The Reverse Review October 2013

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Finding Success in a New HECM Market

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AN UNDERWRITER’S GUIDE TO A CLEAN CASE BINDER PG. 28 TEXANS RALLY BEHIND THE HECM FOR PURCHASE PG. 21 + MARK ACCHIONE SITS DOWN IN OUR HOT SEAT PG. 18

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THE

REVERSE october 2013

review

The Reverse Review October 2013

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• Call 855-77-URBAN (855-778-7226) • Explore our new wholesale and correspondent portal: ufgwholesale.com • Come see us at NRMLA’s Annual Meeting and Expo (booth #207), November 4–6 at The Roosevelt New Orleans. Meet our account executives, underwriters and executive leaders..

* Since December 2011. Based on trailing 12 months’ endorsement volume. Source: Reverse Market Insight.

NMLS ID# 2285. For mortgage professional use only, not to distributed to the general public. Urban Financial Group Corporate Office: 8909 South Yale Avenue,Tulsa, OK 74137; Urban Financial Group, Inc. may do business under the name REVERSE IT!, which is a DBA, or division of Urban Financial Group, Inc. © 2013 Urban Financial Group, Inc. All Rights Reserved.

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The Reverse Review October 2013

From the Editor synopsis is just a fragment of the conversation

that needs to be had. There is so much more to

be said. We intend to continue the discussion—

Senior Publisher

new rules and assessing how the industry can

Publisher

bring this product to a wider audience.

When we look back on these changes five or

10 years from now, I believe we will see FHA’s

the HECM program launched the industry into

Reza Jahangiri Erik Richard

Editor-in-Chief Jessica Guerin

recent move as a pivotal turning point for the

Creative Director

mortgage product that will forever alter the

Copy Editor

industry, a historical moment for the reverse

FHA’s recent revisions to

Meet the Team

analyzing how to market this revised product, detailing tips for successfully navigating the

A note from jessica guerin

l

way people utilize home equity to support their retirement goals. With these changes,

there is great hope that the negative image that has shrouded the product will dissipate as the public begins to recognize the HECM as the

Traci Knight

Kersten deck

Marketing Director alycia colacion

Printer The Ovid Bell Press

overdrive, igniting a frenzy of discussion about

important financial planning tool that it is.

drastic change and giving way to a deluge of

In the meantime, the road may be somewhat

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

implementation.

guidelines. It’s important that we don’t lose

Subscriptions email : information@reversereview.com

In the wake of the announcement, some

are afforded with a government-insured

Editorial Content email : jessica@reversereview.com

optimism. Whatever your take, the fact is the

While business may not be the same as it

participants across the board. Business as usual

great opportunity to take the HECM to the

© 2013 Reverse Publishing, LLC. All rights reserved. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, Reverse Publishing, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only.

Postmaster : Please send address changes to The Reverse Review, 3800 West Chapman Ave., Orange, CA 92868

the effectiveness of what some considered

questions directed at HUD regarding proper

bumpy as the industry adapts to new

sight of the possibilities senior consumers

expressed discouragement while others chose

product that grants access to home equity.

new rules will substantially impact industry

once was, with a bit of creativity, there is

will not be the same.

mainstream marketplace.

In this issue, our team sought to explain the

Editor-in-Chief

changes and shed some light on how the

reverse mortgage space might be affected by

talking to seasoned professionals with varying perspectives on the new guidelines. But our

sign up for the newsletter at reversereview.com.

Get the latest issue delivered directly to your inbox!

FIND US ON:

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ed

Feedback is very important to us here at The Reverse Review. Send us your thoughts on past articles or something that is on your mind and we will publish it in this section. information@reversereview.com

Want to talk to Jessica?

Reach her at jessica@reversereview.com.

t ay ec st onn c

Feedback

{ Jessica Guerin }

FACEBOOK AND LINKEDIN

Table of Contents

TRR 10.13

26 | Marketing Inbound Marketing Succeeds Where Purchased Leads Fail How this multifaceted strategy can reinvigorate your marketing Scott Gordon

In this issue...

31 alissa scott prieto Title Tip

28 | Underwriting HUD’s Audit Process and How to Avoid the Dreaded PETR An underwriter’s guide to a clean case binder Britany Luth

09 | Movers & Shakers

The latest developments in companies across the reverse space

11 | Industry Update

18 | Hot Seat Mark Acchione

33 | Appraising Can We Talk?

Managing director of capital markets at One Reverse Mortgage

Encouraging dialogue to ease tensions between DE underwriters and appraisers

21 | Originating

Headlining stories of the past month

13 | Top Lenders Report

HECM proponents in Texas prepare to hit the polls to vote in favor of the H4P.

Reverse Market Insight

23 | Originating

Scott Norman

August year-to-date volume for top reverse lenders

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25 | Originating Retro Reverse

INSIDE

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Adjusting to Program Change

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17 THE | Roundup

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George Lagarde

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AN UNDERWRITER’S GUIDE TO A CLEAN CASE BINDER Marty Bell TEXANS RALLY BEHIND THE HECM FOR PURCHASE

How will the industry adapt in the wake of major change?

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Read about the association’s current initiatives.

35 | HMBS Cruel Summer The secondary market reacts to product change.

Darren Stumberger

Reversing Our Focus

14 | NRMLA News

Spotlight

John Golden

Texans for Proposition 5

Reverse Mortgage Daily

36 Gregg Smith

50 | Last Word Stepping Forward and Looking Back

38 joshua shein Spotlight

On the eve of retirement, one reverse professional reflects on his fulfilling career in reverse mortgage servicing.

John LaRose

REVERSE review

Jessica Guerin

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INSIDE this issue

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Adjusting to Program Change

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AN UNDERWRITER’S GUIDE TO A CLEAN CASE BINDER PG. 28 TEXANS RALLY BEHIND THE HECM FOR PURCHASE PG. 21

+ MARK ACCHIONE SITS DOWN IN OUR HOT SEAT PG. 18

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How FHA’s program changes will impact the reverse mortgage market

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“In effect, FHA’s recent guidelines revamp the HECM as we once knew it, creating a new type of reverse mortgage product that, by demanding a slower consumption of home equity, caters to a different type of borrower.”

october 2013

THE

An in-depth look at FHA’s overhaul of the reverse mortgage program and what it means for the future of the industry

@

Want the online version? reversereview.com/magazine

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40 | HECM Revamp

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FEATURE

Seth Hooper

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SEPTEMBER 2013

Why trends in HECM lending signal renewed creativity and innovation

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A collection of recent facts and surveys affecting the reverse market

THE

REVERSE SEPTEMBER 2013

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The Reverse Review October 2013

Contributors

John K. Lunde

Marty Bell

J ohn K . L und e

Ma rty B e ll

Ma r k ac c hio ne

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

14 | NRMLA News g Marty Bell is NRMLA’s senior vice president of communications and marketing.

This is Bell’s professional Act III after careers in books, journalism and the Broadway theater.

Bell is the author of two novels and four nonfiction books, and his writing has appeared in publications including Playboy and New York magazine. Bell wrote and produced the awardwinning documentary film The Boys of Summer and produced 15 Broadway shows (including Ragtime, Fosse and Dirty Rotten Scoundrels) that won 27 Tony Awards.

18 | Hot Seat g Mark Acchione is managing director of capital markets at One Reverse Mortgage, the nation’s largest retail-only provider of reverse mortgages.

Acchione is responsible for capital market operations located in Detroit, Michigan.

s cot t nor man

ge or ge lagar d e

s e th h ooper

21 | Texans for Proposition 5g Scott Norman is the presidentelect of the Texas Mortgage Bankers Association. In 1999, Norman founded the Texas Association of Reverse Mortgage Lenders, where he managed three successful campaigns to amend the Texas Constitution in order to enhance reverse mortgage lending.

Norman served on the NRMLA Board of Directors from 2005 until 2009. texasmba.org 512.423.4545

23 | Reversing Our Focus g George Lagarde has been in the mortgage industry since 1984. The former owner of New York-based Island Mortgage Consultants Inc., Lagarde now works with All Western Mortgage in Las Vegas. He holds a real estate broker’s license in Nevada and loves to help seniors evaluate their specific situations and decide whether a reverse mortgage is a viable solution.

His motto: Changing lives, one senior at a time.

25 | retro Reverse g Seth Hooper has more than 10 years of experience working in the reverse mortgage market and previously held the position of director of operations at First American Loan Production Solutions and director of reverse mortgage solutions at CoreLogic. He is currently the chair of MISMO’s reverse mortgage workgroup. He has a bachelor of arts in history from the University of Colorado.

s cot t g or don

B r i tan y Lu th

Ali s s a Sc ott prieto

26 | Inbound Marketing Succeeds Where Purchased Leads Fail g Scott Gordon is the founder and CEO of Open Mortgage, LLC in Austin, Texas. Gordon is also a serial entrepreneur, investor, board member and author.

Gordon is passionate about business mentoring, social media, mortgage marketing, senior finance and idea sharing.

28 | HUD’s Audit Process and How to Avoid the Dreaded PETR g Britany Luth is the vice president of operations for Urban Financial Group, Inc., based in Tulsa, Oklahoma. She oversees Urban’s underwriting team and has Direct Endorsement underwriting authority. Prior to joining Urban nearly six years ago, Luth managed a nationwide title company. She obtained a B.S. in business management with a minor in marketing from Oklahoma State University.

31 | Title Tip g Alissa Scott Prieto has worked for Premier Reverse Closings since August 2004. Prieto began her career in Southern California developing a sales and operations team as PRC’s first account manager before moving to the East Coast. Two kids later, Prieto moved back to California to be close to her family and the corporate office.

She graduated from Southern Methodist University with a degree in psychology.

Mark Acchione

e

Scott Norman

George Lagarde

Seth Hooper

Scott Gordon

Britany Luth

Alissa Scott Prieto

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Contributors

John Golden

Darren Stumberger

Gregg Smith

Joshua Shein

Jessica Guerin

j ohn g ol de n

d ar r e n s tu mbe r ge r

gr e gg s mi th

33 | Can We Talk? g John Golden is the national quality control manager for Landmark Network, Inc., an appraisal management company that services clients nationwide. Golden, a former certified residential and FHA appraiser, is currently on the HUD 203k consultant roster. He relies on a 13-year background in valuation and inspection in dealing with quality control matters. jgolden@landmarknetwork.com 888.272.1214 ext. 718

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

36 | Think in Reverse g Gregg Smith is the president, chief operating officer and founder of One Reverse Mortgage, LLC. Smith oversees loan operations, capital markets and government affairs for the company. His leadership began with the organization in 2001, and since then One Reverse Mortgage has grown into the largest consumer-direct reverse mortgage lender in America. onereverse.com

j os hua s hei n

je s s i c a gu e r i n

joh n l a r os e

38 | Change Is an Opportunity g Joshua Shein joined Maverick Funding in 2012 to expand its national reverse mortgage network and establish its Maryland operations. Since then, Maverick Funding’s Reverse Mortgage Network has consistently been ranked among the top 10 national lenders.

Previously, Shein was CEO and president of 1st Maryland Mortgage Corp/Great Oak Lending Partners. Under his leadership, the company became one of the fastest-growing reverse mortgage companies in the U.S. He graduated cum laude from Ithaca College.

40 | HECM Revamp 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.

50 | Stepping Forward and Looking Back g John LaRose is the chief executive officer of Celink, the nation’s largest reverse mortgage subservicer. LaRose also serves on the board of directors of the National Reverse Mortgage Lenders Association and is the co-chair of its Compliance Subcommittee.

ou Do y what have kes? it ta

Be a part of the conversation.

Write for us!

John LaRose

before we begin 44

pg.

page 38

FHA Announces Changes to the HECM Program

Read A RECAP OF THE NEW RULES inside this issue

We are looking for new contributors.

Share your thoughtful commentary with our readership today.

Email jessica@reversereview.com to learn more.

comments we loved “It appears that the wait is over: The long-awaited changes, adjustments to principal limits and draws, and the very, very long-debated and discussed financial assessment guidelines and policies have all been announced... This is the new reality. Maybe you like the changes or maybe you are worried about them, but the bottom line is: We all must adapt. The marching orders are clear: Get used to it and get on board with it!” - Joshua Shein

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

info@reversereview.com

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

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The Reverse Review October 2013

experienced leadership. exceptional service.

extRAoRdinARy tiMing.

Announcing Reverse Mortgage Funding LLC. We’re not just a new reverse mortgage company. We’re a new company created to help you thrive in the rapidly changing reverse mortgage industry. That said, we’re anything but new to the business. We have the deep experience, responsiveness, proprietary tools, technology, and product innovation to help you deliver more to your customers.

to learn more about this exciting new venture, visit booth #113 at nRMLA. 8

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or contact Mike Mooney, third Party Sales, at: 860.413.9857 | mmooney@reversefunding.com

ReverseFunding.com

Movers & Shakers Read about the latest developments in companies across the reverse space.

