The Reverse Review May 2014 by The Reverse Review

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INSIDE

HECM trainers keep their partners informed.

he reverse rev ie w

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HOW TO PICK THE RIGHT CRM SYSTEM FOR YOUR BUSINESS PG. 18 INTEGRATED TECHNOLOGY BRINGS GREATER EFFICIENCY TO SERVICING PG. 25 +JEAN NOBLE SITS DOWN IN OUR HOT SEAT PG. 16

THE

REVERSE review

m ay 2 0 1 4

what you should know about

reverse mortgage counseling

How nonprofit agencies overcome limited funding, consumer confusion and frequent program changes to educate seniors about HECM loans

The Reverse Review May 2014

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Where “above and beyond” is standard operating procedure At Urban Financial of America, LLC (UFA), we go the distance for our wholesale partners and their customers. When you work with us, you’ll have the advantage of our competitive pricing and best-in-class operational support. Plus access to customizable marketing materials, a robust training program, powerful origination software, and an online portal that puts your most important business resources at your fingertips.

Let us help you take your business to the next level. To learn more: • Call 855-77-URBAN (855-778-7226) • Explore our wholesale & correspondent portal: ufawholesale.com

* Since December 2011. Based on trailing 12 months’ endorsement volume. Source: Reverse Market Insight. For mortgage professional use only, not to distributed to the general public. NMLS ID# 2285. Corporate Office: 8909 South Yale Avenue, Tulsa, OK 74137. ©2014 Urban Financial of America, LLC. All Rights Reserved. CALIFORNIA BUSINESS NAME: URBAN FINANCIAL GROUP OF AMERICA, LLC. NEBRASKA BUSINESS NAME: REVERSE IT! LLC. UFA58 [Exp 03/2015] reversereview.com

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The Reverse Review May 2014

From the Editor l

While funding concerns are an ongoing burden that may not be relieved anytime soon, the counselors we spoke to for this article agreed that professionals in other sectors of the reverse mortgage space could help alleviate some of the other challenges they face by learning more about the work they do.

Meet the Team Senior Publisher Reza Jahangiri

Publisher

Erik Richard

Editor-in-Chief Jessica Guerin

Creative Director Traci Knight

Mainly, they say HECM originators

A note from jessica guerin

In this issue of TRR,

we take a look at HECM counseling. An integral (and mandatory) part of the reverse mortgage loan process, counseling helps seniors considering the loan by requiring them to talk through their options with a HUD-certified professional. As nonprofit entities, housing counseling agencies are tasked with the enormous challenge of providing

should properly prepare prospective borrowers for their session and stress to them the value of counseling. Clients the necessary paperwork, a positive attitude and an open mind are far more likely to extract the most benefit. When this is the case, the borrower—and the lender—can feel confident that the senior has made the right choice for a better financial future. Editor-in-Chief

{ Jessica Guerin }

information on the ever-changing mostly on federal grants to support their operations.

alycia colacion

Want to contribute to the conversation? Contact jessica@reversereview.com.

Printer The Ovid Bell Press Advertising Information phone : 630.207.3882 email : jessica@reversereview.com Subscriptions email : information@reversereview.com Editorial Content email : jessica@reversereview.com © 2014 Reverse Publishing, LLC. All rights reserved. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, Reverse Publishing, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 3800 West Chapman Ave., Orange, CA 92868

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who approach counseling armed with

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Table of Contents 24 | Tech

TRR 5.14

Moving Technology Forward in the Reverse Market How customizable technology for the reverse space helps lenders advance

In this issue... 18 Christopher Russow Originating

Aaron Stein-Sapir

25 | Servicing Integrated Information Technology: A Foundation for Quality Servicing How a flexible platform can help servicers meet evolving business demands Brent Steiner

28 | Spotlight 08 | Movers and Shakers

The latest developments in companies across the reverse space

09 | Industry Update

Headlining stories of the past month

15 | Roundup

A collection of recent facts and surveys affecting the reverse market

16 | Hot Seat

Telling You Where to Go and How to Get There

23 Laurie Denker MacNaughton Originating

Reverse mortgage trainers help originators adapt to an evolving product landscape. Jud Lyman

Jean Noble Head of marketing for Urban Financial of America

38 | Last Word

Reverse Mortgage Daily

10 | Report

20 | Originating

While the industry continues to evolve, some essential factors remain constant.

March’s Top Lenders Report and HECM endorsement stats through February

I Was Your Worst Nightmare

Reverse Market Insight

Colleen Moore

How I came around to embracing the power of the HECM

The More Things Change, the More They Stay the Same

27 Haydn J. Richards, Jr. Legal

Jeffrey S. Taylor

12 | NRMLA News

Read about the association’s current initiatives.

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

How nonprofit agencies overcome limited funding, consumer confusion and frequent program changes to educate seniors about HECM loans

may 2014

jessica guerin

RE V

E TH

E REVIEW THE VERS RE R

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INSIDE this issue

TH E

HECM trainers keep their partners informed.

HE REVERSE REV IE W

HOW TO PICK THE RIGHT CRM SYSTEM FOR YOUR BUSINESS PG. 18 INTEGRATED TECHNOLOGY BRINGS GREATER EFFICIENCY TO SERVICING PG. 25

+JEAN NOBLE SITS DOWN IN OUR HOT SEAT PG. 16

W THE RE REVIE VE

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THE

HECM counselors aim to educate

“When borrowers are able to discuss the details of leveraging their home equity with an independent third party, they are better able to assess whether the loan is the right fit for them. Counseling ensures that borrowers who move forward with a HECM are fully educated about their rights and responsibilities, protecting not only the borrower, but also the lender.

cover EVIE

Mortgage Counseling

Want the online version? reversereview.com/magazine

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32 | What You Should Know About Reverse

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FEATURE

Marty Bell

THE

REVERSE review

M AY 2 0 1 4

WHAT YOU SHOULD KNOW ABOUT

REVERSE MORTGAGE COUNSELING

How nonprofit agencies overcome limited funding, consumer confusion and frequent program changes to educate seniors about HECM loans

reversereview.com

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The Reverse Review May 2014

Contributors

John K. Lunde

Marty Bell

J ohn K . L und e

Ma rty B e ll

je an n obl e

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

12 | 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.

16 | Hot Seat g Jean Noble is director, head of marketing and call center sales at Urban Financial of America. As such, Noble is responsible for all lead generation tactics, marketing communications and CRM systems. A seasoned marketer and business strategist, Noble launched one of the first national TV campaigns in 2004, featuring Jerry Orbach and Robert Wagner for Senior Lending Network. She is the chair of NRMLA’s Public Relations Committee.

chr i s t opher r us s ow

c olle e n moor e

lau r i e d e nker macn au gh to n

Jean Noble

Christopher Russow

Colleen Moore

Laurie Denker MacNaughton

18 | The Importance of Customer Relationship Management g Christopher Russow is a consultant who specializes in consumer-direct sales, sales management, online marketing and lead generation, and sales technology integration. He has previously worked with Livewell Financial, Urban Financial, One Reverse Mortgage and Financial Freedom, among others. Russow has a B.S. in business/ economics from Cal Poly San Luis Obispo and an MBA from the University of California San Diego.

20 | I Was Your Worst Nightmare g Colleen Moore is the national reverse mortgage director for Golden Equity Mortgage, a company she owned before it merged into a division of Land Home Financial Services in 2013. Moore is a CRMP who has worked in both forward and reverse mortgages for more than 20 years. In the last decade, she has been focused on educating professionals about the power of HECMs.

23 | Career, Calling and Comedy in a Season of Change g Laurie Denker MacNaughton is a reverse mortgage specialist at Middleburg Bank. She grew up in Tucson, Arizona, in a large, multigenerational household, and was a highly competitive athlete, symphony harpist and community volunteer. MacNaughton studied in Europe, graduated with honors from Villanova University and attended graduate school at George Washington University. She is a freelance writer and a frequent speaker at elder law, health care and financial planning events. lmacnaughton@middleburgbank.com

Aaron SteinSapir

Brent Steiner

Haydn J. Richards, Jr.

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aar on s t ei n-s ap i r

br e n t s te i n e r

24 | Moving Technology Forward in the Reverse Market g Aaron Stein-Sapir is chairman and CEO of Mortgage Information Services, Inc. (MIS). Founded in 1990 by Leonard Stein-Sapir, MIS is a national provider of title insurance, loan settlement, valuation services and technology solutions. An innovative solutions provider since the company’s inception, SteinSapir continues driving initiatives at MIS to streamline the title, closing and valuation processes for its diverse clientele.

25 | Integrated Information Technology: A Foundation for Quality Servicing g Brent Steiner serves as chief technology officer at Celink. He has managed the IT team at Celink since the servicing platform’s inception. In his spare time, Steiner enjoys outdoor and family activities, as well as volunteering for his church and several other organizations.

h ay d n j. richards, jr . 27 | Consumer Complaints: When Life Gives You Lemons, Make Lemonade g Haydn J. Richards, Jr. is a member at Dykema and is the director of the firm’s national Financial Institutions Group. Richards advises the financial services industry on state and federal regulatory matters and counsels financial services companies regarding CFPB preparedness and implementation strategies for the CFPB’s new regulations. He has extensive experience with the SAFE Act and has been deeply involved with the development and testing of the NMLS.

Contributors

Jud Lyman

j ud ly ma n

je f f r e y s . tay lor

28 | Telling You Where to Go and How to Get There g Jud Lyman is a training manager at Liberty Home Equity Solutions. His focus is helping Liberty’s partners grow through efficient and effective educational material. Prior to joining Liberty, Lyman spent 15 years in marketing in the securities and insurance industries and worked directly with financial planners and insurance agents.

38 | The More Things Change, the More They Stay the Same g Jeffrey S. Taylor, Master CMB, is the founder of Wendover Consulting, Inc., a reverse mortgage consulting firm. A 35-year veteran of the financial services and mortgage banking industries, Taylor led Wells Fargo’s Senior Products Group from 2000 until his retirement in August 2009. Taylor is a Master Certified Mortgage Banker, a former chair of the MBA’s CMB Committee, a founding chair of NRMLA and a former member of Fannie Mae’s Housing Impact Advisory Board. Taylor is qualified as an expert witness in reverse mortgage litigation.

Jeffrey S. Taylor

GINNIE MAE RULES ON NEW FIXEDRATE VARIATIONS PG.09

page 23

comments we loved

“Right now, our industry is beset by change… but you know what? For most of us, we roll with it because this job is not just a job; it’s that most enviable of intersections between career and calling—seasoned, not infrequently, with profound comedy.” —Laurie Denker MacNaughton

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

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Be a part of the conversation.Write for us! We are looking for new contributors. Share your thoughtful commentary with our readership today.

