October 2009
THE
REVERSE review
Efficiency Key To Profitability In Reverse Lending Trevor Gauthier page
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At present, reverse mortgage lenders are inundated with new rules and regulations as well as drastic changes to both the HECM product and the industry as a whole. With such changes it becomes increasingly difficult to maintain volumes and compliance while making efficient use of time. As a result, lenders are quickly coming to the realization that surviving in this industry is no longer just a game of numbers; it requires efficiency. Therefore, this month’s feature offers readers a list of vital systems and processes in order to increase efficiency while keeping volume up and keeping you compliant.
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© 2009 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
note from the editor
A
help expand our horizons and facilitate our growth through knowledge. For instance this month Ali Redjai’s article, “The Myth of CRM” takes a subject that is often misused and misunderstood by many and helps our readers understand what a CRM truly represents, how to correctly incorporate it’s use into your daily business and most importantly, how to select the one that best suits your needs.
lways learning!
Although The Reverse Review is edited for it’s readers, it is also true that the people who put it together, e.g., the editor, contributors, the creative director etc., all be educated, informed and entertained by the material they are reading. Companies that are visionary or even quirky, brilliantly managed or skating on thin ice, can be found in every industry across the nation; all we have to do is get inside. This means that each issue of The Reverse Review will
At TRR we have a fondness for education in the reverse industry. Our readers are always learning and incorporating ideas that make their business successful, whether it’s by reading TRR news on-line, attending webinars, or conferences. The staff at The Reverse Review hopes each reader can learn new ideas and meet new people to help our industry grow and prosper.
Erica English Editor-in-Chief
October 09
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CONTENTS
14 CRM Tool; The Last Golden Piece Ali Redjai
22 Reverse Mortgages
Under Fire: What Can We Do? Paul Fiore
18 So Why Is Everyone
Waiting To Correctly Market Themselves To Seniors? Jorge Villar
24 FEATURE: Efficiency
Key To Profitability in Reverse Lending Trevor Gauthier
30 Breaking Through The
Senior Communication Barrier Sam Collins
34 Minding Your Ps and Qs - Legal Considerations In The Marketing Of Reverse Mortgages
Weiner Brodsky Sidman, PC
ESSENTIALS
66
5 Note From the Editor
8 Ask the Underwriter
12 Industry Stats
42 Ask the Servicer
45 Directory
46 The Last Word
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ask the underwriter
Ralph Rosynek
Mention the word “October” to anyone and generally you will hear one of two things; “spring forward, fall back” or “Halloween”. Since the extra hour of sleep this month won’t even begin to make a dent in your ability to feel less tired, how about a few scary thoughts to help keep you awake! ….... Another recent Google Alert reports that other late to the party fixed rate lenders announcing their product entry into the reverse mortgage market will significantly assist in reducing extended industry processing, underwriting and closing turn times. Certainly our reverse mortgage lender history of the past has taught us a lesson, so is history really repeating itself? The scary part of this story is the failure of the turn time reporting and rescuing resources to identify what is probably the more accurate cause of delays – quality of loan file origination and processing. Increased borrower activity largely fueled by continuing economic uncertainty and declining property values requires efficiencies to handle the demand beginning with quality efforts in complete origination and complete file processing activities. When undertaken, these efforts provide for the Underwriter to “clear to close” the file on a first pass basis in many cases. While the ultimate solution to any industry issue is solid education and training, which leads to greater consistency and file quality, your immediate efforts to avoid many of the listed most common mistakes which Underwriters encounter will be the best tool to assist in an overall industry effort to reduce turn times: • •
• • • • • • • • • •
•
Take control of the borrower(s) from the beginning. Advise the borrower(s) of specific documents, verification information, and important steps required to meet their loan request need. Prepare your borrower(s) from the point of initial contact. Fully explain the entire reverse mortgage loan process, be realistic about the timeline to close, and advise the borrower(s) of their required assistance and activities in order to get to the closing table. Question, question, question!! Listen carefully to the borrower(s), ask questions during the pre-qualification and application process, and document/reference potential issues. Get what you need upfront, the first time, in legible complete form. The “back and forth” calls and requests waste time and add to delays. Do you use a checklist? With all of the paper involved and required documentation, you must have a “go to” resource to determine if you have a complete package – you need a checklist! Are your copies and support documents LEGIBLE, COMPLETE and CURRENT. Did anyone thoroughly review the credit report? Did anyone thoroughly review the preliminary title work? How about comparing the credit report to the preliminary title report? Did anyone review the trust documentation at the time it was provided? Proper verification of assets to close is a must. Real assets, with a history, that are cash or converted to cash with a trail must be in place. The appraisal. Do you have a review checklist? It is amazing how much a thorough review when it is received can seriously reduce the time delays resulting from basic underwriting conditions – and remember comparables assist the underwriter in determining the final value, make sure your appraiser used appropriate current comparables. A processor’s certification. Many timing delays result from lack of information, incomplete information or conflicting information. A processor’s certification is a great way to augment file information and provide additional detail.
….... A recent e-mail to a processor from a loan originator indicated “Please cancel the FHA casefile number and provide me with a copy of the appraisal, the borrower doesn’t like the value and has chosen to work with our company to complete the transaction.”
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A big boo on this request! While a case file transfer request, properly initiated by the borrower(s) and addressing payment of the appraisal fee, is permissible, the scary part of this story is the fact that we can make a casefile number “go away” and a new improved appraisal can be ordered. Yes, in some cases a new appraisal can be ordered if the new lender determines deficiencies or protocol deviation in the present appraisal, however, just because a party “doesn’t like the value”, “it is what it is” in most cases. ..….. Recent HUD Mortgagee Letters pose some significant industry changes which will require additional education and training, and perhaps a shift in how and who has access to the reverse mortgage product. Implementation will be on a short time frame basis in some cases as well. The scary part of this story is many of us will not read or review the information until the last minute!! While the Mortgage Letters do not go into effect until January 1, 2010, we are further required to also implement RESPA/GFE changes and Federal Licensing requirements. New Year’s Eve may not be a celebration, but rather a launch party for many into a whole new way of doing business. For more information on the GFE/HUD/RESPA changes, please visit the HUD website at http://www.hud.gov/respa or email their office at: hsg-respa@hud.gov. To review all the HUD changes taking effect on January 1, 2010 please reference the HUD website at: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ and read the following Mortgagee Letters. a. b. c. d.
Mortgagee Letter 09-28 Mortgagee Letter 09-29 Mortgagee Letter 09-30 Mortgagee Letter 09-31
The last scary part of this story is how many of these questions you are sure you know the answer to: (yes, the answers will be printed upside down in next month’s column!) • • • • • • • • • • • • • • • • • • • •
How long is an FHA appraisal report valid? What action comes first, borrower counseling or ordering an FHA casefile number? What maximum amount of gift funds are permitted to be used for “cash to close” in an FHA HECM purchase transaction? How long is a current FHA appraisal value attached to the property? What are the basics to “good funds” verification for cash to close? Who can order an FHA appraisal? What are the required net worth minimums for FHA approval? What is the difference between an open ended versus a closed ended loan transaction? What are the seasoning requirements for chain of title for an FHA HECM Purchase versus a Refinance transaction? When does the FHA Spot Condo form expire? When does the credit report expire? What additional verification items are needed for a modular home? What term describes the other vested parties to a life estate? What documents does a non-borrowing spouse sign at closing? What “formula” is generally used to determine the minimum amount of property hazard insurance? What components equal the UPB of a HECM loan on the day after loan funding? When is a HECM loan due and payable? What is the amount of the filed security instrument of record and its expiration date for a HECM loan transaction? What are the seasoning requirements for a quit claim deed? How long is the POA document considered valid?
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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.
Ali Redjai - CRM Tool; The Last Golden Piece, page 14
Ali Redjai is President and Founder of REMO Live! Reverse Mortgage Sales and Productivity Suite. REMO Live! is the first CRM tool specifically created for the Reverse Mortgage Industry. REMO Live!’s robust and scalable functionalities provide a great platform for small and large organizations to maximize their productivity. For more information contact 949.891.8779 or visit www.remolive.com
Jorge Villar - So Why Is Everyone Waiting To Correctly Market Themselves To Seniors? Not
doing things right is hurting the industry, page 18 Jorge Villar is the co-founder and partner of RME, a national marketing powerhouse in Florida with annual revenues exceeding $35 Million. He is credited with developing direct mail programs around the “Neighborhood Marketing Concept.” From social dinner seminars and innovative and personalized lead generation, Jorge’s programs are among the most successful prospecting programs in the country.
Paul Fiore - Reverse Mortgages Under Fire: What Can We Do?, page 22
Paul Fiore joined AAG to head the retail platform in California. Mr. Fiore was most recently the Chief Learning Officer at Senior Lending Network, where he developed SLN University. Paul has been a speaker at NRMLA and MBA meetings . He joined SLN as VP of Internal Production, helping to build their reverse mortgage sales center to the 4th largest reverse mortgage retail provider.