Hav e a c o mpan y u p dat e y o u w ou ld lik e t o s e e p u b l i s h e d?

Reverse Mortgage Funding Hires Mark O’Neil

Reverse Mortgage Funding (RMF) LLC has hired Mark O’Neil as regional account manager. Previously, O’Neil worked as an account executive for MetLife and Security One Lending before becoming an independent consultant. He also worked as a reverse mortgage loan originator for Countrywide and Everbank Reverse Mortgage, and was a founding partner in Humphreys and O’Neil LLP, a general practice law firm specializing in residential real estate transactions. In his new role with RMF, O’Neil will focus on developing thirdparty relationships for the newly formed lender.

ReverseVision Unveils Appraisal Services With the Release of ReverseAccessVision 4.0.0, Hires Kelly Kelleher as Marketing Manager Reverse mortgage software provider ReverseVision has released the 4.0.0 version of its ReverseAccessVision (RAV) platform, which includes a new appraisal feature via Mortgage Information Services (MIS). On the new platform, users will be able to order an appraisal with the click of a button, while the RAV system manages the order, status and delivery of the appraisal.

“Our customers have made it clear that service integration is a powerful tool for them to streamline the origination process, drive down cycle time and save cost,” said ReverseVision President and CEO John Button. “We are responding to that need with ReverseAccessVision—a powerful, simple-to-use, ever-expanding library of services.” ReverseVision has also hired Kelly Kelleher to join the team as marketing

Email it to Jessica@reversereview.com.

manager. In her new role, Kelleher will lead the strategy to increase awareness and build upon ReverseVision’s success as a major reverse mortgage software provider.

Urban Financial Group Welcomes Sheila Lancaster to its Wholesale Team, Adds New York to Its State Licensing Urban Financial Group has hired Sheila Lancaster as wholesale account executive.

Lancaster, who worked previously for Generation Mortgage Company and Financial Freedom, has more than nine years of experience in the reverse mortgage wholesale business. “We are very happy to welcome Sheila to the team,” Urban’s managing director of sales, Sherry Apanay, said. “She embodies the Urban ‘can do’ spirit and has established an unblemished reputation of integrity, hard work and excellent customer service.”

Urban has also announced that it is now licensed to conduct its retail and wholesale reverse mortgage business in the state of New York.

Generation Mortgage Company Updates nu62 Software for New HECM Program Generation Mortgage Company (GMC) has updated its nu62 software to demonstrate the value of the new HECM products.

Nu62 navigates the complexities of the new HECM products with ease, allowing prospective borrowers to focus on how leveraging home equity can work for them.

Early reports by existing users indicate the upgrades to nu62 make selling the new HECM simple and straightforward.

Nu62 is available to GMC partners. Call 877.741.9071 to set up a demonstration and see the “nu” way to increase sales, despite complex program changes.

Equity Settlement Services Launches Senior Settlement Services Division Equity Settlement Services, a 25-year-old title and settlement corporation based in New York, has launched a new division that will cater specifically to reverse mortgage lenders and their senior borrowers. Called Senior Settlement Services, this new division is designed to streamline the HECM lending process for the company’s business partners. “Senior Settlement Services will handle all aspects of the settlement process, providing application notary services to ensure our lender partners receive a complete and timely loan application, and offering closing and funding services throughout the entire reverse mortgage process. Our trust review and our approval and opinion letters are analyzed by the expert attorneys to ensure quality,” said Vice President and National Sales Manager Mary O. Moran. “We are ready, willing and able to take on the everchanging challenges within this industry.”

Proficio Mortgage Ventures Welcomes Carol Ann Dujanovich to Its Reverse Team Proficio Mortgage Ventures is continuing the expansion of its reverse mortgage division by hiring Carol Ann Dujanovich as underwriting manager of the company’s Henderson, Nevada, office. Dujanovich has more than 34 years of experience in the mortgage industry, with the last 10 years spent specifically on HECMs. Previously, Dujanovich worked as an underwriter and wholesale operations manager for Urban Financial Group.

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The Reverse Review October 2013

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Industry Update

October Edition

Brought to you by:

an update of this past month’s breaking news

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

headlining news

3. AARP: Reverse Mortgage

1. HUD Announces Major

HUD’s recent changes to the reverse mortgage program will likely exclude many borrowers, but the changes are well intentioned, says a representative from AARP. “The future of the HECM program depends on striking a balance between responsible lending and access to credit. We will closely monitor the implementation and impact of these changes and will continue to advocate for changes that promote the fundamental goals of the HECM program for future borrowers.” Overall, AARP says it supports the program and a sustainable future for a tool with which seniors can access the equity they have built up in their homes.

Changes to the HECM Program

HUD announced much-anticipated changes to the HECM program designed to help manage risk to FHA’s insurance fund, as well as improve safety for reverse mortgage borrowers. Outlined in mortgage letters 2013-27 and 2013-28, the changes include the consolidation of the HECM Standard and HECM Saver products.

Additional changes include updates to the initial mortgage insurance premiums and principal limit factors; restrictions on the amount of funds borrowers may draw at closing and in the first year after closing; the requirement of a financial assessment for all borrowers to ensure that they have the capacity to meet their financial obligations; and the requirement of a setaside at closing if determined necessary by the financial assessment. All of the changes take effect October 1, 2013, with the exception of financial assessment and the establishment of set-asides, which will be instituted January 1, 2014. // September 3, 2013

2. HUD Seeks Industry Feedback on Financial Assessment

HUD has asked members of the reverse mortgage industry to submit comments regarding the agency’s financial assessment guidelines, with a deadline for submission of October 15, 2013. Interested parties can visit federalregister.gov for information on details regarding submission. // September 12, 2013

Program Changes Will Bar Access But Improve Program

// September 8, 2013

4. WSJ: Government to Lower Maximum Loan Amounts

The government is getting ready to lower the maximum size of loans eligible for backing by Fannie Mae and Freddie Mac, according to the Wall Street Journal The move is designed to help bring the private market back into the mortgage industry, but will likely face resistance from the real estate industry. Fannie and Freddie Mac can back mortgages that have balances as high as $417,000 in most parts of the country and up to $625,500. The Federal Housing Finance Agency, which regulates Fannie and Freddie, said it hasn’t announced how far it will drop the loan limits, which would take effect January 1, 2014. // September 10, 2013

5. Reverse Mortgage

Counselors See Demand Surge as October Approaches

have been struggling to handle an influx of demand that has resulted from principal limit cuts instituted October 1. Agencies report borrowers hurrying to meet the September 28 deadline to receive a case number before the changes take effect. In addition, agencies must also educate and train staff on the recent program changes.

While the timeline is short for counselors to adapt to the new changes outlined by mortgagee letters totaling nearly 100 pages, HUD will be sponsoring additional training sessions to help better position counselors for the change. // September 22, 2013

6. HUD Reminds Counselors of Protocol Regarding NonBorrowing Spouses

HUD issued a reminder to counselors of rules regarding non-borrowing spouses, who must also be counseled before taking out a reverse mortgage loan. “In situations where there is the potential that one of the spouses will be taken off title or for any other reason will not sign the HECM note, counselors are strongly encouraged to thoroughly explain the implications of removing, or not including, the non-borrowing spouse on the HECM mortgage note and deed,” the notice states. Further, counselors should ask whether borrowers have been encouraged to remove a borrower from the home title, the noticed stated, adding, “HUD is concerned that this practice may be encouraged inappropriately.” In instances where a counselor believes a borrower has been steered or directed toward removing a spouse from the title, the counselor should report it to HUD. HUD is currently working on a disclosure specific to non-borrowing spouse situations, but is encouraging counseling agencies to develop their own in the meantime. // September 16, 2013

Reverse mortgage counseling agencies reversereview.com

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The Reverse Review October 2013

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Report August 2013

Top Lenders Report

12345 American Advisors Group

Liberty Home Equity

Endorsement

Endorsement

925

658

Lender

S1L / RMS

Endorsement

570

One Reverse Mortgage

Urban Financial Group

Endorsement

Endorsement

465

Endorsements

277

Lender

Endorsements

PROFICIO MORTGAGE VENTURES LLC

199

SUN AMERICAN MORTGAGE CO

15

GENERATION MORTGAGE COMPANY

196

GUARANTEED RATE INC

15

REVERSE MORTGAGE USA INC

107

FIRST PRIORITY FINANCIAL INC

14

OPEN MORTGAGE LLC

77

ASPIRE FINANCIAL INC

14

NATIONSTAR MORTGAGE LLC

76

CHRISTENSEN FINANCIAL INC

14

NEW DAY FINANCIAL LLC

71

SUCCESS MORTGAGE PARTNERS INC

14

MAVERICK FUNDING CORP

70

STERLING SAVINGS BANK

13

ASSOCIATED MORTGAGE BANKERS

69

CONTINENTAL HOME LOANS INC

13

M & T BANK

55

BANK OF ENGLAND

13

NET EQUITY FINANCIAL INC

49

GATEWAY FUNDING DIVERSIFIED

13

CHERRY CREEK MORTGAGE CO INC

48

JAMES B NUTTER AND COMPANY

12

SUN WEST MORTGAGE CO INC

43

AMERICAN NATIONWIDE MORTGAGE CO

12

MONEY HOUSE INC

39

AXIA FINANCIAL LLC

11

MCM HOLDINGS INC

39

INTEGRATED FINANCIAL GROUP INC

11

FIRSTAR BANK NA

39

GEORGETOWN MORTGAGE

11

HIGH TECH LENDING INC

35

SIMONICH CORPORATION

11

FIRSTBANK

32

TOP FLITE FINANCIAL INC

11

GMFS LLC

31

UNIVERSAL LENDING CORPORATION

11

UNITED NORTHERN MORTGAGE BANK

31

MORTGAGESHOP LLC

11

SENIOR MORTGAGE BANKERS INC

28

CS FINANCIAL INC

10

ADVISORS MORTGAGE GROUP LLC

25

BARRINGTON BANK AND TRUST

9

PEOPLES BANK

24

FRANKLIN FIRST FINANCIAL LTD

9

PLAZA HOME MORTGAGE INC

23

FULTON BANK NA

9

TOWNEBANK

22

LEADER ONE FINANCIAL CORP

9

AMERICAN PACIFIC MORTGAGE

20

UNITED SOUTHWEST MORTGAGE CORP

19

VAN DYK MORTGAGE CORPORATION

19

SOUTHERN TRUST MORTGAGE LLC

18

VIG MORTGAGE CORP

18

NATIONWIDE EQUITIES CORPORATION

18

ATLANTIC BAY MORTGAGE GROUP LLC

17

MAS ASSOCIATES LLC

16

Reverse Market Insight - Logo October 9, 2009

Brought to you by:

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The Reverse Review October 2013

NRMLA News

On the Docket

Once again, as an industry we find ourselves facing change, and this time it is perhaps the most comprehensive change since the creation of the HECM program.

In the short run, these changes seem difficult. They require adjustments to systems, adjustments to documents, new approaches to marketing, the re-education of potential borrowers who have already begun the loan process—and all on a tight timeline with the implementation of a one-product market, initial draw limitations and a different MIP structure by October 1.

But over time, the changes not only address concerns at HUD, particularly about the sustainability of the MMI Fund, but also concerns we have heard repeatedly as we fulfill one of our primary roles: listening to our membership. As a result of these changes, we can anticipate positive trending on a number of fronts that have perpetually nagged us: Negative press Within a week of the September 2 release of the mortgagee letter outlining HECM changes, pieces by savvy financial industry reporters Tara Siegel Bernard of The New York Times and Mark Miller of Reuters appeared arguing that while some potential borrowers will lose eligibility due to the changes, the product has shifted to more of a financial planning tool.

This is a perspective on reverse mortgages for which members have been calling for at least the past four years. Many of the recurring criticisms that spread virally through the press will be significantly silenced by changes that assure a longer life span for many borrowers’ assets.

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The four most hated words We should not be hearing our least favorite phrase, “loan of last resort,” much anymore.

Many of those for whom the reverse mortgage may have been a last resort will no longer qualify due to the change in PLFs, the limitation on first-year draws and Financial Assessment.

The phrase that scared and demeaned aging Americans is no longer relevant.

Engaging financial planners There has been widespread discussion within our industry about methods of attracting the interest (and clients) of financial planners, as well as a good deal of frustration about their sometimes tepid interest. But they too will be reading pieces like

those by Siegel Bernard and Miller and the mere labeling of reverse mortgages as financial planning tools (rather than as the dreaded phrase mentioned earlier) should perk a great deal more interest.

Aggressive advertising You don’t hear complaints about the volume of car commercials on football broadcasts, probably because people who cannot afford the cars will not buy them. Hopefully what Financial Assessment (accompanied by set asides) will accomplish is protecting borrowers who cannot afford reverse mortgages from hurting themselves and, as a result, the volume of advertising may no longer be interpreted as a problem.

