The Reverse Review November 2015 by The Reverse Review

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Tips for increasing your referral base

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INSIDE THIS ISSUE | Building a Network of Professional Partners

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REVERSE review N OV E M BE R 201 5

THE INDUSTRY WORKS TO FIND NEW FOOTING IN THE WAKE OF MAJOR PROGRAM CHANGE.

TED TOZER SITS DOWN IN OUR HOT SEAT PG. 22

THE IMPORTANT WORK OF REVERSE MORTGAGE TRAINERS PG. 24

TAXATION AND REVERSE MORTGAGES PG. 26

HUD ISSUES A GAME CHANGER FOR T&I DEFAULTS PG. 30

The Reverse Review November 2015

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EXCITING. EDUCATIONAL. INSIGHTFUL. This event is designed to give a competitive advantage for RV Exchange (RVX) users and partners. We will also introduce new products aimed at streamlining performance such as RV Sales Accelerator (RVSA), eSign and more! Space is limited so sign up today to learn new skills and network with top players in the industry.

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WHO SHOULD ATTEND: Executives and Decision-Makers Account Executives Loan Officers Operations Personnel Administrators RV Exchange Software Users

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2 | TRR

WWW.REVERSEVISION.COM | CONNECT@REVERSEVISION.COM | 858-433-4970

Evolving Our Brand As of December 1st, Urban Financial of America, LLC (UFA) will become Finance of America Reverse LLC (FAR).

Solving Your Challenges FAR will continue our tradition of commitment to our partners, solidly backed with industry expertise and even greater strength and innovation. You will continue to receive the highest standards of service on which we’ve built our nationwide reputation. As FAR, we’ll be thinking ahead and continuing our evolution as an industry leader, delivering revolutionary products, intuitive technology, and best-in-class training to help you be successful.

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For business and professional use only. Not for consumer distribution. NMLS #2285 (http://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/2285); Corporate Office: 8909 South Yale Avenue, Tulsa, OK 74137. Not all products and options are available in all states. Terms subject to change without notice. ©2015 Urban Financial of America, LLC. All Rights Reserved. Equal Housing Lender. CALIFORNIA BUSINESS NAME: URBAN FINANCIAL GROUP OF AMERICA, LLC. NEBRASKA BUSINESS NAME: REVERSE IT! LLC. UFA248 [Exp 11/2016] reversereview . com

8 TRR | 3

The Reverse Review November 2015

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4 | TRR

From the editor RE

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A NOTE FROM JESSICA GUERIN

VERSE R EV E RE

Tips for increasing your referral base

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INSIDE THIS ISSUE | Building a Network of Professional Partners

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REVERSE review N O VEMBER 2015

Let’s face it: The past few years have been rough. The industry has weathered seemingly endless rounds of substantial program change. Learning new guidelines and adjusting internal processes while continuing business as usual has been a challenge. Survival has meant long hours and hard work.

In this month’s feature story, we take a look at how all this change has impacted the market. We point out that, while volume has suffered notable declines, each time it recovered. Even if the momentum was slow and the recovery slight, it did come back. The fact that the product has managed to endure so much and continues to help senior consumers proves its resiliency.

THE INDUSTRY WORKS TO FIND NEW FOOTING IN THE WAKE OF MAJOR PROGRAM CHANGE.

TED TOZER SITS DOWN IN OUR HOT SEAT PG. 22

THE IMPORTANT WORK OF REVERSE MORTGAGE TRAINERS PG. 24

TAXATION AND REVERSE MORTGAGES PG. 26

NOVEMBER 2015

COVER

HECM professionals work to promote the product after a series of program changes.

HUD ISSUES A GAME CHANGER FOR T&I DEFAULTS

Meet the Team SENIOR PUBLISHER

Reza Jahangiri PUBLISHER

Erik Richard EDITOR-IN-CHIEF

Jessica Guerin

CREATIVE DIRECTOR

Traci Knight

COPY EDITOR

Kersten Deck

PG. 30

Although some in this industry may feel battered by all the ups and downs, many have powered on—undeterred, even hopeful. The HECM offers a unique value proposition to senior consumers, one that may become crucial to a comfortable retirement. Many dedicated professionals are empowered by this fact, excited to teach others about the product. With significant program change in the past, the industry is ready to move forward. Armed with a stronger, more sustainable product, reverse professionals can focus on spreading the news about its potential.

JESSICA GUERIN Connect with me about how you can participate. Reach me at jessica@reversereview.com

MARKETING DIRECTOR

Alycia Greer

Printer The Ovid Bell Press Advertising Information phone : 630.207.3882 email : jessica@reversereview.com Subscriptions email : information@reversereview.com Editorial Content email : jessica@reversereview.com © 2015 Reverse Publishing, LLC All rights reserved. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, Reverse Review Publishing, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 3800 West Chapman Ave., Orange, CA 92868

Feedback Feedback is very important to us here at The Reverse Review. Send us your thoughts on this issue or comment online for a chance to see your perspective in print.

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The Reverse Review November 2015

Find out how AAG can deliver results for your business today! 866-964-1109 | AAG.com/Wholesale 6 | TRR

table of contents 10 | Book Review

28 | Appraising

A new book by Shelley Giordano explains how HECMs can help retirees achieve financial security.

FHA’s new single-family housing guidelines seek to elevate communication between appraisers and lenders.

15 | Stats

JOHN GOLDEN

Reverse Mortgages and Retirement Planning

TRR 11.15

HUD Enhances the Appraisal Process

September’s top lenders and HECM endorsement stats through August

30 | Servicing

HUD Issues a Game Changer for T&I Defaults

REVERSE MARKET INSIGHT

New guidelines enforce shorter timelines for borrowers seeking assistance to prevent foreclosure.

18 | NRMLA News

Read about the association’s current initiatives.

SHANNON OZANICH

MARTY BELL

33 | HMBS

All Quiet on the Street

21 | Roundup

A collection of recent facts and surveys affecting the reverse market

The year’s end will see spreads widen after a volatile summer.

22 | Hot Seat

34 | Spotlight

DARREN STUMBERGER

Ted Tozer

Building a Network of Professional Partners

President of Ginnie Mae RE

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42 | Last Word

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KENT KOPEN

Tips for increasing your referral base

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Tips for teaching your sales force to succeed in today’s marketplace

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The Important Work of Reverse Mortgage Trainers

ISSUE | Building a Network of Professional Partners

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How you can increase your referral base to better your business EW

Our Customer’s Experience: Ordeal or Opportunity?

EVERSE review

24 | Originating

LORRAINE GERACI

26 | Originating

Taxation and Reverse Mortgages

How a HECM can help alleviate tax burdens for high-net-worth seniors

Why we need to focus on enhancing our sales process at every turn

JIM MAHONEY

HARLAN ACCOLA

FEATURE

RY WORKS TO FIND NEW FOOTING IN THE WAKE OF MAJOR PROGRAM CHANGE.

38 | Feature The Impact The industry works to find new footing in the wake of major program change. JESSICA GUERIN

“In the past few years, the program has undergone massive alterations, with FHA’s policymakers working hard to secure the HECM’s long-term viability while making sure it can still meet the needs of consumers... Reverse specialists have endured quite a lot in a short amount of time. Still, many of those who have stuck it out hold firm to the belief that recent change will better the product.

IN EVERY ISSUE...

13 | INDUSTRY NEWS Headlining stories of the past month

REVERSE MORTGAGE DAILY YOU CAN DO IT!

REACH OUT TO US ABOUT WRITING FOR TRR. INFO@REVERSEREVIEW.COM reversereview . com

8 TRR | 7

The Reverse Review November 2015

contributors JOHN K. LUNDE

MARTY BELL

DARRYL HICKS

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

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 award-winning documentary film The Boys of Summer and produced 15 Broadway shows (including Ragtime, Fosse and Dirty Rotten Scoundrels) that won 27 Tony Awards.

Darryl Hicks serves as vice president of communications for NRMLA. Before joining the association in 1999, he spent three years writing for National Mortgage News, where he covered politics, regulatory changes impacting the financial services industry and niche mortgage products. At NRMLA, Hicks writes membership communications, contributes articles to Reverse Mortgage magazine, responds to questions from consumers, oversees the Certified Reverse Mortgage Professional program, and helps organize conferences and other events.

15 | Stats g

John K. Lunde

Marty Bell

Darryl Hicks

TED TOZER

22 | Hot Seat g

Ted Tozer

Lorraine Geraci

Harlan Accola

John Golden

Shannon Ozanich

Darren Stumberger 8 | TRR

Ted Tozer is the president of Ginnie Mae. He has more than 30 years of experience in mortgage, banking and securities. Tozer has served as senior VP at National City Mortgage Company, VP at the BancOhio National Bank, chairman of the Capital Markets committee of the Mortgage Bankers Association of America, and as a member of Fannie Mae Midwest Secondary Advisory Group. Tozer received his degree in accounting and finance from Indiana University. He is a certified public accountant and a certified management accountant.

18 | NRMLA News g

LORRAINE GERACI

24 | The Important Work of Reverse Mortgage Trainers g

Lorraine Geraci is VP of learning and development at Urban Financial of America, where she oversees all training and technical writing. She has more than 11 years of experience in the reverse industry and 20 years of experience in training, coaching and customer service. Formerly a top-producing originator, Geraci has trained more than 1,000 HECM LOs nationwide in classroom and webinar settings. A certified professional coach, she is the author of Living a Rock Star Life.

18 | NRMLA News g

HARLAN ACCOLA

26 | Taxation and Reverse Mortgages g

Harlan Accola is the branch manager and senior mortgage planner for Moneywise Mortgage, a division of Top Flite Financial. Accola has been in the mortgage industry for more than 15 years and is a registered financial consultant and a Certified Senior Advisor. Based in Marshfield, Wisconsin, Accola specializes in educating retirees and preretirees on the advantages of using reverse mortgages for financial and estate planning. harlan@allmoneywise.com

JOHN GOLDEN

SHANNON OZANICH

DARREN STUMBERGER

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

Shannon Ozanich is vice president of the tax and insurance department at Celink. She has held several positions at Celink since May 2002, including senior management of the default department (forward side). She was promoted to her current position in October 2011. Her process knowledge is unparalleled, as are her compassion and concern for clients and borrowers.

Darren Stumberger is an executive VP at LiveWell Financial and a leading expert on reverse mortgage securitization. He has more than 15 years of experience in residential mortgage trading and securitization, and chairs the NRMLA HMBS Issuer Committee. Stumberger has worked in New York City as a mortgage trader and banker for some of the nation’s leading investment banking firms, including Goldman Sachs, Morgan Stanley and Bank of America Merrill Lynch.

28 | HUD Enhances the Appraisal Process g

30 | HUD Issues a Game Changer for T&I Defaults g

33 | All Quiet on the Street g

contributors KENT KOPEN

JESSICA GUERIN

Kent Kopen is vice president at Emery Financial. He is a certified chartered retirement planning counselor and has held Series 7 and Series 66 securities licenses, and insurance and real estate broker licenses in both California and Colorado. Kopen earned a B.S. from the University of Colorado and an MBA from USC. He is the co-author of Borrow Smart Retire Rich.

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.

