EW THE
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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
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review
DE CE M BE R 201 5 / J A N U A RY 2 0 1 6
HOT SEAT: S1L SALES ALL-STAR LARRY McANARNEY PG. 18
A GUIDE TO KITCHEN-TABLE COMMUNICATION PG. 20
CLARIFYING YOUR BORROWER’S CIRCUMSTANCE PG. 25
A HISTORICAL LOOK AT HMBS ISSUANCE PG. 31
Reverse Loans. One Platform. All Connected. The Reverse Review
December 2015 / January 2016
ReverseVision is the only tool you need to be successful. Fully-integrated solution spanning loan life cycle Financial Assessment compliant within RV Exchange
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Now is the time for HECMs. Over 25 million potential borrowers are waiting Financial Assessment (FA) strengthens loan quality HECMs can be used to purchase a new home HECMs are FHA-insured loan programs Financial Planners recognize HECMs as a viable retirement option 2 | TRR
WWW.REVERSEVISION.COM | CONNECT@REVERSEVISION.COM | 858-433-4970
Evolving Our Brand As of December 1st, Urban Financial of America, LLC (UFA) will become Finance of America Reverse LLC (FAR).
Solving Your Challenges FAR will continue our tradition of commitment to our partners, solidly backed with industry expertise and even greater strength and innovation. You will continue to receive the highest standards of service on which we’ve built our nationwide reputation. As FAR, we’ll be thinking ahead and continuing our evolution as an industry leader, delivering revolutionary products, intuitive technology, and best-in-class training to help you be successful.
Join a leader who continues to take the industry forward and set new standards.
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For business and professional use only. Not for consumer distribution. NMLS #2285 (http://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/2285); Corporate Office: 8909 South Yale Avenue, Tulsa, OK 74137. Not all products and options are available in all states. Terms subject to change without notice. ©2015 Urban Financial of America, LLC. All Rights Reserved. Equal Housing Lender. CALIFORNIA BUSINESS NAME: URBAN FINANCIAL GROUP OF AMERICA, LLC. NEBRASKA BUSINESS NAME: REVERSE IT! LLC. UFA248 [Exp 11/2016] reversereview . com
8 TRR | 3
The Reverse Review
December 2015 / January 2016
From the editor RE
V IE
E R EVE W TH RS
RS VE
RE
A NOTE FROM JESSICA GUERIN
EV
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ER
IE
SE
VERSE R EV E RE
A tribute to the late HECM advocate
TH
EW THE
RE
EW
REVI
E
VI
E
INSIDE THIS ISSUE | Remembering Fred Thompson
E
R
THE
review
D EC EMBER 2015 / JANUARY 2016
S1L SALES ALL-STAR LARRY McANARNEY PG. 18
A GUIDE TO KITCHEN TABLE COMMUNICATION PG. 20
CLARIFYING YOUR BORROWER’S CIRCUMSTANCE PG. 25
DECEMBER 2015 JANUARY 2016
COVER
How FA has changed the work of an underwriter.
A HISTORICAL LOOK AT HMBS ISSUANCE PG. 31
As part of our goal to help reverse mortgage professionals advance in their field, we talk a lot in this magazine about changes and challenges. But as 2015 comes to a close, it seems a good time to review some of the more uplifting events of the past year. Sure, Financial Assessment has dominated the conversation this year, as industry participants—originators, underwriters and processors alike—have had to work hard to adjust to new guidelines. But the challenge has proved our resiliency. It has highlighted our ability to band together as professionals to discuss the issues at hand—at NRMLA conferences and lender-sponsored meetings, online and in person. We are learning from each other and growing together in an effort to better serve our clients.
This year has also seen an encouraging wave of academic research extolling the HECM’s benefits in retirement planning, furthering the industry’s collective mission to gain support in the financial planning community. Things in the press have lightened up, too. Negative headlines about reverse mortgages have largely faded as national publications— The Wall Street Journal and Time, most recently—are publishing articles that explore the potential benefits afforded by home equity conversion. Many even predict that reverse mortgages will become a popular solution for boomers faced with the cost of retirement and long-term care. After a long period of change and challenge, perhaps the market can finally begin to realize its full potential. With this hope in mind, the staff at TRR would like to wish the dedicated members of this field a restful holiday and an optimistic, energetic start to business in the New Year. Cheers!
JESSICA GUERIN Connect with me about how you can participate. Reach me at jessica@reversereview.com
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 © 2015 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
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table of contents 10 | NRMLA in San Francisco
HECM professionals gather in SF to discuss the state of the market.
27 | Marketing
In With the Old, but Make Room for the New A mixed bag of marketing tactics is the best way to ensure success.
12 | Stats
October’s top lenders and HECM endorsement stats through September
GLENN MAIN
REVERSE MARKET INSIGHT
Complying with FA’s Property Tax Requirements
14 | NRMLA News
Read about the association’s current initiatives. MARTY BELL
18 | Hot Seat: Sales All-Star Series
Larry McAnarney SECURITY ONE LENDING
20 | Originating
Across the Kitchen Table A guide to reflective listening and effective communication BILL SMITH
Confirming Owner Occupancy A checklist to help ensure that your borrower meets HUD’s requirements ELENITA LAYUGAN
27
29 | Tax Tip
Assessing methods for collecting tax information CHUCK BURKEY AND J. KEVIN BROWN
31 | HMBS
HMBS Quarterly Issuance Steady at $2.1 Billion Despite program change, average quarterly issuance remains consistent. JOE KELLY
32 | Spotlight
Remembering Fred A tribute to spokesman Fred Thompson
23 | Originating
TRR 12.15/1.16
25
38 | Last Word
Another Year Older, Another Year Wiser? Reflecting on lessons learned in life and business MICHAEL D. KENT
25 | Originating
23
20
What’s the Story, Dude? FA has made it essential for originators to clarify a borrower’s circumstance. COLLEEN MOORE
FEATURE
38 | Feature The Underwriter’s Job in a Post-FA World How Financial Assessment has impacted the loan process JESSICA GUERIN & RALPH ROSYNEK
“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.
IN EVERY ISSUE...
13 | 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 | 5
The Reverse Review
December 2015 / January 2016
contributors JOHN K. LUNDE
12 | Stats g
John K. Lunde
Larry McAnarney
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
LARRY McANARNEY
BILL SMITH
Larry McAnarney is a Home Equity Conversion Mortgage specialist at Security One Lending. He has been originating reverse mortgages since 1999, focusing on helping homeowners 62 and older understand the HECM loan process from end to end.
Bill Smith works for Reverse Mortgage West in Irvine, California. He began his reverse career with Financial Freedom in 2002 and has since originated more than 600 reverse mortgages. While at Financial Freedom, he pioneered efforts on seminar selling, fiduciary support and assisting conservators who want to obtain HECMs for their clients. Smith has lectured on reverse mortgages across the country and has been a speaker at NRMLA conferences, FPA chapters and the National Guardianship Association.
18 | Hot Seat: Sales All Stars g
Bill Smith
Elenita Layugan
Colleen Moore
ELENITA LAYUGAN
COLLEEN MOORE
GLENN MAIN
Elenita Layugan is a specialty product manager at Guaranteed Rate, Inc., where she focuses on managing the company’s reverse mortgage operations. Layugan has been in the mortgage business for 21 years. A DE and VA underwriter, she has worked in processing, underwriting and quality control.
Colleen Moore is the national reverse mortgage director for Golden Equity Mortgage, a company she owned before it merged into a division of Land Home Financial Services in 2013. Moore is a CRMP who has worked in both forward and reverse mortgages for more than 20 years. In the last decade, she has been focused on educating professionals about the power of HECMs.
Glenn Main has been in the mortgage business for more than 13 years, originating reverse mortgages since 2006. A branch manager at Home Point Financial, Main has helped thousands of homeowners obtain reverse mortgages. His primary focus is to educate homeowners and help them achieve their goals.
23 | Confirming Owner Occupancy g
Glenn Main
Chuck Burkey
J. Kevin Brown
Joe Kelly 6 | TRR
20 | Across the Kitchen Table g
25 | What’s the Story, Dude? g
27 | In With the Old, but Make Room for the New g
CHUCK BURKEY
J. KEVIN BROWN
JOE KELLY
Chuck Burkey is senior vice president of business development at LERETA, LLC. He has been involved with insurance and tax property charges in the reverse market since 2009, focusing primarily on property tax charges for Financial Assessment. 678.517.8168
J. Kevin Brown is executive vice president at LERETA, LLC. He has more than 25 years of tax service experience, and has developed several products and services for the reverse market during the last decade to help lenders mitigate risk.
Joe Kelly is a founding partner of New View Advisors. Before establishing New View in 2008, Kelly managed all aspects of Lehman Brothers’ prime mortgage finance agenda, and structured the first proprietary reverse mortgage securitizations. At New View Advisors, Kelly continues to develop new reverse mortgage loan products, valuation models, quantitative research and online products for his clients.
29 | Complying with FA’s Property Tax Requirements g
29 | Complying with FA’s Property Tax Requirementsg
31 | HMBS Quarterly Issuance Steady at $2.1 Billion g
contributors RALPH ROSYNEK
34 | The Underwriter’s Job in a Post-FA Word g Ralph Rosynek
Jessica Guerin
Michael D. Kent
QUOTES WE LOVE
25
pg.
Ralph Rosynek is the senior vice president of the Money House, Inc. – U.S. Division, responsible for sales and operations activities of the company’s HECM and forward mortgage national wholesale and correspondent business channels. Rosynek is a seasoned HECM DE underwriter and has written for The Reverse Review since the magazine’s launch as its underwriting expert. He has held many leadership roles in the reverse mortgage industry for the past 15 years.