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contributors Efficiency Key To Profitability In Reverse Lending, page 24 - Trevor Gauthier Trevor Gauthier is the vice president of sales and marketing at Mortgage Cadence. He is a seasoned business-to-business sales and marketing professional with experience overseeing marketing, public relations and sales operations. His responsibilities include the development and execution of marketing and communication strategies, branding, content creation, market identification and segmentation and recommending strategic approaches and executable plans to maximize sales activity and returns on investment. Mortgage Cadence, Inc. is the leading provider of Enterprise Lending Solutions (ELS). Mortgage Cadence provides data driven workflow automation and seamless integration across the enterprise to help lenders achieve harmonious operational rhythm for both forward and reverse lending. Breaking Through The Senior Communication Barrier, page 30 - Sam Collins 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 Minding Your Ps and Qs - Legal Considerations In The Marketing - Joel Schiffman Of Reverse Mortgages , page 34 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. Minding Your Ps and Qs - Legal Considerations In The Marketing - Fed Kamensky Of Reverse Mortgages , page 34 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 42 - 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.
October 09
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Ali Redjai
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reversereview.com
CRM Tool
The
The last Golden Piece
Myth
of CRM
The term CRM (Customer Relationship Management) is one of the most misused and misunderstood acronyms in business. People often use the term to describe software tools or a technology solution and lose sight of what it truly represents. October 09
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CRM is a comprehensive set of processes bound by a systematic approach to interact with, track, and manage, prospects and customers. A CRM tool is a software application, which is deployed to automate, manage, and execute your established CRM structure. CRM as a complete approach should fulfill your overall corporate growth strategy- to originate more loans and to increase profits. You do not need technology to create this structure. Imagine you generate 20 leads a year, let’s say 1 lead every couple of weeks or so. You would calendar, prospect, qualify/reject, follow-up and so on; this can be accomplished without any tools: a pen and piece of paper is all you need. Now imagine you obtain 20 leads a week, the game is starting to change. To maximize those leads and perform proper follow-up you may need to use a spreadsheet or a simple contact management tool to set reminders and follow-ups. What if those 20 leads a week come from 3 different sources such as seminars, purchased leads, and professional contacts? To further maximize productivity you need to customize your messaging according to each source, or perhaps set certain trigger-based communications tasks. Maybe you have specific letters to send some leads or you follow-up more aggressively on others. Whatever logic or process you use to manage your leads, it now demands that you utilize a more advanced set of tools to execute your CRM structure. In an effective CRM initiative, the only element that changes in all the above scenarios is the execution tool. My example started with a pen and piece of paper as the CRM tools and ended with a robust software application. Your process of lead acquisition, nurture, and conversion should be the constant. It may be an ever-changing constant as you continue to improve your process; nevertheless it should be independent of any technology platform. A CRM tool like any other technology is an enabler, the last golden piece which should automate, maximize, and execute your sales and growth strategy. This realization will save plenty of money and grief as you begin to implement the CRM initiative company-wide. CRM Initiative An effective CRM initiative is a three-pronged approach. In this multi-part series, the main focus will be on the Technology Platform Adoption segment relating directly to the CRM tool. The Strategy: Your quest for the most appropriate CRM tool should start with establishing a clear business management strategy. This sales and growth strategy is your company’s essence which should drive your success.
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The Structure: Simply put, these are a set of policies and procedures that map out the entire customer sales cycle and all touch-points. While you are evaluating a CRM tool or setting any expectations, you should have a clear vision on processes, which the tool needs to manage and streamline. This is an extremely important step that sets the tone for all the following deliverables. Do not overcomplicate this effort as it can adversely impact your progress. The CRM structure is an ongoing quest for excellence, it is never complete. Being familiar with your CRM approach and being able to answer the following questions is a solid start: • What are the immediate steps I perform after receiving a lead? (For all interaction touch-points and per lead source, e.g. via phone, via email, seminar, referral, . . . ) • Are the leads treated differently depending on the source? • What are the sales stages or milestones? (sales lifecycle) • What are the events that trigger a follow-up? • When do I consider a lead to be “bad/lost”? • When/How do I distribute leads to my Loan Officers? • When do I redistribute an existing lead to a different loan officer? Developing a comprehensive questionnaire insures standardization of your processes. Furthermore, the CRM structure sets actions and consequences to each lead management scenario. A CRM structure does not need to be very formal, exhaustive, or time-consuming. Besides, a good CRM tool should provide additional feedback to further refine this structure. The amount of effort required to establish a CRM structure depends on the size and complexity of your organization. You may also engage an external expert to assist in the creation of an ideal CRM structure for your needs.
reversereview.com
The Benefits of a Successful CRM Initiative If executed successfully, a CRM will be the most important weapon in realizing your sales and growth strategy. This is accomplished by delivering the two crucial interdependent ingredients for front-office excellence.
One of the most elusive and frustrating elements of the sales process is the sheer number of variables that exists. These variables place an unnecessary amount of noise and resistance on the sales process, causing a slowdown in productivity. Some examples of sales process variables are: quality of leads, different operating protocols through which loan officers manage prospects, and inconsistent procedures on how leads are nurtured pre and post application. CRM initiative will objectively naturalize the variables oneby one to provide a more harmonious and consistent sales process. Effective decision-making and increased productivity can only be achieved once the variables are controlled and ultimately bring your organization a step closer to predictability. The ability to predict productivity provides an incredible advantage over the competition. The CRM structure with support from a robust CRM tool will make the entire sales cycle extremely transparent. This transparency allows managers to make decisions more quickly, plan ahead, and make adjustments to maximize productivity, and invest marketing dollars more effectively. So far we have established all the necessary groundwork in selecting a CRM tool. Next month, we will discuss the process Technology Platform Adoption in depth. We will cover the following topics: • CRM tools functionality spectrum • When do you know how much technology is enough? • Selecting the best CRM tool for your organization • What should you expect from a good CRM tool? • What is possible when a CRM initiative is executed successfully (examples and case studies) October 09
Strategically thinking...
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SO WHY IS EVERYONE WAITING TO CORRECTLY MARKET THEMSELVES TO SENIORS?
Not doing things right is hurting the industry Jorge Villar
For years I have been shocked to see how POORLY many Reverse Mortgage agents and their companies were at promoting their services to the senior market - a market that is continuously bombarded with junk mail, offers and solicitations from so many organizations wanting to reach this very sensitive and guarded audience (and rightfully so, by the way).
Operationally thinking...
How about using the most proven old-fashioned way to personally send those folks an important message, in the most “American-type” format and one of the most powerful promotional and emotional vehicles in the world-YES, DIRECT MAIL LETTERS (done the correct way that is). Other than a referral, direct mail is still the most personal, emotional and accepted medium to make a connection with people. Not the direct mail that you see out there in the industry; not those flimsy flyers, cheap postcards, and not those tiny newspaper ads. Think of this, you are marketing a very special product (backed by the government) that needs to be immediately associated with TRUST, CREDIBILITY, and REPUTATION. So you use cheap methods to promote it? Why? Do you understand how important your image is when you are asking seniors to listen to your advice and then to meet with you, a total stranger? The way you look in the mailbox will tell a lot about you and your services. Does that make sense to you? That is the very first impression that you make with your targeted audience. What do you want them to think or perceive? I see agents with nice business clothes, nice cars, nice homes, nice offices, and nice presentation materials, yet their marketing looks CHEAP! Have you ever seen a wedding invitation in a postcard format? How about Hallmark? Do you see cheap looking postcards in the greeting card aisles? The answer is NO. You see personalized and emotion-eliciting messages on nice stationery that is delivered in an envelope. Personalized is the critical word here. Generic does not cut it in today’s world. “You will never save your way into
“
Other than a referral, direct mail is still the most personal, emotional and accepted medium to make a connection with people.
”
October 09
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ROI (Return on Investment) ReverseVision fair pricing model guarantees a quick return on investment, increasing profitability. ReverseVision Inc.
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success”, ever heard that before? The same goes for marketing. Good marketing that works costs money. Good marketing is an investment not an expense. If it is an expense to you, STOP doing it the wrong way. Bad marketing is very expensive. Most do not use mail because they claim that it did not work for them. Of course it didn’t because it was done wrong to begin with. A local printer or letter-shop is not a marketing company. They usually print what you tell them to print. So you are now a marketer also? I thought you sold Revere Mortgages? Stick to selling, that is where the real money is made. Hire professional and experienced marketers to handle your promotions. You can fill seminars with qualified 62-year-old seniors, you can generate lots of calls to your office, or you can meet face to face with interested prospects if you know how to use the art of highly personalized mail. By the way, 98% of your competition will never do this so that is a huge advantage for you. I wanted to write this article to talk you out of spending money in foolish marketing and to help the RM industry’s credibility by adding a personal touch when marketing to that highly respected senior population that really needs
your product and your help. It’s the way you present it that will help Reverse Mortgages gain more understanding and popularity in that community. Help stop the poor image and low quality advertising that agents are using to promote your industry because it’s hurting all of you. The direct mail industry has come a long way. There are better mailing lists today. There is advanced printing equipment that will help you look great with clever packaging. There are imaging techniques that calculate the amount of money each prospect in your mailing list could receive using your Reverse Mortgage product. The dollar amounts (payments, lump sum, charts, etc.) get printed on each individual letter and it’s different for every household you mail to. Each mail piece is personalized specifically to your prospect. That will make a huge difference to your success in the mailbox and add incredible impact to your message. Remember, it all starts with you. You have to do things the right way. You need to understand mail (how’s, do’s
and don’ts), you have to be willing to spend money and then you have to be willing to stick to the best practices NO JUNK MAIL. I love that show The Dog Whisperer on TV. Have you seen it? I often use it as a life & and business analogy. It’s about a fellow Mexican - a dog trainer - who seems to fix any dog, anywhere, any place with any behavioral problem. He walks into homes and within an hour, sometimes minutes, and cures the animal from its real bad even dangerous habits. Here is the clue on how he does it: he really cures the people that own the dogs. He says it all of the time. “I am not really fixing your pet, he just wants to be a dog. I am really fixing YOU because his or her behavior is occurring because of you.” You see it’s not the mail. It’s not the industry, and it’s not the seniors. It’s YOU that we need to fix and how you market yourself and Reverse Mortgages. Get it? Yes, no doubt, the industry’s recent changes with payouts and the economy have hurt everyone but the fact is there is still a need for your product and there are millions of seniors who are qualified to receive it. Are you just going to walk away from everything? Are you going to quit? That is definitely an option but if you want to stay in the business
“
You see it’s not the mail. It’s not the industry, and it’s not the seniors. It’s YOU that we need to fix and how you market yourself and Reverse Mortgages. Get it?