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The Reverse Review May 2014

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

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

ReverseVision Welcomes Jeffrey S. Taylor to its Board of Directors, Adds Gregg Holsapple as Product Strategist ReverseVision has announced that Jeffrey S. Taylor, Master CMB, has joined its board of directors. Taylor is founder and president of Wendover Consulting, a leading reverse mortgage banking consulting firm, who has been instrumental in forming retail loan origination, correspondent and wholesale lending, and secondary marketing operations during his 35-year career. “The RV platform offers state-of-the-art technology and services to the reverse industry that are second to none,” says Taylor. “I am looking forward to working with the ReverseVision team as new services are developed to boost loan production and reduce cost for reverse mortgage originators.” RV has also hired Gregg Holsapple as product strategist, responsible for product and program analysis, developing requirements and building out our product design process.

Celink Enhances Servicing Platform to Meet GNMA Guidelines Celink has updated its reverse mortgage servicing platform, ReverServ, in response to customer needs and recent Ginnie Mae servicing guideline modifications related to the pooling of loan advances. Celink customers now have the ability to securitize current-month draw activity on loans with existing GNMA participations, bringing flexibility and increased speed to the loan activity process. “Celink will be reviewing the evolution of this change, under guidance from GNMA, and will remain responsive to our customers as experience and new guidelines dictate further enhancements,” said President and COO Ryan LaRose.

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Email it to Jessica@reversereview.com.

Urban Financial of America Names Jonathan Scarpati VP of Wholesale, Michael J. Weltman AVP and Sales Manager for the Southern Region Urban Financial of America (UFA) has appointed industry veteran Jonathan Scarpati to the company’s newly created position of vice president, wholesale production, overseeing all of UFA’s account executives. A seasoned reverse mortgage sales executive with more than 10 years of industry experience, Scarpati joined UFA in March 2010. UFA has also named industry veteran Michael J. Weltman assistant vice president and sales manager for the southern U.S. region, from Southern California to Florida. Weltman, who joined UFA in January, is a regular TRR contributor.

AAG Achieves Record Loan Volume AAG has achieved a new monthly retail sales record of 754 loans from its California- and Georgia-based call centers, taking the lender’s March funding numbers above and beyond 1,000 loans. The sales growth is followed by the absorption of more than 90 field retail reps from both the AMB and RMUSA reverse mortgage divisions, bringing the company’s staff total to more than 800 across the country, which has allowed AAG to exceed previous monthly loan numbers and lead the industry in year-to-date volume despite recent product changes.

Generation Mortgage Company Mentioned in Mainstream Media Generation Mortgage Company has achieved numerous mentions in toptier mainstream media outlets in recent months, furthering its position as both an industry leader and expert resource for the media. Writers from The New York Times and Marketwatch interviewed GMC CEO

and President Colin Cushman for articles regarding HECMs. Also, a recent article in Kiplinger’s Retirement Report featured content from GMC’s Senior Operational Oversight Specialist Diane Coats. To see the latest media coverage about GMC, visit generationmortgage.com.

360 Mortgage Introduces Reverse Mortgage Processing as a Service Platform, Hires Mike Suits to Lead Division 360 Mortgage Group, a privately owned mortgage banker with a primary focus on third-party origination, has launched a reverse mortgage processing platform for brokers, third-party originators, community banks and credit unions to originate reverse mortgage loans. The company will also be originating HECMs through its retail channel, hiring Mike Suits as division manager to lead a 16-person team. “Our on-demand reverse mortgage processing platform will not only allow third-party originators to offer additional products to remain competitive through any market cycle, but also remain fully compliant, mitigate risk and continue to control the client relationship. With Mike and his new team, we are off to a fast start,” said President and Founder Mark Greco.

Reverse Mortgage Funding Hires Robert Cooper as Director of Strategic Partners, Richard Thorpe as Sales Channel Leader Reverse Mortgage Funding has hired Robert Cooper as its director of strategic partners. Cooper will be responsible for building strategic relationships and partnerships with the builder and Realtor communities. RMF has also hired Richard Thorpe as its sales channel leader focused on distributed retail, one of several key channel strategies for the company this year.

Industry Update

May Edition

Brought to you by:

an update of this past month’s breaking news

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

headlining news 1.HUD Details 60-Day

Foreclosure Extension for Reverse Mortgage NonBorrowing Spouses

HUD has issued a notice stating that lenders may now request up to 60 additional days for non-borrowing spouses who are facing foreclosure due to the death of the borrower. “Under existing regulatory authority for forward and reverse mortgages, the secretary has the discretion to grant additional time for mortgagees to comply with reasonable diligence timeframes,” HUD wrote. “As part of its processes, FHA utilizes this discretion on a case-by-case basis.” The agency provided details on the cases that are eligible for the extension, including cases when the property securing the HECM is the primary residence of a surviving spouse who was married to the borrower at the time the mortgage was endorsed for insurance and was not listed as a borrower on the mortgage; when the HECM has become due and payable solely because of the death of the HECM borrower; and when the property securing the HECM has not been sold to a third party. HUD also provided instructions for filing these extensions, specifying that lenders must submit the request on company letterhead, obtain a servicing manager’s signature on the request and upload the request into the HERMIT portal. //April 22, 2014

2.Ginnie Mae Rules on New

Fixed-Rate Reverse Mortgage Products

Ginnie Mae has announced that it will prohibit lenders from including fixed-rate reverse mortgage loans in HECM-backed

securities, stating that pools issued on or after June 1, 2014, will not be permitted to include these kinds of loans. “The origination of HECM loans in which servicers are committed to advancing future funds at a fixed interest rate gives rise to the risk that such advances will become uneconomic should interest rates rise from the time of origination,” the agency wrote in a memo. Following HUD’s changes to the HECM program, some lenders have introduced a variety of loan options, including ones that give borrowers fixedrate access to reverse mortgage proceeds one year after the initial disbursement. But the risks associated with those offerings are more than Ginnie Mae is willing to take on, the agency said. In addition to prohibiting the pooling of these fixed-rate HECMs, Ginnie Mae said it will monitor issuers with non-agency guaranteed pools containing such loans, as interest rate risk could impact the issuer’s ability to meet obligations for pools backing Ginnie Mae-guaranteed securities. //April 1, 2014

3.Reverse Loans Comprise

Just 1% of All CFPB Mortgage Complaints

Reverse loans accounted for just 1 percent of all mortgage complaints reported by consumers to the CFPB in 2013, according to the bureau’s annual report. Mortgage complaints accounted for nearly 37 percent of total complaints received by the CFPB in 2013, the majority of which were related to consumers who were unable to pay collection and foreclosure, and included instances of loan modification. //April 16, 2014

4.FHA: No Mortgage Insurance Premium Reduction in Sight

mortgage insurance premiums, despite recent pleas from housing industry groups like the National Association of Realtors. FHA Commissioner Carol Galante told attendees at a Mortgage Bankers Association Washington Policy Conference that “now is not the right time to do a wholesale rollback of mortgage insurance premiums.” Galante’s statement emphasized that the agency is still working to achieve its required 2 percent capital ratio for its Mutual Mortgage Insurance Fund, which retained a value of negative $1.3 billion as of December 2013. //April 13, 2013

5.FHFA, CFPB to Expand

Largest-Ever Mortgage Data Collection

The Federal Housing Finance Agency is making a push to expand access to the national mortgage database it has created in conjunction with the CFPB. In 2012, in an unprecedented move, the agencies said they would create the largest-ever mortgage database in the country’s history, including information dating back to 1998, a look into loan level information from origination to servicing, and credit and financial profiles. Now, the FHFA says it is ramping up the database even further in a request for comments on expanded data sets for the loans it is gathering. The categories may include information spanning five main dimensions: mortgage record, real estate transaction, household demographic data on the borrower, physical characteristics of the house and neighborhood, and performance data on the mortgage and all credit lines. The agencies said the database would be used as a tool for both regulators and researchers, granting new access to a wealth of data. //April 21, 2014

FHA said it has no plans to lower its reversereview.com

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The Reverse Review May 2014

Report March 2014

Top Lenders Report

12345 Liberty Home Equity

Endorsement

968

American Advisors Group

One Reverse Mortgage

Urban Financial Group

Endorsement

789

Lender

406

Endorsements

346

S1L / RMS

243

Lender

Endorsements

PROFICIO MORTGAGE VENTURES LLC

155

SUN AMERICAN MORTGAGE

GENERATION MORTGAGE COMPANY

104

INTERGRITY HOME LOAN OF C. FL.

MAVERICK FUNDING CORP

ASPIRE FINANCIAL INC

NET EQUITY FINANCIAL INC

BERKSHIRE BANK

PLAZA HOME MORTGAGE INC

LAND-HOME FINANCIAL SERVICES

FIRSTBANK

GATEWAY BANK MORTGAGE

ADVISORS MORTGAGE GROUP LLC

DOLLAR BANK FSB

ASSOCIATED MORTGAGE BANKERS INC

LENOX FINANCIAL MORTGAGE CORP

NORTH AMERICAN SAVINGS BANK

CITYWIDE HOME LOANS

NATIONWIDE EQUITIES CORPORATION

BANK OF ENGLAND

LIVE WELL FINANCIAL INC

REAL ESTATE MORTGAGE NETWORK INC

M & T BANK

STERLING SAVINGS BANK

GMFS LLC

THE FEDERAL SAVINGS BANK

OPEN MORTGAGE LLC

VAN DYK MORTGAGE CORPORATION

TOP FLITE FINANCIAL INC

ATLANTIC BAY MORTGAGE GROUP LLC

UNITED NORTHERN MORTGAGE BANK

AMERICAN PACIFIC MORTGAGE

SUN WEST MORTGAGE CO INC

EVOLVE BANK & TRUST

TOWNEBANK

FIRST PRIORITY FINANCIAL INC Reverse Market Insight - Logo

CHERRY CREEK MORTGAGE CO INC

EASTERN BANK

MCS MORTGAGE BANKERS INC

MONEY HOUSE INC

FIRSTAR BANK

GATEWAY FUNDING

HIGH TECH LENDING INC

MORTGAGESHOP LLC

SOUTHERN TRUST MORTGAGE LLC

CS FINANCIAL INC

RESIDENTIAL HOME FUNDING CORP

MORTGAGE SERVICES III LLC

CITY FIRST MTG SERVICES

MANN MORTGAGE LLC

FULTON BANK

| TRR

Endorsement

PANTONE COLORS

October 9, 2009

Brought to you by:

REVERSE MARKET INSIGHT

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

3005C

Process Blk C

Report HECM Endorsement Stats Through February 2014 INDUSTRY SUMMARY

Trailing Twelve Month Endorsements

RETAIL UNITS

Retail Endorsement Growth

6,000

-6.27%

Wholesale Endorsement Growth

4,000

12.36%

2,000

2.08%

0 3 4 5 6 7 8 9 10 11 12 1 2 Retail

*Figures above reflect change from prior month

Wholesale *Numbers represent months

Mar

3,318 17.74%

Apr

3,145

-5.21%

UNITS

CHG%

TOTAL UNITS

CHG%

5,812 20.21%

2,494 23.65% 2.97%

5,713

-1.7%

May 2,823 -10.24%

2,498 -2.73%

5,321

-6.86%

2,568

Jun

3,002

6.34%

2,335 -6.53%

5,337

0.3%

Jul

3,232

7.66%

2,511

7.54%

5,743

7.61%

Aug 3,125

-6.44%

-3.31%

2,248 -10.47%

5,373

Sep 2,735 -12.48%

1,782 -20.73%

4,517 -15.93%

2,510

-8.23%

1,676 -5.95%

4,186

Nov

2,734

8.92%

1,951 16.41%

4,685 11.92%

Dec

2,594

-5.12%

1,629 -16.5%

4,223

Jan

2,789

7.52%

2,265 39.04%

5,054 19.68%

Mar

2,614

-6.27%

2,545 12.36%

5,159

Oct

Total Endorsement Growth

CHG%

WHOLESALE

TOT

34,621

26,502

-7.33% -9.86% 2.08%

61,123

{ FIGURE } 70%

Fixed Rate Percentage

60% 50% 40% 30% 20% 2/1/14

1/1/14

12/1/13

11/1/13

9/1/13 8/1/13

10/1/13

8/1/13 7/1/13

7/1/13

6/1/13

5/1/13

4/1/13

2/1/13 12/1/12

3/1/13

1/1/13

10/1/12

9/1/12

8/1/12

7/1/12

6/1/12

Fixed

ARM

$1,200.0 $1000.0 $800.0 $600.0 $400.0 $200.0

1/1/14

12/1/13

11/1/13

10/1/13

9/1/13

6/1/13

5/1/13

4/1/13

3/1/13

2/1/13

1/1/13

10/1/12

9/1/12

8/1/12

7/1/12

6/1/12

5/1/12

4/1/12

3/1/12

$0 2/1/12

in the millions

initial principal limits

hecm endorsement

11/1/12

{ FIGURE }

5/1/12

4/1/12

3/1/12

10% 2/1/12

hecm endorsement trends

reversereview.com

8 TRR

| 11

The Reverse Review May 2014

NRMLA News

On the Docket: Rough Times In March, The New York Times published a column by Jessica Silver-Greenberg focused on heirs of reverse mortgage borrowers. The article was later picked up by the Boston Globe, the Worcester Telegram and Yahoo, and was referred to in personal finance columns in other publications. In response, NRMLA sent the following letter to the editors and, in some cases, ombudsmen, of all publications that ran or referenced the article:

To the Editor: Mortgages May Pass A recent article [“Pitfalls of Reverse 4] published on The to Borrower’s Heirs,” March 26, 201 riddled with false New York Times’ DealBook blog was support them. The assumptions and devoid of facts to for years to improve ked wor reverse mortgage industry has ounding them. We surr the product and tighten federal rules y’s reverse mortgages have made great progress, and toda tool for many aging are an important retirement financing icularly discouraged to Americans. That’s why we are part perpetuates myths and see this incorrect reporting, which misunderstandings.

the federally mandated Third, the article fails to mention that reverse mortgage—which counseling required to qualify for a received—includes review the parents featured in the article g equity aspect of the of the growing balance and declinin the borrower’s estate. mortgage, as well as the impact on nts featured in your article With all of that knowledge, the pare mortgage. decided to proceed with a reverse

entirely false premise. First of all, the story is based on an r loan, is a loan to the A reverse mortgage, like any othe . If a parent passes away borrower, not the borrower’s heirs traditional “forward” and leaves behind a home with a onsible for the terms resp mortgage, the heirs are no less the terms of a reverse of that loan than they would be for a reverse mortgage, mortgage. The difference is that, with are used to sustain the funds advanced by the lender s. There is no right year the borrower in his or her final article suggests. or entitlement to inheritance, as the more and more of a With increasing longevity, it will take and health care expenses, household’s wealth to cover living mer, I recognize that my diminishing inheritances. (As a boo inheritance coming my parents’ longevity might diminish any having my parents this way, but I am instead blessed with late into my own life.) eading rhetoric. It claims Secondly, the article is filled with misl discovering that their heirs are getting a “harsh sting” in e. In fact, they have often parents utilized a reverse mortgag parents while they been spared from having to fund their home, heirs have the the were alive. And if they want to keep . If the home’s value has option of simply paying back the loan ng back 95 percent of declined, they have the option of payi the borrower’s death. the appraised value at the time of 12

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only offered an heir the The article claims that one lender ent of its current value option to buy the home for 95 perc , there is no reason once contacted by the Times. In truth s to accept a payoff at for a lender to violate HUD’s guideline it’s the most cost-effective 95 percent of the value, because for the lender. The Federal and immediate route to resolution cover a shortfall from the Housing Administration (FHA) will contract of insurance. full balance due under the lender’s rse mortgage passes Finally, when the borrower on a reve ion Mortgage or HECM, away, under a Home Equity Convers that the loan is due and the lender gives the estate notice what they want to do, for payable, time to make a decision home, an initial period and, if a decision is made to sell the ns, to do so. If the of six months, plus possible extensio respond, then the loan representatives of the estate fail to trol of the property. con servicer must take action to gain ly difficult—both The handling of an estate is inherent Times’ decision to emotionally and logistically. But the ilies to make a misguided narrowly focus on three grieving fam mortgages undermines and one-sided case against reverse ls who have chosen, the tens of thousands of individua out their lives in their own through a reverse mortgage, to live their financial obligations, homes, with the comfort of meeting while not burdening their families. Peter Bell

rse Mortgage President and CEO, National Reve Lenders Association Washington, D.C.

NRMLA News

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

On the Set with the Extreme Summit

On the Beach—Save the Date The beautiful Loews Hotel in Miami Beach’s sizzling South Beach will be the site of this year’s NRMLA Annual Meeting & Expo. Mark your calendars and join us November 10-12 for the largest, most exciting (and hottest) gathering of reverse mortgage professionals each and every year. (Surfboards permitted.)

In New York new hecm,

HMBS Poised for Growth Almost 300 NRMLA members, non-members and interested investors gathered at the Intercontinental Times Square Hotel in New York in March for an energetic and forwardlooking Eastern Regional Meeting & Finance and Investor Forum titled, “New HECM, New York.” The focus throughout the two-day event—the largest-attended NRMLA regional meeting in recent years—was utilizing recent changes to the HECM program to expand the base of potential borrowers and present them with a better product and more secure future. Many of the sessions—including a look at industry trending that featured HUD’s Karin Hill, AAG’s Reza Jahangiri representing industry executives, Anthony Lopes of Cambridge Credit Counseling representing counselors, and NRMLA President and CEO Peter Bell— highlighted broadening the spectrum of interested consumers as regulations and research sway reverse mortgages toward those assembling a comprehensive retirement plan. The Finance and Investor Forum, an afternoon devoted to developments in the HMBS program, featured a review of the state of the program by John Getchis, senior VP in the Office of Capital Markets at Ginnie Mae; a look at myths and misperceptions of reverse mortgages to better educate attendees from outside the industry; and panels on expectations for the improved HECM following recent changes by representatives of a dozen companies from the investment community. Overall, the forum presented an HMBS program geared up for considerable growth and diversity. reversereview.com

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NEWS FROM NRMLA

On a sunny Friday in March at the foot of rolling hills 30 miles northeast of Los Angeles, 22 people near or over retirement age celebrated a life well led—thus far. The occasion was the shooting of a television commercial for an educational campaign about new reverse mortgages known within the industry as the Extreme Summit. As director Mark Taylor clapped his hands repeatedly to keep his crew of more than 20 moving at a quick clip around a gray cyclorama, actor Paul Ganus made his way—in under a minute—through college, the ‘60s, marriage, the purchase of a house, children and arrived at the threshold of retirement. Having made the choices throughout his journey to live the life he wanted, he now found himself faced with a choice that could secure the rest of his life. The spot is a joyful jaunt through the good things in life, and the atmosphere in Stage 3 at Delfino Studios in Sylmar reflected both the tone of the commercial as well as the upbeat demeanor of Taylor and executive producer Sylvia Versace of Radarworks ad agency in Los Angeles. Together, they led two months of careful, well-thought-through pre-production that enabled shooting a boomer’s life journey in just a day’s time. (I’m intentionally not revealing the overall theme of the spot as well as the tagline, so that you eagerly look forward to seeing it for the first time.) The spot will be the centerpiece of a three-city pilot for the educational campaign scheduled to launch in Philadelphia, Denver and Seattle in the late spring. It will be aired on television in those markets as well as featured on a website, newreversemortgage.org, specially constructed for the effort. Spreading the message will also include print ads and a comprehensive boots-on-the-ground public relations effort in each market administrated by NRMLA and aimed at engaging local press and influencers and, as a result, consumers. We will be rallying NRMLA members in those cities and surrounding areas to help us expand this industry-sponsored effort. Be on the lookout for invitations to join us at upcoming preparation sessions.

The Reverse Review May 2014

“

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Roundup

Here is a look at the latest

news and stats

affecting the market.

t h is mont h

{

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

S enior S tats

M ar k et U pdate

Medicare beneficiaries report dismal savings.

The housing market continues its recovery.

A quarter of all Medicare beneficiaries have less than $11,300 In their 401(k)s, IRAs and other financial accounts. A Kaiser Family Foundation study designed to gauge whether older Americans will be able to absorb rising Medicare premiums, co-pays, deductibles and related costs revealed that half of all Medicare beneficiaries have little income and even less savings:

$23,500

In annual income In savings, Less than

$61,400

Nearly every housing market tracked by RealtyTrac has improved since the height of the foreclosure crisis four years ago. Of 410 counties included in the report, 96 percent have improved since 2010 when taking into account home price appreciation, affordability, REO sales and unemployment rates.

W ord on t h e S treet “According to the U.S. Census Bureau, in 2011, the homeownership rate was more than 70 percent among younger baby boomers and more than 80 percent among older, retiring baby boomers. With the first wave of baby boomers beginning to retire at a rate of more than 10,000 retirees per day, a trend expected to continue for the next 18 years, the demand for reverse mortgages should increase. The recent housing market crash has had a negative impact on the reverse mortgage market, but the current expansionary monetary policy may create new opportunities. In the long term, reverse mortgages

likely will become a significantly more important part of retirement planning.”