JESSICA GUERIN
34 | The Underwriter’s Job in a Post-FA Word g
Jessica Guerin is the editor-inchief of The Reverse Review. She has worked on the editorial teams of Chicago Home & Garden, Chicago magazine and Time Out Chicago. Prior to joining the magazine, Guerin managed the marketing efforts for a commodity brokerage firm in the Chicago Board of Trade. She has a master’s degree in magazine publishing from Northwestern University and a B.S. in journalism from Boston University.
rrosynek@moneyhouseus.com
MICHAEL D. KENT
38 | Another Year Older, Another Year Wiser? 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.
“I truly believe FHA wants us to make loans—appropriate loans that help our borrowers. They are just asking that we make sure the loan will genuinely be to the borrower’s benefit, that it makes sense and that we are not just using a HECM to postpone the inevitable. Sometimes, although not often, the kindest answer is no, even though as originators that may be painful.” -Colleen Moore
240.864.4844
fnctitle.com
A nationwide title and settlement company servicing the reverse mortgage industry. Our dedicated team of professionals has the experience and knowledge to smoothly close reverse transactions. Through years of experience, FNC has gained valuable knowledge by building strong relationships with reverse mortgage lenders and brokers, as well as the borrowers we service. We firmly believe that our clients deserve the best treatment, and that is why FNC is where reverse mortgages take center stage.
reversereview . com
8 TRR | 7
The Reverse Review
December 2015 / January 2016
movers & shakers READ ABOUT THE LATEST DEVELOPMENTS IN COMPANIES ACROSS THE REVERSE SPACE.
HAVE A COMPANY UPDATE YOU WOULD LIKE TO SEE PUBLISHED? Urban Financial of America Changes Name to Finance of America Reverse
Leading lender Urban Financial of America has changed its name to Finance of America Reverse LLC, reflecting the name of its parent company, Finance of America Holdings. “Unifying the Finance of America Holdings brands is a key step in establishing the wide diversity of products and services available to our customers,” says Kristen Sieffert, president of Finance of America Reverse. “Finance of America will be synonymous with all types of lending, and reverse mortgages are a key component of that business. Changing our name also increases transparency and assists us in placing all customers into the product that best serves their lifestyle.” As a result of the ownership of Finance of America Reverse and the acquisition of several additional mortgage companies, Finance of America Holdings has become one of the nation’s largest nonbank originators.
RMF to Sponsor NAHB Survey on the Housing Preferences of Baby Boomers
Reverse Mortgage Funding (RMF) will sponsor a National Association of Home Builders (NAHB) survey, “Housing Preferences of the Boomer Generation: How They Compare to Other Home Buyers.” Results will be presented at the NAHB International Builders’ Show in late January. “This survey will provide a unique look at the buying preferences of our core customer, and serving as a title sponsor will help strengthen our brand awareness among the conference’s participants, which include many of the nation’s largest, most respected homebuilders as well as leading economists and personal finance professionals,” says Jean Noble, 8 | TRR
email it to jessica@reversereview.com
chief marketing officer of RMF. “Our presence at this marquee event will serve to help these parties understand and appreciate how a Home Equity Conversion Mortgage for Purchase loan can increase the buying power of older Americans, providing them with the financial flexibility to purchase the home they really want, including the amenities they need or desire.” The survey will be conducted online in two phases using a consumer research panel maintained by an independent subsidiary of the NAHB.
ReverseVision Announces Credit Report Integration with Certified Credit Reporting
ReverseVision has partnered with Certified Credit Reporting, a nationwide provider of credit reports and mortgage information services. This integration within RV Exchange (RVX), ReverseVision’s flagship reverse loan origination system platform, increases RVX users’ choice of automated credit report services. Reverse mortgage lenders use RVX for the full lifecycle of the loan-from initial proposal through application, underwriting, closing and post-closing. “Certified Credit Reporting is already a trusted provider of mortgage information services to lenders nationwide and their emphasis on attentive customer service makes this relationship a natural fit,” said ReverseVision President and CEO John Button.
AAG Hires Wholesale Strategy Director
AAG has hired Fraser Tod as its new director of wholesale strategy. Tod, who has more than nine years of reverse mortgage industry experience, worked previously for Liberty Home Equity Solutions, where he ran the wholesale inside sales production support and strategy teams. In his new role, Tod will drive AAG wholesale data reporting, analytics and strategies to propel channel growth and position AAG as the leading reverse mortgage wholesale lender in the country. “We’re pleased to welcome Fraser and the unique skills, knowledge and experience he brings to help us evolve and execute our wholesale growth strategy,” says Kimberly Smith, AAG’s senior vice president of wholesale lending. “With his acute understanding of the reverse mortgage industry, there’s no doubt Fraser will help advance AAG as the forerunner among our competitors.”
Be a part of our Movers & Shakers column, where you can read about the latest company initiatives, programs, hires, acquisitions and more. Send us your company’s press releases or email us news of your latest venture, and we’ll consider printing it in the next issue. Send your news to jessica@reversereview.com.
industry news
Dec./Jan. 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. ECONOMIC VALUE OF
FHA’S REVERSE MORTGAGE PORTFOLIO GROWS $7.9 BILLION FHA’s Mutual Mortgage Insurance Fund gained $19 billion in Fiscal Year 2015, driven by a $7.9 billion increase in the HECM portfolio, according to FHA’s annual report to Congress. For the first time since 2008, the independent actuarial analysis showed the MMI Fund’s capital ratio stands at 2.07 percent, exceeding the congressionally required 2 percent threshold FHA must maintain. Fiscal Year 2015 marks the third consecutive year of economic growth for the fund, having improved 0.41 percent from FY 2014. The net value of the fund is nearly $24 billion, marking the largest one-year increase since FY 2012. As for the HECM program, its $7.9 billion increase in performance raised the HECM capital ratio from negative 1.2 percent in FY 2014 to positive 6.4 percent in FY 2015. Currently, the value of the HECM portfolio for FY 2015 stands at $6.8 billion.
// November 16, 2015
2. FHA LOAN LIMITS
REMAIN UNCHANGED FOR REVERSE MORTGAGES IN 2016 In Mortgagee Letter 2015-29, FHA announced the national maximum claim amount for HECM loans will remain unchanged in 2016 at $625,500. Loan limits for forward mortgages, however,
will increase in 188 counties next year. FHA will maintain the current HECM loan limit through December 31, 2016.
// December 9, 2015
3. FHA UPDATES CONDO APPROVAL GUIDELINES, INCLUDES REVERSE MORTGAGES
FHA has published new guidelines intended to increase the number of condominium projects that are eligible for FHA insurance, heeding the calls of lawmakers and mortgage industry groups who have long pushed for easier condo requirements. Effective immediately, the temporary guidance from FHA—issued via Mortgagee Letter 2015-27—will streamline the agency’s condo recertification process and expand the eligibility of acceptable “owneroccupied” units to include second homes that are not investor-owned.
// November 13, 2015
4. FHA EXTENDS DEADLINE FOR NON-BORROWING REVERSE MORTGAGE SPOUSES
Reverse mortgage lenders have been given a deadline extension when assigning HECMs to HUD, in turn granting eligible non-borrowing spouses more time to establish the legal right to remain in the home. In a memo, FHA said that mortgagees may request an extension of 60 days in order to confirm that the non-borrowing spouse has secured title or the legal right to remain in the property, and to complete its assessment following the lender’s Mortgagee Optional Election (MOE) Assignment as required by Mortgagee
Letter 2015-15 issued earlier this year. FHA said it had been advised that certain states’ probate procedures may have impeded a non-borrowing spouse’s ability to obtain title or otherwise establish the legal right to remain in the home before the deadline for a mortgagee to complete its MOE assessment.
// December 8, 2015
5. NASDAQ: BOOMERS’
WEALTH PRIMED FOR REVERSE MORTGAGE USE As baby boomers age, they will challenge the nation in several ways, from housing to health care delivery. Although boomers have accumulated more wealth than their parents’ generation, rising costs of living and high mortgage debt are two obstacles that may have them looking for additional wealth-building strategies. And for many, that could mean tapping into home equity with a reverse mortgage, suggests a recent article by Nasdaq. A J.P. Morgan study found that boomers’ expected annual income ranges between $34,000-$40,000, according to the article, yet the median boomer household spends nearly $56,000 per year. “If boomers want to maintain that lifestyle, more cash will have to come from somewhere, and the most likely source of that cash will be liquidating home equity,” Nasdaq writes. Keeping that in mind, the article recommends financial advisors become more familiar with aspects of residential real estate, from downsizing to relocation to reverse mortgages.
// November 30, 2015
reversereview . com
8 TRR | 9
The Reverse Review
More than core values: Words we live by.
December 2015 / January 2016
CARING
AAG cares about our customers, associates and community, treating others with dignity and respect.
DRIVEN
AAG is driven to deliver superior customer service in all we do.
ETHICAL
As a fair and ethical lender, AAG conducts our work with the highest degree of integrity.
96% of American Advisors Group customers are satisďŹ ed with our service1
Their future is our business. Be a part of something special - partner with AAG today! 866-964-1109 AAG.com/Wholesale #1 reverse mortgage lender in the U.S. 10 1 | TRR Based on American Advisors Group customer surveys between June 1, 2013 and September 30, 2015.
ON THE SCENE VISIT NRMLA.ORG FOR A LIST OF FUTURE EVENTS.
{
NRMLA goes to San Francisco
1.
NOVEMBER 16-18, 2015 SAN FRANCISCO, CA Reverse mortgage professionals attended NRMLA’s 17th Annual Meeting and Expo. Guests listened to industry leaders sound off on recent issues affecting the space and attended networking events with their colleagues from across the country.
2. 4.
5.
3. 6.
9.
7.
8. 10.
