week
Help spread positive messages about the versatility of using home equity as a retirement planning tool to your colleagues in related businesses.
KNOWLEDGE IS POWER. LET’S K E E P O U R S E N I O R S E D U C AT E D .
During the week of April 18, NRMLA will host a series of online educational sessions to teach Realtors, health care workers, financial advisors and other professionals how reverse mortgages work and how they can help meet their clients’ financial needs. At any time, professionals and service providers who work with seniors could be asked, “What is a reverse mortgage? Should I get one?” Education Week is about helping them respond with good information about how a HECM works and how it can help. NRMLA is working with the Mortgage Bankers Association, the American Society on Aging and the National Association of Realtors to reach their members, and interested guests, with educational content emphasizing the features, responsibilities and consumer protections of HECM loans. Speakers will also discuss the spectrum of ways seniors can use reverse mortgages to pay for inhome care, defer Social Security, make retirement savings last, protect investments from market volatility, do home modifications to age in place, pay off credit card debt, buy a new home, or any number of reasons a senior may consider tapping home equity to meet their needs. NRMLA is also hosting a special webinar on Friday, April 22, at 3 p.m. Eastern Standard Time that will be free and open to all professionals who work with seniors. The online educational event, “Meeting Your Clients’ Needs with a Reverse Mortgage,” will feature an overview of the product and discussions on how seniors can use a HECM loan to manage the costs of aging, enhance a financial plan and purchase a new home. You can be a part of NRMLA Education Week by encouraging the professionals in your network to register for one of the sessions listed on the event calendar. Contact Jenny Werwa, NRMLA’s director of public relations, at jwerwa@dworbell.com with questions about Reverse Mortgage Education Week.
HIGH REVERSE MORTGAGE S AT I S F A C T I O N L E V E L S A new study of HECM borrowers shows that homeowners who got reverse mortgages were generally current on property taxes, had a higher overall sense of well-being and were satisfied with their decision. The key findings come from “Aging in Place: Analyzing the Use of Reverse Mortgages,” a
comprehensive research effort led by Dr. Stephanie Moulton, a professor at The Ohio State University’s John Glenn School of Public Affairs. A first look at study outcomes is published in the March-April issue of Reverse Mortgage magazine. The outcomes, both datasupported and anecdotal, confirm that the HECM
program has fulfilled its intent and improved the lives of utilizers. Read the complete article and link to the study at nrmlaonline.org.
nrmla news O N T H E D O C K E T:
CLARIFICATION ON NON-BORROWER SPOUSE UPON DEATH OF HECM BORROWER
FY 2017 Budget Highlights
This proposed section revises the National Housing Act to clarify that the term “mortgagor” does not include the successors and assigns of the original borrower. In addition, it allows that the obligation to satisfy the loan is deferred until the death of the homeowner, the sale of the home or other occurrence of other events specified in regulations of the secretary. Finally, it provides for the secretary, in his sole discretion, to provide for further deferrals.
NEGATIVE SUBSIDY RECEIPTS The $222.7 billion in loan volume projected for the entire MMI portfolio in fiscal year 2017 is expected to generate $9.1 billion in negative subsidy receipts, including $61 million in negative subsidy receipts from the HECM MMI, which are transferred to the MMI Capital Reserve account and available to cover any projected cost increases for the MMI portfolio. Negative credit subsidies represent the projected savings to the government of operating a loan guarantee program.
STATEMENT FROM GINNIE MAE SECTION
PERMANENT REMOVAL OF HECM CAP This proposal removes the aggregate mortgage cap in Section 255(g) of the National Housing Act, which limits the total number of HECM loans that can be insured by the FHA. The department proposes to repeal the first sentence in the act to remove the cap permanently.
JEFF FLANERY Cambria Mortgage // Eden Prairie, Minnesota
WILLIAM NASS Gershman Mortgage // St. Louis, Missouri
RICK RODRIGUEZ Proficio Mortgage Ventures, LLC // Henderson, Nevada
DANIEL FULLMER Affinity Mortgage, a division of Mann Mortgage // Nampa, Idaho
(February 14-March 14)
27,467
61,701
(compared with 30,444 for January 14-February 14)
(compared with 75,641 for January 14-February 14
UNIQUE USERS
PA G E V I E W S
Lakeland Bank Oak Ridge, NJ (Lender member)
OSC, a Breckenridge Company
Irvine, CA (Associate member)
4
TRA F F I C TO REVERS EM O RT GAGE.O RG
EverBank Boston, MA (Associate member)
4
KYLE BUCK Affinity Mortgage, a division of Mann Mortgage // Nampa, Idaho
Wilmington, NC (Lender member)
4
JUDD BROWN PS Financial Services // Miami, Florida
Alpha Mortgage Corporation
4
NE W C R M Ps
NRMLA congratulates the following people for achieving the status of Certified Reverse Mortgage Professional:
NRMLA welcomes the following companies that recently became members:
4
Currently, FHA’s HECM program allows Ginnie Mae-qualified issuers to help underserved and elderly borrowers while tapping into a safe, secure and guaranteed capital markets solution. Ginnie Mae’s securitization and MBS is the only securitization program for reverse mortgages in the world. Ginnie Mae’s securitization of HECMs reduces costs to seniors by allowing issuers to offer loans at lower-than-market interest rates. By focusing on senior housing, Ginnie Mae is well-positioned to serve the needs of a major demographic subgroup that is predicted to increase rapidly in the coming years.
NEW MEMBERS
Silex Financial Group, Inc. Hawthorne, NJ (Lender member)
reversereview . com
8 TRR | 15
The Reverse Review April 2016
The Leading AMC for Reverse Mortgages What makes us the best? We know reverse and follow the industries best practices for working with your seniors. P
Borrower outreach and visit preparation
P
FHA Expertise
P
Order-hold for FHA eligibility concerns
P
Direct integration with FHA Connection, Reverse Vision, and Bay Docs
P
Dedicated rebuttal and value appeal coordinators
Call today or visit us online and see why we are leaders in reverse. 888.272.1214 landmarknetwork.com
Follow us @LandmarkAMC 16 | TRR
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roundup
THIS MONTH H O ME EQU I TY
A LOOK AT THE 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.
HE CM F A C TS
RET IREMENT ST AT S
HUD TESTIMONY SHINES LIGHT ON PROGRAM STATS.
STATES WITH THE HIGHEST % OF EMPLOYED PEOPLE AGED 65 & OLDER
Testifying before the House of Representatives Committee on Financial Services, Subcommittee on Housing and Insurance about the health of the MMI Fund, a topranking HUD official shared interesting facts about the recent success of the HECM program.
District of Columbia
Nebraska
39% 22% 46% WERE SINGLE MALES
South Dakota
WERE BETWEEN AGES 62-69
60% 46%
expect a continued increase this year
Vermont
OF THESE HOMEOWNERS:
According to a nationwide survey of 1,000 mortgage holders by loanDepot:
reported an increase in their home equity in the past three years
Alaska
IN FY 2015, THE PROGRAM HELPED 57,990 SENIOR HOUSEHOLDS AGE IN PLACE, 6,000 MORE THAN THE YEAR BEFORE.
WERE SINGLE FEMALES
{
{
Americans have equity but are hesitant to tap it.
58%
said they have always been conservative about their home equity
14%
said the housing crisis has made them more cautious about using their equity
MON EY M A TTER S Research shows Americans are carrying a greater amount of debt later in life than before. $30k $25k $20k
NUMBER CRUNCH
$15k
18 YEARS
$10k Median debt level among adults ages 65 and older, 1998-2012
The average length of retirement
$5k $0 1998
2000
2002
2004
2006
2008
2010
2012
-Statistic Brain Research Institute reversereview . com
8 TRR | 17
this is our YEARREVIEW
The Reverse Review
April 2016
We’re se
ven this yea
IN
r!
HERE’S A RECAP OF OUR RECENT COVERAGE:
CELEBRATING SEVEN YEARS OF COVERAGE
RS VE RE
EW THE
REVI SE
ER EV
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Reverse experts offer their advice. EV
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INSIDE THIS ISSUE | Refining Your Strategy: Tips for Successfully Bringing a Loan to Close
VERSE R EV E RE
E
R
THE
“For this month’s feature story, we reached out to five borrowers from around the country about their reverse mortgage experience. While each borrower’s story is unique (and each lender involved different), there were common elements among them.”