-“Retirement Trends, Current Monetary Policy, and the Reverse Mortgage Market,” Journal of Financial Planning

T oday ’s T rend

Seniors today are increasingly tech-savvy.

4¾ of seniors have a cellphone

6 in 10 use the Internet

450% have

broadband at home -Pew Research Center

M one y M atters

Significant number of U.S. adults lack financial awareness, but many say they’re willing to learn. A financial literacy survey of 2,000 adults conducted by Harris Poll in March revealed:

Believe they could benefit from advice and information regarding personal finance management

Gave themselves a grade of C, D or F when it came to personal finance knowledge

Carry credit card debt from month to month

Do not have a budget reversereview.com

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The Reverse Review May 2014

the

THE

REVERSE

hot

review

seat

May 2014

Jean

From her favorite movie to her first job, we get the personal and professional Urban Financial of America

Director, head of marketing and call center sales 16

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facts from Jean Noble, director and head of marketing and call center sales at Urban Financial of America, in this monthâ&#x20AC;&#x2122;s edition of The Hot Seat.

the marketing team for creating the

P E R SO N A L > Ten

commercial—she said her life changed

years from now I hope to begin

dramatically just by watching TV one

drafting a book. It has always been a

morning. There really is a feel-good benefit

dream of mine. The topic is TBD, but I do

to our business.

know that it will be a work of fiction, based on some real-life events. > Something

where I made balloon arrangements. I

nobody knows about me is

actually met my husband there—who knew

that I considered making a radical career

one day we would get married, have three

change and went to school part time for

kids and a dog?

interior design. But after three semesters at the New York School of Interior Design, I

> My

threw in the towel and somehow landed in the mortgage industry instead.

what was your favorite part of the day?” It’s amazing the answers you will get from a

craziest thing I’ve ever done was

If I had three wishes they would be to

> The

best purchase I’ve ever made was

and to retire on the North Fork of Long

our home. It’s a great family house with

Island, buying a home between a vineyard

big trees and enough room to host my six

and the Long Island Sound.

siblings and their families for Sunday get-

> My

togethers.

favorite movie is Love Actually.

I never miss an episode of the Today

years ago, a colleague tried to get me to convert to one of the first tablets, but I just couldn’t embrace the technology for notetaking.

I am a papere-of and-pen t yp gal. (Thanks, C hr is !) Mul lins—I tried

If I could trade places with someone for a day, I would choose Jeff Bezos, the

show, The Voice, Shark Tank, House of

CEO of Amazon; Howard Schultz, the CEO

Lies, House of Cards or The Newsroom. >

I always live life to its fullest. “Go big or go home” is my mantra.

have one last chat with my dad—gosh, I miss him; that my children are always safe;

i can’t go without my notebook. A few

10-, 7- and 5-year-old!

get into the mortgage business!

favorite time of the day is dinner

with my family. I love to ask my kids, “So,

> The

My first job was at a party goods store,

of Starbucks; or Pope Francis. It’s really a

I can’t go without my spiral notebook. A

tie between three visionaries whose to-do

few years ago, a colleague tried to get me

lists I would love to see!

to convert to one of the first tablets, but I

My first job was at a party goods store, where I made balloon arrangements.

just couldn’t embrace the technology for note-taking—I am a paper-and-pen type of

Professional

gal. (Thanks, Chris Mullins—I tried!)

> Ten

> When

I was a kid my dad told me,

“Jeannie, walk faster—it’s a man’s world

and thriving business. I will review the RMI

out there and you need to keep up.” I

market share reports with great pride and

guess this was sound advice in the ’70s for

reminisce, “I remember when we were a

a dad to give his daughter who wanted a

boutique business doing 65,000 units per

career in business. Either way, it stuck with

year.”

me. If he saw me today, he’d probably tell

years from now the reverse

mortgage industry will be a much larger

I am optimistic about the reverse

me to slow down!

mortgage industry because we

I’ll never forget when I was pulled into

constantly think outside the box and try

a loan closing in 2004 shortly after one of

innovative strategies to brace the industry

the first reverse mortgage TV commercials

for the future. The Extreme Summit is the

aired. The borrower wanted to thank

perfect example.

I never miss an episode of The Today Show, The Voice, Shark Tank, House of Lies, House of Cards or The Newsroom.

reversereview.com

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The Reverse Review May 2014

MANAGE

originating The Importance of Customer Relationship Management Ch ris t o p h e r R us s ow

ver the past decade, technology has become a critical part of the mortgage business and has worked its way into lead generation, the sales cycle and the entirety of the operations process. While it is still possible to self-source a lead, take a paper application at the kitchen table and process the loan yourself through â&#x20AC;&#x153;traditionalâ&#x20AC;? means, companies that want to grow their business and leverage economies of sale have increasingly turned to technology to help them do this. I could write an entire book on the ways in which customer relationship management (CRM) systems can help you enhance your business, and a quick search on Amazon will show you that indeed, many people already have. Since we donâ&#x20AC;&#x2122;t have the space to fit all that information here, in this article I will discuss the importance of using a CRM to manage, track and report on your clients. In addition, I will highlight three very important functions of a CRM that are crucial to any salesperson: contacting your clients, continued follow-up and reporting on your business. Finally, I will discuss some of the CRM systems currently available and which ones might best suit your needs.

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When it comes to contacting your client, there are two critical components: contact time and your contact percentage. CRM systems have the ability to integrate into your phone system, allowing you to call a lead as soon as you receive it. This is critical as researchers from Harvard University and MIT have shown that your chance of closing a sale diminishes substantially the longer you wait to get a hold of the potential client. In addition to a speedy contact time, any good salesperson will tell you that more at bats means more chances to hit a home run, and to achieve this, you want to make sure that you are able to contact as many of your potential clients as possible. The average salesperson might be able to contact 20 to 25 percent of their leads (purchased online) through regular methods of contact. However, using a CRM system with an integrated phone line, that same salesperson could increase their contact ratio to 35 or even 40 percent, depending on the quality of their leads and the quality of their CRM system. The contact ratio is a perfect example of a scenario where you have the opportunity to

double your business by integrating technology into your process. A second valuable function of a CRM system is its ability to help you manage and increase your follow-up. As smart as we are and as skilled as we may be, no human has the ability to manage a pipeline of 100 or more leads effectively without the assistance of technology. CRM systems allow you to keep track of when and how often you touch each lead, set reminders and appointments to contact leads in the future, and follow the status of a lead as it moves through your sales and operations processes. In addition, the CRM system can help you set up drip email marketing campaigns, generate lists of clients to reach out to based on certain events (e.g., a list of clients who all turn 62 in the same month), and can even remind you to reach out to your clients on the anniversary of their loan closing to ask for referrals. The third point I want to touch on is the issue of reporting. A single loan officer might be able to manage their data reasonably well, but once you

originating According to russow “When it comes to contacting your client, there are two critical components: contact time and your contact percentage. CRM systems have the ability to integrate into your phone system, allowing you to call a lead as soon as you receive it. This is critical as researchers from Harvard University and MIT have shown that your chance of closing a sale diminishes substantially the longer you wait to get a hold of the potential client.”

The last CRM system I want to discuss is Leadmailbox (LM). LM is a basic CRM system at a really low price point that will give you a simple set of tools you can use to manage your leads. This system is no-frills and doesn’t give you the option to customize any of its features. However, for an individual who just wants to manage a small pipeline of leads, this could be a good option.

( A leader in CRM technology ( Customizable system can be tailored to meet specific needs ( Can be pricey salesforce.com

Overall, an easy way to decide what system will best suit your needs is by looking at the size of your business and evaluating your goals. If you’re an individual trying to get a better handle on your lead pool, LM (or a system like this) is probably the right choice. If you’re running a business with a sales team of between 5 to 100 loan officers, a system like IS or VF is probably where you want to focus your attention. Between the two, IS is going to be the better buy based on the feature set, customization and reporting capabilities. Finally, if you’re running a large company with 100-plus salespeople (and you’re ready to write some large checks), SF is probably the right fit for your business. Whatever your situation, investing in the right CRM system is going to help you increase your business, maximize the return on your marketing spend, and gain valuable insights into your individual or team’s business. x

( Decent price ( Has some customization capabilities ( Newer, smaller company insellarate.com

legal

( Decent price ( Fewer customizable options than those listed above ( Can be difficult to set up velocify.com

( B asic system with simple tools ( Not customizable ( Low cost leadmailbox.com reversereview.com

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spotlight

Two other systems worth mentioning are Insellarate (IS) and Velocify (VF). These

servicing

The leader in CRM technology is usually considered to be Salesforce (SF). SF is an all-encompassing CRM system that can be customized and tailored to almost any business in any industry. The main downfall with SF is always going to be the price, which isn’t just the cost for using the system (per person/per month), but also the additional cost in setting up and customizing the system to do all the things you need it to. Since it’s so hard to customize on your own, the costs to setting up SF (and maintaining it over time) can really add up.

Check Out These Popular CRM Systems

tech

Now that you know why you need to use a CRM system, let’s look at some of the software available to you and discuss what you should consider when picking the right one for your business. There are literally dozens of systems on the market that can offer you a full range of features with varying options and prices. I am going to touch on four systems that have been used successfully in our industry and mention some pros and cons of each.

systems are very comparable, although they have some key differences. Both offer a range of features and options and cost roughly the same amount of money per month. However, VF is much harder to set up and doesn’t offer you nearly as many customization options as IS. IS also has much better reporting tools and a more intuitive user interface. On the flip side, IS is a newer and smaller company than VF, so their team has less experience working with clients in the reverse mortgage space.

originating

have a team of loan officers, you need the help of a CRM system to manage them effectively. A good system will give users the option to make customized reports that can show you how may leads your LOs are calling and how often, how long it takes them to reach new leads, how long each client takes to move through the various steps of the process, etc. Armed with this information, a skilled team leader can identify bottlenecks in the sales process and put in place the appropriate measures to increase the team’s efficiencies. Reports can also be used as a valuable way to identify underperforming salespeople, maximize your marketing spend and gain additional insights into your business.

going to the source

The Reverse Review May 2014

originating

Want to see more stories like this? Visit reversereview.com.

I Was Your Worst Nightmare Coll e e n M o o r e

was your worst nightmare. A decade ago, I was that person who told anyone who asked that, in my opinion, they should never get a reverse mortgage. I had built a very large forward mortgage business over the previous decade, based entirely on referrals and educating my clients. But even with my professional financial background, I harbored uneducated and completely unfounded opinions about reverse mortgages. Thankfully, one of my attorney partners asked for my help in securing a $3 million reverse mortgage for her client. When I was less than positive about her suggestion, she challenged my opinion and I was ashamed to admit that I really had no information whatsoever! I will forever thank that estate attorney. Because she forced me to actually research HECMs, I fell in love with the benefits that a well-done reverse mortgage can provide a client.

