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How HECMs can keep you afloat
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TIPS FOR CONNECTING WITH CLIENTS OVER THE PHONE PG. 20 FRANK TALK ABOUT A PROGRAM THAT MATTERS PG. 26 + MICHAEL KENT SITS DOWN IN OUR HOT SEAT PG. 18
w
THE
REVERSE september 2013
review
The Reverse Review September 2013
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reversereview.com
8 TRR
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The Reverse Review September 2013
From the Editor market analysts and seasoned reverse
professionals to help us break down what the changes will mean for your business
and for the future of the reverse mortgage market.
to the HECM program. While the exact details are still unknown, early reports have indicated that the agency will
consolidate the Standard and the Saver
programs. As for the much-talked-about set-asides for taxes and insurance and Financial Assessment, those are set to be implemented in a second wave of
program changes that might not take place until early 2014.
At The Reverse Review, we pledge to
rundown of the new regulations once they
are released. We’ll talk to industry experts,
Creative Director
have insisted that the pending program
Copy Editor
of the HECM market, and we must trust
Marketing Director
changes will benefit the overall health
that this is so. We must also keep in mind that tens of thousands of baby boomers
are reaching retirement age, and they will need a financial tool like the HECM to
access their home equity. Whether they are
Traci Knight
Kersten deck alycia colacion
Printer The Ovid Bell Press
able to do so through a federally insured
Advertising Information phone : 630.207.3882 email : jessica@reversereview.com
that arise in the proprietary market, that
Subscriptions email : information@reversereview.com
product or through new opportunities
remains to be seen. But the demand exists, and although we may need to weather a tough period of adjustment to get there,
the future of the reverse mortgage market does look bright. Editor-in-Chief
{ Jessica Guerin } Want to talk to Jessica? Reach her at jessica@reversereview.com.
Editorial Content email : jessica@reversereview.com © 2013 Reverse Publishing, LLC. All rights reserved. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, Reverse Publishing, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 3800 West Chapman Ave., Orange, CA 92868
sign up for the newsletter at reversereview.com.
Get the latest issue delivered directly to your inbox!
FIND US ON:
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ed
Feedback is very important to us here at The Reverse Review. Send us your thoughts on past articles or something that is on your mind and we will publish it in this section. information@reversereview.com
Jessica Guerin
t ay ec st onn c
Feedback
Erik Richard
it’s important to maintain a positive
stay on top of these important program changes and plan to bring you a full
Reza Jahangiri
Editor-in-Chief
outlook. HUD and other industry leaders
breath for HUD to announce changes
Senior Publisher
continue with business as usual despite the gathering clouds of uncertainty,
As we wrap up this issue, we are waiting with bated
Meet the Team Publisher
But in the meantime, as we attempt to
A note from jessica guerin
l
FACEBOOK AND LINKEDIN
Table of Contents
TRR 9.13
25 | Originating The Pendulum Swings… Again
Although program changes are imminent, reverse professionals must maintain their focus.
In this issue... 31 megen lawler Tech
Lance R. Canada
26 | Originating Speaking My Mind Frank talk about a program that matters Marc Helm
09 | Readers Respond
TRR has sparked some conversation online. See what our readers have to say.
10 | Movers & Shakers
The latest developments in companies across the reverse space
11 | Industry Update
Headlining stories of the past month Reverse Mortgage Daily
13 | Top Lenders Report
July year-to-date volume for top reverse lenders Reverse Market Insight
14 | NRMLA News
Read about the association’s current initiatives.
29 | Marketing
17 | Roundup
A collection of recent facts and surveys affecting the reverse market
18 | Hot Seat Michael D. Kent
How to Get Seniors to Read Your Letter
33 ryan larose Servicing
Tips for a successful direct mail campaign Jeff Bush
President of mortgage lending at RMS
20 | Originating Selling to Seniors Over the Phone Tips for connecting with clients without the benefit of meeting in person Christopher Russow
22 | Originating Sister Act
35 | HMBS HMBS Update A recap of happenings in the secondary market Darren Stumberger
36 | Spotlight Lifeboat How a HECM line of credit can provide an important safety net for retirees
42 john Mitchell Last Word
Harlan Accola
Two reverse mortgage programs help one happy family. Michael J. Weltman
Marty Bell
38 | The Business of Being a Broker
Reverse mortgage brokers are working hard to find a profitable niche in today’s evolving marketplace.
@
Want the online version? reversereview.com/magazine
Jessica Guerin September 2013 W IE
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this issue EVIE
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How HECMs can keep you afloat ER EV
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TIPS FOR CONNECTING WITH CLIENTS OVER THE PHONE PG. 20 FRANK TALK ABOUT A PROGRAM THAT MATTERS PG. 26
+ MICHAEL KENT SITS DOWN IN OUR HOT SEAT PG. 18
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The challenges facing brokers in today’s marketplace
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“No doubt, the industry is on the brink of major change. And although the uncertainty surrounding this change can be taxing for small businesses, brokers have proved their ability to adapt.
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FEATURE
THE
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The Reverse Review September 2013
Contributors
John K. Lunde
Marty Bell
J ohn K . L und e
Ma rty B e ll
Mi c h ae l D. Kent
13 | Top Lenders Report g John K. Lunde is president and founder of Reverse Market Insight, Inc., a performance data analysis and consulting firm specializing in the reverse mortgage industry. RMI clients include eight of the top 10 reverse mortgage lenders, plus investors, servicers and vendors to the industry. rminsight.net 949.429.0452
14 | NRMLA News g Marty Bell is NRMLA’s senior vice president of communications and marketing. This is Bell’s professional Act III after careers in books, journalism and the Broadway theater. Bell is the author of two novels and four nonfiction books, and his writing has appeared in publications including Playboy and New York magazine. Bell wrote and produced the awardwinning documentary film The Boys of Summer and produced 15 Broadway shows (including Ragtime, Fosse and Dirty Rotten Scoundrels) that won 27 Tony Awards.
18 | Hot Seat g Michael D. Kent joined Reverse Mortgage Solutions in February 2010 as senior vice president of lending and business development after more than 30 years of mortgage banking experience in senior and executive level management positions. He is responsible for the design, implementation and management of the company’s lending efforts, including production channel design and production source risk assessment.
C hr i s t opher R us s ow
Mi c h ae l j. w e ltman
lan c e R. Canada
20 | Selling to Seniors Over the Phone g Christopher Russow is an experienced reverse mortgage professional who specializes in sales management, online marketing and lead generation. Russow previously served as vice president of sales for Urban Financial. He has also held positions at EquiPoint Financial, One Reverse Mortgage and Financial Freedom. Russow has a B.S. in business/economics from Cal Poly San Luis Obispo and is currently working toward his MBA at the University of California San Diego.
22 | Sister Act g Michael J. Weltman is a sales manager for FirstBank. Weltman, who has 12 years of experience in the reverse mortgage business, is treasurer of the Mortgage Bankers Association in Tallahassee, Florida. He has also served as president of a local real estate board in Wakulla, Florida; holds a broker license and real estate instructor license; and has a license with the Florida Department of Financial Services.
25 | The Pendulum Swings… Again g Lance R. Canada, CRMP, is a 17-year veteran of the mortgage industry and has spent the past nine years educating seniors about reverse mortgages. He is currently a reverse mortgage originator with TowneBank Mortgage in North Carolina. Canada comes from an entrepreneurial background, having owned and operated several businesses for more than 20 years. He recently finished his first book, Recognizing the Laws of Failure, Changing Attitudes.
ma r c hel m
je f f bu s h
me ge n lawler
26 | Speaking My Mind g A 30-year-plus veteran of the financial services and mortgage banking industry, Marc Helm serves as CEO of Reverse Mortgage Solutions, Inc. and as president of RMS Consulting. Both firms are dedicated to servicing reverse mortgage loans and advising the mortgage industry on all aspects of operations, management and technology initiatives. Helm previously served as senior vice president at Washington Mutual.
29 | How to Get Seniors to Read Your Letter g Jeff Bush is the president of overflowworks.com, a direct mail company that has handled more than 1 billion direct mail pieces in the mortgage industry. Bush is the former owner of a mortgage banking company that closed more than 5,000 loans from 2000 to 2007, using direct mail campaigns as its primary source of lead generation. He has more than 20 years of experience in direct mail marketing. jeffbush@overflowworks.com
31 | Technology in Reverse g Megen Lawler has been in the reverse mortgage industry since 1991 and founded Bay Docs, Inc. in 1994. Prior to Bay Docs, Lawler was an integral part of the development of the Home Equity Reverse Mortgage product origination, servicing and quality control procedures. Bay Docs launched its loan origination system in 2008 to work in conjunction with its reverse mortgage document processing services.
Michael D. Kent
Christoper Russow
Michael J. Weltman
Lance R. Canada
Marc Helm
Jeff Bush
Megen Lawler
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Contributors rya n l a r os e
Ryan LaRose
Darren Stumberger
33 | Servicing HECMs g Ryan LaRose is president and COO of Celink, an independent reverse mortgage subservicer. LaRose has more than 12 years of servicing experience and has worked exclusively in reverse mortgage servicing since 2005. In addition, he is an active member of the NRMLA servicing and technology committees. celink.com 517.321.5491
d ar r e n s tu mbe r ge r 35 | HMBS Update g Darren Stumberger, managing director at Stifel Nicolaus & Co., heads mortgage trading and is responsible for HMBS/HREMIC, HECM and Jumbo reverse loan trading, distribution and risk management. Prior to Stifel, Stumberger held mortgage trading and finance positions at Goldman Sachs, Morgan Stanley and BofA Merrill Lynch. stumbergerc@stifel.com
Harlan Accola
joh n mitchell
36 | Lifeboat 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 pre-retirees on the advantages of using reverse mortgages for financial and estate planning.
42 | The Future g John Mitchell, CPA, is the founder of Reverse Mortgage USA. The company is the seventhlargest reverse mortgage company in the country. It is based in Austin, Texas, and originates in 10 states. In 2011, Mitchell authored a 58-page study showing that the reverse mortgage program saves $5 billion a year in Medicaid dollars.
harlan@allmoneywise.com
before we begin John Mitchell
h ar lan ac c ola
President Obama Signs the Reverse Mortgage Reform Bill into Law
pg.11
Be a part of the conversation.
