The Reverse Review December 2009 January 2010 by The Reverse Review

Dec 09 / Jan 2010

THE

REVERSE review

Supporting HECMâ&#x20AC;&#x2122;s Unintended Value Atare E. Agbamu, CRMS page

Despite HUDâ&#x20AC;&#x2122;s ban on new sub-liens as part of HECM transactions, as well as the added ban to subordination of existing liens, these are worthy topics for discussion as we continue to search for ways to solve the foreclosure crisis that has ravaged so many seniors nationwide. This month, Atare E. Agbamu caught up with David L. Mandel, a prominent lawyer and senior advocate at Senior Legal Hotline, to discuss his ideas for helping seniors avoid foreclosure.

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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

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Subscriptions and Editorial Content phone : 858.217.5332 e-mail : information@reversereview.com website : www.reversereview.com

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

am confident we all walked out of 2009 and on January 1st, took a deep breath and with a big smile said, “Hello 2010”. We’re ready for the new year and the new set of challenges it brings, and armed with the confidence that things will absolutely get better we will forge forward! Therefore, in 2010, The Reverse Review is on a mission to bring you the best content and educate you, the reader and hopefully make us all more successful.

note from the editor

Yes, our industry continues to face serious challenges – but I’m proud to be facing these challenges alongside each and every one of you and I promise to continue publishing positive and helpful information every month. I do so with your best interests and needs at heart, and hope that 2010 will be a successful year for all of us.

Happy New Year!

It seemed that 2009 defined by the “Survival of the fittest” mentality and I am sure that many of you would agree. For that reason, we at TRR feel it’s our job in 2010 to provide our readers with the ultimate survival guide that will help everyone face the ups, the downs, and the great unknowns of what lies ahead.

Erica English Editor-in-Chief

December 09 / January 10 TRR

CONTENTS

14 How To Make It Big In

The Reverse Mortgage Business Sam Collins

22 The Difference Between 28 Building Trust With Expense and Expensive Is A Lot More Than Two Letters

Reverse Mortgage Clients Bo Hussung

Jonathan Neal

18 2009: The Year Success

Became A Moving Target Michael Banner

24 FEATURE: Supporting

HECMâ&#x20AC;&#x2122;s Unintended Value Atare E. Agbamu, CRMS

34 Protecting the Integrity of Reverse Mortgages Regina M. Lowrie

ESSENTIALS 5 Note From the Editor

8 Ask the Underwriter

30 Ask the Servicer

33 Directory

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December 09 / January 2010

12 Industry Stats

Keep your eye on

The Reverse Review in 2010

www.ReverseReview.com

Welcome to a new decade of seniors in need of your services. Now that you have completely convinced yourself that the time and effort in preparing a 2010 New Year’s Resolution List resulted in confirmation that your will power needs an adjustment, relax, cross out all of those feel good items and write this across your entire page – “This is the year I will succeed!” There is no doubt about it, 2010 will be the year you will assist more seniors than ever before. Despite the media, regulators and legislators the latest surveys only report 1-2% of eligible seniors currently utilize the HECM product. Take the time to undertake a 10-minute check-up as you prepare yourself to originate and have a healthy and prosperous New Year! Compliance and Disclosures • While there is a short “grace period” afforded with the implementation of the new GFE disclosure format, have you read the FAQs and brushed up on new required disclosure items and the grouping format? • January 1st is the implementation date for many recently passed state consumer updated and new disclosures – have you reviewed your application and closing packages for these additions or changes? Policies and Procedures • New and updated disclosures may require you to revisit your Quality Control Plan to determine if it addresses needed policy and procedure updates. When was the last time you read your Quality Control Plan? When is the last time you flow charted the pre-application, processing, underwriting, closing and funding components of your company production strategy to determine areas of weakness and steps to increase your overall effectiveness? Pre-Application Activities • When was the last time you all met as a group to discuss and formulate new communication and marketing strategies for the new year? • At your next group meeting, will someone(s) role play the explanation of the GFE and application disclosures to the Borrower? Application Activities • Have your application checklists been updated to reflect new forms and procedures? • Does everyone know what a “complete” application package looks like? Processing Activities • New forms, disclosures and policies & procedures require the alteration of your present processing methodologies. Have you updated your processing checklist? • When was the last time you reviewed alerts, updates and form & process changes with your investors. When was the last time you checked with your account executive for updates?

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HVCC • Do you really know what this HVCC “thing” is all about? Are you comfortable in your knowledge of who, what, when, where and why the control of the appraisal process and the report are issues? Loan Submission Activities • How do your loan officers explain the processing, underwriting and closing process to the borrower(s)? Have you reviewed time parameters for key areas of the loan process with the Sales and Marketing staff? • Has your investor provided recent feedback as to your file quality and processed loan submissions? Have you asked your investors if there are ways which can expedite your file underwriting and closing turn times? Underwriting • In the last 3 months, how many times have you said to yourself “I didn’t know that”, “I never heard of that” or “I forgot all about that”? When was the last time you did some self-education and information activities to brush up on your weaker areas of knowledge? • While driving, traveling or taking a breather, ponder this question – what does it really take to get a “clear to close” on a first time file submission to your investor? Closing and Settlement • How do you explain the closing and settlement procedure to your borrower? Are your time frame and procedure estimates in need of updating? • Do you or does someone explain the servicing access and contact information your borrower may need after the loan has closed and disbursed? • How and when do you explain the repair escrow/holdback/release procedure to your borrower? Sales and Marketing • Great – a whole new sales strategy and campaign is ready to unfold for the new year – has anyone done a review check for state and federal advertising and disclosure compliance and guidelines? Do you have corporate counsel reviewing this information? • Do you set origination goals and measurement standards for yourself? How many new contacts should you make in the next 30 days? How many new referral sources? How many new originations? How many follow-ups on prior leads? How many cold calls? How many Pre-Qualifications? • How many thank you cards, newsletters and informational e-mails and phone calls? • When was the last time you told someone you assist seniors by offering information on reverse mortgage loans?