In the Wings In addition to listening to our members, we view one of our other key roles as providing you with insight into the reasons for change and encouraging the sharing of experiences as companies adapt.

We titled this year’s NRMLA Annual Meeting & Expo “New Music: Changing the Reverse Mortgage Conversation” in anticipation of program alterations in time for the new fiscal year that begins October 1.

If you join us at the Roosevelt Hotel in New Orleans from November 4-6, you will have the opportunity to hear from the people who make the rules, colleagues who are utilizing them and those outside our industry, such as financial planners, whom they can affect. In fact, among our presenters will be financial planner Michael Kitces, who writes the Nerd’s Eye View blog at kitces.com and serves as the practitioner editor for The Journal of Financial Planning. Kitces will tell you, in light of the changes, what is the appropriate approach to engage financial planners.

To register for NRMLA’s Annual Meeting & Expo, go to nrmlaonline. org.

On reversemortgage.org A record 23,810 unique consumers visited NRMLA’s consumer site, reversemortgage.org, in August, surpassing July’s record of 19,970.

This year, the consumer website is averaging 17,435 unique visitors a month, a significant increase from the 11,163 monthly visits averaged in 2012.

One of the popular features of the website is the “find a lender” locator, which consumers use to find reverse mortgage lenders close to them. The top 10 states visited include California, Florida, Texas, New York, New Jersey, Pennsylvania, Illinois, Arizona, North Carolina and Ohio.

Please make sure your complimentary lender listings are still current. If changes are necessary, please email them to Darryl Hicks at dhicks@dworbell.com.

In Committees

Following the publication of Mortgagee Letter 2013-27, the HUD Issues Committee and the Servicing Committee identified several issues that needed further clarification.

A letter was submitted to FHA requesting input on 17 different issues related to origination and servicing. NRMLA, with input from the Risk and Compliance Committee, also submitted a letter to FHA that offers suggestions on improving the agency’s Quality Assurance Process.

FHA published a notice in the Federal Register on July 9 seeking input from the lending community, consumer groups and the general public. Comments were due on September 9.

NRMLA requested that any changes adopted through the

solicitation should first be published as a proposed rule, so that the industry has an opportunity to comment. The association also pointed out that HUD guidance can be hard to discern and inconsistent with what is published in handbooks and regulations, and is sometimes interpreted or applied differently among the four homeownership centers.

“Thus, before FHA makes any changes in the QAP, it should first address what some perceive to be an area for improvement in FHA review of loan endorsements,” says the letter.

brought to you BY MARTY BELL: national reverse mortgage lenders association

NRMLA member

New members

NRMLA welcomes the following companies who recently joined the association. They include: • 1st California Home Loans Laguna Hills, California • Brean Capital New York • MiLEND, Inc. Atlanta, Georgia • National Field Representatives, Inc. Claremont, New Hampshire • One Trust Senior Lending San Diego, California • Platinum Financial Grants Pass, Oregon • The StoneHill Group Atlanta, Georgia

New CRMP

NRMLA congratulates Laurie Libby of Newport Beach, California, who became the third member from Liberty Home Equity solutions to earn the designation of Certified Reverse Mortgage Professional.

Senior Settlement Services Where the senior always comes first!

Senior Settlement Services was formed exclusively to service the unique requirements of the reverse mortgage industry and the senior borrower.

Senior Settlement Services is a full-service title and settlement company. Our parent company, Equity Settlement Services, has been servicing the needs of lenders in 38 states for more than 25 years.

CONTACT US TODAY!

Phone: 631.715.3444 seniorsettlementservices.com

info@seniorsettlementservices.com

reversereview.com

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NEWS FROM NRMLA

NRMLA News

The Reverse Review October 2013

SEE US AT

NRMLA

NOV. 4-6, 2013

VISION turn your

into reality

We turn your AMC vision into reality with an outstanding customer experience and unparalleled valuation software, providing the tools you need to have complete control over the appraisal process.

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Š 2013 Landmark Network, Inc. All rights reserved.

Roundup

Here is a look at the latest

news and stats

affecting the market.

this month

{

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

r e ti r e m e n t fa c t s

S av i n g s Stat s

Older Americans are taking on more debt in retirement.

Americans are still not saving for retirement.

In the span of 12 years, from 1998 to 2010, the number of people in their 60s who have debt has grown to just under half to nearly two out of three. According to a study by the Urban Institute, debt is becoming increasingly common among older people, regardless of their income levels.

One major reason for debt: mortgages.

More older Americans have mortgages, partly because they are paying them off more slowly than before and partly because mortgage balances have increased. number crunch

The number of American seniors who use social network sites has increased significantly in the past four years.

43% Now

13% 2009

-Pew Research Center

$

Despite recent attention on the lack of retirement savings being accumulated

by American workers, the numbers have not changed.

Just 18 percent of working Americans are saving more for retirement than they were in 2012, while 17 percent are

the senior agenda

saving less, according to a

Majority of Americans are unprepared for the costs of long-term care.

survey released by Bankrate.

More than half of the survey’s

Only 20 percent of Americans age 40 and older are confident they will have enough financial resources to pay for their long-term care needs down the road, according to a report from the SCAN Foundation. The report also revealed that 65 percent of Americans say they have done little to no planning for long-term care expenses. According to the study, these results are concerning because an estimated seven out of 10 Americans over age 65 will require longterm care for an average of three years.

respondents said they were saving the same as last year.

Home prices

July home prices increased nationwide.

National home prices increased 12.4 percent in July compared with the previous year, rising 1.7 percent from June, according to CoreLogic. The increase represents the 17th-straight month that home prices have risen annually. The states with the highest home price appreciation, including distressed sales, were:

5.

4.

1. Nevada up 27% 2. California up 23.2% 3. Arizona up 17% 4. Wyoming up 16.4% 5. Oregon up 15%

1.

2.

3.

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The Reverse Review October 2013

THE HOT SEAT

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

the hot seat From his first job and his best life lesson to his thoughts about the future of the reverse mortgage industry, we get the personal and professional facts from Mark Acchione, managing director of capital markets at One Reverse Mortgage, in our monthly edition of The Hot Seat.

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Mark One Reverse Mortgage Managing Director of Capital Markets

P E RSO N AL >

You can’t always be wrong, so I’ve got that going for me.

>

My first car was an ’86 Buick Skylark in baby blue.

>

The craziest thing I’ve ever done was drive my mother’s car to school without asking. I was 13 years old.

>

If I had three wishes they would be health and prosperity for Sarah, Gracie, Jacob and Olivia; a new kitchen and bathroom for my wife; and for a Swedish Fish to be in my left pocket every time I reached into it.

>

If I could meet anyone, past or present, it would be Wilbur and Orville Wright.

There’s something about people who rebuke the impossible that I admire.

>

My favorite movie is a toss-up between The Hunt for Red October and Gladiator.

>

Every morning I stop at a McDonalds drive-thru for coffee and an Egg McMuffin.

>

I can’t go without coffee and Egg McMuffins.

>

My first job was working for my father’s company, unloading semi-truck trailers full of 50-100lb bags of soil. I learned the meaning of the term “a hard day’s work” when I was 12 years old.

>

The best lesson I’ve ever learned was that if it’s not in writing, it didn’t happen.

>

The worst purchase I’ve ever made was a convertible. It was nice until I got it home and tried to strap two car seats into what they claimed was a backseat.

>

If I could trade places with someone for a day, it would be Bob “The General”

Every morning I stop at a McDonalds drive-thru for coffee and an Egg McMuffin.

Yeary. But not without insuring my body before giving it to him for the day. >

If I could time travel, I would be in 1983, on the set of Knight Rider.

Professional >

The most important thing financial advisors can learn about reverse mortgages is that when properly aligned, they are the best retirement product to use in building their clients’ financial profiles.

>

The biggest impact reverse mortgages offer to seniors is impossible to summarize. I came up with a list of 36 words that can fill this space. At the top of that list were “sovereignty and assurance.” I can only hope that as I enter my golden years, a broad equity product will be available that will enable me to access the investment my wife and I work so hard for every day. Without that, I will have wasted a lot of blood, sweat and tears.

My favorite movie is a tossup between The Hunt for Red October and Gladiator. reversereview.com

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The Reverse Review

AAG in New Orleans October 2013

4-6NOV

2013

,9+) Ĝĥį ææĽPÙį íæ ğ æq į\į ĉîįPIJ > į9íð ʼn ØIJį íı Ù

In tune with the

NEW

REVERSE MORTGAGE

/çįĤıP´ įPØÙįŊ Ö~

Contact Kimberly Smith, Senior Vice President of Wholesale Lending, to make your appointment today!

CALL OR TEXT 916.759.2479 VISIT AAGwholesale.com EMAIL KSmith@AAG.com AT BOOTH #101 20

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ASSESS

originating

Texans for Proposition 5

Sc ot t N o rm a n

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spotlight

Perhaps soon, Texas’ seniors will have the same financial options as the rest of the country. x

hmbs

Today, the reverse mortgage industry is looking to strengthen those protections and amend the Texas Constitution to allow senior homeowners the ability to purchase a home with a reverse mortgage. Texas is also the only state in the nation that does not authorize such a financial transaction, which is known as a reverse mortgage for Purchase.

Now, with the bipartisan approval of the Texas Legislature earlier this year, Texas once again has the opportunity to champion the cause of protecting senior homeowners. The prospects are positive and the options are real. When November 5 arrives, I urge all Texans to vote for Proposition 5.

appraising

The reverse mortgage for Purchase is an FHA-insured loan that will provide many of the state’s senior homeowners the ability to maintain and enhance the quality of their lives with a new home purchase. Already authorized by the Texas Legislature by a combined vote of 170-1, the bill, if approved

by Texas voters this November, will allow senior homeowners age 62 or older to use a reverse mortgage for Purchase to downsize into a smaller residence. Unlike a traditional mortgage, there are no credit or income requirements and participants never make a mortgage payment as long as they continue to live in the home. Simply looking at the state’s aging demographic shows that we must act now to help provide liquidity and safety to the burgeoning senior housing market. Texas is already the second-largest state in the country with a population of 26 million, and projections indicate the population

title tip

Going to the source

Texas’ overall population, like the nation’s, is growing older. With more than 700 Texas baby boomers entering retirement every day, the size of the senior demographic is ballooning and will continue to do so until 2020, when there will be more than 3.5 million seniors in the state. As they retire, baby boomers will put a disproportionate demand on government programs for the state. What does the future hold for the housing industry as Texas’ population changes over the next quarter century? One thing is certain: The ability to purchase appropriate senior housing with a reverse mortgage will be a boost to the real estate industry and to the senior homeowners who may be purchasing a new wave of senior-friendly homes.

Residential real estate firms and homebuilders, for the foreseeable future, will undoubtedly be working with an increasingly more mature population. The aging of the overall population will certainly impact the housing industry in Texas and significantly increase the demand for senior housing.

underwriting

More importantly, according to the Texas Department of Savings and Mortgage Lending, the commissioner has not issued one disciplinary action based on complaints against a licensed reverse mortgage lender in the last six years. While it may come as a surprise to some outside the financial

Today, the reverse mortgage industry is looking to strengthen those protections and amend the Texas Constitution to allow senior homeowners the ability to purchase a home with a reverse mortgage. Texas is also the only state in the nation that does not authorize such a financial transaction, which is known as a reverse mortgage for Purchase.

*

marketing

After 154 years, the voters of Texas finally approved reverse mortgage lending in 1999. Since then, nearly 55,000 senior homeowners have obtained and benefited from a reverse mortgage. After 14 short years, Texas now ranks second in the United States in total reverse mortgages originated.

will be 36.4 million by 2030. That is the equivalent population of another Dallas, Houston, Austin and San Antonio combined.

originating

S

ince the days of the Republic of Texas, the Texas Constitution prohibited the forced sale of homesteads except for nonpayment of mortgage, property taxes, home improvement loans, or for property settlements in certain divorce and probate proceedings.

industry, reverse mortgages in Texas are arguably the most regulated and consumer-friendly mortgage loan in the entire country.

The Reverse Review October 2013

Ms. Smith

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NMLS ID #1319. For our state(s) legalese, visit: www.generationmortgage.com/statelegalese. | TRR 22

originating positives will outweigh the fact that some seniors will no longer qualify for the loan.

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spotlight

“Many reverse professionals also seem to agree that the new regulations will benefit affluent seniors by catering to those who would use a HECM as a financial planning tool rather than as a source for cash to pay day-to-day living expenses.”

hmbs

While this critique of the new changes may be true, there are some positive developments that will come from the new program, and perhaps these

As a recent article in The New York Times pointed out, HUD’s changes will effectively make the HECM a more attractive financial planning tool, and less viable for needs-based seniors looking for quick access to cash.