REVERSE review MAY 2 0 1 5
The
BORROWER’S
Perspective Understanding the loan from the consumer’s vantage point
05/15 ATARE E. AGBAMU SITS DOWN IN OUR HOT SEAT PG. 16
UNDERWRITING YOUR COMPANY PG. 23
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Explaining the power of the HECM EV
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INSIDE THIS ISSUE | A Call to Action: Making the Case to Financial Planners
VERSE R EV E RE
JUNE
THE HALLMARKS OF A PROFESSIONAL LOAN OFFICER
PG. 20
TH
INTERNET MARKETING // J U N E 2 0 1 5 For originators looking to connect with senior consumers, the Internet has become a powerful tool
HOW TO CONNECT WITH SENIOR CLIENTS PG. 18
VI
E
R
THE
REVERSE review
“Nowadays, prospective borrowers are going online to learn about the loan and find a lender, making it more important than ever for reverse professionals to market their services on the Web. In an effort to do so, lenders big and small are taking steps to elevate their online presence: fine-tuning their websites, posting educational resources and utilizing social media to spread the word.”
JU N E 2 0 1 5
06/15
PAUL FIORE SITS DOWN IN OUR HOT SEAT PG. 16
AVOIDING THE PITFALLS OF A DIRECT MAIL CAMPAIGN PG. 24
THE NEED FOR DIALOGUE BETWEEN SALES AND SERVICING
WHY RECENT POLICY CHANGE WILL PROPEL THE PRODUCT
PG. 26
PG. 38
THE LIFE OF A HECM LO
RE
V IE
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E
RE
RS VE
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EV
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RE
New guidelines address the NBS issue.
VERSE R EV E RE
E
R
JULY
E
INSIDE THIS ISSUE | HUD Expands the Rights of Non-Borrowing Spouses
TH
// J U LY 2 0 1 5 For many reverse mortgage advisors, the work is more than a job—it’s a passionate mission to help seniors find financial security
VI
THE
REVERSE review
“Their work requires them to not only educate, but also to listen. They build a relationship with their clients—one that is deeply personal, shaped by empathy and rooted in trust. For many, being a reverse mortgage advisor is not a career; it’s a calling.”
JU LY 2 0 1 5
For many reverse mortgage advisors, the work is more than a job—it’s a passionate mission to help seniors find financial security.
07/15
STEVE IRWIN SITS DOWN IN OUR HOT SEAT PG. 18
PG. 20
THE LOAN OF LAST RESORT: RIP
THE GREATEST ASSET
RE
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Online resources to better your business
EV
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INSIDE THIS ISSUE | Tools for a Successful Loan Originator
VERSE R EV E RE
E
R
AUGUST
PG. 28
TH
// AU G U S T 2 0 1 5 Why more Americans will access their home equity to support their retirement years
HECM-TO-HECM REFINANCE GUIDELINES
PG. 27
EW
THANK YOU TO OUR LOYAL READERS FOR ALL YOUR SUPPORT OVER THE YEARS!
UNDERSTANDING REVERSE MORTGAGE LEADS
VI
18 | TRR
Alycia Greer
HOW REVESE MORTGAGES CAN HELP SENIORS REGAIN CONTROL PG. 26
EW
MAY
WHY FINANCIAL ASSESSMENT WILL ESTABLISH A HEALTHIER BRAND PG. 21
TH
THE BORROWER’S PERSPECTIVE // MAY 2 0 1 5 Understanding the loan from the consumer’s vantage point
RALPH ROSYNEK SITS DOWN IN OUR HOT SEAT
PG. 18
VI
MARKETING DIRECTOR
W
Kersten Deck
IE
COPY EDITOR
RE
VERSE R EV E RE
Traci Knight
E
APR I L 2 0 1 5
TRR CELEBRATES SIX YEARS OF COVERAGE!
PUBLISHER
CREATIVE DIRECTOR
E REVE W TH RS
REVERSE review
PG. 12
Reza Jahangiri
Jessica Guerin
V IE
04/15
SENIOR PUBLISHER
EDITOR-IN-CHIEF
RE
We talk to counselors
THE
“The market has inarguably taken a hit in the last few years, but despite the slump, these companies have managed to stand apart from their competitors, achieving notable success in a tough environment. Since February 2014, the same lenders have ranked among the nation’s top five.”
–-The TRR team
Erik Richard
INSIDE THIS ISSUE | HECM Counselors Grapple with New FA Requirements.
TH
WE WOULD LIKE TO THANK our valued community of readers, writers and advertisers for helping make this magazine the leading publication for reverse mortgage professionals. Our dedicated staff works hard every day to bring you valuable content, insight and news to keep you informed of the numerous issues that continue to affect this ever-changing industry. Without feedback and contributions from people like you, we would not be able to accomplish this goal. Thanks for supporting us along the way!
APRIL
E
EW
TRR!
// AP R I L 2 0 1 5 How the industry’s top lenders have managed to thrive in a tough market
VI
Happy Birthday,
THE HECM’S TOP FIVE
THE
REVERSE review AU GU ST 2 0 1 5
“The fact is that Americans are living longer, approaching a long retirement without pension plans, with nominal Social Security benefits, and little in the way of savings. Many will need to consider the use of their greatest asset.” 08/15
Why more Americans will access their home equity to support their retirement years
SHANNON HICKS SITS DOWN IN OUR HOT SEAT PG. 20
DR. YUNG-PING CHEN: THE EARLIEST ADVOCATE PG. 24
GENERATING LEADS IN A POST-FA WORLD
PG. 27
UNDERSTANDING PROBATES PG. 28
RE
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REVI
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VERSE R EV E RE
Tips for effective communication
TH
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INSIDE THIS ISSUE | Mastering the Art of Reverse Mortgage Conversation
E
R
THE
REVERSE review SEPTEM B ER 2015
THE PIONEERS / / SE PTE M BER 2 0 1 5 A personal look at the early days of the reverse mortgage program
SEPTEMBER
“What began in the summer of 1989 as a pilot program with a limited run of 2,500 loans became a full-fledged, multimillion-dollar industry... Despite the ups, downs, acquisitions and regulations, the one constant is the people who remain committed to the product’s sustainability and growth.”
things WE’VE
READ
09/15
MEGEN LAWLER SITS DOWN IN OUR HOT SEAT PG. 20
WORKING WITH REALTORS PG. 24
THE NEXT GENERATION OF CRM
WHEN THE LAST SURVIVING BORROWER DIES
PG. 27
PG. 28
RE
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TH
RE
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RS
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Navigating new regulatory demands
REVI
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VERSE R EV E RE
INSIDE THIS ISSUE | Advertising Reverse Mortgages in Today’s World
E
R
THE
PG. 16
TRID’S IMPACT ON THE HECM MARKET PG. 19
AFFLUENT SENIORS AND THE H4P
NEW TECHNOLOGY ENHANCES PROFITABILTY
PG. 21
PG. 24
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VERSE R EV E RE
Tips for increasing your referral base
TH
RE
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RS
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INSIDE THIS ISSUE | Building a Network of Professional Partners
E
R
THE
REVERSE review NOVEMBER 2015
THE INDUSTRY WORKS TO FIND NEW FOOTING IN THE WAKE OF MAJOR PROGRAM CHANGE.
TED TOZER SITS DOWN IN OUR HOT SEAT PG. 22
THE IMPORTANT WORK OF REVERSE MORTGAGE TRAINERS PG. 24
TAXATION AND REVERSE MORTGAGES
HUD ISSUES A GAME CHANGER FOR T&I DEFAULTS
PG. 26
RE
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VERSE R EV E RE
A tribute to the late HECM advocate
TH
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INSIDE THIS ISSUE | Remembering Fred Thompson
E
R
review
DECEMBER 2015 / JANUARY 2016
S1L SALES ALL-STAR LARRY McANARNEY
A GUIDE TO KITCHEN TABLE COMMUNICATION
PG. 18
PG. 20
CLARIFYING YOUR BORROWER’S CIRCUMSTANCE
A HISTORICAL LOOK AT HMBS ISSUANCE
PG. 25
RE
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T H E R EVER IEW S
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VERSE R EV E RE W
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The rise of home equity conversion
THE
REVERSE review FEBRUARY 2016
nt
retireme
finances
02/16 RMF SALES ALL-STAR JULIE DIDYOUNG
COMBATTING THE MISCONCEPTION
PG. 18
PG. 20
ORIGINATIONS AND OPPORTUNITIES
HOW TO ENHANCE YOUR REFERRAL BASE
PG. 21
11 / 1 5
THE UNDERWRITER’S JOB IN A POST-FA WORLD
R
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VERSE R EV E RE W
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Engaging a borrower’s children
THE
FACTS ABOUT + LONG-TERM CARE
What you need to know about funding this daunting expense
03/16 PG. 18
BEYOND THE PITCH PG. 20
THE FOUR Ps OF MARKETING PG. 22
/ / DEC 2015-JAN 2016
DEC./JAN.
How Financial Assessment has impacted the loan process
“One year ago, we wrote a cover story outlining the details of the impending FA—speculating how the industry would react and offering tips on how to best navigate this new landscape... Now, nearly a year after FA, we’re revisiting the topic through the lens of the underwriter, exploring to what degree this monumental program change has truly impacted the industry.”
THE PUBLIC’S PERCEPTION // FEB R U ARY 2 0 1 6 Are Americans changing their opinions on reverse mortgages?