HIGHLIGHTS OF THE THREE-DAY CONFERENCE: A keynote address from HUD’s Deputy Assistant Secretary for Single Family Housing, Kathleen Zadareky
1. NRMLA’s executive committee reflects on the past year and discusses the future of the market. 2. Liberty Home Equity’s Mike Kent and Senior Security Advisors’ Sandy Tennekoon 3. John Lunde (RMI), Ralph Rosynek (Moneyhouse) and Topher Thiessen (RMI) 4. Aaron SteinSapir and David Stroop of MIS 5. Attendees mingle near RMF’s booth. 6. AAG’s Sean Bobbitt, Paul Fiore, Matt Engel, Austen Verst and Kevin Blakeney 7. NRMLA’s Director of Meetings and Events, Sarah Aaronson 8. Rhiannon Behnke (Retirement Funding Solutions), Peter Bell (NRMLA) and Laurel Anderson (AAG) 9. Wells Fargo’s Linda Bridges and NRMLA’s Marty Bell 10. Don Currie (Hightech Lending), Cheryl McGrath (AAG) and Joan Imelio (Hightech Lending)
A fundraising event supporting the Curry Senior Center, a nonprofit organization serving homeless and low-income seniors in San Francisco’s Tenderloin district A presentation of important research findings regarding consumer satisfaction and acceptance of reverse mortgages reversereview . com
8 TRR | 11
The Reverse Review
December 2015 / January 2016
stats November 2015
Top Lenders Report
12345 American Advisors Group
One Reverse Mortgage
Endorsements
Endorsements
1,022
358
RMS/S1L
UFA
Endorsements
Endorsements
320
302
Live Well Financial
Endorsements
203
Lender
Endorsements
Lender
Endorsements
SYNERGY ONE LENDING INC
171
NEW AMERICAN MORTGAGE LLC
9
LIBERTY HOME EQUITY SOLUTIONS INC
143
VAN DYK MORTGAGE CORPORATION
9
NATIONWIDE EQUITIES CORPORATION
95
RESIDENTIAL HOME FUNDING CORPO
9
HOME POINT FINANCIAL CORPORATION
71
WILLOW BEND MORTGAGE CO
8
HIGH TECH LENDING INC
58
UNITED SOUTHWEST MORTGAGE CORP
50
TOWNEBANK 8
REVERSE MORTGAGE FUNDING LLC
ADVISORS MORTGAGE GROUP LLC
192
LENOX FINANCIAL MORTGAGE CORPO
10
8
UNITED NORTHERN MORTGAGE BANKERS LTD 46
FIRSTAR BANK NA
8
THE FEDERAL SAVINGS BANK
7
45
SUN AMERICAN MORTGAGE CO
43
SENIOR MORTGAGE BANKERS INC
PROFICIO MORTGAGE VENTURES LLC
6
43
QUONTIC BANK FSB
6
41
PACIFIC RESIDENTIAL MORTGAGE LLC
6
FIRSTBANK 39
VIP MORTGAGE INC
6
SUN WEST MORTGAGE CO INC
37
FULTON BANK NA
6
36
GERSHMAN INVESTMENT CORP
6
36
LAND-HOME FINANCIAL SERVICES
6
33
HOMEOWNERS MORTGAGE ENTERPRISE
23
23
PEOPLES BANK
OPEN MORTGAGE LLC
PLAZA HOME MORTGAGE INC
MONEY HOUSE INC
CHERRY CREEK MORTGAGE CO INC MCM HOLDINGS INC GMFS LLC
6
AMERICAN NATIONWIDE MORTGAGE COMPANY 22 FAIRWAY INDEPENDENT MORTGAGE CORP
20
M & T BANK
18
FRANKLIN FIRST FINANCIAL LTD
15
AMERICAN PACIFIC MORTGAGE
15
SUCCESS MORTGAGE PARTNERS INC
15
BANK OF ENGLAND
13
12
RESOLUTE BANK
UNIVERSAL LENDING CORPORATION
10
YADKIN VALLEY BANK AND TRUST
10
CONTOUR MORTGAGE CORPORATION
10
12 | TRR
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 October 2015 INDUSTRY SUMMARY
MO. 10
2,500
Retail Endorsement Growth
11
2,867 14.68%
12
2,874
1
2,557 -11.03%
2
2,772
8.41%
3
2,597
-6.31%
TRAILING TWELVE MONTH ENDORSEMENTS 6,000
Wholesale Endorsement Growth
-8.61%
2,000
Total Endorsement Growth
-7.3%
0 Wholesale *Numbers Represent Months
01
0.24%
UNITS CHG%
4,407
1,907 -8.23%
-9.15%
4,940 12.09%
8.7%
2,073
4,936
-0.08%
4.7%
4,716
-4.46%
1,862 -13.76%
4,634
-1.74%
1.77%
4,492
-3.06%
4
2,477
-4.62%
1,793 -5.38%
4,270
-4.94%
5
2,971 19.94%
2,324 29.62%
5,295
24.0%
6
2,694
-9.32%
0.3%
5,025
-5.1%
7
2,929
8.72%
2,820 20.98%
5,749 14.41%
8
2,589 -11.61%
2,080 -26.24%
4,669
-18.79
9
2,427
-6.26%
1,901 -8.61%
4,328
-7.3%
* Figures Above Reflect Change from Prior Month
TOT
2,159 1,895
2,331
32,254
25,207
57,461
60% 50%
FIXED RATE PERCENTAGE
40% 30% 20%
10/1/15
9/1/15
8/1/15
7/1/15
6/1/15
2/1/15 2/1/15
5/1/15
1/1/15 1/1/15
4/1/15
12/1/14 12/1/14
3/1/15
11/1/14 11/1/14
9/1/14
8/1/14
7/1/14
6/1/14
4/1/14
3/1/14
10/1/14
02
10/1/14
ARM
{ FIGURE }
2/1/14
1/1/14
12/1/13
10% 10/1/13
HECM ENDORSEMENT TRENDS
UNITS CHG%
-9.84%
70%
{ FIGURE }
11/1/13
Retail
TOTAL
2,062 -0.53%
5/1/14
11 12 1 2 3 4 5 6 7 8 9 10
WHOLESALE
UNITS CHG%
-6.26%
4,000
RETAIL
FIXED
$1,200.0 $1,000.0
$600.0 $400.0 $200.0
10/1/15
9/1/15
8/1/15
7/1/15
6/1/15
5/1/15
4/1/15
3/1/15
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
12/1/13
11/1/13
$0 10/1/13
IN THE MILLIONS
HECM ENDORSEMENT
INITIAL PRINCIPAL LIMITS
$800.0
reversereview . com
8 TRR | 13
The Reverse Review
December 2015 / January 2016
nrmla news BROUGHT TO YOU BY NRMLA STAFF
ON THE D O C K E T:
HUD’s Inspector General Publishes Alert on HECM Refinancings HUD’s Office of the Inspector General issued an “Integrity Bulletin” warning HECM lenders that it has identified instances of fraudulent appraisals being used to increase loan amounts in order to refinance existing borrowers. According to the OIG, an analysis of more than 5,000 HECM refinances over the last several years showed that a small group of HECM originators is responsible for a large percentage of potentially fraudulent HECM refinances, generally within relatively small geographic areas. “Analyses of these refinances revealed one of the hallmarks of mortgage fraud: unexplained, large increases in appraised values in a relatively short period of time,” the bulletin states. The OIG will investigate appraisers, loan officers, originators and sponsors who engage in fraudulent HECM transactions and will refer them for criminal or civil prosecution, or administrative sanctions as appropriate. Underwriters are reminded that they should carefully scrutinize appraisals and appraisal comps on all HECM originations, particularly on HECM refinances. Underwriters are reminded that they are responsible for being familiar with geographic areas in which properties are located and should question appraised values if they are out of line with the market. 14 | TRR
ETHICS COMMITTEE
Amends Refinance Guidelines
NRMLA distributed a member alert announcing new anti-churning policies adopted by the Ethics Committee. “Ethics Advisory Opinion 2015-2: Ethical Refinancing of HECM Reverse Mortgage Loans and Anti-Churning Considerations— New Requirements” states that for a HECMto-HECM refinance to provide a bona fide advantage to the consumer, the date on which FHA assigns the case number must be 18 months or later from the date of the closing of the original HECM loan. To meet
the Closing Cost Test, the amount of loan proceeds available from the refinance must equal or exceed five times the amount of the closing costs paid by the borrower, while the Loan Proceeds Test can be met if the Available Benefit Amount from the HECM Refinance equals or exceeds 5 percent of the HECM Refinance Principal Limit. Examples of these policies are provided as Attachment A to Ethics Advisory 2015-2. In drafting the advisory opinion, the Ethics Committee noted that changing from one type of loan to another—such as refinancing from a fixed rate loan to an adjustable rate loan—does not provide a bona fide advantage unless the subject loan meets the Seasoning Requirement, Closing Cost Test and Loan Proceeds Test described above.
AT N R M L A : T h e F o g L i f t s i n S a n F r a n c i s c o For the past few years, the industry was stuck operating in the fog of regulatory changes. Though the wide consensus is that these changes improved the program, they took time to navigate and implement. The agendas of NRMLA’s most recent two annual meetings were, appropriately, largely focused on the changes. But the fog has lifted and the sun now shines on the vast ocean of possibilities. The improvements in the HECM program coincided with a new focus in American culture, government and business on its older citizens. Every day now there seems to be new evidence that the American conversation is shifting from youth culture to the needs of aging. At NRMLA’s 2015 Annual Meeting, the theme was “The Golden Gate to Retirement Security: Reverse Mortgages and Funding Longevity,” and the agenda focused on how the improved HECM can contribute to a more secure retirement and, as a result, a more secure society.
SOME HIGHLIGHTS from the NRMLA Conference HUD OFFICIAL TO REVERSE MORTGAGE LENDERS:HECM Program on Solid Ground On the same day that the Secretary of HUD announced that the FHA’s MMI Fund is in the black for the first time since 2008, Kathleen Zadareky, Deputy Assistant Secretary for Single Family Housing and the official who oversees the HECM program, told attendees at NRMLA’s meeting, “Positive gains in the HECM program are a large part of the reason why the MMI is sufficiently capitalized at just over the 2 percent ratio mandated by Congress ahead of expectations.”
