The Reverse Review April 2010

April 2010

THE

REVERSE review

How Medicaid’s Estate Recovery Can Help You Make New Friends Jonathan Neal page

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Those of us in the Reverse Mortgage Industry are here because we truly care for Seniors and want to see them enjoy their golden years. As such, this is also true for those who seek to provide seniors with Long-Term Care Insurance. As the saying goes, “two minds are better than one”, so why not put our heads together in order to offer Seniors products that benefit them in the long run. This month, Jonathan Neal focuses on the idea of Reverse Mortgage and Long-Term Care Insurance professionals coming together in order to provide Seniors with sound knowledge and advice on another use for their Reverse Mortgage funds which they may not have considered in the past.

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Publisher Aman Makkar Editor-in-Chief Erica English Copy Editor Harpreet Makkar Production Jason Westbrook Creative Director Traci Knight Layout & Design Wilferd Guenthoer National Accounts Manager David Peck Printer The Ovid Bell Press

Advertising Information

Rates, specifications, and deadline information available. phone : 858.832.8320 e-mail : advertising@reversereview.com

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THE

REVERSE review 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127

© 2010 The Reverse Review, LLC. All rights reserved. The Reverse Review, LLC is a California limited liability company and is the publisher of The Reverse Review magazine.

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, The Reverse Review, 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, 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127

H

note from the editor

appy Birthday! It’s already been two years of publishing The Reverse Review, and let me say, “It’s been such a great experience!” Like most Editors, it takes countless hours each month to put together articles, layouts and interesting ideas for readers, so I am happy to hear that TRR has become a huge part of many people’s business lives. Thank you to all the contributors and advertisers, and also a huge “Thank You” to my amazing staff here at TRR. You guys ROCK! I know our industry is in unfamiliar territory with new compliance and regulatory changes and it can seem overwhelming for small to mid-size companies. I urge you to remember that sometimes, such drastic change can, in fact, be beneficial in the long run. I’m so pleased whenever I see a company grow or a newcomer enter our industry, as it is a clear sign that our products are here to stay.

It is how I remain optimistic through these challenges and makes me believe that we will begin to see significant and positive changes in the way our industry continues to take shape.

In our two-year anniversary issue, we have some very interesting content from Jonathan Neal discussing the importance of Reverse Mortgage specialists and Long-Term Care Insurance agents coming together in order to promote the reverse mortgage product together. I hope you all enjoy and learn from this and the rest of the magazine in its entirety.

So in the meantime, I’ll be floating around the different road shows and conferences throughout 2010 and I look forward to meeting new people and catching up with old friends!

Erica English Editor-In-Chief

April 2010 TRR

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CONTENTS

14 Building Lasting

Relationships for a More Sustainable Reverse Business Model…

The Next Steps...This is Not Speed Dating Bo Hussung

16 Consider Press Releases OR Press Campaigns to Boost Your Reverse Mortgage Business

18 FEATURE: How

Medicaid’s Estate Recovery Can Help You Make New Friends: Why Reverse Mortgage Brokers Should Be Going Out of Their Way to Meet People Who Sell Long-Term Care Insurance Jonathan Neal

Sam Collins

ESSENTIALS

22 How Reverse Mortgages Can Boost Emerging Older-preneurs Boom

Atare E. Agbamu, CRMS

24 Spotlight Interview: Security 1 Lending

28 HUD Gives HECM Model Forms a Makeover: A Review of Mortgagee Letter 2010-07

Weiner Brodsky Sidman Kider, PC

5 Note From the Editor

8 Ask the Underwriter

12 Industry Stats

32 Ask the Servicer

33 Directory

34 The Last Word

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ask the underwriter Tea for two….

Ralph Rosynek Congratulations to The Reverse Review! Two years running and growing strong! Happy Birthday 2 You! I can’t help thinking how the number “2” impacts what we do with reverse mortgages. First and foremost there is the team of two that begins the process; Loan Originator and Borrower(s).

Then, there is the 2% origination fee base, a HECM has 2 Notes and 2 Mortgages or Deeds of Trust, 2% upfront MIP fee, 2 indices associated with an adjustable rate program, 2 different rates – the initial and the expected, and lastly there are those other team pairs of trusted advisor/counselor, loan processor/underwriter and Lender/HUD. I have to tell you, 2 years into this column and I continue to be amazed. Recently I had the chance to catch up with a title closer and I thought I would share the highlights of our “tea for 2”.

Let’s start by telling you the end of the story - 4 hours later the Borrower(s) “closed”, barely, totally confused.

What occurred during the 4 hours was a frantic chase of paper that began once the Borrower(s) arrived at the settlement agent office and as the closer entered the room. There in front of the Borrower(s) was a stack of paper the size of a ream of copier paper.

As the closer proceeded to tell me the details of the eventful hours, I couldn’t help but draw the conclusion that perhaps those team pairs of 2 we spoke of earlier, shifted, resulting in the tremendous amount of confusion for the borrower as to the basics of their reverse mortgage – what were they getting, what kind, how much, and which paper is correct were the questions of the day.

It appears the basic premise to this story is that of over communication.

Each of the pairs of 2, in some cases, went over the top to support the Borrower(s). We know, as an industry and as professionals, disclosure is good, a well-informed Borrower is good, and a compliant loan is good. But what happens when everyone does “good?”

So I ask you to read the “good” disclosure job facts done for the Borrower(s) which created a large part of their pile of paper, and drop me your thoughts to editor@reversereview.com for next month’s column.

These are the facts………….

The “Preliminary” Loan Costs and Loan Comparison Summary was sent to the Borrower(s) based upon their initial inquiry.

A 2nd “Preliminary” Loan Costs and Loan Comparison Summary was sent to the Borrower(s) for counseling use.

A 3rd “Preliminary” Loan Costs and Loan Comparison Summary was sent to the Borrower(s) based upon the Counselor suggesting a reduced monthly servicing fee may be available from other Lenders.

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The application package was sent to the Borrower(s) with full disclosures and GFE provided based upon a line of credit product choice.

The application package was updated to fixed rate product choice and another partial set of new disclosures and GFE was sent to the Borrower(s) with application changes.

The application package was updated as the spouse was removed from title, another partial set of new disclosures and GFE was sent to the Borrower(s) with application changes.

The appraisal was received for $25,000.00 less than all parties estimated, another partial set of new disclosures and GFE was sent to the Borrower(s).

In file processing, the property liens were verified higher than estimated; another partial set of new disclosures and GFE was sent to the Borrower(s).

The file was sent to Lender and the Lender sent a partial set of new disclosures and GFE to the Borrower(s).

Underwriting adjusted the property value, a partial set of new disclosures and GFE was sent to the Borrower(s).

The underwriting loan conditions were cleared and the rate locked, a partial set of new disclosures and GFE was sent to the Borrower(s).

The Borrower was unable to close due to illness, the closing was rescheduled, the rate relocked, and a partial set of new disclosures and GFE was sent to the Borrower(s).

I look forward to your thoughts. Cheers 2 you too!

It’s hunting season...

Join our team today!

Security 1 Lending is on the hunt for

Reverse Mortgage brokers interested in becoming lenders and established loan

officers looking to receive live transfers.

For more information on how you can be a part of the Security 1 Team, visit our web site at S1L.com

contributors Ralph Rosynek - Ask The Underwriter, page 8

Ralph Rosynek is President and CEO of 1st Reverse as well as a HECM DE Underwriter.

Mr. Rosynek has been involved in mortgage lending for over 30 years with the last 5+ years exclusively providing reverse mortgage lending solutions. To contact Mr. Rosynek or to learn more about 1st Reverse Financial Services, Please visit www.1streverse.com or call 877.574.1000.

John Lunde - Reverse Market Snapshot, page 12 John Lunde is President and founder of Reverse Market Insight, the premier source for market intelligence and analytics services in the reverse mortgage industry. RMI clients include five of the top ten reverse mortgage originators, both lender and independent servicers, as well as some of the largest financial services firms in the world. Find out more at www.rminsight.net or call 949.281.6470.

Bo Hussung - Building Lasting Relationships for a More Sustainable Reverse Business Model…

The Next Steps...This is Not Speed Dating, page 14 Bo Hussung is a sales and business development strategy consultant with over 25 years experience in B2B sales including 16 years in the mortgage and title industries.