FEBRUARY
“Recently, research and commentary from noted academics and financial professionals have outlined the benefits of strategically using one’s home equity through a reverse mortgage, insisting that one’s housing wealth should become an important factor in retirement planning... The public conversation about reverse mortgages is trending toward positive, and many are predicting that public opinion will follow suit.”
THE FACTS ABOUT LONG-TERM CARE
MARCH
What you need to know about funding this daunting expense
AAG SALES ALL-STAR ALINE SIMON
-Wade Pfau
“For our industry to succeed, it is critical for us to focus on the best customer experience possible by limiting the number of people the borrower has to interact with; providing easy-to-understand checklists of the steps to come so the customer can follow along and not feel in the dark; providing possible solutions for problems when they arise; not letting too much time go by without communication; and, if they call you, making sure their questions always feel welcome.” -Jim Mahoney
PG. 25
E
INSIDE THIS ISSUE | The Benefits of Including the Kids
NOVEMBER
“The media is increasingly reporting positively about reverse mortgages, so there may be more clients asking their advisors about it. It’s going to be a slow process, but slowly but surely advisors will get updated knowledge about how the reverse mortgage world has changed.”
“In the past few years, the program has undergone massive alterations, with FHA’s policymakers working hard to secure the HECM’s long-term viability while making sure it can still meet the needs of consumers... Reverse specialists have endured quite a lot in a short amount of time. Still, many of those who have stuck it out hold firm to the belief that recent change will better the product.”
PG. 31
E
INSIDE THIS ISSUE | HECM Pioneer Dr. Yung-Ping Chen: My Story
THE IMPACT / / N O V E M BE R 20 1 5 The industry works to find new footing in the wake of major program change
PG. 30
THE
12/1501/16
“Americans are living longer than ever before, and with the aging of the boomer generation, today’s retirees are a force strong in numbers. They are confident, tech-savvy and energetic. They are a determined generation, redefining what it means to age in this country and find fulfillment in their golden years.” 10/15
HOW TODAY’S RETIREES ARE REDEFINING THE GOLDEN YEARS
MARTIN LENOIR SITS DOWN IN OUR HOT SEAT
// O C T O B ER 2 0 1 5
OCTOBER
REVERSE review OCTOBER 2015
THE NEW RETIREMENT PICTURE
How today’s retirees are redefining the golden years
LIVING TRUSTS AND THE HECM PG. 24
// MAR C H 2 0 1 6
“When establishing a plan for the future, it is essential that we consider the potential cost of the care we may need in our old age—and that we explore ways to fund those expenses.”
THANKYOU
FOR BEING A PART OF THE CONVERSATION.
“It is critical for lenders to work collaboratively to improve the product’s perception and to build awareness for reverse mortgages beyond the needs-based customer segment. Everyone in the industry should be thinking about how to double or triple our education efforts. We can all work together through NRMLA to support broader public awareness and the acceptance of reverse mortgages.” -Otto Kumbar
reversereview . com
8 TRR | 19
The Reverse Review April 2016
APRIL
2016
I CAN’T GO WITHOUT water. I drink more of it than anyone I know.
TO READ MORE ONLINE VISIT U S @ R E V E R S E R E V I E W. C O M
THE
HOT SEAT
Sales All-Stars IN THIS SPECIAL SERIES, WE HONOR OUTSTANDING HECM ORIGINATORS AT
LEADING LENDER COMPANIES. WE GET THE SCOOP ON THEIR PERSONAL FAVORITES AND LEARN THE SECRETS TO THEIR PROFESSIONAL SUCCESS.
Ryan
Wall
HECM specialist - NMLS #1122941
20 | TRR
>
FUcNts
My favorite movie
fa
is Braveheart. The
battle scenes are a little gruesome, but if you can get past that, the movie has
>
drink a big glass of
it all: action, love,
water. It is a great
humor, and it is really
way to wake up your
well-written and
body.
directed.
PERSONAL >
M Y FAV O R I T E SITE IS ESPN.COM
>
and a lot wiser. >
My favorite place to vacation is Yosemite.
My family and I go every other year and I love
>
be driving it if I didn’t get rear-ended on the freeway. >
staying up to date with what is going on in the sports world.
>
>
in comparison.
since has been easy
>
My parents taught me how to budget frugal thanks to my dad.
My favorite book is The Alchemist. It is a
>
The best purchase I ever made was
very simple
the engagement ring
story that
I bought my wife. It was expensive, but
makes you
she’s worth every
think.
penny.
The best advice I could Ryan is a Southern Califonia native.
ABOUT RYAN
remember that getting a reverse mortgage is a
mortgage. I explain to them
very major decision for the
how the program works and
>
I help them through the >
I entered the industry because there is a lot
borrower, so don’t rush
if it makes sense for them,
them.
of opportunity to grow
The most challenging part
mortgage industry continues to grow.
who has misconceptions
works to keep an open mind when discussing it with me.
I find my WORK REWARDING because a lot of seniors are burdened by financial stress and usually a reverse mortgage will eliminate or significantly reduce that stress. I really enjoy being able to rid them of that burden.
your career as the reverse
of my job is to get someone about how the program
People should seek a career in the reverse mortgage industry for job security. It is reported that 10,000 Americans turn 62 every day and as people continue to live longer and as the cost of health care increases, I believe the reverse mortgage program will be a much more common financial tool used to make sure seniors don’t outlive their retirement money.
my money. I am very
originator would be
why they need a reverse
how the program works.
When I was
give a fellow HECM
to not sell a borrower on
borrower now understands
other job I have had
BEST BOOK EVER
My biggest sales tip is
process. If not, at least the
hour movie.
really
My favorite website is espn.com. I love
PROFESSIONAL
department. Every
in the ladies’ shoe
coordinated. >
My first car was a Ford Escort. I would still
episode is like a one-
not very tall or
millions of dollars to hold a clipboard and not
>
working at Macy’s
player, but I’m
a backup quarterback. I would love to get paid
My first job was
episode of Game
to be a basketball
If I were a professional athlete I would be
have to deal with concussions.
>
younger I wanted
it because it has amazing hiking and views. >
I never miss an
of Thrones. Every
Ten years from now I plan to be a little older
Every morning I
>
I love my job because I
enjoy providing seniors with peace of mind for the future and my workday always goes by really fast.
KEEP AN EYE OUT FOR MORE OF OUR S A L E S A L L - S TA R S IN TRR’S HOT S E A T. D I S C O V E R W H AT M A K E S THESE LEADING O R I G I N AT O R S SUCCESSFUL IN THEIR FIELD.
reversereview . com
8 TRR | 21
The Reverse Review April 2016
ORIGINATING
RR
ASSESS
RR
RR
A Message in the Numbers By Kirk O’Connor
What the top 20 MSAs reveal about the health of the market
In a review of the HECM’s top 20 MSAs (metropolitan statistical areas), there are a few messages that shouldn’t be ignored. These messages indicate an expanding number of originators (actively originating companies), an increased number of endorsements, a possible connection between the two, and an increase in endorsements per originator. As we look at the top 20, we need to note the following: l They represent 36.3 percent of all endorsements. l They include 23 percent of all age-eligible homeowner households. l They indicate a 3.65 percent penetration rate (the percentage of age-eligible homeowner households with an active reverse mortgage today), compared with the national average of 2.41 percent. l In 2015, they endorsed 3.3 loans per 1,000 age-eligible homeowner households (the national endorsement rate is 2.1 per 1,000). l They boast a collective 12.22 percent growth in endorsement volume (past 12 months), in contrast to the national growth of 2.41 percent. 22 | TRR
To the right is the list of MSAs, their rank and an abbreviated list of variables reviewed. Expansion of an Active Marketplace Among the top 20 MSAs, 70 percent experienced an increase in originators. Those that experienced a decrease did so by only single digits. The top 20 MSAs collectively expanded by 159 active originators, translating to a 13.05 percent increase. This increase in the number of active companies within the top MSAs is particularly interesting when compared with an overall industry expansion of 8.49 percent. Growth in Production Adjacent to an expanding number of originators, the top 20 MSAs yielded 12.22 percent growth versus the 2.41 percent nationwide. About 75 percent of the top MSAs showed growth, with only one (Philadelphia) experiencing a double-digit decline. Notably, 11 of the 15 areas that experienced growth did so with double-digit movement! As our market continues to mature, it is a positive message to see this collective growth across a number of the top markets—even when industry growth may not feel entirely optimistic.