Write for us!
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We are looking for new contributors.
Share your thoughtful commentary with our readership today.
Email jessica@reversereview.com to learn more.
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The ReveRse Review The R everse Review August 2013 September 2013
THE
REVERSE review
The Reverse Review’s website offers complete access to all of the magazine’s content in a clean and crisp format. Read the latest issue or peruse the archives and access important stories from past editions.
Reimagined, refined and refocused to deliver the insight you need – in brief and in depth. Visit our website to read about current issues facing the reverse mortgage industry.
Connect with us in print and online. Thinking about contributing? Find out how you and your company can be a part of the TRR team! 38
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Saving the HECM for Middle America R
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MARKETING TO THE CHILDREN OF POTENTIAL SENIOR BORROWERS PG. 27 ALICIA MUNNELL TALKS ABOUT THE HECM’S ROLE IN RETIREMENT PG. 35 + COLIN CUSHMAN SITS DOWN IN OUR HOT SEAT PG. 16
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The past few issues have sparked some conversation among readers online. Here are THEsome of the responses we received. THE
W
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do you have something to say?
review
JUNE 2013
The
co$t of Compliance
U
WU
Reverse mortgage lenders grapple with mounting operational costs in a hyper-regulated world
oo
Letter to the Editor June 2013
respond
readers
“The Reverse Review has SUBSTANCE. You do a terrific job. Interestingly, however, I don’t share your enthusiasm for granting HUD all this rulemaking authority in that they have demonstrated frequently over the years (I have been originating HECMs exclusively since 1991) that they lack focus on reverse
mortgages and have applied many ill-conceived and ill-advised ‘guidelines’ through mortgagee letters on matters within their authority that often had to be retracted because they were so poorly thought out and lacking in consultation with the broader industry.” -Jim Spicka
Marketing to Real Estate Agents “We are making a push for HECMs this year and hope to capitalize on this opportunity the market has presented for seniors.”
By Bart Johnson, July 2013
-Unity West Lending
ays, fin
the latest
d all
and great
on reve
est article
s
Comment on our stories online for a chance to see your thoughts in print. Be a part of the conversation about how we can better serve our seniors!
Change the Game, Transform the Industry!
By Brian Cook, May 2013
As alw
reversereview.com 8
Something on your mind? Need to get something off your chest? Hate something we do? Love something we do? Letters to the editor may be emailed to jessica@reversereview.com.
rserevie
w.com.
The Key to Effective Reverse Mortgage Advertising
Selling the Adjustable-Rate HECM
By Mark Erickson, April 2013
By Mark O’Neil, July 2013
“Good insight. We have seen lead flow increase significantly when we deliver a clear solution to the TV audience. Although we can only provide basic information in a short, 60-second TV spot, we offer other avenues for the viewer to get the additional information they are seeking. The senior market is discerning—not to be talked down to—and open to good advice. They can separate the good from the ‘not so good’ options being offered.” -GJ
“Mark, I’ve been a reverse mortgage specialist for eight and a half years, and I want to let you know that your article, ‘Selling the Adjustable Rate HECM,’ in the July issue was one of the best and most informative articles that I’ve ever read in TRR. Even though I’ve been in this business for some time, I learned several things in your article that I was not aware of. I love TRR, and articles like yours are partially responsible for my success in this business. Thanks again.” -Owen Coyle
“Bart, thank you for a very insightful article. I agree that new demand is around the corner as people recognize reverse mortgages are not a ‘loan of last resort’ but a valuable financial tool for tax planning and extending the life of retirement portfolios. After all, isn’t the goal to make your assets last as long as you do? Shouldn’t a tool that safely allows tax-free draws from the equity while continuing to enjoy the home something all boomers, seniors and their advisors should be very interested in? I think so. You are correct as we do need smarter marketing and proprietary reverse mortgage products to blend with the HECM. Then reverse mortgages will provide the real help that’s needed for more people to retire comfortably.”
reversereview .com 8 TRR –Maggie O’Connell
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The Reverse Review September 2013
Movers & Shakers Read about the latest developments in companies across the reverse space.
Hav e a c o mpan y u p dat e y o u w ou ld lik e t o s e e p u b l i s h e d?
Peer Advisors to Acquire Celink Peer Advisors has announced that it signed a definitive agreement to acquire Celink, the largest sub-servicer of reverse mortgage loans in the nation, in a deal that grants the investment group 100 percent of Celink’s stock. Peer Advisors, which focuses on opportunities in the emerging senior housing finance market, is led by Jim Mahoney, Jason McNamara and Al Benedetti. Following the close of the transaction, Mahoney will serve as chairman, McNamara will serve as CEO, and Benedetti will serve as executive finance director of Celink, which will remain based in Lansing, Michigan. Celink founder and CEO John LaRose has agreed to act as consultant to the company, and Ryan LaRose will remain Celink’s president and COO. “Celink is a great company that takes excellent care of borrowers and that lenders and issuers have come to count on for quality servicing,” said Mahoney, a reverse mortgage industry pioneer and former longtime CEO and chairman of Financial Freedom.
Reverse Professionals to Volunteer for Habitat for Humanity in New Orleans Dozens of reverse mortgage professionals attending the national NRMLA conference in New Orleans are flying in early to help build a home for a deserving family in the New Orleans area. Hosted by Security One Lending/RMS for the third year in a row, the volunteer mission for Habitat for Humanity invites professionals from companies across the reverse space to lend a hand for a good cause on Saturday, November 2. For more information about the event, contact Rhiannon Behnke at rbehnke@s1l.com. 10
| TRR
Email it to Jessica@reversereview.com.
Reverse Mortgage USA Welcomes Tammy Lahndorf to Wholesale Team Reverse Mortgage USA is continuing the expansion of its wholesale lending division by hiring Tammy Lahndorf as wholesale account executive. Lahndorf, who has 17 years of wholesale experience with five years spent specifically in reverse mortgage wholesale, will help cover the upper Midwest states. “As we continue to grow and expand our wholesale channel and market share, adding good, quality people like Tammy is essential to our success,” Senior Executive Vice President Mike Suits said.
Industry Veterans Launch Reverse Mortgage Funding Longtime industry professionals have joined forces to launch Reverse Mortgage Funding (RMF). The new venture is headed by several former MetLifers and industry veterans: Craig Corn (CEO), Robert Sivori (COO), Mike Mooney (third-party origination manager), David Peskin (president) and St. John Bannon (CFO). The company has 30 employees with plans to grow; it recently announced the hire of former MetLifer Michele Zachensky as fulfillment leader. RMF is already licensed to purchase closed loans in 46 states and Washington, D.C., and is looking to develop a wholesale branch in the coming months. Learn more at reversefunding.com.
Texans to Vote on New Reverse Mortgage Option This fall, Texans will vote on whether to approve Proposition 5, a constitutional amendment that would authorize Texas homeowners age 62 and older to use a reverse mortgage to purchase a home. Currently, Texas is the only state that prohibits the HECM for Purchase program.
“With a reverse mortgage for Purchase, homeowners who are downsizing or relocating to be closer to medical care or their families will have a new option enabling them to finance the purchase of their new home and save thousands of dollars over the life of their loan,” said Scott Norman of Sente Reverse Mortgage in Austin. Proposition 5 will be on the November 5 statewide ballot.
Generation Mortgage Company Hires Mark Gordon, Alicia Hahn Generation Mortgage Company (GMC) hired Mark Gordon as director of marketing and Alicia Hahn as regional retail sales manager. Gordon, who has more than 20 years of marketing, communication design and management experience, has worked for GMAC, Wachovia, Bank of America, SunTrust and Hewlett Packard. Hahn worked for 13 years as branch and operations manager for the reverse mortgage division at Wells Fargo.
ReverseVision Partners with National Mortgage Lender MiLEND San Diego-based reverse mortgage technology company ReverseVision has partnered with MiLEND, a national mortgage lender headquartered in Atlanta, Georgia. By leveraging ReverseVision’s software, MiLEND will now be able to process reverse mortgage loans quickly and efficiently, knowing that its loans meet the requirements necessary for approval. “After doing our research it was clear that ReverseVision is the most widely used and most recommended software for originating and closing reverse mortgages,” said MiLEND Managing Director Sam Morano.
Industry Update
September Edition
Brought to you by:
an update of this past month’s breaking news
News direct to you: The industry’s headlining stories at your fingertips Want even more up-to-the-minute news? Visit reversemortgagedaily.com.