34 | Building a Network of Professional Partners g Kent Kopen

Jessica Guerin

38 | The Impact g

JIM MAHONEY

42 | Our Customer’s Experience: Ordeal or Opportunity? g

Jim Mahoney has been involved in the development, design, marketing, origination and servicing of home equity conversion loans since 1990. In his role as executive chairman at Celink, he focuses on strategy and direction. Mahoney has served as chairman, special advisor and CEO at Financial Freedom.

what’s on page

Jim Mahoney

page 42 -

34?

comments we loved “The reality is that our product and process have become more complicated... Let’s embrace it and challenge everyone in the assembly line to find ways to improve communication and make the process simpler, more personal and more pleasant for our customers.” —Jim Mahoney

Want tips to help you build your professional referral base? Check out this month’s Spotlight.

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8 TRR | 9

The Reverse Review November 2015

BOOK REVIEW Reverse Mortgages and Retirement Planning A new book explains how HECMs can help retirees achieve financial security.

What’s the deal with reverse mortgages, your friends might ask? Well, now you can save your breath and offer them a book that will answer their questions smartly and simply. Written by Shelley Giordano of the Funding Longevity Task Force, What’s the Deal With Reverse Mortgages? seeks to debunk many popular misconceptions about the product and educate readers on how a reverse mortgage can be used to bolster retirement savings. As principal at Longevity View Associates, Shelley Giordano provides expertise in education, marketing and sales to both lenders and firms associated with retirement income. With more than two decades of industry experience, Giordano also chairs the nonprofit Funding Longevity Task Force, a team of researchers, gerontologists, financial planners and lenders devoted to helping seniors understand how their housing wealth could provide a more secure retirement.

Detailing the product’s change since its inception in 1989, Giordano explores how this financial tool in its current form can be used to help retirees achieve financial security in retirement. She examines the benefits of a home equity line of credit and compares its features with the credit line available through a reverse mortgage.

Available now on Amazon, Giordano’s book topped the charts in the site’s retirement planning category and was acclaimed by Chicago Tribune columnist and former reverse mortgage skeptic Elliot Raphaelson, who writes that he would highly recommend the book to those looking to learn more about the financial options in retirement. “It will help you understand options such as fixed vs. variable loans, the nuances of using credit

10 | TRR

IF YOU’RE LOOKING FOR A GREAT READ TO HELP EXPLAIN HECMS TO FAMILY AND FRIENDS, WHAT’S THE DEAL WITH REVERSE MORTGAGES? IS AVAILABLE NOW ON AMAZON.

FIND IT ON lines and all of the mortgage fees,” Raphaelson writes. “Giordano’s book will also help you select the best options.” Giordano says she hopes the book will help cast a more positive light on reverse mortgages and how they can be used to help fund retirement. “There are a lot of really good books out there about reverse mortgages, so I tried to make this one a little bit more granular in terms of how people can position their housing wealth for retirement income security,” she says, adding that she drew heavily from research by John Salter, Wade Phau, Jack Guttentag, Barry Sacks and Gerald Wagner to build her case. “I hope it will serve as a resource for not only lenders, but also financial planners and consumers.” Giordano says she is working vigilantly alongside many of her active and outspoken colleagues to enhance the reputation of reverse mortgages and spread the word about how useful they can be. “As I was writing, I was getting righteously indignant about how little regard people have for reverse mortgage salespeople and how hard they work. Most of them are generous and ethical almost to a fault, and yet we still continue to carry this stigma around,” she says. “I’m hoping that this will dispel [readers’] preconceptions that people in the reverse mortgage business are predators.” Giordano says she feels that this collective effort to advance the product is finally taking root as more outside researchers and financial experts get vocal about the product’s benefits. “We’re just now making progress,” she says. “It’s exciting to be a part of it.” x

A TRIBUTE TO

Fred Thompson August 19, 1942 — November 1, 2015

Former Senator, actor and longtime reverse mortgage spokesperson Fred Thompson passed away earlier this month at 73 after a battle with cancer. Born in Alabama and raised in Tennessee, Thompson earned a law degree from Vanderbilt University before joining the U.S. Attorney’s office, where he served on the Watergate Committee investigating President Nixon.

Well known for his many movie and TV appearances, Thompson starred in The Hunt for Red October and Cape Fear, and played the U.S. district attorney on Law & Order. A conservative Republican, Thompson served as a U.S. senator from Tennessee for two terms. In 2007, he launched a campaign for the Republican nomination for presidency.

Since 2010, Thompson has served as spokesperson for AAG. “Fred imparted credibility, in-depth knowledge and genuine commitment to making a difference in the lives of others,” the lender said in a statement following Thompson’s passing. “With deep respect and gratitude, AAG will continue to carry out our shared mission of helping American seniors live better in retirement.”

movers & shakers READ ABOUT THE LATEST DEVELOPMENTS IN COMPANIES ACROSS THE REVERSE SPACE.

HAVE A COMPANY UPDATE YOU WOULD LIKE TO SEE PUBLISHED? Kristen Sieffert Named President of UFA

Finance of America Holdings has announced that current COO Kristen Sieffert will assume the role of president of Urban Financial of America. Former President and CEO Steve McClellan will move to the position of president of Finance of America Holdings. “Kristen has led the implementation of many of our business and operating processes. Most importantly, she models the core values that are key to our continued success,” McClellan says. Since 2004, Sieffert has worked in various roles within the industry, including customer relations, underwriting, sales and overall operations management. Prior to joining UFA, she was acting president of EquiPoint Financial and VP of Operations for One Reverse Mortgage.

Firstbank Adds to its Origination Team

Firstbank has announced new hires as it continues to grow its reverse origination

email it to jessica@reversereview.com

business. The lender has hired Patricia Whitlock (New York); Sue Durdock (Pennsylvania); Wayne Bodow, Esq. (New York); Al Jones (Texas); and Mike Ravotta (Pennsylvania) as reverse mortgage loan originators. FirstBank’s HECM division is extremely excited to continue to add qualified, experienced and enthusiastic loan originators to its growing team.

Reverse Mortgage Funding Adds to Its West Coast Operations

Reverse Mortgage Funding has hired Brandy Edwards as regional account executive, supporting the company’s third-party origination sales channel, and Natalie Santos as relationship manager. A designated CRMP, Edwards worked previously for Liberty Home Equity Solutions, where she spent almost seven years as regional account manager. Santos worked previously as junior underwriter for Summit Funding. “Brandy and Natalie are talented and experienced individuals who are well-versed in all phases of the reverse mortgage process, and dedicated to providing exemplary

customer service throughout each step,” says RMF President David Peskin. “We believe their ability to connect with customers and offer an informed perspective on reverse mortgages and the industry will help us further solidify our brand along the West Coast.”

Reverse Focus Hires Elissa Shaner

Reverse mortgage technology, tools and training provider Reverse Focus has hired Elissa Shaner as account manager. In her new role, Shaner, who has more than 15 years of technical training and software implementation experience, will assist clients in successfully integrating Reverse Focus technology into their business. “In her short time here, Elissa has become an invaluable member of the Reverse Focus team. She has shown proficiency and skill in working with brokers, TPOs and loan officers in implementation and training,” says Reverse Focus President Shannon Hicks. “Reverse Focus members will be well-served in working with Elissa.”

reversereview . com

8 TRR | 11

The Reverse Review November 2015

12 | TRR

industry news

November 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

frame to take first legal action where the mortgagee is actively reviewing the borrower for loss mitigation.

1. CFPB FINALIZES RULE

3. BARCLAYS: IMPROVED

TO INCREASE REVERSE MORTGAGE DATA REPORTING

The CFPB finalized a rule regarding the reporting requirements under the Home Mortgage Disclosure Act (HMDA)—also known as Regulation C—which requires lenders to report information about the home loans for which they receive applications or that they originate or purchase. Originally enacted in 1975, the HMDA serves as a resource for both the public and regulators so that they can use the information to monitor financial institutions, identify possible discriminatory lending, and assist in distributing public-sector investment so as to attach private investment to areas where it is needed. Among other things, the final rule requires that covered lenders report information about all applications and loans secured by dwellings, including reverse mortgages and open-end lines of credit.

// October 15, 2015

2. HUD EXTENDS DEADLINE

// October 20, 2015

‘HECM 3.0’ REVERSE MORTGAGE OFFERS ATTRACTIVE VALUE TO BANKS

HECMs have evolved over the years to become safer reverse mortgages for borrowers and investors, according to Barclays, and the product’s most recent transformation offers a “very attractive” value to banks. A research note released last week by Barclays managing director and global head of securitized products strategy says the most recent round of policy updates over the past few months have HECMs likely entering a new “steady period.” Viewing the HECM over the course of three phases (before the financial crisis, post-crisis and the “HECM 3.0” that stands today) Barclays says, “The new program is different from prior ones in many respects and fixes the weaknesses in the previous programs to make this a more stable product for investors, as well as a better financial risk for the FHA.”

// October 13, 2015

FOR DEFAULT REVERSE MORTGAGES—AGAIN

4. NEW VIEW ADVISORS

HUD is giving reverse mortgage lenders until January 18, 2016, to submit due and payable requests on HECMs in default due to unpaid property charges. Mortgagee Letter 2015-26 provides HECM mortgagees with an extension to the time frames previously provided in ML 2015-11, and extends the time

In an effort to provide a better understanding of the underlying characteristics of HECMs and HMBS, New View Advisors has introduced a new index focused specifically on reverse mortgage draw behavior. The Reverse Mortgage Draw Index

LAUNCHES REVERSE MORTGAGE DRAW INDEX

is the latest offering from New View Advisors, joining its Reverse Mortgage Prepayment Index, which has become an industry standard since its introduction in 2010. Together, the two indices strive to shed light on the “big three” reverse mortgage performance indicators: prepayment, default and draw behavior. The Reverse Mortgage Draw Index value is expressed as a monthly draw rate, equal to the amount of Line of Credit draws taken in any given month, divided by the Total Line of Credit Amount available at the beginning of that month. The index only applies to loans with a line of credit feature and does not include fixed monthly term or tenure payments.

// October 1, 2015

5. AARP’S NEW $40

MILLION INVESTMENT FUND TARGETS AGING IN PLACE INNOVATION

AARP and J.P. Morgan Asset Management have announced the formation of a new $40 million investment fund that will provide capital to companies focused on improving the lives of people age 50-plus, with a primary focus on helping seniors age in place. The AARP Innovation Fund will make direct investments in early- to late-stage companies developing innovative products that improve older adults’ capacity to age at home, convenience and access to health care, along with measures targeted at preventive health.