ORIGINATING
TOP 20 MSAs MS
A
RA
NK
LO
AN
S
Los Angeles-Long Beach-Glendale CA
1
2,935
Riverside-San Bernardino-Ontario CA
2
New York-White Plains-Wayne NY-NJ
TS N EN ING TIO EM TING RS A N AT TRA DO IGIN IGI NIES PENE N R E O A OR E MP P E R PA N Y R AT CO M CO
429
4.65%
6.84
1,717
280
5.71%
6.13
3
1,654
198
2.83%
8.35
San Diego-Carlsbad-San Marcos CA
4
1,164
214
4.28%
5.44
Chicago-Naperville-Joliet IL
5
1,016
97
2.40%
10.47
Santa Ana-Anaheim-Irvine CA
6
1,010
252
3.57%
4.01
Phoenix-Mesa-Scottsdale AZ
7
1,008
95
3.24%
10.61
Nassau-Suffolk NY 8
999
119
4.18%
8.39
Houston-Sugar Land-Baytown TX 9
975
88
2.67%
11.08
10
947
103
3.40%
9.19
Oakland-Fremont-Hayward CA
11
883
135
3.46%
6.54
864
113
3.89%
7.65
13
798
156
4.48%
5.12
Philadelphia PA 14
776
108
3.19%
7.19
Dallas-Plano-Irving TX 15
715
82
2.99%
8.72
Sacramento-Arden-Arcade-Roseville CA
672
130
7.27%
5.17
625
66
1.83%
9.47
Baltimore-Towson MD 18
596
82
4.87%
7.27
Edison NJ 19
552
103
3.45%
5.36
20
546
81
3.02%
6.74
Seattle-Bellevue-Everett WA
3.52%
ENDORSEMENTS PER ORIGINATING COMPANY
13.07
TOP 20 LOANS
20,452 PENETRATION RATE
3.56%
ORIGINATING COMPANIES
1,377
ENDORSEMENTS PER ORIGINATING COMPANY
14.85
NATIONAL LOANS
56,363 PENETRATION RATE
2.41%
ORIGINATING COMPANIES
2,223
ENDORSEMENTS PER ORIGINATING COMPANY
25.35
TITLE TIP
16
Atlanta-Sandy Springs-Marietta GA 17
Miami-Miami Beach-Kendall FL
PENETRATION RATE
1,027
SERVICING
Denver-Aurora CO 12
13,425
ORIGINATING COMPANIES
ORIGINATING
Washington-Arlington-Alexandria DC-VA-MD-WV
TOP 10 LOANS
To t a l k f u r t h e r a n d e x p l o re yo u r m a rke t , v i s i t r m i n s i g h t . n e t .
l 93 percent of those that experienced originator expansion (or 100 percent of those with originator expansion greater than 3 percent) also enjoyed endorsement growth. l 93 percent of those that experienced endorsement growth (or 100 percent of those with endorsement growth greater than 2.25 percent) enjoyed originator expansion. l The difference between the top 20 MSA collective growth (12.22 percent) and collective expansion (13.05 percent) is less than one percent (.83 percent to be precise)! Bringing this Home: Endorsements per Originator Anytime the marketplace expands, some will fear an increased difficulty in growing or sustaining year-over-year production. With the top 20 MSAs being the most active, seeing how
lN ine of the 15 MSAs that experienced originator expansion (almost two-thirds) had an increase of EPO. lO nly three of the five MSAs that experienced endorsement decrease also measured a decrease of EPO. lN ationally, the industry measured 25.35 EPO, down 1.51 from 2014 (a 5.61 percent loss). lF or the top 20 collectively, the decrease was only .11, landing at 14.85 EPO (only a .74 percent loss)! Conclusion In summary, in an industry that has been plagued with disruptions and negative messages in recent years, it is good to filter out the noise and notice positive movement. Although the correlation between originator expansion and endorsement growth isn’t totally clear at this point, we can see they are connected in a positive way. Additionally, as our industry expands, we can feel comfortable with how the endorsements per originator had negligible change in the past year, and in fact showed more consistency in markets with increased competition. n reversereview . com
8 TRR | 23
SPOTLIGHT
When stacked side by side, it is hard to say which is more influential. Did the increase in originators drive greater growth, or did growth in production allow an increase in the number of originators? Answering that question may be helpful someday, but it isn’t critical at this moment. Instead, let’s explain what we do know about the top 20 MSAs:
expansion has impacted endorsements per originator (EPO) is a good place to start testing this theory. Consider the following:
LEGAL
Connecting Expansion & Growth
The Reverse Review April 2016
ORIGINATING
Reversing Our Emphasis By Richard Wills
Building a successful business model to achieve sustainable growth The HECM program is an underutilized, powerful financial product that can provide meaningful advantages to millions of seniors. We need initiatives that first and foremost benefit our clients; this will benefit our industry and promote sustained growth. Unfortunately, some people in our industry failed to realize this simple proposition in the past. They developed initiatives designed to benefit their companies without regard to the degree it would impact consumers. Emphasis on these initiatives led to periods of shortterm growth, but also resulted in long-term problems and stagnation. A quick trip down memory lane will illustrate two of the most striking examples of such behavior.
No.1 Combining the sale of annuities with the sale of reverse mortgages
Some in the industry engaged financial advisors who sold annuities by showing originators they could receive an origination fee for selling a reverse 24 | TRR
mortgage, and then make a second fee by encouraging clients to use the proceeds of the loan to purchase an annuity. Companies allowed this tactic because they could collect two fees without considering how it would impact the consumer. In fact, the concept of buying a reverse mortgage in order to purchase an annuity product was financially detrimental to many borrowers. This initiative led to shortterm sales growth, but had catastrophic results in the long term (government intervention and regulation, extremely negative publicity and harm to the consumer).
No.2 The fixed-rate HECM
The development and introduction of the fixed-rate reverse HECM was a welcome advancement for the program. Then some companies developed initiatives that tainted the entire industry. They strongly encouraged their sales teams to sell the fixed rate because they could make more money. Some companies went further by only originating fixed-rate HECMs. It did not matter whether a fixed rate benefited the borrower or not. This practice led several to make a lot of money in the short term, but again led to catastrophic results in the long term (more government intervention and regulation, harsh negative modification of the fixed-rate program, harm to FHA’s MMI Fund, and financial harm to numerous consumers). Currently, our industry is emphasizing initiatives to recruit “new blood” and developing mutually beneficial relationships with financial advisors and Realtors. These are all essential, intelligent undertakings to increase our business and create sustainable growth. The question now becomes: Can we accomplish these initiatives without shooting ourselves in the foot? We can if we do not lose sight of the fact that these initiatives must be conducted with a focus on providing the maximum benefit to our borrowers.
I am offering the following suggestions to stimulate discussion on how we can build a model for our industry that will create more sales now and sustainable growth in the future.
1
Change the emphasis on companies’ recruiting of new loan originators. Many in the industry are using aggressive tactics to lure forward originators to the reverse world. Much of the advertising I have seen merely emphasizes how much money one can make on a reverse. This is certainly not the picture our industry wants to paint. We all want to and can make a good living for ourselves, but you can expect disastrous results if you bring in people whose single overriding reason for entering the market is to make money. The reverse mortgage can be a complex financial product. In seeking new originators, look for people who have a financial background; people who have the ability to understand complex ideas and then be able to clearly explain these ideas to potential borrowers; people who can be trained; people active in their communities; and people who care about the product and their clients.
2
Companies need to establish proper training for new originators and continuing training and education for their current originators. This will require companies to invest the time, money and other resources necessary to educate originators on the complexities of the product. Companies should consider implementing mandatory continuing training and even testing new originators before they are sent into the field. The industry must bring in financial advisors and those who work in real estate to train originators on how to properly approach and deal with these professionals. NRMLA is doing a very good job of this at its conferences, but because so many originators do not attend these meetings, it will be up to companies to fill this void.
ORIGINATING
3
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The post-HECM change era begins and the Age of Aging continues.
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now believe I was wrong; we need more than that. I believe companies need to develop a short guidebook to explain what the borrower can expect post-settlement. Some of the topics that should be included in this notice are an explanation of how to read their monthly statement (include an example of a monthly statement), directions on how to request funds from their line of credit, directions as to what a non-borrowing spouse has to do to remain in their home, and detailed information on timelines and actions that must be taken when the reverse mortgage becomes due and payable. Companies should develop dedicated systems for their borrowers to receive quick, accurate information concerning their post-settlement issues. Keep your clients happy and informed. Do not let their confusion about post-settlement issues change their positive perception about the program. n
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Companies and originators must own the loan with the borrowers. By this I mean your involvement should not end at settlement. I receive the majority of my leads through referrals and encourage my clients to keep in touch. Your client base should be an excellent source of referrals and good will for the program. However, I have been receiving more and more phone calls from my clients, as well as other borrowers, who were previously happy with the program and are now irate about situations they experienced post-settlement. Some of these issues can be tied to problems with servicing, but numerous problems seem to be based upon confusion and ignorance about the required procedures necessary to resolve the borrower’s issues. I once believed that thoroughly discussing what to expect after closing would be sufficient preparation for the borrower. I
ORIGINATING
Coming of Age, a baby boomer and senior marketing agency, writes on their blog that through their work with seniors, “Older consumers tend to be quicker than younger consumers to reflect emotionally a lack of interest in or negative reaction to an offered product… Such ‘first impressions’ are more likely to be permanent than among the younger set, who are more likely to give a marketer a second chance.” For the long-term success of the HECM program, it does not make sense to flood the market with new originators who are inadequately trained, looking to make the most money they can on the loan and do one or two reverse mortgages a year. Our industry cannot afford to have these originators creating the first impression of the program for seniors and financial professionals. In the short term it might result in more originations, but in the long term many more seniors and financial advisors might develop lasting negative perceptions about our program, negatively impacting our attempts to create sustainable future growth.