headlining news 1.President Obama Signs
Reverse Mortgage Bill into Law
President Obama signed into law a bill that grants HUD the authority to reform the HECM program. The Reverse Mortgage Stabilization Act authorizes HUD to establish new requirements for the program that will be designed to improve its fiscal safety and soundness. Introduced by Reps. Fitzpatrick and Heck, the bill passed by unanimous consent in the House in June and later through the Senate in late July. HUD has been working closely with NRMLA and the reverse mortgage industry to create program changes that will help protect borrowers and shore up the FHA’s insurance fund, which came under scrutiny following an annual audit in late 2012 that projected substantial FHA losses due to the HECM program. “All of these changes consider both the best interests of borrowers and the ongoing health of the government insurance fund,” NRMLA President Peter Bell said. // August 9, 2013
2.HUD to Combine Existing
Reverse Mortgage Products
HUD is planning to create a new reverse mortgage loan program, while discontinuing the two programs—the Standard and Saver—as they are currently offered, according to comments made by HUD Deputy Assistant Secretary Charles Coulter during a conference call with NRMLA’s executive and policy committees. The new loan will come with new principal limit factors that range
somewhere between the current Saver and Standard programs, though details have not yet been released on exactly where on the scale the new PLFs will fall. Details are expected from HUD in the coming weeks, and the agency said it plans to implement the changes before October 1, 2013. // August 19, 2013
3.Wall Street Journal:
Reverse Mortgages Can Help a Wide Array of Retirees Reverse mortgages can help a wide population of older Americans, from those who are trying to keep their homes to “well-heeled retirees” seeking an investment buffer, the Wall Street Journal wrote in a recent article titled “Reverse Mortgage Rethink.” The article discussed research on the HECM program led by John Salter and Harold Evensky at Texas Tech that positioned the Saver loan as a safeguard against losses across other investments in a retiree’s portfolio. No longer a loan of last resort, the article writes, financial planners today are taking a different approach to reverse mortgages. // August 18, 2013
4.CFPB Sheds More Light on Upcoming Mortgage Lender Exams
The CFPB released a second update to its exam procedures to offer guidance regarding what it will look for in examinations following the issuance of new mortgage regulations in January 2013. The updates relate to several new regulations the CFPB issued in January, many of which stemmed from the DoddFrank Act and cover various stages of the consumer mortgage experience. Updates to the mortgage exam procedures cover
the Ability-to-Repay/Qualified mortgages; high-cost mortgages; appraisals for higher-priced mortgage loans; and new amendments related to the escrows rule, along with recent changes to credit card rules. Exam procedures now cover the CFPB’s mortgage origination rules issued through May 29, 2013, and mortgage servicing rules issued through July 10, 2013. The new rules issued at the beginning of this year go into effect in January 2014. The recent release of exam procedures are meant to help mortgage companies understand and prepare for how they will be examined for the bureau’s rules that require lenders to evaluate a borrower’s ability to repay and services to provide monthly statements and disclosures, among others. // August 15, 2013
5.Stifel Financial Launches Reverse Mortgage Business, Targets National Growth
Stifel, Nicolaus & Company, Incorporated (NYSE: SF) has entered the reverse mortgage business through a new origination and securities trading platform and its recent acquisition of Knight Capital Group’s Fixed Income Unit. The platform, based in New York, is currently up and running under Stifel’s broker dealer, Stifel, Nicolaus & Co., and began trading reverse mortgage HMBS July 1. It also completed its first HREMIC transaction in July and is working on a second HREMIC transaction this month. Stifel has big plans for growth for the division utilizing its federally chartered Stifel Bank & Trust that includes a 50-state nationwide mortgage origination presence. // August 9, 2013
reversereview.com
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The Reverse Review September 2013
Ms. Smith
Use our versatile nu62sm app to demonstrate to your clients how a reverse mortgage can be structured to meet their financial goals.
The next generation in retirement planning tools. Reverse mortgages were designed to be a valuable financial tool for seniors allowing them to age-in-place. The nu62SM technology makes it easy to explain how a reverse mortgage can be used as a financial resource with many options. This technology has introduced the reverse mortgage to a whole new audience by allowing the user to quickly and easily demonstrate the features to a prospective borrower on the spot. We look forward to meeting you this fall! Come see us at the National Association of Mortgage Brokers (NAMB) Convention at Harrah’s in Las Vegas, in the Nevada Ballroom at Booth #20, October 19-21. If you miss out on Vegas, we’ll see you at the NRMLA Annual Meeting & Expo 2013 at the Waldorf Astoria in New Orleans, November 4-6 at Booth #201.
Call us today to see how a reverse mortgage can meet your clients financial goals at 866-790-6151
Proud member of: © 2013 Generation Mortgage Company, 3565 Piedmont Road NE, 3 Piedmont Center, Suite 300, Atlanta, GA 30305. | TRR NMLS ID #1319. For our state(s) legalese, visit: www.generationmortgage.com/statelegalese.
12
Report July 2013
Top Lenders Report
American Advisors Group
Liberty Home Equity
S1L / RMS
Endorsement
Endorsement
12345 914
645
Lender
Endorsement
592
One Reverse Mortgage
Urban Financial Group
Endorsement
Endorsement
429
Endorsements
389
Lender
Endorsements
GENERATION MORTGAGE COMPANY
282
SUCCESS MORTGAGE PARTNERS INC
16
PROFICIO MORTGAGE VENTURES LLC
254
UNITED SOUTHWEST MORTGAGE CORP
15
REVERSE MORTGAGE USA INC
127
AXIA FINANCIAL LLC
15
OPEN MORTGAGE LLC
124
HOMESTREET BANK
15
HIGH TECH LENDING INC
95
MORTGAGESHOP LLC
14
NEW DAY FINANCIAL LLC
87
NORTH AMERICAN SAVINGS BANK
13
SUN WEST MORTGAGE CO INC
82
LEADER ONE FINANCIAL CORP
13
ASSOCIATED MORTGAGE BANKERS
78
MAS ASSOCIATES LLC
12
CHERRY CREEK MORTGAGE CO INC
63
ROYAL UNITED MORTGAGE LLC
12
FIRSTAR BANK
53
FRANKLIN FIRST FINANCIAL LTD
12
NET EQUITY FINANCIAL INC
47
DOLLAR BANK FSB
12
M & T BANK
47
CHRISTENSEN FINANCIAL INC
12
GMFS LLC
44
ATLANTIC BAY MORTGAGE GROUP LLC
11
NATIONWIDE EQUITIES CORPORATION
42
FULTON BANK
11
MCM HOLDINGS INC
31
UNIVERSAL LENDING CORPORATION
11
MAVERICK FUNDING CORP
30
VALUE FINANCIAL MORTGAGE
11
MONEY HOUSE INC
30
MORTGAGE SERVICES III LLC
11
PLAZA HOME MORTGAGE INC
28
MANN MORTGAGE LLC
10
PEOPLES BANK
26
VANGUARD FUNDING LLC
10
FIRSTBANK
26
STERLING SAVINGS BANK
10
CONTINENTAL HOME LOANS INC
24
SOUTHERN TRUST MORTGAGE LLC
10
SENIOR MORTGAGE BANKERS INC
24
GATEWAY FUNDING DIVERSIFIED
10
VIG MORTGAGE CORP
23
DAS ACQUISITION CO LLC
10
TOWNEBANK
22
BANK OF ENGLAND
10
SUN AMERICAN MORTGAGE CO
22
AMERICAN PACIFIC MORTGAGE
22
ADVISORS MORTGAGE GROUP LLC
20
ASPIRE FINANCIAL INC
19
UNITED NORTHERN MORTGAGE BANK
19
TOP FLITE FINANCIAL INC
18
EVOLVE BANK & TRUST
18
AMERICAN NATIONWIDE MORTGAGE CO
17
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The Reverse Review September 2013
NRMLA News
On the Docket Just prior to breaking for summer recess at the end of July, the U.S. Senate passed the Reverse Mortgage Stabilization Act, H.R. 2167, by unanimous consent, authorizing “the secretary of Housing and Urban Development to establish additional requirements to improve the fiscal safety and soundness of the HECM program.”
NRMLA had been working with HUD to create such legislation to give the department the ability to makes changes via mortgagee letter rather than regulation ever since the auditor’s report on the agency was released last November. Our legislative team, led by NRMLA President Peter Bell and Executive Vice President Steve Irwin and including our lobbyists (Melody Fennel, David Horne and Scott Olson), spent much of the past seven months meeting with members of Congress, their staffs and committee staffs to explain and advocate for the value of legislating the desired authority to HUD. This authority is reiterated in the FHA Solvency Act of 2013, passed with a 21-1 vote by the Senate Banking Committee on July 31. However, the House of Representatives’ Protecting American Taxpayers and Homeowners Act, sponsored by Financial Services Committee Chair Jeb Hensarling and passed out of the committee on a close 30-27 vote, would eliminate the HECM program after two years. The Hensarling bill will not gain any traction in the current Senate or with the current administration. So the next steps are the issuance of mortgagee letters by HUD that will address such specific issues as tax and insurance set-asides or escrows, capping upfront draws in some manner and implementing a financial assessment procedure.
NRMLA Attends Bill Signing In recognition of NRMLA’s support during the legislative process, HUD Secretary Shaun Donovan and FHA Commissioner Carol Galante invited Peter Bell to join them at the White House on August 9 to witness President Barack Obama signing the bill. 14
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New Music in New Orleans—Registration Now open
Join your colleagues amidst the music of New Orleans at NRMLA’s 15th Annual Meeting & Expo, “New Music: Changing the Reverse Mortgage Conversation,” as we explore and adjust to:
* New procedures and requirements that will be implemented by HUD
* New research by leading academics
* New ideas for engaging financial planners and Realtors
*N ew clients and new products, including proprietary loans
*A brand-new approach to industry-wide advertising and volume growth (Of course, some things never change—like our networking reception, the single-largest annual gathering of reverse mortgage professionals in one room.) To register, go to nrmlaonline.org.
New members
NRMLA welcomes the following companies that recently joined the association: • American Fidelity Mortgage Services, Inc. Lisle, Illinois (lender) • Stifel, Nicolaus & Company New York, New York (brokerage and investment banking firm)
New CRMPs
• Galen Call Treehouse Mortgage Group
NRMLA member
NRMLA News
Three separate conferences in Washington in the last week of July and first week of August addressed aspects of the retirement funding gap. With 77 million boomers steadily reaching the retirement benefit eligibility age, and the older sector soon to become the largest sector of the American population for the first time, this wave of discussion is likely to keep building. A conference sponsored by the think tank Aspen Institute urged lawmakers to tackle tax reform to maintain the current system of workplace retirement plans encouraged by tax benefits. There was widespread support among the speakers, who agreed that the most effective tool to encourage more savings among more Americans is an Automatic IRA.
At another conference entitled “Rethinking Retirement: Moving Ahead Without Leaving Anyone Behind,� sponsored by AARP and the U.S. Chamber of Commerce, organizations often on the opposite sides of debate on financial issues, a joint statement was offered supporting:
Among the issues raised that could be addressed by reverse mortgage loans were:
aExpanded worker access to tax-
who planned their retirement, were saving, lost their jobs as a result of the recession, cannot find other work and thus are left with a cash gap in their retirement funding plans.
deferred retirement savings plans while minimizing additional burdens this may impose on employers
aEnhanced incentives for workers to save for retirement
aIncreased education about saving funds for retirement Finally, the annual Washington conference sponsored by Boston College’s Center for Retirement Research, the University Retirement Research Center and the National Bureau of Economic Research focused on the future of Social Security.
aMany Americans who want to retire are postponing solely due to the burden of their mortgage payments.
aThere is a cohort of people over 55
aInstead of borrowing against their homes, many people are using credit cards with high interest rates to pay their medical bills and thus multiplying the cost of their medical care over time.
aFinancial advisors tend to focus on asset accumulation and income replacement, but of equal or even greater value can be debt elimination.
