EW THE
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Navigating new regulatory demands
TH
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INSIDE THIS ISSUE | Advertising Reverse Mortgages in Today’s World
E
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REVERSE review O CT OBE R 2015
HOW TODAY’S RETIREES ARE REDEFINING THE GOLDEN YEARS
MARTIN LENOIR SITS DOWN IN OUR HOT SEAT PG. 16
TRID’S IMPACT ON THE HECM MARKET PG. 19
AFFLUENT SENIORS AND THE H4P PG. 21
NEW TECHNOLOGY ENHANCES PROFITABILTY PG. 24
The Reverse Review October 2015
Confused by the twists and turns of the reverse mortgage industry?
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2 | TRR
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*Since December 2011. Based on trailing 12 months’ endorsement volume. Source: Reverse Market Insight. For business and professional use only. Not for consumer distribution.
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UFA’s HomeSafe reverse mortgage is a proprietary product of Urban Financial of America, LLC, and is not affiliated with the Home Equity Conversion Mortgage (HECM) program. Currently available in AZ, CA, CO, CT, FL, HI, IL, NY and TX. NMLS #2285 (www.nmlsconsumeraccess.org); Corporate Office: 8909 South Yale Avenue, Tulsa, OK 74137. Not all products and options are available in all states. Terms subject to change without notice. ©2015 Urban Financial of America, LLC. All Rights Reserved. CALIFORNIA BUSINESS NAME: URBAN FINANCIAL GROUP OF AMERICA, LLC. NEBRASKA BUSINESS NAME: REVERSEreversereview IT! LLC UFA 204 [Exp 7/2016] . com 8 TRR | 3
The Reverse Review October 2015
From the editor RE
V IE
E REVE W TH RS
RE
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EW THE
REVI
A NOTE FROM JESSICA GUERIN
Meet the Team
EV
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SE
VERSE R EV E RE
Navigating new regulatory demands
TH
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INSIDE THIS ISSUE | Advertising Reverse Mortgages in Today’s World
E
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THE
REVERSE review OCTOBER 2015
In this month’s TRR, we take a look at today’s version of “the golden years.” In this post-recession world, the definition of retirement is visibly evolving for thousands baby boomers who are now approaching their mid-60s. What was once typically morphing into a more active, productive
MARTIN LENOIR SITS DOWN IN OUR HOT SEAT PG. 16
TRID’S IMPACT ON THE HECM MARKET PG. 19
AFFLUENT SENIORS AND THE H4P PG. 21
NEW TECHNOLOGY ENHANCES PROFITABILTY PG. 24
Reza Jahangiri PUBLISHER
Erik Richard EDITOR-IN-CHIEF
a time of quiet leisure appears to be
HOW TODAY’S RETIREES ARE REDEFINING THE GOLDEN YEARS
SENIOR PUBLISHER
Jessica Guerin
phase for many Americans.
CREATIVE DIRECTOR
While finances have dictated this change
COPY EDITOR
Traci Knight
for some, others are choosing a livelier path for other reasons—a desire to remain connected or a wish to find professional
Kersten Deck MARKETING DIRECTOR
Alycia Greer
fulfillment. OCTOBER 2015
COVER
A new generation is changing the definition of retirement.
Whatever the reason, the fact remains that Americans are living longer than ever before. Seniors approaching their retirement years are doing so with energy and confidence, eager to explore the opportunities available to them as they navigate this new stage of life.
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
JESSICA GUERIN Connect with me about how you can participate. Reach me at jessica@reversereview.com
© 2015 Reverse Publishing, LLC All rights reserved. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, Reverse Review Publishing, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 3800 West Chapman Ave., Orange, CA 92868
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4 | TRR
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table of contents
TRR 10.15
11 | Industry News
22 | Originating
REVERSE MORTGAGE DAILY
Tips to help you effectively get your message across
12 | Stats
MARK VICKERS
Headlining stories of the past month
August’s top lenders and HECM endorsement stats through July REVERSE MARKET INSIGHT
21
Four Secrets to Communicating With Clarity
24 | Tech
Technology & Efficiency How efficiency impacts profitability for HECM lenders
17 | Roundup
A collection of recent facts and surveys affecting the reverse market
JEFFREY M. BIRDSELL
26 | Spotlight
A Changing Market: Advertising Reverse Mortgages in Today’s World
16 | Hot Seat Martin Lenoir
Chief marketing officer at AAG
19 | Originating
TRID’s Impact on the HECM Space How one market’s hurdle has become another’s open door DENNIS LOXTON
21 | Originating
Investing in Retirement, Not Home Purchases
How to market the product while navigating new regulatory demands JIM MILANO 34
34 | Last Word
26
After All Is Said and Done The product’s evolution has been challenging, but the future is bright. LANCE CANADA
Why reverse mortgages make more sense for affluent borrowers
24
TANE CABE
FEATURE
30 | Feature The New Retirement Picture How today’s retirees are redefining the golden years JESSICA GUERIN
“Americans are living longer than ever before, and with the aging of the boomer generation, today’s retirees are a force strong in numbers. They are confident, tech-savvy and energetic. They are a determined generation, redefining what it means to age in this country and find fulfillment in their golden years.
IN EVERY ISSUE...
09 | MOVERS AND SHAKERS The latest developments in companies across the reverse space
YOU CAN DO IT!
send us your company news. REACH OUT TO US ABOUT WRITING FOR TRR. INFO@REVERSEREVIEW.COM
reversereview . com
8 TRR | 5
The Reverse Review October 2015
contributors JOHN K. LUNDE
MARTIN LENOIR
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
Martin Lenoir joined AAG in 2014 as chief marketing officer. He is a marketing veteran who has driven direct-to-consumer marketing campaigns for blue chip organizations like DISH Network, New York Life, Kaiser Permanente and Capital One. Lenoir has nearly 15 years of experience managing highperforming teams and maximizing marketing performance to grow sales. He earned a B.S. at the University of Pennsylvania and an MBA from the University of Texas at Austin.
12 | Stats g
John K. Lunde
Martin Lenoir
16 | Hot Seat g
Dennis Loxton TANE CABE
Tane Cabe
Mark Vickers
21 | Investing in Retirement, Not Home Purchases g
Tane Cabe is manager of Churchill Mortgage’s Gig Harbor, Washington, branch. Churchill Mortgage provides conventional, FHA, VA and USDA residential mortgages across 33 states. Cabe is also the author of Double Your Retirement Dollars. churchillmortgage.com @churchillmtg facebook.com/churchillmortgage
Jeffrey M. Birdsell JIM MILANO
Jim Milano
Jessica Guerin
Lance Canada 6 | TRR
26 | Advertising Reverse Mortgages in Today’s World g
Jim Milano is a partner with the law firm of Weiner Brodsky Kider. Milano’s practice focuses on regulatory compliance for the financial services industry, particularly with respect to reverse mortgage issues. Milano is nationally recognized as one of the leading lawyers in the area of reverse mortgage law, and is a frequent speaker on topics of interest to industry members at various trade association conferences and webinars.
DENNIS LOXTON
19 | TRID’s Impact on the HECM Space g
Dennis Loxton is a regional manager at 1st Financial Reverse Mortgages. A certified financial planner and certified reverse mortgage professional, he has more than 20 years of experience in financial services. Loxton launched a suite of proprietary reverse mortgage products at VirtualBank/Lydian Private Bank and founded a CE school that teaches attorneys, financial advisors and Realtors about HECMs. He publishes an e-newsletter for 26,000 subscribers in the financial services and mortgage industries.
MARK VICKERS
JEFFREY M. BIRDSELL
Mark Vickers is a certified professional coach, a Gitomer Certified Advisor and certified world-class speaking coach. Vickers is a consultant focused on helping organizations achieve excellence through improved communication and speaking skills. He is known for creating and delivering specialized and innovative programs to help his clients. For more information about Vicker’s workshops, consulting and certification programs, visit speakingisselling. com.
Jeffrey M. Birdsell is the VP of professional services at ReverseVision. A certified mortgage banker and NRMLA Board Member, Birdsell has been in the mortgage industry for 22 years. Prior to joining ReverseVision, he consulted with a top 10 lender and other reverse mortgage software companies, and held CIO and product development roles at Financial Freedom.
22 | Communicating With Clarity g
24 | Technology & Efficiency g
JESSICA GUERIN
LANCE CANADA
Jessica Guerin is the editor-inchief of The Reverse Review. She has worked on the editorial teams of Chicago Home & Garden, Chicago magazine and Time Out Chicago. Prior to joining the magazine, Guerin managed the marketing efforts for a commodity brokerage firm in the Chicago Board of Trade. She has a master’s degree in magazine publishing from Northwestern University and a B.S. in journalism from Boston University.
Lance Canada, CRMP, is an 18-year veteran of the mortgage industry and has spent the past 10 years educating seniors about reverse mortgages. He is currently an originator and branch manager with Homestead Funding Corp. Canada comes from an entrepreneurial background, having owned and operated several businesses for more than 20 years.