”
you better learn how to make your marketing more effective and how to get the most ROI from your promo dollars. Doing things wrong is not an option; you cannot afford to go down that road. Yet I see many irresponsible marketers out there peddling undesirable “junk mail looks” to make a buck. Remember what happened to the forward mortgage market? A lot of bad brokers ruined it for the rest and gave the industry a bad name with their poor marketing schemes. So, a nice looking, well written and personalized oldfashioned American letter done the old fashioned way is the way to go. Let’s remember, these are seniors you are talking to. My mom and dada, your parents, our grandparents - so how do you want to be perceived? Think about it. What you just read should make sense. Just do it the right way. It’s really up to you now.
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Reverse Mortgages Under Fire
What Can We Do?
Paul Fiore As we are all well aware, our country’s economy has taken quite a hit over the last couple of years. One of the biggest fallouts that have occurred during this time is the collapse of the housing market. It isn’t uncommon to see many areas of the country that have experienced alarming rates of foreclosure, dramatic value drops, and non-existent housing sales. The housing market that once helped drive our economy essentially came to a screeching halt. Unfortunately, it may take years before the housing market fully recovers and the mortgage industry as we knew it will never be the same. Where do reverse mortgages fit into this picture?
In recent months, in both print as well as television, there have been many stories about reverse mortgages. If you were to just go based upon these stories, you would think a reverse mortgage is a toxic product that should be avoided at all costs. Many times when my staff speaks to potential clients, they have to spend as much time defending the product and overcoming misconceptions about it as we do actually discussing the benefits. What most of these stories fail to explain is that a reverse mortgage, if utilized correctly, is a tremendous financial product for seniors 62 and over. I am sure that many of us can point to numerous clients that we were able to help with the funds from a reverse mortgage. Based on the numerous thank you letters that my loan officers get from clients who are enjoying the benefits of a reverse mortgage, I know that there is a significant disconnect between what is reported and what is true. Why? This industry, like almost any other industry, will have its bad seeds. There will always be people that sell products and unfortunately do not operate in an ethical manner. The fact that this is the mortgage industry, amplifies any misconduct that is done by a specific loan officer or company. Essentially, the reverse mortgage industry currently has a bulls-eye on it and any negative story is going to get a lot of press. Each of us has a responsibility to do whatever it takes to help change this perception. We must all hold ourselves to a higher standard and make sure that we take every step necessary along the process of selling a reverse mortgage to ensure that our clients are truly benefitting from it. Every time I interview a prospective candidate with reverse mortgage experience, I am always curious about the type of training they may have already received. Proper, ethical selling of reverse mortgages begins with a solid foundation. If you are going to sell a reverse mortgage product to a senior, it is imperative that you have received the proper training PRIOR to selling it. Not only should you learn facts about the product, you should also learn how and when to sell the product. There are many factors in today’s economy that are leading more and more seniors to seek out financial assistance to satisfy their basic needs, you should learn what those factors are and how a reverse mortgage can potentially accomplish their goals. Is a reverse mortgage right for every single person you speak with? We owe it to our clients to provide the proper financial direction when considering a reverse mortgage. Before we discuss the qualifications of the program, let’s first spend a significant amount of time identifying the major need or want of the client and see if the reverse mortgage is the appropriate choice for them. s Once you have learned the product, how to properly sell it, and when it doesn’t make sense for a prospective client;
you must remember one very important thing, you never stop learning. Always take the time to stay fully informed on our industry, the changes within it, and the impact those changes have on the clients we serve. Think about the most recent changes that have occurred regarding the principal limit reduction, how much of an impact is that going to have on our client base? How many people were you speaking to that qualified for a reverse mortgage one day, and now due to the changes, are short to close? If you spend the appropriate time getting to know your clients in the beginning, you will be able to truly understand how these changes could impact your client. The more we educate ourselves, the more we can educate our clients and the better off everyone will be. The last and perhaps most important way we can ensure that reverse mortgages are looked upon in a positive light, is to make sure we highlight the positive stories. As an industry, we need to come together and focus on all of the people that have been helped dramatically by a reverse mortgage. There are many examples of clients who may have been facing a foreclosure, weeks from losing their home and used a reverse mortgage to save their homes. Other clients who are barely making their monthly expenses quite often have used reverse mortgages to change their financial future. Stories such as these are powerful and real. The best advocates we have for the reverse mortgage are the clients that we have helped. Every time you see a negative story on television or in print, remember the 2007 survey conducted by AARP, 93% of clients polled said that a reverse mortgage had a positive impact on their lives. That doesn’t sound like a toxic product to me. Let’s all work together to get the positive message of the reverse mortgage out to the clients we serve.
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Always take the time to stay fully informed on our industry, the changes within it, and the impact those changes have on the clients we serve.
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Many of the 80 + million baby boomers have reached the 62-yearold minimum age eligibility for HUD reverse mortgages. This demographic group is expanding exponentially with more than 6,500 seniors turning 62 each day. On top of this, life expectancy continues to rise at a time when government entitlement programs including Social Security and Medicare are already dangerously overextended. It is only going to get worse in the years ahead as more baby boomers retire and tap into these programs. October 09
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The aging population currently holds billions of dollars worth of equity in their homes. These individuals are faced with mounting medical bills and have a strong desire to stay in their homes longer. Adding fuel to this momentum, the federal economic stimulus package, which was passed earlier this year, increased eligible home values for a reverse mortgage from $417,000 to $625,500, thus opening up more properties and equity that would qualify for reverse mortgages. As mentioned above, all of this is happening at a time when lenders are being inundated with new rules and regulations with which they must comply. Reverse mortgage lenders are feeling the pressure to adopt mandatory live pricing introduced by Fannie Mae. There have been regulatory changes for RESPA, the HUD-1 and the GFE, which include form changes and updates, different classifications of fees and the introduction of tolerances depending on the fee type and selection of provider to name just a few. As a result of these changes, reverse lenders are quickly realizing that success in the reverse mortgage market cannot be achieved on volume alone; efficiency is absolutely critical. It is within these market conditions that technology can be a great enabler. In order to more effectively and proactively adapt, reverse lenders need to embrace automation solutions (robust technology platforms) that enhance their ability to deliver operational efficiency.
• Better process control - improved management of business processes achieved through the standardization of working methods and the availability of audit trails significantly improves compliance. • Improved customer service – consistency in the processes leads to greater predictability in levels of response to customers. • Flexibility – software control over processes enables ease of configuration that is in line with changing business needs and constantly changing rules and regulations. • Business process improvement - focus on business processes leads to streamlining and simplification thereby reducing errors. Electronic Document Management and Imaging The inundation of paper documents resulting in thousands of folders, lost and misplaced documents, cluttered offices, off-site storage, poor data security and compliance issues can break the rhythm of even the most efficient enterprise. A fully integrated electronic document management solution enables lenders to capture, store and manage documents for everyday business operations more efficiently; helping to accelerate the lending process by applying exception based processing.
Often times, reverse lenders view technology as a cost rather than an investment in their organization. This mindset has resulted in reverse lenders spending money on niche technology products. Historically, these products included reverse mortgage calculators, point-of-sale tools, web portals, investor technology tools and document preparation. These systems have typically been purchased from individual technology providers claiming best of breed, ease of use and low cost of entry. With margins shrinking, reverse lenders should explore the benefits of a robust, fully integrated technology platform that includes the likes of workflow automation, electronic document management and imaging, business rules engine and intelligent forms creation. Each reverse lender must become more efficient instead of engaging in more rhetoric between niche products and fully integrated technology platforms. A fully integrated technology platform can deliver true efficiency, which is vital to profitability for today’s reverse lenders. This article will define what the elements of a fully integrated technology platform include and provide specific reverse lending examples of this technology in action. Workflow Automation Workflow automation consists of business procedures automation or “workflows” during which documents, information and/or tasks are passed from one participant to another in a way that is governed by rules or procedures. In turn, this will eliminate or significantly streamline manual or disparate processes. The Key Benefits of Integrated Workflow Automation
“Each reverse lender must become more efficient instead of engaging in more rhetoric between niche products and fully integrated technology platforms.” Electronic document management and imaging systems provide advanced capture and Optical Character Recognition (OCR) technology to enhance data accuracy and loan quality while increasing operational efficiencies and decreasing costs. Lenders have the ability to capture any document from any data source, view and annotate the document, and then print, fax, email or package for delivery. Documents are stored securely and all activities in the imaging system are audited. Lenders can control access to specific documents and specify who can view them and what actions can be performed on them.