Zadareky cautioned the industry not to take the gains for granted, because a pattern has emerged of HECM contributing or taking away from the positive performance of the fund. “FHA is mindful of this and we’ll continue to consider actions we can and should take to manage the volatility of the program,” she said. Zadareky also discussed how recently implemented changes, such as Financial Assessment and new rules for nonborrowing spouses, are making HECMs more sustainable for borrowers without significantly limiting accessibility to these loans.
nrmla news H U D S TA F F P R E S E N T HECM PROGRAM U P D AT E S
At the NRMLA meeting, President & CEO Peter Bell recognized the distinguished careers of Jeffrey Taylor and Sherry Apanay by bestowing each with a Career Achievement Award. Taylor, the founding chairman of NRMLA, ran the reverse mortgage program at Wells Fargo Home Mortgage for many years and currently sits on the board of directors for ReverseVision. Sherry Apanay started her career in the industry 23 years ago with Unity Mortgage Corporation, serves on NRMLA’s Board of Directors, and is currently responsible for all reverse mortgage sales channels for Finance of America Reverse, formerly Urban Financial of America.
National Support Solutions Corp.
San Juan, Puerto Rico (Associate member)
4
PCV Murcor
Pomona, California (Associate member)
4
NRMLA 2016 CONFERENCE SCHEDULE APRIL 4-5 New York City, NY InterContinental New York Times Square, Eastern Regional
NOVEMBER 14-16 Chicago, IL Swissotel Chicago, Annual Meeting & Expo
Rumford, Rhode Island (Lender member)
Secure Lending Incorporated Cleveland, Ohio (Lender member)
4
MAY 10-11 Huntington Beach, CA Hyatt Regency Huntington Beach Resort & Spa, Western Regional
Shamrock Financial Corporation
4
The Curry Center provides at-risk and very low-income seniors with a wide range of integrated services, including health care, housing, nutrition and a strong sense of community. Curry’s director of development, Tod Thorpe, said that NRMLA’s service project was the largest volunteer effort held at the center and that he hopes more groups will follow the association’s lead.
Certified Credit Reporting, Inc.
4
More than 70 NRMLA members spent the morning of November 14 preparing meals, distributing Thanksgiving grocery bags, and socializing at the Curry Senior Center on Turk Street.
NRMLA welcomes the following new members.
Ontario, California (Associate member)
REVERSE MORTGAGE PROFESSIONALS OFFER HELPING HAND TO AREA SENIORS Members of the industry focused on supporting senior homeownership shared a meaningful connection with hundreds of seniors who live in the single-residency occupancy hotels and homeless shelters of San Francisco’s Tenderloin District.
NEW MEMBERS
4
It is still too early to know the full impact of program changes, but gains in FHA’s MMI Fund show that some of the new policies are already having a positive effect. That’s according to Karin Hill, HUD’s senior policy advisor, who addressed a crowded ballroom at NRMLA’s meeting. The overall reduction in the number of full-cash draws at closing is directly related to the positive actuarial review, said Hill. The data shows that since 2013, when HUD introduced a new MIP structure based on draw percentages, 63 percent of borrowers taking a variable rate loan drew 60 percent or less of their available proceeds in the first year compared with 55 percent in 2014 and 46 percent in 2013. “HUD’s priority is to ensure that the HECM program is a sustainable solution for the borrower. We want borrowers to have long-term access to home equity to support their ability to age in place, and to move away from use of the program as a crisis management tool,” said Hill. Total HECM endorsements increased from approximately 52,000 loans in FY14 to 58,000 in FY15 at a value of $16.1 billion for the year. Hill said that HUD is very pleased with the increase and will continue to look for ways to expand volume. She also noted that the agency expects the numbers of loans assigned to HUD, currently 34,000, to increase significantly over the next couple of years.
NRMLA HONORS INDUSTRY PIONEERS
Sterling Mortgage Services of the Treasure Coast Stuart, Florida (Lender member)
reversereview . com
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The Reverse Review
December 2015 / January 2016
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roundup
THIS MONTH 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.
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SAVI NG S TA TS
RET IREMENT P LANS
AMERICANS AREN’T SAVING MUCH.
THE CFPB LAUNCHES ONLINE RETIREMENT PLANNING CALCULATOR.
Americans are saving about 4 cents on the dollar of their disposable income, less than half of what they were saving in the ’70s and ’80s, according to the Bureau of Economic Analysis.
30
25
20
15
10
5
0
-5
1929 1931 1933 1935 1937 1939 1941 1943 1945 1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Percentage of Personal Disposable Income Saved
Personal Savings Rate in the U.S.
Source: U.S. Bureau of Economic Analysis
A new resource released by the CFPB allows users to calculate how much Social Security they can receive based on their filing age. Users can input their birthdate and annual income to view their estimated benefit based on the age they wish to claim. The calculator also allows them to view the difference in their benefits based on age.
Most Americans are afraid to engage financial advisors.
A recent survey by Harris Poll revealed that 71% of Americans don’t want to consult with financial planners. Most cited the cost as their leading concern.
71%
Don’t want an advisor
SAVING STATS
IN T H E N E WS
81 PERCENT
HOME EQUITY MUST BE CONSIDERED.
of householders 65 and older owned their homes as of fourth quarter 2011.
“The lack of focus on home equity in retirement income planning is nothing short of a complete failure to properly plan and utilize all available retirement assets. This needs to change immediately because strategic uses of home equity, especially reverse mortgages, could save many people from financial failure in retirement and help stem the overall retirement income crisis facing Americans.”
-Forbes magazine contributor Jamie Hopkins
MO NE Y MAT TE R S
View this tool at consumerfinance.gov.
-U.S. Census Bureau reversereview . com
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The Reverse Review
December 2015 / January 2016
DEC./JAN
2016
WHEN I WAS YOUNGER I WANTED TO BE a dentist.
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.
Larry
McAnarney HECM Specialist
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NMLS #21059
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McAnarney has been originating reverse mortgages since 1999, focusing on helping homeowners 62 and older understand the HECM loan process from end to end.
ABOUT LARRY
My BIGGEST SALES TIP is to focus on your customers’ needs and listen to what they are saying. Many times we get to hear their life story. BE A GOOD LISTENER and build a personal relationship.
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.
Reverse Mortgage Solutions, Inc. dba Security 1 Lending. 14405 Walters Road, Suite 200, Houston TX 77014. NMLS ID 107636. 866.571.8213. nmlsconsumeraccess.org Georgia Residential Mortgage Licensee. Georgia Mortgage Lender License #32179. Illinois Residential Mortgage Licensee #6760766. IndianaDFI First Lien Mortgage Lending License #19368. New Jersey Residential Mortgage Lender License #107636 Licensed by the Pennsylvania Department of Banking, Mortgage Lender License #40634. TexasSML Mortgage Banker Registration #107636. Complaints Regarding Mortgage Bankers Should Be Sent to the Department of Savings and Mortgage Lending, 2601 North Lamar, Suite 201, Austin, TX 78705. A Toll-Free Consumer Hotline is Available at 1.877.276.5550. Virginia Lender License, NMLS ID 107636. Wisconsin Mortgage Banker License #107636BA.
reversereview . com
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The Reverse Review
December 2015 / January 2016
ORIGINATING
RR CONVERSE RR RR
Across the Kitchen Table By Bill Smith
A guide to reflective listening and effective communication
As a reverse mortgage originator, one should never discount the importance of the elevator pitch. Successfully generating interest up front with listeners by clearly describing the reverse mortgage provides the opportunity to dig deeper into the product to explore how it will specifically benefit them. Because the balance of the conversation deals with significantly more complex issues and concepts, the words and phrases we employ become that much more critical. I’ve learned that two factors lead to understanding and sound decisions: First, highly developed listening skills are essential. Second, a wellcomposed and rehearsed set of descriptions and explanations that 20 | TRR
are clearly delivered and easily understood increase the opportunity for an appropriate use of the reverse mortgage. Discovery/Listening Before Jim Garner was retained as our celebrity spokesperson at Financial Freedom, I was invited to be videotaped for the company’s promotional CD and future television commercial. Asked on camera to comment on the use of a reverse mortgage, I said that one fundamental question was essential to the reverse mortgage discussion: “If additional cash or income were available, would the homeowner attain greater peace of mind or an improved quality of life?” That question became
the theme of the CD and the TV spots that followed. Our conversations with senior homeowners must unearth the facts that answer that fundamental question. Together we must identify the problems and circumstances that stand in the way of reaching those goals, and we must allay the fears that often exist as a result of misinformation and misunderstanding. Every reverse mortgage prospect is searching for a solution to a problem or the foundation of an opportunity. Some are big. Some are small. Some are critical and some are not urgent at all. And sometimes they are hidden. Enter into every reverse mortgage discussion with the attitude that the secret to achieving the prospect’s goal is waiting to be discovered. Effective listening delivers the eureka moment. The discovery occurs when a reverse mortgage is the solution or part of a solution. Not only are we required to listen carefully if we want that discovery, but if we listen to the words and tone used by our prospect in describing their situation or dreams and then reflect back what we hear using their own words and phrases, we will be significantly more effective in communicating the reverse mortgage solution. Loan officers can gain a great advantage by learning a technique that therapists call reflective listening. The approach arose from Carl Roger’s school of clientcentered therapy. As employed across the kitchen table, reflective listening involves understanding a speaker’s idea and then reflecting that idea back to the speaker to confirm that the idea is correctly understood. There are a couple of key elements to reflective listening when talking with a homeowner. First, summarize what the speaker said, thereby mirroring his essential concept. Recap the message by combining the prospect’s words and phrases with your own. Reflect the prospect’s specific
ACCORDING TO BILL “I’ve learned that two factors lead to understanding and sound decisions: First, highly developed listening skills are essential. Second, a well-composed and rehearsed set of descriptions and explanations that are clearly delivered and easily understood increase the opportunity for an appropriate use of the reverse mortgage.”