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I learned that this product made so much sense as a financial and estate planning tool as well as a tool for more needs-based clients. I dug and I researched and I discovered that FHA was offering an amazing opportunity for our senior community. It was so refreshing to have an industry do everything possible to make a loan work as opposed to the evertightening forward world, where it sometimes seemed like they really never wanted to make the loans. As I originated HECM loans, and each time I helped a needs-based client, I was both enriched and sobered at the responsibility and the privilege of being a reverse mortgage specialist. I lost that $3 million reverse mortgage because the client had a fatal accident before we could consummate the transaction, but to this day, 10 years later, her kids contact me annually to check in and thank me for what I tried to do for their mom. Even though she

had substantial equity, this senior was struggling to make her mortgage payments and did not have extra money to enjoy her life. She was extremely house poor, and this reverse loan would have provided a huge relief for her as well as $1.5 million in estate tax relief for her heirs. Our industry affords us the opportunity to truly make a difference, so donâ&#x20AC;&#x2122;t miss those opportunities; I know I never will again! Each reverse mortgage transaction is different, and each one can provide a solution to a particular problem or fill a specific need. While the needs-based client is always heartwarming, the financial planning and estate planning aspect of this business is incredibly funâ&#x20AC;&#x201D;I call it the art of the deal! When I really became an expert at not only how a reverse mortgage works, but also why it works for countless planning opportunities, I developed

originating

according to colleen

legal spotlight

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servicing

If we view these changes in a “cup is half-full” manner, we will see the opportunities all around us; I know I do and I am excited to see how this next year plays out in our industry. Don’t let yourself fall into the trap of being an old dog who doesn’t think they can learn new tricks—you can, and when you do, you will be grateful that you really embraced the changes and became a wonderful success in our ever-changing but always rewarding industry. Go get ’em! x

tech

We have all felt the crunch of the recent changes, but I truly believe that for those in this industry who really want to become a “student” of this wonderful product, the opportunities are actually expanding. Real estate agents want to learn about the HECM for Purchase program, and there are more boomers than ever who are

concerned about their retirement. They may only have a few hundred thousand saved and they cannot even think about how they might be able to retire before they are six feet under! Our economic woes have created need and we all know that is one of the greatest motivators of all—not the severe need, like we were used to preprogram change, but the real, growing concern in a large majority of the baby boomer generation. originating

“We have all felt the crunch of the recent changes, but I truly believe that for those in this industry who really want to become a ‘student’ of this wonderful product, the opportunities are actually expanding. Real estate agents want to learn about the HECM for Purchase program, and there are more boomers than ever who are concerned about their retirement.”

a new outlook on how many places we can find business. I once found Purchase clients in tenants! I had one couple recently that had rented for the last 28 years and saved up $200,000 to buy their first home. They actually came to me to see how much of a forward mortgage they could qualify for, and they were very disappointed. She was the only one working, and I could barely get them a $100,000 mortgage. In San Diego, $300,000 won’t buy very much. This was just before we had the principal limit reductions, so with the money they had to put down, they were able to purchase a lovely new $475,000 house. They were thrilled and so was I!

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May 2014

Technology that simplifies the mortgage process.

Effective business solutions combine deep expertise with sophisticated software. Our cloud-based mortgage origination technologies redefine the way lending is done. Look to Accenture Mortgage Cadence to increase efficiencies, reduce costs and improve the borrower experience. Thatâ&#x20AC;&#x2122;s high performance, delivered.

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originating

Career, Calling and Comedy in a Season of Change L au ri e D e n k e r M a c Na ug ht on

There’s a sub-point here as well. As a loan officer, I often become aware of things in seniors’ lives others have no occasion to know—things as diverse as the need for a special-needs trust for a handicapped adult child, or the appropriateness of an in-home

Right now, our industry is beset by change. We continue to battle bad press. New challenges seem to surface on a regular basis, and there is the promise of more change to come. But you know what? For most of us, we roll with it because this job is not just a job; it’s that most enviable of intersections between career and calling—seasoned, not infrequently, with profound comedy. With confidence we can hold our heads high and march on because need, demographics, longevity and personal gratification are on our side. x

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spotlight

As is often noted both in this magazine and in the general press, the question has changed from, “How do we help children survive childhood?” to “How do we help seniors survive longevity with some measure of grace and dignity intact?” Of course, because I’m a reverse mortgage originator, I am going to mention the role the HECM

health aid recommendation. More times than I could possibly count, I have referred borrowers to elder law attorneys, members of the clergy, health care providers, handymen, the area agency on aging, the local commissioner of the revenue, the fallprevention coalition and even, upon rare occasions, the local food bank. I have organized home rebuilds and collected hundreds of thousands of dollars of donated construction items for massive home makeovers. I possess a box overflowing with letters, some written in big, spidery script, thanking me for help. And most of my reverse colleagues have similar stories to tell.

legal

The increase in lifespan has only accelerated over recent decades. Unless some apocalyptic event blasts mankind back into a second dark age, we can assume longevity will be a permanent feature of the human race.

Here’s my real point: We reverse mortgage originators are a funny lot. In dealing with the aged we encounter things forward originators cannot fathom. No forward originator reaches over the rails of a hospital bed to steady documents for a stroke victim, or gingerly steps over an oxygen hose. No forward lender has a client “disappear” for 12 weeks because she broke a hip, or sorts through 50 years’ worth of yellowing documents to find a tattered Social Security card. Or squeezes around a bedside commode, chases escaped cats, coaches a borrower on how to send an email, or kisses a wrinkled cheek. And yet, as odd, funny, poignant, tough or heart-wrenching as some situations are, those of us who have stuck with the industry for years roll with the awkward because the reward outweighs all else. We love our work (most of the time), because we love the gratification of truly helping find solutions to one of the most vexing issues of old age.

servicing

Said more simply, lots more people started surviving into old age. Recently, I poked around on Sweden’s demographical database, which records the tiniest of demographic details going back to the 1400s. Among the many fascinating data points, one thing was no surprise: People who lived past 50 were statistical outliers. Today, we’re traumatized when a friend dies at 50.

But were that my only point, this article would not be worth reading—or writing— as the topic has been addressed extensively.

tech

Starting early in the 20th century, this changed as deaths from infectious disease began to drop off, and within a few decades, death itself went from being the province primarily of the young to being almost exclusively the province of the aged.

is going to play in enhancing many seniors’ odds of financial survival.

originating

wo horrible diseases lurk in the recesses of my gene pool; both kill babies before their third birthday. Historically, however, it was infectious diseases, not inherited conditions, that overwhelmingly represented childhood deaths before the age of 3.

The Reverse Review May 2014

ADVANCE

tech Moving Technology Forward in the Reverse Market Aar on Ste i n -Sap i r

in different areas of the loan process to develop a unique data exchange between our systems, resulting in a more efficient environment for originators.

few years ago, MIS made a strategic decision to expand our title, settlement and appraisal management business further into the reverse mortgage industry. Since our inception, we have worked with companies that originated and closed both forward and reverse loans, although our focus fell mainly on the forward side. While performing external assessments of process workflow, we came to realize that the solutions available to reverse mortgage providers were not as robust as those offered to their forward brethren, and started looking at initiatives to advance technology offerings in the market.

In addition to working directly with originators, we immediately began looking for technology partners and industry leaders with whom we could package solutions capable of increasing efficiencies across the board. Our integration with ReverseVision eliminates the need for users to log into multiple systems to place, track and view title and appraisal orders. Using the LOS as a single point of contact for these services benefits originators throughout the entire process, saving valuable time since all subsequent information for the order is funneled through that portal. In order to achieve this, MIS worked hand-inhand with ReverseVision, combining our expertise

Technology can also help at the end of the loan cycle by using smart devices to streamline the document signing and closing process. We developed a standalone solution for the QC and delivery of critical closing documents, where signing agents can send photo-quality, critical docs though a secure connection for review. Errors can be rectified within hours rather than days as signing agents can be notified quickly, potentially eliminating the need to reschedule closings, delay the funding process and upset the borrowers.

Mortgage professionals need to review their production processes from end to end, identifying tasks that g may be completed using n i go the technology to rce sou solutions. “Mortgage professionals need to review their production processes from end to In today’s end, identifying tasks that may be completed using technology solutions. In today’s regulatory regulatory environment, every step in the loan process is under scrutiny, effectively environment, raising the cost of doing business on each file.” 24

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every step in the loan process is under scrutiny, effectively raising the cost of doing business on each file. More time and energy is being spent working on non-core tasks. But by relying on technology solutions to manage those tasks, professionals will be able to focus on the items that are key to growing and expanding their business. The benefits of technology initiatives that improve workflow will become more apparent due to their scalable nature. The reverse community is able to grow with these advances, create customizable solutions and take advantage of the efficiencies that come with them. With solutions catered specifically to the reverse market, we may better adjust to regulatory and market changes, before they slow down or even grind loan processing to a halt. In the creation of a dynamic, businessfriendly and compliant lending environment, we must not lose sight of the ultimate goal: helping our borrowers meet their financial needs. x

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EVOLVE

The reverse mortgage industry is extremely fast-paced and dynamic. It regularly moves from current structures through the influence of emerging trends and regulatory changes that drive the market at an unpredictably intense pace. This article will address the demand for integration of information technology (IT) into servicing and how IT is helping shape the future and effectiveness of servicing by enhancing its speed and quality. Translating “IT speak” into language that everyone can understand is a formidable task. The language of IT can appear as complex as our processes. Don’t stop reading now! I’m confident that if you stay the course, you’ll realize you’re a lot more IT conversant than you think.

Integrated services, platform independence, flexibility and agile servicing functions must be in place to meet new challenges from regulatory, client and business environments. At the same time, maximum levels of security must be maintained. This is challenging work that requires the highest level of trust and core competencies of the people and systems that IT utilizes. To meet every challenge, and enable servicing-related organizations to thrive and grow in this dynamic market, IT must be agile and responsive. Change is one of the only constants in the reverse mortgage industry. The old paradigm of a highly structured IT environment has been replaced with one that has the same level of adaptability as the business it supports. x

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often hear people bemoan the pace of technological change. Anyone who grew up proudly carrying one of the first pocket calculators and who now has a smartphone or computer with a calculator application instead knows how exhausting keeping pace and adapting to technology can be.