30 | The New Retirement Picture g
34 | After All Is Said and Done g
Readers Respond The last few issues of TRR inspired lots of conversation on the Web. Here’s what our readers had to say:
respond
READERS
Do you have something to say?
HUD Expands the Rights of Non-Borrowing Spouses By Jessica Guerin “This was an EXCELLENT article, and I will share it with the several non-borrowing-spouse clients I have. This information will make them very happy and give them ‘peace of mind.’” -Owen Coyle
JULY 2015 A Resource for Seniors By Susan A. Pomfret “The borrower care department of every reverse mortgage servicing operation has a true partner in borrower and product success in empathic HECM professionals like Susan Pomfret. Thank you, Susan!” -Mary Katherine Quasarano, Celink
www.reversereview.com 8
“I receive your publication each month and also go online to search for articles to provide updates to our banking partners. The area we service is somewhat conservative and the worth of the HECM is yet to be proved to many. That applies to our partners as well. With the articles relating to current program changes and updated overviews on the ways the program can help seniors, I find your publication a great tool.” -Dan Willis Comment on our stories online for a chance to see your thoughts in print. Be a part of the conversation about how we can better serve our seniors!
REVERSE REVIEW READERS HELP THOUSANDS OF SENIORS FIND FINANCIAL SECURITY. LET’S TALK ABOUT HOW WE CAN HELP THOUSANDS MORE.
“I get a lot of great information and ideas from your publication. I have been a forward loan originator for 10 years and in the last few years have originated reverse mortgages. My biggest hurdle is educating Realtors, financial planners and CPAs on the benefits a reverse mortgage will have on their clients. ‘The Greatest Asset’ was an excellent article. I look forward to more articles that will help me enlighten my clients and referral partners, showing that a reverse mortgage/Purchase may be the perfect addition to their retirement plan.” -Saul Ginsburg
SOMETHING ON YOUR MIND? Need to get something off your chest? Hate something we do? Love something we do? Letters to the editor may be emailed to JESSICA@ REVERSEREVIEW.COM.
Get involved. info@reversereview.com YOUR MONTHLY PUBLICATION FOR REVERSE MORTGAGE NEWS
“Mike, I love the comparison to preventive medicine and your grandpa’s story. GREAT ARTICLE!” -Patricia Whitlock
Loan of Last Resort: RIP By Mike Gruley, July 2015
reversereview . com
8 TRR | 7
The Reverse Review October 2015
8 | TRR
movers & shakers READ ABOUT THE LATEST DEVELOPMENTS IN COMPANIES ACROSS THE REVERSE SPACE.
HAVE A COMPANY UPDATE YOU WOULD LIKE TO SEE PUBLISHED?
AAG Introduces Jumbo Reverse Mortgage Loan AAG has launched the AAG Advantage, a jumbo reverse mortgage loan that allows qualified borrowers to obtain a loan on properties valued at up to $6 million. This is different from FHA’s Home Equity Conversion Mortgage loan, which has a $625,500 loan limit. The AAG Advantage is available to owners of property types eligible for a HECM loan and to owners of Ginnie Mae-approved condominiums. This means borrowers whose properties previously may not have qualified for a reverse mortgage now have access to this viable retirement planning tool. The AAG Advantage will initially be made available to senior homeowners in select states, and will roll out to other U.S. states in subsequent phases. “With our new AAG Advantage, we’re proud to help extend reverse mortgages to a greater number of seniors and provide borrowers with higher-value homes a solution to access more funds,” says AAG CEO Reza Jahangiri. “The launch of AAG’s jumbo reverse mortgage loan further reinforces our commitment to helping American seniors age in place and gain greater financial freedom.”
email it to jessica@reversereview.com
ReverseVision Adds Matthew Shaffer as Business Development Manager ReverseVision has hired experienced mortgage professional and technology sales strategist Matthew Shaffer as business development manager. Shaffer joins ReverseVision from Ariba, Inc., the leading provider of collaborative business e-commerce solutions, where his role included connecting Fortune 500 businesses with technologyenabled revenue growth strategies. Previously, he served as operations manager with The Mortgage Company and vice president of operations with Colony Mortgage, both Connecticutbased mortgage lenders. Shaffer’s goal is to educate banks and communitybased financial institutions about how recent HECM policy changes minimize the reputational risk associated with reverse mortgage lending. “We are impressed with Matt’s strategies for bridging the concerns and aspirations of mortgage lenders with viable solutions by beginning with education specifically with banks and credit unions,” says ReverseVision VP of Sales and Marketing Wendy Peel. “Large parts of the eligible marketplace, comprising homeowners age 62 and older who either own outright or have a high percentage of equity in their home, can benefit from a reverse mortgage, and FA gives lenders guidelines that will help identify the best candidates. It is also the responsibility of lending institutions to ensure they are offering their customers every possible option in order to keep them as a valued customer under their umbrella of products and services.”
Accumatch Hires Kim Morris as Director of Tax Operations Property tax servicing firm Accumatch has hired Kim Morris to join its team as director of tax operations. As such, Morris will lead Accumatch’s continued initiative to grow within its nationwide footprint of property tax services. Morris brings a 25-year history of property tax and mortgage servicing knowledge to Accumatch, with specific experience in property tax servicing, mortgage servicing, reverse mortgages and tax certificates. Morris served previously as director of operations at Fannie Mae and senior operations manager at First American Commercial Real Estate Tax Service. “Accumatch has grown north of 100 percent annually for each of the past three years,” says CEO Aaron Anderson. “It was important to add someone like Kim to the team who could hit the ground running and not only allow us to continue on our growth plan, but most importantly, to add value to our clients.”
We want your company news! Be a part of our Movers & Shakers column, where you can read about the latest company initiatives, programs, hires, acquisitions and more. Send us your company’s press releases or email us news of your latest venture, and we’ll consider printing it in the next issue. Send your news to jessica@reversereview.com. reversereview . com
8 TRR | 9
The Reverse Review October 2015
The value of A STRONG ALLY:
INNOVATION.
Industry leaders aren’t always the biggest...they’re the fastest. Reverse mortgages require highly specialized servicing and adaptability to rapidly changing regulations. Celink reduces our clients servicing costs and risk through continued innovation.
For more information, please contact Katie Kirkham, Director of Client Relations at (844) 228-2101. 10 | TRR
celink.com | (844) 228-2101
industry news
October Update AN UPDATE OF THIS PAST MONTH’S BREAKING NEWS
The industry’s headlining stories at your fingertips UP-TO-THE-MINUTE NEWS? Visit reversemortgagedaily.com
NEWS DIRECT TO YOU: WANT EVEN MORE
HEADLINING NEWS HUD REVISES FHA 1. LENDER CERTIFICATION RULES HUD has proposed a revision to the certification requirements for FHAapproved lenders. Under the new proposal, lenders that remit loans to FHA would have to certify that their firm and its principals were not “debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from covered transactions” by any federal department or agency in order to be eligible for FHA insurance. Lenders will also have to certify that they have not, within a threeyear period preceding this certification, been barred from any federal agency or convicted of fraud or any criminal offense, including embezzlement, theft, forgery, bribery or falsifying documents. The proposed certification is open for a 60-day commenting period starting September 1, and the changes are expected to take effect in early 2016.
// September 1, 2015
2. FHA RESOLVES TECH HANG-UPS WITH REVERSE MORTGAGE FINANCIAL ASSESSMENT FHA has identified an edit in the FHA Connection system that will allow reverse mortgage lenders to complete the Financial Assessment Update screen on HECMs with negative residual income. In establishing the HECM Financial Assessment system requirements for FHA Connection, the FHA provided functionality for lenders to enter the type of compensating
factors considered in the underwriting decision. These system requirements, however, did not allow mortgagees to enter a negative number in the “Residual Income” data field, or allow them to enter income available from compensating factors that would supplement the mortgagor’s residual income. To allow the entry of a negative residual income amount in the FHA Connection for HECMs, the agency established temporary procedures. FHA said it will implement changes to the HECM Calculator software in the near future to address these limited situations.
// August 1, 2015
3. REVERSE MORTGAGE INDUSTRY HONORS JOHN LUNDE WITH SERVICE AWARD At the 15th annual Reverse Mortgage Day conference in Austin, Texas, the industry honored Reverse Market Insight Founder and President John Lunde with the Jim Mahoney Distinguished Service Award. “This award is given to an individual who has given more to the industry than they receive,” says Scott Norman, national field retail sales vice president for Urban Financial of America and organizer of the annual Texas event. “In his many years of distinguished service to the reverse mortgage industry, John has exemplified this.”
mortgage sector, according to comments recently made by company executives. Following a $56.5 million goodwill impairment charge related to its reverse mortgage business for the second quarter ended June 30, 2015—which contributed to the company’s net loss of $38.1 million during the quarter—and a recent settlement with the Department of Justice regarding RMS, Walter remains bullish on its reverse mortgage platform. The optimism is due to a “comprehensive review” Walter took on its reverse mortgage business, which includes the company making changes to this business segment and “reforecasting” long-term cash flows, said Gary Tillett, EVP and CFO at Walter, during the Barclays Global Financial Services Conference. “We feel good about the business,” he says. “We feel good about the platform and the space, and we’re looking forward to improving the company’s results in the future.” Looking ahead, Walter plans to continue building out its distributed retail and consumer-direct channels in the reverse mortgage space, as well as make further investments in training and technology.
