The Reverse Review September 2009 by The Reverse Review

September 2009

THE

REVERSE review

How Can Lead Nurturing Win Over Senior Clients? Sam Collins page

“Have you noticed that your marketing response is not what it used to be? If so, don’t feel bad you’re not alone.” This month, Sam Collins focuses on the importance of not only accumulating leads, but nurturing them and helping them grow from lead to sale to closing.

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Publisher Aman Makkar Editor-in-Chief Erica English Copy Editor Harpreet Makkar Production Jason Westbrook Visit www.wellsfargo.com/careers to learn more about this outstanding opportunity to grow your reverse mortgage career at Wells Fargo.

Attention Reverse Mortgage Specialists • Do you have a passion for helping seniors reach their financial goals? • Do you have a proven track record of success in the reverse mortgage business? • Do you want to join forces with the nation’s #1 retail reverse mortgage lender as part of the nation’s largest mortgage and bank store network? There’s never been a better time to take your reverse mortgage career to the next level with Wells Fargo. With 10,000 Americans turning 65 every day starting in 2012 and millions of current Wells Fargo and Wachovia customers already there, this market is anticipated to be one of the fastest growing mortgage segments, and Wells Fargo is committed to aggressively growing its share in the Reverse business. Who Are We Looking For? Ideal candidates have a minimum 2 years of demonstrated success in reverse mortgage lending and possess an established and transferable referral network. You’ll be responsible for owning your local market by creating awareness and demand for reverse mortgages with referral clients and prospects. Why Wells Fargo? We’ve been the nation’s leading retail mortgage lender for the last 15 years. Our historic legacy and well-respected brand can help establish customers’ trust, and our national diversified financial services presence in more than 10,400 Wells Fargo and Wachovia stores can provide more opportunities for referrals to grow your business. In addition, we offer the best marketing, fulfillment, product support/development, technology, and loan servicing teams in the business, so you can work more effectively, efficiently, and profitably. And when you join us, you’ll receive ongoing professional development training specifically designed to take your career to the next level. Are you ready to join our reverse mortgage team? To learn more about this outstanding opportunity, visit www.wellsfargo.com/careers, and search keyword: “Reverse Mortgage”. Wells Fargo is an Affirmative Action and Equal Opportunity Employer, M/F/D/V. © 2009 Wells Fargo Bank, N.A. All rights reserved.

Creative Director Traci Knight Layout & Design Guenthoer Design National Accounts Manager David Peck Printer The Ovid Bell Press

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

© 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 publisher Mortgage Lending Conference, MBA’s 96th Annual Convention & Expo, and the 2009 NRMLA Annual Meeting & Expo, “Navigating Change: Sailing Safely in the New Economy”. So while it’s been an interesting summer with many of the changes and challenges we have all faced, there’s no better time to re-focus our energies and get back to work.

alph Rosynek sums it up in the opening of this month’s “Ask The Underwriter”; “it’s time to brush off the beach sand, tighten the cap on the cocoa butter bottle and move those sandals to the side – pull on your street shoes, it’s time to get back to work!” Conference season has arrived, The Reverse Review just launched a brand new interactive website and last but not least, we’ve added a new member to our family.

Lastly, we have to welcome David Peck to our industry as well as our TRR family. David is in charge of our advertising efforts, but as with any small business, he’s quickly become an integral part of our growth and wears many hats on a daily basis. We hope to see you soon in San Diego! Oh yea, don’t forget to come check us out at www.reveresereview.com.

So to start off, most of you know TRR as an industry publication, maybe a thing of beauty you wait to receive in the mail every 30 days with an undying passion. Well, to some extent, wait no more! The Reverse Review is dedicating itself to a new state-of-the-art interactive website. We will be hosting online training events, daily news updates, blog features and of course our proud publication. Don’t worry, you’ll still get 48 pages of magnificent content by snail-mail each month, but this is our way of being in touch with all our readers on a daily basis!

Aman Makkar Publisher

Next, conference season has finally arrived and hopefully everyone is excited to get out and about and come to San Diego. This year our beautiful city will be host to the MBA Reverse

September 09

CONTENTS

14 Successful Phone Sales Paul Fiore

18 Driving Attendance

to Your Next Reverse Mortgage Community Education Event.... Putting More Butts in Seats

20 New, Personal Factors Impact Reverse Mortgage Demand H. Marc Helm

30 HUD’s Summer Julep -

Mortgagee Letter 200921 and HECM-to-HECM Refinances Weiner Brodsky Sidman, PC

24 FEATURE: How Can Lead Nurturing Win Over Senior Clients?

36 The Counselor’s Role Debbie German

Sam Collins

Valerie VanBooven, RN BSN

40 Preventing the Misuse of Reverse Mortgage

Regina M. Lowrie, CMB

ESSENTIALS 5 Note From the Publisher

8 Ask the Underwriter

12 Industry Stats

43 NEW! Book Review

44 Ask the Servicer

45 Directory

46 The Last Word

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ask the underwriter

FALLING BACK INTO LINE... ...time to brush off the beach sand, tighten the cap on the cocoa butter bottle and move those sandals to the side in the closet – pull on your street shoes, it’s time to get back to work!