4 Outstanding service to our wholesale partners 4 Record-breaking underwriting and closing turn times 4 Seasoned reverse mortgage professionals provide expert knowledge at every turn
800-748-1184 WholesaleRMUSA.com reversereview.com
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NEWS FROM NRMLA
Everyone in Washington Seems to Be Talking Retirement Funding
brought to you BY MARTY BELL: national reverse mortgage lenders association
The Reverse Review September 2013
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Roundup
Here is a look at the latest
news and stats
affecting the market.
this mon t h
{
Get up-to-date retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.
H EC M T r e n d s
m a r k e t u p d at e
HECM endorsements rise in July.
Report reveals the latest top players in the HMBS program.
Endorsement numbers rose 7.1 percent from June to July, marking a 15.2 increase year to date. Eight of ten geographic regions were also showing increases, with Pacific/Hawaii leading the charge. In that region, Phoenix, Tucson and Las Vegas all showed strong signs of growth.
A quarterly report from New View Advisors noted that HMBS issuance totaled $4.9 billion during the first half of 2013, with $2.5 billion attributed to the second quarter. The program has a total of 10 issuers and 500
Reverse Market Insight - Logo October 9, 2009
PANTONE COLORS
REVERSE MARKET INSIGHT
r e t i r e m e n t fa c t s
Report finds Americans have good reason to be anxious about retirement savings. According to the National Institute on Retirement Security, two-thirds of households age 55-64 with at least one earner have less than one year’s worth of their annual income in their retirement savings account. The report states that based on retirement account assets, 92 percent of households in this age bracket have far less savings than needed to maintain their standard of living in retirement.
3005C
the senior agenda
pools, 35 percent of which
A survey reveals that American seniors rank finances as a top concern over health.
belong to RMS. Fixed-rate
Process Blk C
The United States of Aging Survey, conducted by the National Council on Aging, United Healthcare and USA Today, revealed that 53 percent of respondents nationwide are concerned about whether their savings and income will be sufficient to last them for the rest of their lives, ranking this as a top concern above health issues. Among retired seniors, 43 percent said they rely on Social Security as their primary source of income, and 41 percent of non-retired seniors said they plan to rely on Social Security in retirement. H om e p r i c e s
issuance also constituted the majority of HECM mortgagebacked securities, accounting for more than 67 percent.
No. 1
No. 2
No. 3
National home prices are up from last year.
No. 4
Clear Capital’s Home Data Index indicated that home prices across the country have risen 9.3 percent since last year and 1.6 percent since last quarter.
No. 5
West 17.8 % Northeast 4.8% Midwest 7.5% South 7.6% reversereview.com
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The Reverse Review September 2013
THE HOT SEAT
things you need to know or may have been wondering september 2013
the hot seat From his most memorable moment and his craziest experience to his thoughts about the challenges facing the reverse mortgage industry, we get the personal and professional facts from Michael D. Kent, president of mortgage lending at RMS, in our monthly edition of The Hot Seat.
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Michael D. RMS
president of mortgage lending
P E RSO N AL >
Something nobody knows about me is that I am a complete sucker for babies.
>
My favorite vacation was in Costa Rica with my daughter and seven of her teenage girlfriends.
>
My celebrity crush is Sheryl Crow.
>
If I were a professional athlete I would be a baseball player.
>
My first car was an Oldsmobile Delmont 88 named Maurice.
>
The craziest thing I’ve ever done was participate in several ritual tribal ceremonies in the jungles of Peru while studying with a shaman.
>
If I had three wishes they would be to end poverty, to end hunger and to grant access to education for all people.
>
My favorite movie is Pulp Fiction.
>
When I was a kid I lived in the most kid- and family-friendly town in America: Park Forest, Illinois.
>
I’ll never forget to thank God daily for where I am now.
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My first job was as a newspaper delivery boy.
>
The best lesson I’ve ever learned was to live life in a way that allows you to look in the mirror every day and respect the person you see.
>
The most memorable moment in my life was when my daughter, Mickey, was born.
>
If I could time travel, I would be here, in the moment!
If I were a professional athlete I would be a baseball player.
Professional >
People should seek a career in the reverse mortgage industry because it is an industry filled with some of the best and brightest people I have ever known and promotes a product that can radically change a person’s life in a very positive way. By working in this industry with integrity and with our customers’ best interests at our center, we honor our parents and their contributions to our country.
>
The most important influence technology will have on reverse mortgages is to open access to the product to a larger number of people and help to commoditize the product.
My favorite movie is Pulp Fiction. reversereview.com
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The Reverse Review September 2013
originating
Selling to Seniors Over the Phone Ch ris t o p h e r R us s ow
T
he reverse mortgage loan is a complex financial tool and educating seniors about how it works has always been an intricate task. But as time passes, our target market has become more educated about the product and the negative stereotypes of the program are slowly becoming a thing of the past. In this day and age, seniors as a whole are more willing to listen as we explain how this amazing product can play a role in helping to change their lives. In the traditional kitchen-table model, the loan officer has a wide variety of tools available to help move clients forward in the sales process. Eye contact, body language and physical presence are all an essential part of an effective and persuasive sales pitch. Unfortunately, when you’re selling a reverse mortgage over the phone, the majority of these tools are unavailable and we have to look to other methods to increase the effectiveness of our approach. To that end, this article will focus on the four most critical aspects of the phone sales process and will provide you with examples of how to incorporate these techniques into your sale. The “Four Cs” that I will discuss encompass the main parts of the sales process, and when combined they provide the loan officer with a powerful 20
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suite of tools to help achieve a greater level of success. The first “C” that I want to discuss, Control, is a crucial part of your future relationship with your client and should start on your very first call. In the first 10 seconds of any new client contact, I always take the opportunity to request something from the person I am speaking to. For example, “Mrs. Client, do you have a pen and paper handy? Please write down my name and phone number in case you need to reach me in the future.” This statement, though simple and relatively unassuming, sets the stage for all future interactions between you and your client. Congratulations! You have just laid the first stone in the foundation of your relationship. From this point forward, you must always remember that when things get off track, asking your client to perform a simple task (verifying information, etc.) can bring you back on track. You must control the conversation to ensure that you’re getting the most from each interaction. Once you have established Control, you need to uncover your client’s fundamental need. To do this, ask questions, learn about their situation (financial and otherwise) and make sure that you dig deep to determine
what really drove them to want more information about the product. In order to build a relationship with your client and encourage them to open up to you over the phone, you need to engage the second “C,” Congruency, to make sure that you can build the trust necessary for them to continue the process with you. When I say Congruency, what I mean is that your tone of voice, your enthusiasm and what you say must be aligned. If your personality is mellow and you try to act enthusiastic over the phone, the client will be able to tell that you’re not being yourself. If you’re very energetic but you’re reading slowly from a script, your words and energy will not match. The best chance you have of winning over your client is by being yourself, genuinely caring about what is best for them and listening to everything they have to say. Remember, you have two ears and one mouth, so you should be listening twice as much as you’re speaking. Once you have uncovered your client’s needs and really understand their specific situation, the next step in the process is to explain how much money they qualify for and which loan product is going to be best for their particular situation. This brings us to the next “C”: Consideration. You started the sales process by asking your client for something: specifically, to take down your information. Now it’s their turn to ask you for specific loan details. However, before you can provide this, you must receive consideration from the client to ensure that they are equally invested in the process. This consideration comes in the form of a firm appointment time to review the specifics of their loan. For example, your client might say, “Can you send me a loan proposal so I can see how much I qualify for?” They have asked you for something, and that means that they must provide some consideration in return. To ensure that they do, you reply, “Of course, I would be happy
originating “In the traditional kitchen-table model, the loan officer has a wide variety of tools available to help move clients forward in the sales process... Unfortunately, when you’re selling the reverse mortgage over the phone, the majority of these tools are unavailable and we have to look to other methods to increase the effectiveness of our approach.”
tech servicing
My favorite analogy for this is a visit to the doctor’s office. If I wake up with a sore throat and call the doctor, they will tell me when I can schedule an appointment. When I go to see the doctor, I sign in, wait in the waiting room and eventually
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marketing
In the popular 1992 film Glengarry Glen Ross, Alec Baldwin’s character famously says that you should “always be closing.” Asking for the business, he says, is a crucial part of this process. Closing, our fourth and final “C,” is the last and most important part of the sale. In the traditional sense, many
people think of closing as some kind of mysterious voodoo moment in the sales process where a couple quick tricks and catchphrases will catapult your client forward into processing. Sadly, there is no such thing as the “voodoo close.” However, there are ways to simplify the act of “asking for the business” that can help you achieve a higher level of success. Working with a consistent process will allow you to move forward in a way that is so fluid that the client will have no reason to object.
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to set up a time to go through the specifics of your loan with you. Let me hang up and do some research into your specific situation and let’s set a time when I can call you back to go through all the figures with you.” The Consideration being exchanged is their FIRM commitment to be by the phone when you call, as well as your commitment to deliver them a proposal that outlines the best loan product for their situation and answers any questions they might have.
get moved to an exam room, where I will wait some more. Eventually, I will see the doctor, who will ask me basic questions, shine a light down my throat, make me say “ahhh” and eventually send me on my way with some antibiotics and a plan to get better. We in the reverse mortgage business are just like physicians. Our clients have a problem, they come to see us looking for a solution and our job as professional loan officers is to write them a “prescription” to get them healthy. We don’t often question the doctor because they are the expert in their field. Showing your client that YOU are the expert eliminates the need for the “voodoo close.” When it comes time to move forward with an application, you can simply say, “The next step in the process is to get your loan into processing and to do this, I need to verify a few pieces of information.” All of a sudden, you’re taking an application and you never even had to “close” the client, because you both know that moving forward is the logical next step. x
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The Reverse Review September 2013
originating
Sister Act Mic h a e l J . W e lt ma n
W
22
hen I got the call from Karen, a local Realtor friend who understands reverse mortgages, she had a very excited client who wanted to meet with me to talk about HECMs for Purchase. Karen’s new client was finally moving out of her apartment and buying a home with her retirement savings. She was shocked to learn about an FHA-insured program that would help her buy a home. Thinking this was too good to be true, the client asked Karen to arrange an appointment with a reverse mortgage specialist to learn more.
have no mortgage payment. But then I told this client that with a reverse mortgage she was free to shop for a house that costs nearly twice the price of what she had saved—and she would have no mortgage payments. Well, we were lucky to have people standing by because she could have fainted from the shock. She even began looking around the room, thinking this was an episode of What Would You Do? or Candid Camera, or something like that. But there were no cameras—this was real. And best of all, it was FHAinsured and made possible by the HECM for Purchase program.