// September 17, 2015
// September 13, 2015
4. WALTER INVESTMENT BULLISH ON REVERSE MORTGAGE MARKET OPPORTUNITY Walter Investment Management Corp. (NYSE: WAC) remains optimistic about its future growth in the reverse reversereview . com
8 TRR | 11
The Reverse Review October 2015
stats August 2015
Top Lenders Report
12345 American Advisors Group
Liberty Home Equity
Endorsements
Endorsements
1,220
570
UFA
RMS/S1L
Endorsements
Endorsements
495
474
One Reverse Mortgage
Endorsements
393
Lender Endorsements REVERSE MORTGAGE FUNDING LLC
236
Lender Endorsements WHOLESALE CAPITAL CORP
18
LIVE WELL FINANCIAL INC
208
LAND-HOME FINANCIAL SERVICES
17
PROFICIO MORTGAGE VENTURES LLC
131
UNIVERSAL LENDING CORPORATION
16
HIGH TECH LENDING INC
100
FIRSTAR BANK
15
HOME POINT FINANCIAL CORPORATION
88
SUCCESS MORTGAGE PARTNERS INC
14
SYNERGY ONE LENDING INC
87
NORTH AMERICAN SAVINGS BANK
14
FIRSTBANK
77
MORTGAGE BROKERS SERVICES
12
OPEN MORTGAGE LLC
62
EVOLVE BANK & TRUST
11
PLAZA HOME MORTGAGE INC
61
FIRST PRIORITY FINANCIAL INC
11
ADVISORS MORTGAGE GROUP LLC
58
MANN MORTGAGE LLC
11
CHERRY CREEK MORTGAGE CO INC
58
BANNER BANK 10
MCM HOLDINGS INC
55
RESIDENTIAL HOME FUNDING CORP
10
THE FEDERAL SAVINGS BANK
51
SENIOR MORTGAGE BANKERS INC
10
SUN WEST MORTGAGE CO INC
46
US MORTGAGE CORPORATION
10
NET EQUITY FINANCIAL INC
46
UNITED MORTGAGE CORP
10
AMERICAN PACIFIC MORTGAGE
45
MONEY HOUSE INC
9
RESOLUTE BANK
42
BANK OF ENGLAND
9
THE MONEY STORE
42
UNITED NORTHERN MORTGAGE BANKERS LTD 42 GMFS LLC
38
SUN AMERICAN MORTGAGE CO
27
M & T BANK
26
Brought to you by:
TOWNEBANK 23 BROKER SOLUTIONS INC
20
AMERICAN NATIONWIDE MORTGAGE COMPANY 19 BANC OF CALIFORNIA
19
FAIRWAY INDEPENDENT MORTGAGE CORP
19
PEOPLES BANK
19
NATIONWIDE EQUITIES CORPORATION
18
UNITED SOUTHWEST MORTGAGE CORP
18
12 | TRR
%%%%% LOOKING FOR MORE STATISTICS? Go to rmsinsight.net for all of the industry’s latest stats and rankings.
stats HECM Endorsement Stats Through July 2015 INDUSTRY SUMMARY
TRAILING TWELVE MONTH ENDORSEMENTS
Retail Endorsement Growth
6,000
-9.32%
4,000
Wholesale Endorsement Growth
0.3%
2,000
Total Endorsement Growth
-5.1%
0 Wholesale *Numbers Represent Months
01
TOTAL
UNITS CHG%
UNITS CHG%
UNITS CHG%
8
1,944 -16.17%
1,306 -26.3%
3,250 -20.56%
9
2,248 15.64%
1,514 15.93%
3,762 15.75%
10
2,773 23.35%
2,078 37.25%
4,851 28.95%
11
2,500
-9.84%
1,907 -8.23%
4,407
12
2,867 14.68%
1
2,874
2
2,557 -11.03%
3
2,772
8.41%
4
2,597
-6.31%
1,895
5
2,477
0.24%
-9.15%
4,940 12.09%
8.7%
2,073
2,062 -0.53%
4,936
-0.08%
4.7%
4,716
-4.46%
1,862 -13.76%
4,634
-1.74%
1.77%
4,492
-3.06%
-4.62%
1,793 -5.38%
4,270
-4.94%
6
2,971 19.94%
2,324 29.62%
5,295
24.0%
7
2,694
0.3%
5,025
-5.1%
* Figures Above Reflect Change from Prior Month
TOT
-9.32%
2,159
2,331
31,274
23,304
54,578
60% 50%
FIXED RATE PERCENTAGE
40% 30% 20%
7/1/15
6/1/15
5/1/15
4/1/15
3/1/15
11/1/14 11/1/14
2/1/15
10/1/14 10/1/14
1/1/15
9/1/14 9/1/14
12/1/14
8/1/14 8/1/14
6/1/14
5/1/14
4/1/14
3/1/14
1/1/14
12/1/13
7/1/14
02
7/1/14
ARM
{ FIGURE }
11/1/13
10/1/13
9/1/13
10% 7/1/13
HECM ENDORSEMENT TRENDS
WHOLESALE
70%
{ FIGURE }
8/1/13
Retail
RETAIL
2/1/14
8 9 10 11 12 1 2 3 4 5 6 7
MO.
FIXED
$1,200.0 $1,000.0
$600.0 $400.0 $200.0
7/1/15
6/1/15
5/1/15
4/1/15
3/1/15
2/1/15
1/1/15
12/1/14
6/1/14
5/1/14
4/1/14
3/1/14
2/1/14
1/1/14
12/1/13
11/1/13
10/1/13
9/1/13
8/1/13
$0 7/1/13
IN THE MILLIONS
HECM ENDORSEMENT
INITIAL PRINCIPAL LIMITS
$800.0
reversereview . com
8 TRR | 13
WE KNOCK OUT THE
The Reverse Review October 2015
COMPETITION
Experience | Excellence | Commitment | Pride
PRC has been FIRST IN REVERSE 15 years running. We are proud to be the first national title and Settlement Company to specialize in reverse mortgages. Our dedicated team of professionals offers the experience and knowledge to smoothly close reverse transactions—correctly. Having closed more than 150,000 reverse mortgage loans, PRC understands the importance of comprehending all HUD and lender guidelines.
TOLL FREE: (800) 542-4113 | www.PRClosings.com 14 | TRR
roundup
THIS MONTH A LOOK AT THE NEWS AND STATS AFFECTING THE MARKET GET UP-TO-DATE retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.
{
{
T HE S EN I O R A GEN DA
SURVEY FINDS MANY BOOMERS PLAN TO STAY PUT
More than half of surveyed homeowners age 60 and up intend to age in place, and many have made or plan to make renovations to their homes. Frequency of intentions to move or stay put among homeowners with household members age 60 or older, according to a recent Houzz survey. NOT SURE RENOVATIONS AMONG 60+ HOUSEHOLDS WHO INTEND TO STAY
OTHER MOVE IN 6+ YEARS STAY INDEFINITELY
60% 57%
MOVE IN <6 YEARS
RENOVATED IN 2014
PLAN TO RENOVATE IN 2015
NUM BER C R U N C H
SENIO R SAT ISFAC T IO N
AMERICANS ARE UNPREPARED FOR THE REALITIES OF THE LONG-TERM CARE THEY MAY NEED AS THEY AGE.
SURVEY RANKS STATES ACCORDING TO SENIOR WELLBEING.
70%
97%
of people over age 65 will require long-term care at some point.
of Americans have made no advanced plans for their longterm care needs.
- USA Today
- American Association for Long-Term Care Insurance
Gallup-Healthways rates all 50 states according to the five elements of well-being: purpose, social, financial, community and physical.
THE BEST Hawaii THE WORST West Virginia
MO NE Y MAT TE R S Americans are still not socking away cash.
A Bankrate survey suggests many workers have little in the way of retirement savings.
10% HAVEN’T SAVED ANYTHING
14% ARE SAVING LESS THAN THEY DID LAST YEAR
THE FACTS
30 PERCENT
of homeowners age 65 and older were paying a mortgage in 2013, an 8% increase from 2001. - CFPB reversereview . com
8 TRR | 15
The Reverse Review October 2015
THE
REVERSE review
THE
O CTOB ER 2015
The biggest challenge in the reverse mortgage industry is getting the media, other third parties and consumers to look at the risks and benefits objectively.