• Improved efficiency - automation of many business processes results in the elimination of many unnecessary steps, which reduces the overall cost per loan exponentially. reversereview.com
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The Key Benefits of Integrated Electronic Document Management and Imaging • Intelligently recognizes standard lending documents without the use of separator sheets or bar codes in order to drive down costs and improve operational efficiencies. • By leveraging advanced capture and OCR technology, the system validates pre-existing loan information within the integrated loan origination system and populates/modifies data fields as necessary. • Takes document capture, storage and retrieval to a new level by learning document types, automatically comparing and analyzing data within integrated loan origination systems and on the related forms, and populating loan origination data fields from the captured forms. • Additionally, documents can be viewed or exported in configurable stacking orders, focusing the presentation of material on the audience that will be receiving it - expediting review times and streamlining your business. Business Rules Engine With the current tempo of business, reverse lenders must be able to institute policy and process changes quickly to gain and maintain a competitive advantage. A Business Rules Engine allows the continual molding of technology to provide dynamic data flow to best leverage internal strategies and real world benefits in the form of time and cost savings along with increased scalability and profitability.
An integrated Business Rules Engine is typically based on a “publish and subscribe” design concept where business functions (actions) are triggered based on events. The solution should include a number of out of box events and actions to fully accomplish your goals; however, you also should have the added ability to take control, extend the system and configure your own policies and processes. The rules engine is normally native to the core technology and manages the rules library to provide an easy, robust and graphical way for rule authoring, management, simplification and use of information. These tools should utilize user-friendly wizards that enable you to design and execute rules from a business user’s perspective without the need for complex programming. Key Benefits of an Integrated Business Rules Engine • Thorough understanding of the mortgage process and built from the ground up to automate the lending process by concentrating solely on streamlining mortgage operations. • An integrated business rules engine will extend to areas such as product and pricing, decisioning, fees, workflow, document management/distribution, messaging, security and more to streamline operational efficiency. • Allows non-technical mortgage professionals to easily and effectively modify and customize their technology to better solve back office challenges and enhance customer service. • Auto-resolution capabilities greatly improve efficiency, mitigate the need for additional training and deliver a significant increase in employee efficiency and customer satisfaction. • Provides for intelligent data edits and validations reducing both data entry and process errors.
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Intelligent Forms Creation Intelligent forms creation enables lenders to dynamically create initial disclosures and closing packages and deliver them securely to the borrower or settlement agent. Accurate and quick document preparation and delivery through a comprehensive platform accelerates the lending process and ultimately increases customer satisfaction while maintaining compliance and reducing costs. This intelligent forms generation technology should work in concert with your fully integrated technology platform to provide 100% data transfer into the required documents while leveraging import/export functionality to push and pull data to dynamically generate document packages thus nearly eliminating the need to manually complete missing files. By reducing manual entry efforts, you are not only gaining efficiencies, but also decreasing costly data entry errors. In addition, all of the necessary calculations take place natively within your system of record removing the need to maintain an interface to a third-party doc prep provider and preventing disparate data on multiple platforms. By handling both initial disclosures and closing packages, the solution should include an extensive forms library along with the ability to create custom forms. The library should be continually
updated to accommodate changes in agency guidelines (federal or state) and compliance rules and regulations. Initial disclosures are automatically generated and placed on a secure website. The borrower is immediately notified via email of the disclosure availability and is provided instructions for downloading and electronically accepting their disclosures via an e-Sign compliant process. Additionally, the three-day window for those disclosures to be delivered to the applicant is upheld via a reminder notice. Finally, the solution will automatically store the completed document package securely in PDF format within the system of record for easy retrieval and future tracking. Key Benefits of Integrated Intelligent Forms Creation • Eliminates manual entry of data to streamline document management while improving data quality. • Provides the ability to accelerate delivery of the latest compliance and regulatory solutions. • The combination of workflow automation, electronic document management, a business rules engine and intelligent forms creation ensures that the right document packages and content are created each and every time.
The key to efficient and profitable reverse mortgage fulfillment lies in the implementation of a robust technology platform that includes integrated workflow automation, electronic document management and imaging, business rules engine and intelligent forms creation. An integrated technology platform is responsible for managing events that direct strategic, automated actions across your loan origination product solutions. There are an endless number of actions that can be created; however, a few highlights include:
The list of actions that can be automated with a robust technology platform to improve efficiency in the reverse lending process is endless. It takes the manual steps and guess work out of the employee’s hands and puts full control over the process back to the organization in order to ensure that compliance, new rules and regulations, investor guidelines and specific timing requirements are met every time. This can include index values, interest rates and how long an offer stays in front of a potential borrower. The timing of these activities has a direct impact on your bottom line.
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A robust technology platform improves the speed at which reverse lenders can change and adapt to constantly changing market conditions while improving data integrity. Since the reverse lending world is driven by government programs that include very specific timing and process requirements, it is critical for reverse lenders to embrace fully integrated technology platforms that can control the process. These systems are ones that can ensure that the right information is delivered at the right time to the right person.
Auto-distribution and notification Automated status and task management Auto resolution Continuous product validation Pricing refresh functionality Risk mitigation actions (including high cost tests) Service requests and data import to and from external systems
While the reverse lending process consists of a multitude of steps, processes and exceptions, a few specific reverse examples of workflow automation in action include: with a fully integrated technology platform, reverse lenders can apply business rules that set the LTV Factor within the system, set the MCAW Section 10-Mulitply Mortgage Basis field (LTV FACTOR*Mortgage Basis), the solution can then validate that the Base Loan Amount is greater than “multiply mortgage basis” and “multiply the value by FHA calc.” Due to the business intelligence within the solution, the system will provide the end user with an immediate warning that the loan amount exceeds the FHA allowed LTV limits. Another example of automation in action is the lender’s ability to set the anticipated advance date three days from the closing date and have it include Saturday. The system can also set the commitment expiration date to 180 days once the commitment date has been issued, or it can set the completion of escrow amount by totaling all repairs that need to be made, significantly streamlining the lending process while eliminating the potential for manual errors. Other examples of how a fully integrated technology platform can streamline the reverse lending process and eliminate manual processes include: • The ability to store and assign originator, broker and underwriter licenses for new regulation changes. • A robust technology platform can automate email to the broker regarding incomplete file submission. These systems can default repetitive items on loan input (account type, lien position etc.). • Lenders have the ability to lock down certain loan fields postconditional approval to make sure that it is closed in the same way as it was disclosed. They can also implement validation for birth date, SSN, etc. If information is missing, the user is warned prior to the file being received in investor delivery. • Reverse lenders can automate pooling for delivery based on pool and commitment rules and flows. They can capture the following data points for each of the trailing docs: received date, shipped date, shipped to whom and tracking information for the doc. In addition, they can set reminders, auto emails and verifications.
Success in reverse lending can no longer be achieved based on volume alone, so more reverse lenders will invest in integrated technology platforms that can deliver on the promise of greater efficiency. This can be accomplished through integrated platforms that provide workflow automation, electronic document management and imaging, business rule engines and intelligent forms creation to streamline operational efficiencies. These efficiencies will drive profitability and ensure long-term success.
What makes communication work? Why do some messages have an impact while others never reach their target? Being aware of the challenges our senior clients face will help you prepare effective communication strategies. Communication and information are critically important to our senior clients. Growing older is a process of adjustment, and having the proper information helps in the aging transition. Your seniors want information not only about housing, but transportation, employment, legal matters, retirement planning, health issues, and nutrition. Your seniors also want to know about special programs, events, services designed for seniors, products that make their lifestyles leisurely, volunteer programs and cultural events.
October 09
Today’s’ seniors are more active and involved than ever. The way you communicate with your senior clients can have profound implications on all parts of your seniors’ lives and well being. Unless you can effectively communicate yourself, your programs, and services your seniors will not have access or a true understanding of the message you convey. 31
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I am sure you already know communications with your seniors is critical, but understanding in more detail areas such as generational gaps, diversity, mediums, and message content are the foundation on which you can break through the barriers. First, communication goes well beyond intentional messages. If your messages are clouded or unable to be understood, then you have a communication issue. You should first ask if your messages are “senior friendly”. I mean does it take into account the following acuities: listening, sights, and physical changes. Are you involved with your senior community? Here is where you learn all the sensitive issues and concerns. From your interwoven involvement you will learn how to communicate and deliver messages that resonate with your senior clients. Have you ever noticed seniors travel and gather in groups? What does this observation tell you? Of course, get on that bus; attend programs and activities your senior prospects attend. When you reach out your hand and heart to seniors, you will touch their minds and strengthen your sense of belonging and gain mutual respect. Are you serving your seniors well? These are some questions you should be addressing to see if you pass the “serve well” test: 1. Do you have a policy or guidelines for serving your seniors? 2. Does your frontline customer service staff have specific training to deal with your senior clients? In other words are they patient, caring, and on the team. 3. Does your staff allow extra time and care with your senior clients, without the rush of trying to get them off the phone or drill a sales pitch or a quick close? 4. If your clients come to your office is it senior friendly and appropriately accessible? For example, does it provide handicap access? 5. Have you created senior friendly educational and marketing materials by using larger font type and proper spacing? Why be concerned about the numbers in your communications? Did you know that 37.9 million adults 65 and older account for 13% of the population as of July 2007, and that by 2050 the projected population of older adults 65+ will be 88.5 million and comprise 20% of the population? You can see the huge potential, but did you know that 80% of persons 65 and older own their homes. This creates and enormous opportunity to pay special attention and communicate properly with our seniors. (Source US Department of Commerce) Don’t let your attitude spoil your communications? Most of you already know a bad attitude can land you in deep trouble. Add attitude with saying the wrong thing and the recipe for failure is imminent. Here are some things you want to avoid in your communications: • Avoid stereotyping seniors. Seniors are active participants using in their lives a full range of roles and activities. • Shun ageism, racism, and sexism in your conversation with seniors. • You should especially avoid the use of ageist language, such as “the aged,” “the elderly,” oldsters, senile, feeble, etc. Use words such as seniors, older persons, older adults, and matures. • Beware and don’t be condescending or use childish expressions and tone. • Seniors are especially smart shoppers. Most times they know as much or more than you when you meet or speak with them. So don’t try to fool a senior less you be made the fool.