His interest in reverse mortgages spawned 3 years ago when her began creating certification and training programs for notaries and loan originators. Bo can be reached at 615.438.7300 or by email: bohussung@gmail.com or online: www.bohussung.com.

Sam Collins - Consider Press Releases OR Press Campaigns to Boost Your Reverse Mortgage Business, page 16 Sam Collins is the President of Sam Collins Reverse Marketing, LLC and Founder of REMALO, the Reverse Mortgage Association for Loan Officers. REMALO is a web based National sales, marketing, training, and full service center, created exclusively for Reverse Mortgage Loan Officers, Correspondents, Branch Managers, and key executives, and brokers. www.remalo.org or 877.262.7656.

Jonathan Neal - How Medicaid’s Estate Recovery Can Help You Make New Friends: Why Reverse Mortgage Brokers should be going out of their way to meet people who sell Long-Term Care Insurance, page 18 Jonathan Neal is the senior partner at CCG-Capital Consulting Group, LLC a sales and training consulting firm located in Atlanta Georgia. Through his 30 years of experience John’s primary focus has been on post-retirement and estate planning. Jonathan is recognized nationally as an author and coach, managing and training financial/insurance professions who work principally in the senior market place. Jonathan can be reach by phone at 678.906.2850 or email at jneal@ccgcap.com.

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contributors How Reverse Mortgages Can Boost Emerging Older-preneurs Boom, - Atare E. Agbamu CRMS page 22 Author and columnist, Atare E. Agbamu, is director of reverse mortgages at Minneapolis based AdvisorNet Mortgage, LLC. A member of BusinessWeek Market Advisory Board, Agbamu is author of Think Reverse and more than 130 articles on reverse mortgages. He can be reached by phone at 612-436-3711 and e-mail at aagbamu@advisornet.com or atare@thinkreverse.com Spotlight Interview - Security 1 Lending, page 24 - Torrey L. Larsen Torrey Larsen, who co-founded Security One Lending, is its Chief Executive Officer. Larsen is active in all aspects of the firm with his central focus on overall business growth and strategic direction. Mr. Larsen has a broad background in the areas of corporate finance, capital markets, and secondary marketing. As a direct result of his leadership, Security One Lending has achieved tremendous growth and is on track to achieve and exceed its sales and financial projections. Mr. Larsen is chairman of the board of directors.

HUD Gives HECM Model Forms a Makeover: A Review of - Joel Schiffman Mortgagee Letter 2010-07, page 28 Joel Schiffman is a member with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. Mr. Schiffman can be reached at schiffman@wbsk.com or by telephone at 949.798.5570.

HUD Gives HECM Model Forms a Makeover: A Review of - Fed Kamensky Mortgagee Letter 2010-07, page 28 Fed Kamensky is an associate with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. Mr. Kamensky can be reached at kamensky@wbsk.com or by telephone at 202.628.2000.

Ask The Servicer, page 32 - Ryan LaRose Ryan LaRose is the Executive Vice President of Celink, an independent reverse mortgage subservicer. Ryan has over 12 years of servicing experience; exclusively in reverse mortgage servicing since 2005. In addition, Ryan is an active member of the NRMLA servicing and technology committees. Visit his website at www.CeLink.com or contact him directly at 517.321.5491.

The Last Word, Page 34 - Stephen Margrett Stephen Margrett is CEO of The Turning Point Inc. The company’s flagship product is Mach3, a marketing/business opportunity engine. With a master’s degree in consumer behavior from the University of Minnesota, Mr. Margrett has been in the field of relationship marketing for more than 25 years. In 1986, he created Europe’s first full-service, data-driven marketing agency and managed it until the mid-1990s, when he moved to the United States.

April 2010 TRR

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In an article by Mark Huffman for the magazine Consumer Affairs Online entitled: Is a Reverse Mortgage a Good Idea? He ended the article by writing, “Even if the reverse mortgage is not a scam, it may come with so many charges and hidden fees to make it a bad deal. And of course, the person trying to sell it to you probably won’t mention that.” (You can read the whole article at the link provided at the end of the article.)

What?!! Okay, don’t blow a gasket! As infuriating as these types of comments are, it underscores the need for diligence in the continued battle to reverse (no pun intended) many of the public misconceptions of the product that we so strongly support. The bigger issue, however, is the types of experiences our valued customers are having that would force this type of commentary.

In a recent article in the Dec/Jan issue of the TRR titled, Building Trust with Reverse Mortgage Clients, I referred to a 2007 National Survey of Reverse Mortgage Shoppers by the AARP that over 50% of the reasons many borrowers were dissatisfied with their lender was due to a lack of product knowledge, an inability to properly explain or provide enough information, answer questions and a lack of respect.

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Be Informed The last thing our industry needs is an overzealous originator to go unchecked and loose their focus of the true objectives of providing a meaningful financial alternative to a senior’s retirement planning. To that, I would say there are solid legislative systems in place to keep that from happening, but is that enough? Because of this, are the reverse mortgage companies in the industry implementing additional accountability standards to their best practices? Do you rely on your mortgage company to provide you with the materials and resources necessary to be the best reverse mortgage professional that you can be? Stay informed of legislative changes.

Use the Internet Apply to popular website RSS feeds and email lists that focus on industry changes and share opinions, like The Reverse Review. Other sites like LinkedIn have group forums and discussions in just about every industry and topic. Plus they are good sites to network with other professionals.

Talk with Others As mentioned above, become part of a network of informed reverse mortgage professionals that share the same quest for knowledge. Create

your own group at work. Don’t just talk at the water cooler about last night’s game or the latest deal you got on your new PDA. Meet once a week, create dialogue and share your experiences with others. This will help create a context for what works and does not work with your clients.

Take your Time and be Engaged We aren’t speed dating. Take your time and ask questions. Make sure to spend a lot of time here and be patient. In fact, I learned a long time ago that the amount of time we spend with a prospect is relative to the success we have with converting them to a client. I am not talking about simply asking them the questions on the application. Take some extra time to get to know them. Remember you’re not there to just make a sale. You are there to help the client make an informed decision. Without the right information, how can you make proper suggestions?

The RESPA Challenge

Know your Client We have already established that Reverse Mortgages are not for everyone.

But in our continuous search for the right prospect to sell our product, is our judgment compromised by not doing the proper amount of due diligence in our discovery and application process?

Get to know the client. Have a meaningful conversation with them. Ask them about their family, their likes and dislikes, where they grew up or where they go to church. We are looking for some common denominators to establish a connection with our client. The more we know about our client, the better chance we have of moving them successfully through the process. I have always said, “Lenders that…. effectively establish rapport with their clients will significantly improve their chances of successfully originating a loan.”

Be Empathetic This is not a game! Reverse mortgages fill a serious need for the senior market and we need to elevate our level of compassion when dealing with the same generation as our parents or grandparents. Remember they are someone’s parents or grandparents as well.

Be Compassionate Zig Ziglar said, “You will get all you want in life if you help enough other people get what they want.” Okay, that makes sense, but you say you have learned the sensitivity of selling in the senior market and how to talk with them and their trusted network of advisers. So, ask yourself the following question. Am I moving closer to helping my client or is my motivation to simply drive revenue for my employer? This is important because, I believe we walk a fine line everyday between an approach of sincerity and generosity in our business without it appearing that we are in it only for money. Notice I said generosity, not charity. We are after all in business to provide for our families and meeting our own personal obligations, while we work to grow the companies with which we work. This doesn’t mean we can’t have a level of compassion. Give seniors credit, they know this, but also don’t be fooled. Seniors have the experience to know when someone’s intentions are not true. Be compassionate about the products and services you are offering.

These are valuable tools in building meaningful relationships with our clients. The more we work on this, the quicker we can bring credibility and integrity to our profession. And, subsequently the more our profession will grow. Remember we are all going to be old one day and may need the services of a reverse mortgage professional. Let’s all continue to work hard to make sure our industry is around so that others and we will be able to benefit from all of our hard work.

Read more: http://www.consumeraffairs.com/news04/2009/10/reverse_ mortgage02.html#ixzz0fjdz2QHp

Stricter RESPA rules, lower principal limits, a more complex FM1009 and other changes pose a serious challenge to our industry. Lenders will take on additional responsibilities and need to be meticulous while working with brokers. Brokers will lose all or most of the YSP and any mistake made in the GFE could cut into their origination fee as well.