Martin From his favorite vacation and the craziest thing heâ&#x20AC;&#x2122;s ever done to his CMO AAG
16 | TRR
thoughts about the reverse mortgage market, we get the facts from Martin Lenoir, chief marketing officer at AAG.
personal >
>
and I met for our first date. We met
Ten years from now my kids will
in Denver for a long weekend, which
be in college and beyond, and my
included fireworks. (OK, it was the
wife and I will be spending more time
Fourth of July!)
together and on our hobbies! >
Something nobody knows about
me is I used to speak Portuguese, but
>
My first job was moving furniture.
>
My favorite time of the day is when
I forgot it before I was 10. >
I first get home from work—the dog
goes crazy, my kids all start to speak
My favorite vacation was my
to me at once and everyone is so
honeymoon in Tahiti. I loved the warm,
excited about the day they just had.
clear water; exotic setting; umbrella drinks—and being newly married! >
>
>
the idea of being good at three things
British Columbia. >
something so “big.” >
those two things. >
community as we’ve moved around.
professionAl >
finally bright. The product is safer and
start.
and more seniors could benefit from
Every morning I have a caffeinated soda to get me going.
>
better than ever, at a time when more
>
the financial system as it relates to
didn’t speak it yet. >
how seniors plan for and manage their retirements.
When I was a kid my parents would secrets from my sister and I since we
I’ve never watched a football game live, even though I went to school in Texas.
Ten years from now the reverse
mortgage industry will be part of
I can’t go without Coke Zero or Diet
speak to each other in English to keep
I’ve The craziest t hinagke a ever done was t t hat job out of c ol lege ahara t ook me t o t he Ser ia. Desert in Alg
this great financial tool.
Coke. >
The future of reverse mortgages is
My favorite movie is Heat. Great
cast and crazy action right from the
>
For success I have sacrificed building deep roots in any one
make them happy, and that my wife company forever. I guess I just wish
My favorite book is The Pillars of the Earth by Ken Follett.
be that my kids pursue life paths that and I continue to enjoy each other’s
The most memorable moment in
in a snowbank at Sunshine Village in
My first car was a Ford Explorer,
If I had three wishes they would
I always chew on my straw when I’m
the third time I asked. We were resting
when it just came out. My parents
>
When I was younger I wanted to be a race car driver. That was all in my head; I’ve never been a great driver.
my life was when my wife said yes—
at once.
didn’t understand why I needed
fact
my wife crazy.
would be a triathlete. Not because I
>
fun s
drinking, which for some reason drives
If I were a professional athlete, I
can swim, bike or run well—I just love
I’ll never forget the time my wife
>
People should seek a career in the reverse mortgage industry
because they want to help seniors age in place and make a real
difference in many people’s lives.
I am optimistic about the reverse mortgage industry because I think it’s only a matter of time now before large, influential voices start to talk about reverse mortgages in a neutral to positive way. reversereview . com
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The Reverse Review October 2015
The new Gold Standard.
877-721-3847
#nofilter #integrity #loyalty #diligence #compassion 18 | TRR
www.rfslends.com
NMLS #1025894
ORIGINATING
RR
CHANGE
RR
RR
TRID’s Impact on the HECM Space By Dennis Loxton
How one market’s hurdle has become another’s open door Back in 2009, when Congress first authorized the Reverse for Home Purchase concept, it would have seemed unusual to write an article on how the H4P could be more advantageous than traditional conventional financing. However, with recent changes coming to the forward world, this will be the case for many active-adult communities.
Those loan officers who serve the active-adult space realize that these new forward rules represent yet another opportunity to differentiate us from the traditional lending process and demonstrate how the H4P can help Realtors sell six to 12 more homes per year. Originators who regularly sell the H4P have likely heard two main complaints from Realtors/builders about the product: We’re prohibited from taking an application prior to the CO being issued and no sales concessions are allowed. While those restrictions have slowed the growth of the H4P concept, originators who focus on the big picture can make these forward TRID changes play out in their favor. Several years ago, while hosting a regional meeting in Florida for a large bank in the HECM space, a local Realtor spoke to our group and was asked what drew him to the Reverse for Purchase concept. His answer was simple: “It helps me create more cash buyers!” The comment derived from the fact that a reverse mortgage (even with the new FA rules) features a much easier qualifying process than a traditional conventional loan. New regulations are always a hot topic for LOs to consider. However, there has been a larger trend in conventional underwriting that has driven
Up until two to three years ago, conventional underwriting guidelines allowed for latitude in using those assets to qualify for a conforming loan. However, those same rules have become dramatically tighter over the past few years, and have caused several of our clients to look to the H4P as an alternative solution. The many new regulations about to hit the forward world present a significant opportunity for aggressive loan officers to educate Realtors/builders about how reverse mortgages can enhance their business by removing last-minute hurdles to closing deals. As you update your personal business plan for the new post-FA world, don’t ignore a significant (and growing) potential block of referral partners from the Realtor and builder communities. With traditional sources of financing more difficult to obtain than in years past, the H4P will prove to be a nice complement to help them sell more homes. n reversereview . com
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SPOTLIGHT
Fortunately for those of us in HECM Land, reverse mortgages are exempt from the new regulations, which begets the obvious question: If reverses are exempt, why spill ink over it?
customers away from a traditional conforming purchase loan and toward the possibility of an H4P. Many well-qualified borrowers in activeadult communities may show little income on paper, (i.e., Social Security, a small pension), but they are blessed with substantial assets that are their primary source of income.
TECH
The process and operational adjustment needed to implement these major changes—which are the largest overhaul of their kind since the early 1970s—makes our implementation of GFE/MDIA a few years ago look like first grade. Without getting too far into the weeds, the timelines outlined in the new rules have caused many lenders and closing agents to warn that for forward mortgages, the 30-day loan cycle is a thing of the past and that Realtors should write purchase contracts for 45 days.
ORIGINATING
This article isn’t written by a compliance expert, nor is it intended to be legal advice. However, any practicing originator needs to be well-versed in compliance in order to remain competitive in today’s hyper-regulatory world. Under the rule of TILA-RESPA Integrated Disclosure (TRID), the current GFE and HUD-1 will be replaced by two new forms known as the Loan Estimate (LE) and the Closing Disclosure.
The Reverse Review October 2015
20 | TRR
ORIGINATING
Investing in Retirement, Not Home Purchases By Tane Cabe
Why reverse mortgages make more sense for affluent borrowers
It is for this reason that HECMs should be discussed more frequently when consulting with affluent homebuyers. There is tremendous potential to be realized: According to Pew Research, more than 10,000 baby boomers are turning 65 years old in the United States every day. In addition, 65 percent of people 65 years and older own their homes outright, representing more than $4 trillion in equity, according to the NRMLA/ RiskSpan Reverse Mortgage Market Index, a quarterly measure that analyzes trends in home values.
Be a part of the conversation.
-
Share your ideas with your colleagues and be a part of the solution. Reach out to us at info@reversereview.com. reversereview . com
8 TRR | 21
SPOTLIGHT
time. While it still holds true that buying a home is a good investment, affluent homebuyers handle money a bit differently than others. High-net-worth individuals are very effective at using cash strategically to generate additional income. However, if a significant portion of cash is used to purchase a home outright, that money is unable to earn the affluent homebuyer anything. In the aforementioned scenario, the homebuyer is surrendering half of the existing cash flow that could instead be secured and leveraged to strengthen a retirement plan.
Despite being a great tool for affluent buyers, HECMs have a historically bad reputation. Poor practices and a lack of oversight in the past have created mistrust among baby boomers. Our role as mortgage professionals is to clear the air and communicate the importance of a HECM so that high-net-worth borrowers can enjoy homeownership while maximizing the value of their retirement investment portfolios. n
TECH
With a higher-than-average amount of liquid assets, many of these prospective homeowners are more than willing to pay cash for their new real estate. For instance, suppose someone with $1 million in cash is looking to purchase a second home for $500,000. In many cases, the purchase will be made in full. Alternatively, a large down payment will be made, and the remaining balance paid off in a very short
â&#x20AC;&#x153;As industry professionals know, a HECM provides homeowners access to the equity in their current home, which can be leveraged in the purchase of a new home. For affluent buyers, this frees up liquid assets that would otherwise be tied to a large down payment or an outright purchase, and enables them to integrate those assets into their retirement plans.â&#x20AC;?
As industry professionals know, a HECM provides homeowners access to the equity in their current home, which can be leveraged in the purchase of a new home. For affluent buyers, this frees up liquid assets that would otherwise be tied to a large down payment or an outright purchase, and enables them to integrate those assets into their retirement plans. So what is the problem?
ORIGINATING
The reverse mortgage industry has historically focused on the needsbased borrower, but affluent individuals have the means to approach the homebuying process differently through the strategic use of a home equity conversion mortgage. This group is represented mostly by people at or near retirement age, those who are entering a new phase in life and, in many cases, seeking to relocate to warmer climates. In this scenario, it is not uncommon for the homeowner to sell their existing home and begin searching for a new place to live.