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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.

Sam Collins - How To Make It Big In The Reverse Mortgage Business, page 14 Sam Collins is the President of Sam Collins Reverse Marketing, LLC avnd 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. Michael Banner - 2009: The Year Success Became A Moving Target, page 18 Founder of LoanWell America, Inc., Michael is one of few Reverse Mortgage professionals accredited to teach continued education classes to CFP’s, CPA’s, attorneys & insurance agents. Michael has been interviewed by the Wall Street Journal, Tampa Bay Business Journal &the Reverse Mortgage Wire. A member of NRMLA’s State & Local Issues Committee & sits on the Board of Directors of FPA of Tampa Bay. For more information: Michael.Banner@loanwellamerica.com or 877.700.0555. Jonathan Neal - The Difference Between Expense and Expensive Is A Lot More Than Two Letters, page 22 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

Supporting HECMâ&#x20AC;&#x2122;s Unintended Value, page 24 - Atare E. Agbamu CRMS Author and columnist, Atare E. Agbamu CRMS, 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 100 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. Building Trust With Reverse Mortgage Clients, page 28 - Bo Hussung 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. Ask the Servicer, page 30 - 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. Protecting the Integrity of Reverse Mortgages, page 34 - Regina M. Lowrie, CMB Regina M. Lowrie, CMB has more than 30 years of mortgage banking experience. Ms. Lowrie is currently President & CEO of Vision Mortgage Capital, LLC, Affiliate of First National Bank of Chester County and is also President & Chief Executive Officer of RML Investments Inc. Regina is also Former Chairman of the national Mortgage Bankers Association.

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The RESPA Challenge

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 â&#x20AC;˘ Raleigh, NC 27607 www.reversevision.com (919) 834 0070 â&#x20AC;˘ info@reversevision.com

December 09 / January 10 TRR

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However, here is a reality, we can’t spread the good word if we don’t create and close loans. Bottom line our profitability is the key to making it big. If you possess knowledge and information to share with someone else, then you deserve to share in the profits of the reverse mortgage. Besides money, you will receive recognition, perhaps even fame. Yes, some folks become local heroes. When you position yourself as the expert and leader in your market, you gain attention, respect, and recognition. The feeling of a businesslike passion comes with the territory; a kind of feeling that only comes with knowing you are the best you can be! The other reward you can get is the inner reward, which only comes by fulfilling a deeper purpose and to make some form of contribution to the world and in the process, help others enjoy a better life. Being a reverse mortgage professional gives you a direct way to make that difference in your senior client’s lives. This famous quote from Ralph Waldo Emmerson sums it up, “It is one of the most beautiful compensations of this life, that no man can sincerely try to help another without helping himself.” Certainly we know there are many other altruistic endeavors, but helping seniors achieve their goals and improve their lives is not bad. Now, let’s discuss how we can make it Big in the Reverse Mortgage Business. I’m going to give you 14 ways you can make it Big in your reverse mortgage business! You will see how to reveal to your senior clients ways, which they can tell others about you. All of these steps will lead you closer to making it big in your reverse mortgage business! 1. Set up a referral system with your current senior clients and set up a reward for their referrals. 2. You need to develop a core of key senior clients who are very open, outgoing, and love to talk. When you give your seniors the opportunity to tell other seniors, you are helping them do what they naturally do on their own. Your job is to provide the right information and means in which to disseminate the word. 3. Develop Free Reports for them to hand out to other seniors. This report might read, “What you need to know about a reverse mortgage?” I have developed over 20 reports I use and rotate these reports based on my client’s particular needs and situation. 4. Establish a team who can know you and can spread the word about you to seniors in a positive and informative manner. I use this through my networking groups. During my conversations, I tell them about the great experiences and good deeds we experience when helping our seniors. This creates a top of the mind awareness with them and when they hear of a senior who may be a candidate for a reverse mortgage, guess who they call? 5. Set up a special treat for them using a system to insure it gets completed. Invite others to come and listen to what you have to say. Ask them for their opinions and how you might improve your communications; above all, take the time to make a positive impression. 6. Give every new senior client a printed questionnaire. This is your opportunity to uncover the need or want for that specific client. Now you can gather information that will build a strong database so you are able to communicate with your senior clients. I use this with every senior client I encounter. Don’t be too invasive or you will start to appear like a salesman. Your goal is to be more consultative and not sales-man like. 7. Give your clients a choice to go where they are most comfortable. Be sure you offer choices to your clients as to where you can meet them. If it is in your office or some public venue, then make sure it is a comfortable and private

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environment. Remember that we are talking about a very serious subject. Keep in mind the home is the real security with a reverse mortgage, so at some point you need to find out the condition of the property. 8. Send all new clients a thank you letter or thank you card. I do this with every new client. I use three methods for doing this and it is very effective and my clients remember me because I remember them.