But there is also good news around the corner...

ReverseVision Inc.

3310 Pollock Place • Raleigh, NC 27607 www.reversevision.com (919) 834 0070 • info@reversevision.com

April 2010 TRR

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CONSIDER Press Releases OR Press Campaigns to Boost Your Reverse Mortgage Business

Sam Collins The importance of using successful media campaigns and publicity can be especially important to your reverse mortgage business. The best part is you don’t have to spend thousands of dollars, but you do have to invest your time. So why not? Time is money and you have the knowledge about the reverse mortgage business…. why not share it?

Here are the steps and procedures you will need to make a successful campaign or press release: Step #1 A successful press campaign can give your reverse mortgage business a great deal of free publicity without leaving a hole in your pocket. There is no other more cost-effective way to generate publicity and credibility for your business.

The challenge is getting the press interested in your story and sometimes this is an uphill battle, because editors and producers are bombarded with hundreds of press releases every day. To increase the chance of having your story published, you must make the editors’ job easier by presenting your press release in a format and style that appeals to them. Here’s the good news, they need stories and who better than you to share the good news of interest about seniors than you. We have great stories to tell about our good deeds done for our senior homeowners.

(1) COLLATE AND ORGANIZE YOUR FACTS. Contrary to what most people think, a journalist actually spends the bulk of his time in collating information and facts. When everything is ready, it is not uncommon for journalists to finish writing the story in just half an hour.

pyramid” format that presents the most important information in the opening paragraph, followed by other information that supports or develops the key points raised in the second paragraph.

(3) CREATE A CATCHY HEADLINE. Keep your headline short and simple using less than ten words. It should convey the key point in your opening paragraph in a light-hearted manner that catches people’s attention and imagination.

For example: HEADLINE: “Goodbye Mortgage Foreclosure! Now I Can Stay In My House!”

OPENING PARAGRAPH: .... followed by details of your story.

(4) WRITE IN THIRD-PERSON VOICE. Unlike an emailed newsletter that is written in a personal voice, a press release must be presented objectively from a third person point of view. The reason is obvious. Every journalist has a duty to provide his readers with impartial facts and figures. He must not be seen as endorsing a company’s products or services. Some of the guidelines are listed below: - refrain from using any sales pitch in your press release. Remember, you are spreading the good word about your story…. it is not an advertisement!!

• • • •

Remove the words “you”, “I”, “we” and “us” and replace them with “he” and “they”.

Provide references to any statistics, facts and/or figures raised in the press release.

Refrain from expressing personal opinions, unless they are done in quotes.

Draw your conclusions from facts and statistics only - not general opinion.

(5) PROVIDE “QUOTES” FROM THE NEWSMAKERS. As a newsmaker, put your most important message down into a quote.

Reporters always use quotes from the newsmakers to add a proof voice to their reports. If your press release contains quotes that are important and relevant to the story, chances are high that they will be fully replicated in the published article.

(6) PROVIDE ADDITIONAL BACKGROUND INFORMATION. You should end your press release with an appendix that provides brief background information on your company, newsmakers, as well as who to contact for further information. This is very important, since the whole idea of this strategy is to become better known within your community.

How should you go about collating all the information and facts surrounding a particular event or client experience? A simple rule of thumb is to find answers to questions pertaining to the who, what, when, where, why or simply, the 5 W’s of the event. Do not stop at just the absolute facts and figures, but present them in the right perspective relative to the reverse mortgage industry norms, trends and statistics. You may have to undertake some research by going through past industry and newspaper reports. More good news, there is plenty of information to go around. Just sharing your experiences and stories can make interesting campaigns that are very newsworthy.

Step #2 Step 2 of writing a press release or press campaign is learning how to identify the angle or headline of a story. This is the most important step in writing a press release. The correct choice of a story’s angle will greatly increase the chance of having your story published by the media.

The key here is simple, the more you get done for the editor or producer, the less work they have to do, which increases your chances of getting your story published or your face seen and your voice heard.

As senior marketers, it is important for you to recognize the profile and buying behavior of your senior clients. Information such as their age groups, interests and preferred media would come in handy when you want to reach out to them effectively. When I meet with my senior clients, I make notes and afterwards spend time detailing the notes and transferring them into my files for easy points of reference.

(2) IDENTIFY YOUR STORY’S ANGLE. Now that you have collected all the relevant facts and figures, the next step is to identify the “angle” or headline of your story. A good story angle must have the following three attributes: • • •

It must be the most important fact in your story.

It must be timely.

It must be unique, newsworthy or contrary to our particular industry norms and trends.

This story angle must be presented in the first paragraph as well as the headline of your press release. Most newspapers employ an “inverted

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(1) IDENTIFY YOUR READERS… Obviously ours is geared toward seniors, but don’t forget, children of seniors are quite concerned about their Mom and Dad.

The key to an effective communication, whether verbal or written, lies in presenting your message to an interested audience or readers. Whenever possible, you should only be sending your press releases to those media outlets whose readers’ profiles match that of your senior clients. However, think outside the box as to why others need to hear your message, such as other professionals, and especially the children and family members of seniors who are interested in the well being and care of their loved ones.

To increase the chance of having your story published, you must send your

press release to the right people. Look through newspapers or publications and identify those reporters who cover events or activities that share the same theme as items of interest for seniors. You can identify the reporters by the articles’ byline.

(2) PRIORITIZE YOUR MESSAGES Before you start writing a press release, you should list all the relevant facts and details on a piece of paper. This is a good writing practice. It helps you to organize your story better. The next step is to evaluate and prioritize the facts according to their relative importance in conveying your intended message to the media. The most important fact will form the basis for your story’s angle. Remember, just one good hook or angle is enough.

The RESPA Opportunity

(3) RELATE MESSAGE TO YOUR READERS What you want to say about reverse mortgages may not be the same as what your readers want to know. What this means is that you and your readers may look at the same event from totally different perspectives.

To spark your senior readers’ interest, you must present your intended message from their perspective. If you have done a good job in understanding your senior readers, you should have no problem in empathizing with their view and interest.

This is widely known in journalism as having “a nose for news”. It all boils down to having a sharp sensitivity to factors that make a person tick!

For example: A senior organization may want to rally their seniors to consider the benefits of a reverse mortgage and just how much it will cost in terms of finances and time for their members.

The organization may have a difficult time with its seniors, if there is not enough done to lay the groundwork for such a suggestion. Therefore, it may be important for you to provide statistics to the person in charge of the organization that will back up the need for consideration of a reverse mortgage and its financial impact on seniors.

In other words, the organization is providing a solution to a problem, which, if left unspoken, could become an issue for its senior members.

(4) PRESENT STORY IN RIGHT CONTEXT The above example also demonstrates the importance of presenting your story in the right context.

You are now ready to present the headline or angle of your story. Using the above example, the headline could go like this: --Say “A Reverse Mortgage, How Can It Benefit You?”

ReverseVision's international team of software engineers, attorneys and mortgage specialists turn these challenges into opportunities.

They build the tools that give their customers a competitive advantage.

This is why over 6000 reverse mortgage specialists in over 600 companies rely on ReverseVision every day.

Sub-headline: [Name of organization] offers information just for you!

Opening paragraph: Giving the fact of extended longevity, the likelihood of a financial shortfall is a real possibility.

Followed by statistics: . . . . . to illustrate the severity of the problem.

Followed by details and merits of increasing the number of seniors living longer and cost rising for care, etc.

--- The above tips should help you get started on writing a press release yourself.

Remember that practice makes perfect and the best way to learn how to write an effective press release is to observe how business news is reported.

Can you afford not to use ReverseVision?

Remember, this is perhaps one of the most cost effective ways to raise awareness about you in your marketing area. It really works if you work it!

If writing a press release is something you are not comfortable doing, there are many people out there for you to hire who can provide guidance or even write and submit your press release. To post an advertorial for a writer of your press release, go to www.elance.com or www.guru.com.

ReverseVision Inc.

3310 Pollock Place • Raleigh, NC 27607 www.reversevision.com (919) 834 0070 • info@reversevision.com

Good luck with your new venture.