“The reverse mortgage can be a complex financial product. In seeking new originators, look for people who have a financial background; people who have the ability to understand complex ideas and then be able to clearly explain these ideas to potential borrowers; people who can be trained; people active in their communities; and people who care about the product and their clients.”
SPOTLIGHT
How is the current economy impacting senior spending? What is the pattern of boomer demographics? What persuaded boomer borrowers to take their reverse mortgages? How are we going to solve the long term care funding problem? How does solar energy equipment affect obtaining a reverse mortgage? All this plus the CRMP Ethics Course and a whole lot of Networking
MAY 10 & 11 Join us at the beautiful Hyatt Regency on the ocean in Huntington Beach, California May 10 and 11 for NRMLA’s Western Regional Meeting
Learn More and Register at NRMLAonline.org reversereview . com
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The Reverse Review April 2016
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A Recipe for Successful Repair Administration By Sydney Godbehere
work alongside the borrower to complete repairs. In the best loan experiences, the borrower has been informed up-front in the loan origination process of what must transpire in order to satisfy the Repair Rider requirements associated with their reverse mortgage. We still encounter borrowers who are unaware of the deadline associated with the repairs or the stipulations wrapped around releasing funds from the Repair Set-Aside, and don’t understand why loan servicers won’t hire the contractors to complete the work on their property! When borrower understanding, the most important ingredient in the loan process, is neglected or overlooked, the recipe for success can rapidly become a recipe for failure.
The essential ingredients for a satisfactory property repair Every effort, whether one is making a chocolate pie (my favorite!) or facilitating the repair administration of a reverse mortgage loan, should follow a proven recipe for success. I can’t vouch for the flakiness of my piecrust, but I can vouch for how well the professionals on my team follow a recipe for success in the repair administration process. I’ve been asked to share that recipe and I’m proud to do so on their behalf. Assemble the Ingredients During the loan origination process, a determination is made as to whether or not repairs need to be completed on the property. Many borrowers have lived in their homes for decades and in that time the property has aged and building codes have changed. A HUD appraiser visits the property and indicates if and what repairs need to be completed to bring the property up to FHA standards. The borrower can either complete the repairs prior to closing or 26 | TRR
the repairs will be required on a Repair Rider. The borrower cannot close on the loan without first agreeing to this Repair Rider. Additionally, when there are repairs that must be completed, the additional Net Principal Limit will be withheld from the borrower and kept in the Repair Set-Aside. The loan servicer will monitor repairs to the property. Preparation and Baking The borrower’s understanding of the repair process lays the foundation for a successful loan experience and can be likened to the quality of the piecrust in determining the overall quality of the pie. Shortly after the loan is boarded with the servicer, the borrower receives a letter explaining the repair process and Repair Administration servicing professionals
The deadline date is the first and most critical piece of information the servicer must relay to the borrower of a loan with Repair Requirements. HUD Mortgagee Letter 2015-10 stipulates that a loan must be forwarded to HUD to review for due and payable within 30 days of becoming “eligible” (loan with a repair set-aside would become “eligible” when it reaches the Repair Rider due date, or the expiration of any previously approved HUD time extensions). The servicer stresses this deadline to ensure repairs are completed within the specified timeline on the Repair Rider. If the deadline is less than 12 months away, the borrower may request extensions from HUD for up to one year from the closing date to complete the repairs. If the deadline is set at one year from closing, a borrower is not eligible to request extensions from HUD. Once the loan reaches the deadline date, including any applicable extensions, the loan must be placed into default
SERVICING if the Repair Requirement has not been fulfilled.
Serve and Enjoy!
LEGAL
Looking for a true partner to help you grow your reverse mortgage business?
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Once our “pie” is baked, the servicer is able to release the Repair Set-Aside funds to a contractor for their unpaid labor costs. Funds can also be given to
SERVICING
Once repairs are complete, a HUDcertified appraiser visits the property to ensure the repairs meet FHA guidelines. Once they confirm the repairs have been approved, the appraiser adds the top crust and the servicer is then able to put the pie in the oven.
There’s a great feeling of satisfaction “Extending our pie metaphor, the for both the borrower Repair Set-Aside funds can be and the Repair likened to pie filling. The pie is not If there are any Administration yet ready and the servicer cannot pay remaining Repair professional when contractor deposits to begin work Set-Aside funds, repairs are certified prior to the repairs being completed the payment plan complete. The and approved. The loan servicer can type determines borrower savors only remove some of the ‘filling’ that their disposition. has been set aside for materials that the slice of comfort The servicer is have been delivered to the worksite, that comes with unable to release are being held in a secure location, the knowledge that any unused Repair and are not yet incorporated into the their home, their Set-Aside funds work.” investment, has been to the borrower if enhanced. The Repair the payment plan Administration is a lump sum. This can be difficult for professional has the satisfaction that a borrower to understand. We explain comes with having created a great unused funds as the unused portion of borrower experience. a line of credit. Credit card holders are only charged for the amount of credit What happens when the borrower they have used—not the entire credit ignores the timer set for proper baking? limit. If a borrower doesn’t use all the As a servicer, we would love if all funds available, he does not owe or repairs were completed before the receive the funds and is not charged deadline. Unfortunately, this is not the with interest on the funds. The servicer case. I’ll discuss more of what occurs transfers any remaining Repair Setwhen repairs are not completed in a Aside funds to the available line of future issue. Bon appétit! n credit when a loan is not a lump sum.
ORIGINATING
Extending our pie metaphor, the Repair Set-Aside funds can be likened to pie filling. The pie is not yet ready and the servicer cannot pay contractor deposits to begin work prior to the repairs being completed and approved. The loan servicer can only remove some of the “filling” that has been set aside for materials that have been delivered to the worksite, are being held in a secure location, and are not yet incorporated into the work.
the borrower to reimburse out-ofpocket expenses.
SPOTLIGHT
Partner with FirstBank to access our boutique wholesale platform.
Call Bob Garczewski at 877-874-5546 for more information. Visit us at fbreverse.com. reversereview . com
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The Reverse Review April 2016
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Frequently Asked Questions at Closing By Megan Hafenstein
AND
A: Due to the fact that there is no maturity
date on a HECM loan, HUD has designed a calculation by increasing the amount on the deed of trust by one and one-half times the national lending limit or appraised value, whichever is less.
A: The first deed of trust secures the
lender’s position and HUD assumes the second position since it is insuring that the homeowner will continue to receive loan payments in the event that the lender becomes incapable of making said payments.
Q: What is the amount of title insurance required for a HECM loan?
A: In order to calculate the amount of Be a part of our conversations or see who is in our network. Join The Reverse Review group on LinkedIn or follow us on Facebook.
title insurance required, PRC refers to the amount stated on the lender’s instructions, which is usually the national lending limit or appraised value, whichever is less.
A: Mortgage Insurance Premium is
collected and paid to HUD because HUD is insuring the loan in case the lien surpasses the home value or if the lending institution can no longer make loan payments to the borrower.
Q: Can the borrower add or remove persons from title after the closing?
A: On a HECM loan, the borrower’s age
is a factor in determining the loan amount. Therefore, altering title can make the loan become due and payable because you are changing the terms of the loan.
Q: When will the borrower receive their monies?
A: After the three-day right of rescission,
if all conditions have been met, the loan will fund and monies will be sent via check (overnight) or wire, depending on the method the borrower has chosen. Note: The Federal Reserve closes at 5 p.m. Eastern Standard Time. If the wire has not been sent by that time, the borrower will receive their monies the next day.
reversereview . com
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SPOTLIGHT
recorded on the property for the HECM loan?
collected on a HECM loan?
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Q: Why are there two deeds of trust
Q: Why is Mortgage Insurance Premium
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Facts to help prepare you borrower for the loan’s final steps
of trust more than the maximum claim amount for that county?
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Frequently Asked Questions at Closing
Q: Why is the loan amount on the deed
ORIGINATING
Q A
The reverse mortgage process is long and often emotional for our borrowers. By the time the senior has completed the numerous steps involved and it’s time for the signing, all parties are often breathing a sigh of relief that the loan is soon to close. It’s at that time when many questions arise. With more than 15 years of reverse mortgage closing experience, PRC has compiled a list of the most frequently asked questions at a closing to help prepare your borrower for the closing table.