So I found myself in the conference room of Weichert Realtors in Tallahassee, Florida, with Karen and her client. Of course, the client always thinks that the money they have saved is going to be enough to pay for the house they want, and they often tell the Realtor they want to pay cash and
So after we picked her up off the floor and she stopped hugging Karen, she went shopping for a new home. If I remember correctly, we closed on a $162,000 home for her. She brought $67,000 to the closing, and because of the Purchase loan she never has to make a mortgage payment. Since then,
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I’ve been invited to see her beautiful new home that she purchased from Jeff at Capital Property Consultants/ Premier Construction, another Realtor who understands reverses. Jeff has done two other reverse mortgage loans on new-construction homes and Karen has also closed a few with me in the last couple of years. This situation has proved to me that my relationship with Realtors in my community is invaluable to my business. So how does one link up with smart folks like this? I suggest you visit your local real estate board and consider joining as an affiliate member, and also check out your local chapter of WCR (Women’s Council of Realtors), attend an SRES-designation class (Seniors Real Estate Specialist), and visit the local Builders Association. Well, you would think my story couldn’t get any better—one satisfied
originating
according to michael
servicing
In closing, I want you to remember that as reverse mortgage professionals, we are equipped with knowledge about important tools that can help seniors and their families solve their financial challenges. When you meet a senior who needs your help, make sure to inform them about all of the possibilities offered by the program—the Purchase, the Refi, the Libor and the Saver. Only one program will be right for them, but perhaps they will remember you when a friend—or a sister—needs your help too. x
tech
As luck would have it, I was planning to visit the Tampa area for a recruiting trip and to attend an MBA convention the following week. While in town I visited the sister and sat down with her to explain the details of the reverse mortgage program. As many of you with sisters or brothers know, no two siblings are alike, and this is true when it comes to a reverse. The Tampa-based sister was not interested in a Purchase loan, as she already had a home; she wanted to know about the other reverse mortgage programs that might help her stay in her home without the
*
marketing
burden of a monthly mortgage payment. Encouraged by her sister’s claim that I had worked miracles to help her buy a new home, this woman called me to ask if I could help her too. “My sister said I better talk to you before I do anything,” she said. “He’s a man I know and trust, enough to recommend him to family.” I couldn’t have been more humbled and honored to have the opportunity to walk these two sisters through the details of a reverse mortgage loan and help them achieve financial security.
originating
This situation has proved to me that my relationship with Realtors in my community is invaluable to my business. So how does one link up with smart folks like this? I suggest you visit your local real estate board and consider joining as an affiliate member, and also check out your local chapter of WCR (Women’s Council of Realtors), attend an SRESdesignation class (Seniors Real Estate Specialist), and visit the local Builders Association.
customer and a solidified relationship with two Realtors interested in utilizing HECMs for Purchase to help their senior clients. And then it did. Eight months after I closed the client’s loan in Tallahassee, I got a call from her sister in Tampa. When she told me who she was, I thought, “Light-bulb moment! How many seniors do I help who have brothers and sisters who might also need my assistance?” It was one of those aha moments when you’re sitting in your office and you just want to get up and high-five someone.
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The Reverse Review September 2013
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Š 2013 Landmark Network, Inc. All rights reserved.
originating
The Pendulum Swings… Again
Lanc e R . Can a d a
Going to the source
Even though we will all be affected one way or another by this pending wave of change and any further adjustments needed in the future, the program has to keep on ticking. It’s also important to remember that our attitude toward these changes can surely impact our success. Like a pendulum, we need to keep on moving, swinging to the left and then swinging to the right, and maintaining our sense of purpose and calm.
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reversereview.com
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spotlight
Even though we will all be affected one way or another by this pending wave of change and any further adjustments needed in the future, the program has to keep on ticking. It’s also important to remember that our attitude toward these changes can surely impact our success. Like a pendulum, we need to keep on moving, swinging to the left and then swinging to the right, and maintaining our sense of purpose and calm. It’s important that we don’t lose focus on the center of this program: our seniors. Where would they be without this program? If we remain focused on the people who stand to benefit from our services, we can prevent ourselves from becoming distracted with the grinding of our ungreased gears as we await our next tune-up. It’s not easy to remain focused, but we can stay busy, all the while picturing that pendulum constantly moving. x
hmbs
When I think of this industry, I can’t help but conjure the image of a pendulum swinging back and forth. As uncomplicated as a pendulum may look, it has been studied, adjusted and improved upon for centuries. It is believed that the earliest use of a pendulum was in the 1st century, but according to history, Galileo Galilei was the first known individual to study the properties of the pendulum in 1602. The first pendulum clock is thought to have been invented in 1656, and until the 1930s this clock was the standard for accurate timekeeping.
When I read about the work that our friends at NRMLA and so many others are doing to preserve this program, it reminds me of the steady hand of a watchmaker making delicate adjustments. Even after these current concerns are addressed, it is likely that even more adjustments will be needed down the road. After all, how many HUD letters and program adjustments have we received throughout the years?
servicing
T
he HECM program certainly has its challenges, but this program is indeed worth fixing, oiling, adjusting and augmenting. It is worth doing whatever is needed to keep this important financial tool available for our seniors and for those of us who continue to champion it. We all know that changes are coming to the HECM program and this industry, and these pending adjustments cannot be ignored. As I write this article a Member Alert email from NRMLA just appeared in my inbox, announcing that Congress has authorized HUD to move forward with program improvements. So, how do we embrace the changes set to come?
tech
We must, however, keep ourselves moving as these improvements take place. The pending changes from HUD are designed to help us do just that. It may be a struggle to maintain day-to-day operations while change is instituted, but I am confident that our resilient industry will get into the swing of things.
marketing
The swaying of a pendulum can be soothing, but these clocks will not keep accurate time unless proper adjustments are made to its mechanisms. Periodic cleaning and oiling keeps them moving. Similarly, if our industry is to continue ticking smoothly, we need to make the appropriate adjustments. We, too, need a little tune-up from time to time.
The Reverse Review September 2013
originating
Speaking My Mind
Ma rc Helm
h, to be 50 again. Recently I celebrated the big one—not 50 or 60, but 63, one year over the magical qualification age for a reverse mortgage. I guess I am luckier than many at 63. I have a job that I love, a great family, good health and, of course, grandkids. (I learned why we have children: so that we can have grandchildren.)
O
what their parents had in actual home equity. With the dramatic decline of property values in the past five to seven years, home equity overall has decreased. This has left some seniors without enough home equity to qualify for a reverse mortgage, and has also resulted in an increase in mortgage risk and losses for our existing reverse mortgage programs.
But some of our seniors are not so lucky. They don’t have a job, Social Security is inadequate to pay basic expenses, and many don’t have extended families that can support them. So what do they have? Hopefully, they have retirement plans, savings accounts and equity in their homes to help them weather their financial future as seniors.
It is indeed a shame that a program that has been around for 24 years has been so maligned in recent months. During this year, reverse mortgage loan plans have been dropped or will be changed so dramatically that some seniors will be unable to retain the last bastions of self-respect: homeownership and the ability to live the remainder of their lives with dignity in their homes. But there are still thousands of seniors who still qualify for a reverse mortgage, and for that we as an industry and as caring humans should be grateful.
Over the years, things have changed from my point of view. When I started in the mortgage business, the mantra for my generation was to borrow as much as could, as cheap as you could, for as long as you could. The bottom line is that the actual dollar equity in a boomer’s home may still be larger due to inflation over time, but it also may be a much smaller percentage of 26
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Let’s talk about the typical reverse mortgage borrower today. It should be no secret that the average borrower since the inception of the program has been female, and it’s probably also
not a shock that the average age for new borrowers over the last two years has been 72. Current life expectancy tables are now projecting a much longer lifetime for reverse mortgage borrowers than was projected when they originated their mortgage loans. Here are some more facts from AARP, NCOA and various news outlets that illustrate just how much has changed for America’s seniors in the past three decades: 3 In 1985, 18 percent of the U.S. the workforce comprised workers age 65 to 69. In 2010, this number jumped to 32 percent. 3 In 2012, unemployed seniors age 55 to 64 were out of work twice as long as those unemployed in the 25 to 34 age bracket. 3 About 44 percent of reverse mortgage borrowers have income under 200 percent of the federal poverty level. 3 A recent survey reported that 41 percent of participating seniors said they relied solely on Social Security for income.
originating 3 Industry sources have revealed that the primary reasons that seniors consider reverse mortgages are: •
To pay off existing mortgages
•
To supplement income
•
To plan ahead for emergencies
•
To pay for home repairs and improvements
Always have the senior’s best interest at heart and treat them with due respect. Work diligently to ensure there is always a viable and meaningful reverse mortgage product.
*
Seek out new investors and private mortgage insurers so that the millions who could benefit from a proper product can have that opportunity. Constantly engage colleagues in thoughtful and analytical discussion about how we as an industry can ensure that all those who qualify have the opportunity to take a reverse mortgage.
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VOTED THE
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tech
A number of years ago I had the opportunity to meet and spend quality time at an airport with Paul Harvey, one of the greatest radio commentators
to go by
marketing
Obviously, these facts will impact the program and we need to be prepared to adjust so that it can meet the needs of senior borrowers in the future.
In future articles, I intend to explore what I believe are new and creative ideas about how we can be better reverse mortgage professionals, not just for the benefit of today’s seniors, but for future seniors as well. Ideas apply only to a moment in time, but our actions can impact an eternity. Maybe if we institute some positive actions like these, we will be remembered as a generation of reverse mortgage providers who made a difference. x
tips
originating
3 About 53 percent of U.S. seniors 65 and older have email accounts and use the Internet, and 25 percent send text messages and participate in social media.
of all time. I had listened to him for years and was always mesmerized by what he said. As I listened to his radio show, I often thought, “I wish I had said that” or “I wish I had thought of that.” I had great respect for him because he always spoke his mind. I am too old not to do so myself, so I plan to do so as my friend Paul Harvey did and speak my mind about the things that matter to me, like the reverse mortgage program.