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Always keep in mind that respect is ultimate. Get permission as to how you should address your senior, Mr., Mrs., Ms., Miss, Dr., or by their first name.
Are all your senior clients the same? In your communications with seniors you can never assume they are all the same. Seniors are all different in their diversity. Seniors are no different than us. They are influenced by the area where they live, education, age, living arrangements, and family values. Tailoring your message for your senior audience means that your senior may hold different views, especially different from you. For example these views may ask the following issues: • What is their definition of the good life? • How do they feel about authority, such as the government? • To what degree will they ask for help? • What are their perceptions about health, illness and passing on? • Do they consider nutrition and food important? • What is their concept of age and aging? • Where do they feel male/females work in their relationships? • How do they feel about social services and how they work? • Do they know about all the programs available to them? Do you understand the changes seniors are facing? Do you understand the changes taking place in visual, hearing, physical, and social settings? It’s important for you to understand that these changes occur, but are often over time. A great example is myself; I can no longer read the newspaper without my glasses. Sight is a change and is a natural process of growing order. Here are some sensory changes and the communication areas that are affected: Visual Signage Reading Print information Televised information Internet information Brochures Post cards & Correspondence Hearing Face to face conversation Over the phone Broadcast radio and television Group discussions Agility and Mobility Assembling and using products Physical Walking and standing Accessing steps Flexibility Strength Speed of execution Social and Emotional Lack of social interaction Turn toward personal contact Family abandonment - isolation Joining clubs More to less phone conversation Loss of memory – fears if loss Abstract thinking deterioration
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Understanding what our seniors are experiencing can help us overcome difficulties in our communications. For example, if you are visiting or speaking with a senior client and they seem to have a difficult time in hearing, then you should repeat the thought again to make sure they understand. Understanding these key points will help you gain better communication skills with your senior clients.
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Here are some possible solutions for breaking through the communication barriers: 1. Clear your mind about outdated assumptions, lifestyles, interests, and the capacity of your senior prospects. You want to stay in touch, using constant touch points, such as thank you, greeting cards, and calls. Next, establish partnerships with seniors’ groups and form focus groups to fully understand what is on your senior prospects mind. 2. Be cognizant of the physical changes of aging. You should explore different formats, layouts, fonts, and communications to see which methodology gives you the best results in communications. 3. Your materials and media must be suited to your senior clients. How about forming an advisory committee to help guide you in the development of these materials? Experiment with different media. Be sure your advisory group addresses a “senior friendly” assessment of you, your staff and your company. 4. Survey your current senior clients to see how successful you have been in your communications. Ask them for suggestions about their preferred methods of receiving information, and how you could improve your materials.
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Here are some final tips for you to improve your communication and breakdown the barriers: • Before you visit your senior client, ask them to prepare a list of questions or concerns to be discussed when you meet.
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Ask your client how they prefer to be addressed, eg. Mr. Ms. First name Use open-ended question to elicit more information. Example, “Do you feel increasing your monthly cash flow would be of benefit? “ Summarize your information and talking points to confirm your senior client understands. Avoid mortgage jargon or being too formal. Speak on the same level as your senior. Offer educational materials that backup what you have said. If your senior client doesn’t understand, rephrase the sentence; don’t just repeat the exact thing. Sometimes giving a real life example works or taking a piece of paper and map out an example.
A simple communication concept is the easiest way to be effective to break the barriers in your communications. You can use these simple methods to be more effective: Give a bookmark with large print displaying your name and contact information. Provide them with a fridge magnet with emergency phone numbers. A preprinted grocery list designed to emphasize nutrition Peel off stickers to put on calendars as reminders. The saying, “friendly is as friendly does” is ever so true in our communications with our senior clients. Simply proclaiming that you are senior friendly won’t gain you much ground – seniors will soon detect if your intentions are genuine. When you “walk the talk” by demonstrating comfort, safety, compassion and understanding to your senior clients you become a winner. Success for you will show in better client satisfaction a healthier bottom line.
Tradition Title Agency Serving You with Knowledge, Experience and Trust
We Help You Grow Your Business Providing Reverse Mortgage Services Since 1996
CALL OUR TEAM FOR MORE INFORMATION AT (631)328-4410 WWW.TRADITIONTA.COM AN APPROVED VENDOR WITH THE LEADING REVERSE MORTGAGE LENDERS October 09
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Minding Your Ps and
Qs –
Legal Considerations in the Marketing of Reverse Mortgages
The marketing of reverse mortgages has become a hot topic of late as the Federal Trade Commission (“FTC”), the Department of Housing and Urban Development (“HUD”), the Office of the Comptroller of the Currency (“OCC”) and the Senate Special Committee on Aging have each either recently commented upon or taken action to stem perceived ills in the marketplace.
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The National Reverse Mortgage Lenders Association (“NRMLA”), through its Ethics and Standards Committee, has similarly taken a proactive role in both clarifying unacceptable marketing practices and combating abuses. Adding to the confusion, HUD’s recent introduction of HECM for purchase and fixed-rate product offerings provide new challenges for lenders and originators marketing a more diverse product menu. All of the foregoing points out the need for industry participants to exercise increased vigilance and careful consideration in the marketing of reverse mortgages to seniors. In this article, we explore some general legal considerations and recent developments for originators and lenders in the marketing of reverse mortgages. To help you mind your Ps and Qs, we explore the “4Ps of Marketing,” the Truth-in-Lending Act’s “Seven Deadly Sins,” the “4 Ps” of the FTC, and, less you grow weary of Ps, concluding with our firm’s not so tongue-in-cheek formulation of the “5 Ps of Reverse Mortgage Marketing. The 4 Ps of Marketing We begin with a well-known model formulated by Professor E. Jerome McCarthy, known as the “4 Ps of Marketing” or the “marketing mix“ which is commonly used in developing a successful marketing strategy. It involves the following four elements: Price, Place, Product and Promotion. As lenders are expanding the Product part of their “marketing mix“, we use Professor McCarthy’s model to highlight the legal aspects of Promotion, i.e., the advertising and marketing practices that make up the lender’s reverse mortgage “marketing mix.“ First and foremost, reverse mortgage loans are fundamentally consumer loans. Therefore, most, if not all, “forward mortgage” rules on advertising also apply to reverse mortgage advertising. Consequently, a number of the alphabet regulations embodying the federal regulatory scheme for consumer loans and a number of state laws impact the advertising of reverse mortgage loans. Federal Rules Federal Truth-in-Lending Act The federal Truth-in-Lending Act (TILA) and its implementing regulation, Regulation Z, provide rules for creditors when advertising consumer credit transactions. The TILA requires creditors to follow certain rules with respect to adverting depending upon whether the mortgage loan is open- or closed-end credit. The “Clear and Conspicuous” Standard Under Regulation Z, for both open- and closed-end mortgage loans, advertisements must generally be “clear and conspicuous,” not deceptive or misleading, and creditors may only advertise terms that are actually available. Last summer, the Federal Reserve Board promulgated significant amendments to Regulation Z (the “New TILA Rule”), which include new advertising requirements for both open- and closed-end mortgage loans. The New TILA Rule generally strengthened the “clear and conspicuous” requirement. Most provisions of the New TILA Rule, including its advertising requirements, became effective on October 1, 2009. The New TILA Rule requires advertisements for both open-end and closed-end mortgage loans to provide accurate and balanced information, in a clear and conspicuous manner, about rates, monthly payments, and other loan features. The New TILA Rule
implemented an express “clear and conspicuous” standard that applies to all open-end and closed-end credit advertisements. The Official Staff Commentary to Regulation Z provides examples (or practice “tips”) on how to comply with the “clear and conspicuous” standard in various scenarios, such as Internet, TV and oral advertisements. By way of an example, the “clear and conspicuous” standard for visual text advertisements on the Internet for home-equity lines of credit and/or closed-end credit transactions means that the required disclosures may not be obscured by techniques such as graphical displays, shading, coloration, or other devices and must comply with all other requirements for clear and conspicuous advertisement. “Seven Deadly Sins” As noted above, the New TILA Rule prohibits advertising practices that are deemed to be “deceptive or misleading.” The following seven “deceptive or misleading” advertising practices – the “Seven Deadly Sins” – are specifically prohibited in connection with closedend mortgage loans (and, therefore, also apply to fixed interest rate HECM loans that lenders structure and originate as closed-end credit): 1. Using the word “fixed” in advertisement for variable-rate mortgage loans or other transactions where the advertised rate may increase, unless the lender also makes certain disclosures regarding the ability of the rate and/or payment to change and includes the word “ARM” in the advertising, if applicable. 2. Comparing an actual or hypothetical rate or payment to the rate or payment that will be available under the advertised product without making certain disclosures regarding rates and payments that will apply over the full loan term. 3. Including any statement in an advertisement that the mortgage loan is a government-endorsed program (e.g., “government loan program”, “government-supported loan”) unless the advertisement in fact is for an FHA loan, VA loan, or similar endorsed or sponsored government program. 4. Using the name of the borrower’s current lender in an advertisement that is not sent by the current lender, unless the advertisement also discloses the name of the actual advertiser and states that the advertiser is not affiliated with the current lender. 5. Making a misleading claim that the mortgage product offered will eliminate a debt or result in a waiver or forgiveness of a borrower’s existing loan terms with, or obligations to, another creditor. (In this regard, reverse mortgage originators should be careful in making claims that “reverse mortgages eliminate debt” – while a reverse mortgage eliminates the borrower’s scheduled monthly payment, it replaces the borrower’s prior “forward” mortgage loan(s) and other obligations (such as credit card debt) with a non-recourse loan debt that must be repaid at maturity or upon default.) 6. Using the term “counselor” to refer to a for-profit mortgage broker or mortgage creditor. (In this regard, note that with reverse mortgages, the word “counselor” is a term of art and should only be used to refer to entities that provide reverse mortgage counseling to borrowers. Note, also, that reverse mortgage originators should be careful when using other