The RESPA Opportunity

9. Shock your client with a special gift. Why not call your client the following day after your visit and personally thank them for having you in their home. Tell them you sent them a token of your appreciation and it is coming their way. I have a special system for this and I never have to lift a finger to make it happen! 10. Ask them to comeback. We all have a stack of clients who have responded to our offers, but to date have done nothing. This is where the gold mine is yet to be uncovered. This is your opportunity to bust open the vault and mine lost revenue. 11. Send a newsletter. You want your newsletter to be friendly and informative. You want it to be a quick read, but it must contain information seniors can use; for example, a recipe, news about Medicare, or social security programs or tips for better health. When you put your mind to it, you can be pretty creative. One problem I see though is that most of us have good intentions about writing the newsletter, but it often gets dropped after a month or two. We have one that works really well and you will never forget, it’s done for you! 12. Send your newsletter to audiences that may also have an interest in a reverse mortgage, but are not yet clients. An easy way to do this is to visit your local senior centers and ask their permission to leave your newsletter on the main counter. Seniors have time to read and if what you do is informative, they will look for it next month. 13. Develop a special event night for all the senior clients who have done a reverse mortgage. Don’t be afraid to get them all together. If you did a good job you have nothing to fear, plus if you have a grumpy client this is your chance to make them happy. Have your client bring someone with them that is not a client yet. Be sure you have them register at the door and capture their information. Next, arrange to have a special guest. Perhaps a CPA, financial planner, a local celebrity, or politician. 14. Get known with your own web site. In case you haven’t gotten the word, boomer homeowners hit the market last year and they are coming on strong. Guess what? They love the Internet. What are they looking for? Information! If you are not there, you will never be known. Check out our done for you web site www.srtkn.com. These ideas I am sharing with you are only a few of the many ways you can make it Big in the Reverse Mortgage business. In fact there are so many ways to be successful; there is no reason why any of you should not make it Big! Remember, having senior clients who are informed and interested will draw them to do business with you. They will bring other senior clients to do more business with you. This will create exciting, rewarding and bottom line profits. You can create a win/win constant circle of business and once in motion, your business will grow Bigger and Bigger! Good Luck!

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.

Can you afford not to use ReverseVision?

ReverseVision Inc.

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

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Matching your talents with a company that values you could be just a click away

Whether you’re at the beginning of your career or looking to make your next move, you want to work for a company that values your individual talents, skills and experience. Wells Fargo was named Among the World’s 25 Most Respected Companies by Barron’s magazine in 2009. Learn about the many exciting career paths and opportunities we offer.

Reverse Mortgage Consultant In this role, you will be expected to develop your local market by creating awareness and demand for reverse mortgages with Wells Fargo customers, prospects, and internal and external referral sources. These sources include realtors, builders, financial professionals, attorneys, and other professionals serving the needs of the senior community. Reverse Mortgage Consultants work directly with borrowers to ensure they obtain the mortgage loan product that best meets their needs while producing high-quality loans that meet strict Wells Fargo Home Mortgage guidelines. Compensation is received through a draw and commission on funded loans. Wells Fargo Home Mortgage is the Nation’s leading retail reverse mortgage lender with a strong nationwide network of over 6,000 Banking Stores and more than 2,000 Mortgage locations. The senior segment is experiencing exponential growth which provides Reverse Mortgage Consultants a great deal of opportunity to create awareness around these unique solutions for seniors. This role demands an understanding around the needs of senior homeowners and a passion to help them achieve their financial goals. Join our team. Visit our career site at wellsfargo.com/careers and search keyword “Reverse Mortgage”.

December 09 / January 10 TRR

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f you are a reverse mortgage professional and you survived 2009 then you deserve congratulations. It was the most unusual year I have ever experienced in my 28 year career.

The Senator’s harmful comments were the start of a string of uneducated and negative remarks from various regulatory agencies and major publications that greatly hurt our industry.

So let’s look back on this very eventful year that has just ended.

Here are a few more:

We saw county FHA loan limits disappear and be replaced with the then conforming loan limit of $417,000.00 and then increased again to $625,500. This was good.

Early in 2009, Consumer Reports were quoted as saying “reverse mortgages are going to be the next financial fiasco.”

A new formula on our origination fees was created which decreased the costs of the reverse mortgage. Believe it or not, although this decreased our fees I still feel this was very positive.

Later in the year they published a staggeringly inaccurate article filled with innuendo and misinformation concerning the reverse mortgage. Top U.S. Bank Regulator John Dugan was quoted as saying we are “the next subprime product.”

The minimum origination fee was increased from $2,000 - $2,500. This was OK. 2009 brought us the HECM Purchase. This was very good.

Parade Magazine, read by millions of seniors, published an article also filled with negative and harmful misinformation.

Let me quickly list the rest of the good things that occurred in our industry in 2009…Ummmmm, I’m sorry, I can’t think of any…

Major television networks brought on so called “reverse mortgage experts” also quoting ignorant and false statements.

Unfortunately, here is the other side of the ledger;

The list goes on and on. The negative result to our industry from these false statements is immeasurable, and to this date we, as an industry, have not figured out a way to convey the correct information to the public.