April 2010 TRR

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Has there ever been a symbiotic relationship quite like the one that exists between Long-Term Care Insurance (LTCi) and Reverse Mortgages?

Most likely there are those who question my use of the word symbiotic in connection with insurance and mortgage products. However, one definition of symbiosis is: a cooperative, mutually beneficial relationship between two people or groups. From that perspective when talking about those people and groups made up of business people it really isn’t much of a stretch to extend the term to products. Either that or I am spending too much time watching the Syfy channel.

Following this line of thinking the cooperation we are looking for is one that should exist between two different groups of sales people, those in the Reverse Mortgage business and those that sell long-term care insurance (LTCi).

As the ability to identify sources of income needed to fund the premiums required for LTCi is essential to the success of people who sell LTCi. It follows suit that it would be advantageous for reverse mortgage specialists to make sure that people who are looking for ways to pay for LTCi know that the RM option often fits that bill nicely. And since the primary market for both products is the same cooperation between these two groups of sales people should be obvious to anyone.

Unfortunately, we live in a world where it is possible for an idea that makes perfect sense to often carry little weight in the eyes of regulators and naysayers. Regrettably, a seemingly endless number of “advisors” i.e. many of the people who create regulations for products designed for the senior market, often know little about the products on which they are passing judgment and regulating. None-the-less there is no excuse for professionals in both industries

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to not explore ideas and options that may be beneficial to their clients.

Hard lessons learned from years of experience have taught me that regardless of how good an idea appears to be on its surface, it always pays to do a little digging to uncover the underlying facts or more importantly make sure that there are supporting facts. Better known as due-diligence, the key in this process is to make sure you are looking for information rather than affirmation. Although time consuming, this process almost always provides additional rewards in the form of information about other products and regulations that are not directly related providing understanding and insight that can support your position, disprove negative stereotypes and generally enhance marketing and sales approaches.

One search provided information that completely dispels one of the most popular negative positions taken by bureaucrats and so called advisors when it comes to using a reverse mortgage to pay for LTCi. And although these so called experts feel perfectly confident when they state emphatically that people who qualify for a reverse mortgage should not use those funds to buy any type of insurance. When it comes to LTCi they are so far off base that they’d need a ticket just to get back into the ballpark. You see in order to honestly make such a statement you would have to be totally ignorant about Medicaid’s Estate Recovery provisions.

When it comes to using funds from a reverse mortgage to pay for longterm care insurance we should start by acknowledging a simple truth; both the federal government and the states have been forcing people to use their home to pay for long-term care services for some 45 years.

Anyone who knows anything about Medicaid and/or long-term care is well aware of the fact that Medicaid is far and away the largest payer of

long-term care services. This is nothing new and was something that the writers of the program obviously anticipated in 1965 when the program began. We know this because the law that was written to put Medicaid into existence included provisions that allowed states to impose liens on property in the estates of deceased Medicaid recipients.

responsibility for ones action is a virtue and reducing both federal and state government expenditures is a fiscally sound idea.

In 1993 the federal government used OBRA to amend the earlier Medicaid Estate Recovery provisions, as such, states they were now required to pursue recovering the cost for Medicaid from the estates of people who had received long-term care services or had prescription drug expenses paid for by Medicaid.

The bottom line is that a primary residence owned by a Medicaid precipitant is a recoverable asset. For those who may not be familiar with this recovery process it’s important to understand that the law does provide for a non institutionalized spouse to live in the home uncontested for as long as they live, even so the end result is the same, Medicaid can and will force the sale of the home to recover long-term care expenses.

So the question is: If the government, by way of Medicaid Estate Recovery, already has a system in place that allows for liens to be placed on the houses of people who have received long-term care services that were paid for by Medicaid; why is it a bad idea for someone to use equity in their home to buy LTCi which would pay for those same services?

The answer to which is: It’s not a bad idea! Conversely it’s an excellent idea that can be enormously beneficial to individual homeowners while at the same time being of great benefit to all taxpayers. As a matter of fact if implemented nationwide it could actually reduce the federal budget. Of course to think like that you have to buy into the ideas that taking personal

Here is the bottom line; even though both products for the most part are targeted at the same market place cooperation between the different sales forces when it comes to sharing information and ideas is at best limited. One reason for this may be that the information these two sides try to share is often seen as having little to no value to the other group.

Reality dictates that in all likelihood you are not going to find many LTCi salespeople who want to sit and listen to you tell them everything you know about reverse mortgages, inversely you probably aren’t all that interested in listening to an LTCi person lecture you on long-term care.

However, taking a little time to discuss how Medicaid Estate Recovery provisions are playing a negative role in both of your business’ and you will almost certainly result in the finding that the government has provided you with some very solid ground on which to build a mutually beneficial business relationship. What makes it even better is that your efforts will result in any number of seniors benefiting greatly from your combined knowledge and professionalism.

You can find all the information you will ever need about Medicaid Estate Recovery by typing those three words into any search engine.

Over the next couple of months I am going to be writing about articles that deal with the positive and negative aspects we have to deal with when it comes to considering reverse mortgages, annuities and insurance in the same estate plan. Should you have any questions or suggestions on this topic or for that matter any financial planning/reverse mortgage related topics I would be happy to receive your thoughts via email at jneal@ ccgcap.com.

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The odds were against them. The two women n their 50s, one from France and the other from California, had no experience owning or running a restaurant. Yet they forged ahead with nothing more than a vision to create “a country French restaurant,” their passion for French cooking, and their capacity for hard work.

Startup cash was so tight they had to max out their credit cards to buy stove, dishwasher, freezer, chairs, tables, utensils, and other capital equipment for their restaurant. The run-down Victorian-styled house they bought in downtown Marshall (Texas) needed so much work they had to knock heads with city officials over permits, inspections, re-inspections, approvals, and re-approvals.

Parking was another headache because it took two months for the city council to approve their parking lot. Since parking was required for them to open for business, their neighbor allowed them to use eleven parking spaces that had to be documented for city officials. And there was the city engineer’s grand-opening-day surprise.

The city’s fire department had signed off on their building for fire, but minutes before they were to open, the city engineer stopped by and said “no way.” He decreed on the spot that they needed another door, so they had to get a carpenter in a hurry, knocked out a window in one parlor, and installed a door.

22 | TRR

April 2010

Through brute determination, some business smarts, lots of work and luck, Durfee Bedsole and Odile Besseau, her French-born partner and roommate, pulled it off and opened The Taylor House, “a country French restaurant with a southern accent” during Thanksgiving in 1991.

Traffic in the southeast coast through Marshall was so good for their restaurant, especially after rave reveiws in Southern Living Magazine and Dallas Morning News, that by 1993, “you couldn’t get in the door,” said Durfee Bedsole.

Six years after they started in 1997, they sold the restaurant, built a log home with their profits, and retired.

Now at the ages of 69 and 75 respectively, and living in Oregon, Odile Besseau and Durfee Bedsole and others like them mirror what experts in business creation have always known: entrepreneurship among the 50-plus is growing. People like Franny Martin of Saugatuck, Michigan who, at 56 in 2002, started a successful cookie business (Cookies on Call) and couples in their 60s such as Brian and Shirley Loflin of Austin, Texas, who turned their love of nature into a publishing business and used a reverse mortgage to finance their capital equipment. Older-preneurship is gathering steam.

In 2005, 5.6 million workers 50 and older were self-employed, a 23 percent jump from 1990. The Small Business Administration (SBA) says Americans

between 55 and 64 start small businesses at a higher rate than any other demographic. It is not a new event. A 2004 Kaufman Foundation survey said 18 percent of business founders were 55 years and older.

The numbers of potential older-preneurs are growing as baby-boomers flock into older adulthood. Census Bureau numbers say 50-plus Americans will rise by 31 million to 118 or 35 percent of the population by 2020, less than 10 years away.

The emerging boom in over-50 entrepreneurs is driven by factors such as the desire of older workers for autonomy and flexibility, worries about age discrimination, corporate layoffs that tend to affect older workers more, and access to cheaper technology. In time past, Franny Martin’s cookies would have been a local or regional business but, thanks to the Internet, she peddles her cookies worldwide.

2.