Whether the industry can adjust to the new regulations may largely depend on how successful we will be in connecting with the financial planning community to promote the product. x

appraising

One negative perspective on the changes is that some expect it will exclude the seniors who need the program the most. These seniors live on fixed incomes, carry debt and, in some cases, are still paying off a mortgage. The HECM program once helped alleviate their financial

These are the seniors who live from Social Security check to Social Security check. Month after month, they live for that check, and many times it’s not even enough to cover their monthly expenses. These are the seniors who have illnesses that Medicare can’t even cover. The stories go on and on.

But under the new program, with Financial Assessment in place, many of these cash-strapped seniors will no longer qualify for a HECM loan.

title tip

I have spoken to a few professionals in the reverse mortgage field and have heard them express mixed feelings about the new program. I will attempt to explain both sides here, and you can make up your own mind.

concerns by providing enough funds to pay off their existing mortgage and giving them additional cash to live on. This money prevented these seniors from having to move to an assisted living facility or a nursing home, allowing them to age in place.

It kept them from utilizing entitlement programs that might be a burden on the government, and allowed them to access their hard-earned equity to support themselves.

Many reverse professionals also seem to agree that the new regulations will benefit affluent seniors by catering to those who would use a HECM as a financial planning tool rather than as a source for cash to pay day-to-day living expenses. Some financial planners are recognizing the potential in HECMs and are advising their clients to take out the reverse mortgage line of credit now, hold onto it for 15 to 20 years, watch the compounding interest it will accrue over that time, and take the money out when it’s needed. Some planners are also advising clients to delay accessing Social Security by taking out a reverse mortgage and living off the income it derives for five years. If seniors wait until 70 to apply for Social Security, their benefits will be significantly higher than they would be at 65.

underwriting

T

he FHA has issued a 40-page mortgagee letter basically revamping the reverse mortgage program. The present Standard and Saver programs have been eliminated, a new program will be initiated on October 1, and there are many basic changes that will affect seniors of all demographics. They have also issued a second mortgagee letter (59 more pages), which also alters the HECM Program as we know it by initiating Financial Assessments effective January 2014.

marketing

geo rge la ga rde

*

originating

Reversing Our Focus

Proponents of the new changes say this new HECM program will be better than the old. The new HECM rules will prevent borrowers from facing foreclosure by requiring set-asides for risky borrowers for real estate taxes and homeowner’s insurance, preventing many from defaulting on their obligations. And it will also benefit the FHA’s Mutual Mortgage Insurance Fund, which has been in the red for a few years now, therefore solidifying the program’s long-term sustainability.

The Reverse Review October 2013

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spotlight

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hmbs

Is there room for non-HECM reverse lending, especially for portfolio

Rather than think of the trends in reverse lending as negative, let’s think of them as another form of creativity and innovation. Mark Twain may have said it best: “History does not repeat itself, but it does rhyme.” If you look at fashion trends, you see hints of the past. Every generation puts their mark on retro revivals. Why should we be any different? There’s room for reverse loans in the U.S. housing market. Let’s get creative. Let’s put our mark on the next generation of HECMs and portfolio products. x

appraising

The HECM program continues to become more buttoned down. In recent weeks it has become clear that the HECM, like many forward loan products, is returning to its roots. We may not see lump-sum distributions anymore, and instead HECMs will provide supplemental income over the life of the loan. Even with this feature, they remain a good option for many seniors.

title tip

Reverse mortgage lending has been undergoing a similar metamorphosis.

In the early days, HECM loans existed to augment the borrower’s income so they could age in place, meet medical expenses and lead a better life than was possible without the loan. Early HECMs provided the homeowner with a way to supplement their income—a good, reasonable feature that provided both the borrower and the lender with longer-term assurances. This is where HECMs got their start and, even though they comprise only a small part of the overall housing market, were helpful to those seniors who needed them to remain in their homes.

And with good reason. Reverse mortgage loans used correctly and for the right borrower are life-changing.

Aging in place is a worthy societal goal. Coupled with the fact that after the mortgage crisis, the only or the most significant financial asset most aging boomers have is their home, reverse mortgage loans seem essential.

The question, however, is will they continue to exist at all?

lenders? There was before Is there room for the housing non-HECM reverse crisis and there lending, especially for portfolio could be again. lenders? There was With home before the housing values having crisis and there could be again. undergone the With home values largest reset having undergone in history, it the largest reset in history, it is a fairly is a fairly safe safe bet that they bet that they will once again will once again consistently rise. consistently rise, albeit more slowly than in the early 2000s. This would be a welcome trend for would-be portfolio reverse lenders. Moreover, if the pre-crisis duration characteristics hold true, these loans tend to have a shorter lifespan than their counterparts in the forward market, especially now that most everyone has refinanced into a low-rate, long-term mortgage.

underwriting

This is certainly true in forward mortgage lending. In the 1980s and earlier, we used fairly simple, very straightforward products to finance homes. Then we got creative. Some of that creativity was helpful to buyers and lenders alike. Some of it, of course, was not. And now here we are, once again lending like we used to.

Overall, I think the outcome has been favorable.

Then there’s that creativity thing.

Not that creativity is a bad thing or that we are against it—quite the contrary. The mortgage industry was, is, and ever shall be ripe for creativity and innovation. None of us will be done experimenting until a quality, performing home loan—forward and reverse—can close within 24 hours of origination. Yet, in the reverse market as in the forward market, we got creatively carried away. And like the forward market, the reverse market has become more conservative.

marketing

I

f you are following the long saga of the housing finance industry, or if you have been participating in it since the 1980s, 1990s or early 2000s, you have noticed a pattern. It is a familiar pattern, and like fashion, old becomes new again. Old methods of business in the lending world have come back for another generation to experience.

ng goi the to urce so

The Reverse Review October 2013

marketing

connect

Inbound Marketing Succeeds Where Purchased Leads Fail Sc ot t G o rd o n

W

ord from the field is that purchasing leads just isn’t working anymore. Many refinance-focused originators bought leads as a business strategy.

Now that rates are moving up, those originators have to learn to work with Realtors or get out of the business. Many will get out.

Reverse mortgage originators have also seen a drastic reduction in lead quality and pull-through rates. This started for reverse mortgage leads before this summer’s higher rates.

“From across the industry, CEOs are confirming to me that their pull-through is down sharply,” commented NRMLA board member Joe Morris.

Boomers are still retiring, and according to HUD, reverse mortgage production is up slightly in 2013 over 2012. So why are leads not working? One possibility is simple market saturation, but that is hard to believe with so many new retirees. A more likely reason is ad saturation. Lead companies run ads to generate leads, and we know ads are becoming less effective.

In the last couple of years the trend across all industries has moved away from advertising and toward inbound marketing. According to a report on shrinking jobs in 24/7 Wall Street, “No occupation has lost a higher proportion of its jobs than advertising and promotions managers.” Sixtysix percent of those jobs are gone. Consumers trust ads less and follow them less, so companies are spending less on advertising.

Inbound marketing is the strategy of providing education and solution-oriented materials through the Web. Search engine optimization (SEO) is used to ensure that the content is found by people looking for solutions. There are many companies positioning themselves as the experts, and clients come to them. As companies advertise less, they are working inbound marketing more.

So in our industry, if buying reverse mortgage leads doesn’t work, what strategies are working?

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8 Inbound marketing is an online strategy using webpages,

blogs, social media and CRM in a systematic pipeline to attract, convert, close and delight. It is a strategy that will take time and effort, but pays great dividends in the long run.

Converting customers to branch champions is the ultimate goal.

There are two related strategies that we see working well together in our space: inbound marketing and old-school networking that uses the education and solution-oriented strategies of inbound marketing.

Inbound marketing is an online strategy using webpages, blogs, social media and CRM in a systematic pipeline to attract, convert, close and delight. It is a strategy that will take time and effort, but pays great dividends in the long run.

Converting customers to branch champions is the ultimate goal.

When you buy an ad, its effects only last while it runs. Money spent on inbound marketing builds a platform that endures.

When you stop running ads, leads stop coming in. But when you stop spending on inbound marketing, it still works because your digital platform is still in place.

This strategy will be most effective for an individual loan originator if a great deal of the work is carried out by the corporate marketing department, since the materials need to be well designed and well coordinated. Think of it as an online marketing onion with lots of layers! You should create your own LinkedIn and Facebook pages, and look to your company for help with your blog, white papers, content and posting. The more you can add yourself, the better.

marketing

strangers

attract

convert

visitors

customers

title tip

The Success

of Inbound Marketing

You can offer presentations to all sorts of groups. Financial advisors need to understand HECMs. Realtors would love to learn about HECM for Purchase. University alumni

Present in person and use your Webbased presence to validate yourself as an expert. When you get in front of groups and make a human connection, providing education and solutions, you will generate leads—quality, organic leads that money can’t buy. x

*

underwriting

brand champions

Presentations need to be entertaining as well as educational. If you aren’t certain you’re a great speaker, you probably aren’t, but that doesn’t mean you can’t get better. Get some coaching and improve your delivery. Speaking is a great opportunity to connect and build authority. Be sure you don’t waste the opportunity.

marketing

amaze

provide

Skilled networkers connect with groups to grow their networks faster.

They look for opportunities to present to their groups. Everyone has seen ads on TV for reverse mortgages, but most people still don’t really understand what a HECM is. There is a great opportunity to go to your network with education and solutions. Think of this strategy as “Attract, convert, provide and amaze!”

groups, teachers’ groups, doctors’ groups, social clubs, sports groups and neighborhood groups are all candidates. There are groups everywhere—look for those with a connection to seniors or their adult children.

originating

leads

Generating content for your inbound strategy should lead you (and your company) to produce educational and solution-oriented materials. The second strategy is using those materials, and that knowledge, in conjunction with old-school networking. Successful originators are getting out and meeting people face to face.

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The Reverse Review October 2013

underwriting HUD’s Audit Process and How to Avoid the Dreaded PETR Brita n y L u t h

O

nce a file has been insured by HUD, the lender’s job isn’t necessarily over. Even if a file does not receive a Notice of Rejection (NOR) and does get insured, 100 percent of HECM for Purchase loans and a random sampling of nonPurchase loans are still subject to an additional Post-Endorsement Technical Review (PETR) by HUD’s Quality Assurance Division (QAD). The lender must either respond within the required timeframe (typically 45 days) or face an indemnification request from FHA. Indemnifications prevent loans from being eligible for the HUD claims process, and the lender is forced to incur any and all loss expenses associated with indemnified loans at final disposition.

It’s no surprise that FHA’s hot-button HECM topics are also the most common PETR findings. Even though HECM for Purchase loans make up a small percentage of HECM volume, the QAD has made a noticeable shift in its focus toward the program this year.

Knowing the common PETR findings can help you submit a cleaner file to HUD and, hopefully, prevent an audit finding—or worse, an indemnification.

HECM for Purchase: Common PETR Stumbling Blocks Owner’s Title Policy ( I think most lenders would agree that the issue of seller- and lender-paid concessions has taken a front row seat this year.

Under Mortgagee Letter 2009-11, “FHA prohibits seller contributions (also known as ‘seller concessions’),

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the use of loan discount points, interest rate buy downs, closing cost down payment assistance, builder incentives, gifts or personal property given by the seller or any other party involved in the transaction. This includes customary charges that are normally paid on behalf of the borrower by the seller.”

This poses a problem in many areas of the country where it is customary for the seller to pay the owner’s title insurance, ensuring the property is being transferred free and clear of any encumbrances or marketability issues, since buyers are not used to paying this fee. Due to the overwhelming number of PETRs that flooded the QAD, it appears HUD has taken the stance that the lender must reimburse HUD any unallowable fee included on the HUD-1. This includes the owner’s title insurance fees paid by the seller, and a variety of other fees that vary by state.

Personal Property ( Under the same HUD mortgagee letter, furnishings or other personal property items left in the property or included in the sale are also considered a seller concession.

So keep in mind that any personal property that will be part of the sale must be reduced dollar for dollar from the sale price.

Whether Purchase or Refinance, these PETRs are also likely to occur: Funds to Close ( Any funds that the borrower is required to bring to closing are highly scrutinized and

PREVENT

therefore must be verified against HUD’s guidelines for allowable funding sources and thoroughly documented in the insurance binder.

All pages of the borrower’s bank statements must be provided, and any large deposits shown on statements must be sourced. The money trail must be adequately documented from each account to the deposit to the title company. For Purchase loans, the HUD-1 from the sale of the departing property and proof that those proceeds were deposited into the borrower’s account must be supplied in the binder, if applicable.

Occupancy ( If there are any red flags surrounding occupancy, it’s always better to be on the safe side. Obtain a letter of explanation from the borrower for any discrepancies and include that explanation along with other forms of occupancy proof in the binder to HUD. For Purchase loans, the “intent to occupy” line should be clearly drawn, especially for borrowers moving out of state.

Appraised Values ( Even though it’s not required, when it comes to supporting appraised values, the HUD form 54114 is the underwriter’s best friend. This simple document affords the opportunity to explain to HUD exactly why the underwriter feels value is supported, and what additional research was performed to validate that final conclusion of value, the marketability of the property and that the property meets minimum HUD property standards.