Our origination fee was capped. This was bad and in my opinion a slap in the face to our noble industry. No other sector in the mortgage industry had this type of cap imposed, why us? We saw our yield spread premiums slashed by more than 50% at the beginning of 2009. This was not only bad but it was the second of a two punch combination, with the first punch being the cap mentioned above, that proved to be too much for many reverse mortgage companies to withstand. Among many other factors these two were in my opinion the largest ingredients to the record amount of mortgage companies either downsizing or closing their doors. The ripple effect of this is still being felt today. There was much talk about decreasing the cost of the up front MIP and increasing the annual premiums. This was very exciting to many of us as it would have answered many of our critics who suggest that the cost of a reverse mortgage are actually so high that they could be considered cost prohibitive. Although I strongly disagree with even the suggestion that costs are prohibitive, no one would disagree that we need to get the costs of this product decreased for the seniors we are trying to serve. Achieving this would have been a huge positive factor in so many ways…it didn’t happen. Very bad… Senator Claire McCaskill (D-Mo) did her level best to make the cross selling of all insurance products, utilizing the proceeds of a reverse mortgage, illegal. That’s right, illegal! This goes past bad. It was a shortsighted gesture that actually hurt the very group of consumers (seniors) that it was intended to protect. Clearly there are many products that should not be sold using the proceeds of a reverse mortgage. To deny that would be blind stupidity, but like with all other financial products it’s about suitability. Although the good Senator ultimately failed in making cross selling against the law she did manage to scare our industry into even taking a stand on this very sensitive subject until very recently. FINRA, in most cases, does not even allow their 630,000 reps to discuss reverse mortgages with their senior clients. Many Certified Financial Planners and long term care insurance agents throughout the nation shied away from even discussing reverse mortgages with their senior clients as they feared doing so could be considered “cross selling.” Again, effectively scaring huge amounts of financial advisors from bringing the reverse mortgage to so many seniors and possibly helping them greatly. Senator McCaskill was quoted as saying “I want to make sure they (reverse mortgages) don’t become the scandal of the next decade.” She continued with “It seems obvious that one of the reasons for the unprecedented growth in20 the|market due to the that there TRR is December 09fact / January 2010is a lot of money to be made.”

And of course on October 13th 2009 the principal limit of a reverse mortgage was reduced 10%. Combined with decreasing property values this was another punch right to the heart of our industry. Oh, but we’re not done yet. As I am writing the word is there will be another principal reduction at the very beginning of 2010. It may very well already be in effect by the time you are reading this. Let’s hope not… The combination of the above and the record breaking decrease in property values caused by the recession did not just make success a moving target in 2009 it may have made it invisible. For those of you that have read my articles before you know I am immensely positive about the reverse mortgage product, it’s emergence into the financial sector and the positive affect it can make in a senior’s life.. and I don’t want you to think, regardless of my negative opinion of the outcome of 2009, that I have waivered in that opinion one inch. We truly are going through the same “growing pains” that most new powerful products have gone through before us. Some might say, “but we’re not a new product, the reverse mortgage products has been around for decades.” And you would be right, but today’s current economic environment has created the perfect storm for our noble industry and its participants. Record breaking losses in senior’s investment portfolios, the lowest interest rates on CDs and annuities in decades, decreasing property values, Social Security benefits not keeping pace with cost of living increases, increases in transportation costs, taxes and insurance and a 12 Trillion Dollar deficit have the masses scared. More scared than many of them have been in their life time. And unfortunately, fear breeds ignorance. The reverse mortgage has been thrust into the limelight of this perfect storm and is taking heavy damage due to this fear. So, what will 2010 bring us? What do we have to do as an industry to ensure 2010 does not echo 2009? It’s about two subjects… EDUCATION & SUITABILITY.

We must educate the public and the financial sector on the benefits truly offered by a reverse mortgage. We must be relentless at this and guess what? We need the big boys to throw their hat in the ring on this one. How about it Snoopy, Wells Fargo, Genworth, Financial Freedom????? You guys have nine and even twelve digit balance statements. Guys like me are trying to figure out how to find “just a couple of more producing loan officers next month.” How about some positive national advertising campaigns on the benefits of a reverse mortgage? All of you have wholesale and retail divisions and will benefit greatly from this type of advertising thrust. And… it will start sending out the positive message our industry so badly needs at this point in time. Come on guys! All of your wholesale divisions do much more volume than their retail counterparts. It’s a win win for all of us. And the word our industry must adapt and live by is suitability. Suitability standards must be developed and adhered to. The first question is always “is a reverse mortgage the suitable answer to the senior’s present situation?” Once that is established, which product best suits their needs? (Fixed, line of credit, term payments, tenure?) Once those questions are answered there may very well be additional disposable income remaining for a senior to spend on financial products they may very well need at this point in their lives. Is it some sort of health care, long term care, critical care, could it be certain annuity products? These are not yes or no questions! And people who insist on giving a blanket yes or no answer are doing more harm than good! Suitability, suitability, suitability…

So there is my advice on making sure 2010 is not the fiasco 2009 turned out to be… Before I say goodbye I did want to add one more very positive thing that happened in 2009 to me personally. I started contributing articles to The Reverse Review. This has been a tremendously positive experience. I want to sincerely thank Erica English & Aman Makkar for this opportunity. This forum has allowed me to voice my opinions on subjects that are very near and dear to me. I have made dozens of friends and acquaintances throughout the country that I never would have had the opportunity to meet if not for this vehicle. Even those of you who have disagreed with my opinions, (as few of you as there are…LOL), it has been a pleasure to converse with you. It is a pleasure & a privilege to be associated with this publication and get to know so many of you! To all of you and your loved ones, a very happy, healthy & prosperous 2010. And let’s all help as many seniors as we can…

If the product benefits the clients and meets their needs in a way superior to other options available then the answer is yes!