The Reverse Review April 2016
REVIEW
LEGAL
Doubling Down By Jim Milano
Want the online version? reversereview.com/magazine
RESPA’s impact on reverse mortgage broker compensation The Real Estate Settlement Procedures Act (RESPA) has been with us since 1974, but with recent CFPB enforcement actions in the mortgage industry, it has been in the news a lot lately. However, despite its age and the relatively new regulator charged with its implementation, there continues to be confusion surrounding the impact of this statute on mortgage broker compensation with reverse mortgages. The source of that confusion is perhaps twofold: new entrants into the reverse mortgage market without a full understanding about reverse mortgages, and an improper interpretation of RESPA as it applies to lender-paid mortgage broker compensation, due perhaps in part to HUD’s changes to the statute in 2010 and the more recent advent of loan originator compensation rules. Let’s take the latter point first. RESPA does not place a dollar or percentage limit on lender-paid mortgage broker fees. Instead, it allows a “payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed.” In HUD’s Statement of Policy 19991, the department outlined that, in determining whether a payment from a lender to a mortgage broker is permissible under Section 8 of RESPA, the first question is whether services were actually performed for the compensation paid. The second question is whether the payments are reasonably related to the value of the services
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performed. In analyzing whether lender payments to mortgage brokers comply with RESPA’s requirements, HUD believes that the totality of the compensation to the mortgage broker for the loan must be examined, including if the lender and the borrower both pay the mortgage broker for the same transaction. Since this statement of policy was issued, a lot has happened on the mortgage front. HUD revised RESPA disclosures; the Loan Originator Compensation Rule took effect; Congress enacted the Dodd-Frank Act; and FHA modified the HECM program. As part of Dodd-Frank, authority over RESPA and the Loan Originator Compensation Rule transferred to the CFPB. Under the revised RESPA guidelines, lender-paid mortgage broker compensation is disclosed as a “credit” to the borrower on the HUD-1. However, FHA stated in Mortgagee Letter 2009-53 that the figure in line
801 of the HUD-1 representing all compensation to the lender/broker for loan origination may exceed the origination fee cap set for government programs. Thus, regardless of the fact that the “origination charge” noted on the HUD-1 may be higher than a program limit on fees, such disclosure under revised RESPA math does not indicate a violation of the HECM origination fee limit. In other words, the “origination charge” under revised RESPA is not the same as an “origination fee” under HECM rules; an origination charge includes the credit of lender-paid mortgage broker fees, an origination fee does not. Further, unlike RESPA, the Loan Originator Compensation Rule prohibits lender payments of yield spread premiums and so-called “dual compensation” (payment to the broker both by the consumer and the lender). However, the Loan Originator Compensation Rule only applies to closed-end credit. Most, if not all,
LEGAL RESPA: Real Estate Settlement Procedures Act
lenders cannot pay mortgage broker compensation separate from fees (i.e., a HECM origination fee) directly charged to a HECM borrower. In fact, mortgage brokers are not mentioned in ML 08-34, indicating that the statute does not place limits on lender-paid mortgage broker fees that are not directly charged or assessed to a HECM borrower.
RESPA,” including if the lender pays the mortgage broker and the borrower pays the mortgage broker in the same transaction.
LEGAL SPOTLIGHT
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SERVICING
Where does this leave us today? On variable-rate HECM loans, which If a mortgage are structured as open-end credit, broker is paid from the dual compensation limit of the two sources on an Loan Originator Compensation open-end HECM (an Rule does not directly apply. Thus, origination fee and conceivably, a mortgage broker lender-paid mortgage originating a HECM could be paid broker compensation), this does not mean that both an origination fee from the a RESPA violation has borrower, and receive lender-paid occurred. compensation. (Alternatively, a In its old statement of policy, HUD broker could be compensated only stated, “To the extent the payment is by the FHA lender without the broker in excess of the reasonable value of the charging the borrower an origination goods provided or services performed, fee. Whether the lender charges the the excess may be considered a kickback borrower an origination fee in these fixed-rate HECMs are structured as or referral fee proscribed by Section instances is not limited by the Loan closed-end credit, and variable-rate [8]”, and that “those persons and Originator Compensation Rule.) ML HECMs are structured as open-end companies that provide settlement 08-34 addressed FHA mortgagee lender credit. services should therefore take measures payments to FHA-approved loan to ensure that any payments they make In 2008, FHA published Mortgagee correspondents. FHA-approved loan or commissions they give are not out Letter 2008-34 to implement the HECM correspondents no longer exist. HUDof line with the reasonable value of the origination fee limits put into place by 1 disclosures continue to be required services received.” However, what value the Housing and Economic Recovery for reverse mortgages and origination is reasonable for the services received is Act (HERA) of that same year. Prior charges as shown on line 801 may be a market-based to this time, there was a $6,000 overall higher than $6,000. determination, regulatory cap on HECM origination This does not mean a and HUD was fees. HERA included this cap and RESPA violation has “In analyzing whether lender clear to state also added a “sliding scale” limit on occurred. payments to mortgage that RESPA is HECM origination fees, so that loans brokers comply with RESPA’s If a mortgage broker not a rate-setting with a maximum claim amount of requirements, HUD believes that is paid one fee on a statute. less than $600,000 will have a lower the totality of the compensation closed-end HECM (for origination fee cap. ML 08-34 states that to the mortgage broker for the While there instance an origination a HECM’s origination fee, which may loan must be examined, including is a long, and fee, or lender-paid be fully financed with loan proceeds, if the lender and the borrower sometimes mortgage broker includes fees paid to FHA-approved both pay the mortgage broker for convoluted and compensation, but loan correspondents and covers a full the same transaction.” confusing, history not both) but paid array of origination services, which to lender-paid from two sources on were listed in the letter. ML 08-34 also mortgage broker an open-end HECM states that lenders may not charge the compensation in the reverse mortgage (an origination fee and lender-paid borrower any fees in addition to the industry, there is also a “new cop on the mortgage broker compensation), origination fee to pay FHA-approved beat.” Not understanding that history this does not mean that a RESPA loan correspondents. In 2010, the agency could lead to incorrect conclusions. By violation has occurred. As HUD did away with the FHA-approved loan the same token, not being mindful of the stated in 1999, “Total compensation correspondent category and allowed new regulatory environment could also should be reviewed to assure that it is non-FHA-approved mortgage brokers to lead to unfavorable results. n reasonably related to goods, facilities, more fully participate in the origination or services furnished or performed to of HECM loans. (See Mortgagee Letter determine whether it is legal under 2010-20.) ML 08-34 does not state that
ORIGINATING
The CFPB has inherited RESPA, and the bureau previously stated that it would follow prior agency guidance until it promulgated new rules. The CFPB promulgated TRID, which combined RESPA and TILA disclosures, but TRID does not apply to reverse mortgages. In recent enforcement actions, the bureau has shown disdain for some prior HUD RESPA statements of policy, but that is not rulemaking; it is enforcement. Pursuant to the Dodd-Frank Act, the CFPB also has other laws in its tool chest, such as unfair, deceptive, or abusive acts or practices.
The Reverse Review April 2016
SPOTLIGHT
“
IN THIS MONTH’S EDITION
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WE TALK TO RETIREMENT PLANNING EXPERT JAMIE HOPKINS ABOUT REVERSE MORTGAGES.
comprehensive approach when crafting a retirement plan, and he says home equity should be part of that equation. Named one of the top 40 under 40 financial service professionals by InvestmentNews, Hopkins is the codirector of the New York Life Center for Retirement Income and an associate professor at The American College in Bryn Mawr, Pennsylvania, where he teaches courses in retirement, estate planning and life insurance. Lately, the frequent Forbes contributor, who is slated to speak at this month’s NRMLA conference in New York City, has been gaining attention for his adamant support for reverse mortgages.
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april 2016
The retirement planning expert on what it will take for advisors to embrace the product
INANCIAL PLANNING GURU JAMIE HOPKINS BELIEVES IN taking a
“Baby boomers are moving into retirement and they simply don’t have enough assets saved,” he says. “The main asset they have besides Social
“
F
Jamie Hopkins Talks HECMs By Jessica Guerin
Security benefits is home equity. People are going to have to start using home equity as a strategic tool for their retirement income planning. It’s going to be the saving grace for a lot of these individuals.”