// October 4, 2015

reversereview . com

8 TRR | 13

The Reverse Review November 2015

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NMLS #1025894

stats September 2015

Top Lenders Report

12345 American Advisors Group

Liberty Home Equity

One Reverse Mortgage

Endorsements

1,239

401

353

UFA

RMS/S1L

Endorsements

315

265

Lender Endorsements

175

Lender Endorsements

SYNERGY ONE LENDING INC

148

FIRSTAR BANK NA

131

BANK OF ENGLAND

122

RESIDENTIAL HOME FUNDING CORPO

UNIVERSAL LENDING CORPORATION

FIRSTBANK 72

FRANKLIN FIRST FINANCIAL LTD

PROFICIO MORTGAGE VENTURES LLC

FIRST PRIORITY FINANCIAL INC

NET EQUITY FINANCIAL INC

FULTON BANK

ASPIRE FINANCIAL INC

ACADEMY MORTGAGE CORPORATION

NATIONWIDE EQUITIES CORPORATION

US MORTGAGE CORPORATION

PLAZA HOME MORTGAGE INC

VIP MORTGAGE INC

REVERSE MORTGAGE FUNDING LLC LIVE WELL FINANCIAL INC

HOME POINT FINANCIAL CORPORATION HIGH TECH LENDING INC

OPEN MORTGAGE LLC

SUN WEST MORTGAGE CO INC

MANN MORTGAGE LLC

UNITED NORTHERN MORTGAGE BANKERS LTD 41

RESOLUTE BANK

ADVISORS MORTGAGE GROUP LLC

SENIOR MORTGAGE BANKERS INC

THE FEDERAL SAVINGS BANK

NEW AMERICAN MORTGAGE LLC

AMERICAN PACIFIC MORTGAGE

AMERICAN NATIONWIDE MORTGAGE COMPANY 8

CHERRY CREEK MORTGAGE CO INC

CBC NATIONAL BANK

GMFS LLC

PEOPLES BANK

FAIRWAY INDEPENDENT MORTGAGE CORP

UNITED SOUTHWEST MORTGAGE CORP

BANC OF CALIFORNIA

MCM HOLDINGS INC

MONEY HOUSE INC

SUN AMERICAN MORTGAGE CO

SUCCESS MORTGAGE PARTNERS INC

M & T BANK

LAND-HOME FINANCIAL SERVICES THE MONEY STORE

TOWNEBANK 14

Brought to you by:

%%%%% LOOKING FOR MORE STATISTICS? Go to rmsinsight.net for all of the industry’s latest stats and rankings. reversereview . com

8 TRR | 15

The Reverse Review November 2015

16 | TRR

stats HECM Endorsement Stats Through August 2015 INDUSTRY SUMMARY

MO.

RETAIL UNITS CHG%

UNITS CHG%

2,248 15.64%

1,514 15.93%

3,762 15.75%

Retail Endorsement Growth

2,773 23.35%

2,078 37.25%

4,851 28.95%

2,500

-9.84%

1,907 -8.23%

4,407

2,867 14.68%

2,874

2,557 -11.03%

2,772

8.41%

2,597

-6.31%

1,895

2,477

TRAILING TWELVE MONTH ENDORSEMENTS 6,000

8.72%

4,000

Wholesale Endorsement Growth

20.98%

2,000

Total Endorsement Growth

14.41%

0 Wholesale *Numbers Represent Months

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%

2,971 19.94%

2,324 29.62%

5,295

24.0%

2,694

-9.32%

0.3%

5,025

-5.1%

2,929

8.72%

* Figures Above Reflect Change from Prior Month

TOT

2,159

2,331

5,749 14.41%

2,820 20.98%

32,259

24,818

57,077

60% 50%

FIXED RATE PERCENTAGE

40% 30% 20%

8/1/15

7/1/15

6/1/15

5/1/15

4/1/15

12/1/14 12/1/14

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

7/1/14

6/1/14

5/1/14

4/1/14

2/1/14

1/1/14

8/1/14

ARM

{ FIGURE }

12/1/13

11/1/13

10/1/13

10% 8/1/13

HECM ENDORSEMENT TRENDS

-9.15%

4,940 12.09%

8.7%

2,073

70%

{ FIGURE }

9/1/13

Retail

0.24%

TOTAL

2,062 -0.53%

3/1/14

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

WHOLESALE

FIXED

$1,200.0 $1,000.0

$600.0 $400.0 $200.0

8/1/15

7/1/15

6/1/15

5/1/15

4/1/15

3/1/15

2/1/15

1/1/15

7/1/14

6/1/14

5/1/14

4/1/14

3/1/14

2/1/14

1/1/14

12/1/13

11/1/13

10/1/13

9/1/13

$0 8/1/13

IN THE MILLIONS

HECM ENDORSEMENT

INITIAL PRINCIPAL LIMITS

$800.0

reversereview . com

8 TRR | 17

The Reverse Review November 2015

nrmla news BROUGHT TO YOU BY MARTY BELL AND DARRYL HICKS

T H E S I LV E R D E B U TA N T E B A L L There were 14 screens at the movie complex in Palm Beach Gardens, but there may as well have been just one. As I stood near the box office late Saturday afternoon, each person in the long line requested the same movie: The Intern. Palm Beach Gardens, after all, is a community where people go to retire, and they all wanted to see Robert De Niro, one of their own, playing a widower who interns for Anne Hathaway and gets to romance Rene Russo. Eventually, the ticket seller stopped asking, “Which movie?” and simply said, “How many?” Just five years ago, I doubt this movie would have been made by a Hollywood studio. And neither would Grandma or A Walk in the Woods or Ricki and the Flash. But we’re in the midst of a culture shift. Some people (particularly those who prefer deficit cutting to caring for our own) call it the Silver Tsunami, which means it scares them. I prefer to call it the Silver Debutante Ball. This is the national coming-out party for older Americans. The focus is on them. Hurrah. -Marty Bell

PROFESSIONAL ACHIEVES CRMP S TAT U S NRMLA congratulates Greg Gianoplus of Gateway Bank Mortgage, Inc., based in Wilmington, North Carolina, for achieving the status of Certified Reverse Mortgage Professional. Gianoplus is one of 112 individuals who have earned the CRMP designation since mid-2010. Each person is prominently listed on the NRMLA consumer website, at reversemortgage. org. To learn more about the CRMP, visit

nrmlaonline.org. 18 | TRR

CONTRIBUTE TO A GOOD CAUSE Throughout 2015, NRMLA has been focusing on the theme of “Helping More

making a $25 donation today. The money we raise will fund CSC’s distribution of Thanksgiving bags to its clients. Our goal is to fill 350 bags with nonperishable food items and word-search puzzle booklets.

People.” As a demonstration of this effort,

Started in the 1970s, CSC offers essential

member companies that are sponsors of

social services, such as free meals, free

this year’s Annual Meeting & Expo have

housing, free health services, and more

organized a charitable event on Monday,

than 40 different community programs

November 16, to raise awareness and

and classes for a very diverse group

money for the Curry Senior Center, a

of people. Staff members speak nine

nonprofit organization serving homeless

different languages, including Cantonese,

and low-income seniors in San Francisco’s

Laotian and Mandarin.

Tenderloin district. CSC serves 350 The Art of Thankful Giving Reception &

people breakfast

Benefit will take place at the Terra Gallery

and lunch 365 days

immediately following NRMLA’s opening

a year. There are 16 rooms available for

reception. There will be a silent auction to

very low-income seniors who otherwise

help raise funds, or attendees can donate

would be homeless. There is a waiting

separately.

list to get a room, but once someone is

If you can’t attend the Annual Meeting & Expo, NRMLA would appreciate your support for the Curry Senior Center by

assigned a room, they can stay there for as long as they wish. To make a donation today, please contact Sarah Aaronson at sarahaaronson@comcast.net.

NAIPC ANNUAL MEETING:

Creating a System for Aging in Place in America The National Aging in Place Council will be hosting its Annual Meeting, Creating a System for Aging in Place in America, at the Georgia Tech Research Institute in Atlanta, Georgia, from December 2 to 3. For two days, thought leaders and industry professionals from around the country will meet to discuss the best ways to plan for aging and improve the aging-inplace process.

The Atlanta Regional Commission’s (ARC) Kathryn Lawler is this year’s keynote speaker. Lawler’s topic is AgeFriendly Communities: Go Big or Go Home. She’ll discuss how this movement has made tremendous progress raising awareness about the need to prepare for an aging society. The meeting will address, among other subjects, advocacy, technology and development. Other panels and roundtable discussions include The

Boomer Sensibility and Overcoming the Denial of Aging; the Crossroads of Housing and Health Care; and Personal Finance: Retirement Funding Options, among others. A special presentation by Bob Carr, founder of Common Courtesy, and a tour of Georgia Tech’s Aware Home Innovation Center are also included in the agenda. To learn more or to register, visit NAIPC’s website at ageinplace.org.

nrmla news O N T H E D O C K E T:

HUD Updates Foreclosure Policies HUD increased the cap on foreclosure attorneys’ fees that may be eligible for reimbursement on FHA insurance claims and published a list of acceptable time frames within every state for completing the foreclosure process. Beginning January 1, 2016, the policies announced in Mortgagee Letter 2015-24 will supersede all prior reasonable diligence (foreclosure) time frames, attorney fee schedules, and Cash for Keys’ relocation allowances, including those outlined in Mortgagee Letters 13-38 and 02-13. “These updates are necessary to help align FHA’s foreclosure timelines with the industry’s experience in all states across the country,” HUD says. “In addition, the guidance provides greater clarity and/or more information to mortgage servicers.” The policies announced in Mortgagee Letter 2015-24 apply to companies that service FHA forward mortgages and reverse mortgages. However, HUD officials confirmed to NRMLA that changes to the Cash for Keys’ relocation allowance—an incentive that pays individuals to voluntarily vacate a property rather than face legal eviction—is not applicable to HECM.

Updating Form 92900-A, But...

HUD published a Notice in the Federal Register on May 15 requesting public feedback on its proposed revisions, which it said were necessary to:

While NRMLA supports HUD’s efforts to revise and update its Addendum to the Uniform Residential Loan Application (Form 92900-A), we are requesting that the department be more explicit about what sections of the addendum apply to HECM mortgagees and consumers.

• Differentiate between the initial and final Uniform Residential Loan Application (URLA)

MEMBERS CAN DOWNLOAD INTO THE MEMBER SITE

• Remove references to HUD Handbooks no longer in use by the Office of Single Family Housing • Update language regarding acceptable sources of funds • Provide updated nondiscrimination language • Update terminology to reflect new Single Family Housing Handbook 4000.1

Secure Lending Incorporated Cleveland, Ohio (lender member)

Form 92900-A is required in FHA loan packages, both forward and reverse, but much of the language is tailored to forward mortgages. In recent comments submitted to HUD, NRMLA highlighted sections of the proposed addendum that do not apply to HECM mortgagees and consumers, and noted that there is currently no

• Revise mortgagee certification on debarment and suspension to be loan-level specific

RTC Mortgage Corporation Laguna Beach, California (lender member)

signature line for non-borrowing spouses.

PCV Murcor Pomona, California (associate member)

NRMLA SUPPORTS

Capital Funding Laguna Niguel, California (lender member)

“The reasonable diligence time frame begins with the first legal action required by the jurisdiction to commence foreclosure and ends with the later date of acquiring good marketable title and possession of the property,” ML 2015-24 states. “HUD expects mortgagees to comply with all federal, state and local laws when prosecuting a foreclosure and pursuing a possessory action.”

NRMLA welcomes the following new members.

The mortgagee letter includes attachments with updated attorney fee schedules and reasonable diligence time frames for every state.

NEW MEMBERS

SingleSource Property Solutions, LLC, Canonsburg, Pennsylvania (associate member)

NRMLA’s complete comments BY LOGGING

NRMLAONLINE.ORG. reversereview . com

8 TRR | 19

PRC HAS BEEN

The Reverse Review November 2015

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 transactionsâ&#x20AC;&#x201D;correctly. Having closed more than 150,000 reverse mortgage loans, PRC understands the importance of comprehending all HUD and lender guidelines.

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

RE T IRE MENT ST AT S

NOT EVERYONE DREAMS OF RETIRING.

THE STATES WITH THE HIGHEST PERCENTAGE OF SENIORS

There are 1.2 million people over the age of 75 who work full or part time, according to the U.S. Department of Labor. By 2019, statisticians predict that more than a quarter of the workforce will comprise Americans over 55.

17.3%

16%

Florida

West Virginia

15.9%

15.4%

Maine

Pennsylvania

MO NE Y MAT TE R S Americans aren’t saving for emergencies.

A bankrate.com study indicates that 1 in 4 Americans have no funds socked away in case of an emergency.