Completing this form and including it in the submission to HUD reduces the likelihood of a finding, and provides a clear picture to the QAD team.

New Construction ( For new construction properties, the Certificate of Occupancy must be issued before any part of the process begins.

That includes taking application, undergoing borrower counseling and

underwriting signing a purchase contract. To prevent a PETR finding, the Certificate of Occupancy should be included in the insurance binder.

If you follow these recommendations, you should be on the way to an auditfree, FHA-insured loan! x

simple tips for avoiding an nor or petr

1 1 1 1 1 1 Underwriter Documents Confirm that the underwriter has signed the final underwriter documents. E-signatures and stamps are not allowed.

1 1 Make sure that all funds-toclose documentation is in the file, including the HUD-1 from the departing residence, if applicable.

1 1 1 If the borrower retained the departing residence, make sure all income documentation is included in the binder.

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1 1 1 1 For new construction properties, be sure to include the Certificate of Occupancy dated prior to application.

appraising hmbs

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8 TRR

title tip

1 Title Insurance Ensure that the title commitment shows the correct title insurance amount, since the title insurance policy will not go with the binder for review.

1 1 1 1 1 Originator Documents An NMLS-licensed loan originator must sign the 1009 and include it with the case binder.

1 Make sure all pages of the contract are complete, legible and included in the package.

underwriting

All transactions

1 1 1 1 Payoffs Include the payoff statements for each lien paid at closing, enabling HUD to easily connect the liens on title to the liens paid on the HUD-1.

HECM for Purchase

marketing

and submitting a clean case binder

1 1 1 HUD-1 Verify that the HUD1 is marked final, and that it correctly reflects the closing and funding dates.

originating

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1 1 Principal Limit Be sure that a “print screen� of the HECM Calculator is available in the file, so HUD’s insuring group can validate the correct principal limit was used to determine closing figures.

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The Reverse Review October 2013

“ The best

reverse mortgage company in

the industry.”

-Henry Winkler

PROUD to have an A+ rating with the BBB.

Our Unique, Award Winning Culture One Reverse Mortgage is a Quicken Loans company. You may have heard about the award winning culture that has people very interested in becoming one of our “team members.” The building blocks of our culture are our ISMs. ISMs are the ideas we work and live by here at One Reverse Mortgage, Quicken Loans and our family of companies. The ISMs don’t just describe what we do, they describe who we are! Our ISMs create an atmosphere that promotes enthusiasm, passion, and creativity! Here are just 3 of the 19 ISM that are a way of life when you work for a Quicken Loans company!

ISM

We Are The “They”

There is no “they” here. “We” are the “they.”All in a mission together.

No corporate barriers. No boundaries.

Yes Before No

Not everything can be a “yes.” But it does mean that we respond with the mindset of “yes” first.

Do The Right Thing

The high road is not a short cut. Stick to the highest standard of integrity, without compromise. Doing the wrong thing is never worth it.

Visit onereversemortgage.com/about-us/careers to learn more about career opportunities!

Roderick Rhodes

Jerry Jones

One Reverse Team Member Since 2006

Heather Alexander

Jim Crombez

One Reverse Team Member Since 2009

One Reverse Team Member Since 2005

One Reverse Team Member Since 2011

One Reverse Mortgage is a licensed mortgage lender. The following states require disclosure of licensing information. (If your state is not listed, it doesn’t require a specific license disclosure or we are not currently licensed in that state.) Arizona – One Reverse Mortgage, LLC, 16425 North Pima, Suite 200, Scottsdale, AZ, Mortgage Banker License #BKBR-0115032; Arkansas – One Reverse Mortgage, LLC, 9920 Pacific Heights Blvd, Ste 350, San Diego, CA, Mortgage Lender/Mortgage Broker – License # 42785; California – Licensed by the Department of Corporations under California Finance Lenders Law – License # 609-9652; Georgia Residential Mortgage Licensee (#23385) – 9920 Pacific Heights Blvd, Ste 350, San Diego, CA; Illinois – Residential Mortgage Licensee #MB 6760594 – Department of Financial and Professional Regulation, 122 S. Michigan Ave 19th Floor, Chicago, IL 60603 (312) 797-8736, 9920 Pacific Heights Blvd, Ste 350, San Diego, CA; Maine – One Reverse Mortgage, LLC, Supervised Lender License NMLS #3030; Massachusetts – One Reverse Mortgage, LLC, Mortgage Lender License #MC 2052; New Hampshire – Licensed by the New Hampshire Banking Department #10940-MB; New Jersey – Licensed Mortgage Banker – NJ Department of Banking, first (and/or second) mortgages only; New York – Licensed Mortgage Banker, N.Y.S TRRDepartment, License #107328; Oregon – License #ML-3511; Pennsylvania – Licensed by the Department of Banking-License # 21860; Texas – One Reverse Mortgage, LLC 9920 Pacific Heights Blvd, Ste 350, San Diego, 30Banking CA; Virginia: One Reverse Mortgage, NMLS ID #2052 (www.nmlsconsumeraccess.org). Restrictions may apply. Washington – Consumer Loan Company License – CL –2052. Equal Housing Lender, One Reverse Mortgage Nationwide Mortgage Licensing System Number 2052

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LEARN

title tip Potential Title Delays

8

By Alissa Scott Prieto

Why do turnaround times on title commitments vary so much?

The best option would be to obtain a release of lien; clients may have received this from the lender and filed it away. You can also check to see if they obtained subsequent financing; the borrower can provide a copy of the previous HUD document showing that the loan was paid off or provide the final title policy. If all options have been exhausted and it is acceptable by state guidelines, the borrower can

3 Statement of information 3 Social Security number 3 Last recorded deed 3 Tax bills 3 Credit report 3 Loan application 3 Bankruptcy information

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An example of this would be if a warranty/grant deed was recorded two weeks prior to opening title and the county recorder hadn’t updated its records to reflect the new owner or vesting. Another example would be if a grant deed was recorded against the property and it appears to be uninsured, meaning that a title company or an attorney didn’t record it. In this circumstance, title wants to know the purpose behind the deed and possibly have a new deed executed and recorded.

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When would a vesting issue create a delay?

What options are available if there is an old lien showing up on title and it’s causing delays because we can’t locate the payoff institution and the client has since refinanced?

If you want to expedite the closing process and prevent these roadblocks from happening, provide the following information at the onset of the transaction:

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4

5

title tip

In some states, title entities can go directly to the title plant to get all the information they need pertaining to the property, but in other states, title companies are at the mercy of abstractors. The difference between an abstractor and a title plant is that an abstractor will physically go down to the county recorder’s office or courthouse (depending on the state) and pull the documentation for title’s review.

If title is having difficulty determining the legal description, a survey must be provided. A survey is performed by a licensed surveyor and is an exact measurement of the property.

It plots out the exact dimension on a piece of property and a map, which is generally recorded at the county recorder’s office. Also, there are some states that are considered survey states, in which a survey is required on every transaction regardless of the legal description, but there are always exceptions to this rule.

obtain a bond that would comply with state requirements or obtain a quiet title action.

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Why is a survey required on some properties and not on others?

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Division of National Closing Solutions Division of Placer Title Company

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originating

Do you ever wonder why title requirements differ so much from file to file? Title companies can be faced with several challenges based on the location of the property, defunct lending institutions and homeowners who received poor advice.

Below are some examples of why a loan could be delayed.

Believe it or not, a title company’s goal is to help you get your loans closed, not prevent you from closing loans.

Title companies never want to be the reason that a file is delayed. That is why it is important to communicate with your title agency from the beginning about your unique borrower’s situation and provide all the documentation they need so they can produce fast, accurate title commitments!

reversereview.com

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The Reverse Review October 2013

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Can We Talk?

Joh n G o l d e n

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The AMC is typically stuck in the middle, managing frustrations on both sides in an attempt to reach an effective means to an end. What can be done? As the national quality control manager for Landmark Network AMC, I believe that frustrations, discontent and overall relations between DE underwriters and appraisers will never improve without the benefit of direct interaction. The power of direct communication is generally a very effective tool for a means to an end to underwriting concerns. But more than that, it provides the DE underwriter and the appraiser the opportunity to explain and understand each other’s concerns and not just to work toward a resolution on the matters at hand, but an improved, effective industry relationship as well.

Landmark Network encourages such effectual dialogue by putting these two individuals together for discussion as often as possible while maintaining the independence of the parties involved. I believe that it is through such arrangements that we learn from one another, learn to respect one another and grow as industry partners. x

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The intent here is not to bully DE underwriters. In fact, I would like to make it clear that it definitely goes both ways, such as in cases in which reports are conditioned “subject to” non-mandated repair of cosmetic deficiencies, or matters that have absolutely no effect on the safety, security or soundness of the property. Let’s certainly not forget about the frequent across-the-grid, unsupported or explained adjustments within the Sales Comparison Approach.

underwriting

pressure and liability for DE underwriters understandably translates into increased scrutiny for the appraiser as it relates to the appraisal report, as the DE underwriter attempts to package and present the loan file (including appraisal) with his or her finest wrapping paper and prettiest bow. The result is often a tug-of-war that frequently gets heated with unwavering positions on both sides.”

Appraisers find many underwriting concerns to be frivolous and without true merit or meaning. The fact that a great deal of subjectivity comes into play related to underwriting is equally frustrating and confusing for appraisers, as they may have handled specific situations similarly for years, with no issues or concerns, only to be “dragged through the mud” by a specific underwriter down the road. Further, appraisers frequently find themselves victim to overzealous efforts associated with inexperienced DE underwriters or newly designated Full-Eagle mortgagee organizations. Often, there is a failure to fully read the reports and commentary for complete comprehension—a frequent reason for unnecessary underwriting requests. And there are times when it seems DE underwriters overstep their bounds as it relates to the practice of the appraiser and his or her process. Examples include the attempt to require that appraisers make definitive statements related to well and septic distances when no survey is available, or to automatically appraise properties with an accessory unit as a multifamily property despite highest and best-use analysis results that are contrary.

marketing

The increased pressure and liability for DE underwriters understandably translates into increased scrutiny for the appraiser as it relates to the appraisal report, as the DE underwriter attempts to package and present the loan file (including appraisal) with his or her finest wrapping paper and prettiest bow.

according to john “The increased

The result is often a tug-of-war that frequently gets heated with unwavering positions on both sides.

originating

B

oth appraisers and underwriters are working in a time of significantly increased scrutiny as it relates to their work, with the pressures associated shared between them both. HUD regularly completes Post-Endorsement Technical Reviews (PETR) on its files. Direct Endorsement (DE) underwriters are on the line for overall mortgage credit underwriting as well as appraisal report underwriting, with unacceptable ratings possible for both aspects, leaving the DE underwriter responsible for indemnification of the loan file. Most appraisers are unaware that the DE underwriter not only shares in the liability associated with the appraisal report, but technically has a much greater liability that relates to all aspects of the loan file.

value

The Reverse Review October 2013

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secondary market

HMBS

Cruel Summer Da r re n S t u m b e r g e r

W

“There aren’t many silver linings in what to expect in the near term.

Industry experts have estimated volumes will drop on the order of 50 percent once Financial Assessment is rolled out in January 2014.

Investors, admittedly, are a bit weary of the constant changes to the program.

accounting treatment.

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8 TRR

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appraising

As we wait for the product to hit the market, the three new flavors of HECMs that we’ll begin analyzing are: the Libor floating-rate lines of credit that have timing restrictions on incremental draws above 60 percent of the initial principal limit; fully drawn fixed-rate where 100 percent of the principal limit will need to satisfy payoffs and closing costs; and the HECM mini, the closed-end, fixed-rate loan where the borrower chooses a fixed rate and gives up any additional principal limit available to them. All three of the cash flows will be materially longer than what is present in the HECM Standard marketplace today, and I think we can expect originations to come in 70/30 floating rate versus fixed rate.

title tip

There aren’t many silver linings in what to expect in the near term. Industry experts have estimated volumes will drop on the

order of 50 percent once Financial Assessment is rolled out in January 2014.

Investors, admittedly, are a bit weary of the constant changes to the program.

The program was changed in 2009 and 2010 and has now been completely overhauled in 2013 after facing the possibility of a complete shutdown. Most troublesome to me is the fact that the Ginnie Mae securitization program does not get correct accounting sale treatment per the SEC and Big Four accounting firms. There has never been a securitization program to my knowledge that doesn’t get sale treatment and we’ve been operating this way for more than two years. I can say with confidence that money center banks and real money participants will be discouraged from entering this space in the future without proper

underwriting

volume at $533 million and August’s at $647 million.