ORIGINATING
Recently, I worked with a woman who warned me at the outset that she had difficulty with math and numerical concepts. Over the next few weeks she proved her assessment accurate.
HMBS
During the process she confused equity, the source and application of available funds and payments, and the accrual of interest and MIP. Frustrated, I finally
TAX TIP SPOTLIGHT
Once trust has been solidly established, the conversation should lead into a deeper discussion of actual circumstances, the values, needs and objectives of the homeowner, and the mechanics and benefits of the reverse mortgage solution. I believe that performing as a skilled speaker is the second most important capability that a loan officer needs to nurture.
Our jobs include making the complex and counterintuitive reverse mortgage easy to understand. Knowledge about how traditional mortgages work can get in the way of comprehending the concepts and mechanics of the reverse mortgage. Even some intelligent people have difficulty understanding how it will work for them. When prospects can’t grasp the complexities or recognize how a reverse mortgage will be beneficial, it often helps to paint a word picture. We can effectively use similes and metaphors to explain or communicate a concept by likening it to something else. Our familiarity with one allows us to understand the other. Having an arsenal of such descriptions ready for common occurrences will serve reverse mortgage professionals well.
remembered a metaphor formerly used by a well-known financial advisor: buckets of money. I explained that with her reverse mortgage, the $550,000 value of her home would be divided into five separate buckets. $11,540 would be placed in the first bucket to pay for the up-front fees and costs of the loan. The second bucket would contain the $50,000 required to pay off her current mortgage. $99,800 would be placed in the third bucket and from that bucket the lender would remove $700 each month to send her monthly tenure payment. The fourth bucket would contain $99,800, the balance of the cash available (the line of credit). From bucket number four, she could take funds as she needed them over the life of the loan. The fifth and last bucket contained her remaining equity. No one would touch that bucket until she died or sold her home. Then, the lender would remove the cash required to pay off the loan from bucket five and send the remaining funds to her or her heirs. She got it! From there it became easy to expand the analogy to describe some of the finer points of reverse mortgages. For example, she was able to understand that every month, additional money would be placed in her fourth Line of Credit Bucket as a result of the reverse mortgage’s credit line growth. Similarly, I was able to explain that if the value of her home increased over the life of the loan, additional money would be put 8
MARKETING
Word Pictures and Metaphors
words beyond their literal meaning through the use of figurative language is one of the most effective tools in a loan officer’s bag. (I just used a metaphor!)
ORIGINATING
point without venturing into subjects that will come later in the conversation. For example, a familiar comment made by reverse mortgage prospects is, “I’ve heard that with a reverse mortgage, the bank can take my house.” One appropriate reflective listening response would be, “It would be scary to enter into a loan where the bank could come in and take your house away.” The loan officer has acknowledged the fear and can then explain the fallacy of this popular misconception. By using the reflective listening approach, she has accomplished more than simply addressing the concern. She has let the speaker know that she listens and that she has respect for his concerns. Trust has been gained and the homeowner is more inclined to accept the explanations and suggestions offered by the loan officer.
Because the reverse mortgage is a difficult product for many people to comprehend, techniques that make understanding easier are essential. I have found that the use of visualizations (word pictures) and metaphors are effective techniques when presenting complex concepts or ideas. Figurative language is a powerful strategy when developing a mature and effective communication style. From similes to metaphors to personification, taking reversereview . com
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The Reverse Review
December 2015 / January 2016
ORIGINATING “Because the reverse mortgage is a difficult product for many people to comprehend, techniques that make understanding easier are essential. I have found that the use of visualizations (word pictures) and metaphors are effective techniques when presenting complex concepts or ideas.” into her fifth Equity Bucket. Since then, I have successfully used the buckets of money analogy with other prospects. Other metaphors have become regular staples in my reverse mortgage repertoire. When asked if it’s a good idea to shop around, I answer that it may be helpful. Then I explain that getting a reverse mortgage is like buying a Chevy or a Ford. They all come out of one factory (HUD) and are all the same. Shopping effectively means selecting the right “dealer.” I then go on to present my strengths and those of my firm. My borrowers almost never talk with a competitor. For prospects who are unsure or nervous about the application process, I describe the path step by step. Then I tell them that my role is like that of an airline pilot. “When you board the flight you want
to sit back, relax and not worry. It’s my job to steer the plane, handle turbulence and get you to your destination on time. You can rely on me to minimize your involvement and to keep you informed of our progress.” It is common for many homeowners to have serious trepidation about tapping into their home’s equity. I have found that a discussion like the following often goes a long way to diminish their fear: “Thirty years ago you paid $67,000 for your house. It’s now grown to $600,000. If you had deposited $67,000 into a savings account in 1985 and somehow had forgotten about it until this year and then discovered that it had grown to $600,000, would you have any trouble withdrawing some of the money to improve your lifestyle? Well, your house is an investment like that. When you step
S E N D Y O U R N E W S T O J E S S I C A @ R E V E R S E R E V I E W. C O M
on the floor, touch a doorknob or turn on a faucet, you are touching your asset. All you are doing with a reverse mortgage is giving yourself permission to turn some of that asset into liquid cash that you can spend now.” Nearly all seniors will grant themselves permission to tap into their home equity asset after accepting this metaphor. Mental images are easier to remember and relate to than financial concepts and processes. Metaphors allow prospects to clearly see our product and its benefits. Decisions about whether a reverse mortgage is the best solution will come quicker and with greater certainty for prospects who see the product in their mind’s eye. You will leave every encounter knowing that you have provided a valuable service; you have presented a clear picture of the good that lies ahead, and that the homeowner can attain greater peace of mind or an improved quality of life with a reverse mortgage. n
R E V E R S E R E V I E W. C O M
THE
REVERSE review
there is nothing more exciting than moving and shaking The Reverse Review wants your company news! Be a part of our new Movers & Shakers column, where you can read about the latest company initiatives, programs, hires, acquisitions and more. Send us your company’s press releases or email us news of your latest venture, and we’ll consider printing it in the next issue.
NEW HIRES
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DEVELOPMENTS
ACQUISITIONS
ORIGINATING
Confirming Owner Occupancy By Elenita Layugan
ONE The credit report should confirm the owner’s occupancy of the subject property. If there are address variations, obtain a letter of explanation for these and make sure the explanation is reasonable. If you need further confirmation, you should request copies of most recent utility bills (cable bill, telephone bill, etc.) to check that services are provided to the subject property address.
SEVEN On a HECM for Purchase, if the borrower is retaining a current primary residence as a rental or second home, obtain a disposition letter for the property being retained and a motivation letter for the property being purchased. Make sure both explanations are sufficient and reasonable. EIGHT On a HECM for Purchase that involves a borrower with an existing FHA loan, ensure that that loan is paid off, because FHA will generally not insure two loans for a borrower at one time. There are very specific exceptions to this rule. If these exceptions apply to your borrower, make sure to obtain all sufficient documentation, per the exception. NINE Lastly, review the borrower’s Homeowner’s Insurance Policy. A standard policy on a primary residence should always reflect coverage for dwelling, personal property, loss of use and liability protection. If the policy presented to you is a dwelling fire insurance policy only, consider that a red flag because policies like this are generally acquired on rental or investment properties where personal possessions do not need to be insured. n reversereview . com
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SPOTLIGHT
To ensure compliance with the loan’s owner occupancy requirements, here are important reminders for reverse originators:
SIX Utilize fraud detection tools like DataVerify to authenticate information provided by the borrower, such as the address of their primary residence.
HMBS
Although the report has a greater impact on those who service HECM loans, there are lessons to be learned for originators too. Audits always involve a review of the loan application, so it is prudent to exercise due diligence on every loan you handle.
FIVE If the borrower provided you with a copy of a driver’s license to prove date of birth, make sure it is unexpired and reflects the subject property address.
TAX TIP
In August, HUD’s Office of the Inspector General released a final review of the agency’s management of the HECM program. The report declared that HUD policies did not always ensure that borrowers complied with residency requirements. A large percentage of borrowers did not live in the properties associated with their loans, according to the review, and some borrowers were receiving rental assistance from HUD’s multifamily program at a different address at the same time.
FOUR On the appraisal report, instead of flipping right away to page 2, where the value is indicated, take time to read the entire report and make note of the “subject” section on page 1. With the exclusion of a HECM for Purchase transaction, the “owner” box should always be checked for “occupant” in this section.
MARKETING
A checklist to help ensure that your borrower meets HUD’s requirements
THREE The address on all documentation should be consistent with the subject property address, so review all W-2s, paystubs, tax returns, bank statements, etc. If there is any discrepancy, ask the borrower for a letter of explanation. Copies of utility bills, as mentioned above, can help confirm owner occupancy.
ORIGINATING
TWO Note the presence of more than one open mortgage on a borrower’s credit report. If this exists, review the Continuation Sheet/Residential Loan Application of the 1009 and match each mortgage to the properties listed. If there was no additional property listed, speak with the borrower and inquire about the additional mortgage listed in the credit report. Furthermore, obtain property tax and homeowner’s insurance information on all additional properties since monthly payment amounts for these are included in Financial Assessment. If the borrower was only a co-signer on the mortgage, it should still be included in Financial Assessment, unless the third party is able to provide documentation to show that he/she has made timely mortgage payments for the past 12 months.
WE KNOCK OUT THE
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December 2015 / January 2016
COMPETITION
Experience | Excellence | Commitment | Pride
PRC has been 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.