“neutral” terms, such as “advisor”, when advertising reverse mortgages.) 7. Providing information about some trigger terms or required disclosures (e.g., initial rate or payment) only in a foreign language while advertising other trigger terms or required disclosures (e.g., the fully-indexed rate or fully amortizing payment) only in English in the same advertisement. Importantly, the above advertising “Seven Deadly Sins” were promulgated pursuant to the Federal Reserve Board’s authority under Section 129(l) of the TILA. Section 129(l)(2) of the TILA permits the Federal Reserve Board to prohibit unfair or deceptive practices in connection with mortgage loans. As such, a violation of the above “Seven Deadly Sins” could subject a lender to the enhanced HOEPA damages equal to the sum of all finance charges and fees paid by the consumer. The FTC Rules – ”Unfair or Deceptive” Acts or Practices The FTC has broad powers to combat unfair or deceptive acts or practices, including in connection with advertising of mortgage loans. The Federal Trade Commission Act (“FTC Act“), originally enacted by Congress in 1938, and updated and revised many times since then, makes unlawful unfair methods of competition, or unfair or deceptive acts or practices in or affecting commerce. Under the FTC Act, the FTC is given authority to issue cease and desist orders if FTC determines that a person is using prohibited unfair or deceptive acts or practices in advertising. The jurisdiction of the FTC extends to non-bank financial institutions, including mortgage lenders and brokers, mortgage servicers and lead generators. However, the FTC’s powers do not extend to banks, savings and loan institutions or federal credit unions. The FTC Act prohibits any ”unfair or deceptive act or practice.” A representation, omission or practice is ”deceptive” if it is likely to mislead a reasonable consumer under the circumstances. To be considered ”deceptive”, the misrepresentation or omission must also be material. For example, FTC generally considers statements regarding the cost of the mortgage to be material. Examples of ”deceptive” conduct in the context of reverse mortgages include implying that the reverse mortgage is a “government benefit,” misrepresenting a government affiliation or otherwise making representations likely to mislead the consumer into thinking the transaction is not a loan or does not require repayment. Another example is advertising lower rates and fees only in the Spanish language, while disclosing higher terms only in English. The focus of the FTC Act is on preventing injury to consumers. The FTC considers an injury to be ”unfair” (and ”unjustified”) if the injury is (1) substantial, (2) is not outweighed by any benefit to the consumer, and (3) the consumer could not reasonably have avoided the injury. The FTC has been taking an active role in the recent years by issuing administrative warnings and enforcement actions in connection with mortgage advertising. The FTC’s enforcement actions have targeted deceptive and unfair practices in all stages of mortgage lending, from advertising and marketing through loan servicing, by mortgage lenders, brokers, and loan servicers. The FTC has been particularly active in the last few years in enforcing its rules in the area of mortgage advertising. In addition to checking October 09
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whether an ad “fails” the ”Unfair or Deceptive” standard (see above), the FTC staff pays close attention to whether the ad is “clear and conspicuous.” In doing so, the FTC looks at the following four (4) factors, or “The Four Ps” of the FTC: Prominence, Presentation, Placement and Proximity. To be Prominent, the advertising should be large enough for consumers to notice and read. Presentation means the marketing materials should provide information to consumers in a way that is easy for the consumer to read and understand. Here, the usual offending suspects are the excessive use of “legalese” and “fine print.” Placement means ensuring disclosures are located where the consumer is likely to look. Lenders should avoid “burying” important information about the loan next to insignificant items. Finally, Proximity means information must be located close to the term that it describes or qualifies. When advertising on a web site, for example, making the consumer “click” several times before the consumer can get to information about the loan may be problematic under this standard. Equal Credit Opportunity Act The federal Equal Credit Opportunity Act (ECOA) and its implementing Regulation B prohibit discrimination on a prohibited basis in the advertisement for credit. A creditor may not make any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage, on a prohibited basis, a reasonable person from making or pursuing an application.
HUD Rules on Advertising HUD recently issued Mortgagee Letter 2009-31 (”ML 09-31”), dated September 18, 2009, that contains provisions strengthening HUD’s oversight of FHA-approved mortgage lenders, including in the area of advertising. ML 09-31 provides notice of several important changes to the FHA program arising from the recent enactment of the Helping Families Save Their Homes Act of 2009 (or the ”HFSH Act”). Among other things, ML 09-31 restricts the use of a mortgagee’s name in advertising and promotional materials, and expands FHA’s authority to pursue civil money penalties for violations of FHA requirements. The HFSH Act amends Section 202 of the National Housing Act and provides that HUD must issue regulations requiring FHA-approved mortgagees to (1) use their business name that is registered with HUD in all advertisements and promotional materials, and (2) maintain copies of all advertisements and promotional materials in such form and for such period as the Secretary requires. Consistent with these requirements under the HFSH Act, ML 0931 provides that FHA-approved mortgagees must use their HUD registered business names in all advertisements and promotional materials related to FHA programs. ML 09-31 reminds lenders that the HUD-registered business name includes any alias or “doing business as” (DBA) name on file with the FHA. According to ML 2009-31, FHA-approved mortgagees must keep copies of all advertisements and promotional materials for a period of two (2) years from the date that the materials are circulated or used to advertise. ML 09-31 also expands the FHA’s authority to pursue civil money penalties for violations of the FHA program requirements. ML 09-31 provides that the FHA can seek civil money penalties against any person, including, among others, sellers of real estate, closing agents, title companies, real estate agents, mortgage brokers, appraisers, loan correspondents, for any use of the words “Federal Housing Administration,“ “Department of Housing and Urban Development,“ “Government National Mortgage Association,“ “Ginnie Mae,“ and the acronyms “HUD, ““FHA, “ or “GNMA,“ or any HUD official seal or logo, except as authorized by the Secretary. HUD rules and regulations not only provide guidance on what mortgagees can’t say in advertisements, but also what they must. By way of example, FHA-approved entities must display the Equal Housing statement, Equal Housing logo, or the Equal Housing slogan on all advertising, brochures, site signs, and other materials. The Equal Housing opportunity slogan reads: “Equal Housing Opportunity.” The Equal Housing opportunity statement reads (in bold type): “HUD properties are offered for sale to qualified purchasers without regard to the prospective purchaser’s race, color, religion, sex, disability, familial status, or national origin.“ The Equal Housing logo is a picture of a house in which an equals sign (=) appears inside of a housing, with the title “Equal Housing Opportunity.” If the Equal Housing logo is used in an advertisement, it must be at least as large as the other logos used in the ad. If no other logos are used, the Equal Housing logo should be clearly visible in a bold display face. Alternatively, when no other logos are used, 3-5% of the advertisement may be devoted to the Equal Housing opportunity policy statement. With respect to the equal
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housing logo in regularly printed media, such as magazines and newspapers, the FHA regulations require the logo to appear in a size relative to the size of the advertisement. The lenders should also follow specific size requirements provided in the FHA regulations. State Mortgage Lending Laws Almost every states’ mortgage lender and broker licensing laws contain restrictions and requirements regarding the advertising of mortgage loans. The general rule under most state mortgage lending licensing laws and regulations is that the advertising may not be “unfair, deceptive or misleading.” The “Unfair, Deceptive or Misleading” Standard The golden rule is to avoid “Unfair, Deceptive and Misleading” advertising. Unfortunately, this “golden rule” can seem at lot more “grey” than “gold” when applied to real life situations. As anyone who reviews consumer advertisements knows, a critical eye is crucial to assessing whether the specific language used in the piece, or its placement, is likely to be misconstrued and deemed to be deceptive or misleading. Reverse mortgage originators and lenders are advised to closely review their promotional materials on a case-by-case, state-by-state basis, in light of each state’s requirements. Among other examples of states who have adopted either general or specific “Unfair, Deceptive or Misleading” standards, in Florida, it is a violation of the Mortgage Brokerage and Lending Act for any person to falsely advertise or to misuse the names such that the advertising can be viewed as indicating a federal agency is involved in the loan. In California, it is unlawful for any person to advertise statements which are known, or should be known, to be untrue or misleading. A person who engages in false or misleading advertising in California is guilty of a misdemeanor and can be punished by imprisonment for up to 6 months, by a fine of up to $2,500, or both.