Hopkins says he began paying attention to the use of reverse mortgages in an overall retirement income strategy about four years ago upon reading research from John Salter, Barry Sacks and others exploring its use. He incorporated this research into coursework for the Retirement Income Certified Professional program, a course he created at the American College that currently includes 1,000 financial advisors. “When you take a comprehensive view, you have to look at home equity. We are finally seeing good research supporting the use of reverse mortgages, where before it was almost a niche market in some regard,” he says. “The research suggests that a lot of people should be
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looking at this and using it as part of their plan.” While he has written numerous articles for Forbes detailing how a reverse mortgage could be useful, he admits that the public and the financial planning community have been slow to catch on. “I think part of the misconception is driven by old rules and new rules. The HECM has undergone changes, and whenever you have constant change you have news media that tends to push the negative,” he says, adding that a lack of familiarity doesn’t help. “People are very familiar with a traditional mortgage, but they just don’t have experience with reverse mortgages. When you’re not experienced with something and you just hear little bits and pieces about it here and there, it’s always going to be a challenge to make sure it’s understood.” Hopkins says Americans in general have very poor financial literacy and even
SPOTLIGHT
“People are going to have to start using home equity as a strategic tool for their retirement income planning. It’s going to be the saving grace for a lot of these individuals.”
FINANCIAL ADVISORS AND MORE COMPANIES ON BOARD, WHICH WILL BE A BIG CHALLENGE, THEN WE’LL SEE ADOPTION RATES START GOING UP. ”
But Hopkins admits that this will be a difficult task. “There are compliance issues for some companies, which is a problem. Certain companies just can’t talk about reverse mortgages and suggest their use. There are still legal hindrances that have slowed down the development and adoption of reverse mortgages in the broader industry.” According to Hopkins, another hurdle is the lack of financial planning software that incorporates HECMs. “That is another huge challenge right now. You can tell a financial advisor, ‘Let’s use a reverse mortgage,’ but very few software programs out there have that ability built in, so they have to do a lot of extra work just to go down that path,” he says. “Once you see software programs building in reverse mortgages, things will improve.”
Despite the challenges, Hopkins says he thinks the industry can tackle the hurdles it faces and push the HECM further into the mainstream— and he doesn’t even think it will take all that long. “I think over the next five or so years we’ll start to see more positive press, more educated financial advisors and more research. All the groundwork is starting to build, but now we’ve got to get it to that next step where financial advisors and companies begin to build this into their process and communicate the benefits to their clients.” n reversereview . com
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SPOTLIGHT
“AS WE GET MORE
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Co-director of the New York Life Center for Retirement Income
But in order for reverse professionals to really succeed in building connections with the financial planning community, Hopkins says they need to learn to speak their language. “The reverse mortgage industry needs to better understand what financial advisors are doing. I too often talk to reverse mortgage experts who say they know everything about reverse mortgages, but they really don’t quite understand what financial services are doing with retirement income planning. They need to learn the language so they can properly explain it to somebody in that industry and explain how it’s going to benefit them,” he says. “They need to educate themselves about retirement income strategy.”
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JAMIE HOPKINS
“We’ve got to start targeting financial services, because they’re the ones who are clientfacing—they connect with the clients who are the right people for reverse mortgages. So as we get more financial advisors and more companies on board, which will be a big challenge, then we’ll see adoption rates start going up.”
Hopkins says recent changes to the program are helpful because they allow reverse specialists to reintroduce the product. “They are good talking points for people. You can now say, ‘Look, there were problems and the government has moved to solve a lot of these problems.’”
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Hopkins says it will take time to improve the public’s understanding of HECMs, and that connecting with financial advisors is the first step.
But Hopkins says he does believe things will change in time. “There’s research. There are more and more positive articles. There are people in financial services writing about this and how to use this strategically. But it’s not a clear path when you’ve got compliance issues and when you’ve got a misunderstanding about reverse mortgages, so it is going to take time.”
ORIGINATING
worse retirement income literacy, which doesn’t help matters. “At the American College, we do a very large literacy test of Americans for retirement income planning and they do very poorly. Very few of them can actually pass the exam. It’s not just reverse mortgages that they don’t understand, but also annuity products and insurance products and withdraw strategies. All of those products struggle with misconceptions as well, but reverse mortgages might struggle more, because the misconceptions actually keep people from considering the product.”
The Reverse Review April 2016
By Jessica Guerin
By all accounts, the HECM for Purchase product is underutilized. Since it first launched in 2009, lenders have simply failed in their attempts to market the H4P and inform Realtors about its potential, inciting some to claim that, as an industry, we have failed the product. But despite its limited success to date, the H4P is a tremendously valuable tool that can help seniors purchase a new home using their existing equity, possibly downsizing into residences that better suit their needs as they age. The premise makes sense, and as more and more baby boomers reach retirement age in the coming years, there could be a sizable demand for this product. The question is: How do we better educate the Realtor and builder communities and spread the word about the power of the H4P? How can we help this product realize its true potential?
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174
South Carolina
158
Virginia
155
North Carolina
147
R
SYNERGY ONE LENDING INC
158
AMERICAN ADVISORS GROUP
142
2461
2006
184
Colorado
192
Texas
REVERSE MORTGAGE FUNDING LLC
2015
235
1678
246
Ohio
271
Arizona
CHERRY CREEK MORTGAGE CO INC
2014
521
1645
665
Utah
670
Florida
RMS/SECURITY ONE LENDING
total
2013
849
2009
California
year
Volume 1/2014 - 1/2016
1594
Lender
HECM Loans Closed 1/2014 - 1/2016
H4P Annual Totals
State
Top H4P Lenders
Chris Bruser, a Florida-based HECM specialist with Retirement Funding Solutions who primarily works with builders to sell the H4P, says this is the biggest issue hindering the product. “Not allowing us to do an application is harmful in several ways. It creates too much stress at the end of the process, especially from a builder’s standpoint,” Bruser says.
2012
Top 10 H4P States
Certainly, there are a few obstacles that have plagued the product, and the industry has yet to find a way around them. As Lunde mentioned, the Certificate of Occupancy requirement has dampened the H4P’s appeal for some. FHA requires a borrower to have a CO before the application process can begin. For builders saddled with the carrying costs of a finished house as they wait out the application process with a borrower, this is a problem.
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But Banner says the abysmal adoption rates prove that we have a long way to go before this potential is realized. “Penetration is amazingly pathetic. The industry is just dropping the ball.”
Has the industry really dropped the ball, or are there product glitches that are hindering the H4P’s use? Perhaps the answer is a mix of both.
Michael Banner, a longtime H4P proponent and owner of Florida brokerage firm Professional Mortgage Alliance, heralds the product’s potential. “About 700,000 people— that’s not even a niche, that’s a market. And every day you’ve got 10,000 people turning 62 for the next 18 years.”
The Roadblocks
2011
John Lunde, president and founder of Reverse Market Insight, notes several reasons for the H4P’s lackluster performance. “First, 2009-2013 was the worst housing market nationally in decades, so home purchase transaction volumes were lower across the board and not just in the HECM for Purchase corner. We’ve also heard several product design/ requirements issues, but mostly it seems to revolve around Certificate of Occupancy challenges that make for a tricky and unfamiliar closing process, particularly on new construction transactions,” Lunde says. “I think these two issues have fed into a lack of sustained effort and resources into this niche by many in our industry
According to data from the National Association of Realtors, the market could be sizable. A 2014 survey revealed that 5.1 million homes were sold by licensed real estate agents that year, and that 14 percent of those sales involved homeowners 62 and older. That means 700,000 seniors purchased homes that year, and one would assume that a number of them might have considered the H4P had they been aware of the program. But only 2,006 H4P loans were closed in 2014, highlighting the fact that much of that market was untapped.
560
In its first year, 560 H4P loans were made, comprising just under 0.5 percent of all HECMs issued in 2009. In 2010, the momentum picked up and the number of H4Ps more than doubled. But since then, volume has been less than promising.
RMI data shows that H4P totals have increased year-over-year since 2009, but the increase is minimal and the volume unimpressive when you consider the potential size of the market.
“No builder likes to delay their closings. I understand we can’t close until the CO is issued, but we certainly should be able to order services so we’re not holding the builder up an extra couple of weeks. It would go a long way to advancing our ability to work with the builder market.” -Ann Marie Harrison
In July 2008, President George Bush signed the Housing and Economic Recovery Act into law, granting FHA the authority to issue HECM for Purchase loans. With this new type of HECM, borrowers could purchase a primary residence and obtain a reverse mortgage in a single transaction, incurring only one set of settlement costs.
given the lack of initial success in generating volume.”