Income is not a factor. Reverse mortgages are “pure” home equity loans.

3.

Their interest rates tend to be lower than what a no-track-record entrepreneur can expect to get from a bank, so long-term cost of funds should be lower.

4.

No monthly repayment is required; so older-preneurs have patient long-term capital that gets cheaper with time.

5.

They are non-recourse loans, which mean the lender can only look to the home for repayment of debt, when the borrower moves, sells, or dies.

6.

The debt has potential tax value for the older-preneurs.

Financing for many 50-plus entrepreneurs tend to come from cash from savings, family, severance packages, and loans from 401(k)s. As Bedsole and Besseau found out, banks shun entrepreneurs with no track record, as most 50-plus entrepreneurs tend to be. This is where reverse mortgages could come in.

While reverse mortgages have the potential to boost entrepreneurship as sources of patient startup capital among older business creators, it should not be used as a business-financing tool without informed counsel from reverse-mortgage-savvy accountants and lawyers.

Although they were conceived and designed to provide supplementary cash in retirement for cash-strapped but house-rich older adults and some reverse-mortgage purists might frown at even judicious alternative applications, reverse mortgages, as financing tools, have potential as sources of patient capital for older-preneurs, turning a time of non-productive consumption into a season of vast value creation for individuals and society.

Here are six features of reverse mortgages that make them worth exploring as alternate financing vehicles for small businesses by older-preneurs.

Bedsole believes if they had had reverse capacity and access to reverse mortgage financing when they started The Taylor House, it would have been preferable to the costly credit card debts they used to get their restaurant off the ground. When given the choice between a reversemortgage and credit card financing for older entrepreneurs, my money is on reverse mortgages.

1.

There are generally no credit requirements, but lenders check credit reports for liens and issues that might affect title. Older-preneurs with weak or no credit histories have nothing to worry about. With FHA reverse mortgages, however, borrowers who owe U.S. government agencies money must show a good repayment plan before they can get FHA reverse mortgage.

The far-reaching social and economic value of reverse mortgages makes it all the more necessary that Congress and HUD should work with industry to strengthen the FHA reverse mortgage program by halting principal limit cuts and reducing high insurance premiums to encourage demand.

“You don’t know where it is going to take you,” Bedsole said, “but when you see an opportunity, you seize it and make it work.”

She turns 76 in September.

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24 | TRR

April 2010

“

This month, The Reverse Review had the privilege of sitting down with the Founder and CEO of Security 1 Lending, Torrey Larsen. Lately, Security 1 Lending has undoubtedly been making waves in our industry and it is clear that this fast paced, aggressive company is poised and ready for a successful future. In this interview, Mr. Larsen gives us excellent insight into the necessary items any Reverse Mortgage company must successfully employ to navigate through these rapidly changing times.

Without further ado: TRR: 2010 is starting with some dramatic changes to the reverse mortgage industry, how do you see S1L positioned in the current environment?

TORREY: We believe chance breeds opportunity - During periods of dysfunction, you can identify, leverage and position your company to grow in the long run and that’s how we’re approaching everything right now.

The changes have been dramatic but I think there are three components that we must focus on and be very good at in order to succeed.

The first is Compliance.

We’re in a different age of the compliance and regulatory environment and the dramatic changes can seem overwhelming for companies. Not only is it the type of change that is overwhelming, but the sheer pace at which these changes are coming about is tremendous as well. When I look back to the start of S1L 3.5 years ago, it was really a very simple industry.

Now the community is growing and whenever new entrants come into the market, liquidity comes as well. I’m positive that we will begin to see significant changes in the way the industry takes shape.

I think we’ve all already experienced this over the last 24 months. So, I think the regulatory environment, and S1L’s ability to manage and navigate through it will differentiate us from many other companies. We are very fortunate to have one of our shareholders, Bill Traske as our Chief Compliance Officer. Bill has been in the QC and compliance arena for about 20 years so when I look at Bill, and he’s making a decision on how our company needs to operate, I know he’s protecting the asset that’s very near and dear to him - the stock of the company - and that also protects me and the entire firm. We’ve got a great leader in that area and we are on top of it. I would stack us up against any other firm relative to the compliance side.

The second is a period of Consolidation.

The word has been out there for 20 years that yield spreads are going to go away so there’s always been that fear. In my opinion, that type of change is more realistic today than it ever has been. This is the first time I remember where the Secretary of the Treasury has testified before congress and actually mentioned yield spread as an issue relative to the melt down of the mortgage industry - which is shocking! So now it’s on the front page and over time, if they do make significant change on that front, it is going to require brokers to make changes in the way they do business. I think that as long as S1L is a strong, viable, well-capitalized mortgage banking operation, we will be positioned during those periods of change to basically bring companies, entities and individuals into our firm to make it stronger. So we see 2010 and 2011 as a period of industry consolidation.

The third is the development of the Capital Markets.

I grew up in the capital markets and so it’s really interesting how liquidity has played such a dramatic role in the pricing of the fixed rate outcome.

There are a lot of people constantly asking why yield spreads continue to rise. Why are premiums continuing to rise? And finally, is that sustainable?

Its economics 101, there is huge investor demand for this product. They like this product because pre-payment fees aren’t through the roof like on the traditional forward side meaning your assets aren’t going to run

We believe chance breeds opportunity During periods of dysfunction, you can identify, leverage and position your company to grow in the long run and that’s how we’re approaching everything right now.

”

off through a refinance boom. This asset is pretty predictable in terms of the revenue stream making it attractive to this investor base. Those characteristics fuel the want for more of the product but at the same time the industry is down 54% in the last 6 months. Therefore, you have excess demand coupled with a dwindling supply and only one thing can happen: prices will go up. But that’s in the short term. As long as we get through this next threat of another potential principal reduction, I think supply will start coming back to the market, there will be more of a balance, and you’ll see prices come back to a more reasonable level. Nevertheless, the current environment is unpredictable. They always say, “the trend is your friend”, I believe that to be true.

TRR: What are some major initiatives for your company within the next 6 months?

TORREY: We have 2 main initiatives.

First, we acquired a group out of Washington and with them, have had great success penetrating the Credit Union and Community Bank market.

We think it’s an underserved market and there’s a need for this product and those clients. Alternatively, Credit Unions and Community Banks like the idea of teaming up with companies like us. We can support their customers but they do not risk valuable clients going to one of the other big depository institutions and from that transaction they start to take away the deposits and the checking and other services. Instead, it works better to do business with a neutral party, someone like S1L, which is not a depository institution. We are precise and experienced in executing Reverse Mortgages on behalf of their clients and then we won’t be going after that client for other services - they feel very comfortable with that.

Their only concern is that they’re teaming up with the right company.

Secondly, we want to be more involved with organizations such as NRMLA and MBA. This is something we’ve only recently begun to focus on, but we have to have more of a presence. We do have people who sit on committees, and Shannon Hicks has spoken at the last two road shows.

So we’ve got some key people who are known entities within NRMLA but I personally want to get more involved in their efforts to figure out how to improve the image of this product.

I think that’s critical at the consumer level. We have some internal April 2010 TRR | 25 lobbying to do within FHA, HUD and to the politicians who shape policy.

I think all three of those avenues have to be managed pretty aggressively and I think NRMLA is taking some good steps right now but I think there is a lot more to be done, and its about protecting the industry as a whole.

Craig Corn from Metlife has done a phenomenal job recently in taking some initiative on that front. I think we just need more involvement from more people who are dedicated to the long-term success of this industry.

be upwards of $6,000, added to the GFE. Even though that cost is not coming directly from the borrower, its coming from the lender, the overall perception of the compensation package seems to be going through the roof. This is not good for the image of the industry. It’s just a matter of dealing with that and educating the consumer in what the yield spread represents.

TRR: What role will brokers play in the Reverse business?

TRR: How is S1L trying to lower the cost of doing a transaction for the senior?

TORREY: We have a lot of brokers - I think they continue to play a vital roll and I think the percentage of market share that they capture will drop overt time. That being said, I think that their market share is still very significant. It will come down to this: there’s been a weeding out process over the last 24 months and the veteran shops need to take a balanced approach to the business. They must take a view from a marketing perspective and present this product to seniors appropriately and with transparency. Companies also need fundamentally good financial management controls so that they know their ROI and they’re acting as very shrewd business people. I think the companies that do those two things, plus focus on compliance issues, are going to be strong players for years to come. The role of the brokers will continue to be important, but overtime, their market share will continue to diminish. I think they are a viable and great alternative to some of the big banks.