TRUST is EARNED. ExpERiENcE is cREDiBiLiTY. KNOWLEDGE is pOWER. “I would like to say that over the last couple of months I have tested the water with a couple of different title companies and not one of them have come close to Tradition Title Agency. The service you offer, along with your amazing team, have proven to me they really do care and not just say they do. I am truly grateful to have you and your team. Thank you a thousand times and please also tell your team they are amazing.” –nicholas J. makhlouf, Guaranteed Home Mortgage company

Tradition Title Agency (631) 328-4410 • www.traditionta.com Providing our clients with Knowledge, Experience and Trust. December 09 / January 10 TRR

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If I were asked to identify one aspect of today’s reverse mortgage market place that makes the least amount of sense, at least to me, I would have to say it is the confusion surrounding the costs associated with putting one in place. Regardless of whom I talk to; whether it is a senior, an accountant, attorney, insurance / financial advisor or an estate planner they all say that reverse mortgages are way too expensive, and because of what they believe to be unjustifiable expenses they tell me that they would never recommend a reverse mortgage to anyone. What makes this so interesting, or a better word might be surreal, is that rarely, if ever, do any of them support their opinion with anything even resembling factual evidence. The reality that is missing here is that no reasonable person expects any business to provide a product or service without incurring expenses which they in turn pass on to those people who purchase their products and or services. Here’s a head shaker for you, it appears that the core of this problem can be found in the full and up front way all the cost associated with a reverse mortgage are disclosed. This leads me to believe that at least when it comes to the reverse mortgage industry the old saying “no good deed goes unpunished” is a painful realism. One could spend a great deal of time trying to figure out how something like full up-front disclosure, which by all right should be seen as a positive, has somehow been twisted into a caustic negative by a coalition of the misinformed and misguided.

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This problem is looking for a solution. Although I’m sure that are numerous way to address this wide ranging misunderstanding, the approach I would take would be communication clarification. The goal here is not to try to justify every charge listed on a disclosure statement, rather to enlighten as many people as possible that there is an enormous difference between expense and expensive. Think about it for a minute, when we talk about expense what we are talking about is the cost associated with something, expensive on the other hand is something that can only be reasonably implied when the cost of one product, opportunity or option is rationally compared to the cost of another product, opportunity or option.

Because a reverse mortgage is only one of any number of products that can be used to enhance a financial position and in many cases life style of a senior, you would be making a mistake to limit your cost comparisons only to other reverse mortgages, forward mortgages, second mortgages and equity loans being offered by your competitors. I make this point because of a personal experience that opened my eyes on this very topic. Like most people outside of the reverse mortgage industry, at one time I also assumed without any reasonable deliberation that reverse mortgages were way to expensive. However, after doing some basic math I learned to my surprise not only are the initial expenses competitive they actually become more completive the longer the reverse mortgage is in place. All it took to reach this conclusion was a little bit of time and a calculator. Once I put all the relevant facts down on paper and was able to compare expenses incurred with other products commonly recommended to seniors it became clear to me that when it comes to what is and isn’t expensive a reverse mortgage can more than hold its own with a variable annuity, and both “A” share and “C” share mutual funds.

You might notice that I didn’t include the cost associated with a forward mortgage or equity loan. The reason for these omissions is that I am not in the mortgage business nor do I consider myself an expert in that field as such I think it better to leave those calculations to those of you who are. The point I’m making here is that there are a lot of misinformed people out there and as a professional working in the reverse mortgage field you can do a lot of good for the general public and your industry by dispelling as many of these negative misconceptions whenever the opportunity to do so presents itself. Personally I can’t think of a better place to start then with this “too expensive” thing which appears to be the number one myth in need of being put to rest. If I was a professional earning a living in the reverse mortgage industry I would go out of my way to make sure that these educational opportunities come up on a regular basis.

The mathematical comparisons and conclusions drawn from this exercise really hit home as the data used wasn’t just some SWAG numbers I had pulled out of thin air but were based on the actual numbers I saw on the disclosure statement provided to my mother-inlaw when she was considering a reverse mortgage. Armed with this information compared the $100,000 she was planning to take out of her home via a reverse mortgage and with the cost that would be incurred over a ten year period in both an “A” or “C” share mutual fund, and a Variable Annuity. Granted a reverse mortgage is not the same as a mutual fund or a variable annuity, but a fair compression of “expensive” can be made, especially since so many people who recommend mutual funds and variable annuities to seniors tell those same seniors reverse mortgages are bad ideas for most senior due to their unjustifiable expenses. Perhaps some future article will explore this particular hypocrisy. The following chart is based on the actual reverse mortgage data provided to my mother-in-law. The data used for the mutual funds and variable annuity where taken from the prospectus of each, I should also disclose here that I have either sold or personally owned all three.