Bank of America, Stifel Nicolaus, Nomura and RBS have been routinely bringing these transactions to market. IOs have weakened considerably post May/June and are 16 to 24 ticks wider in dollar price. Seasoned fixed rates are trading on spread after the correction. Three-year paper is trading in the 70s to swaps, four-year paper is just behind that and one- to two-year paper is trading in the 30s to 50s to swaps, depending on the exact duration. I don’t expect any tightening from here and I am more inclined to think we will widen as the new product rolls out in October.

marketing

Most of the floating-rate HMBS have been stripped into HREMIC transactions, with September’s deal

according to darren

originating

e continue to see new issue floating HMBS TBAs (to be announced) trade well out of Urban Financial Group, Generation Mortgage Company, Liberty Home Equity Solutions and Security One/RMS. As we near the end of September with the new program changes about to be implemented, spreads for Saver and Standard have tightened marginally after the two- to three-point dollar price correction in May/June. A lot of this is dealer-led due to strong technicals as institutional investors sat on the sidelines through the quarter’s end, digesting Fed communications and intentions. While the September Fed announcement shocked most by not tapering, we are much closer to the Fed tapering than easing more, and that will continue to pressure the mortgage basis. Mortgage optionadjusted spreads (OAS) touched negative 50 after the announcement of QE3, but they are currently at 25bps and I expect them to widen as we get more clarity on the unwind of the Fed’s buying.

The Reverse Review October 2013 Two industry veterans talk about adjusting to HECM policy change.

spotlight article

Adjusting to Change

by G r e gg Sm i t h & Jo s h ua S h e i n

w

In month’stehis dition,

two s ea profe soned reve ss rs about ionals tal e k comin terms g to with polic the y cha nge.

Think in Reverse

by Gregg Smith

T

here are two ways of thinking: The glass is half empty or the glass is half full. As a result of the recent economic recession and housing crisis, our industry has experienced many changes to the reverse mortgage program. This constant state of change can lead many to believe that the reverse mortgage glass is half empty. However, with each change, we eliminate resistance from various pundits, improve the fiscal outlook of the program and move the reverse mortgage product toward the mainstream. All of these factors make for a pretty bright road ahead—and in fact, our collective glass is quite full.

So Far in 2013

Gregg Smith is the president, COO and founder of One Reverse Mortgage.

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Earlier this year, HUD eliminated the HECM Standard fixed loan option in order to reduce the number of clients who choose the maximum equity draw from their reverse mortgage. As structured, the HECM Standard fixed, fueled by the great recession, had an elevated level of property charge defaults. Removing this loan option was a good first step toward bringing stability to the program.

In August, President Obama signed the Reverse Mortgage Stabilization Act into law, enabling HUD to “establish, by notice or mortgagee letter, any additional or alternative requirements that the secretary, at the secretary’s discretion, determines are necessary to improve the fiscal safety and soundness of the program.” In other words, HUD now has the ability to react quickly to rapid changes in the marketplace. In fact, within weeks of the act becoming law, HUD published two mortgagee letters that rolled out new riskmanagement tools for lenders.

Overall, the act will help protect not only the borrower, but also the lender. These changes will help bring stability to the program and, although there will be some restrictions, they will help eliminate the negative perception facing the reverse mortgage industry and provide borrowers with peace of mind in moving forward with the loan program.

Today’s Seniors by the Numbers According to a recent Harvard study, “Housing America’s Seniors,” older adults have the highest homeownership rates of

spotlight article any age group in the United States.

The study also found that as the baby boomer population moves into the 64-70 age range, they will continue to maintain a high percentage of the housing market.

hmbs

The fact that HUD has been given additional authority to control decisions about the reverse mortgage program is a clear sign of commitment to a program that has been proven to help senior Americans nationwide. x

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With the safeguards that have been in place for many years and the new options that have been added, we anticipate various critics will now see the reverse mortgage program as a viable financial option for seniors, as it was intended when it was created in 1989. The goal is still to allow seniors to access their largest asset, their home equity, as a financial tool in their retirement years to help:

Support Aging in Place // Older Americans allocate a much greater percentage of their monthly income to paying for housing costs. The 2007 American Housing Survey indicated that more than 8 million households age 65 years and older spend more than 30 percent of their income to cover housing costs.

title tip

How a Reverse Mortgage Can Help

investments have declined in value over the years, leaving them with a need to access other financial support or resources. In fact, there have been numerous studies conducted over the last couple of years demonstrating that a reverse mortgage, working within a comprehensive financial plan, can significantly extend the duration of a senior’s assets.

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With the future growth of this segment of the population, it is important to also focus on the needs that will be growing over the coming years. Those needs include things like paying for daily living expenses, medical bills and aging-in-place costs. With these growing trends, it’s important that seniors are aware of the fact that they can defray some of these costs with the proceeds of a reverse mortgage.

Supplement Social Security and Other Investments // Many retirees’

In life, change is inevitable. While some in the industry look at the changes with trepidation, this should be viewed as a period of growth and opportunity to help the growing population of seniors stay in the homes they love and enjoy their retirement.

marketing

Seniors are also the fastest-growing age bracket falling into debt. Between 1998 and 2010, debt among people in their 60s increased from 57 to 70 percent, according to a recent study from Boston College’s Center for Retirement Research. With the onset of debt for this age group, many are concerned about where they will live when they get older, how they will be able to retire and, more importantly, how they will afford to pay for medical expenses as they age.

Time and again we hear the No. 1 cause of debt for seniors is health care costs. Many seniors are living on small pensions as well as Medicare and Social Security that cannot adequately cover all of their monthly costs. According to the 2010 U.S. Census, the average life expectancy is 79 years, which is five years longer than in 1980, so people are living longer and outliving their assets at an alarming rate. Some seniors need help paying for health care costs because of inadequate health care coverage.

The reverse mortgage program can help supplement these expenses seniors face and relieve concerns about being able to pay monthly bills and health care costs into their golden years—and maybe even have some extra to enjoy their retirement.

originating

According to a report from AARP, more than 25.5 million seniors over the age of 50 have a traditional mortgage on their home. In all age brackets for Americans with a mortgage, seniors struggle the most as they are trying to live on a strict budget and also pay a mortgage.

Cover Health Care Expenses //

Support Long-Term Care or Activities of Daily Living (ADL) Services // ADL services assist with basic personal tasks of everyday life, such as bathing, dressing and managing meals. According to the U.S. Department of Health and Human Services, 70 percent of those turning 65 years of age will need some form of long-term care service. Medicare does not pay for this type of assistance. reversereview.com

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The Reverse Review October 2013

spotlight article

Change Is an Opportunity

by Joshua Shein

T

his fall, many of us have been waiting for two things. For tech junkies like me, it was the recent release of the much-awaited iPhone 5S. It was a bit of a letdown, but maybe that was the shortterm distraction we needed. For the reverse industry, the anticipation of FHA’s final decision on proposed changes has been agonizing: What will they be? How long will they give us to implement them? What will come next? When will the waiting ever end, the uncertainty, the constant change?

Will we get a break? A delay? Good news?

“Change is not a threat, it’s an opportunity.

Survival is not the goal, transformative success is.”

– Seth Godin “In times of rapid change, experience could be your worst enemy.”

– J. Paul Getty

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When can we all get back to work— originating loans, working with customers who we know need the product, borrowers whose lives we know are changed by their reverse mortgages? We all know numerous borrowers, and have story upon story, as well as emails, cards and letters, from people whose decision to obtain a reverse mortgage was a truly life-changing event.

It appears that the wait is over: The longawaited changes, adjustments to principal limits and draws, and the very, very longdebated and discussed financial assessment guidelines and policies have all been announced. Deadlines and implementation dates are set in writing and we may finally have nothing more to wait for, nothing more to wonder about, speculate on or debate regarding the when, where, who and how of more changes.

This is it. This change is good: HUD, FHA and Congress have, at last, confirmed and verified their support for the HECM program. It is here to stay and these changes ensure the product and our industry have little else that can be changed or modified. We also have a product that can be supported by the media and financial professionals at all levels. No longer will they have to denigrate the product and our industry.

JOSHUA SHEIN IS THE VICE PRESIDENT OF THE REVERSE MORTGAGE NETWORK, A DIVISION OF MAVERICK FUNDING.

Change yet again. This is the new reality. Maybe you like the changes or maybe you are worried about them, but the bottom line is: We all must adapt. The marching orders are clear: Get used to it and get on board with it!

As the saying goes, we either adapt or we die. While we all want to think our industry and our niche are getting hit harder than others, talk to the printing company that used to get paid to print color documents and letterhead (now done at a fraction of the cost, often in-house), or the company that made hard drives and data storage and has watched prices plummet over the years because of companies like Google that give away cloud storage for free. And don’t forget that AOL used to charge money for an email account and Internet access by the hour. All of these industries have undergone transformative change and there are always winners and losers that emerge from the upheaval. Think about where you will be over the next six to 12 months.

Our industry’s new reality only has room for professionals and long-term originators.

Short-sighted, quick-income people won’t survive.

So it’s time to get back to work. Now what?

Here are seven tips for recharging your originations to maintain your volume and thrive in the new industry:

Educate yourself // Make sure you understand what the changes are, why and how they came about, what they accomplish, and how they will help our industry and product survive and grow.

spotlight article

Be a professional to your borrowers // Ensure they understand

Make a plan // More than ever the

VO

TE

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#1

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BEST

Want to see more stories like this?

Visit reversereview.com.

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VOTED THE

I hope and suspect that is what will happen this time, and we can have the confidence and comfort in knowing that we will be clear of any other major changes for a long, long time. So we can all get back to work assisting seniors and improving their lives. And beginning our wait for the iPhone 6! x

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borrowers that the Wall Street Journal and financial columnists, such as Jane Bryant Quinn, are finally able to write positively about HECMs.

The market penetration for our product and industry remains abhorrently low. The key for us now, with the most credible product in years, is going to be education and knowledge. The need is there and continues to grow, the investments and merger and acquisition activity from outside companies is a testament to the industry, its product and its potential. The business is there, the volume is there and the serious players will emerge stronger than ever. The

TITLE COMPANY

toll-free: 800.542.4113 www.PRClosings.com

underwriting

Promote and use articles from the media // We can now show our

enjoy it and can’t be positive about it, you will not be successful doing it.

marketing

professionals with a three-, six- and 12-month plan will set themselves apart from their competition. How do you intend to originate? What methods will you use? How many people will you talk with each day, week and month? What are your goals and how will you reach them?

Love what you do // If you don’t

We have all been through change, year after year, adjustment after adjustment.

Each time we worry and debate and discuss, but in the end, the change comes and we all live with it. We still close loans and, ideally, continue to grow our businesses.

originating

the changes and that you are their source for information and education on the new products.

short-term profiteers will get out of the way knowing this is now more than ever a serious product and serious industry for serious professionals who know they have to be knowledgeable, trusted advisors who work hard.

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will accomplish nothing. Accept it for the benefit of your peers and, most importantly, for your customers.

Work harder and smarter // In this new world, we all have to work twice as hard to close the same business we did a few years ago. Luckily, technology and efficiencies in the industry allow us to do more, faster than ever before. Be efficient but be working—if you’re not, know that your competition is! Think about new approaches and methods to your business.

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Embrace the changes in a positive way // Complaining about it

Does your title company leave you to fix their mistakes?

PRC GETS THE JOB DONE RIGHT. reversereview.com

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The Reverse Review October 2013

By Jessica Guerin 40

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Following the much-anticipated release of a pivotal mortgagee letter, the reverse mortgage program was subjected to the most drastic change it has faced since its inception.

With less than 30 days to adjust, the industry jumped into overtime in an effort to understand the new rules and prepare for their implementation.

In effect, FHA’s recent guidelines revamp the HECM as we once knew it, creating a new type of reverse mortgage product that, by demanding a slower consumption of home equity, caters to a different type of borrower.

With these new guidelines in place, originators will be forced to connect with a more planning-oriented consumer looking for a strategic financial tool to support retirement, rather than selling the product as a crisis-management tool for a more needs-based borrower looking for fast cash.

The changes have been a long time coming, and although some of the adjustments—like a reduction of the amount of available loan proceeds— were steeper than many expected, the industry can finally move past the speculation and focus instead on adaptation.

The changes will no doubt make for a rocky year ahead as the industry adjusts, with some expecting volume to dip as low as 50 percent. There are those who are skeptical about how well things will play out, hoping that HUD will be willing to revisit some of the guidelines down the road as to not completely exclude the needs-based borrower. Others are optimistic about the future of the product, and although they admit there are hurdles to jump, they’re eager to explore new ways to market the HECM and tap into a

greater slice of the potential market.

mission failure,” he says.

While time will tell how the industry will fare, one thing is certain: Those who are dedicated to the success of the HECM are unwavering in their commitment. They have reaffirmed their determination to see this product succeed in the mainstream marketplace, vowing to get creative with their marketing and choosing to view the HECM’s revamping as an opportunity to get to that next level.

Brien Brandenburg, a VP for regional lender TowneBank Mortgage’s reverse division, agrees that FHA had to take action to protect the fund. “While in the short term it may be a little challenging, it will be good for the overall economic viability and health of the program,” he says.