TE
D
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The Reverse Review
Are you looking for more leads and more sales? Connect with seniors in need of a reverse loan through our direct mail campaigns.
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connect
How to Get Seniors to Read Your Letter
D
originating
Jef f Bu s h
oes this sound familiar?
You’ve invested thousands of dollars in a direct mail campaign. You’ve waited weeks for the letters to be printed, mailed and reach the mailboxes of seniors with equity. You wait by the phone… and it doesn’t ring. What went wrong?
Now that your customer has opened your letter, you have earned another five or six seconds of their attention. Their eyes will be drawn to your opening paragraph, so it is important to deliver your strong offer within the first two sentences. They will typically scan down the body of the
letter and focus at the end, so it is crucial to have a strong P.S. message. I prefer to reiterate my strong offer and place my phone number right next to it so they are side by side. As effective as a handwritten letter is, there are some challenges from a production standpoint. Writing and addressing a letter by hand is a time-consuming and laborintensive effort. There is only one way to do it, and that is the correct way. Beware of cutting corners: Trying to cheat the process could have a negative effect. For instance, writing a single form letter and inserting a typed variable name will diminish the credibility of your campaign. Handwritten campaigns also require a larger initial investment due to the labor involved. However, direct mail campaigns are like most things in life: You get what you pay for. If your 5,000-piece campaign yields a 1 percent response rate due to the extra money you spent on handwriting your letters, that equals 50 inbound calls. These are not livetransfer telemarketing calls. These are seniors with equity who have made a conscious decision to call you. Leads do not get much warmer than that. If the initial investment allows you to fund five to 10 more loans a month, wouldn’t it be worth it? If you are looking to fill your pipeline with warm leads, consider a handwritten campaign and ensure your customers read your letter and receive your offer! x reversereview.com
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Seniors with equity are a unique market segment. They come from an age before email and the Internet, a period when people took the time to sit down and write someone a letter by hand. There is a certain tradition to it, a certain respect for the process. The unconscious logic is if someone took the time to write a letter, the recipient will take the time to read it.
looking at a piece of mail in their mailbox. How do you capture their attention in mere seconds?
hmbs
Sometimes, the simplest, most time-honored solutions are the best: Send them a handwritten letter.
8 The average person spends less than five seconds
servicing
That being said, you can achieve these two elements successfully and still have a major hurdle to leap: How do you get the seniors on your list to read your letter? The average person spends less than five seconds looking at a piece of mail in their mailbox. How do you capture their attention in mere seconds?
tech
There are two crucial elements to a successful direct mail campaign: a strong offer and a strong data list. In other words, you need to send your mail to the right people and give them a good reason to call you. A successful direct mail campaign should generate a 0.5 to 1 percent response rate, and if you have done these two things, you have positioned your campaign to do just that.
marketing
There are a lot of myths and misconceptions about direct mail. I have been in the business for 20 years and have mailed millions of successful pieces, and I can tell you this: Direct mail works. It just has to be done correctly.
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ADVANCE
tech
According to megen “With the Dodd-Frank regulations and many other state agencies weighing in on compliance requirements, originators should make sure that all aspects of their system have grown with the times.”
originating marketing
Technology in Reverse
tech
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Meg e n L aw l e r
Compared to the forward mortgage world, we have very few originators
Just as the industry has changed and grown over the past few years, so too have the rules and regulations. As a technology and document provider, Bay Docs has intricate knowledge of these changes. With the Dodd-Frank regulations and many other state agencies weighing in on compliance requirements, originators should make sure that all aspects of their system have grown with the times. Technology will continue to be at the core of growing our industry, because without it we’d be moving at a snail’s pace! x
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spotlight
When I talk to a prospective customer about our Reverse Express system, we nail down exactly what they are looking for. Do they need a system only to produce application packages or do they need a system that will take them all the way through closing? Will they be able to transmit their data to an investor electronically? There are so many customizable options to choose from that it can be a bit overwhelming, but that’s the beauty of it.
in the reverse mortgage space. As such, the need for multiple technology platforms has simply not been as high. Couple that with the fact that many of the larger companies have found that developing their own origination and post-closing system is a better alternative to utilizing a third-party system, and there is little room for growth in the third-party system.
hmbs
We all use technology in one way or another. The goals of creating a platform can be very different. Having been in the industry for nearly 20 years, I can assure you that technology in this industry has made huge strides. Although technology in the reverse space doesn’t hold a candle to the forward market, the reality is that the enhancements that have been made have significantly helped grow the industry.
For years, many individuals have simply shopped for a system that could provide them with the necessary calculations and perhaps create an easier way for them to obtain application and closing packages. Then, as technology grew, it became clear that much could be done with the data stored in a particular system. Now, not only can an originator process, underwrite and close a loan, but they can fund, post close, track collateral, etc.
servicing
T
he beauty of technology is that it provides a faster, cleaner and more efficient way to produce a result. The problem with technology is that every user wants to get to the desired result in a different manner. As such, it is imperative when developing or enhancing your technology platform that you take into account the way your system will be used. If the platform is to be used by more than one originating lender, then the need for flexibility is essential to the success of the platform.
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servicing
learn
The Value of Reverse Mortgage Servicing Rya n L a R o s e
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spotlight
Senior borrowers are attentive to detail and they will ask about anything they
The truest value of reverse mortgage servicing extends well beyond the economic valuations associated with the servicing rights themselves. When a servicer takes on each and every new loan and for the life of loan thereafter, he becomes the calm, reassuring voice of reason for the lender, the monthly point of contact for all things financial and the helpful hand to hold during grief and transition. x
hmbs
These touch points begin with the servicer’s initial contact with a new borrower. On forward loans, the initial call to a borrower might take 45 to 60 seconds. In the reverse world, initial borrower calls average four to five minutes, and it’s not uncommon for them to last for up to 20 minutes. The average senior borrower requires more explanation and patience, and those who service this product understand and accept this responsibility.
Servicers work with grieving family members, offering them gentle hand-holding, advising them of their responsibilities regarding the loan, and helping them properly dispose of the property if the last surviving borrower has passed away. My father, Celink CEO John LaRose, has said, “Servicing staff overseeing this challenging process must have the patience of a saint, the calm presence of a Tibetan monk, and the sensitivity and compassion of a funeral director.”
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servicing
Counselors, loan officers, processors, underwriters and closing/title agents are first points of contact for the borrower, and these professionals form and frame the reverse mortgage experience. These individuals ensure that each loan is timely and properly executed and that borrowers have a pleasant and informed experience. The
When the servicer receives a loan after closing, it is being entrusted with a valuable asset that will be in its possession an average of seven years, and that timeframe is getting longer as life expectancy increases. Frontline industry professionals will touch borrowers in the origination process, but these touch points number fewer than the touch points a servicer will have with their borrowers over the life of the loan.
tech
Valuation of a lender or investor’s servicing rights is directly linked to the value the servicer brings to bear on the portfolio; they fit together like the proverbial hand in glove. Economic valuation models calculate the dollar figures associated with mortgage servicing rights for those who engage in the practice of buying and selling them. To my knowledge, none of these models takes into consideration the quality of servicing, as quality servicing is too often assumed.
sales and closing process of a reverse mortgage can vary and take up to six months.
marketing
T
his article is not about the economic valuation of reverse mortgage servicing rights. These are thoughts on the tangible benefits lenders receive from the quality servicing of their reverse mortgage portfolios.
Additional touch points between a servicer and borrower are the requisite annual certification of occupancy, monitoring and overseeing repair administration (requiring communication between borrowers, contractors and HUD-certified inspectors), tax and insurance defaults, and perhaps the most challenging contact of all: the death of a borrower or their spouse.
originating
do not understand, and at length. Servicers at times have to answer the same types of questions every month, month after month (often to the same borrower). Since Celink began servicing reverse mortgages in 2005, the percentage of incoming calls every month is approximately 20 percent of its portfolio, and it has remained at that level for years.
The Reverse Review September 2013
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HMBS
secondary market
Want to see more stories like this? Visit reversereview.com.
HMBS Update Da r re n S t u m b e r g e r
according to darren originating
I also expect market spread levels to continue to drift wider as the Fed tapers uncertainty and time is needed for investors to digest the new program parameters and speed history. Given most, if not all, floating HMBS is structured in CMO form, execution will be driven by IO investors, and given their sophistication level, it’s likely that a track program will be needed before they jump into something new. I think prepays will actually be more muted in the new program, with spreads eventually tightening; it will just take some time for this to play out. x
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spotlight
Most importantly, the program is being strengthened with robust full-document underwriting, the rejection of borrowers with a propensity to go delinquent on their taxes and insurance, and the elimination of nonborrowing spouses and broker steering. All of these changes keep the existing universe of bonds safe from any type of refinance/ prepay scenario, and I would expect the new production post-October 1 to be even less callable than prior vintages (although
that’s not saying a lot).
hmbs
Operationally, it seems like a tall order for servicers to monitor draw requests against the absolute prohibition to draw in the face of
extenuating circumstances or an increased need for additional proceeds. Again, we’ll see how that plays out.
servicing
With the upcoming program changes, the market will continue to be dominated by floatingrate products (call it an 80/20 split) and the cash flows will be incrementally
longer because LTVs have been lowered. Even though the curve is steeper, which shortens average life, the drop in LTVs will outweigh the effect on cash flows. Moreover, the modeling of draw behavior will become more nuanced as borrowers will be capped in one way or another in drawing on their available proceeds. It’s possible we’ll see “pent-up” draw demand during the initial 12 months and then a spike upon expiration, but that’s pure speculation and time will tell.
tech
F
loater spreads have leaked wider into quiet August flows along with IOs (interestonly securities). IOs have been off a half of a point over the past several weeks. Seasoned fixed rates have stabilized and tightened after widening 40-50 bps in late June. Three-year and five-yearplus average life papers are trading in the very high 70s. The four-year part of the curve has been more challenged with spreads 5-10 bps wider.
marketing
“With the upcoming program changes, the market will continue to be dominated by floating-rate products (call it an 80/20 split) and the cash flows will be incrementally longer because LTVs have been lowered. Even though the curve is steeper, which shortens average life, the drop in LTVs will outweigh the effect on cash flows.