10 Year Cost Comparison

December 09 / January 10 TRR

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Designed to reverse cash shortage among seniors, reverse mortgages have proven their effectiveness in reversing a common financial ailment among elders today: foreclosure. December 09 / January 10 TRR

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nown to professionals for some time, the ongoing foreclosure crisis has brought this reverse-mortgage value to the public. For seniors facing foreclosures and for banks looking at balance-sheet-busting losses from bad home loans, this unintended use of reverse mortgages is a win-win; but there is a problem. In some cases where reverse-mortgage cash could be used to pay off a forward mortgage in default and save the borrower’s home, the homeowner’s equity may be insufficient to satisfy the loan balance. Wisely, some lenders are accepting reverse-mortgage proceeds as sufficient payment for satisfaction, reasoning that the headline risk of putting seniors on the streets is not worth the extra dollar they may gain from foreclosure and a fire sale. Sadly, not all lenders take this approach, which brings us to a lawyer and senior advocate in Northern California. David L. Mandel of California Senior Legal Hotline has proposed one solution: Put a subordinate lien (sub-lien) behind a HECM reverse mortgage, the dominant program in the U.S. market, controlled by the Federal Housing Administration (FHA). However, in Mortgagee Letter 2009-49 (November 18, 2009), FHA reiterated its ban on new sub-liens as part of HECM transactions and added a ban to subordination of existing liens. Mandel was a writer and editor for 20 years (including 9 years at the Sacramento Bee) before, during, and after law school in Israel, where he lived for 11 years. He has written and spoken widely on delivery of legal services to seniors, housing counseling, ethics, and technology at legal aid hotlines. When he is not presiding over crushing caseloads of seniors in foreclosures and other financial crises, Mandel finds respite in his family, in playing his viola, and in training for marathons. Although FHA has banned sub-liens behind HECM, discussing them is healthy as we look for ideas to solve a raging foreclosure crisis among our elders. David Mandel and I caught up recently to discuss his ideas for helping seniors avoid foreclosures. What do you do at California Senior Legal Hotline/Sacramento Senior Legal Services? At the hotline, we field calls from seniors statewide on any legal issue and provide at least some information and advice, at times more extensive intervention when we can and it’s likely to be effective. For Sacramento seniors our responsibilities include also representation in selected cases and various types of community education and outreach. Beyond that, our practice tends to focus on certain areas as developments occur or as funding opportunities arise that are consistent with our mission, which is to empower seniors with the help they need to maintain health, safety and independence to the extent possible. These days, we spend much of our time working with seniors facing possible loss of their home due to the foreclosure crisis. We advise, negotiate for modifications or other workouts and, in some cases, litigate. Other current special projects include pension counseling and advocacy, SNAP (food stamps) outreach and enrollment, and an in-house mediation department. For more information please visit us on the web at www.seniorlegalhotline.org. What kinds of challenges are seniors facing in your areas of operation, what are the causes of these challenges, and how can they be resolved? There are huge economic challenges among seniors such as foreclosures and evictions. Seniors with home equity were high on the target list of financial predators. Layoffs and furloughs are hurting many of those who have remained employed. The $62-a-month reduction in SSI (Supplemental Security Income) payment hurt many seniors. Add to that suspension of property tax help, cuts in many programs like meals, transportation, case management, in-home help,

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adult day care, total elimination of state funding for our program, where so many try to turn for help in dealing with everything else. We have nowhere near the capacity to answer all calls. You have proposed a loss mitigation idea to help seniors and forward lenders in potential foreclosure situations. What is it, and why do you think it is a good idea for seniors and lenders? Do you have any success story? In several cases, servicers (and investors) have been willing to accept the net proceeds of a reverse mortgage as a short payoff of a loan balance far higher than market value. Typically this occurs when there is a smoking gun of predatory lending and frankly, when we keep up the pressure. We’d like to see it become much more common, and think that servicers would have an interest in getting the quick payoff that only a reverse mortgage (as opposed to a standard modification) can provide when appropriate; even though it comes to just a percentage of current value. In more run-of-the-mill cases without any serious legal violations in the original loan, we’d like to see the use of subordinate loans (amortized over a short term or silent) to make up the difference between HECM proceeds and net present value (NPV – what a lender would net from a foreclosure), where appropriate after counseling.

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With Mortgagee Letter 2009-49, FHA has closed the door on your idea. What is the reception from conventional lenders? In conversations with FHA we had heard that it remains opposed to the idea. And now it has apparently even disallowed the one previously permitted means -- modification of the existing underwater loan into the subordinate one (as opposed to creating a new loan).

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In this economic crisis, we think that is unfortunate. In normal times, preserving equity is paramount and a reverse mortgage may or may not be the best solution for a given client. Now, when a client is determined and able to keep their home of decades, and foreclosure is the clear alternative, we think it should at least be made an option in the government’s Making Home Affordable program. A number of lenders we’ve spoken to understand this very well and some say that they have made such arrangements, however, in general, they seem hesitant to help push the idea with HUD. You deal with seniors in crisis. You hear their stories. What is your favorite story? An 84-year-old client was illegally locked out last year after foreclosure of a predatory loan by a local real estate agency representing Fannie Mae that somehow thought eviction law didn’t apply to it. We helped arrange for a locksmith, who donated his services, to break the locks as TV cameras rolled. The foreclosure sale was voided, and she is still there more than a year later, having been offered a series of unaffordable modifications while we try to get someone to listen to our proposals involving a HECM. In another case we handled, a borrower and his terminally-ill wife were on the verge of eviction. So we helped them persuade a court to set aside the judgment. Then, we negotiated with the lender for months, and it agreed to reverse the foreclosure and accept the HECM proceeds, writing off nearly $400,000 in principal. A second lender agreed to accept a small payoff from the first lender and subordinate a small remaining amount, with very affordable payments by the homeowner. A story about the case appeared in the October 21st issue of the Wall Street Journal.