14.9% Iowa

-U.S. Census Bureau

A G IN G T RE N DS

REPORT CALLS FOR NATIONAL EFFORT TO HELP SENIORS AGE IN PLACE.

A study published by the Bipartisan Policy Center reports that the vast majority of seniors want to age in their homes. “The strong preference to grow older in one’s own home and community stems from a desire among many seniors to remain close to family and friends and maintain the social connections that have enriched their lives,” the paper states. In order to make this possible, the paper asserts that a “comprehensive national effort is required,” as the cost of health care often makes meeting aging-in-place expenses unmanageable.

NUMBER CRUNCH

81 PERCENT of householders 65 and older owned their homes as of fourth quarter 2011. -U.S. Census Bureau reversereview . com

8 TRR | 21

The Reverse Review November 2015

THE

REVERSE review

THE

N OV EMB ER 2015

The reverse mortgage field should be rife with opportunities, as this option should be considered for all retirees.

Ted From his favorite TV show and his first car to his thoughts about the reverse PRESIDENT Ginnie Mae

22 | TRR

mortgage market, we get the facts from Ted Tozer, President of Ginnie Mae, in this monthâ&#x20AC;&#x2122;s edition of The Hot Seat.

personal >

Ten years from now I hope that the

professionAl >

changes made at Ginnie Mae that

industry is how to make reverse

have occurred during my tenure have

mortgages more of a mainstream

been institutionalized so that Ginnie

product. That’s important because no

Mae continues to be a major factor in

as taking advantage of senior citizens or their heirs. You can help prevent

My favorite vacation was a week in

this through more education, so that

St. Simons Island, Georgia, to enjoy

borrowers and their heirs know exactly

time with my family away from all the

what they are agreeing to with a

hustle and bustle of the modern work

reverse mortgage. You have to make

world. >

the borrowers and lenders feel more comfortable with the product and

My first car was a 1979 Mercury

potential headline risk.

Cougar. >

If I could meet anyone, past or

is interesting. The program could be

he was able to motivate and unify his

the majority of consumers have little

cabinet on very divisive issues.

savings for retirement and they are

My favorite movie is Goodbye, Mr.

biggest asset. However, it’s critical

living longer. Their home is often their that we have a program that makes

make an impact in small ways, even

everyone—lenders and borrowers—

if you don’t realize you are making a

comfortable, and that borrowers

difference. I never miss an episode of

understand the program. >

Jeopardy! >

consideration in retirement planning. >

have come a long way in terms of

treat people properly and be a positive

understanding how we can make the

influence. He was a community banker

program better. Now, we just have to

and was willing to take a chance

move forward and make this a truly

on small business owners so they

impactful program for future seniors.

could have a positive impact on the

My first job was as a corporate accountant.

My favorite books are the early ones by Tom Clancy.

I am optimistic about the reverse mortgage industry because we

My grandfather taught me how to

community.

Ten years from now the reverse

mortgage industry will be a major

Every morning I read the paper and have breakfast with my wife.

If I could time travel, I would like to meet Abraham Lincoln. It’s fascinating to read how he dealt with confrontations and adversaries in order to achieve his goals.

very important in the future, given that

Chips, because it shows how you can

fact

The future of reverse mortgages

present, it would be Abraham

Lincoln. I would enjoy observing how

fun s

organization wants to be perceived

the mortgage industry. >

The biggest challenge in the

Reverse mortgage professionals

can best support the public image

of reverse mortgages by continuing to educate borrowers about the

realities of the reverse mortgage program. It’s a good program that can help many, many borrowers, but they need to understand the consequences and the realities of getting a reverse mortgage.

The best lesson I’aves ever lear ned w ke t o treat people lio be you would like t treated. The greatest setback for our industry is borrowers not thoroughly understanding that they have to pay the taxes and insurance on the property. If they don’t take that responsibility, foreclosure is inevitable. reversereview . com

8 TRR | 23

The Reverse Review November 2015

ORIGINATING

EDUCATE

The Important Work of Reverse Mortgage Trainers By Lorraine Geraci

Tips for teaching your sales force to succeed in today’s marketplace

or from articles they have read without ever sharing personal experiences or discussing work they have done that has led to success—or to disaster. I’ve found that personal anecdotes, good and bad, can humanize the teacher and help foster a stronger bond between teacher and student, creating a more open and productive classroom environment. Remember, the Audience Has Changed

In the wake of major policy change, education in the reverse mortgage industry is more essential than ever. HECM professionals need to not only stay up-to-date on current rules and regulations, but also understand how the product’s audience has changed. The target market for this product has shifted, and the way we educate our sales teams must shift along with it. Many lending institutions and NRMLA are providing increased education for sales professionals. Experienced trainers are crucial to meet these needs. The task of educating sales professionals can be extremely difficult in 24 | TRR

a world where priorities are changing and fires need to be put out. A trainer’s focus is often pulled in a million different directions. It’s a difficult job, and one that requires a special set of skills and a keen self-awareness. Everyone Learns Differently During my 24 years of training, supervising, and working in customer service and sales, I have been fortunate enough to meet thousands of people. Some were resilient, some creative, some distraught, some unhappy, some successful, some struggling and some inspiring. But they all had one thing in common: They were each unique.

One mistake some educators make is to teach, preach to, present to and train every student the same way. To avoid this pitfall, assess your classroom. Try to connect with each student individually. Learn what makes each student tick. What gets them jazzed? What makes John more passionate than Jerry? A good educator takes the time to assess his students before determining what the best educational approach is for them. It’s surprising how often this does not happen.

HECM specialists are not just dealing with older adults anymore—we are talking to other professionals, explaining the advantages of the reverse mortgage program to a variety of potential referral partners. The ability to comfortably explain the loan at the kitchen table to one or two older adults is not the main issue anymore; it’s no longer the key teaching point. There are dozens of other ways reverse specialists now work to spread the word, and your students must learn to successfully sell in a multitude of situations. Nowadays, salespeople have to present their products in front of large groups, attend social and business events,

Get Personal Good educators share the rewards as well as the bruises they have accumulated along the way. Many teach from a book

It’s important to study up on how to use programs and graphics to create stimulating webinars that will keep your students engaged.

ACCORDING TO LORRAINE

ORIGINATING and participate in grassroots networking. We must help our students develop the skill sets needed to handle all of these situations. Revise Your Lessons for Those With Forward Experience

Master the Art of the Webinar

Many companies in the reverse space are taking a much firmer stance on the importance of the growth and development of their employees. Companies that properly focus on and invest in the professional development of their sales teams will shine and prosper. A trainer’s role in this process is pivotal. With a dedication to bettering the sales team you teach, you can have a major, positive impact on your company’s bottom line. n

fnctitle.com

HMBS

240.864.4844

Educators Are Key

SERVICING

Reverse mortgage trainers should carefully consider the scope of their lesson plans. Topics such as Financial Assessment, reverse mortgage products and applications, using loan origination software, and navigating the concerns of older adult homeowners are important, but so are classes that focus on general professional development, such as presentation skills, public speaking, project management, telephone techniques, business plan writing, using social media and grassroots networking.

This “soft skills training” is essential to equipping our sales professionals with the skill sets they need to be successful.

APPRAISING

Professionals are now frequently scattered throughout the country, or working remotely, so webinar training is more and more common. But connecting with students online can be challenging. It’s important to study up on how to use programs and graphics to create stimulating webinars that will keep your students engaged. In addition, instructors should work to develop an assured and friendly tone of voice that will draw in listeners. Finally, make sure your presentation flows at a solid pace so attention spans do not begin to wane.

Diversify Your Lesson Plan

ORIGINATING

More and more traditional mortgage sales professionals are entering the reverse mortgage space, and they require special training that explains the differences between the two products. learning to communicate with older adult homeowners and understanding financial abuse and elder-related situations are just two examples of subjects that must be taught. Educators must teach these students how to explain the advantages of a reverse mortgage to older clients and ensure they understand

FHA’s purpose for offering this product to a protected class of people.

“Many teach from a book or from articles they have read without ever sharing personal experiences or discussing work they have done that has led to success— or to disaster. I’ve found that personal anecdotes, good and bad, can humanize the teacher and help foster a stronger bond between teacher and student, creating a more open and productive classroom environment.”

SPOTLIGHT

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

The Reverse Review November 2015

ORIGINATING

Taxation and Reverse Mortgages By Harlan Accola

It is easy for high-income, high-asset folks to make costly tax mistakes, and unfortunately, many financial advisors have narrow, orthodox views of retirement money management, which can limit people’s options. As reverse mortgage professionals, the more we know about a variety of retirement products, the more valuable we are to our clients. Income taxation is a huge issue in retirement and often ignored until a big check needs to be written to the IRS because a large withdrawal is made on a retirement account. So, what is the deal with taxes in retirement? In his book The Power of Zero, David McKnight does a great job of explaining the value of having money in non-taxable accounts for flexibility of withdrawals in retirement. He argues that it is not only how much we have in retirement funds, but also how much we can actually use. For example, a married couple has $40,000 in monthly income—including pensions and Social Security—and has another $40,000 coming out of IRAs. If they want to pull out another $30,000 to buy a car or remodel, they will likely be pushed into a 30 percent-plus tax bracket for the last distribution. So that $30,000 car really cost the client $42,000, not $30,000, because they have to take enough out of the IRA to pay the taxes. They may not even realize that they can be taxed up to 85 percent, even on their Social Security income.

How a HECM can help alleviate tax burdens for high-net-worth seniors Everyone has heard about diversification of investment, but very few advisors talk about diversification of income distribution in retirement. Taxes are usually the largest single threat to our retirement nest egg— especially for those who are wealthy. Yet most people just look at their “number” and forget how much has been pledged to the IRS from their IRA! It is important that we understand the role that reverse mortgages can play in this critical part of retirement income distribution. People in this industry are tired of hearing that reverse mortgages are just for the poor and those who have mismanaged their money or poorly planned for retirement. We know that a HECM is far more versatile. There are clear advantages to getting a reverse mortgage when you don’t need one.

There are lots of rules that apply to seniors in retirement, from increased standard deductions to required minimum distributions. The IRS is involved heavily in retirement accounts because it gave you a tax break when you put the money in many years ago—and you were told that you would be in a lower tax bracket when you retired. Seniors who properly saved and have a half million or more in IRAs or 401(k)s likely will not be in a lower tax bracket. For example, I recently worked with a client with a multimillion-dollar IRA who had required minimum distributions of more than $150,000 per year—not even counting his other income. He is not in a lower tax bracket. So, what does a reverse mortgage have to do with all of these rules? Many high-income individuals want to continue to have a mortgage so they have some deductions to reduce their taxable income. In fact, this is often an objection from potential clients. They have lost all of their other deductions—no dependent children, no college costs, no business expenses. They don’t want to pay off their mortgage because they still want (or need) the tax deduction; it’s all they have left. The sad thing is that a forward mortgage is very rigid and payments must be made every month no matter what. So let’s look at a perfect example of when a reverse mortgage can help from a deduction standpoint when a traditional mortgage could not. A client only has a $200,000 mortgage at a 4 percent interest rate. The mortgage interest is only $8,000 per year and will probably not be enough to itemize for a married couple because they would be better off using the standard deduction. So the interest deduction is worthless to them in further reducing their income. But if that same balance was on a reverse mortgage, they would not have to make

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. 26 | TRR

ORIGINATING

GOING TO THE SOURCE

of credit at 62. They then have control over how much non-taxable income can be taken out each year to reduce the amount of money they need from other taxable sources of retirement income, including the ability to delay Social Security income. One of my clients ended up saving more than $20,000 per year in taxes by making this simple change in the distribution of their retirement income.