The Reverse Review October 2015
ORIGINATING
Four Secrets to Communicating With Clarity By Mark Vickers
Ask yourself: * What is the single most important message I want them to hear? * What are the most important details I need to share? * What do I want them to remember? * What action do I want them to take? * What can I say or ask that will help them take action? * What story could I share to illustrate benefits?
Tips to help you effectively get your message across After learning to create and present a clear and succinct value proposition, Gerry, the owner of a small company, was overheard lamenting: “I had no idea how important it was to get rid of all those extra words and slow down. How many sales have I lost over the last five years because my prospects didn’t understand my message?” Gerry’s response is typical when professionals realize they have been overwhelming people with information while under-messaging them. From the kitchen table to a partner meeting, your ability to deliver a message with clarity will have a dramatic impact on your success. What is the cost of unclear communication with a potential client? When it comes to your spoken communications, planning and preparation allows you to deliver your message more effectively, increasing the likelihood others will respond as desired. 22 | TRR
As you consider your approach to any conversation or presentation, consider the four keys to developing clarity:
During your contemplation of substance you will invariably encounter a degree of “ego impact.” While you would like to believe that people care about everything you have to say… they don’t. As part of your message development process, continually ask, “Who cares?”
* Substance * Simplicity * Structure * Speed Substance When you are communicating with others, you have a message to share and a desired outcome of the conversation. When you focus on the substance, you start taking an intentional look at your message to identify the key message and essential elements. By devoting time to developing your message, you increase your probability of success.
GOING TO THE SOURCE
These questions will help you identify the most important substance of your presentation and form a strategic outline.
When you consider what you are presenting from the perspective of your audience, you can honestly assess whether or not they care about certain statements or points. By removing elements that your listener doesn’t care about, you will begin to create truly powerful and impactful messages using fewer words than you imagined possible.
“In the early stages of becoming more intentional about the structure of your presentations, you may have concerns that you will become bored with structured presentations. When this occurs, remind yourself that your presentation is not about you or for your entertainment and enjoyment; it is about the people you are talking to, their needs and helping them move forward.”
ORIGINATING Simplicity
Structure
Having identified your core substance, ask yourself: “How can I deliver this in the most simplistic manner possible?”
Once you are clear on your key message and wording, developing the structure of your discussion or presentation will help you avoid missteps.
Keep in mind that when you are presenting to others, they are: * Listening to you * Processing the information *T hinking about the information and what it means to them
Some of the key areas that require attention are: * Rapport building * Opening * Information gathering * Information sharing
* Distracted by their surroundings
* Story structure and placement
* Feeling their cellphone vibrating
* Closing/call to action
*T hinking about other things they need to do
*U sing simple terminology, avoiding buzzwords and jargon * Using short, concise sentences *U sing a short story to illustrate a point Keep in mind that the intent of simplicity is not to talk down to people but to present a message that is easy to understand, interpret and act on. During your process of simplifying your message, don’t be surprised if your ego kicks in again. Part of your mind will try to convince you that those fancy, complicated words and long sentences with multiple commas and semicolons make you sound more impressive. Remind yourself: “Less words equals more message.”
* Highlight points that you are excited about and practice saying those at a faster rate and in a slightly higher tone of voice to convey excitement. * Highlight important points, and practice slowing down and lowering your tone to convey importance. * Practice using pauses to allow your listener to connect to your points and think about their impact.
Speed
Initially, the changes to your speaking patterns will feel awkward and uncomfortable. Continue practicing and recording your presentation. As you listen to the recording, consider the power of the message your audience will hear. You will begin to realize that the improved vocal variety is improving your message.
You have prepared and practiced your presentation and now it’s time to talk to a potential client or present to a group. During any form of presentation, it is important to use vocal variety (tone, volume and speed) to help keep your audience engaged and emphasize critical points.
Effective communication is an intentional and practiced process. Through your increased focus on substance, simplicity, structure and speed, your presentations to your customers or audience will become more consistent, powerful and, most importantly, more effective. n
Sami, a computer consultant and project manager, believed that she was a dynamic presenter but could not understand why the members of her project team did not respond the way she expected. After listening to a recording of herself presenting in a meeting, she was reversereview . com
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SPOTLIGHT
As you develop your message, consider:
In the early stages of becoming more intentional about the structure of your presentations, you may have concerns that you will become bored with structured presentations. When this occurs, remind yourself that your presentation is not about you or for your entertainment and enjoyment; it is about the people you are talking to, their needs and helping them move forward.
* Record yourself speaking normally to determine your baseline speed, tone and volume.
TECH
Given the level of thought and distraction occurring within the mind of your listener, the more straightforward your message, the higher the probability your message will stick with them.
As you become more strategic about the structure of your presentations, you will develop a library of common openings, stories and calls to action that you will be comfortable using in a variety of situations.
There are a few steps that will help you be more intentional about using speed to create greater impact:
ORIGINATING
* Watching you
embarrassed and explained, “I sound so boring! I don’t even sound like I care about the project. All I do is move step by step through all of the points I wanted to cover in the meeting.” What Sami realized is that what she thought she was presenting and what others were hearing were two very different things.
The Reverse Review October 2015
ADVANCE
TECH
Technology & Efficiency By Jeffrey M. Birdsell
How efficiency impacts profitability for HECM lenders Using technology to maximize your business productivity, reduce mistakes and maintain compliance creates the platform to realize true business success. The right technology ensures organizations have the tools to overcome the challenges of executing on strategy every day and prospering in today’s ever-changing mortgage climate. Increased business productivity can be traced to technology and the automation of processes, allowing for faster communication and updates, increased time spent on priorities, fewer mistakes and greater loan completion rates. Together, these factors maximize productivity and profitability. Some of the challenges facing reverse mortgage lenders today include: 1 Decreased productivity 2 Increased regulation 3 Industry changes 4 Training, education and process
review
5 Lead management Let’s discuss these challenges. 1 Decreased Productivity Financial Assessment caused the timeline from application to funding to increase from 60 to 80 days. Technology—through functionality like integrated credit reporting—can help minimize the impact of this prolonged process. In fact, there are many integrations and options 24 | TRR
specifically designed to help eliminate the redundancy of work, human errors, duplicated efforts and time needed to complete. 2 Increased Regulation The reverse mortgage industry and the HECM product have always been extremely regulated, and as our industry grows, more and more companies will be visited by regulators like the CFPB. These auditors are going to look at things like controls, data security, and policies and procedures. The right technology gives you the controls and security you need to protect your business. 3 Industry Changes The way you do business is affected by each change to the industry. In 2013, HUD introduced the HECM 60. In 2014, HUD added structure and pricing for non-borrowing spouses. This year, HUD introduced Financial Assessment, which has strongly affected turn times. Technology, through automations and integrations, can and reduce the impact on your business.
4 Training and Education The reverse industry has gone through many recent changes and keeping your team up to speed can prove challenging. Financial Assessment is just one example of industry change that is crucial for everyone on your staff—from loan officers to processors, underwriters and closers—to understand in order to stay compliant and competitive. Technology supports education and training opportunities, and enhancements to your company software can go a long way to keeping your entire team on track. 5 Lead Management As the industry changes, customers that didn’t qualify in the past might qualify now. New changes create opportunities to reach out to inactive leads. CRM technology can keep you in touch with your leads and help you mine your data to make marketing decisions. So what do these challenges mean for your business? Improving efficiencies in managing loan files and streamlining workflow
TECH can help to reduce operating expenses and improve mortgage profitability. You should regularly map out your entire workflow and review it with your management staff. This will help reduce duplication, eliminate some inefficiencies and educate departments on how a loan goes through your entire system. Data and loan files must be organized, complete and consistent. This is your best audit defense and supports rapid response to audit requests, demonstrating strong internal policy adherence.
2. TECHNOLOGY HELPS YOU
accomplish both of these goals by allowing your people to work at their highest capabilities and your business to be aligned from top to bottom.
3. DON’T USE TECHNOLOGY JUST FOR THE SAKE OF USING TECHNOLOGY. Consider how your
business operates and determine how to use that technology to benefit your organization in terms of saving time and increasing your bottom line.
4. TECHNOLOGY PROVIDERS SPEND A LOT OF TIME and
money designing systems that you can configure to meet your needs and conduct business in a way that fits your company’s goals. Be sure you’re taking advantage of all it has to offer and the efficiency gains, controls and profitability will be returned in spades.