The system should be modular for customer service functionality, loss-mitigation functions, reporting and loan maintenance functions. Financial activity should be managed through a series of edits and validation checks with management access level controls. As I mentioned previously, GNMA processing and reporting is incredibly complex, yet it is an essential aspect of any software platform. The ability to differentiate whole loan activities, with multiple GNMA pool activities, must be fully integrated to ensure seamless accounting, financial reporting and regulatory reporting.

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Our servicing columns have typically focused on borrower care: the important, people-focused side of reverse mortgage servicing. We’re shifting attention to take a behind-the-scenes look at the critical value of technology and its role in reverse mortgage servicing. Both are foundational elements of world-class servicing. I’m pleased to introduce Brent Steiner, chief technology officer at Celink. –Ryan LaRose

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Bre n t S t e in e r

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Integrated Information Technology: A Foundation for Quality Servicing

Modern servicing systems must incorporate the ability to shift to new and enhanced platforms to support the growing and dynamic servicing business that is integral to the reverse mortgage industry. A reverse mortgage servicing platform must provide investor accounting and reporting, borrower accounting, regulatory reporting, workflow management, historical archives and GNMA HMBS reporting (which is arguably the most complex aspect of the Celink servicing platform).

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The servicing platform is the control center of every servicing operation. Beyond the platform, there is a need for highspeed fiber-optic Internet connectivity lines to handle the inbound and outbound phone traffic. Dedicated and secure connections to remote hot-site disaster recovery locations ensure business continuity and secure data backup. Data security and the technology environment must utilize and be protected by an Intrusion Prevention System that is managed, monitored and administered 24/7 by securitycertified professionals. Additionally, firewalls, access control policies and other protections must ensure industry best practices for security and control of confidential borrower information. Secure email encryption services should scan emails and attachments for word and pattern matching, and automatically encrypt the email for delivery.

The Reverse Review May 2014

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LEARN

legal Consumer Complaints: When Life Gives You Lemons, Make Lemonade Hay d n J . R ic h a r ds , J r .

onsumer complaints: Every financial business has them. Companies try at all costs to ensure that customers are pleased with their business experience and overall customer service so that they can minimize the amount and severity of those complaints. However, executive management of every company should consider what consumer complaints mean and how companies can take advantage of the signals that consumer complaints provide to increase the overall understanding of the company’s business practices and to identify areas in need of improvement.

Here are some things that should be considered:

With the advent of the CFPB and its Consumer Complaint Database, proper management of an entity’s consumer complaint intake is essential. The Consumer Complaint Database provides the CFPB with insight into industry-wide practices and failures, and the CFPB expects that companies will promptly respond to any complaints received. In early April 2014, the bureau issued its annual report on consumer complaints, and its discussion concerning consumer mortgage complaints provides interesting insight concerning certain segments of the industry. For example, of the 59,000 complaints received relating to mortgages, only 1 percent related to reverse mortgage loans. That figure is, more or less, similar to the percentage that the reverse mortgage marketplace comprises within the overall mortgage space. So, reverse mortgages do not appear to cause an overly significant number of consumer complaints. Rather, the figures appear to be in line with what might be expected. In addition, the CFPB noted that the types of complaints made by consumers often involved problems with making payments or a general inability to “Utilize the receipt make payments. So, it can generally of complaints, the be said that the reverse mortgage correction of those industry should not face undue complaints, and the scrutiny by the CFPB as a result of monitoring of complaints consumer complaints, even though for trends as a teaching the CFPB may have other reasoning tool for your mortgage for placing heightened scrutiny on loan originators and the industry as a whole. other operations

1 When complaints need to be escalated, who handles them?

1 Does the company have a process in place that acts as a framework for actions relating to consumer complaints?

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1 Is the company’s legal department involved with the consumer complaint response process?

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1 Does the legal department ensure that any correspondence delivered to a consumer has been reviewed or, at minimum, that form correspondence has been developed and approved for use?

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Having considered the process that your company utilizes in managing its consumer complaint function, executive leadership also should periodically review consumer complaint data for trends. For example, could a review of consumer complaints reveal a global compliance issue that requires correction? In the alternative, could monitoring complaints reveal a business practice that is not consistent with a company’s established procedures? Regularly monitoring complaints for trends will allow a company to understand how it can improve its practices in its operations and its compliance processes.

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Regardless of the fact that reverse mortgages do not appear to be an overly significant source of consumer complaints, companies and their executive management should take the opportunity to re-evaluate their consumer complaint intake and management process.

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personnel.”

1 Does the company have a person with substantial responsibility accepting consumer complaints and making certain that prompt responses are made to those complaints?

Periodic monitoring of consumer complaints should not simply result in reports to management. Instead, utilize the receipt of complaints, the correction of those complaints, and the monitoring of complaints for trends as a teaching tool for your mortgage loan originators and other operations personnel. To the extent that executive management educates its workforce at regular intervals in a clear manner, the quality of a company’s originations can only improve, and the likelihood of heightened CFPB or other regulatory scrutiny will lessen. In short, placing appropriate focus on a company’s consumer complaint process and, where necessary, revising and updating those processes to make them current, can better enable a company to navigate operations and compliance challenges. x reversereview.com

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The Reverse Review May 2014

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Companies across the HECM space offer their partners continued education.

Telling You Where to Go and How to Get There by J ud Lyman

In his month’stedition

Rever se m train ortgage origi ers help nato infor rs stay med.

he reverse mortgage industry is full of a variety of lenders, brokers (both big and small) and third-party originators. When you consider HUD, FHA, the CFPB and state regulators, as well as interested organizations that can influence change, the number of moving parts within the industry can be mind-boggling. In addition, there are the subtle and not-so-subtle product differences between forward and reverse mortgages. Given all of these components, how do you stay up-to-date on everything that impacts your profession and your ability to earn a living? The answer: your industry trainers. Many reverse mortgage lenders have dedicated training teams to help originators stay on top of an evolving product and market landscape. These teams focus on helping their originating partners grow their businesses by expanding their knowledge and expertise of the product, educating both seasoned reverse professionals and those new 28

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to the industry. As a HECM trainer, I typically find myself directing people “where to go” (talking about how the product works and what changes are about to be implemented) and “how to get there” (how to work within the system to be successful). When I speak to originators about their work, a common thread in every conversation is how we can help them grow their business. This is when my job becomes truly enjoyable. While each of the trainers I know follows a similar path when it comes to teaching LOs about the product and the market, lessons designed to help LOs grow their business are open to interpretation, imagination and creativity. Each trainer has his or her own lesson plan when it comes to maximizing profitability, and this is where I believe LOs get the biggest bang for their buck. Furthermore, most, if not all, reverse mortgage training is free, supported by lenders who

recognize the value in supporting the continuing education of their staff. Trainers also know that your time is valuable, so many design classes around relevant topics that can be beneficial right away. At Urban Financial of America, Training Division VP Lorraine Geraci and her team offer classes on working with older adults, working with other professionals, sales skills and effective communication of client concerns. Her classes, which also cover the history and intent of the HECM program, are offered in both webinar and classroom formats. “We pride ourselves in offering catered training programs based on the needs of our clients to better assist the needs of older adults nationwide,” Geraci says. “The training division at UFA is proud to partner with other trainers in the industry who are dedicated to the enhancement and expansion of knowledge for all reverse mortgage professionals.”

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an advisor has created. Once an individual completes the class and passes an exam, they receive a copy of my presentation and a sample script guiding them through an initial conversation with a financial planner. To help spread the benefits of reverse mortgages to larger

-Jud Lyman, Liberty Home Equity Solutions

audiences, both AAG and Liberty offer financial planners the ability to earn CFP continuing education credits. The classes show financial planners how the product can complement their current retirement plans and further secure a client’s financial future.

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At Liberty Home Equity Solutions, I focus on referral networks. I spent part of my career in the financial industry, so I have a solid understanding of financial planners and how they work. I utilize my knowledge and background to tell my partners where to go and how to get there when it comes to connecting with the financial planning community. My information on financial advisors is delivered in two stages. First, I go over the basics of a financial planner—who they are, how they work with their clients and how to differentiate yourself from other vendors vying for their time. Second, I focus on how to present reverse mortgages to financial planners. I review product basics and then discuss four case studies designed to show how the product can complement the retirement plan

When it comes to helping everyone understand upcoming industry changes, the trainer’s challenge is to explain “how to get there” in a way each person will understand. There is no one right way to teach someone, which means we have to create multiple ways to reach our audience. With all the recent changes to the HECM program, trainers across the industry have had their plates full as they figure out how to educate their colleagues about new program mandates. From the elimination of the HECM Standard fixed product to the change in the PLF table, the one constant in the reverse space seems to be change. As a trainer, 8

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“When it comes to helping everyone understand upcoming industry changes, the trainer’s challenge is to explain ‘how to get there’ in a way each person will understand... With all the recent changes to the HECM program, trainers across the industry have had their plates full as they figure out how to educate their colleagues about new program mandates… As a trainer, I not only need to comprehend these changes myself, but I need to know how to best package and deliver the information so that my colleagues can understand the information and how it will impact their origination methods.”

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Tabatha Addison, the director of performance, training and development at AAG, teaches classes on purchasing a home with a reverse mortgage, explaining key terms, features and benefits as she outlines the basic guidelines of the HECM for Purchase product. At AAG University, originators can learn about a wide range of topics, including courses on professional development and a class called Trading Ages, which offers sensitivity training in partnership with SCAN health care to help originators better understand common issues facing many of their reverse mortgage clients. “Our goal in the wholesale division is not just to be the No. 1 reverse mortgage company in the wholesale space, but to also be No. 1 with the training and learning

resources we offer our partners,” Addison says. “We appreciate that the more successful our partners are, the more successful we will be. By providing trainings that will strengthen the knowledge of our partners/brokers in all areas of their business, we create a win-win for everyone.”

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If you are looking for new suggestions on how to communicate the strategic use of home equity to a broader audience, Dan Hultquist at Generation Mortgage Company holds weekly product demonstration classes of the lender’s nu62 software. Generation promotes nu62 as “a new look at funding the future,” asserting that the product will demonstrate the expected performance of a client’s HECM over time and display projections in simple graphs. “Our nu62 software is unlike anything else in the industry marketplace, so it’s essential that our partners understand the details of its functionality,” Hultquist says. “Once participants have completed nu62 training, they should feel comfortable explaining how a HECM could affect a senior’s long-term financial planning goals.”

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The Reverse Review May 2014

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“With so many changes taking place within the industry, it’s a trainer’s job to stay ahead of the curve and ensure that partners and sales staff are up-to-date regarding the latest announcements.”