FHA Acts, the Industry Reacts FHA’s adjustments to the HECM program were designed to realign the reverse mortgage product with its original intent, from which it has strayed in the past several years.

Prompted by a November 2012 audit of its Mutual Mortgage Insurance (MMI) Fund that attributed $2.8 billion in losses to the HECM program, FHA found the current use of the product to be too risky and detrimental to its long-term sustainability.

According to Colin Cushman, president and CEO of Generation Mortgage Company, the agency had little choice but to issue drastic change.

“FHA was put in a position where it had no good options. The original intent of the program was to help retirees pay off existing debt and use the remaining line of credit as longterm cash flow to facilitate aging in place. But in recent years, the industry marketed the product as something different from this, which led to an adverse, increased risk to the MMI Fund, both in the form of losses and in

Mark Browning, HomeChex “I think in the long haul [some of] these things are going to be good for the industry.

It reorients the product for a planner-type consumer versus the immediate-need user… Frankly, it’s more attuned to the kind of consumer we saw using this product earlier on in its history.”

Although many agree that something had to be done, industry participants express mixed reactions to the changes that were made.

Mark Browning, CEO of New Yorkbased lender HomeChex, says most of the new guidelines will be beneficial in the long term. “I think in the long haul these things are going to be good for the industry. It reorients the product for a planner-type consumer versus the immediate-need user. The changes seem thoughtful and well balanced,” Browning says. “Frankly, it’s more attuned to the kind of consumer we saw using this product earlier on in its history.”

Others, like John Mitchell of Texasbased Reverse Mortgage USA, are not as supportive. “I think that we’re ultimately going to see that HUD has overreacted on this,” says Mitchell.

He predicts that the annual audit in November will show that the HECM is now cash positive for the fund, leaving the industry to question the institution of such drastic measures.

Joe Kelly of New View Advisors also thinks FHA might have taken it a step too far, with new principal limit factors (PLFs) drastically reducing the amount of loan proceeds, and increased mortgage insurance premiums (MIPs) making the product more costly. “The original HECM PLFs, we always thought those were too high, for years.

But this round of cuts, combined 8

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The Reverse Review October 2013

with the increase in the MIP, we think it’s overkill, frankly,” Kelly says. “Now I expect the HECM will be pretty profitable for FHA.” Whether or not you agree with FHA’s actions, the bottom line is that a modified program is better than no program at all. John Lunde of Reverse Market Insight says the choice was either shut it down or change it. “If they didn’t make these changes, then in the next six months to a year they might have had to cancel the program entirely,” Lunde says. “Put in that context, I think these changes are great.”

Indeed, by instituting reforms, FHA has demonstrated its long-term commitment to the program. While the new guidelines may seem unnecessary to some, FHA’s renewed commitment is a major bonus for an industry whose future has been hanging in the balance.

As Mitchell says, “That’s maybe the silver lining in all of this.”

PLF Cuts and Utilization Restrictions With the consolidation of the HECM Standard and the HECM Saver, FHA created a new reverse mortgage with a lower PLF, meaning that it offers less proceeds to borrowers. While a reduction in PLFs was expected, most did not anticipate the cut to be so steep: about 15 percent, according to industry analysts.

“Compared with what the industry was expecting, I think maybe it’s a notch or two worse,” Lunde says. “I think for most people in the industry it was a little bit of a surprise.”

Some, like Cushman, object to the steep cuts. “I can understand why they implemented the cuts, but I fundamentally believe it was the wrong thing to do,” he says. “Every time you cut the drawable equity, you cut the opportunity for seniors to succeed in the program.”

RMS CEO Marc Helm says that while he too was surprised by the steep PLF reduction, the fact is this is the new 42

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impact future volume to an unpredictable extent. If home prices continue to appreciate, they could help mitigate the drop. But he says consumer behavior could be more problematic. “If we get more borrowers thinking, ‘Hey, why are you telling me how to use my money?’ that could definitely be a bad thing,” he says.

reality and the industry must learn to deal. “It is a deeper cut than we thought it would be, but it is what it is and we’ve just got to learn to live with it and make the best of it,” Helm says.

In addition to a reduction in available proceeds, the new rules restrict the amount of money a borrower can take at closing and in the first year of the loan to 60 percent of the total loan amount. This restriction in how borrowers utilize the proceeds from their reverse mortgage is intended to encourage them to draw on their equity slowly, rather than consuming it immediately in one lump sum. The inevitable result of the PLF cuts and this utilization restriction is that loan volume is going to take a nosedive in the coming months.

“I don’t think anybody knows how damaging the changes are going to be,” Mitchell says. “I think it’s a fairly reasonable expectation that you’re going to see a 30 to 40 percent decline in funded loans initially.”

Lunde and his team at Reverse Market Insight attempted to put a number on the potential impact, running July and August funded-loan totals as if the new rules were in place. According to their findings, the impact of the reduced PLF, coupled with utilization restrictions, reduced industry volume by 49 percent. “But that’s a simple number,” he says.

“There are a lot of other factors that could come into play.” Lunde says both home price appreciation and consumer behavior could

joe kelly, new view advisors “The original HECM PLFs, we always thought those were too high, for years. But this round of cuts, combined with the increase in the MIP, we think it’s overkill, frankly. Now I expect the HECM will be pretty profitable for FHA.”

Many say they hope HUD will revisit the PLF table down the road.

“The question on everyone’s mind is: Can PLFs ever go up? They’ve always gone down. I guess we’ll find out,” says Kelly. “FHA may actually find their profit from this new HECM is lower, because the volume will be lower, so it will be interesting. It’s going to take a while, but I think the industry is hoping FHA will see the light. This was probably harsher than needed.”

Cushman is among those who hope for reassessment down the line. “My hope is that upon future review, FHA determines that the other policy changes it recently administered reduce the expected losses enough to increase the PLFs again. Of course, that cannot happen until the next president’s budget: October 1, 2014. Until then, I believe industry participants willing to learn or relearn the true value proposition of this program will not have a problem increasing sales in spite of the PLF cuts.”

Financial Assessment Another major change to the HECM program was the establishment of a

Marc Helm, RMS financial assessment, which institutes underwriting guidelines that include a credit history analysis and an analysis of cash flow and residual income to ensure borrowers have the ability to pay their property taxes and insurance.

Industry participants express mixed reactions about Financial Assessment, with some recognizing the need for tougher underwriting and others concerned about the practicality and subjectivity of the process.

Cushman supports the assessment, but admits that it may take some time to work out the kinks. “The program needs the transparency and legitimacy that comes with Financial Assessment in order for it to become a mainstream program. Leveraging home equity contains risks and rewards and, like any loan program, should be subject to basic underwriting to assess whether borrowers are willing and able to meet their financial obligations,” he says.

“This is the first policy of this nature for the program, and so it will take an iterative process to home in on policy

“[The PLF reduction] is a deeper cut than we thought it would be, but it is what it is and we’ve just got to learn to live with it and make the best of it… We’ve heard hundreds and hundreds of these wonderful stories about what a reverse mortgage can do. So I’m going to be just as committed today as I was a week ago or two months ago or after the last program change, to make sure we continue to be a provider of this reverse mortgage product as long as it’s around.”

that successfully weeds out borrowers who were not going to succeed in the program.”

Kelly is also a proponent. “I think there should be some form of financial assessment,” he says, adding that New View Advisors has been advocating for a financial assessment for several years now. But Kelly also says that it remains to be seen how well this proposed version, which will not be implemented until January 2014, will pan out. “It’s looking like a pretty thorough underwrite. Whether that’s overkill, we’ll find out.”

Others, like Browning, fundamentally object to a financial assessment of retired borrowers. “What the Financial Assessment tries to do is overlay protocol associated with traditional transaction lending on your retirement product… We’re making long-term projections based upon the unpredictable,” he says. “I think there’s a lot of work that needs to be done on the Financial Assessment protocol, and I’m hopeful we’ll do that before January comes around." 8

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The Reverse Review October 2013

Breaking Down the Changes I n M ortgagee Letter 2013-27

Changes to the HECM program designed to protect the viability of the MMI Fund, effective October 1, 2013:

1

No.

The Consolidation of the HECM Standard and Saver These two products have been eliminated and replaced by a product with new PLF tables and a revised upfront MIP structure.

Compared with the previous structure, the PLFs of this revised HECM reduce the amount of proceeds available to the borrower by about 15 percent, according to industry analysts.

2

No.

UPFRONT UTILIZATION RESTRICTION A cap limits the amount of proceeds a borrower can take at closing, or during the initial 12 months after closing, to 60 percent of the initial principal limit. If there are mandatory obligations, such as paying off an existing mortgage, the disbursements can match the sum of those obligations and include an additional 10 percent of the initial principal limit.

3

No.

A FIXED-RATE OPTION WITH REDUCED PROCEEDS Borrowers have the option to take a single, lump-sum payment at closing that is equal to 60 percent of the initial principal limit, or mandatory obligations plus 10 percent of the initial principal limit.

4

No.

Revised UPFRONT MIP Structure The new product has two available pricing options: * If the disbursements at closing or within a year of closing do not exceed 60 percent of the initial principal limit, there will be an upfront MIP of .05 percent of the maximum claim amount (MCA). * If the disbursements exceed 60 percent, there will be an upfront MIP of 2.5 percent.

Effective January 2014: 5

No.

Financial Assessment There will be a mandatory financial assessment of prospective borrowers, which includes a credit history and cash flow/residual income analysis, to determine if a borrower is capable of making property tax and insurance payments. A handbook for underwriters, HECM Financial Assessment and Property Charge Guide, spells out the guidelines for implementation.

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6

No.

Set-asides For borrowers who fail the Financial Assessment, lenders will be required to set aside a portion of the loan proceeds at closing, or withhold a portion of monthly loan disbursements, for the payment of property charges. In some cases, borrowers may have to set aside an amount based on life expectancy.

“The changes being announced today will realign the HECM program with its original intent, which will aid in the restoration of the MMI Fund and help ensure the continued availability of this important program.

Our goal here is to make certain our reverse mortgage program is a financially sustainable option for seniors that will allow them to age in place in their own homes.” –FHA Commissioner Carol Galante

The Bright Side One positive result of these changes, some say, is that it will essentially make the program “safer”—at least, for FHA. By eliminating risky borrowers whose inability to make property tax and insurance (T&I) payments can sometimes lead to default or foreclosure, the program is more viable in the long term.

“I think FHA is taking some of the most risky borrowers out of the market,” Lunde says. “I think T&I default rates will come down, and I think foreclosure rates will likely come down a little bit too. But the reality is we’re taking out a really big chunk of the market to do that, so the medicine hurts.”

Some are also hopeful that this revamped HECM will help the industry repair its damaged reputation. By eliminating risky borrowers whose stories often inspired damning news headlines that fed the public’s mistrust, the reverse mortgage

product might have a chance of revamping its image.

Browning is among those who think the changes could help reduce the media scrutiny. “I think we’ve lost part of the market because of the reputation problems the program has had. I know that our referrals from trusted advisors—meaning lawyers, accountants, those types of people—have been way off over the past several years. People just aren’t comfortable recommending a reverse mortgage with the type of negative publicity it’s been getting,” he says.

“I think this is a step in the right direction.”

The Secondary Market’s Response In the wake of such drastic product change, some are left wondering how the secondary market will react. What will happen, they say, when an already small market gets even smaller?

According to Darren Stumberger, who heads HMBS trading at Stifel Nicolaus

& Co., the HECM market may constrict to half its size in the coming months, and that could present a problem from an investor standpoint.

“Investors are going to want to sit on the sidelines and see the performance data of this new product and which of these variations are going to prepay faster than others,” Stumberger says, adding that despite the potential impact on volume, he does believe the changes were necessary for long-term sustainability.

“Yes, the program is safer and it has mitigated some of the issues related to tax and insurance default and broker steering and stuff like that, so that’s great. But the investor base is going to see a small market getting much smaller,” Stumberger says.

“You really, really have to believe in originators and their ability to increase penetration rates.”

Kelly, though, says he is not too worried about the secondary market’s reaction. “I’m not as concerned 8

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The Reverse Review October 2013

THE

REVERSE review

The Reverse Review’s website offers complete access to all of the magazine’s content in a clean and crisp format. Read the latest issue or peruse the archives and access important stories from past editions.

Reimagined, refined and refocused to deliver the insight you need – in brief and in depth.

Visit our website to read about current issues facing the reverse mortgage industry.

Connect with us in print and online.

Thinking about contributing? Find out how you and your company can be a part of the TRR team!

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A PROF E S S I O N A L P E R S P E C TI VE Darren Stumberger, Stifel Nicolaus & Co. “The value proposition at the end of the day doesn’t change. If anything, the value proposition of these loans is still there, it’s just how much volume and support and sponsorship will there be on the dealer side and the capital market side to keep everything contained and not let spreads widen… Originators need to increase market penetration to increase volume; that’s the only way the program is going to flourish at this point.”

about that. It’s still a Ginnie Mae [program],” he says. “I think there will be some temporary problems in the secondary market, but I don’t see that as being the main problem here. I think the market will find a level and go on from there. The real problem is volume.”