TOLL FREE: (800) 542-4113 | www.PRClosings.com
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ORIGINATING
What’s the Story, Dude? By Colleen Moore
For many files, we need to address why something happened, what is being done about it and why it will not be an issue in the future. Anything short of that will not satisfy FA requirements. Sometimes you can glance at a file and it seems obvious that something happened, but without an explanation, the file could either be denied or a full LESA could be enforced. It is so much easier to address those issues before submission, since climbing up a hill is far more difficult than rolling down. I can promise you, we as lenders want to approve files and we do not want to impose unnecessary LESAs on a borrower, but we need the help of our originators. Take the time to talk to your borrower, and if it makes sense, help them substantiate their story. Hand your
underwriter rose-colored glasses instead of dark ones; let them know and feel the borrower’s story. Without a true and valid story, prepare your borrower for a LESA account and show them what a beneficial and positive thing it can be for them. Some borrowers have always struggled to pay their bills and property charges, and you can help them remain in their homes safely with no concerns of future defaults. I truly believe FHA wants us to make loans—appropriate loans that help our borrowers. They are just asking that we make sure the loan will genuinely be to the borrower’s benefit, that it makes sense and that we are not just using a HECM to postpone the inevitable. Sometimes, although not often, the kindest answer is a no, even though as originators that may be painful. So do your borrowers a favor: Ask the questions and tell their story to help them find financial security. n reversereview . com
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SPOTLIGHT
underwriter try to figure out if there are any extenuating circumstances for credit or property charge issues, or if compensating factors exist for a residual income shortfall.
HMBS
My earnest plea with originators in this industry is to tell the story. Explain the borrower’s circumstances clearly so that the underwriter can get a sense of the full picture: Who lives there? Why were there credit issues? What other source of income do they have? Are there any assets? What are they planning to do once the loan is in place? If there are any issues with credit or property charges, what are the extenuating circumstances? Be specific and document the situation. There is nothing worse than making an
“My earnest plea with originators in this industry is to tell the story. Explain the borrower’s circumstances clearly so that the underwriter can get a sense of the full picture.”
TAX TIP
As a lender, one consistent issue that I see when files are sent for review is a lack of clarity. Often, an originator will not clearly identify what is happening with a borrower. I am a strong believer in the adage, “a confused mind says ‘no,’” and there could be no truer example of that then when your underwriter is trying to make a determination on a file. I see this repeatedly when concerns arise involving credit, property charges or income, and there is no explanation whatsoever accompanying that submission.
MARKETING
HECM originators today are faced with the challenge of Financial Assessment. There are many complexities to this new program, and we as lenders are trying to find the sweet spot: that place where we can satisfy HUD’s new requirements and still help seniors who could benefit from a reverse mortgage.
ORIGINATING
FA has made it essential for originators to clarify a borrower’s circumstance.
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December 2015 / January 2016
Ring in the New Year with us.
877-721-3847
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www.rfslends.com
NMLS #1025894
PROMOTE
MARKETING
In With the Old, but Make Room for the New By Glenn Main
A mixed bag of marketing tactics is the best way to ensure success.
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SPOTLIGHT
The most important piece of marketing advice I can offer my fellow originators is to truly believe in the value of the service you offer. The HECM is a unique financial tool that can be extremely beneficial to our customers. If you focus on the importance of this product as you work to spread the word about your services, the rest will ultimately fall into place. n
HMBS
THE SECOND strategy involves mailers. Don’t underestimate mailers. They instantly became invaluable when the National Do Not Call Registry was put into effect, and they provide a channel to reach many people who have otherwise become inaccessible. Plus, because only those who are interested will respond, you can save your breath on disinterested parties and focus on those who have already displayed a desire to learn more about the loan.
No. 2
A second new strategy involves employing the services of a marketing expert who can help make your phones ring. Recently, those who are most effective at this do so through infomercials, although a quality list of Internet leads can also be useful. While quality Internet leads in any reasonable quantity have been very hard to come by in the past, I believe they will continue to get better as more and more people becoming eligible for reverse mortgages will be computer literate and active Internet users.
TAX TIP
THE FIRST can be summarized by two of the scariest words in sales: cold calling. While the Internet has ushered in new modes of communication, I’ve never abandoned cold calling; it has been the foundation of my business model since the beginning of my career. When it comes to hitting the phones, I believe that you put in what you get out. My first manager gave me key advice that has stayed with me: “Your phone is an ATM and what you withdraw is up to you.”
No. 1
MARKETING
What do I consider old strategies? These are the classics, and in my opinion, they have never gone out of style.
Now, on to making room for the new. The key to success in many industries is to build a strong professional network. This is especially important with reverse mortgages, as it is crucial that we include financial advisors in conversations about HECMs. Realtors, builders and elder law attorneys are also great professional contacts for HECM originators. Some of these relationships can begin with a simple phone call on a number pulled from an Internet listing. With advisors who are open to meeting with me, I try to schedule a lunch where we can discuss the details of the loan program and get to know one another in person.
ORIGINATING
I believe that trying new marketing strategies is essential to continued success in this business. But I also believe that there are tried and true tactics that have proved to be an important part of any lender’s marketing foundation. While some may say, “Out with the old and in with the new,” I say, “In with the old, but make room for the new,” because when it comes to marketing, both can serve you well.
LASTLY, always seek referrals from your customers. It is consistently effective, takes very little time and doesn’t cost anything. Yet, I have found that many loan officers don’t ask their customers for referrals. By simply making this a normal practice as you see a loan to its conclusion, you can help your business tremendously. Not only will you remind them to share their experience with friends and family, but you can also gauge how your customers feel about you, your staff and the service you’ve provided.
No. 3
The Reverse Review
December 2015 / January 2016
28 | TRR
TAX TIP
RR
ASSESS
RR
RR
Complying With FA’s Property Tax Requirements By Chuck Burkey and J. Kevin Brown
8
Assessing methods for collecting tax information
In the end, it basically comes down to the lender to decide which option would be the most cost-effective and least risky, and ensure compliance with the FA requirements so they can remain competitive in the marketplace. n
REVERSE REVIEW READERS HELP THOUSANDS OF SENIORS FIND FINANCIAL SECURITY. LET’S TALK ABOUT HOW WE CAN HELP THOUSANDS MORE.
Get involved. info@reversereview.com YOUR MONTHLY PUBLICATION FOR REVERSE MORTGAGE NEWS reversereview . com
8 TRR | 29
SPOTLIGHT
Each option has its own advantages and disadvantages. When the borrower provides the information, internal processing resources can be dedicated to their core competency, which is closing loans and producing revenue. This can also eliminate the cost of additional staff and increased closing costs. The disadvantages are the additional pressure on or inconvenience to the borrower; uncertainty that all tax years and all jurisdictions are included in the supplied information; delays during closing due to incomplete or inaccurate borrowersupplied information; and the possibility of fraudulent information.
As with the insourcing option, outsourcing to a third party eliminates many, if not all, of the disadvantages referenced in the borrower-provided model, but does not require a substantial investment in a fixed-cost model by the lender. However, lenders must be selective in choosing the right outsource partner to ensure they receive the level of information needed to determine a borrower’s willingness and ability to pay property charges.
HMBS
1 Borrower provides the information 2 Insource model 3 Outsource with a third party
Insourcing the collection of tax information eliminates many of these disadvantages, but requires a substantial time and financial investment to build an experienced team of tax professionals to obtain information from the 26,000-plus tax assessors and collectors within the U.S., to ensure that all information collected is timely and accurate. Moreover, settlement service charges are traditionally passed to a service provider and cannot be retained by the lender. Therefore, the development of an insource model is cost-prohibitive for many.
TAX TIP
During our research, we found three primary methods currently being utilized to collect tax information prior to a loan closing:
“IN THE END, IT BASICALLY COMES DOWN TO THE LENDER TO DECIDE which option would be the most cost-effective and least risky, and ensure compliance with the FA requirements so they can remain competitive in the marketplace.”
MARKETING
For example, the regulation requires that a 24-month payment history be obtained as evidence that a prospective borrower has demonstrated these characteristics. But what if a person’s property tax was paid late, or by a previous mortgage servicer, or by a family member, or via a plethora of other options currently available to senior citizens, including tax deferrals and exemptions? What methods are you using to gather this detailed information to help ensure you are mitigating financial risks while helping your borrowers plan for the future?
ORIGINATING
History has shown that delinquent property taxes are one of the major causes of defaults in the HECM program. As a result, evaluating property tax charges became a key component of the Financial Assessment process. The new regulations appear to be rather simple, however, many lenders are discovering that a wide variety of special situations and allowances must be considered when determining a senior’s ability and willingness to maintain property charges.
The Reverse Review
December 2015 / January 2016
The value of A STRONG ALLY:
FOCUS.
You need a partner you can count on. Your brand depends on it. Celink is exclusively dedicated to reverse mortgage servicing.