Regardless of the number of years you have been in the reverse mortgage industry or the number of loans you have closed, the industry’s constant evolution requires that each and every one of us participates in continued education. Your industry trainers understand what it takes to learn new content and apply it to everyday professional life. We are knowledgeable and dedicated to helping you succeed. Just ask us; we are more than happy to tell you where to go and how to get there. x

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get educated(

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Several other lenders also offered both live and on-demand training resources to help their staff learn the details of the program revisions

A key ingredient to the longevity of the reverse mortgage industry is the addition of new originators. Whether those originators are hired by existing brokers or lenders, or come on board with new companies entering the market, a trainer’s job is to help bring new LOs up to speed as quickly as possible. This situation may require more showing than telling them where to go, but the goal is still the same. Most lenders offer introductory courses designed for this purpose. At AAG, Addison’s wholesale group teaches the World of Reverse Mortgages, a course designed to provide a solid foundation about what a reverse mortgage is, who can qualify, etc. Urban’s Geraci runs a wholesale academy offering instructor-led

At Liberty, we offer a self-directed option to learn the business. Our Training Academy provides a list of more than 20 two- to six-minute on-demand videos with topics including why to get into reverse mortgages, how to get started, product basics and how to market to your existing database. The courses are organized in a way that makes it easy to follow the suggested path but still allow the learner to choose a course they want if a particular topic is of great interest. The videos are available online for convenience. For those individuals who prefer a more interactive model, our lender support team and account managers lead live, webinar-style classes.

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trainer’s role can be. Generation’s Hultquist leaped into action as soon as ML 2013-27 landed on his desk. By the beginning of October he had a live class prepared and an online video that his partners could view at their convenience. Online stats reveal that his video was viewed more than 2,000 times by the time the changes were implemented. “With so many changes taking place within the industry, it’s a trainer’s job to stay ahead of the curve and ensure that partners and sales staff are up-to-date regarding the latest announcements,” Hultquist says.

courses in a classroom setting, allowing those new to the industry to learn the basics from an industry and product expert with the benefit of asking questions face to face.

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released in that mortgagee letter. Offering partners multiple -Dan Hultquist, Generation Mortgage Company training options to learn I not only need to comprehend these the material is a key component changes myself, but I need to know to effective training, enabling the how to best package and deliver the partner to select what is most information so that my colleagues convenient for them and what best can understand the information and suits their learning needs. Live, how it will impact their origination webinar-style events are interactive methods. and offer the ability to ask questions, while the on-demand videos give The program updates released individuals the ability to learn the September 3 of last year are a information when it’s convenient. perfect example of how essential the

Each of the lenders mentioned in this article can be contacted directly about their available training.

Urban Financial of America

Generation Mortgage Company

AAG

Liberty Home Equity Solutions

ufawholesale.com training@ufareverse.com

gmcuniversity.com training@ generationmortgage.com

AAG University aagwholesale.com

Liberty Wholesale Academy 866.877.1351 reversereview.com

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The Reverse Review May 2014

what you should know about

reverse mortgage counseling How nonprofit agencies overcome limited funding, consumer confusion and frequent program changes to educate seniors about HECM loans

By Jessica Guerin 32 | TRR

Everyone involved in the reverse mortgage loan process—from brokers to underwriters to servicers—is likely to agree that counseling is essential for those considering the loan. When borrowers are able to discuss the details of leveraging their home equity with an independent third party, they are better able to assess whether the loan is the right fit for them. Counseling ensures that borrowers who move forward with a HECM are fully educated about their rights and responsibilities, protecting not only the borrower, but also the lender. When the HECM program was established in the late ’80s, lawmakers recognized that counseling would be crucial, especially considering that, as seniors, HECM borrowers are part of a protected class who may need extra assistance. From the onset, lawmakers included provisions to ensure that prospective borrowers were properly educated, requiring them to speak with a certified housing counselor prior to origination. HUD developed a training program in collaboration with AARP and other nonprofits to teach counselors how to educate seniors about this type of mortgage. That program has since evolved into a national network of FHA-approved HECM counselors who are thoroughly trained on HUD protocol to ensure that borrowers receive quality, unbiased information. In the past several years, HUD has perfected its protocol, instituting mandatory exams every three years to ensure that counselors are current on new product offerings, establishing a roster of approved agencies and introducing a financial assessment test to extract pertinent information from borrowers. But despite these improvements, the counseling sector continues to face

challenges. Some concerns, like the need to obtain sufficient federal funding, are ongoing and may not be solved in the immediate future. Other issues, like consumer misconceptions and confusion over program revisions, continue to evolve and will hopefully improve as public awareness increases. Still, many counselors agree that if originators had a better understanding of the work they do, borrowers could approach the counseling process with more knowledge and efficiency.

Education and Protocol During a HECM counseling session, counselors are required to cover three main topics: the basics of a reverse mortgage, the costs and benefits of the loan, and potential alternatives that should be considered. Counselors must also reference HUD’s Financial Interview Tool (FIT), a list of 25 questions regarding income, debt and health, designed to initiate productive discussion about how a HECM could help the senior meet their goals. Because of geographic and financial limitations, as well as the basic fact that there are few FHA-approved counselors, HUD allows these sessions to be conducted over the phone. Still, some consumer groups argue that face-to-face sessions would be more beneficial for seniors, although only North Carolina, Vermont and (for some cases) Massachusetts require that HECM counseling be conducted in person. According to Anthony Lopes, housing director at Cambridge Credit Counseling, it typically takes about an hour to 90 minutes to complete the session. Lopes says his counselors will follow up with the client within 45 days of the session and then, if an outcome hasn’t been determined, upon the counseling certificate’s expiration six months later. For counselors, the mission is simply to educate. Amy Ford, director of home equity initiatives at the Washington, D.C.-based National Council on Aging (NCOA), says the agency’s goal is to supply quality information so that prospective borrowers can make an informed decision. “The goals of counseling are education, education, education—providing older adults with all the information necessary to allow them to make the best choice for them,” Ford says, adding that NCOA, which has a network of counselors across the country and a centralized call center, considers either outcome a success. “If someone decides to get the loan and it’s a good fit for them and they’re able to meet all their goals with the reverse mortgage, that’s a great outcome. And if someone decides to hold off or take some more time to think about it or decide it’s not for them, that’s also a good outcome. We 8 reversereview.com

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know the loan isn’t for everyone, so having access to the information and the tools to make the best choice possible is really our goal.” Jeremy Shadrick, president of the HECMfocused counseling agency Quick Cert, echoes Ford’s comments. “Our goal is to educate, inform and make sure [prospective borrowers] have all of the facts before making decisions and going forward,” he says. “We want them to make sure they understand what they’re doing and know what they’re giving up. Equity is a valuable commodity to them and their families and we want them to understand that.” One way counselors help seniors assess whether or not a HECM is the best way to meet their financial needs is by directing them to BenefitsCheckUp, a free online service provided by NCOA that claims to have helped about 3.8 million people find more than $14.1 billion worth of benefits. (Visit benefitscheckup. org to check it out.) The site prompts users for key information to determine if they are eligible for more than 2,000 federal, state, local, public and private benefits. HUD requires all counselors to direct clients to the site, and to walk through the checkup with those who fall below 200 percent of the federal poverty limit or who don’t have Internet access. According to Ford, BenefitsCheckUp can provide some seniors with another solution. “Sometimes we find that someone needs just a small amount of money to close a gap or they have a very specific need—they find their utility bills are through the roof and they can access benefits for a weatherization or energy assistance program in their area. It might allow them to think about the reverse mortgage in a different way,” she says. “Sometimes there are veteran benefits, sometimes there’s property tax relief, sometimes there’s Medicare savings programs—you really just never know. It’s such a robust screening tool that anytime we can further that conversation I think that’s helpful for the client.”

“The goals of counseling are education, education, education—providing older adults with all the information necessary to allow them to make the best choice for them... We know the loan isn’t for everyone, so having access to the information and the tools to make the best choice possible is really our goal.” -Amy Ford, National Council on Aging 34

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BenefitsCheckUp Counselors direct clients to this free online service that helps seniors access benefits from more than 2,000 sources.

Misconceptions and Reluctance Many in the reverse mortgage space are hopeful that recent program changes and industry initiatives will help turn the tide of public opinion, and some counselors say they have noticed a difference among their clientele. Shadrick says his staff of 18 counselors has been talking about a noticeable change as of late. “There’s a difference in attitude from several years ago to today,” he says. “Before, most people had a negative perception coming into the counseling session about what the reverse was, and now people are hearing positive things in their communities. It does seem like it’s become a more accepted product.” But long-held misconceptions about reverse mortgages still linger, and many counselors say they often have to dispel myths about the product. Lopes says the most common misconception is the idea that the bank automatically assumes ownership of the home. “A lot of people think the bank keeps the home,” he says. “They think they’ll lose the house. That’s the biggest one.”

Others note that some clients can be reluctant to participate in the counseling sessions, and that effectively extracting important information in these cases can be a challenge. In 2009, a GOA investigation into counselor compliance and efficiency revealed concerns about borrower attitudes. “Counselors interviewed for this study reported that many prospective borrowers did not take the sessions seriously. According to counselors, these prospective borrowers viewed counseling not as an opportunity to learn about the product and make a better decision, but as a hurdle between them and their goal,” the report stated. “Counselors stressed that prospective borrowers needed to allow themselves the time to learn about the product and the options without rushing toward a desired conclusion.” Lopes, though, says that most of Cambridge’s clients do seem to be receptive. He says loan officers can help by stressing the value of counseling to potential borrowers. “If they discount the importance of counseling, they make the client less engaged and make our jobs more difficult,” he says. “They need to explain to them this is part of the process, this is what needs to be done.”

Funding and Fees The housing counseling sector in general has long been plagued by funding concerns, relying largely on federal grants to keep doors open. In its lengthy reverse mortgage report to Congress published in June 2012, the CFPB acknowledged that funding was a major hurdle for agencies struggling to provide sufficient HECM counseling. “Maintaining an adequate cadre of well-trained, impartial and accessible counselors often comes down to funding,” the report stated. “The unpredictability of counselor funding remains a concern.” News of the latest round of funding was released last June when HUD announced a $40 million grant to housing counseling agencies nationwide. HUD said the grant would be distributed among 334 FHA-approved agencies that provide all types of housing counseling with the goal to help more than 1.6 million households. But the grant money only goes so far. HUD acknowledges that agencies will need to supplement the money with other sources of income, which essentially means they will have to charge clients when their grants have been tapped—a problematic practice considering the fact that financial hardship is often the catalyst that brings many to counseling in the first place. HUD has mandated that agencies issue fees at a level deemed “reasonable and customary,” and it also prohibits them from turning away clients if they are unable to pay. When it comes to HECMs, HUD does allow for the fee to be paid using the loan’s proceeds. This, however, is also problematic, as it could detract from the counselor’s impartiality because the agency is not paid for sessions that do not lead to loans. The CFPB acknowledged the flawed situation in its report, admitting that this practice could create “misaligned incentives.”