“As reverse mortgage professionals, the more we know about a variety of retirement products, the more valuable we are to our clients. Income taxation is a huge issue in retirement and often ignored until a big check needs to be written to the IRS because a large withdrawal is made on a retirement account.”

SERVICING

In another example researched by Harold Evensky and John Salter at Texas Tech University and published in the Journal of Financial Planning, a client has no mortgage whatsoever and no real need for addition cash flow. So they simply take out a line

But the bottom line for your wealthy, high-income clients is that they need to be aware that a reverse mortgage can be a valuable cash management tool as well as a potential tax savings vehicle. Those who say that the reverse mortgage is a product of last resort just don’t understand the power of this very unique tool! n

APPRAISING

But wait, it gets better! If your client has an ARM loan, it is a line of credit that continually expands to either make room for interest or additional borrowing power. So, when the client makes a $30,000 payment, which is applied first to interest and MIP, the credit line increases by about the same amount the very next statement. So, if the client pulled out $30,000 from the IRA to make the interest payment, now they can pull that same $30,000 from their line of credit and get the cash back— tax free!

Of course, your client must seek the advice of a tax professional and be aware that every situation is different. But, it is up to you to educate the client and the advisors you deal with about the tax implications and flexibility of a reverse mortgage compared with a forward mortgage. I often tell my clients that they have paid monthly mortgage payments for all those earning years and now they are old enough to decide when they want to pay. Maybe they want to pay their mortgage interest monthly, annually or after they die. When they want to make payments is up to them, not the mortgage company.

ORIGINATING

payments for two or three or even four years, and then they would make one big payment of $20,000 or $30,000 in accrued interest and MIP (if applicable). Then, they would get a 1098 to use for that year and take full advantage of the deduction because it would exceed the standard deduction. Try that with a traditional forward mortgage! Don’t forget that no monthly mortgage payments were made, so no cash flow had to be taken out of the nest egg to potentially cause an increase in the tax bill.

HMBS SPOTLIGHT

VISIT US AT NRMLA! FIND US AT BOOTH 7 reversereview . com

8 TRR | 27

The Reverse Review November 2015

APPRAISING

ADVANCE

HUD Enhances the Appraisal Process By John Golden

FHA’s new single-family housing guidelines seek to elevate communication between appraisers and lenders. September 14, 2015, marked another pivotal day in the appraisal industry. On this date, HUD’s new FHA Single Family Housing Policy Handbook 4000.1 went into effect for all FHA Case Number files issued on and after that date. This new handbook combines and supersedes more than 400 various single-family handbooks, mortgagee letters and other documents into a single source. If you have ever had the experience of researching single-family housing policy—combing through the multiple resources of handbooks and mortgagee letters just to find answers to a single situation—you understand what a monumental development this is. The new handbook has been placed in an online resource library powered by the Allregs electronic platform, a wellknown publisher of underwriting and loan product guidelines for a number of key organizations in the lending industry, and can easily be accessed through links on the HUD website. This allows for easy access to and through the 4000.1 SFH document libraries, easing previous tensions associated with researching guidelines. The new handbook is broken up into five sections: 28 | TRR

I. Doing Business with FHA II. Origination through Post-Closing/ Endorsement III. Servicing and Loss Mitigation IV. Claims and Disposition V. Quality Control, Oversight and Compliance

The appraisal guidelines are housed in Section II under Subhead B: Appraiser and Property Requirement for Title II Forward and Reverse Mortgages. Within Subhead B, there are 12 categories covering all aspects of the appraisal process, pulling together guidance from numerous handbooks and mortgagee letters. While monumental, this new handbook did not introduce sweeping changes to the appraisal process for HUDrelated reports. Instead, a key focus was highlighted for appraisers to observe, analyze and report: the need for enhanced communication during various stages of the appraisal process. With the new handbook in effect, mortgagees are required to provide a

point of contact so that the appraiser can communicate any noncompliance issues determined in the inspection process. Further, this contact information must be provided to the appraiser before the appraisal process begins. The idea is to bring the appraiser and the DE underwriter together early in the process to work through noncompliance issues so that the appraiser may seek guidance or direction in certain unusual situations. This is a major benefit for all parties involved as it eliminates the element of surprise for the mortgagee when issues with the property arise. It also helps eliminate the need for requests for correction or additional explanations after an appraisal report has been submitted, which is a plus for the appraiser. As a national appraisal management company, Landmark Network has attempted to foster this kind of communication for some time, especially in unique situations where the appraiser and DE underwriter have difficulty understanding each other’s positions on appraisal matters. As part of these new guidelines, immediate communication is now a mandated part of the process.

APPRAISING THE HANDBOOK ALSO OUTLINES OTHER CHANGES that will impact the appraisal process. For example, there are 22 specific situations identified within the new 4000.1 SFH handbook in which the appraiser is now required to notify the mortgagee about minimum property requirements or deficiencies regarding:

1. New construction 2. Property rights not held in Fee Simple or Leasehold

8. Externalities related to properties being located within 10 feet of a pipeline easement boundary

10. Lack of safe pedestrian and adequate vehicular access

6. Encroachment effects on the property

11. Probable or imminent danger of subsidence

13. Property

improvements that do not comply with HUD’s defined characteristics

covering, or a roof cover with less than two years of remaining physical life

14. Multiple ADUs on

19. Inability to view

a single parcel

15. Inoperable conveyed appliances 16. Heating systems that do not comply with HUD’s defined requirements

systems

18. Failure of the roof

the attic area safely in its entirety (requires rescheduling of the inspection)

22. Observed conditions that potentially affect the safety, soundness or security of the dwelling, but are being deferred to inspection by a qualified individual or entity

20. Inadequacies

related to the basement and/or inoperable applicable sump pump

21. Inability to view

the crawl space safely in its entirety, or crawl space areas that do not meet HUD’s defined requirements

SERVICING

5. Non-residential areas exceeding 49 percent for the SFR property

4. Leasehold interests

17. Inadequate utility

APPRAISING

that do not comply with HUD’s defined requirements

9. Externalities related to proximity to overhead electric power transmission or distribution lines

12. Coastal Barrier Resources System or a Lava Zone location

ORIGINATING

3. PUD communities that do not meet HUD’s definition

7. Externalities related to special airport hazards for proposed construction, under construction or properties less than 1 year old

HMBS

( Three-year listing history for subject

Key reporting changes required for HUD-related appraisal reports now include:

( Three-year prior sales/transfer history

( New requirements for patios/decks indicated on the sketch—must show covered/uncovered

( New photograph requirements for

subject street scene, new construction grading, interior rooms, common areas and condominium project amenities

( Inclusion of at least two closed sales

within 90 days of the effective date of appraisal, and two active listings or pending sales whenever housing trends

are reported to be in motion—increasing or decreasing (formerly only required for decreasing motion) (FHA-specific requirement—industry is 12 months) for all comparables (FHA-specific requirement—industry is 12 months)

Finally, the most noteworthy reporting change is that there is now no requirement for the comparable sales in positions one through three to have settled within the past 12 months of the effective date in the Sales Comparison Approach—though a minimum of three sales that have settled within the past 12 months must be provided. This allows the appraiser the latitude to present what is considered to be truly the best

examples of comparison for the subject property in positions one through three, previously a major point of contention for appraisers and mortgagees. Certainly, these new communication requirements will take some getting used to for both parties. However, such dialogue will provide a platform of mutual respect between appraisers and DE underwriters as they begin to work together. Liability related to the appraisal report has always been shared to a certain degree between these two individuals, though rarely recognized or considered on one side or the other. Communication and collaboration in this regard will help to streamline the appraisal process for the ultimate benefit of the end recipient: the borrower. Kudos to FHA for this major single-family housing effort. n

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SPOTLIGHT

The new requirements for the mortgagee point of contact ensure the ability for the appraiser to meet their notification obligations for the matters indicated above.

The Reverse Review November 2015

SERVICING

LEARN

HUD Issues a Game Changer for T&I Defaults By Shannon Ozanich

The most profound impact to borrowers is the requirement for the servicer to request HUD’s approval to call the loan due and payable within 30 days of advancing funds to pay property charges on behalf of the borrower. Under the prior mortgagee letter, the servicer had flexibility to work with the borrower to exhaust all loss mitigation options available before the loan had to be presented to HUD for due and payable approval. This dramatic change in policy has created an extremely challenging timeframe for the senior borrower to reach out for counseling assistance and obtain assistance from their servicer, local assistance programs or family.

New guidelines enforce shorter timelines for borrowers seeking assistance to prevent foreclosure. There are two constants in the life of every reverse mortgage industry professional: change and adaptation. The economy and housing markets change, we adapt. The borrower demographic changes, we adapt. HUD makes changes, we adapt. Let’s take a look at some of the more sweeping changes the last few years have brought forward on tax and insurance tracking, and how servicers are working diligently to soften their impact upon our industry’s most valuable spokesperson: the borrower. The January 2011 release of Mortgagee Letter 2011-01 provided much-needed guidance on mitigating tax and insurance defaults, and rumors swarmed after its release that more detailed HUD guidance on defaults would be forthcoming. Several years passed before that happened, and in the interim, servicers were provided with a certain amount of flexibility in the ML to assist defaulted borrowers. We began at Celink with instituting a Single Point of Contact (SPOC) program, which assigned a dedicated representative to each borrower to help them through the default process. We participated in Fannie Mae’s “Know Your Options” customer care training program, and recently participated in Hardest Hit Funds (HHF) programs aimed at helping reverse mortgage borrowers in default receive state assistance grant funds to help them pay delinquent taxes and insurance. On April 23, 2015, HUD released updated guidance relating to tax and insurance default servicing in ML 2015-11, which replaced guidance released in ML 2011-01. After reading the ML several times, meeting with HUD in Washington, D.C., and holding several conference calls with others in the reverse mortgage industry, the adaptation process began in earnest. The implications to both the servicer and borrower are immense and these sweeping changes impact borrowers, servicer staffing requirements, servicing system programming, processes and procedures. In a word: everything. 30 | TRR

Florida and California have implemented HHF programs for borrowers once their loan is in default, and the counseling, application, approval and funding process for these programs typically takes an average of 120 days from start to finish. ML 2015-11 provides a 45-day extension to the due and payable process for borrowers who have received conditional approval for funding, but that step in the process is typically around day 60-90. In all states, the counseling process alone takes an average of 60 days to get the borrower approved for any local assistance and to complete the budget plan. Servicers are also experiencing situations where a delinquent tax advance is made by the servicer and the borrower pays the county directly before the servicer’s check is received. The borrower then provides proof they paid the delinquent taxes and the servicer has to request a refund from the tax collector. The tax refund process through the tax collector can take anywhere from four to six weeks, and three to six months in extreme cases. In either case, the borrower’s loan could erroneously be called due and payable, with HUD-required appraisal and inspection charges added to their loan balance. Another significant change is that borrowers are no longer eligible to enter into a repayment plan until the loan is called due and payable. Previously, if the borrower agreed to a repayment plan (maximum of two years), then the loan did not have to be called due and

ACCORDING TO SHANNON

SERVICING

If borrowers are not eligible for a repayment plan, they may be eligible for protection against foreclosure if they meet the age and unique occupancy criteria for an “at-risk extension.” The ML was not clear as to what documentation is required by HUD for this extension, making the request process challenging for the servicer and the borrower. If approved, the borrower must certify on an annual basis that they still qualify for the extension. Delinquent homeowner association (HOA) dues must be paid in full by the borrower within 30 days of the advance, or the loan will be required to be called due and payable and repayment plan options will not be available for these advances. This is particularly challenging to track, as historically the delinquent HOA dues have been included in the property charge default balance, and now need to be tracked and repaid separately.