For more information, please contact Katie Kirkham, Director of Client Relations at (844) 228-2101. 30 | TRR
celink.com | (844) 228-2101
HMBS
RR
ANALYZE
RR
RR
HMBS Quarterly Issuance Steady at $2.1 Billion By Joe Kelly
HMBS ISSUANCE BY QUARTER
2009 2010 2011 2012 2013
41.9%
Q3
$90,697,498
$392,431,248
$483,128,746
18.8%
Q4
$44,943,315
$269,638,295
$314,581,610
14.3%
Q1
$210,561,502
$102,318,576
$312,880,078
67.3%
Q2
$570,829,415
$404,470,718
$975,300,133
58.5%
Q3
$1,927,639,673
$1,564,124,032
$3,491,763,705
55.2%
Q4
$3,003,997,895
$748,461,283
$3,752,459,178
80.1%
Q1
$1,954,598,264
$994,003,421
$2,948,601,685
66.3%
Q2
$1,921,759,584
$427,355,811
$2,349,115,395
81.8%
Q3
$1,994,098,197
$667,183,011
$2,661,281,208
74.9%
Q4
$1,901,136,975
$824,303,975
$2,725,440,950
69.8%
Q1
$1,918,257,083
$764,623,717
$2,682,880,800
71.5%
Q2
$1,980,365,104
$611,969,866
$2,592,334,970
76.4%
Q3
$1,893,092,198
$772,405,157
$2,665,497,355
71.0%
Q4
$1,490,462,669
$491,192,877
$1,981,655,546
75.2%
Q1
$1,468,962,699
$786,053,712
$2,255,016,411
65.1%
Q2
$1,556,177,659
$596,171,875
$2,152,349,534
72.3%
Q3
$1,524,191,593
$570,681,068
$2,094,872,661
72.8%
Q4
$1,575,333,969
$515,265,228
$2,090,599,197
75.4%
Q1
$1,868,902,091
$521,205,115
$2,390,107,206
78.2%
Q2
$1,881,414,477
$637,884,595
$2,519,299,072
74.7%
Q3
$577,225,518
$1,623,966,616
$2,201,192,134
26.2%
Q4
$285,436,885
$2,179,820,808
$2,465,257,693
11.6%
Q1
$438,989,850
$1,275,781,640
$1,714,771,490
25.6%
Q2
$545,293,255
$872,154,719
$1,417,447,974
38.5%
Q3
$545,285,095
$978,177,310
$1,523,462,405
35.8%
Q4
$587,410,168
$1,354,704,124
$1,942,114,292
30.2%
Q1
$469,366,214
$1,537,953,533
$2,007,319,747
23.4%
$464,699,743
$2,051,040,739
$2,515,740,482
18.5%
Q3
$431,620,526
$1,787,930,024
$2,219,550,550
19.4%
$671,249,588
$788,574,032
14.9%
Q2
10/2015 $117,324,444
TOTALS $35,474,585,025 $27,319,550,304 $62,794,135,329 56.5% reversereview . com
8 TRR | 31
SPOTLIGHT
2014
FIXED %
$559,539,090
HMBS
2015
QUARTER TOTAL
$325,027,623
TAX TIP
Since I last outlined the history of HMBS issuance in the November 2014 issue of TRR, the HECM program has experienced several reforms—issuers have come and gone and the product mix continues to change. Despite this, the average quarterly issuance remains steady at the historical average of approximately $2.1 billion per quarter, helped by the surge in HMBS “tail” issuance of $2.1 billion over the last four full quarters. Adjustable-rate issuance has increased in the last year, peaking in the second quarter at… well, you can probably guess.
ADJUSTABLE
$234,511,467
MARKETING
Despite program change, average quarterly issuance remains consistent.
FIXED
Q2
ORIGINATING
2008
The Reverse Review
December 2015 / January 2016
SPOTLIGHT RR
12 / 2015 1 / 2016
WANT TO SEE MORE ARTICLES LIKE THIS?
See them at reversereview.com.
REMEMBERING
FRED
The industry pays tribute to late Senator and reverse mortgage advocate Fred Thompson.
B Y J ES SICA GUE R IN
I
N A PACKED HOTEL BALLROOM IN SAN ANTONIO, excited
chatter hushed to near silence as Fred Thompson took the stage to address hundreds of reverse mortgage professionals who had traveled to attend NRMLA’s annual meeting. Tall, confident and polished, the former senator assumed his place at the podium with ease. Smiling warmly to the audience, he opened with a joke about his commercials before launching into politics and reverse mortgages. 32 | TRR
People were crammed into the room, filling every seat and lining the walls two deep to hear Thompson speak. They listened with rapt attention, smiling, nodding, chuckling as he spoke. Afterward, they talked excitedly about their encounter with Thompson, thrilled to have listened to such a notable person pledge their support for the HECM program, charmed by his affable persona. The talk made it abundantly clear that Thompson was revered by many in the industry, regardless of what lender they
worked for. HECM specialists respected the AAG spokesperson for his advocacy of the program; they were proud to have him on their side. When Thompson passed away in November at age 73 after a battle with cancer, professionals across the industry mourned his loss. The credibility his support lent the program encouraged thousands of seniors to consider how a reverse mortgage might work for them. So while he might have worked for one lender, in a way he worked for them all.
SPOTLIGHT “Fred was an icon in so many different ways and in a multitude of areas,” says Mike Kent, president of Liberty Home Equity Solutions. “Having him represent our industry was possibly the single best image lift we have had in many years. His stature as a leader and his commitment to personal independence provided the honor and recognition our senior clients deserve.”
But Thompson never abandoned his love for politics. In 1994, he won Tennessee’s seat in the U.S. Senate in a special election to replace Al Gore. He was reelected and served eight years before leaving on his own accord. In 2008, he launched a bid for the presidency, but ultimately dropped out of the race. The outspoken conservative took a prominent role as a sideline commentator instead, raking up a sizable following on Twitter with his humorous one-liners. “Fred was super-charismatic and very, very funny,” Jahangiri recalls. “He always made the people around him feel good. Those who were close to him knew they could count on him for a laugh.”
Otto Kumbar, CEO of Liberty Home Equity Solutions, says Thompson’s personal experience highlighted the fact that his role as spokesman was more than just a job for him. “I once asked him why he rarely talks about his mother’s reverse mortgage. He said, ‘It makes a better shield than a sword.’ Fred had enormous impact on American life far beyond the reverse industry, and this single insight helped me understand why. He wanted seniors to make their own decisions for their own individual circumstances,” Kumbar says. Jahangiri says this was typical of Thompson’s character. “He was a genuine, thoughtful, humble guy,” Jahangiri says. “He was a statesman in the truest sense of the word. He really left his mark in this world, and he will be missed.” n
reversereview . com
8 TRR | 33
SPOTLIGHT
After graduation, he worked on Howard Baker’s Senate re-election campaign before getting his first big break in 1973: a spot on the Senate Watergate Committee. As chief minority counsel, Thompson led the line of questioning that uncovered the Nixon tapes. Later, he was asked to play himself in a film about the scandal, and he discovered he was quite comfortable on stage. He went on to star in more than 20 feature films, including Cape Fear and The Hunt for Red October, and also landed a longtime gig as the Manhattan district attorney on Law & Order.
“His mom was someone who fit the profile—she was very equity rich and needed some cash flow for in-home care,” Jahangiri says. “Fred was helping to manage her affairs at the time, and he thought it was a good fit. He went through the exact same process everyone else does; he went to counseling and did the paperwork. His experience really confirmed his belief in the utility of the product. He said to me, ‘Now I have a true understanding of what every senior goes through. I can really see how this helps people.’ The experience validated his advocacy for him.”
HMBS
Jahangiri says Thompson thoroughly researched the product and became adamant about the benefits it offered aging Americans. “He thought backing
Thompson was born from humble roots in Sheffield, Alabama, in 1942. Freddie Dalton spent his childhood in Tennessee, where he developed a passion for politics over dinner-table conversations with his father. He went on to Memphis State University to major in political science and then to Vanderbilt University’s School of Law.
While many people are aware of Thompson’s commercials about reverse mortgages, few know that his mother had one.
TAX TIP
AAG CEO Reza Jahangiri recalls his first meetings with Thompson to discuss a potential partnership. “I remember saying AAG CEO Reza Jahangiri with that our odds Thompson at were really low to NRMLA’s 2012 annual meeting in get someone like San Antonio. Fred Thompson, especially not long after the 2008 presidential primary,” Jahangiri says. “But when we met, he had such an open mind. He wanted to know the facts and to learn about how the product worked. He didn’t focus on the commercial aspect of the deal; he wanted to know how the product was of service to the country’s seniors.”
No doubt, Thompson’s support was a major win for the industry. He was a remarkable public figure. His 50-year career, which took him from Tennessee to Washington to Hollywood, was impressive in its breadth.
Thompson’s wit made him one of the top conservatives to follow on Twitter. “As long as we’ve got Joe Biden around, there will always be something to tweet about,” he quipped to TRR in 2012. “I’ve always believed that it’s better to laugh than cry, and with some of the things that happen around here, you have to do one or the other.”
MARKETING
“As one of the faces of the reverse mortgage industry, Senator Thompson’s strong belief in and endorsement of reverse mortgages brought a fresh and relatable perspective, helping to increase awareness of the product and how it can be used as a powerful retirement tool for older Americans,” says Jean Noble, chief marketing officer at Reverse Mortgage Funding.
the product was the right thing to do, independent of political consequence or popular consensus, which was exactly what we needed in the reverse mortgage industry,” Jahangiri says.
ORIGINATING
Thompson maintained a national presence as AAG’s spokesman for five years, appearing in dozens of commercials about the benefits reverse mortgages can offer seniors. His campaign was a major boost for the industry, lending a likable, reliable face to a product that was often wrongly maligned.