Technology protects you and mitigates risk. Changing regulations and increasing scrutiny make it harder for you to be compliant. If you don’t respond quickly to an audit request with clean, well-organized files, examiners are likely to apply even more scrutiny. You need to demonstrate that you did everything right when originating or servicing loans. Investing in the right technology, and taking the time to customize it to support the way you do business, is sure to optimize your workflow and will allow you to generate reports and do analysis configured to your company’s specific needs. Invest in your people and make sure they are educated. With the changes in the industry, even the experienced employee can benefit from training. n
TECH
Make efficiencies a top priority. Technology allows you to more efficiently document and track your
1. GENERALLY SPEAKING,
businesses want to increase revenue and employees want to be appreciated for their hard work.
mortgage management processes, which allows you to focus on your profit goals, improve your customer response time, and respond swiftly and comprehensively to auditors.
ORIGINATING
Technology also supports integrations with third-party vendors. These integrations help automate your process, decrease processing time, automatically attach documents to your electronic files in the proper location, increase turn times and eliminate data entry errors. Taking advantage of these integrations will help with your turn times.
Key Takeaways
fnctitle.com
A nationwide title and settlement company servicing the reverse mortgage industry. Our dedicated team of professionals has the experience and knowledge to smoothly close reverse transactions. Through years of experience, FNC has gained valuable knowledge by building strong relationships with reverse mortgage lenders and brokers, as well as the borrowers we service. We firmly believe that our clients deserve the best treatment, and that is why FNC is where reverse mortgages take center stage. reversereview . com
8 TRR | 25
SPOTLIGHT
240.864.4844
The Reverse Review October 2015
SPOTLIGHT
The Market is Changing: Advertising Reverse Mortgages in Today’s World B Y J I M MI LAN O
M O NT
H’
ED
IN
HOW TO MARKET THE PRODUCT WHILE NAVIGATING NEW REGULATORY DEMANDS
S
RR
ITION
w
IS TH
10 / 2015
WANT TO SEE MORE ARTICLES LIKE THIS?
See them at reversereview.com.
H
istorically, there has been a popular view among those in the industry that one does not sell a reverse mortgage—one provides information about a reverse mortgage and over time a senior decides whether the loan is right for them. However, given recent regulatory developments, the practical ability to inform seniors about reverse mortgages on a nationwide basis bears further consideration and re-examination. How does one sell or market a reverse mortgage in the current regulatory environment? Based on recent enforcement actions and pronouncements, the answer to this question has become more complicated and dependent on a company’s advertising and marketing strategies. Sales are the lifeblood of any business, and generating and sourcing sales is a fundamental part of a company’s success. Until someone makes a sale, 26 | TRR
no one gets paid. But over the past year, some of the most important lead channels have come under attack. What follows is an outline of recent CFPB actions in relation to mortgage advertising, marketing and lead sales arrangements, several matters of which focus specifically on reverse mortgages. Advertising: Not Too Small to Fly Under the Radar Challenges arising from criticism of reverse mortgage advertising are not new. However, two recent developments bring these challenges back into focus. In February 2015, the CFPB filed suit against a Maryland-based mortgage broker, All Financial, for promoting faulty reverse mortgage advertising. The suit alleges that All Financial’s actions violated both UDAAP provisions and the Mortgage Acts and Practices – Advertising (Regulation N) or the MAP Rule. The substance of the allegations are not new: impersonating the government, misrepresenting that reverse mortgages have no
required repayment, an aggressive and misleading call to action (“act fast, supplies are limited”). However, the process of policing them is new. Three points can be gleaned from the All Financial matter thus far. First, it is litigation. The CFPB has many avenues of enforcement. It can bring administrative enforcement actions, make investigative demands (similar to a subpoena process), engage in administrative litigation or sue companies in court. In the All Financial matter, the CFPB sued a mortgage broker in federal court. If that sounds serious, it is. With administrative enforcement actions (as opposed to litigation), such as consent orders, public settlement agreements are filed and some facts are discernable, but with the All Financial litigation, there are detailed allegations in public court filings, with exhibits of alleged faulty advertising and even copies of emails between the broker and its third-party marketing company vendor—all very transparent.
SPOTLIGHT Second, as stated, All Financial is a mortgage broker, not Bank of America or Wells Fargo—it is not “too big to fail.” Some were concerned that when DoddFrank was enacted, some companies would be “too small to comply.” However, with the All Financial case and other CFPB enforcement actions, one thing has become abundantly clear: No company is too small to fly under the CFPB’s radar, and that goes for company officers as well. One point bears repeating: In many enforcement actions, the CFPB is also going after company executives.
“If mental gymnastics were an Olympic sport, the CFPB would have won a gold medal for the reasoning it utilized in its actions against Lighthouse Title.”
Paying for mortgage marketing services, if done properly, is permissible under RESPA. However, since 2010, marketing services agreements have been under reversereview . com
8 TRR | 27
SPOTLIGHT
In June 2015, the CFPB issued a report entitled “A closer look at reverse mortgage advertisements and consumer risks.” This is a curious document. Unlike prior CFPB pronouncements (such as guides, bulletins or even rulemaking), this 15-page document is based on the bureau’s review of reverse mortgage marketing materials, conversations with
TECH
This leads to the third point: In the review of reverse mortgage advertising, the CFPB will know deceptive or misleading advertising when it sees it. On one hand, in cases like All Financial, if the allegations are true, one could surmise how the CFPB might disapprove of such advertising strategies. However, in other cases, it is more difficult to understand the source of the CFPB’s displeasure.
ORIGINATING
In 2011, the FTC instituted the MAP Rule, which, among other things, prohibits misdealing and deceptive mortgage advertising. Authority to implement the MAP Rule transferred to the CFPB as part of the Dodd-Frank Act. The Dodd-Frank Act also mandates that the CFPB police and prohibit so-called Unfair, Deceptive or Abusive Acts or Practices (UDAAP). In the All Financial matter, the complaint was based on allegations of non-compliance with the MAP Rule, as well as allegations of violations of UDAAP provisions.
attack, first by HUD and now focus groups and one-on-one by the CFPB. At the core interviews with seniors who of both agencies’ concerns reviewed reverse mortgage is the possibility that the advertising. Before showing “No company is marketer might steer or refer the ads to seniors, the CFPB too small to fly a consumer to the company stated that, on their face, the under the CFPB’s being marketed. In 2010, ad materials it collected were radar.” HUD issued an interpretive confusing, incomplete and bulletin specifically regarding inaccurate regarding borrower Realtors’ sales of home warranties, requirements, government insurance and but which had broader implications borrower risks. With that as a precursor, for marketing services agreements in could one be surprised about the the mortgage market in general. In the bureau’s final conclusions? bulletin, HUD expressed concerns that After viewing ads with focus groups, the the company (in that case, a Realtor) CFPB reported that many consumers marketing a settlement service provider were confused or had misconceptions might be in a position to influence a about important features and terms consumer to use the settlement service of reverse mortgage loans. Some provider (in that case, a home warranty consumers struggled to understand company). that reverse mortgages are loans that In September 2014, the CFPB must be repaid with interest. Consumers announced an enforcement action also often misinterpreted the role of against Lighthouse Title for an allegedly the federal government in the reverse faulty marketing services agreement. mortgage market as providing consumer If mental gymnastics were an Olympic protections that are not actually offered. sport, the CFPB would have won a gold The CFPB went on to state that medal for the reasoning it utilized in its advertisements frequently do not describe actions against Lighthouse Title. Without all the details of the particular product or even mentioning or making reference service being advertised. Interestingly, to the prior HUD bulletin on home however, some consumers participating warranty sales, the CFPB concluded in the survey noted that television ads that the mere existence of a marketing they saw presented “neutral” information. services agreement is in itself a “thing of One consumer described television ads value” as defined under RESPA. Thus, as “more informative than trying to sell notwithstanding the fact that actual and you something… it seems like he’s just reasonably valued marketing services trying to give you information.” If reverse may be performed under a marketing mortgages are complex, as the CFPB services agreement, if the marketing posits, how can a lender explain all of company is also making direct referrals the features of a reverse mortgage in a of consumers to the mortgage company, 15- or 30-second advertisement? Further, that is in itself a RESPA violation and the advertising air time can be expensive. So, legitimate services being performed under many reverse mortgage advertisements the marketing services agreement cannot encourage seniors to call in and request be used to defend such referrals. additional information in the form of This action by the CFPB has had a handbooks, DVDs and other materials. It chilling effect on the use of the marketing would be interesting to determine seniors’ services agreements in the mortgage views of the reverse mortgage after market, and two large mortgage reviewing this additional information. companies recently announced that they Marketing would no longer use such agreements. 8
The Reverse Review October 2015
SPOTLIGHT Lead Sales In February 2015, the CFPB entered into a Consent Order with NewDay Financial. In the order, the bureau alleged that “If reverse NewDay engaged mortgages in deceptive are complex, acts by failing to as the CFPB disclose payments posits, how can to a veterans’ a lender explain organization all of the features that endorsed of a reverse NewDay, and that mortgage in a payments under a 15- or 30-second marketing services advertisement?” agreements constituted illegal payments for mortgage referrals. In the mid-1990s, HUD staff had issued a since-withdrawn informal RESPA opinion indicating that lead sales arrangements where payments are made for a list of names would not be in violation of RESPA, as long as the payment per name was nominal and did not take into account the value of any endorsement by the lead seller of the company purchasing the leads. Leads sales arrangements in the mortgage market today are vastly different from HUD’s informal opinion on lead sales in the mid-1990s. Nonetheless, in the NewDay matter, the CFPB won another medal in mental gymnastics when it reasoned that not disclosing an endorsement in a lead sales arrangement constitutes a UDAAP violation. If under RESPA payments for a lead cannot include the value of the endorsement, but under UDAAP a lead buyer must disclose that it paid for an endorsement, well… Checkmate! Other Channels
(
Mortgage Brokers
In 2012, in response to questions submitted by FHA mortgagees regarding a mortgagee letter, FHA issued a response to the following frequently 28 | TRR
asked question: Does a sponsoring mortgagee have to include the review of its sponsored TPO’s advertising materials in its Quality Control Plan? HUD replied: All FHA-approved lenders must include a process for reviewing all advertisements generated by or on behalf of their company for compliance with HUD/FHA advertising requirements as part of their Quality Control Plan. Lenders must ensure that they take prompt corrective action upon discovering any violation of advertising requirements. This includes advertising abuses by employees of the lender, and any violations committed by employees of non-FHA-approved lenders, sponsored TPOs, marketing firms, or companies that advertise or generate borrower leads or other business on behalf of the lender.