2010
The Facts
*Stats brought to you by Reverse Market Insight reversereview . com
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“We need to continue working with FHA to institute changes that make sense and align us with forward lending transactions. The more we can align the two, the less confusion there will be for all parties to the Purchase transaction. A forward originator has no problem originating a forward purchase. It should be just as easy to make this transition with the H4P.” -David Cook Bruser says it’s hard to explain the CO requirement to the builders he works with. “I tell them it’s a small price to pay if they’re going to sell more homes with this program, but for builders who don’t really understand it, it’s a tough sell. They say, ‘We’re going to build a home for you and at the end we’re not even sure you’re going to qualify? We build the house and then we’re going to process your application?’ You can see why that would make them a little bit uneasy.” Ann Marie Harrison, another H4Pfocused originator with Retirement Funding Solutions, echoes Bruser’s comments. “No builder likes to delay their closings. I understand we can’t close until the CO is issued, but we certainly should be able to order services so we’re not holding the builder up an extra couple of weeks. It would go a long way to advancing our ability to work with the builder market.” Harrison, who has been focused on the H4P for seven years, works with 15 builders in the suburbs of Columbus, Ohio. She says conditional COs are also problematic. In cold weather, builders are often unable to lay sod or pave the driveway, she explains, and when an appraiser assesses the property, they sometimes leave the report “subject to” the completion of these final tasks. “We can’t close a HECM for Purchase with a ‘subject to’ appraisal. But I think this should be allowed, as long as the builder has funds set aside to complete the work when weather permits.” Another issue is HUD’s prohibition on seller concessions, which means the seller cannot contribute to the closing costs in an H4P deal. In the past, NRMLA has appealed to HUD to reconsider its position, but the plea was met with silence. David Cook, a reverse mortgage consultant with Finance of America 36 | TRR
Reverse who focuses on training referral partners on the H4P, says the ban on seller concessions often complicates the process. “It’s confusing for a real estate professional to remember they should negotiate a lower price to make up for the fact that the buyer must pay for what would customarily be a cost to the seller,” he says, explaining that things like home warranty, property survey and owner’s title policy—all things a seller typically pays for in a forward transaction—become the buyer’s responsibility in an H4P deal. “We need to continue working with FHA to institute changes that make sense and align us with forward lending transactions. The more we can align the two, the less confusion there will be for all parties to the Purchase transaction. A forward originator has no problem originating a forward purchase. It should be just as easy to make this transition with the H4P.” Finally, some have been vocal about their opinion that it is the industry itself that has been holding the product back. Industry-wide apathy, they say, is perhaps the H4P’s biggest problem. Many of the originators Banner talks to say they prefer to be given leads. “They don’t want to do the work. ‘Talking to Realtors is like herding cats’— that’s a big one that I hear a lot. Or, ‘I didn’t get into this industry to solicit Realtors all day.’ As long as the industry maintains that attitude, the H4P will never go anywhere,” says Banner. “Industry laziness is the biggest problem.”
The Solution So perhaps there are some program issues that could use refinement. And maybe the industry isn’t as vocal as it could be about the product. But the H4P still offers seniors a unique option that presents real value, and that reason alone should inspire originators to pursue this type of
business. There are thousands of seniors who could benefit from this loan—if they only knew it existed. Banner says he’d like to see a marketing push from the industry’s top lenders. A TV campaign, he says, would go a long way to educate the public. “I wish some big company would start promoting it. Why don’t we see a Remax commercial with a red-and-white balloon with a Realtor saying, ‘I can’t believe you can buy a house and make no payments!’? We would get a thousand calls in the next hour. Where’s the push?” Bruser agrees. “Industry leaders need to be talking about it more,” he says. “People always ask, ‘Why aren’t more people talking about this?’ That’s a hard question to answer. I don’t know why! It seems like everyone should be talking about it. Is it right for everybody? No, nothing is right for everybody, but it’s got to be part of the conversation.” Bruser says originators can do their part by being active in their communities. To sell the product, he says, you have to get out there. “This is a grassroots, face-to-face, boots-to-the-ground conversation that has to be had. We have to get out of our comfort zones a little bit. You can’t sit in your office and expect the phone to ring,” he says. “You’ve got to be networking, going to Realtor meetings, calling on people, walking into offices.” Harrison agrees, suggesting that originators looking to expand their H4P business pursue builders in their communities. “Start regional. Start with people who don’t have a lender in house. Do some fact-finding and learn about the builder. What type of houses are they building? Is it conducive to the 62-plus buyer? Is it a condo community? Is FHA approval of the condo community going to come into play? Know your client before you walk in there.” “Put yourself in a position where you’re able to share the power of the HECM for Purchase program with Realtors and builders. You’re not going to do it from your home on your phone. You have to get dressed up and get out there every day. “
Cook also stresses the need to build relationships with referral partners. “Originators should focus on marketing to, training and establishing a true relationship with real estate professionals that have the Senior Real Estate Specialist (SRES) designation, and those that are only buyers agents, if at all possible,” he says. “You have to be a trusted resource to all referral sources, but especially to real estate professionals first and builders second if you want to be successful with H4P. Real estate professionals come first because you will get to the builders through those relationships.”
The Future Those who make their living selling the H4P are adamant about its potential. Inspired by the response they get from consumers when they learn about the loan, these originators are vocal about the product’s tremendous value. “The interesting thing is once people find out about it—and once I have a chance to explain it to their financial
planner or to their attorney—the No. 1 comment I hear from their advisors is: ‘I cannot see the reason why you would not want to consider this,’” Bruser says. “I think we’re giving people a chance to better their retirement years by keeping more money in their pockets as opposed to having it tied up in home equity in that stage of life. I’ve got to believe that it makes sense from a financial planning perspective, and that it’s going to make sense to more people in the future.” Lunde is equally optimistic about the future of the H4P. “The good news is that 2014 and 2015 have shown increased volumes of HECM for Purchase transactions and there’s plenty of additional potential there. Several companies have shown some consistent focus and are reaping an outsize share of volume, with rebounding property markets and overall real estate transaction counts increasing,” Lunde says. “The success by RMS/Security One, Cherry Creek, RMF and now Reverse Funding Solutions in this area points the way
for others to follow their example and substantially grow the HECM for Purchase volume for the industry overall.” Harrison says the key to growing H4P volume is spreading the word. “The only reason more people aren’t using it is because they don’t know about it. Part of that is something that’s going to come over time, but another part of it is that we in the field have to be talking more about it.” Cook agrees. “The more real estate professionals who see this, the more likely they are to begin considering the H4P as a viable option they should offer to senior buyers and a solution to buying for many seniors,” he says. “We are still a very long way from mainstream, but as we buy into H4P more as an industry, so will our referral partners, and their clients.” Banner says it bluntly. “The H4P is out there. The potential is there. Does our industry want to work for it?” n
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LAST WORD
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REFLECT
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Changing Lives, One at a Time By Michael D. Kent
In January of this year, the company I work for, Liberty Home Equity Solutions, hit an important milestone. Since Liberty’s entrance into the reverse mortgage market in 2001, we have funded more than 50,000 HECMs—more importantly, we have changed well over 50,000 lives! Now, granted that 50,000 loans is not a big number in the great scheme of things where mortgages are concerned, but with this loan product, lives are profoundly changed one person at a time. I started in this business in 2010 at the invitation of my good friend and mentor, Bob Yeary (the co-founder of RMS). He hooked me by telling me a story about a grandmother named Betty. Betty lived in Watts, California. She was the sole provider for her three grandchildren. The kids’ father had been killed in a gang-related shooting, and their mother was a drug addict who had simply dropped the kids at Betty’s one day and had not been seen since. At the time, Bob was giving reverse mortgage seminars. He decided to see what it was like to actually go through the entire process with a borrower. That’s where Betty came in.
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The powerful impact of a reverse mortgage loan
him to see help make this happen. Bob was determined to make her wish a reality, and was able to get the reverse mortgage loan done. In fact, Betty ended up with a term payment of $800 per month for a period that would see all three of her grandchildren through high school. I think about Bob and Betty almost every day. The story so moved me six years ago and it still does today. It is the story of how we can and do profoundly change lives. One loan, four lives—that is powerful.
“Every day, I know we are changing lives, making a positive difference in people’s futures. For me, the most moving part of the story is that lives were potentially changed.” Bob met Betty at a seminar and scheduled an appointment to meet with her at her home in Watts. Bob arrived at the appointed time and began the application process with Betty. In his own words, “I was not prepared for how the application process would go, and was speechless when the appointment was over.” During the application process, Betty made it very clear to Bob why she was getting a reverse mortgage, and said it was very important that he keep her reasons in the front of his mind—as well as in his heart—at all times.
Betty told Bob she was on a fixed income that barely covered her monthly expenses, but she was OK, she was making it work. Now, however, she had her three grandchildren to raise. She said she figured out she needed about $500 or $600 more per month. Betty told Bob this amount of money each month could change these kids’ lives forever. It would mean being able to focus on schoolwork and not need to help out financially. It would mean three good meals a day so they would be healthy and ready to learn. It meant having school supplies and clothes to wear. She told Bob this extra money was for their future, and she was counting on
Now, those of you who knew Bob Yeary know he was a great storyteller and salesman. I cannot attest to every detail in this story, but I do know that Betty exists, that Bob arranged a reverse mortgage for her, and that the grandchildren are real. I am not concerned if Bob’s story is 100 percent accurate because I see it every day. I read countless letters and emails from borrowers who attest to the life-changing power of this product. Every day, I know we are changing lives, making a positive difference in people’s futures. For me, the most moving part of the story is that lives were potentially changed. Thanks, Bob, for sharing this story. You continue to be an inspiration. n
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The Reverse Review April 2016
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