a license within the past 12 months must submit proposed advertisements to the Nevada Commissioner for approval. “Tag Lines” and “Mouse Print” Approximately 20 or more states have “tag line” (or “mouse print”) disclosure rules that require a licensee to disclose information about its licensing status in advertising materials and on its web sites. For example, in California, all lenders must include in the printed text of any advertisement, or in the oral text of any radio or television advertisement, the license type under which the advertised loan would be made, the state regulatory body which supervises that type of loan transaction, or if the lender is not licensed, a statement that the loan is being made by an unlicensed party that is not operating under the regulatory supervision of a state agency. In some states, in addition to the license number, the advertising must contain certain special language or “mouse print.” For example, in New Jersey, the advertisement or broadcast announcement by a licensee must include the name, address and telephone number of the licensee and the words “licensed by the N.J. Department of Banking and Insurance.” By way of yet another example, in Georgia, all advertisements by licensees, including websites, must contain the name, license number, valid unique Nationwide Mortgage Licensing System and Registry (NMLS) identifier, and an office address of the licensee or
Under these state rules that prohibit “unfair, deceptive and misleading” advertising, reverse mortgage originators should be very careful, for instance, with the use of superlatives in advertisements, such as “lowest rates in town”, unless the lender can show that its rate is, in fact, the “lowest rate in town.” Lenders should also avoid use of the word “benefit” in advertisements for HECM loans. With HECM loans, the loan proceeds are not considered to be government benefits since they are loan proceeds and must be repaid upon the occurrence of a maturity event. Pre-Approval by the State Regulator Several states also require loan originators and lenders to obtain prior approval of advertisements from their state mortgage lending regulator before they can be used by the licensee. One such prior approval state is California. In California, a licensee under the California Finance Lenders Law (CFLL) must submit two (2) copies of all advertisements that will be used in its lending business to the California Department of Corporations for prior approval. The CFLL licensee may not use advertising material until the California Department of Corporations notifies the licensee in writing that use of the advertising is not disapproved. In Nevada, under the Nevada Mortgage Broker Act, mortgage brokers who received
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registrant. The name, address, and license number of the licensee must conform with the name, license number, valid unique NMLS identifier and office address on record with the Georgia Department of Banking and Finance. Record Keeping Requirements Many states’ mortgage lending laws require licensees to keep copies of advertising materials for a minimum period of time after the advertisement has run so that the state mortgage lending regulator may review such advertisement upon an exam or audit. In Florida, for instance, licensees must maintain samples of all advertisements, including scripts of radio or television broadcast, for examination by the Florida Office of Financial Regulation, for 2 years after the date of publication or broadcast. In Georgia, the retention period is 5 years. Other State Advertising Restrictions Most states impose additional substantive restrictions that affect many aspects of reverse mortgage advertising. More and more states restrict references in advertisings to other lenders’ names and/or trade names. In this regard, California prohibits the use of the name, trade name, logo, or tagline of another lender without the consent of that lender, unless the solicitation clearly and conspicuously states that the person is not sponsored by or affiliated with the lender and that the solicitation is not authorized by the lender, which shall be identified by name. This statement must be in close proximity and in the same or larger font size used as first and the most prominent use or uses of the name, trade name, logo, or tagline in the advertising. Some states also restrict the use of simulated “live checks.” For instance, California Finance Lenders Law licensees may not utilize any “live check” unless the document bears the following phrase printed in 12-point type on the front of the document: “THIS IS A LOAN OR AN EXTENSION OF CREDIT. YOU WILL PAY CHARGES.” In addition, many states prohibit non-depository lenders form using the word “bank” or a similar name in their advertising or marketing. Some states also impose specific requirements that apply to the mortgage originator’s websites. For example, in Nevada, a link on the mortgage broker’s or mortgage agent’s website that links the user to a website of another commercial enterprise must provide notification to the user that the user is leaving the website of the mortgage broker or mortgage agent. NRMLA Code of Ethics Many readers of this article are participants in the reverse mortgage industry and are likely Members of the National Reverse Mortgage Lenders Association (or NRMLA). NRMLA has adopted a Code of Ethics to which its Members, by virtue of their becoming a member of the organization, agree to adhere. Through its Ethics and Standards Committee, NRMLA has issued Ethics Advisory Opinions that impact the advertising practices of NRMLA Members. Ethical Advertising Guidelines On February 28, 2008, NRMLA issued Ethics Advisory Opinion 2008-1 that provides specific guidance to NRMLA Members about what constitutes “unethical advertising.” In that opinion,
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NRMLA made clear, among other things, that a NRMLA Member may not market or advertise a particular FHA-insured HECM loan as a “Government Loan Program”, or a “Government Benefit” or as “Government Supported.” Further, such advertising may not state or imply that the communication is from or provided by a “Government Loan division” or as “Official Business”, or “endorsed” or “Approved” by the government, federal government, HUD, the FHA or AARP. It is a violation of the NRMLA Code of Ethics for a NRMLA Member directly or indirectly to state or suggest that a failure to respond to its marketing or advertising will or may result in a loss to the consumer of any consumer benefit to which the consumer is or may be entitled or enjoying. It is also a violation of the NRMLA Code of Ethics for a NRMLA member to arrange for or make “testimonials” that fail to clearly disclose the nature of the relationship between the party and the member. In this regard, when using prior loan customers, it may be prudent to disclose the consumer’s first name, and indicate their last name by an initial, and give a city and state of residence for the consumer. Such consumer information, of course, must be truthful. The NRMLA Code of Ethics also prohibits a NRMLA Member from making misleading or unfair or exaggerated claims of benefits to consumers, particularly if coupled with inadequate (or with no) description of related costs or risks. Lead Generators and Ethical Advertising On June 16, 2009, NRMLA issued Ethics Advisory Opinion 2009-2 regarding reverse mortgage lead generation. Among other things, this Ethics Opinion states that reverse mortgage lead generation is subject to the ethical advertising provisions found in NRMLA’s Ethics Advisory Opinion 2008-1 (see above). GAO Reverse Mortgage Report At the request of Senator McCaskill and the U.S. Senate Special Committee on Aging, the Government Accountability Office (“GAO”) recently examined several HECM loan practices, including marketing and advertising of HECM loans. In its report issued on June 29, 2009, the GAO states the review of HECM marketing materials revealed that a number of claims made by lenders in such advertisings were potentially misleading because they were inaccurate, incomplete, or employed questionable sales tactics. The GAO identified the following six common “potentially misleading” claims in reverse mortgage advertisings: • •
“Never owe more than the value of your home” Implications that the reverse mortgage is a “government benefit” or otherwise, not a loan “Lifetime income” or “Can’t outlive loan” “Never lose your home” Misrepresenting government affiliation Claims of time and geographic limits
• • • • s The GAO concluded that some HECM originators may not be maintaining sufficient focus on marketing standards. Thus, the GAO is concerned that borrowers might pursue HECM loans with misunderstandings about this complex product. The GAO report therefore recommended that HUD, FTC, and the federal banking regulators (the Federal Reserve, the OCC and the OTS) take steps
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to strengthen oversight and enhance industry and consumer awareness of such “potentially misleading” marketing tactics. Conclusion: The “5 Ps” of Reverse Mortgage Marketing We began this article with the “4 Ps of Marketing“ (as a reminder, they are Price, Place, Product and Promotion). We also described the “The Four Ps” of the FTC (i.e., Prominence, Presentation, Placement and Proximity). We conclude with the last of your Ps and Qs, our formulation of the “5 Ps” of Reverse Mortgage Marketing, and they are: Proper Planning Prevents Poor Performance. In developing a reverse mortgage marketing strategy and promotional materials, a lender or originator is well advised to always get its legal and/or compliance departments involved early in the process. When promotional materials are developed, give your vendors sufficient time to review, edit (if necessary) and produce such advertising pieces. It is always a good idea to use “dry runs” for video and radio advertisements. Always keep copies of advertising materials and scripts for the required retention period under applicable federal and/or state law, and make sure you properly identify and are able to track all of your company’s advertising pieces. And, last but not least, follow the suggestions provided by your legal and/or compliance departments. As your grandmother may have advised, mind your Ps and Qs, but also remember to use common sense and good judgment in developing advertising materials that are fair, accurate and ultimately informative to your senior customers. 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 Fed Kamensky and Joel Schiffman, 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.
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ask the servicer
By Ryan LaRose
What safeguards does a Servicer implement in order to prevent borrowers from being defrauded?