( Relators and Home Builders Traditionally, many mortgage companies preferred to enter into various agreements with realtors and/or home builders in order to source HECM for Purchase business. Such agreements might include marketing services agreements, desk rentals or the sharing of joint advertising expenses. The challenges with marketing agreements are outlined above. Properly structured desk rentals can be viable, but they raise state mortgage branch licensing issues, and the payments should be based on the fair market value of the rental space and not on the volume of mortgage business generated from the arrangement. In joint marketing arrangements, the sharing of third-party advertising expenses (for example, newspaper ads) should be done equitably based on the cost and exposure of each party. For instance, if a Realtor and mortgage company take a full-page ad and each are displayed equally, the companies should spilt the cost evenly.
(
Other Professionals
In the reverse mortgage business, there are potential sources of business from other professionals, such as elder care attorneys, long-term care agents and financial planners. Where financial
planners and long-term care agents are concerned, in addition to the above challenges with marketing agreements and other structures (if utilized), lenders must be cognizant of the so-called McCaskill provisions under the HECM statute, which place limitations on activities around the so-called “crossselling” of other financial services products with reverse mortgages. About a dozen states have similar laws with limitations on cross-selling other financial services products with reverse mortgages. California imposes such limitations both on mortgage companies involved in the offering of other financial services products and insurance agents involved in the promotion of reverse mortgages. Conclusion and Some Practice Tips The CFPB has stated more than once that reverse mortgages are complex financial transactions. However, the bureau has criticized some reverse mortgage advertising as incomplete. Some rule of reasonableness is in order here, and the CFPB should recognize and understand that not all of the features of a reverse mortgage can be explained in a 15-second advertisement. The CFPB should also understand that a senior does not see a celebrity on TV and immediately pick up the phone and apply for a reverse mortgage. It just does not happen that way. This points to the fundamental flaw in the CFPB’s latest report on reverse mortgage advertising, which the bureau even seems to recognize in its own report: “Focus groups are not intended to give us statistically significant data that can be generalized to all consumers.” Nonetheless, what is a mortgage company to do to source reverse mortgage business in such a regulated environment? This may depend on your company’s marketing and advertising strategy. However, in today’s environment, there is no excuse for not knowing the “black letter of the law” (including the UDAAP provisions of Dodd-Frank and the MAP Rule). Although this law and rule can be amorphous, one can glean how the CFPB will proceed with enforcement by reviewing
SPOTLIGHT Have a process in place for reviewing and approving advertisements in light of regulatory requirements.
You also must know your counterparties and vendors EXCUSE for not and their reputation in the knowing the ‘black Regarding marketing market, including whether letter of the law.’” services agreements, a they had consumer fundamental question now complaints or regulatory is whether to do them at all. actions, and if so, what If one decides to engage in marketing corrective actions have been taken. services agreements, they must be well Now, every company is required to documented, the marketing services have compliance systems and policies should be valued by a third party, and the and procedures in place, even small implementation of the agreements must companies. As the CFPB’s actions have be closely monitored to ensure that only demonstrated, it does not discriminate marketing services are being performed in its investigations and enforcement and there is no direct referral activity. actions based on a company size. Must a mortgage company review every vendor Recordkeeping is mandatory and robust with which it conducts business? When recordkeeping is imperative. This includes it comes to mortgage broker advertising, documenting all agreements with third HUD seems to think so. The CFPB parties—including mortgage brokers, has also issued guidance on vendor advertising agencies or marketing management and mortgage companies’ companies and Web masters—as well responsibility to review and monitor their as keeping copies of all advertisements vendors. You are “your brother’s keeper.” and the dates they were disseminated.
Do not pay “based on success.” When it comes to marketing agreements, lead sales and desk rentals, pay for marketing services, on a per name basis, or for the value of the space rented, respectively, and not the volume of mortgage business (such as submitted applications or loans closed) due to or derived from such a channel or relationship. And do not “mix and match.” If you have a marketing services agreement, do not combine it or place elements of a lead sale arrangement in or with it. If you have a desk rental or marketing services agreement, do not also engage in joint advertising under the same agreement with the same party.
If you do not embrace this, at least accept it. At a minimum, a risk-based approach should be undertaken with the review of your most active counterparties and “There is NO largest vendors first.
TECH
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SPOTLIGHT
S E N D Y O U R N E W S T O J E S S I C A @ R E V E R S E R E V I E W. C O M
And remember, in today’s environment, neither you nor your brother is too small to fly under the radar. n
ORIGINATING
settlements and actions taken specifically in the reverse mortgage arena, and the mortgage market in general.
The Reverse Review October 2015
By Jessica Guerin
HOW TODAY’S RETIREES ARE REDEFINING THE GOLDEN YEARS
HOW MUCH retirees have saved
29% 17%
LESS THAN $1,000
$1,000 $9,999
SOURCE: EBRI 30 | TRR
17% 12%
$10,000$24,000
8%
$25,000$49,000
7%
$50,000$99,999
11%
$100,000$249,999
$250,000 OR MORE
or many working Americans, visions of retirement are dreams of leisure. A convertible cruising up the sun-soaked coast, a golf cart parking next to a lush ninth hole, a simple morning stroll along a quiet lakefront path. But in today’s post-recession world, many are beginning to see that these dreams may simply be that: dreams, ones that may never be fully realized. The economic reality facing many Americans means that retirement is not what it once was. Today, Americans are faced with diminishing pensions, shrunken portfolios and increasing health care costs. Financial experts are stressing the need to save more, spend less and work longer. But while the retirement picture is different than it was for generations past, that’s not to say it’s entirely bleak. Americans are living longer than ever before, and with the aging of the boomer generation, today’s retirees are a force strong in numbers. They are confident, tech-savvy and energetic. They are a determined generation, redefining what it means to age in this country and find fulfillment in their golden years. A DEMOGRAPHIC SHIFT At this year’s Retirement Research Consortium meeting in Washington, D.C., Joseph Coughlin of MIT’s AgeLab presented compelling statistics about the country’s changing demographics. “The context and definition of retirement is changing,” he said, adding that in 2047, there will be more Americans over age 60 than children under 15. “The country will have the demographics of Florida.” Coughlin predicted that the attitudes of America’s aging population would be different than generations past—more confident, less polite than their parents’ generation. This is a demographic that knows what it wants, and as they reach their retirement years, they are unlikely to sit back and take things as they come. The financial picture has
changed for many, but perhaps today’s retirees will take control—forging their own path and changing society’s perception of the golden years. When it comes to achieving happiness, several longevity experts have highlighted a number of key elements said to have the largest impact on an overall sense of fulfillment for aging adults. KEY ELEMENTS OF SATISFACTION:
FINANCIAL SECURITY
HEALTH
LEGACY
HOME
LEISURE
WORK
These elements are entwined, mixing together to create a complex picture of one’s personal fulfillment. No doubt, the current economic climate has impacted the health of each of these fundamentals for many—affecting how long they need to work, how much they have saved and where they can afford to live. But perhaps Coughlin’s remark about a sense of confidence among this generation will help them conquer these factors in their own way. Maybe this sense of boldness will enable them to actively redefine what it means to live a happy retirement. WORK & MONEY It’s no secret that Americans are not saving enough for retirement, but just how little many have socked away is alarming. Nearly one-third of retirees have less than $1,000 in savings, according to the Employee Benefit Research Institute. In light of this, it makes sense that roughly 30 percent of boomers who participated in a 2010 AARP study said they don’t plan to retire until after 70, and 40 percent said they planned to “work until they drop.”8
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The Reverse Review October 2015
“A more recent study by the AARP, released just last month, revealed that 37 percent of respondents plan to continue to work for pay in retirement, with 73 percent expressing a desire to work part time, prompting the association to claim that ‘work is the new retirement.’”