The Reverse Review September 2013
spotlight article
A HECM LINE OF CREDIT CAN PROVIDE SENIORS WITH FINANCIAL SECURITY IN RETIREMENT.
Lifeboat
b y Ha r lan A ccola
w
In month’stehis dition,
we ex am a HEC ine how M is a n imp safet ortant y net fo retir ees. r
M
any of America’s retirees believe they don’t need a reverse mortgage. For now, they may be right. They may have an ample pension and strong savings. But no one would deny there are financial clouds on the horizon. A HECM line of credit can change uncertainty into certainty in a very volatile home value market. For most retirees, home equity is a substantial part of their net worth. In this article, I will share how I explain to potential clients the value of getting a HECM line of credit now, before they truly need it, so they will be better protected in the future. If you explain this correctly, your clients may come to understand that an ounce of prevention is worth a pound of cure. Loan officers often talk to potential clients about the “lifeboat strategy.” Let’s say you are going on a cruise and the ships you are choosing between are identical, but one ship charges $950 for the week and the other $900. The only difference is that the more expensive ship has lifeboats while the other does not. Despite the fact that it is unlikely that you would need the 36
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lifeboats, few of us would think twice about spending the extra 4 to 5 percent for the safety of the lifeboats. To set up a HECM Standard ARM, it will usually cost a borrower about the same percentage in closing costs. That can scare away potential borrowers and cause them to wait until they “need” it. We explain to our clients and their financial planners that they should not enter retirement without a HECM lifeboat. After all, the best time to get an umbrella is before the rain begins. Retirement can be a long and sometimes difficult journey. Potential problems can arise, like health care expenses, decreasing bond values, fluctuating stock markets and decreasing home prices. No matter how well planned, retirement can be rather unpredictable. Fortunately, reverse mortgage loan officers can bring certainty to one of the biggest uncertainties in the last several years: the value of home equity. It is impossible to predict exactly what you can sell your home for a year from now, to say nothing about 20 years from now. But, because of
the increasing credit line feature of the HECM ARM products, we can guarantee an increase in your access to your home equity (in cash) for years to come, regardless of what happens to the underlying value of the home, inflation and all other financial indicators. If you are 62, just retired and looking forward to a long retirement, this should be a lifeboat you employ to help ensure a safe retirement journey. It is impossible to know exactly how much your real estate taxes, health insurance, utilities costs and life insurance will be in the future. Establishing a line of credit on your home equity that can be accessed if and when it is needed, is simply a prudent thing to do when there are so many uncertainties. In the example graph shown at the top of page 37, taken from Generation Mortgage’s nu62 software, the purple line represents the potential line of credit established at age 62 if it is not drawn on for 20 years. The green line represents the potential home value based on Moody Analytics parameters.
spotlight article The pink line represents the cost of setting up a reverse mortgage and not paying for any of the closing costs out of pocket. This example shows a client with a $500,000 home that can secure a $250,000 line of credit for a 62-year-old borrower. This theoretical borrower has enough savings lined up so he doesn’t need to tap the credit line for the first 20 years. Based on the projections, when the borrower reaches 82, he will have more than $1.1 million in an available (tax-free) credit line.
Use of HECM Lifeboat, Coordinated Strategy Standard & Poor’s 15-Year Historical Numbers (Jan 1998-Dec 2013)
tech servicing hmbs
No HECM Lifeboat, Uncoordinated Strategy Standard & Poor’s 15-Year Historical Numbers (Jan 1998-Dec 2013)
NMLS #277693, Moneywise Mortgage, a division of Top Flite Financial reversereview.com
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The bottom line is that we need to get the word out to our local financial planners and our prospects that a reverse mortgage is NOT a loan of last resort but a wonderful financial tool that can create certainty out of uncertainty by utilizing what is often a retiree’s largest asset: home equity. Taking a lifeboat along on your retirement journey, even if you don’t think you will need it, is simply a wise and prudent financial decision. Make sure your clients don’t miss the boat! x
marketing
When I explain this concept to potential clients, I use a very simple pair of Excel spreadsheets that show the last 15 years of S&P investment returns. It illustrates the coordinated strategy that the Sacks brothers wrote about last year in the Journal of Financial Planning. There were four down years over the last 15 years in the stock market. We simply show the distributions being drawn from the line of credit instead of from the IRA when the market turns negative for those four years. In the typical $200,000 account that we use for an example, the client would have $170,000 left after 15 years based on a 6.5 percent draw if they drew from a HECM line of credit during those four down years. Comparatively, the client would have only $59,000 left if they drew from the IRA. Furthermore, they would have increased liquidity because they used only a part of their HECM line of credit in those 15 years.
originating
Think of the possibilities! If health care challenges arise or if the stock market has a long slide like it did in 2008, the borrower will be covered. If the borrower wants to gift money to his children or travel around the world, these options are now possible. By making this smart decision 20 years ago, when he was 62, this borrower now has access to a significant sum to help him navigate his retirement years—and he doesn’t have to sell his house! He can still live there for the rest of his life. What informed financial planner would not want to discuss this with his wealthy clients, those who never thought about using a reverse mortgage because they didn’t “need” it?
The Reverse Review September 2013
By Jessica Guerin
reverse mortgage broker can be defined as an advisor and intermediary, someone who connects a loan-seeking consumer with the right HECM lender and facilitates the loan process through closing. A mortgage broker advises the borrower on what loan option best suits his or her needs, helping to complete the necessary paperwork and shopping the loan among lenders to find the best deal for the client.
A
In the past, it was common for interested consumers to reach out to a local mortgage broker to discuss their loan options. In the reverse mortgage space, brokers once generated the majority of the industry’s volume, originating roughly 60 percent of all HECM loans. But in recent years, with the rise of nationwide call centers and shifts in the 38
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regulatory landscape, the industry has seen this percentage drop closer to 40. Much of this drop can be attributed to a wave of state and federal mandates in recent years governing the way HECM loans must be handled, with some regulations effectively limiting the amount of compensation available to brokers. Many small broker shops are also straining to stay on top of new requirements while maintaining day-today operations. The result has left some brokers struggling to find a profitable niche in this evolving marketplace. But while the past few years may have been rough for some brokers, many have powered on, determined to make it over this hurdle and get to the other side. Most insist that the broker’s role in the reverse mortgage market is essential, and that
once program changes are solidified and the industry adapts, the market will see a greater penetration rate as more consumers turn to the product. They believe that when this happens, there will be senior consumers out there who will prefer to talk to their local broker about their best financial path toward a secure retirement.
The Broker’s Advantage One of the biggest benefits of working with a broker to obtain a reverse mortgage loan is the fact that brokers have more tools at their disposal. Rather than being beholden to the rates and offerings of a single lender, brokers often work with several lenders and will shop a client’s loan among them to find the best deal. According to Richard Wills, co-owner
Brian Cook, a broker with Washingtonbased Best Mortgage, agrees. “I had about three loans denied by one lender. I took them to another lender and was able to get them closed, even though they are supposed to follow the same guidelines,” Cook says. “When I’m working with multiple lenders, it’s basically [a question of] who is going to get the loan done right the first time. So having those multiple lenders and choices really goes a long way, especially with a difficult property. As a broker, you can take a step back, work through the pricing and shift through different lenders if you need to.” Another great advantage to working with a broker is the fact that most are based locally and can meet with clients in person. For many seniors, this face-to-face connection helps them feel more comfortable talking about their finances. “When you work with a broker, you can sit down face to face with somebody and go line by line over the paperwork,” Cook says. “That can go a long way when you’re working with homeowners, especially if they’re on the fence with the decision.” Wills also emphasizes the value of an in-person meeting, citing this as a major argument against the call center model. “I think your client can get a better understanding of the program if they’re face to face with someone who can answer their questions. You can get a determination of how well that person will represent you, more so than if you [communicate] by phone or by letters,” he says.
Connecting With the Consumer Effective marketing is an important aspect of any successful broker business, and active shops are utilizing all sorts of methods to connect with and educate consumers about the product. Some brokers focus their efforts on direct mail, while others are testing out Internet ads or creating radio broadcasts. Others have found success with a particular professional community, developing relationships with financial advisors or real estate agents and actively promoting their services amongst these groups. And still others spend money on the purchase of viable leads, hoping the investment will generate enough business to make a decent return. Cheryl Chargin, a wholesale account executive with AAG who has spent years working with reverse mortgage broker shops of all sizes, says she has seen brokers achieve success with all sorts of marketing tactics. “It is not one-size-fits-all for our seniors,” Chargin says, adding that different approaches will cater to a different segment of the market. “I do think there is a lot of relationship selling and in-person meetings can create a bond. But I also think that there are more technologically advanced seniors coming into play.” Chargin says she advises brokers to find an approach that suits their personality and run with it. “You’ve got to do what makes the most sense for you, your background and what you are comfortable with, and just be consistent and do it well.” Regardless of how creative their marketing effort may be, one hurdle many brokers face is the public’s negative perception about reverse mortgages in general. Cook says battling this image is still a persistent challenge. “You can utilize marketing, but you’re still up against the same misconceptions that have always 8
advantage
Wills also says that being local has other advantages. “When you have these fluctuations in rates and when they’re going up and down, you can have a much better handle on it when you’re local and you can get to the person’s house that day or the next day to make sure they maximize their benefits under the program,” he says. “I think you can manage cases better by being local, because you can respond quicker to changes in the interest rate, etc.”
the broker’s
of Retirement Life Funding in Sykesville, Maryland, the ability to shop for the best price is a huge advantage. “I think the broker plays an integral role in making sure the client gets the best deal possible,” Wills says. “If I’m an independent broker and I’m affiliated with three or four different companies, I can get companies that may offer products that their retail person cannot offer from their bank. And that happens a lot. Sometimes people eliminate better margins before other companies eliminate them, so therefore you get to ride out the better interest rate for a longer period of time. That’s a great advantage of being a broker. You can in many instances beat the prices that the competition is offering and you have more independence in what you can offer and the circumstances there.”