TRR: Yield spread premiums have gone up sharply in 2010; do you see current prices leveling off? If not, can the industry sustain these levels?

TORREY: I do not see these levels being sustainable in the long run. I do see price levels coming back over time and again we see a better balance between supply and demand for the product in the capital markets. I think the high yield spreads can be somewhat problematic, especially for the broker because the broker has to disclose that premium to the borrower.

As an industry, we’re talking about taking costs out of the equation for the borrower, yet the borrower is going to see this yield spread which could

26 | TRR

April 2010

TORREY: Cost structure is really the key and I think everyone looking at our industry is focusing on it. We recently came out with our “Security Savings Program”, which has eliminated the monthly servicing fee, lowering overall cost of the transaction and providing additional proceeds back to the borrower by having zero monthly servicing fees. So the borrower will get great proceeds back from the transactions with a lower monthly cost. Those are immediate things we’re focusing on. In the long term, we’re focusing on the origination structure within our company to insure that the consumer is getting a great deal in comparison to our peers in the marketplace. We’ll continue to keep an eye on competitive factors and implement internal examinations as to what we believe is a fair compensation for the service we provide the senior.

TRR: Baby Boomers are becoming more comfortable with the Internet and social media, what are S1L’s plans in adjusting to the trend?

TORREY: This has been a real focus for us in the last 6-12 months. We’ve become very proficient in our search engine optimization marketing and we are getting very precise in our ability to reach the right demographic in the right manner. What I mean by the right manner is the manner in which they want to be contacted and the means by which they want to interact. We have focused a lot of time and energy on that side of the business and that falls right in line with the baby boomers. We know

that demographic is an absolute force that is growing everyday they are very comfortable with the technology including social media. On the social media side, we have a presence on Facebook and Twitter. We know that the fasted growing demographic on Facebook is elderly women over the age of 65 who are trying to connect with their kids and grandchildren. They are becoming very comfortable with that technology and interacting with it more. For that reason, we as a firm have to be prepared to assess and interact with them over a platform they feel comfortable with. This makes Facebook very key in this industry when you think about that statistic.

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Additionally we are focusing on the difference between an online experience and a traditional “offline” experience. The two are radically different and we want to bridge that gap. If they’re going to interact on the front end through technology, we want that to be a world-class experience. We’re looking at video technologies and live chat because it’s clear that they want immediate responses from a friendly responder.

Then, we’re trying to take that technology and way of reaching the senior to couple it with the way they want to transact the business. If they want to continue down the path of dealing with a call center or the technology side, we can take that from cradle to grave for them and that’s one of the reasons we acquired Omni Reverse – it’s for that expertise. A lot of them want to gather info and be educated through the technology experience but then transact the business over the kitchen table. So our retail sales force is very broad and diverse right now and we want to take a good chunk of those leads and distribute those to our traditional retail loan officers, if that is what the consumer wants. So time will tell which way of fulfilling the business is actually preferred by the senior and I think that will change over time as people want to do everything via technology instead of just initial research.

TRR: NMLS and regulatory agency are playing a much bigger role in the mortgage industry these days, how do you see these changes affecting the way people do business?

TORREY: I think it’s’ having a huge impact: first of all, it’s weeding out the uncommitted originators. There is an entire segment of the origination force that’s doing this part time, on the side, or as a hobby and the amount of time and effort they have to put into the licensing process, is significant. So what it’s doing is the people who are not very serious or not very committed to this business have made a fundamental decision that the time and effort is not worth it relative to licensing process. This is healthy. You’re going to end up with a sales force that is more specialized. They’re experts at what they do.

Individuals who do a loan once a quarter can’t live on that, plus they’re not in the business every day so the likelihood of them making mistakes with that borrower is much higher. The licensing process helps get rid of them.

The second thing I know has happened in the first quarter of 2010 is that the originators are so focused on the registration and passing the national test that they have to put a lot of time and effort into that, redirecting their focus away from the origination. I think that has played a huge role in the drop of originations from October 2009, until now. So I think as we get over the hump, people will be able to refocus exclusively on originating and we’re going to start seeing production numbers hit their stride.

Transparency to that borrower is the key to everything. We have to do a better job reducing the overall cost to consumers and we have to be spot on relative to the education we provide to the consumer in terms of accuracy and clarity. They know what they’ve got, they know what they’re paying for and there are no surprises. If we do that collectively as a group, we’re going to be in great shape and this business will continue to grow and evolve and it’s going to be exciting.

Another Benefit for Your Customers In today’s economy, seniors are facing unprecedented financial challenges. That’s why Consumer Credit Counseling Service of Greater Atlanta now offers reverse mortgage counseling at no charge.

CCCS is the trusted name for comprehensive, unbiased housing counseling. As a HUD-certified national intermediary, we work hard to ensure that seniors across the United States have easy access to the counseling and support they need to make informed decisions. It’s proof that expert advice doesn’t have to come at a high price.

Free consumer information about reverse mortgages is available at www.cccsinc.org/reverse. To schedule a counseling session in English or Spanish, 24/7, call 866.616.3716 or visit us online.

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Copyright 2010, Consumer Credit Counseling Service of Greater Atlanta, Inc.

April 2010 TRR

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April 2010

So it is with a sense of jubilation, and a dose of trepidation, that we greet Mortgage Letter 2010-07, published on March 1, 2010, which heralds some material changes to the HECM Loan Agreement and certain ancillary documents. Similar to the first time you look in the mirror after a new hairdo, reviewing revised HECM loan documentation can be a little scary.

But with familiarity, even a lousy haircut can grow on you. In the best figurative sense, we trust the same can occur with the newly revised HECM loan documents. To facilitate that process, in this article we provide a short primer on HUD’s HECM loan documentation and examine, in some detail, the revisions occasioned by ML 10-07.

HECM Model Documents As noted in HUD Handbook 4235.1 REV-1 (HECM Handbook), lenders originating HECM loans must utilize the model HECM loan documents (i.e., the HECM first and second security instruments, the HECM first and second Notes and the HECM Loan Agreement) as published in the Appendices to the HUD HECM Handbook. The HECM Handbook was issued in 1994 and, ever since that time, these model HECM loan documents have not been replaced. Notwithstanding the foregoing, HUD has provided several updates to the model HECM loan documents through various Mortgagee Letters issued over the years, including the last major revisions, announced on April 24, 1997, in Mortgagee Letter 1997-15 (ML 97-15). ML 97-15 included several changes to the model forms for the HECM security instruments, HECM Notes and the HECM Loan Agreement. According to HUD’s instructions in the HECM Handbook, lenders must ensure that the HECM loan documents comply with all applicable HUD requirements that, of course, would include ensuring that the loan documents incorporate the changes announced in ML 97-15 and, all other Mortgagee Letters, including ML 10-07. In addition, HUD also instructs lenders to ensure that the loan documents comply with applicable state and local requirements.

This includes state laws that must be followed to create a recordable and enforceable security instrument and to ensure that the lender has an enforceable contract.

A HECM loan is, by definition, a “non-recourse” transaction. HUD clarified the meaning of the term “non-recourse” in Mortgagee Letter 2008-38 (ML 08-38), issued on December 5, 2008. According to ML 08-38, if the borrower (or the borrower’s estate or heirs) does not re-pay the balance of the HECM loan in full when it becomes due (or sell the property for at least 95% of the appraised value), the lender’s remedy is limited to foreclosure and neither the borrower or the borrower’s estate will be personally liable for any deficiency resulting from the foreclosure.

Because a HECM loan is “non-recourse,” the HECM lender may look only to the collateral property for repayment of the loan balance. Thus, it is of critical importance for a HECM lender to ensure that its HECM loan documents will be sufficient to provide the lender with an enforceable contract secured by a good and valid lien in the jurisdiction where the property is located.