But the AARP study also reveals other interesting facts. While some reported feeling uncertain about the future, most felt hopeful (87 percent) and confident (84 percent). The study concluded that this first wave of baby boomers were “feeling good and not ready to quit.” A more recent study by the AARP, released just last month, revealed that 37 percent of respondents plan to continue to work for pay in retirement, with 73 percent expressing a desire to work part time, prompting the association to claim that “work is the new retirement.” AARP research points to a continuing trend toward a more active retirement. “There has been a long-term, steady, incremental increase in people working into their retirement years. For example, in 1985, 10.8 percent of those Americans 65 and over were in the workplace, working full or part time. That percentage has slowly moved up from year to year,” an AARP spokesperson tells TRR. “As of July of this year, 18.6 percent of those 65 and over were in the workplace.” “AARP surveys have shown that people work into retirement for several reasons, whether it is for financial reasons or for personal enrichment,” the spokesperson says. But the AARP notes that financial reasons are not the only motivation for older adults to remain in the workforce. Of the respondents in the 2015 survey who said they wanted to continue working, the top reasons cited were a desire to connect with co-workers, to find interesting and challenging work, and to establish a work-life balance in their later years. Some respondents also expressed a desire to change fields, hoping to pursue their dream job in this next chapter of their lives. Clearly, a shift is taking place. Many older Americans are looking to balance their desire for leisure time with the satisfaction they get from their work.
retirement communities, move to assisted living residences or remain in modified versions of their current homes. Interestingly enough, although many might think downsizing to be the most common move for older adults, just under half (49 percent) of respondents in a comprehensive study by Merrill Lynch moved to a larger home. Americans claim to feel a new sense of freedom in retirement, and the ability to live where they want to is a major factor in this sense of independence. In the Merrill Lynch study, 64 percent of respondents said they plan to move at least once, and most cite a desire to be closer to family as a leading motivator.
27% 36% BASE: 50+ RETIREES
37% Do not anticipate moving in retirement. Have moved in retirement Have not yet moved, but anticipate moving SOURCE: MERRILL LYNCH
Older adults, it seems, feel more connected to their communities than their younger counterparts, suggesting that the decision to relocate or stay put is a weighty one, strongly tied to their
attachment to their neighborhood and their sense of belonging. Of course, another key factor impacting a senior’s living situation is their potential need for care as they age. USA Today declared that 70 percent of adults over age 65 will require long-term care at some point. The respondents in Merrill Lynch’s study indicate an overwhelming preference for in-home care. Other studies point out a significant shift in how seniors are receiving long-term care, with nursing home attendance dropping while the demand increases for in-home care aides. FINANCIAL SECURITY Not having enough money to fund retirement is the leading financial concern among Americans, according to a Gallup Poll, which notes that 66 percent of its 1,100 respondents cite this as their greatest worry. While multiple studies prove the validity of this concern, there are myriad options available for those who are willing to actively pursue creative ways to finance their golden years. A reverse mortgage, for example, is one such option. For many seniors, the home equity they have spent years building has become a substantial part of their net worth. On average, homeowners over age 65 have more than $200,000 of equity in their homes, according to the Merrill Lynch study. The NRMLA/ Riskspan home equity index indicates that homeowners 65-plus have $4 trillion in aggregate home equity. For these homeowners who wish to access their equity to achieve a sense of financial security in their retirement years, a reverse mortgage can be a solid
PERCENT WHO FEEL CONNECTED TO THEIR NEIGHBORS AND COMMUNITY BY AGE:
HOME
UNDER 35
50%
Another major determinant impacting one’s sense of happiness is their home. Today, older adults have many choices when it comes to their living situations—some downsize, join
35-44
55%
45-54
55%
55-64
60%
65+
74%
32 | TRR
0%
100%
AVERAGE HOME EQUITY AMONG HOMEOWNERS BY AGE:
UNDER 35
$53,700
35-44
$111,300
45-54
$140,900
55-64
A study by the Brookings Institute reveals an interesting $212,800 fact about human beings as they age. Through an $150,000 $200,000 $250,000 analysis of worldwide data, the study concludes that, generally, a person’s happiness increases with age, reaching unprecedented levels by age 70. option in the right situation. By accessing The study suggests that, even though the their equity, seniors can support their logistics of retirement and aging can be desire to age in place, enabling them daunting, many do experience a sense of to make renovations to their residence fulfillment in their later years, perhaps to enhance its functionality or pay for finding peace in a life well lived. in-home care. Using the reverse for
$194,900
65+ $0
A NEW KIND OF RETIREMENT
$50,000
$100,000
“A study by the Brookings Institute reveals an interesting fact about human beings as they age. Through an analysis of worldwide data, the study concludes that, generally, a person’s happiness increases with age, reaching unprecedented levels by age 70.”
Purchase loan, homeowners who wish to relocate can use the equity in their current home to purchase a new one.
With energy and confidence, this generation of retirees is likely to find the solution that works best for them— whether they choose to work longer, utilize public benefit programs, downsize or access their home equity. Part of the new retirement picture involves the active pursuit of financial stability.
Retirement in today’s world means something different than it did a generation ago. Many baby boomers are active, energized and eager to enjoy this new phase in their lives. Yes, some may need to scale back their expectations, working longer than they had planned or clinching their purse strings just a little bit tighter, but there are still great opportunities for older Americans to embrace this stage in life. n
儀甀椀挀欀䌀攀爀琀 栀愀猀 愀 渀攀眀 氀漀挀愀琀椀漀渀 椀渀 䰀漀甀椀猀愀渀愀℀ 圀椀琀栀 漀甀爀 琀爀愀椀渀攀搀 䠀䔀䌀䴀 挀漀甀渀猀攀氀椀渀最 猀琀愀昀昀Ⰰ 眀攀✀爀攀 栀攀爀攀 琀漀 戀爀椀渀最 氀漀挀愀氀 氀攀渀搀攀爀猀 琀栀攀 焀甀椀挀欀 琀甀爀渀ⴀ琀椀洀攀猀 琀栀攀礀 渀攀攀搀⸀
㠀㠀㠀ⴀ㌀㠀㌀ⴀ㠀㠀㠀㔀 焀甀椀挀欀挀攀爀琀⸀漀爀最 漀瀀猀䀀焀甀椀挀欀挀攀爀琀⸀漀爀最 reversereview . com
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The Reverse Review October 2015
LAST WORD
RR
CONSIDER
RR
RR
After All Is Said and Done Lance Canada
The product’s evolution has been challenging, but the future is bright. grind, to assume a 10,000-foot view of the HECM program. I thought about the totality of the changes and how they might change the product and the experience for potential consumers in years to come.
On a recent Sunday morning, I made it a point to read a few issues of The Reverse Review and NRMLA’s Reverse Mortgage magazine. There has been so much going on that I haven’t had time to enjoy a good read about the industry to which I’m devoted. Although I skim over daily news about happenings in
the reverse mortgage field, it is so easy to be absorbed in what I like to call “the thick of thin things.” That’s not to say that the recent changes to the industry are by any means thin, but it’s easy to focus on the minutiae rather than assess the situation from a high-level perspective. As I considered this idea, I decided to force myself to think outside of the daily
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While assuming this mental stance, I read an article about how the HECM for Purchase program helped a couple retire 10 years earlier than they had originally planned. Other stories covered new rules promising relief for non-borrowing spouses and strategic ways seniors can utilize home equity to protect their portfolios. These articles helped me appreciate the evolutionary road this product has taken. It highlighted the fact that as an industry, we are
Reverse Review articles (current and past) are available on our website. Access a wealth of content about the business of HECMs online. www.reversereview.com 34 | TRR
working together with our partners in government to shape the program so that it can be the most beneficial to the consumers we serve, so we can help the most people find financial security in their retirement years. I am reminded that nothing good comes easily. As Scottish author Samuel Smiles said, “The very greatest things—great thought, discoveries, inventions—have usually been nurtured in hardship, often pondered over in sorrow, and at length established with difficulty.” This seems to be a poignant statement for our industry. While the road has been tumultuous at times, and recent policy change will be tough to endure, we will manage, just as we have before. The result will make us better and stronger. After all is said and done, I am confident that we are heading in the right direction. n
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Reverse Loans. One Platform. All Connected. The Reverse Review October 2015
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Now is the time for HECMs. Over 25 million potential borrowers are waiting Financial Assessment (FA) strengthens loan quality HECMs can be used to purchase a new home HECMs are FHA-insured loan programs Financial Planners recognize HECMs as a viable retirement option 36 | TRR
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