Technology has advanced to a very high-performance level, and a borrower’s identity and personal data are safe behind many levels of firewall protection. All reverse mortgage servicers and subservicers have invested an extraordinary amount of money, time, and effort to do everything possible to electronically safeguard their borrowers’ data. We all know, however, that firewalls have never completely protected anyone from having their identity stolen or personal information abused. As technology has become more sophisticated, criminals have too. The senior population we serve ranges from those who can spot deception at twenty paces to those who cannot recognize that the offer that seems too good to be true really is just that. In a recent borrower survey conducted by Celink, 85% of respondents still preferred delivery of their monthly reverse mortgage statements via regular mail. A number of those borrowers commented that they have a high level of distrust and aversion to receiving electronic information and prefer the “safety” of the mail service. Yet, these same people literally raise the red flags on their home mailboxes - signaling to someone intent on stealing identities that there could be something of value for the taking. Others freely volunteer personal information over the phone – with little knowledge or regard to the risks. Still others, the most vulnerable of all, are lonely or in a weakened physical or mental condition and they welcome a friendly voice over the phone promising something that appears to be the answer to a prayer. Servicers cannot call into question every request for a draw from a borrower’s account, because to do so would be an insult to the majority of those simply exercising their right to access their funds. Every once in a while, however, an attentive servicer senses something could be amiss. It could be nothing more than a nuance in the tone and tenor of the voice of the caller, and they should immediately and always follow their instinct to investigate. The sophistication of the schemes being perpetrated against borrowers can range from simple account inquiries to someone pretending to be a lottery official, notifying them of their “winnings”. While these situations are not commonplace, and certainly not unique to the reverse mortgage industry), one borrower being victimized is one too many. Allow me to recount a recent scam one of our borrowers fell victim to – certainly not to humiliate the borrower, who shall remain nameless, but to illustrate how even when the best of safeguards and technology are in place, borrowers can fall victim to professional criminals. This particular con man calls elderly people telling them he is with the Better Business Bureau and that he has indentified someone who had stolen the elderly person’s identity. He tells them the person is in jail, but the thief may have done damage to the person’s credit, or run up bills the borrower will have to pay.
He then tells them he is their “assigned agent” and personally insures that their identity is protected. To do so, they need to send him money to get all of the “insurance benefits”. He told this borrower he was working “under cover” and that if they did call the local BBB, they would disavow any knowledge of him. Like I said earlier, these con artists continue to get more creative. The scam starts out slowly by asking for only a few thousand dollars. Once he has built their trust and confidence, he starts asking for a lot more. It should be noted that each draw request submitted to the servicing department was legitimate and validated before being processed. However, one draw request came in for a large amount – higher than an internal threshold we maintain. Because of this, a phone call to the borrower was prompted and the borrower voluntarily disclosed for the use of the money. That’s when everything unraveled. The signs of fraud quickly became clear, but by the time this borrower disclosed this information, she had given the criminal approximately $65,000 in total. Her reverse mortgage proceeds were virtually gone, and she is without remedy. Perhaps the saddest truth of this story is that this despicable criminal will probably never go to jail because the authorities were only able to track him to somewhere in Jamaica. This woman willingly gave her life savings, albeit unknowingly, to a snake that eagerly and greedily consumed it. Let’s get back to the question of safeguards. Servicing technology provides sophisticated protection of a borrower’s information, but it cannot protect the vulnerable senior from a professional con artist or identity thief. Servicers must utilize a combination of the latest technological safeguards with good old-fashioned common sense. If it walks like a duck, quacks like a duck…you know the rest. No one likes to think of our parents, or the people we’ve looked up to and admired all of our lives as being vulnerable, but they certainly can be. It is the job of a servicer to always be on the alert for strange requests or nuance in conversations with the borrower. Quite frankly, sometimes it’s nothing more than a gut feeling that something is amiss. Though technology provides the electronic firewalls, the alert and attentive servicing staff is the last and truest line of defense between a con artist and a borrower. I look forward to receiving any questions you may have regarding servicing at: ryan@celink.com. Please remember: 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. If you wish to remain anonymous for my response, just let me know.
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the last word John K. Lunde Another year is almost done, and we’ve all been so busy fighting fires it feels like yesterday we were talking about 2009 in a future tense. The past year has been all about cash: who has it and who doesn’t, for an exceedingly long list of reasons. The universal theme behind many recent client conversations is all about how regulators, legislators, warehouse lenders, secondary market investors and even wholesale lenders are all impacting their cash picture. You are probably already intimately familiar with some of the forces that have recently impacted profitability in the reverse mortgage industry, but for humor let’s run down the list: Negatives Origination Fees: First on the list of cash reducing news items, lower origination fee caps impacted many originators by immediately reducing revenues by 19% on a $362,790 loan, even factoring in the higher premium potential of fixed rate loans we’re seeing today. Importantly, this gap is barely recovered on a per loan basis from higher lending limits, with a $625,500 loan showing projected revenue almost dead even with a $362,790 loan under the old caps. Marketing Response Rates: What happens when direct mail response rate goes from 1% to 0.3%? Or lunch seminars have twice the attendees but no applications? What if both of these happen at the same time? Ouch. In recent work with clients we’ve seen this to be more the rule than the exception, and it’s squeezing everyone where it already hurts. A client we highly respect recently mentioned that the ‘secret sauce’ for originators is the ability to generate leads. We absolutely agree and if there’s one ingredient that’s critical to brewing up your own lead generation ‘secret sauce’ that someone might buy someday, it’s learning from your past performance. We’ve seen plenty of originators leave the business because marketing costs per funding were skyrocketing, but by analyzing their campaign data it’s clear they’ve been doing the same thing despite decreasing returns for years, ignoring nuggets of success in their own campaigns they could have capitalized on if they actively managed their campaigns before their cash ran out. Knowing how to use your own performance to sustain and grow your success is key as this business continues to get more competitive. Warehouse Lending: HECMs are now insured by one arm of Uncle Sam, but were mostly purchased by a GSE for 20 years and now are bundled into securities insured by a federal agency. On top of that, the resulting securities offer 200+ bps above prevailing comparable term rates with no credit risk. What’s not to like for a warehouse lender? Fortunately or unfortunately, the shortage of warehouse lending has almost nothing to do with the specifics of the reverse mortgage business. It’s one of the easiest ways for institutions short of capital to decrease their lending activities quickly, so our proverbial reverse mortgage baby is sitting outside in a pool of bath water. The good news is that as institutions are stepping back into warehouse lending activities, reverse mortgage is becoming
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better understood as a favorable niche in the warehouse lending business, so this issue is already improving. Positives Loan Limit Increases: Not only did loan limit increases raise the total UPB on which revenues could be earned, but it also incrementally increased the market size by allowing higher value homes with larger mortgages to pay off those liens where lower loan limits were insufficient. It also touched off a dramatic refinance wave for both HECM to HECM (6,300 loans and counting) and even a few proprietary to HECM loans, again increasing volumes and revenues for originators. Through July, 28% of the total volume for 2009 was above $362,790, and it’s a safe bet that a majority of those loans wouldn’t have happened without the lending limit increases last year. HECM for Purchase: The future gift, which really hasn’t seen as much activity as the potential analysis indicates. Undoubtedly, the industry will take time to tell the story to realtors, homebuilders and other business sources who were previously underwhelming in their volume potential and thus largely overlooked by originators in their education and networking efforts. While we’ve only seen about a thousand loans under this program thus far, our analysis shows 10,000+ annual loan volume potential from this niche, even if we assume only 5% of senior homebuyers would use a reverse mortgage. We think the reverse mortgage preference for senior homebuyer financing will rise significantly over time, but regardless of how long that takes it’s a great incremental source of business for lenders. GNMA HMBS: A gift that benefits the select few with the good fortune to already be GNMA approved at the start of the financial collapse. We’ve done plenty of work on this subject with clients and while most of our work in this area is confidential, we can say without a doubt that lenders need access to this and similar liquidity sources that will develop over time. In order to do that you need to track and understand important trends like termination rates, loan losses above FHA insurance and foreclosure timelines. Conclusion After so many changes in the past year, the obvious question is “what’s next?” We don’t own a crystal ball, but we’d argue the first question you attempt is rather “how did each of these changes affect my business this year?” If you can answer definitively then not only do you have a leg up on your 2010 planning, you’re also way ahead in contingency planning for the inevitable ‘fire drills’ that will happen next year – in addition to principal limit reductions, higher loan limit extensions, FHA broker approval process changes and YSP legislation that already look probable. We would never advise anyone to drive exclusively by looking in the rear view mirror, but if you talk to enough investigators you’ll notice that they all look at the skid marks and debris trail to learn why cars crash and advise drivers on steering around future accidents. Let’s learn from our own and others’ successes and failures in a tumultuous year, and make this the year our industry and our companies navigate safely in an uncharted ocean of opportunity serving seniors.
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Enterprise Lending Solutions, Document Services and Compliance Solutions In every enterprise, there is an underlying rhythm – a cadence – in the execution of mortgage loans. Those companies that have seamless system integration and dynamic data flow across the enterprise are in rhythm and optimize their efficiency at every step. Their business flows in absolute harmony to increase productivity, retain customers, maintain compliance and reduce costs. Now your company can catch the rhythm and reach a whole new level of performance. Mortgage Cadence is orchestrating the ultimate mortgage origination performance by providing a true Enterprise Lending Solution (ELS) that handles both forward and reverse lending, as well as multiple business channels. With the Mortgage Cadence suite of solutions you have access to full end-to-end loan origination functionality, automated underwriting, business rule management,
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