He thought backing the product was the right thing to do, independent of political consequence or popular consensus, which was exactly what we needed in the reverse mortgage industry.” -Reza Jahangiri
The Reverse Review
December 2015 / January 2016
B Y J ES S I C A G U ER I N AN D R AL P H R O S Y N EK
34 | TRR
One year ago, we wrote a cover story outlining the details of impending Financial Assessment— speculating how the market would react and offering tips on how to best navigate this new landscape. Like many articles at that time, projections and strategies were based upon pages and pages of dense guidelines that, once enacted, would take this industry through uncharted waters. At the end of the day, it was all speculation. Some was positive and forward-thinking, while other conjecture was wrought with skepticism and fear. Now, nearly a year after FA, we’re revisiting the topic through the lens of the underwriter, exploring the degree to which this monumental program change has truly impacted the industry. It seems that the work of the underwriter has been most drastically altered by the adoption of FA. We’ve spoken with dozens of these dedicated professionals about how their teams have adjusted processes to thoroughly document a borrower’s ability and willingness according to the new rules. We’ve learned that the adjustment has not been completely smooth, despite months of preparation. It turns out that even the best-laid plans bend and turn when put into action. As one underwriter said, FA has taken us for quite a ride. But in many ways, the industry has successfully adapted to the change. And as originators . continue to advance their skills and education, easing the burdens of the underwriter, one can assume that things will improve as times marches on. Perhaps now is a good time to reflect on the challenges we’ve faced in the wake of FA these past several months as we prepare to put our best foot forward in 2016. A MEETING OF THE MINDS In early December, Finance of America Reverse (formerly Urban Financial of America) held a twoday underwriting seminar in Tulsa, Oklahoma, as part of its commitment to the ongoing training and education of its B2B partners. Led by Britany Luth, FAR’s vice president of best practices and a longtime underwriting contributor for TRR, the seminar provided a
place for more than 30 underwriters and loan support professionals to discuss issues affecting their work. As you might expect, the challenges posed by the implementation of FA dominated the conversation. “Since its launch, we have learned a lot that we simply hadn’t thought of when preparing for Financial Assessment,” Luth says. “Early on, the 2 industry worked through questions and confusion on various interpretations of the new guidelines. As we continue to run across new scenarios and receive clarifications from HUD, we use it as an opportunity to share what we have learned. The goal of this training was to reset. We identified key areas of confusion and targeted those as areas for training. The response was overwhelming and exceeded our expectations, proving there is still a desire to learn more within the industry.” During the training session, we spoke with dozens of underwriters who offered their views on how FA has impacted their work. Based on these opinions, we’ve outlined some key themes that were repeated by many of these professionals. Their collective commentary offers valuable insight into how the role of a HECM underwriter has changed in today’s lending environment, and how the loan process has been impacted as a result. ASK THE UNDERWRITER
Since its launch, we have learned a lot that we simply hadn’t thought of when preparing for Financial Assessment. Early on, the industry worked through questions and confusion on various interpretations of the new guidelines. As we continue to run across new scenarios and receive clarifications from HUD, we use it as an opportunity to share what we have learned.” -Britany Luth
Reverse professionals in charge of operations, policy and workflow spent a great deal of time preparing for FA. New procedures designed by such experts were enacted at lender companies across the country, and in most cases they were thoughtful and efficient improvements. But once FA came into play, it became evident that no workflow revision could change the fact that the underwriter had the greatest burden to bear. With an experienced eye needed to analyze nearly every case file, underwriters say they are facing increasing demands. It is they who now provide the framework for a loan originator’s success. While special email addresses, hotlines and scenario support desks for originators were established at many companies, at the end of the day, LOs just wanted to hear from their underwriters. It was the underwriter they sought out to discuss the need for a full or partial LESA, or to ask if enough evidence had been provided to prove a borrower’s eligibility. This development made one thing clear: The role of the underwriter appears to have been elevated significantly with the onset of FA. LOs were more confident when an underwriter was involved 8 reversereview . com
8 TRR | 35
The Reverse Review
December 2015 / January 2016
upfront in the origination process, and bringing one into the loop early as a final step in the prequalification process proved to measurably reduce processing turn times.
now encompassing a more thorough interview process with a potential borrower than before.
A LETTER OF EXPLANATION TO ACCOMPANY YOUR LETTER OF EXPLANATION It was expected that many originators would have difficulty applying FA’s guidelines to determine 1 a borrower’s ability and willingness. LOs would need to address three key factors on all case files in order for the loan to proceed: credit history, prior property charge payments and residual income. But despite advanced training and discussion, it became clear that many originators were having trouble, with underwriters reporting that originator confusion was lengthening turn times. For many, more training and education were needed. Perhaps the greatest challenge arose from the need for originators to supply a letter of explanation with proper evidentiary support in case files with extenuating circumstances. Underwriters have reported that, while great care and detail was often provided in the LOX for their review, many files failed to include verifiable documentation. So, for example, if a case involved a borrower whose income was depleted because of a serious medical issue, the case file might include great detail about the borrower’s plight, but fail to include a letter from their doctor and a hospital invoice in support of this claim. Underwriters might be sympathetic, but without such support they are unable to approve the file under FA guidelines. The need for additional support for these letters of explanation were delaying turn times with a request for resubmission, and in some cases, a resubmission of the resubmission was needed to get it right. For many underwriters, the paperwork began to pile up, clogging the pipeline as they worked to push cases through to approval. Under FA guidelines, underwriters can no longer read between the lines. Instead, they must slog through a tower of paperwork to make sure an explanation is provided down to the letter. MAKING A LIST, CHECKING IT TWICE While the need for increased documentation has been an adjustment, originators are catching on, with some underwriters reporting that the problem has begun to right itself as LOs learn the ropes. It seems that continued training and education is the answer to the problem, with origination 101 36 | TRR
Perhaps the greatest challenge arose from the need for originators to supply a letter of explanation with proper evidentiary support in case files with extenuating circumstances. Underwriters have reported that, while great care and detail was often provided in the LOX for their review, many files failed to include verifiable documentation.”
The process must be aided by a comprehensive checklist, one that outlines exactly how a borrower interview should proceed, particularly in troubled cases that require extra support. A number of lender companies have ushered in a return of the paper checklist to assist their LOs, helping them navigate the guidelines, a move that is certainly helpful to those with little to no forward experience. Many of these checklists perform as a combination job aide and roadmap to information and document collection. In most cases, the forms have morphed from a page to a packet and include an example of a pre-qualification discussion between originator and borrower. Because FA is so detailed, the checklist may also prompt the user to consider exceptions, alternative documentation, extenuating circumstances and compensating factors. It might provide prompts for more common situations to further the borrower interview. For many lenders, these checklists have been essential to helping originators get through the process. A SENSE OF OPTIMISM When news of FA was first announced, many in the space had their concerns. One was about
“The role of the underwriter appears to have been elevated significantly with the onset of FA. LOs were more confident when an underwriter was involved upfront in the origination process, and bringing one into the loop early as a final step in the pre-qualification process proved to measurably reduce processing turn times.”
It seems that continued training and education is the answer to the problem, with origination 101 now encompassing a more thorough interview process with a potential borrower than before.
how potential borrowers might respond. But with nearly a year behind us, it’s safe to say that for most, the elevated pre-qualification process has not made a marked difference in consumer interest. In fact, the changes HUD has made in the past two years seem to have inspired greater support from the media, which have many predicting greater consumer acceptance down the road. Discussions at NRMLA and elsewhere appear to reflect a sense of optimism. The emphasis has
been on the need to embrace change and to foster clarity between HUD and the industry as we work together to get a handle on FA and see the market succeed. Both sides have recognized the importance of an ongoing dialogue as we work through the changes, and many have applauded HUD for its responsiveness to industry queries throughout this process. While FA has undoubtedly increased the demands of their job, many of the underwriters we spoke with echoed this sense of optimism. Several professed their belief that additional requirements for borrower eligibility strengthen the HECM program and ensure its continued availability to aging Americans. Many stressed that the key is 3 continued, industry-wide support for ongoing education so that the application of FA eventually varies little from lender to lender. As we move into the New Year, one prevailing question lingers: Will next year see program growth and volume? Over the past three years we have seen tremendous change to the HECM as HUD enacted measures to ensure its longevity. Now, there appears to be a sense of hope that we might enjoy a period of stability where industry participants can focus on mastering the changes and connecting with a larger audience. n
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8 TRR | 37
The Reverse Review
December 2015 / January 2016
LAST WORD
RR
REFLECT
RR
RR
Another Year Older, Another Year Wiser? By Michael D. Kent
So, what did I learn about myself and the world around me this year and did I in some way become wiser? I learned that life, in almost all situations and circumstances, is about the people we love, those we choose to associate with and those we serve. This year, I learned a lesson in love, again. It’s a lesson I learned with the birth of my children, but it has come back to me at this age more pronounced and poignant than ever. I was reminded that wealth and material things do not come close to that all-encompassing jolt of love and complete contentment I felt when I first laid eyes on Ryan. Just barely 5 pounds and worth more than all I own.
Reflecting on lessons learned in life and business
In April 2015, I joined the team at Liberty Home Equity Solutions as president. I inherited an incredible management team and one of the finest staffs I have ever been associated with. Being new in any position is always a challenge. Joining a team that has historically had great leaders and trying to fill that role myself has been a bit intimidating. However, I quickly learned to lean on those who have made this company so great. It really is all about the people.
On my birthday, I set aside time to reflect on my year. What happened that moved me? What did I learn about myself and the world around me? And most importantly, did I become wiser?
Our industry has had a very challenging year full of change. However, my belief is that we may have an opportunity to become much wiser as an industry as a result of these changes. Financial Assessment will require significantly more time and conversation with our customers. Maybe we will get to know them better. Maybe we can and will take more time to help them determine if a reverse mortgage is right for them. Maybe we will educate, inform and truly serve as opposed to sell.
I was most moved by two events in my life this year. I witnessed the passing of my dearest friend and mentor, Bob Yeary, the co-founder of RMS, and I became a grandfather to Ryan, the most adorable and spectacular child ever born. (OK, maybe I am biased.)
Changes to NBS guidelines, MOE process and default reporting requirements mean all of us must be better educated about our product so we can better educate and serve our customers. Maybe significantly greater participation in a more robust CRMP program is called for.
This year, the two events that moved me the most involved the two people who have changed me the most.
When it comes down to it, the personal lesson I learned this year is reflected in my professional life: It is all about the people: those we love, those we associate with and those we serve. Am I wiser after this revelation? I’d like to think so. Has our industry become wiser? Let’s hope so. Let’s pledge to do all we can to better serve our senior customers and better educate ourselves.
Public admission: I just had another birthday and I am rapidly approaching the qualifying age for a reverse mortgage.
Bob Yeary was my mentor in the mortgage business for 30 years. He was also a dear friend and my surrogate father. He taught me to always give my best effort, look for what others miss and care about the people around you. Bob is a major reason I enjoy any kind of success in the mortgage business. The birth of my granddaughter reminded me of what is truly important in life: family and our love for one another. She has reminded me just how connected we all are and how important that is for us all. Her birth was also a reminder of how quickly time flies. 38 | TRR
In the spirit of celebrating those you love and serve, I’m wishing all of you a joyous and peace-filled holiday season. n
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Call today or visit us online and see why we are leaders in reverse. 888.272.1214 landmarknetwork.com
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