“Grant funding is always going to be an issue,” Lopes says, adding that Cambridge charges about $125 for a session, a fee that fluctuates depending on the level of federal funding coming in. But Lopes says charging the client when funding runs out isn’t a great solution. “A lot of times they can’t afford to pay the fee upfront, and industry-wide only about 50 percent of counselees end up closing on a loan. So that means one out of every two sessions that we do, we are not going to get paid for if we roll the fee into closing. That’s a constant issue.”

don’t get paid for. That way, we don’t have to ask for payment from clients or ask for funding upfront.”

Lopes says supporting the 16 counselors on staff at Cambridge Credit Counseling—seven of whom are dedicated full time to HECM counseling—is a tremendous challenge without sufficient funding. “When we don’t have grant funding, it makes it more difficult for us to pay our salaries and keep our lights on, and makes it harder for us to grow and be able to handle more clients.”

With all of the changes that have taken place in the reverse mortgage sector in the last year or so, Shadrick says concerns about counseling funding have fallen by the wayside. “I don’t think anybody’s really dealing with it, but it needs to be in the forefront because the counseling needs to be here and we’ve got to find a way to fund it. People need to know that counseling is in trouble.”

The CFPB has suggested establishing alternative sources to supplement government grants, namely the creation of a lender-funded pool. “Lenders could contribute funds to a central pool, which would then be disbursed to counseling agencies according to need or client volume. The pool could be administered either by HUD or by a neutral third party,” it stated. “A mechanism of this sort has the potential to provide a more stable funding source for counseling while mitigating any conflict of interest.” In order for this to happen, though, Congress would need to issue an amendment to HERA, which prohibits lenders from directly or indirectly funding counseling.

Progress and Change

Shadrick says some lenders and loan officers don’t acknowledge that even though they are nonprofit, counseling agencies still have bills to pay. “It’s hard to make them see this is a service we’re providing and that counselors need to be paid because it’s a business,” he says. “They need to be aware of the lack of funding and what that means for counseling in the future if it’s not corrected and addressed.”

While the funding issue is an ongoing problem that may not be resolved anytime soon, other aspects of HECM counseling have improved in the past several years. According to Lopes, HUD’s protocol updates in 2009 enhanced the counseling process by ensuring that clients are getting the same quality education regardless of where they go. “The industry as a whole offers a much more consistent delivery of information now from agency to agency,” he says. 8

Shadrick says a lender-funded pool is a solid solution if the government is unable to properly subsidize counseling programs. “I think at some point the lenders as a whole have to put some kind of a pool together, whether or not it’s managed by HUD, to compensate for the sessions that reversereview.com

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reverse mortgage counseling

Ford agrees that counseling practices have progressed over the years. “I think that counseling ends up evolving organically when the market changes,” she says. “The conversation sometimes changes and counselors have to learn and grow and adapt and be sure they’re meeting the clients’ needs. And with the introduction of the exam and the protocol and the training and the retesting and the retraining—all that HUD has implemented has definitely enhanced counseling since 2009.” Recently, NCOA and other agencies have noted a slight jump in the number of seniors seeking counseling. Ford attributes the increase to recent program changes. “I think most agencies see a volume uptick when changes are on the horizon, and changes of this level of significance are definitely no exception,” she says. “You hear a buzz in news articles around the country on a daily basis saying reverse mortgages are becoming more restrictive, and I think that creates a level or urgency in the public. So I think we all typically see the volume do a little upturn around the time that changes are pending.” Lopes says he has noticed a greater number of clients approaching the product as a financial planning tool to support retirement. “I got on the phones [in March] and I saw a lot more people who were looking at it as a financial planning tool than I had in the past,” he says. “It does seem like more people are looking at it for longterm planning. Is it 60 percent? No, but it went from 0 percent to 10 or 20, so it does seem to have changed a little bit, [shifting] more to the financial planner segment.” Still, some hurdles remain. Ford says the program’s constant evolution presents challenges for counselors. With so many rule revisions, it’s tough for agencies with limited resources to stay on top of all the changes. But Ford says NCOA does its best to 36

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educate its staff. “We have a rapidly changing marketplace. We monitor changes very closely and we have monthly conference calls and trainings and Listservs and PowerPoints— everything we can do to keep our counselors as up-to-date and prepared as possible for all the questions that can come to the table.” Lopes says the recent wave of fixedrate variant products has presented some challenges. “With these new products, there’s very little training coming from anywhere. Some of them are getting squashed, but it looks like there’s going to be a new round of them coming out,” he says. “They could easily lead to confusion, especially if you have a counselor who looks at the protocol like it’s the Bible.” Financial Assessment is also likely to lead to some confusion. Although the industry anticipated the release of FA guidelines in early 2014, HUD says it’s still refining its protocol and sources say it may not be finalized until the end of the year. Many agree that FA will impact counseling to some degree. “There will be more material that we’ll have to cover, so we’ll likely see longer counseling sessions, and there might be groups that will have to raise what they’re charging. There’s going to be fewer loans that close, because when things get to underwriting, issues are going to come up [that didn’t before FA],” Lopes says. “Also, lenders already have their own underwriting policies over and above the protocol that they need to follow, so there’s a good chance that we’re going to see more of a variance in underwriting from lender to lender. It might cause confusion.” Shadrick agrees that FA will impact counseling, but says overall it will be a positive change for the industry “It’s going to take longer to explain everything and make sure clients understand everything. But I think for the longevity of the product, it’s the right thing to do. We’re just going to have to re-educate ourselves and

learn how to deal with it, because it’s coming. We just have to figure it out and make it work.”

Facilitation and Efficiency The reverse mortgage program may continue to evolve and hurdles related to this progress will likely affect counseling down the road. For now, though, many counselors say originators can help facilitate the counseling process by learning more about what it entails. First, counselors say originators need to remember that they are obligated to review variations in pricing with clients. “We’re required to cover what fees vary and what fees don’t— origination, margin, interest rate,” Lopes says. “Loan officers don’t realize the huge disparity we see every day in pricing.” Ford says a counselor’s job is to inform clients of their options, but they will never comment on any specific lender. “We never discuss any particular lender—ever. But we do discuss that it’s a marketplace. There’s competition and you want to make sure you’re getting the best deal that’s the best fit for you.” Counselors also say that originators need to take the time to work through important details of the loan with the client before sending them to counseling. “Make sure you’re spending time with your client, make sure they understand what the reverse mortgage is,” Shadrick advises. “Honestly, if the loan officer does their job, nothing that we go over should be a surprise.” Lopes says omitting key facts prior to counseling can deter a client. “If the loan officer leaves something out, it’s going to come out during counseling,” he says. “If it’s going to be an issue, it’s not the counselor’s job to sway the person—we can’t. We have to educate them and provide them with the information to make their own

“If the loan officer leaves something out, it’s going to come out during counseling,” he says. “If it’s going to be an issue, it’s not the counselor’s job to sway the person—we can’t. We have to educate them and provide them with the information to make their own decision. So you may have borrowers who don’t take out a loan because they’re confused [by this omission] and it sours them on the whole process.” -Anthony Lopes, Cambridge Credit Counseling

decision. So you may have borrowers who don’t take out a loan because they’re confused [by this omission] and it sours them on the whole process.”

be counseled. It seems like the LO isn’t asking if there is anyone else on deed. This leads to confusion and the client is sometimes put off by the process.”

Lopes also stresses the importance of properly preparing clients for counseling, explaining what the process entails and how long it will take so they know what to expect. “They need to prep them on what the process is going to be. We have clients who say, ‘I don’t know why I’m calling. I was just told I need to be counseled and to call someone on this list.’ We’ll say it’s going to take a minimum of an hour on the phone and they’ll say, ‘Oh, wow, an hour! I didn’t know that,’” he says. “So make sure they know they are going to spend an hour or more on the phone with a housing counselor, and that they are going to cover all this information that’s here to help them make sure they understand everything.”

Ford suggests originators review with clients what documents they’ll need to have ready for the session, a practice that may become even more important when FA goes into effect. An essential aspect of counseling is an assessment of the senior’s budget, and a number of documents need to be gathered and reviewed to get an accurate financial picture. “Anytime the client can come to the table with a good understanding of their income and expenses, it really enhances that conversation,” Ford says.

Lopes says originators should also make sure they have informed the client that anyone else listed on the deed will also need to undergo counseling. According to one counselor at Cambridge, this can be an issue. “We have clients calling us who have a spouse or someone else on the deed who needs to be counseled, but the client is unaware that the other party needs to

Most importantly, originators should recognize the value of counseling. Those who undergo counseling and choose to move forward with a HECM can do so knowing they have properly explored their options and made a sound decision. As Ford says, “Ultimately, the more informed decision the client makes, the better the loan will perform over time. The more information and knowledge the client can glean about the product, obligations, opportunities, alternatives, etc., the better. It sets the client up to thrive.” x

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The Reverse Review May 2014

last word The More Things Change, the More They Stay the Same

REFLECT

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Jef fre y S . Tay l or

have been involved in the FHAâ&#x20AC;&#x2122;s HECM program since 1989 and have watched it grow from a pilot with just 2,500 loans. From the beginning, there was little technology, few counselors and a lack of participating lenders. Over time, the HECM program became permanent and more lenders entered the space. Over the past 25 years, the program has faced what at times seemed to be insurmountable challenges, from variable lending limits by county to lower principal limits with ongoing program changes. Regardless of what challenges it has faced, the industry has always persevered and it will continue to do so. The reverse mortgage industry relies on three primary legs of the well-known threelegged stool:

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qualified and eligible borrowers, qualified and participating lenders, and qualified and willing investors. This continues to exist today. With recent program changes and the upcoming Financial Assessment, the industry is preparing for the next stage of home equity lending for reverse borrowers. Borrower and counselor education continue to be the primary drivers of an expanding group of eligible and qualified borrowers for the new HECM program. Today, the industry is enjoying increased technology with loan origination, underwriting, secondary marketing and loan servicing enhancements. Down the road, the reverse mortgage industry will need more lenders as the HECM program becomes a nationally

recognized home equity mortgage loan resource for eligible borrowers. This will be possible due to increased education and awareness of the program basics, borrower protections and the use of the HECM program as a retirement resource. Of course, the more things change, the more they stay the same. The program has been altered, but at the end of day, the basic rules still apply. Lenders and counselors will, as always, need to connect with qualified borrowers interested in exploring the benefits of the program and teach them how a HECM can help them achieve their goals. x

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The Reverse Review May 2014

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