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Documents Revised By ML 10-07 The changes announced in ML 10-07 affect primarily the model Home Equity Conversion Mortgage Loan Agreement (HECM Loan Agreement), the HECM Loan Agreement Exhibits, and the Residential Application for Reverse Mortgages (Fannie Mae Form 1009). These changes improve the disclosure of loan terms to the borrower and render the documents more compatible for use in HECM for purchase transactions. In addition, ML 10-07 prohibits the use of the Uniform Residential Loan Application (Freddie Mac Form 65/ Fannie Mae Form 1003) with HECM loans and confirms that HECM lenders must use the HUD/VA Addendum to Uniform Residential Loan Application (Form 92900-A) with all HECM loans. However, as was the case with ML 97-15, the changes announced in ML 10-07 provide an update of applicable model forms, rather than a complete do-over.

ML 10-07 does not address the HECM security instruments or HECM Notes. However, HUD’s guidance has always been that it is the lender’s

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responsibility to ensure compliance with state laws for validity and enforceability of the HECM security instruments and the HECM Notes, even if such laws are not expressly reflected in HUD’s written guidance.

For instance, HECM lenders must ensure that their state-specific HECM security instruments securing a HECM loan contain the language that may be required in the state in order to obtain lien priority protection of future advances made under the HECM Loan Agreement. In this area, lenders may wish to consult with their counsel to ensure their HECM loan documents comply with applicable state laws.

The HECM Loan Agreement The revised HECM Loan Agreement published in ML 10-07 contains several updates and modifications. ML 10-07 states that the model HECM Loan Agreement (originally published as Appendix 7 to the HECM Handbook) is revised with respect to the definition of the term “Maximum Claim Amount.” The definition of Maximum Claim Amount is provided in Section 1.4 of the HECM Loan Agreement. As revised, Maximum Claim Amount is defined as the lesser of (i) appraised value of the property, (ii) the sales price of the property, or (iii) the national maximum loan limit established under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a single-family residence. By referencing the sales price of the property in the definition of Maximum Claim Amount, the revised HECM Loan Agreement is now more compatible with the HECM for Home Purchase program.

A sample of the revised HECM Loan Agreement is available as an attachment to ML 10-07. A review of the revised HECM Loan Agreement reveals several additional changes that are not expressly referenced in the text of ML 10-07. For instance, the title of the HECM Loan Agreement is revised by inserting the word “Mortgage”, as follows: “Home Equity Conversion Mortgage Loan Agreement.” The revised HECM Loan Agreement attached to ML 10-07 also amended the definition of Principal Limit. However, the revision of the Principal Limit definition appears to clarify, rather than change, how the HECM Principal Limit should be calculated. As revised, the definition of Principal Limit in Section 1.7 of the model HECM Loan Agreement provides: Principal Limit means the amount indicated on the attached payment plan (Exhibit 1) when this Loan Agreement is executed, and increases each month for the life of the loan at a rate equal to one-twelfth of the sum of the mortgage interest rate and one-half of one percent. The Principal Limit is calculated by multiplying the Maximum Claim Amount by a factor supplied by the Secretary, which is based on the age of the youngest Borrower and the Expected Average Mortgage Interest Rate.

The changes in the sample HECM Loan Agreement attached to ML 10-07 also include a revised definition of the HECM origination fee, which incorporates the $6,000 “cap” on the HECM origination fee into Section 2.2.1 of the revised HECM Loan Agreement. ML 10-07 also revised Section 2.8.3 of the HECM Loan Agreement to provide that the fee for changing HECM payment plans is twenty ($20) dollars, rather than “an amount determined by the Secretary,” as was previously provided in the HECM Loan Agreement. In addition, the revised HECM Loan Agreement provides, in Section 6.4, that HECM lenders must comply with the Fair Housing Act, which prohibits discrimination on the basis of race, color, religion, sex, handicap familial status, or national origin.

Please note, also, that although the HECM Loan Agreement generally is not a state-specific document, the HECM Loan Agreement may require special adaptation in several states.

For instance, in Texas, the HECM Loan Agreement should

30 | TRR

April 2010

contain several state-specific provisions. In fact, HUD previously published separate Mortgagee Letters providing guidance concerning the HECM Loan Agreement for use in Texas. As noted above, lenders may wish to consult with their counsel to ensure their HECM loan documents comply with applicable state laws, such as, for instance, provisions concerning reverse mortgages in the Texas State Constitution.

HECM Loan Agreement Exhibits ML 10-07 revised Exhibit 1 to the HECM Loan Agreement, the Payment Plan. The revisions to the Payment Plan include a disclosure of the type of the payment plan option selection of the borrower. Specifically, the lender must indicate at loan origination whether the borrower has selected a Tenure, Term, Line of Credit, Modified Tenure or Modified Term payment plan option.

The Payment Plan is also revised to include the following disclosures: (i) a disclosure of the expected average mortgage interest rate, (ii) a disclosure of the initial mortgage interest (accrual) rate, and (iii) the margin used to originate the loan. In addition, the Payment Plan requires a disclosure of whether the expected average mortgage interest rate was locked. As a reminder, with HECM loans, the expected rate is used to determine payments to the borrower and is fixed throughout the life of the loan.

With regard to HECM for Purchase loans, the revised Payment Plan requires the lender to enter on Line 3 the amount of any debts to be paid off at closing, including existing liens on the property, delinquent Federal debts and amount disbursed, by the closing agent, to the seller of the property involved in a HECM for Purchase loan. The revised HECM Payment Plan and instructions are available as an attachment to ML 10-07.

ML 10-07 also revised the heading of Exhibit 2 to the HECM Loan Agreement to read: “Schedule of Liens/HECM for Purchase Disbursements to Seller.” The heading “Schedule of Closing Costs” remains unchanged. ML 10-07 instructs lenders to itemize each closing cost item and the amount charged under the “Schedule of Closing Costs” section of Exhibit 2.

ML 10-07 did not change The HECM Repair Rider (Exhibit 3 to the HECM Loan Agreement) yet the mortgagee letter does indicate that lenders may attach an addendum to the Repair Rider to spell out the repairs in clear and complete terms.

Residential Loan Application for Reverse Mortgages As noted above, ML 10-07 announced several revisions to Fannie Mae form 1009, Residential Loan Application for Reverse Mortgages.

Specifically, Section I of the Fannie Mae Form 1009 has been revised to include data fields for the following types of mortgages and terms: (a) HECM for Purchase, (b) Sales Contract Price, (c) Land Installment Contract Price, (d) Borrower’s Investment, (e) Purpose of Loan, (f) Index Type, and (g) Loan Origination Fee. Section II of the Fannie Mae Form 1009 has been revised to include the following property ownership information: (a) Irrevocable Trust, and (b) Revocable Trust.

In addition, ML 10-07 revised Section IV of the Fannie Mae Form 1009 to provide examples of liens against the property that the borrower must list on the application. Examples of such liens include federal or state real estate liens, judgment liens, mechanics liens and second mortgages.

ML 10-07 also updated the “Declarations” section of the application by adding items “i” through “k.” Specifically, ML 10-07 added the following declarations: i. j.

Were you required to bring money to closing? If yes, did you borrow the money?

Do you intend to use the reverse mortgage to purchase or invest in financial products such as insurance, mutual funds or annuities? If yes, provide name of financial product and cost to purchase or invest below: Example: long-term care insurance $10,000.

k.

Do you have an existing FHA insured loan? If “yes” provide property address, account number, name of creditor, amount of mortgages and liens, and unpaid loan balance below.

Finally, ML 10-07 updated Section VIII of the of the Fannie Mae Form 1009 that contains information to be collected by the loan originator for government monitoring purposes.

Other Guidance in ML 10-07 As noted above, ML 10-07 expressly clarified that HECM lenders may not use the Freddie Mac Form 65/Fannie Mae Form 1003, Uniform Residential Loan Application, for HECM loan transactions. In addition, ML 10-07 clarified that the HECM lenders must continue to complete the HUD/VA Addendum to Uniform Residential Loan Application, Form 92900-A, for every HECM loan transaction.

Samples of Revised Documents ML 10-07 provides lenders with samples of the revised model HECM Loan Agreement and Exhibits, which are included as attachments to ML 10-07.

ML 10-07 and its attachments are available on HUD’s web site located at http://www.hud.gov. Lenders can download the revised Fannie Mae Form 1009 from the Fannie Mae web site available at https://www.efanniemae. com/sf/formsdocs/forms/index.jsp.