Visit our website at www.reverseit.com If you believe you have what it takes to succeed in a fast pace environment within a rapidly growing company, please fax your resume to:

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December 09 / January 10 TRR

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According to a 2007 National Survey of Reverse Mortgage Shoppers by the AARP titled, “Reverse Mortgages: Niche Product or Mainstream Solution?” some of the main reasons borrowers were dissatisfied with their lender were a lack of product knowledge, inability to properly explain or provide enough information, inability to answer questions and a lack of respect. These reasons accounted for 53% of the overall total. As if having to overcome the complexities of a very confusing industry and product aren’t challenging enough; the mortgage industry has been fraught with questionable ethics and fraud, complex regulations, poor financial performance and a severely weakened housing market. As if that is not difficult enough, originators have the additional complexity of having to sometimes work with uninformed relatives or caregivers. Although consumer awareness has risen significantly in the last 10 years, many consumers admit they still know very little about reverse mortgages. The reverse mortgage industry is still considered in its formative stage and thus is susceptible to bad press that can negatively affect consumer perceptions and subsequent decision making of an already wary consumer. These are formidable challenges to be sure. It is no wonder that trust is one of the biggest hurdles in gaining the loyalty of the RM borrower. Fortunately, however, the benefits of a reverse mortgage for the right customer far outweigh most of these challenges. In fact 94% of the respondents of the survey said their reverse mortgage “gave them peace of mind”. The recent growth and popularity of reverse mortgages underscores its importance “as an asset management tool to address financial needs {of borrowers} in retirement”. Lenders that are able to successfully navigate many of the pitfalls named previously and effectively establish rapport with their clients will significantly improve their chances of successfully originating a loan.

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Reverse mortgages are not for everyone and each situation is unique, but how one successfully builds trust with a RM client is not always as easy as it sounds and requires a certain amount of expertise and finesse. Speaking from his office in Nashville, TN, Chip Kandrach, a recognized authority in the reverse mortgage industry and a 7-year veteran stated in a recent interview that reverse mortgage clients require more “time and hand holding” in order to properly detail every step of the process. Since he was willing to spend the time answering questions and walking his clients through the steps, he was able to impact his conversion ratios as high as 90%. However, he also acknowledged that because the reverse mortgage origination process was time consuming, an experienced loan originator was limited to how many transactions he could close. So the question remains, what is the best way to build trust with the client and guide them successfully through the decision process? Here were a few suggestions: 1. Take your time and be patient – Nationally, the average age of the typical RM client is 73.6 years. In many cases they do not have the faculties to review all the complex data. Take your time with each client and explain, explain, explain and then explain again. Make sure the borrower and each person involved in the decision is given all the correct information about his or her loan. 2.

Build alliances – with other professionals that share a common goal and will work in unison with you and your client. This is not only critical to establishing your credibility, but also to drive additional business. People like associating with other professionals and when you build alliances that establish you as a professional, they will seek out your expertise. The right advisors in ones network include financial advisors, accountants, estate planners, caregivers and other reverse specialists who are used as trust agents in a carefully orchestrated network of the originator.

Meet clients face to face - In most cases, effective interviewing cannot and frankly should not be done over the phone. When it is not possible to meet the client directly due to geographical distance, as mentioned before, another example of a trust agent may include an initial contact with the client when the disclosure package has to be signed. The right professional can help the borrower smoothly navigate and understand the complicated paper work and terminology with assurance.

Communicate often - We live in a very fast paced, ever-changing, technological world and while the ideal RM candidate typically lives in an era where these changes are slow to take hold, most borrowers do not even have an email address, much less a computer to read them. Make sure you call the borrower at every point of the process. Spend the time necessary to make sure the client understands what is happening with their loan. The last thing a borrower wants is to be left out of the communication loop regarding their loan. This includes bad news as well as good news.

Be accessible - One of the other highest percentage complaints from RM borrowers in the same AARP survey was not being able to contact their loan officer. This almost seems laughable, but when a client has a question, a good originator is always available. Being busy is unavoidable, but being inaccessible should never be. If you are too busy then have people in place to answer questions. Otherwise, return phone calls in a timely manner and call back when you say you will.

Educate yourself - the largest percentage of complaints came from 4 separate categories that all addressed the same issue, which was a lack of knowledge about the products that they were selling. Again, this seems laughable, but if we accept the responsibility of advising a certain demographic group about their financial future, then it should be mandatory to know every single detail of the product, its benefits and its shortcomings. Ask yourself the following question, would you let anyone who could not establish their credibility or align themselves with credible advisors give advice to your parents about their financial future?.....of course not. Then why would anyone attempt to do business with someone if they were not properly educated about what they were selling? Educate yourself and develop a system to stay abreast of all the most up to date changes in the Reverse Marketplace.

These steps are proven customer relationship tools that will not only build trust with your clients but will significantly impact your success as a successful lender and originator. They will help you establish and maintain your credibility as an authority in your profession and will also help improve the credibility of the industry with which you work.