One of the biggest benefits of working with a broker to obtain a reverse mortgage loan is the fact that brokers have more tools at their disposal. Rather than being beholden to the rates and offerings of a single lender, brokers often work with several lenders and will shop a client’s loan among them to find the best deal.
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The Reverse Review September 2013
been around,” he says. “It’s tough to get past the bad press out there.” Wills says he believes members of the industry need to take a stand and be verbal about the good work they do in order to turn things around. “For us to be successful, we have to correct some of the incorrect, negative assumptions people have, not only about our business, but about brokers.” The broker’s local handle can go a long way to aid in this mission by helping them establish a solid reputation within their community. This reputation could not only help improve the community’s perception of the reverse mortgage product, but also enable brokers to connect with referral partners. For many brokers agree that at the end of the day, it’s all about referrals. Lots of brokers, including Cook, rely heavily on referrals from members of their community, including past clients, real estate agents or other mortgage brokers. “That’s one big referral source for me: other mortgage companies that don’t do reverse mortgages but are looking for a reliable source,” Cook says. By being rooted and active in the communities in which they work, brokers have the opportunity to develop a stable business as the go-to guy for local borrowers considering a HECM. According to Cook, nothing can go further to attest to your credibility than a recommendation from a trusted professional or a satisfied client. “If you do your business right, if you’re trustworthy, if you have the referral partners, there is great opportunity out there.”
Compliance Chaos Since the housing meltdown of 2008, both state and federal regulatory bodies have upped their scrutiny of businesses operating in the financial services sector, effectively increasing the cost of compliance across the board. The result for reverse mortgage brokers has been a
deluge of paperwork and a never-ending list of new regulations that must be interpreted and adapted. According to Wills, the time and money spent on compliance concerns have impacted his six-person brokerage. “One of the things that brokers in our level have problems with is that it takes an extremely long amount of time for us to work on the regulatory issues, especially if you’re in more than one state. It takes an inordinate amount of time. At one point we were paying someone to deal entirely with it, but in looking at the financial forecast for the business, a lot of brokers can’t afford to pay someone to do the entire regulatory checklist,” Wills says, adding that even if you take on most of the burden yourself, you still need to pay someone to review your work, and the attorney fees can be substantial. The need to spend considerable time and energy on compliance concerns can be difficult because the broker’s plate is already so full. As Chargin points out, brokers must juggle all aspects of the business at once. “The broker in many shops has to wear all of the hats. They have to be their own compliance officer; they have to be their own marketing department; they have to be their own sales manager and trainer. They also often originate their loans and care about their borrowers,” she says. “They wear all of the hats for every step of the business and worry about profitability in all they do.”
From Broker to Banker Some industry analysts suggest that 2011 regulations changing broker compensation models prompted some brokers to take steps toward becoming a correspondent lender, sometimes by consolidating with an existing bank or by joining forces with multiple brokers. Under current regulations, correspondent lenders can receive both a consumer-paid fee (like an origination fee) and a lender-paid premium for the
“The broker in many shops has to wear all of the hats. They have to be their own compliance officer; they have to be their own marketing department; they have to be their own sales manager and trainer. They also often originate their loans and care about their borrowers.” 40
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loan sale, unlike brokers who stand to make less money on a loan transaction. Michael Branson, CEO of Californiabased All Reverse Mortgage, says his company transitioned from a broker to banker late last year after a lengthy back-and-forth with HUD. “The benefit of being a banker is that you get different treatment under Dodd-Frank and we’re not pricing the same way,” Branson says, although he adds that pricing for brokers has improved and is not too far from what his company offers. “The companies that we sell to on a correspondent basis are pricing the brokers real close to what we’re getting anyway.” Branson says being a banker gives All Reverse more control over its loans, which can be both a positive and a negative. “It gives us a little more control over what we do and don’t do, which is sometimes good and sometimes not as good. Those loans we used to turn in and not worry about anymore, now our underwriter is the one who’s fighting with every one of those deals. And you have different HOC offices that are completely different in their treatment of loans, and appraisals are a big issue with different HOC offices.” But whether you’re a bank or a broker, one thing is consistent: paperwork. “I joke that one of these days I’m going to get back to the business of loans,” Branson says. “My job is paperwork these days… It’s constant.”
The Future for Reverse Mortgage Brokers Asked to predict future for brokers, some think that, at least to some degree, consolidation could play a role. By joining forces to develop an economy of scale, brokers could potentially increase their chances of remaining afloat when volume is low and compliance costs are high. But as Branson points out, such a partnership could come with its own set of problems. “It’s inevitable that some people are going to look at this and say, ‘I can’t do it anymore,’” he says. “I do think that you’re going to start to see a lot of people looking at where they can consolidate, but the problem with consolidation is
that brokers and small bankers by nature are entrepreneurial—they don’t really want to have to worry about working for somebody or working underneath somebody. And then you have two different entrepreneurial spirits who may not necessarily be doing the same thing or may be worrying about how they are going to do things the same way. It doesn’t always make a great fit.” Wills agrees. “I do see brokers getting together with other brokers and putting their companies together, but there are some problems with that,” he says, adding that his company has been exploring that option for the past four years. “There are a lot of concerns about how to share the revenue.” Still, Wills says that until the market can increase its penetration rate, brokers might not have a choice. “I think that some brokers will be looking to join with other brokers, either formally or informally, to try to get through this period.” Complicating things further is the air of uncertainty hovering over the industry as it awaits program changes from HUD. Although the first wave of program
changes is expected any day, HUD has said some of the other, much-discussed changes like the establishment of T&I set-asides and Financial Assessment won’t be released for several months. Chargin said a number of the brokers she works with have expressed some trepidation about the coming changes. “These are probably some of the biggest changes that we have had to deal with and weather,” she says, “And I know there is some fear out there.” But Chargin says the industry has a strong track record of adapting successfully to change. “Because our industry has thrown us through loops so many times, those of us who have been in it for longer than we care to admit realize that we’re actually pretty resilient.” Chargin emphasizes the importance of maintaining a positive outlook despite the fact that there may be a rough patch ahead as the industry adapts. “I think that a lot of people are going to focus on these changes in a very negative light. I would hope that they can adjust their thinking and view it in the long term. While it is going to be an adjustment and confusing for a while, I think that the
overall changes are what we need for the health of the industry.” Chargin also suggests that the coming wave of change could help expand the market down the road. “I think people shouldn’t forget about the private sector and the possibility of propriety products being able to come back in to meet needs that the federally insured program may no longer meet,” she says. “And while that isn’t going to be happening tomorrow, I think we should be focusing on what we can do and the hope of future possibilities we haven’t seen yet, and not what has been taken away.” No doubt, the industry is on the brink of major change. And although the uncertainty surrounding this change can be taxing for small businesses, brokers have proved their ability to adapt. As Branson points out, “Brokers have always been able to change really quickly with the way the industry has moved. Small operations can move quickly and turn fast and do what they need to do,” he says, adding that he believes this time will be no different. “I think there will always be a place for brokers.” x
We just added QuickCert as one of our local HECM counseling agencies because they have great service and do telephone counseling NATIONWIDE! What’s everyone celebrating?
BRILLIANT 888.383.8885 ops@quickcert.org Telephone counseling nationwide reversereview.com
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The Reverse Review September 2013
last word
CONSIDER
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The Future Joh n M it c h e ll
in the market. Down the road, 15 to 20 years from now, it’s likely to be 20 to 30 percent. It’s pure math. Our market is growing by leaps and bounds because of demographics, coupled with the fact that folks are illprepared for retirement and their houses are their biggest asset. There is no way our industry doesn’t have a bright future. Also, have a little perspective on the product itself. We’re giving people money that they never have to pay back, as long as they stay in their home. And it’s got the blessing and the seal of approval of the U.S. government. Further, it doesn’t take a big out-of-pocket expenditure for a customer to do it. How good is that? If you were dreaming, and had no limitations, you couldn’t come up with a better product than that. Never lose sight of that fact. It’s the greatest product I’ve ever seen!
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o how do you feel about the future of the reverse mortgage business? Maybe not so good, given that our compensation has been substantially reduced. But let me share with you why you need an attitude adjustment. It’s a matter of perspective. You’re looking at the glass as half empty, because you are comparing it to what we had a few months ago. Let me change your perspective. Selling the adjustable product is something we did exclusively about four years ago. Back then, we had a lesser back-end compensation than we get today, and we made a decent living doing it. It’s also relevant to appreciate that there are peaks and valleys in every industry. That’s normal. A true professional committed to this industry takes the good with the bad and has a long-term view. So let me make the case for why the future is bright today for the reverse mortgage industry. Every single day, 11,000 people turn 62. The average net worth of a senior household excluding their home is just over $28,000. Those two facts tell us that the future of the industry is very bright. Today, the reverse mortgage industry has about a 2 percent penetration
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Some may be concerned about the looming changes coming from HUD. Consider this: The pure economics of our business from HUD’s standpoint have never been better. Home prices in the United States are now increasing 10 percent per year, after a historic fall over the last four or five years. Secondly, a while back HUD changed materially the mortgage insurance premium paid by borrowers on a monthly basis, increasing it substantially. That’s why today, the economics of the program to HUD have absolutely never been better. The book of business being written now is clearly cash positive for the government, and that won’t change in the near future. But let’s also talk about the elephant in the room: the effect of HUD possibly limiting draws on the Standard adjustablerate product. Will that change materially reduce the number of people who will take a reverse mortgage? The answer is a resounding no. Here’s why: Folks are taking reverse mortgages not only for the immediate benefit, but also to support them in the coming years. Limiting the draws helps them budget for the future. And it’s all in how you present it. So yes, we as originators will have to “up” our sales skills. We can’t do that? Sure we can! And in the end, it helps the customer be financially responsible regarding their future. So here’s the big picture. Let’s have a little perspective. Today our compensation as originators is better than it was four years ago, selling the same adjustable-rate product. Let’s also have confidence in the great business we are in and accept the fact that we have to improve our sales skills and appreciate that HUD is making intelligent, long-term changes to the program that are good for everyone. x
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