Although we might have longed for more dramatic revisions to our beloved HECM model forms, the changes wrought by ML 10-07 provide seniors with clearer disclosure of HECM loan terms and render the loan agreement, and its exhibits, more friendly for use in HECM for purchase transactions. While these changes are mandatory and must be incorporated into HECM loan documents for all HECM case numbers assigned on or after August 1, 2010, HUD has indicated that lenders may begin utilizing the revised model forms anytime prior to that date.

This article provides only an overview of some of the federal and state laws and regulations that may affect reverse mortgage lending, marketing and finance matters. Although the practice of Weiner Brodsky Sidman Kider P.C. is national in scope, attorneys within our firm do not actively practice law in all jurisdictions, and these materials are not intended to and do not provide legal advice. Because of the generality of this article, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

By Joel Schiffman and Fed Kamensky, of the law firm of Weiner Brodsky Sidman Kider, P.C. The law firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. The firm has offices in Washington, D.C., Newport Beach and Dallas.

Additional information can be found at www.wbsk.com or by telephone at 202.628.2000. Messrs. Schiffman and Kamensky can be reached at schiffman@wbsk.com and kamensky@wbsk.com.

April 2010 TRR

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ask the servicer What do you enjoy most about Reverse Mortgage Servicing?

Ryan LaRose “Ask the Servicer” has covered a great number and variety of questions about reverse mortgage servicing. I’ve spent a lot of time in past articles writing about the technical side of reverse mortgage servicing: management and oversight of occupancy defaults, death defaults, repair administration, bankruptcy, and foreclosure.

This month’s spotlight isn’t about a specific servicing question or inquiry; it’s being directed at the various heads of reverse mortgage servicing operations in our industry. I suspected the belief that “this (servicing) is so much more than a job” was a belief and sentiment shared by my peers and decided to tap into their collective thoughts for this month’s column.

I have to admit; the opportunity to flip the process around a bit was enjoyable! All articles in the ‘Ask the Servicer’ column, and this one is no exception, allude to “the people factor” – the human touch that is critical in successfully servicing this product.

What better way to gain insight into some of the best servicing operations in our industry than to reach out to them and ask the above-stated comment? I decided to do just that. The question, along with the invitation to share, was sent to each of the members of the NRMLA servicing committee. What follows are the responses received and each reflects the unique perspective of the respondent.

Chris Antaya Chris is Vice President of Loan Servicing for Generation Mortgage Company. She has over 30 years of experience in the mortgage industry including residential, commercial, franchises, and reverse mortgages.

“For me, servicing reverse mortgages has allowed the opportunity to assist seniors in achieving positive life changes. We are afforded the privilege of giving back to seniors and providing them with the resources to enable them to live the life they choose and not the life they must have. I feel truly blessed to be in a profession that I not only love, but also rewards me with new relationships based on mutual trust and respect.”

Charlie Jones & Michael Kressin Both Charlie and Michael are executives in the reverse mortgage servicing division of Bank of America. Each of them has accumulated an impressive number of years of experience in servicing the reverse mortgage product.

“What we enjoy most about servicing reverse mortgages are the experiences with our customers. We have the opportunity to make a positive impact in their lives with the products we offer and the worldclass customer service we provide. Reverse mortgages fill a need that many of our seniors have and it is a privilege to offer a product and provide a service that can help improve our customers’ quality of life.”

Marc Helm Marc Helm is Chief Operating Officer for Reverse Mortgage Solutions. Marc has spent over 30 years in the mortgage servicing business and, before coming to RMS, was a Senior Officer with Washington Mutual.

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April 2010

“I have a passion about servicing reverse mortgages that I never had with forward mortgages. Frankly, servicing forward mortgages most of my career had tended to be boring at times. With reverse mortgages, I feel a greater purpose. This purpose spans from not only helping a senior manage their financial position, but also waking up every morning reminded that I have a fiduciary responsibility to the seniors to ensure that their money and account information are protected from predatory sources.”

Linda Bridges Linda Bridges is Assistant Vice President of the Reverse Mortgage Servicing division of Wells Fargo. She has 25 years in the mortgage servicing business, with the last nine focused in the reverse mortgage sector. Linda also serves as co-chair of NRMLA’s servicing committee.

“The reverse mortgage product is unique within the financial industry. It is the uniqueness that drives my compassion. I enjoy the opportunity to work with HUD, investors, lenders and trade associations on loan servicing practices resulting in service excellence. The advantage of being in servicing is building long-lasting relationships with customers. My greatest joy is fulfilling a customer’s need and doing it with pride and excellence” Each response received was unique and reflected the commitment and professionalism of each individual. However, there is one consistent theme prevalent throughout each response – their dedication to the “people factor.”

Originators – those who interface daily with potential borrowers know from experience that people buy from those they like and trust. Contrary to popular belief, the sales process of a reverse mortgage loan is not completed at closing. Servicers will spend an average of seven (7) years post-closing with borrowers. Servicing operations continue to “close the sale” on a daily basis by providing reassurance, excellent customer service, and confirmation that they (borrowers) made the right decision in choosing a reverse mortgage.

A sincere thank you is offered to each member of the NRMLA servicing committee that responded. Each of you reminds me why “this is so much more than a job” and what a privilege it is to be part of an industry that does so much for so many.

I look forward to receiving any questions you may have regarding servicing at: ryan@celink.com. There is no such thing as a stupid question. No doubt, the question you ask will have been in the minds of other readers as well.

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the last word Survivors are Looking Ahead Stephen Margrett Survival has clearly been the rallying cry for the past year or two: protect the bottom line, defend market share, etc; we always knew, however, that at some point we would have to start thinking ahead again. That moment has clearly arrived.

The survivors of the downturn are fewer and relatively stronger than before. They are engaged in a serious search for ways to take advantage of opportunities in today’s market and to secure their future over the long term.

In today’s mortgage market, executives are faced with constantly changing regulations, rate fluctuation, foreclosures, negative equity, defaults, loan modifications, and new investor programs and requirements. They are inundated with regulatory changes and compliance updates. In addition, property values have dropped significantly and consumer confidence in the mortgage industry is at an all time low. In the midst of these challenges it is critical for executives to be able to look ahead and effectively identify business opportunities.

To make the challenge even greater, many lenders are forced to do more with less. Executives are under pressure to produce, often with fewer resources and support staff to assist them in accomplishing the task at hand. Executives need to be able to identify the highest quality business opportunities regardless of source prospects, customers and referral partners. They need to drive the potential borrower to the point-of-sale, and initiate targeted personalized communications for converting them into clients.

Lenders want the classic benefits of technology, of course: enhanced efficiency, performance and profitability. But now, in addition, they need solutions that deliver regulatory compliance and management control across the enterprise.

On the marketing side of lenders’ operations this means that management has to take a much more active role in ensuring their company’s brand and its products are correctly and compliantly represented in the marketplace. Communications with prospects, customers and even referral partners – whether driven by corporate or by individual loan originators – must be controlled, but without inhibiting genuine creativity and individual initiative.

The problem is that offerings in the marketing space have typically been “LO-centric”, providing their users with only a functionally unorganized and non-automated toolbox to help them perform specific tasks.

Generally overlooked have been management’s needs for control,

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accountability and adherence to those increasingly stringent compliance demands. New solutions – that establish a controlled environment in which ingenuity and enterprise are able to flourish – are what executives will demand as they look to move forward.

These new solutions need to provide executives with multiple levels of management control, for example: Authorization: Marketing materials created by users at lower levels in the corporate hierarchy cannot be implemented until approved by relevant management.

Oversight: Users at higher levels in the corporate hierarchy can “impersonate” users at lower levels, giving management a window to the activities of Loan Officers.

Reporting: Real-time analysis of marketing results enables management to hold Loan Officers and other players in the process accountable for their performance.

Prohibition: Management can prevent different types of users from accessing a system function, or even an entire page, by means of a “permissions” capability.

At the end of the day, it’s all about the ability to collect, analyze, act on and track information across the enterprise to seize business opportunities. The more tools executives can provide to automate the entire marketing and sales process, the better position executives are in to take advantage of market opportunities. Seizing those opportunities is critical to reaching short-term goals while looking ahead to ensure long-term success.

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