Cushman also thinks things will eventually work out in the secondary market. “I believe the secondary market will—in the long run— gravitate to this product. The challenge of the day is getting them and us in alignment for the long haul.”

Stumberger says finding that alignment might be tough at first. “It’s going to be tough sledding, honestly,” he says. “The value proposition at the end of the day doesn’t change.

If anything, the value proposition of these loans is still there, it’s just how much volume and support and sponsorship will there be on the dealer side and the capital market side to keep everything contained and not let spreads widen. That’s to be determined.”

Entering the Mainstream For reverse originators, the challenge now is learning how to connect with an entirely new segment of borrowers.

In order to succeed in selling this revamped HECM, originators will need to rethink their entire sales approach.

“I think now it’s gut-check time,” Lunde says. “It’s clear that this is going to have a really big impact on business as usual, so I think it’s time to find new niches and new tactics to grow the market. This industry has really only addressed a relatively tiny slice of the total opportunity.”

In order to thrive despite these changes, the industry needs to figure out how to increase its penetration rate, which is estimated to be around 2 to 3 percent of the market’s potential. Now that a large portion of the borrowers once targeted, those who were the most needs-based, will essentially be removed from the equation, figuring out how to tap into the rest of the market will be key.

need to increase market penetration to increase volume; that’s the only way the program is going to flourish at this point,” he says.

Those who are convinced of the HECM’s potential are certain that it’s possible to reach a greater segment of the potential market, but many concede that it may take some time.

As Cushman says, the industry needs to reevaluate its approach in order to attract a wider audience. “What the industry is missing right now is a level of expertise that is required to attract the mainstream. We need to be transparent. We need to demonstrate the value proposition of our product in a way that borrowers can see where they can go wrong and where success lies,” he says. “The industry is young.

In order to grow up, it needs to quickly find a way to attract the mainstream to all that leveraged home equity has to offer.”

“Everybody talks about millions of senior homeowners out there who are addressable—20 million, or somewhere in that neighborhood—but the reality is that all the marketing A New Kind of Borrower has been spent on probably the 2 million or 3 million who are the most In order to advance needs-based and the HECM into motivated to get the realm of rid of an existing a mainstream mortgage or get a financial product, lump sum of cash originators will need to bail them out A PR OFESSIONAL to connect with a of their financial PER SPEC T IVE larger audience, problems,” Lunde and this requires says. “FHA is John Lunde, Reverse a new approach basically saying, Market Insight to marketing the ‘That’s not what “I think it’s time to find new product. Originators niches and new tactics we want the will need to retool to grow the market.

This market to be,’ their marketing industry has really only so we’ll have efforts to connect addressed a relatively to figure out a tiny slice of the total with a different way to address opportunity… I think that kind of borrower, the whole rest for folks who are dedicated one who is less of the market, and really willing and able needs-based and which frankly to do some of the work more focused on has always been required to address these opportunities in other market opportunities the industry’s retirement planning. and really change challenge.” their business, there is According to absolutely a good business Stumberger Cushman, the here still.

It has agrees that program changes just changed increasing the from what it leave the industry industry’s reach was a couple without a choice. is imperative. of months “They demand that “Originators ago.” we elevate 8 reversereview.com

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The Reverse Review October 2013

Colin Cushman, Generation Mortgage Company “What the industry is missing right now is a level of expertise that is required to attract the mainstream.

We need to be transparent.

We need to demonstrate the value proposition of our product in a way that borrowers can see where they can go wrong and where success lies…

The industry is young. In order to grow up, it needs to quickly find a way to attract the mainstream to all that leveraged home equity has to offer.”

the conversation from ‘How much money can you get at loan closing?’ to ‘How can you succeed in retirement?’” he says.

segment to look at. If you just look at those who already have [a HELOC] loan in place, that’s roughly 8 million.”

In light of this fact, many are stressing the importance of connecting with the financial planning community to spread the word about the HECM’s value. While this has long been a goal for the industry, the progress thus far has been slow.

The Potential for a Proprietary Market

Lunde acknowledges that this could be a decent pathway to greater market share, but it might take some strategic thinking to develop a solid referral base among this group. “The financial planning [community] encompasses a lot more than a single profile, so I think there’s going to have to be some drill-down on that opportunity, but it’s definitely big.”

Cushman is less enthusiastic about the benefit of connecting with financial advisors. “I believe financial planners play a role in this future, but I surely don’t believe they are the solution for this industry. The product we offer can be valuable to too many people who do not have a financial advisor, so believing financial planners are our solution is relatively shortsighted.”

Some suggest originators look for opportunities in the HECM for Purchase market, and also consider focusing on converting potential HELOC borrowers. As Lunde says, “Focus on people who are taking HELOCs, those who are age eligible… and were thinking about taking HELOCs but didn’t qualify.

That’s a pretty good-sized

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With FHA’s new product limitations, some are talking about the potential return of a proprietary, or jumbo, reverse mortgage product.

“I think a natural byproduct of this is going to be the jumbo reverse, or the nonagency reverse mortgage,” Stumberger says. “That market is going to resurface.”

While some agree that this wave of change makes the opportunity for the return of a proprietary market more attractive, they are skeptical as to how helpful that would be. As Lunde points out, it will take some time for a proprietary market to grow.

“I don’t think it’s necessarily the saving grace for the industry,” he says. “The reality is it’s not something that will go from zero to 3,000 loans overnight. Even back in its heyday it was a lower unit volume product, even though the dollars were bigger per loan.”

Kelly agrees that the road to a thriving proprietary market—and one that could compete with FHA-insured loans—is a long one. “With a proprietary program, you don’t have turnkey program with great liquidity like HMBS has. You’ve got to rebuild brick by brick…

You’ve got to painstakingly rebuild the non-agency securitization machine.”

The Strong Will Survive In the meantime, the road ahead for the reverse space may be a bit rocky, and it’s likely that some lenders will opt out of the journey. New Day Financial, which recently ranked 11th on the list of top lenders, announced its exit from the space just four days after the changes were released.

Many expect that other companies with marginal commitments in the space will follow suit.

“I believe the folks not fully committed and who don’t fully understand this program will exit the industry, and in the long run, that will be a good thing,” Cushman says. “The folks who stick around and fully appreciate the value of this program, and more importantly who can capably articulate it to prospective borrowers, will survive.”

Lunde agrees that exits and consolidation are inevitable, but insists that opportunity remains. “I think that for folks who are dedicated and really willing and able to do some of the work required to address these other market opportunities and really change their business, there is absolutely a good business here still. It has just changed from what it was a couple of months ago.”

Remaining Committed In the wake of this major change, there is speculation as to how various entities in the space will fare.

Browning predicts that smaller companies may have an easier time adapting. “I think smaller companies will

have an easier time adjusting to the new target consumer. I think they will be more nimble with respect to the consultative sales process, especially compared with a call center model,” he says.

Brien Brandenburg, TowneBank Mortgage “While in the short term it may be a little challenging, it will be good for the overall economic viability and health of the program… We are committed to the space and we’re making plans for how we are going to attract this new market and what we’ll need to do when the rest of the changes happen in 2014.”

Some say lenders that are also Ginnie Mae issuers will fare slightly better than the rest, since the shift to an ARM market means they’ll be able to collect revenues on future draws.

needed clarity. We need to make sure we’re all on the same page and that we understand every aspect of how the program works.”

“I think Ginnie Mae issuers are going to make out OK because they’re able to securitize the tails of these lines of credit,” Stumberger says. “For folks who aren’t Ginnie Mae issuers, it’s not going to be pretty.”

However frustrating these program changes may be, one positive fact is that the wait is now over. As Browning says, “Now the question is over, the industry debate has finished and we can finally move forward.”

But no matter what, the changes are bound to be tough on everyone.

Companies will need to weather a rough patch as they adjust processes and realign distribution models to accommodate the program changes.

In order to move forward, reverse professionals are going to have to roll up their sleeves and get busy strategizing how they can retool their sales processes to reach a new audience.

In the meantime, there is little to do but study the new rules and prepare for implementation. A Helm says, the goal right now is to learn the new program. “We need to continue to submit questions to NMLRA and FHA about the program for clarity, and there are a number of things that

Many, including Brandenburg and his team at TowneBank, are doing just that. “We are committed to the space and we’re making plans for how we are going to attract this new market and what we’ll need to do when the rest of the changes happen in 2014,” he says.

John Mitchell, Reverse Mortgage USA “I don’t think anybody knows how damaging the changes are going to be. I think it’s a fairly reasonable expectation that you’re going to see a 30 to 40 percent decline in funded loans initially… [But] the big picture is the demand for our product is tremendous and it’s getting bigger… people are ill-prepared for retirement and their houses are their biggest assets.”

Despite the hurdles, many remain optimistic about the value of the product. “The big picture is the demand for our product is tremendous and it’s getting bigger,” Mitchell says.

“The reverse mortgage idea is the best idea I’ve ever seen in my life, simply because people are ill-prepared for retirement and their houses are their biggest assets. And you’ve got 10,000-plus a day turning 62—that is just a tidal wave of good news for the reverse mortgage business.”

Helm echoes Mitchell’s optimism about the HECM’s potential. “We’ve heard hundreds and hundreds of these wonderful stories about what a reverse mortgage can do. So I’m going to be just as committed today as I was a week ago or two months ago or after the last program change, to make sure

we continue to be a provider of this reverse mortgage product as long as it’s around,” Helm says. “We’ll do everything we possibly can to make sure that all the people who qualify and need a reverse mortgage get one.”

With similar passion, Brandenburg says he also remains deeply committed. “There have been a million changes, and there are people who have been through these ups and the downs and are still committed to the program because of what it does for our customers. I’m committed to helping seniors have a better quality of life,” he says. “The question is: Are you?”x

Tell us what you think. Be a part of the conversation.

FHA’s recent changes to the HECM program will drastically impact business for the reverse mortgage market.

The Reverse Review needs your help in discussing how professionals in this space can successfully navigate the new landscape.

Share your experiences, ideas and advice about how the industry can reach a greater market share.

Play an active role in the industry’s success.

Contact us at info@reversereview.com to get involved.

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The Reverse Review October 2013

last word

reflect

Want to comment on this article?

Comment online at reversereview.com.

Stepping Forward and Looking Back joh n l a ro s e

M

any of you know that I am selling my stock in Celink to a forward-thinking and innovative group of investors led by Jim Mahoney, Jason McNamara and Al Benedetti. To suggest there are multiple and mixed emotions around the writing of this Last Word is an understatement. I never thought I could feel so happy, sad and everything in between, all at the same time.

The sadness comes from knowing that in a year or so I will be departing an industry that I have been madly in love with since attending my first NRMLA conference in Atlanta in 2004. It felt like nothing short of a calling; I was being presented with an opportunity to help build an organization and industry that would serve and protect our greatest generation, as well as those who would follow.

I write this from a plane returning from Austin, Texas, having recently attended the Texas Mortgage Bankers Reverse Mortgage Day. I was reflecting on how many people have dedicated their professional lives to helping seniors benefit financially and retire with strength and longevity. I have met so many wonderful, terrific people. The reverse mortgage industry is populated with men and women who are not just brilliant businesspeople, they are honest, ethical and deeply devoted to the seniors they provide with the financial comfort of a reverse mortgage. These people (first among them my son, Ryan) are the future of the industry and that future is very bright indeed. I will miss regularly interacting with all of them.

During one panel presentation in Austin, Joe DeMarkey, the co-chair of the NRMLA board of directors, described recent

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changes to the HECM program as taking us “back to the future.” His words caused me to wistfully think back to what our industry’s world was like six or seven years ago. It was, by present standards, a far simpler time: We had one investor (Fannie Mae); most of the products were adjustable rate loans; selling loans at a premium was not in our vocabulary; we did not have an abundance of tax and insurance defaults; and we had never heard of appraisal-based claims.

Happiness comes from having lived through our industry’s “good old days” and now watching the next generation of industry leaders enthusiastically embrace the GNMA HMBS program and adapt to all of the market changes that have occurred. This new leadership accepts the program changes and understands that while we may indeed be going “back to the future,” the industry moves ahead with a stronger, more sustainable HECM program long into the future.

I started in the subservicing business on October 1, 1985, and this column will appear in the October 2013 edition of The Reverse Review. Is this coincidence? I see it as a wink from God. As news of the sale has traveled, I have been asked many times what I would change if I could live my life over again. My answer is always the same: “Not one thing!” The sum of every life experience has brought me to where I am today. I stand at another of life’s crossroads, stepping forward and confident that I have done my small part to help move the reverse mortgage industry to a very good place. Thanks for sharing this look back with me as I take the first steps on this new leg of my journey. God bless our industry and each of you. x

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The Reverse Review October 2013

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