We strongly stand with HUD for the need to set limits and boundaries on when a loan should be called due, however, we know from experience that the appropriate and reasonable number of days is not 30—it is realistically closer to 90-120 days. That sort of time frame gives the servicer a proper amount of time to effectively assist senior borrowers to research their options to cure the default. ML 2015-11 can be likened to the proverbial stone dropped into the pond. The ripples (or ramifications) for our industry and borrowers continue. Despite the strict and rigid timeline changes and adaptations we all must make, our primary goals must remain unchanged: Assist senior borrowers in repaying the default, work with them to become sustainable within their budgets (which ensures payment of future property charge obligations), and remain peacefully in their homes. The greatest spokesperson for our industry and product deserves no less. n

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SPOTLIGHT

Celink has experienced a slight increase in borrowers paying the default in full within the first 30 days or shortly after the loan is called due and payable. Borrowers who are unable to repay in full are willing to provide their budget information to be considered for repayment plan approval. We are very hopeful that the

Even with this positive outlook, more borrowers need additional assistance. Servicers have genuine, substantiated concerns over the short window of time provided for senior borrowers to address their default before the servicer is required to request HUD to call the loan due and payable. Borrowers simply don’t have enough time to make contact with their servicer, go through counseling and apply for assistance before their loan is moved on to the foreclosure process.

HMBS

Loans that were called due for tax and insurance default prior to April 23, 2015, are not eligible for a repayment plan, even if the borrower was in the process of establishing a repayment plan prior to the release of ML 2015-11. This condition has placed an additional hardship on many senior borrowers who otherwise may have been eligible (given their available surplus income) for a repayment plan under the new guidelines.

new repayment plan calculation will identify borrowers who can truly afford to remain in their home, as well as those who cannot.

SERVICING

If the repayment plan is approved, the servicer must request a Property Charge Loss Mitigation extension through HUD’s HERMIT system to extend the due and payable timeline for the duration of the repayment plan. While the due and payable/foreclosure processes are on hold during this time that the borrower is performing on their repayment plan, a HUD-required appraisal and monthly recurring property inspections are still required,

even while loans are in a repayment plan status.

APPRAISING

payable while the borrower performed on that plan. Under the new rules, the borrower’s budget must be reviewed for repayment plan eligibility and the borrower could have up to 60 months to repay the default balance as long as the payment does not exceed 25 percent of their surplus income and the loan does not reach 98 pecent of the Max Claim Amount (MCA). If the borrower’s loan balance has already exceeded 98 percent of the MCA, they are not eligible for the repayment plan option. The MCA is not something that the borrower typically is aware of (as the MCA is typically a “back-office” threshold used by servicers and investors, not borrowers) and challenges can arise when communicating this complicated concept to the senior borrower.

ORIGINATING

“Loans that were called due for tax and insurance default prior to April 23, 2015, are not eligible for a repayment plan, even if the borrower was in the process of establishing a repayment plan prior to the release of ML 2015-11. This condition has placed an additional hardship on many senior borrowers who otherwise may have been eligible (given their available surplus income) for a repayment plan under the new guidelines.”

The Reverse Review November 2015

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HMBS

UPDATE

All Quiet on the Street By Darren Stumberger

$6b

have issued just over in loans and tails in

2015 thus far reversereview . com

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SPOTLIGHT

DID YOU KNOW

Also, there’s been an uptick in prepayments for seasoned loans

HMBS

“The Street is heavy with paper heading into Q4, and coupled with year-end balance sheet pressure, spreads should continue marching wider into 2016.”

SERVICING

HMBS spreads continue to march wider into the fourth quarter with no near-term catalysts to flip the script. Fixed-rate HMBS spreads are now at 90 after touching 35 to swaps earlier in the year. One-month Libor/10 percent cap loans are at 80 discount margin (DM) versus 35 DM in the spring, and annual Libor is touching 40 DM versus its forming spot in the mid-teens.

To date, there’s been roughly $6.7 billion in HMBS issuance in 2015, with about $6.5 billion of that being structured into HREMICs. Since program inception, the best execution for floating HMBS has been stripping coupon into a par-priced floater with corresponding WAC (weighted average coupon) IO (Interest Only class). With the market shifting to 80-90 percent floating-rate origination, this trend will continue (i.e., HREMIC execution). Nomura has been the lead HREMIC structurer to date in 2015 with $2.4 billion in deals brought to market. BAML, which has maintained a first-place position in HECM-structured deals since 2005, is close behind at $2.1 billion. Credit Suisse and Barclays round out the league table. In HMBS issuance terms, six issuers comprise 90 percent of volume. AAG, RMS, Urban, RMF, Live Well and Liberty have issued just over $6 billion in loans and tails in 2015 thus far, and as an industry we should get within striking distance of $10 billion for the year. n

APPRAISING

The year’s end will see spreads widen after a volatile summer.

Prepayments on HECMs have been mostly volatile and erratic since the principal limit factor change in August 2014. Large numbers of HECMto-HECM refinances (due to the FHA program change) on the 2013 HECM 60 vintage firmly place this vintage as the worst-performing ever. Partial prepayments on newly originated floating-rate loans also continue to plague the sector, whereas loan officers and brokers exchange the elimination of closing costs for drawing more line of credit than they would otherwise have at closing (and then coaching the consumer to pay back the funds shortly thereafter in subsequent months).

due to more aggressive servicing procedures. So, the purity of the HECM prepayment story that has been welcomed by investors since 2009 has been put to the test. Security and originator/ GNMA issuer selection is paramount to sidestepping land mines and finding value in the sector.

ORIGINATING

Summertime market volatility brought on by plunging commodity prices, China’s equity market rut and global growth concerns caused many securitized product investors to move to the sidelines. In addition, many banks typically do their buying in the first half of the year. Without bank sponsorship, demand for HMBS and HREMIC floaters tend to dry up, causing secondary market spreads to widen. The Street is heavy with paper heading into Q4, and coupled with year-end balance sheet pressure, spreads should continue marching wider into 2016.

The Reverse Review November 2015

SPOTLIGHT

Building a Network of Professional Partners M O NT

H’

ITION

HOW YOU CAN INCREASE YOUR REFERRAL BASE TO BETTER YOUR BUSINESS

IS TH

B Y K EN T K O P EN

11 / 2015

WANT TO SEE MORE ARTICLES LIKE THIS?

See them at reversereview.com.

everse mortgages are such a feel-good product. The tangible and positive difference we make in our clients’ lives is easy to see. And yet the grind of finding clients and the financial pressure of making a sale often detracts from the good we do. What if there were a way to systematically build a reverse mortgage practice based entirely on referrals from professionals you knew, liked and trusted? What if all your clients came from people who respected you and respected reverse mortgages as a financial tool? The key to origination success is consistent, predictable lead generation at a reasonable cost. At scale, consumerdirect can be effective, however, it is capital-intensive and difficult to maintain a sustainable competitive advantage— others quickly copy what works and conversion rates drop. The most profitable and efficient lead is a referral accompanied by an endorsement. The 34 | TRR

big question is: How do you build that type of practice in one year instead of 10? The most likely referral sources are those who come in contact with large numbers of people who may need our services. Everyone knows this, but they lack strategy, tactics and patience to build relationships with financial and senior services professionals who can refer ideal prospects. Regardless of how brilliant you are, it takes time to build relationships and educate referral partners. However, it is easier to be patient when you’re confident your daily habits will yield results. This article aims to provide insight and an actionable plan to help you build a sustainable, profitable reverse mortgage practice and minimize unproductive marketing investments and activities. Most originators are not sure how to approach and engage professionals who often have more credentials and education than they do. The single best

source I have found to address this legitimate concern is found in the book High Trust Selling, a New York Times best-seller by Todd Duncan. Chapter 11 provides an excellent roadmap on how to target, build value, set appointments, interview and help solve the types of problems we are uniquely positioned to solve with the use of a reverse mortgage. Let’s start with a Stephen Covey quote: “Begin with the end in mind.” Our ideal end-state, strategy and goal is to work with eight to 10 financial services professionals who know, like and trust us, and who each refer two prospects per week. Ideally, we want one to two strong relationships in each of the following categories: 4Financial advisors 4Insurance agents 4Estate planning attorneys 4Elder law attorneys 4Accountants/CPAs

SPOTLIGHT With a larger sample size and statistical analysis software, it would be interesting to better understand relationships between the following: ONE // Familiarity with reverse mortgages and the amount of fees that are considered excessive TWO // How the professional rates reverse mortgages and the amount of fees considered excessive THREE // How people rate reverse mortgages and the magnitude

build a relationship. Again, from Stephen Covey, “Seek first to understand, then to be understood.” The best way to understand is to ask and listen. By the way, my survey was purposely designed to address concerns or misconceptions and then end with the strong points of reverse mortgages. I did not want it to seem like a sales pitch.

of their misconceptions around the product

Tactically, your approach might look like this:

4Realtors

The infographics that accompany this article are a compilation of results of the 73 who responded. Can you do something similar in your local market? Of course you can! Tell them you’re writing an article for your website. Or, how about copying the survey and using it as the basis for a oneon-one conversation?

4 When they ask about you, after sharing some personal information like how and why you got into the business, slide your iPad across the table with a five- to 10-slide PowerPoint deck you’ve created addressing: 8

MY SURVEY RESULTS I asked more than 70 financial services professionals their opinions on reverse mortgages, and here’s what they said: What is your speciality?

26% 0% Financial Advisor, CFP, CFA, CRPC

Insurance, ChFC, CLU

Realtor

Reduces size of heirs’ inheritance Inadequate education for borrowers

Attorney, AEP, EPLS

Loss of control of the asset - bank takes the house

Elder Care, CSA, CSC,

Used when not appropriate

0% 15% 55% CSS

Concerns (legit or not) your peers might have about reverse mortgages

Other

Fees are too high Equity erosion Interest rates too high Borrower is liable if balance is more than home’s value Unsafe Unregulated

50% 47% 45% 40% 37% 32% 23% 18% 11% 11%

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SPOTLIGHT

Leading with a survey is a great way to

4 Start the meeting by asking, listening and learning about their professional practice. Ask about their ideal client profile. Try to keep the balance of the meeting more focused on them. Any meeting where you talk less than 50 percent is a good meeting.

HMBS

For this article, I approached financial services professionals who were first-level LinkedIn connections. I sent individualized

4 Meet for coffee with those who rated reverse mortgages favorably or called themselves a “raving fan.” If you need more prospects, also meet with those who had no opinion.

SERVICING

So how do we build these eight to 10 key referral partner relationships? Obviously, they won’t end up being the first 10 people we talk to; we may have to meet with four to get one. And this is not a cold-call game. This is where we leverage social media connections. Who are you already connected to who is a professional in one of the target categories?

I’ve been invited to write an article for The Reverse Review magazine, an industry trade publication. It is an honor and I want to add value to the audience. You can help me if you’d be kind enough to complete a 60-second survey. Please visit: reversequestionnaire.com.

APPRAISING

Diversification of referral partners creates its own synergy. By making good recommendations when clients ask for referrals, we distinguish ourselves as trusted advisors (instead of salespeople).