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ask the servicer By Ryan LaRose

I had a great time at the NRMLA Conference! I had the privilege of sitting on one of the breakout session panels, and the thoughtful and intelligent questions the panel fielded made me proud of the level of professionalism in our industry. In addition to the informative breakout sessions, our booth provided a wealth of input and insight from those who stopped by to chat. A number of servicing questions have been asked and answered this past year. In 2010 we’ll be exploring Ginnie Mae securitizations, servicing management issues, and other topics raised as questions or concerns at NRMLA conferences, or by the readership at large. One question that comes up time and again and I’ve always been reluctant to answer it. It came up several times at the recent NRMLA Annual Conference so I’m thinking it’s probably time to answer it once and for all. Drum roll please… “What’s it like to work with your Dad?” It’s great! That’s cheating, I know. In honor of the last column of 2009, the year that marked my companies 40th Anniversary, I’ve interviewed my Dad. I’ll let you read for yourself and determine why “It’s great” says it all, and why reverse mortgage servicing is so much more than a job. Ryan: There’s precedent in our family for father and son collaboration. Please share with readers what you learned from working with your Dad.

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John: I started working for my Dad when I was about 13 years old. He owned a meat- packing plant in Detroit. I began work by running errands, getting supplies, cleaning up, and taking out the trash. I grew up to drive a delivery truck and worked for my Dad through high school and college. My father started work every day at 5:30 am and came home around 7:00 pm without complaint. I learned many things from him; especially persistence, perseverance, and that having an all-encompassing attitude of “doing whatever it takes” will bring you success. Ryan: Why did you choose to go into mortgage servicing instead of origination? John: I came out of the Army in 1970 after serving a tour of duty in Vietnam. I finished college and my first job was in sales. I loved making people happy and soon realized I wanted to be in a service business. Entering the mortgage servicing business in 1985 was a combination of coincidence and circumstance. I was looking for a new career and my next-door neighbor was an owner of Celink looking for a CEO. I vividly recall one of the other owners asking me how I was doing after my first few weeks. My response was an instantaneous: “I love it!” but I was immediately concerned he would think that an unprofessional response from a CEO. He didn’t, and looking back, I really did love my work then, and I still do. I enjoy the long-term connections with the borrowers and our clients and helping people overcome financial challenges. If I ever retire, I will miss this work immensely. Ryan: Why can’t reverse mortgage loan servicing ever be an “auto-pilot” effort? John: As you’ve said many times in conference presentations, there are many “touch points” in reverse mortgage servicing. The demographics of our clients’ servicing portfolios require a lot of personal involvement and it can be expressed in many ways. Personal involvement comes through conversations with our Borrower Care unit; it can be a staff member helping a borrower work out a repair problem with their contactor; or it can be

that “uncomfortable call” with a borrower who is unable to pay their taxes or insurance. Many of our internal processes are fully automated, but we learned early on that seniors not only require - they demand - personal attention. When they call, they don’t want an automated attendant, they want a live voice. That’s exactly what we give them. Ryan: What is the one thing about industry that makes you the most proud? John: The overwhelming understanding and appreciation of the borrowers’ specific needs and wants, and the incredible patience required to work through the origination and closing process. Despite all the “horror stories” that get way too much play in the media, every day I am strongly encouraged by how much our clients sincerely care for their borrowers. It is not uncommon for one of our client’s executives to ask me, “How are my seniors doing?” I have NEVER heard a similar question posed in almost 25 years of forward loan servicing.

new insurer steps into the industry, but I think the annual volume would have to be significantly higher than what it is today to draw their attention. Ryan: Why is ethics such an important topic in reverse mortgage conversations? John: When we started building our reverse mortgage servicing department in mid-2005, I asked you to use your Grandma Betty as the grounding principle for all processes and procedures. You were to build a servicing operation that treated every borrower like your grandmother. Further, any new hire would have to convince you that she/he would take very good care of your grandmother, and be able to demonstrate a capacity for extraordinary patience. If someone passes the “ethics” test of treating my mother with dignity, respect, and sincere concern about her welfare, they not only have a place at Celink, they have a place in this industry. Ryan: Do you have any predictions for our industry?

Ryan: What is the biggest challenge facing the reverse mortgage industry/ servicing today?

John: I’d prefer to leave the prognostication to the producers (gosh that’s a mouthful!), but I do believe our best years are ahead.

John: I see three actually. The first is the fact that if Ginnie Mae had not come into the HECM market, we would be in a world of hurt. Fannie Mae has been a wonderful partner and investor for many years, but with all of the recent turmoil in their organization, it is reassuring to know that the industry has an option.

Ryan: What would you think about my sons working with me someday?

The second is negative publicity. I would like to see a stronger industry response to the damaging innuendos and false information around reverse mortgages. I don’t think we, as an industry, have done a good job of “counterpointing” negative stories.

Senior citizens are resting easy through the cold, celebrating the season and warming themselves by hearth fires in their own homes because of the reverse mortgage industry. I’m proud to be a part of it, and equally proud to work with John LaRose, experienced industry professional, father, mentor and friend.

The third challenge facing our industry is uncertainty about what HUD is going to do next. The recent reduction in principal limit, implemented with almost no notice, sent shockwaves through our industry. I don’t think we’ve seen the last of these types of actions. I long for the day when a

John: I have thoroughly enjoyed working with you, and my hope and prayer is that someday you have the privilege of working alongside one, or both, of your sons. It has been an experience I will cherish forever.

If you would like me to address a specific servicing topic in a future issue, please contact me at: ryan@celink.com.

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877.882.4368 ext. 866| 31 December 09 / January 10 TRR

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