ORIGINATING

4 Survey financial services professionals you’re connected to on LinkedIn.

versions of the following message to 236 of them with a link attached:

4Senior care specialists

The Reverse Review November 2015

SPOTLIGHT 6 The most common concerns about reverse mortgages 6 The top reasons someone might explore a reverse mortgage 6Your firm 6Your credentials 6Your unique process 4 Let them flip through the PowerPoint; that way they’re in control. Watch and see what they pause on. Encourage them to express their feelings and/or ask questions.

4 You want to have the heart of an educator, not a salesperson. Beyond this meeting, you’ll want to use your CRM to make sure you’re touching them monthly. Vary the touches—some personal, some professional. Also, vary how you touch them—email, phone, face-to-face, etc.—until you learn their preferred modality. Build your group of eight to 10 with people you’d actually like to have at your birthday party. Life is too short to spend a lot of time around people you don’t like and respect. One of Todd Duncan’s

How familiar with are you reverse with reverse mortgages mortgages? are you? Get the concept, don’t know the details 47% Familiar with them 29% Familiar and know someone with one 18% Don’t know much about them

How would you rate reverse mortgages? No opinion 29% Favorably 26% Skeptical 19% Raving fan 16% Against

How long ago did you first hear about reverse mortgages? 0-5 years 32% 6-10 years 34% 11-20 years 27% 20+ years

Not sure

What total fees would you consider too high? $0 - $5,000 10% $5,000 - $10,000 39% $10,000 - $15,000 32% $15,000+ 18% 36 | TRR

teachings is that “There are enough people that will do business your way to not worry about those who won’t.” My new filter is this: If you’re not someone I’d have as a Facebook friend, someone who gets to see pictures of my kids, you’re not someone I want as one of my eight to10 key partners. Here are just three of the survey comments that illustrate the broad spectrum of the responses I received:

Can different lenders charge different fees for the same reverse mortgage?

19% 15% 66% No, fees are mandated by HUD/ FHA.

Yes, lenders have discretion.

I don’t know.

Can a reverse mortgage be used to purchase a home?

40% 21% 39% Yes

I don’t know

Which of the following recent changes were you aware of?

31% 24% 19% Financial Assessment required income and credit qualification

Nonborrowing spouse has survivor rights to the property

Lower upfront mortgage insurance if borrower takes less than 60% of proceeds in first year

SPOTLIGHT 4 “I’m so glad to see that you are analyzing this topic. I’m a CPA. I don’t know a whole lot about reverse mortgages, outside of the general tax implications, but my clients are getting older and it would be great to have them protected.” 4 “If this was a test, I probably failed! Don’t know much about the subject.”

Admittedly, many aren’t so fortunate. As originators, we get that and we have compassion for those we can’t help. I’m sure great doctors and nurses deal with similar emotions when they can’t help a patient. The story that helps me when I’m facing that goes like this:

SERVICING

One day, an old man was walking along a beach that was littered with thousands of starfish that had been washed ashore by the high tide. As he walked he came upon

Ours is a noble cause. The number of people who need the solution we offer is enormous. The biggest obstacle is ignorance, but like the honeybee who gathers nectar, when we build a practice around a small number of strategic partners, and we take the time to educate them, we pollinate a much wider audience. In the process, we’ll help more people bridge the gap between longer life spans and insufficient retirement savings. n

APPRAISING

As a salesperson, resist the urge to convert that third respondent. Remember the 80:20 rule—you’re looking for people

Finally, one of the biggest pushbacks I hear from financial professionals is that reverse mortgages are not for everyone, as if that invalidates those for whom it is the ideal solution. Twenty-five million baby boomers will rely on Social Security for 90 percent of their income. The lucky ones have enough home equity that a reverse mortgage can allow them to age in place, mitigate some of their concerns and help them realize some of their aspirations.

a young boy who was eagerly throwing the starfish back into the ocean, one by one. Puzzled, the man looked at the boy and asked what he was doing. Without looking up from his task, the boy simply replied, “I’m saving these starfish, sir.” The old man chuckled aloud, “Son, there are thousands of starfish and only one of you. What difference can you make?” The boy picked up a starfish, gently tossed it into the water and said, “I made a difference to that one!”

ORIGINATING

4 “Not sure the point of this survey. Seems more like a survey to encourage advisors to use reverse mortgages. Reverse mortgages are a much-abused tool pushed by advisors looking to make a buck and sold to clients who don’t understand them. It doesn’t help that Fonzie and other celebs are whoring themselves out as spokespeople so seniors should use them.”

who like you and the product. Let the rest go.

What are the reasons someone over 62 might explore a reverse mortgage? HMBS

Monthly income for as long as home is primary residence 68% Eliminate current mortgage payment 61% Make retirement savings last longer 52%

SPOTLIGHT

Support aging-in-place expenses, like caregiving and home modifications 47% Medical expenses and/or to pay for additional health insurance 37% Home improvement 21% Social Security maximizer - delay benefit start date to get more later 19% Protect spouse when decedent’s pension or Social Security income stops 18% Protect investment accounts during market downturns 16% Line of credit, which grows over time, for future expenses 16% Early inheritance strategy - minimize future conflicts 13% No obligation if loan balance exceeds home’s value at end 13% Reverse mortgage purchase on a home that better fits needs 11% No effect on Social Security, Medicare or pension benefits 11% Tax-free proceeds 11% Monthly income/credit line continues even if house less than balance 10% Help others with college expenses, buy first home, start a business, etc. 10% Insured by the federal government

2% reversereview . com

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The Reverse Review November 2015

THE INDUSTRY WORKS TO FIND NEW FOOTING IN THE WAKE OF MAJOR PROGRAM CHANGE. By Jessica Guerin

S A PRODUCT SHAPED AND INSURED BY THE

federal government, reverse mortgages are subject to frequent regulatory change. In the past few years, the program has undergone massive alterations, with FHA’s policymakers working hard to secure the HECM’s long-term viability while making sure it can still meet the needs of consumers. The industry has endured its fair share of ups and downs—product variations have come and gone, big banks have entered and exited, home prices have risen and fallen, investor interest has ebbed and flowed. Despite such volatility, the demand for reverse mortgages remains—and to many the future looks promising. Some analysts predict sizable growth as home prices recover and a massive wave of baby boomers prepares to enter their retirement years with little savings in the bank. But for professionals in the space, weathering the storms that shake the market can be stressful and challenging. Reverse specialists have endured quite a lot in a short

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amount of time. Still, many of those who have stuck it out hold firm to the belief that recent change will better the product. They are working hard to carry on in this new environment, continuing to help seniors and share their ardent belief in the HECM’s potential to help thousands of aging Americans. ML Mayhem in 2013 Each time a mortgagee letter mandates an impactful new guideline, a ripple effect is felt through the industry. And each time, the pattern repeats itself: First there’s a surge in endorsements as lenders usher borrowers through the loan process before new changes take effect; then there’s a lag as volume wanes and originators adjust. But every time, there is a rebound. It may not be huge— endorsement numbers haven’t climbed back to the unprecedented highs of 2009—but they have come back after each change, even if the recovery is small. The past three years have been particularly volatile for the reverse mortgage program. The first hit came with the release of ML 2013-01 in January 2013, which essentially announced the elimination of the Standard fixed-rate HECM.

The fixed-rate had become an increasingly popular product even as overall volume declined, and the industry was shaken over how this would impact business. In the months ahead of the April 1 effective date, fixed-rate volume soared, following a predictable pattern as borrowers pushed to get approval before the product disappeared. Reverse Market Insight tallied the impact, noting that fixed-rate loans, which could be funded through June of that year, continued to inflate endorsements until August, when they finally cleared the pipeline. At that point, volume began to taper as the impact was felt. Originators had to rework their sales approach and focus on marketing the adjustable rate product. RMI’s John Lunde explains the impact of the loss of the fixed rate on the market. “When the Standard fixed was eliminated, it shifted a lot of volume over to the Standard ARM, because it still had the highest principal limit factors, so [it offered] the most cash to the borrower. I wasn’t originally expecting there to be an overall volume decline because of that, but we actually did end up seeing some decline there,” he says. “It wasn’t a dramatic volume change, but it was there.” While the impact might have thrown off business as usual, some still thought it was a positive step that would improve > John LUNDE

> “Hopefully we’re on the path toward recovery and we’ll get back to showing sustained growth... I think we’ve also seen quite a bit of recovery from the home price perspective, so we’ve got a decent wind on our backs there and that certainly helps.”

the future of the product. According to Mark Browning, CEO of New Yorkbased lender HomeChex, the Standard fixed product wasn’t always a great choice for senior borrowers, and its loss benefited the program as a whole. “Frankly, I think it culled some of the players who were in the market for the wrong reasons, so I think that was good. And I would comment that industry volumes were at their highest before the fixed-rate, closed-end ever existed,” Browning says. “It was a good product that was perhaps used in the wrong ways, and I think most of the veterans in the industry quickly rebounded.” Industry players had little time to focus on losing the fixed rate, as HUD moved forward with the release of ML 2013-27 just five months later. This monumental mortgagee letter left the industry bracing itself for a reduction in principal limit factors (effectively cutting a borrower’s available proceeds by about 15 percent) and the institution of an upfront utilization restriction (which capped the amount of money a borrower could take upon the loan’s closing). The changes were drastic and a palpable sense of fear radiated from many HECM specialists who worried about the impact this would have on their business. How would potential borrowers respond? How would the market react?

> Mark BROWNING

> “We are deeply embedded in our communities and we really believe the product can make a difference. The need and the demographics are compelling, and considering the retirement situation of baby boomers, clearly they are going to need housing equity as part of their solution.”

Industry veteran Jim Veale recalls the reaction. “People were talking about huge disaster. A number of people were talking about the end of the program,” he says. “It was a very bleak picture for a lot of people.” Despite all the volatility, 2013 came to a close on a high note, with endorsements rising just over 15 percent year over year to a total of 61,122, according to RMI, which noted that the new guidelines would likely not impact endorsement figures for several months as loans funded ahead of the changes made their way through the pipeline. RMI attributed the year’s success to stabilizing home prices and the fact that leading lenders stayed put, unlike 2012 when a notable exodus caused volume to drop. Still, the industry braced itself for changes ahead. Feeling the Effects in 2014 The following year took a hit as the new mandates took effect. Following the release of yet another PLF change in July—which made more money available to older borrowers in a lower interest rate environment, but also made less proceeds available to most borrowers in a higher rate environment—lenders were increasingly weary. “I think many people were concerned about what impact [the reduced PLFs] would have in the marketplace,” 8 > Jim VEALE

> “We’re dealing with the unknown, because our client base is changing… We’re going to the referral source rather than the individuals. I think we’re a mature industry that is going to see very solid growth, but it’s not going to be as speedy as we would like.”

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The Reverse Review November 2015

who needed access to immediate cash. That meant lenders needed to remarket in order to find a way to redefine the HECM’s appeal, a move that would likely mean they would need to attract a new customer base—and find a way to connect with financial planners who had access to a more sophisticated clientele. says Browning, adding that thus far the effect has turned out to be mostly nominal. “At the time they occurred, I think it was really manageable and a lower interest rate environment facilitated a relatively smooth transition. Obviously, it was packing up the pipeline that occurred before, but once that cleared, people found it wasn’t as a big a problem as they might have thought.” The real concern, Browning says, is for the future. “If interest rates normalize, then it will have a very, very significant and adverse effect… I think everybody is worried about that. There’s a real potential future problem.” Lunde agrees. “There are pretty significant changes on the higher expected interest rate PLF curves. If and when we get to the point where we have higher expected rates, there’s definitely going to be some impact there,” he says. Veale says the push to sell the product through financial planners could create further complications. “Here’s where the rubber meets the road: If the interest rates increase substantially, we’re going to have to go back to the financial advisors who have been our referrals and say. ‘Hey, [PLFs] are a little bit worse now,’ and they will remember what it was like before. They may go back and tell their clients, ‘Wait a bit, the interest rates could go back down,’” Veale says. “We now have an interference layer between us and the potential client. This is a whole new way of doing business.” RMI analysis pointed out the market’s steep nosedive from June through September of that year, which it primarily attributed to FHA’s new limit on borrower cash withdrawals. The reduction in cash upfront changed the way consumers could use the product— making it more of a retirement planning tool and less of a product for those

40 | TRR

As lenders struggled with remarketing the product, the year took a hit, finishing with a total of 52,949 loans (down 13 percent). The market was beginning to climb out of the abyss, but the recovery was just so slow.

True to form, volume soared ahead of FA’s implementation as originators rushed to get loans endorsed before the new rules complicated the process. August closed with 5,570 loans, the highest monthly total in two years. But the hit finally came as the gap between funding and endorsement narrowed and the FA took hold. Endorsements dropped to 4,671 in September, signaling the end of a strong three-month surge. The true impact of FA remains to be seen, but according to a poll conducted in June by Reverse Mortgage Daily, many are feeling the heat. Of the poll’s 190 respondents, more than half said their volume had declined more than 15 percent, with some claiming to have experienced a drop as sharp as 50 percent.

To Lunde, this was worrisome. “I would call it the most significant volume impact event that we’ve had in the industry. Not just because it had a dramatic shift right away, in terms of the volume, but because there was a muted Veale points to the recovery,” Lunde numbers to highlight The past few years have says. “We basically FA’s toll. “Right been tumultuous for the bumped along at now, we are at a industry, but many HECM a similar level for conversion rate of specialists have stayed almost a year after less than 60 percent,” put, committed to the that event, so that was he says. “June, July product and convinced of new. That was more and August—not its importance. concerning to me than one saw more than the initial volume 6,400 case numbers decline. It brought assigned. The us to the lowest level that we’ve been conversion rate is the lowest it’s ever for probably a decade, but even more been since the early 2000s… It is sliding concerning than that was the lack of downward and it doesn’t want to come recovery for quite a while.” back up.” Perhaps the problem was that the final shoe had yet to drop—FHA had not yet released the full details of Financial Assessment, which it promised in September 2013’s mortgagee letter. Financial Assessment Takes Its Toll in 2015 While 2014 was behind them, industry participants had yet to take a deep breath. Financial Assessment had been finalized and was set to take effect in March, and several were concerned about how many potential borrowers would effectively be locked out of the program, unable to meet the new criteria. Lenders would need to assess a borrower’s “ability and willingness” to meet the obligations of the loan, requiring significant underwriting, including a credit history analysis.

Browning says that while he thinks some kind of financial assessment was needed, he fears the current policy is overkill. “Financial Assessment is prudent and it needs to be in place; the insurance fund needs to be protected. But the current guidelines have turned the HECM into a cumbersome, clunky product compared with alternatives like the HELOC. To reach its potential, the HECM has to reach middle and uppermiddle class households.” “I think that Financial Assessment as it’s currently constructed fundamentally changes the equation and I think the implications will take a long time to unfold,” Browning says. “I’m hoping there will be some room to adjust the program guidelines to better reflect the reality of the retirement picture for baby boomers.”

> hecm

17,000

13,000

TREND case numbers issued

11,000

Reverse Market Insight Inc.

15,000

9,000

2013 JANUARY 8,593 FEBRUARY 7,302 MARCH 13,613 APRIL 5,182 MAY 6,526 JUNE 6,495 JLUY 7,397 AUGUST 8,167 SEPTEMBER 16,006 OCTOBER 3,611 NOVEMBER 4,964 DECEMBER 5,203

2014 JANUARY 5,707 FEBRUARY 5,700 MARCH 6,329 APRIL 6,406 MAY 5,858 JUNE 6,145 JULY 5,823 AUGUST 11,413 SEPTEMBER 7,788 OCTOBER 8,471 NOVEMBER 7,004 DECEMBER 6,812

2015 JANUARY 6,537 FEBRUARY 9,758 MARCH 9,331 APRIL 13,484 MAY 4,184 JUNE 6,183 JULY 6,350 AUGUST 6,089

Veale agrees, saying succinctly, “We need FA, but I don’t know if this is the right FA.” For now, the industry will just have to keep the faith and weather the storm. “We just need to get through the transition period, which can always be a little rough,” says Lunde, who calls FA a good thing for the long term. “I think so far the industry has done a pretty good job coming through it.” Hopes for 2016 and Beyond The past few years have been tumultuous for the industry, but many HECM specialists have stayed put, committed to the product and convinced of its importance. Browning says that many who are part of smaller organizations like his are bound to their work by a sense of responsibility. “We are deeply embedded in our communities and we really believe the product can make a difference. The need and the demographics are compelling, and considering the retirement situation of baby boomers, clearly they are going to need housing equity as part of their solution.”

Veale says that while the road ahead may be tough, he predicts a slow but positive recovery. “We’re dealing with the unknown, because our client base is changing… We’re going to the referral source rather than the individuals,” he says. “I think we’re a mature industry that is going to see very solid growth, but it’s not going to be as speedy as we would like.” Lunde also predicts some growth down the line, even if 2016 doesn’t turn into a banner year. “Even if we end up flat [in 2016] from where we are now, we’d still be somewhere in the 50,000-60,000 loans per year range. I do tend to think that we’ll see a little bit of growth barring any additional changes,” he says. “Hopefully we’re on the path toward recovery and we’ll get back to showing sustained growth... I think we’ve also seen quite a bit of recovery from the home price perspective, so we’ve got a decent wind on our backs there and that certainly helps.” Browning says stability will be key to the program’s future growth. “If the HECM is going to find its place in the mainstream financial planning arena, it needs to have a sustained, stable period where financial, legal and other advisors to families can get their arms around what the product is. We’ve had this process of continual change and it has really driven a lot of folks away from the product. When it stabilizes, I think it will certainly help the landscape because people will be able to invest the time to understand the product.”

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Lunde says more distribution channels will also go a long way to propelling the product forward. “We’ve got some good companies that have weathered the storm and have come through and found ways to make it through a very challenging period. I think that we’ll have some champions in that group, and I think it would be beneficial to them and everybody else in the industry if we had some additional large brand names with good distribution platforms and networks come back into or enter the industry. I think that’s more realistic these days than it’s been for the past several years because I think the product changes have made it more attractive; they’ve put more protections in place.” Whatever the future holds in this postFA world, there is something to be said about the product’s resilience. “We layered on these changes sequentially and in a very short timeline. Nothing was ever given a change to see how it affects the risk profile of the book of business,” Browning says. “We just kind of threw everything but the kitchen sink at the product, and I think the fact that it’s still standing is a testament.” Lunde echoes this idea. “I think we’ve shown ourselves to be a very resilient industry, which speaks to the product being one that borrowers like and proves that we have a customer base that needs the product and is wellserved by the product,” he says. “As long as we continue to achieve that, I think the future is bright for us.” n

reversereview . com

8 TRR | 41

The Reverse Review November 2015

LAST WORD

IMPROVE

Our Customer’s Experience: Ordeal or Opportunity? By Jim Mahoney

We start with an older client who is probably unfamiliar with the process. Then, we discuss their various options, which can often appear as a blizzard of numbers, and, of course, the multiple and confusing required disclosures. Now with Financial Assessment, we need the customer to provide financial information so we can qualify them and send them off to counseling—another experience out of our control that can add to the customer’s fatigue.

Why we need to focus on enhancing our sales process at every turn We’ve all seen the commercials on TV showing us the shiny new vehicle of our dreams and telling us how easy it is to buy. There’s the “sign and drive” pitch, the “zero down” offer, the “we pay your first year’s payments” deal, and other tantalizing offers designed to get us in the showroom. But once you appear on the car lot, we all know what really happens. First, a smiling salesperson shows up and tells you how easy he is going to make your purchase. He will go over the numerous models and mind-numbing list of options. After narrowing down your selection, he won’t tell you at what price the dealer will sell you the car, instead asking what you are willing to pay for it! Then, after your initial offer is presented, the “sales manager” shows up and tells you how they can’t possibly sell the car for your offer, as they would be losing money and blah, blah, blah. Sometimes another manager shows up to join the negotiations and help wear you down. When you finally agree to a price, and you think the ordeal might be coming to an end, it’s on to the finance officer who, besides finalizing your paperwork, is there to try to sell you a few more add-ons. By the time you drive off in your dream car, instead of being excited about your new purchase, you are just relieved to have the whole ordeal over! This is not a great or even good customer experience, and it is little wonder that the car sales industry has such a poor reputation. HOW IS THIS RELEVANT TO THE REVERSE MORTGAGE INDUSTRY? We have the opportunity to make the customer experience excellent or we can ignore the challenges and let it be difficult and unpleasant. We must make taking out a HECM the best experience possible. 42 | TRR

After counseling and an application, the lender’s team takes over with more personnel—loan processor, underwriter, closer—and this relatively inexperienced customer has to deal with appraisers, inspectors, title searches and repair bids, which can be tedious and intimidating. Unlike the car industry, which has a choice in how they develop the sales process, we are given a mandate by HUD and the regulatory agencies in how a loan is originated. The car sales process takes hours, whereas our process takes weeks and can be a great source of frustration and dissatisfaction. Years ago at Financial Freedom, we performed research on our “canceled” loans and found that 25-30 percent of the cancellations were due to the customer’s fatigue with the process. At just a few days away from closing, these people said they were just plain worn out. This was incredibly revealing to us and illuminated the need to really focus on the customer experience from start to finish. For our industry to succeed, it is critical for us to focus on the best customer experience possible by limiting the number of people the borrower has to interact with; providing easy-tounderstand checklists of the steps to come so the customer can follow along and not feel in the dark; providing possible solutions for problems when they arise; not letting too much time go by without communication; and, if they call you, making sure their questions always feel welcome. The reality is that our product and process have become more complicated. Instead of complaining about it, let’s embrace it and challenge everyone in the assembly line to find ways to improve communication and make the process simpler, more personal and more pleasant for our customers. With some creative energy and enthusiasm, a lot of wrinkles can be ironed out and customer experience improved. With a better customer experience, our satisfaction rate (not to mention our conversion rates) will go even higher, referrals will be easier, the PR folks will have even more good things to write about and, most importantly, our customers will be able to truly enjoy a secure retirement! n

The value of A STRONG ALLY:

FOCUS.

You need a partner you can count on. Your brand depends on it. Celink is exclusively dedicated to reverse mortgage servicing.

For more information, please contact Katie Kirkham, Director of Client Relations at (844) 228-2101.

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8 TRR | 43

Reverse Loans. One Platform. All Connected. The Reverse Review November 2015

ReverseVision is the only tool you need to be successful. Fully-integrated solution spanning loan life cycle Financial Assessment compliant within RV Exchange Optimized for retail, wholesale and correspondent channels No license fee for third-party originators Integrated workflow connects back office with originators Compliant docs configured for your business needs Ship and purchase closed loans collaboratively with investors

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 44 | TRR

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