W •

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hile you were on summer hiatus, the reverse mortgage space didn’t stand still. Time to focus back on the business and follow-up on a few things: The HECM purchase market continues to grow as realtors become more familiar with the product features and benefits, and originators become more comfortable working with seniors and the market in addressing borrower needs and concerns. Time to hit the knowledge trail for answers (answers in next month’s column) to several HECM purchase questions which still remain a little “fuzzy” in terms of fact or fiction: • What about gifts? • What about buying a condo in Arizona and living there 6 months or more, but also owning another home somewhere else that won’t be sold or rented? • What about a non-borrowing spouse who has a HECM loan on another property? After October 1st, the next time you hear “spot” you can be sure it won’t be associated with a condo! Spot condo underwriting will be a thing of the past. While there still remains some additional guidance and procedure forthcoming, the best clarity recommendation is to review the Mortgagee Letter 09-19 in detail for upcoming condo changes. A complete copy is available at: http://www.hud.gov/offices/adm/hudclips/ letters/mortgagee/. Based upon growth, several readers have asked how to become a HECM Direct Endorsement Underwriter. The DE Underwriter is granted authority to issue approvals and endorse HECM loans when their individual authorization is attached to an entity that has been approved for Direct Endorsement activities. Once an entity is approved as a DE mortgagee, the addition of more HECM underwriters is at the company discretion. As indicated, underwriting (direct endorsement authority) is granted to supervised (generally institutions regulated by a banking regulator and the FDIC) and non-supervised (generally a

•

mortgage banker or subsidiary of a regulated institution) Lending Institutions (you can not be a sponsored Loan Correspondent) that have attained approval from HUD/FHA to provide an underwriting decision. However, since HECMs require specialized experience, the normal DE status does not cover authority for these institutions to underwrite and insure HECM loans automatically. Additional test cases and separate approval from FHA is required. It is highly recommended to gain experience with another lender that is currently providing the underwriting decision under a principal-authorized agent agreement relationship before attempting to gain HECM DE status. Based upon your AAFB (area approved for business) you should check with your HUD HOC (home ownership center) for specific details as to the requirements and procedure for attaining and implementing FHA HECM direct endorsement authority. Haven’t seen too much relief on the declining markets front. I continue to hear and see issues related to availability of recent comparables not associated with “bank” sales stated by appraisers in the form of “no better, no closer, no recent, no current, no supporting….” If I can make a suggestion, work with your appraiser from a “thesaurus and dictionary perspective”. For $350, a few extra words couldn’t possibly require additional man-hours. The word “no” is the operative

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word. It is completely acceptable when followed by words that explain “no” and provide a basis of support to the underwriter in determining the final value. These days, major danger to final value determination by the underwriter is present when a declining market is indicated by the appraiser and not supported by 2 of the comparables being less than 90 days old. I need a loan for 798 Million! – The security would be real estate, owner occupied as a primary residence by borrowers over 62 years of age. Seriously, be aware that resolution of the FHA subsidy issue may come in the form of lowered principal limits. Disclosure Checklist Warning. For the many new participants in the reverse mortgage space, now is the time to revisit the consumer disclosures you are currently using. Recent state additions, modifications and changes to required disclosures are constantly being promulgated. Read your broker/ correspondent agreements with your investors. Many of these contracts require you to hold your investor harmless for failure to properly disclose. Hazard insurance issues continue to surprise originators. Be aware that many of the insurers have changed their guidelines, especially in continuing volatile weather areas of the country. Most obvious is the lack of guaranteed replacement coverage availability, resulting in a per square foot value assessed based on structural age. This change gives rise to the real possibility that your appraised value would exceed the insurable value – an issue which must be resolved before the loan is scheduled to close and final figures calculated. A good safeguard to this situation is to review the hazard policy at the time of application, make sure there will be at least 90 days coverage past the

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anticipated closing date, and if the insured value is less than the sum of the anticipated appraised value less the land value – have the borrower be prepared to discuss increasing the coverage with their agent once the appraised value is determined versus once the loan is approved subject to coverage changes and the investor being listed as the loss payee. Speaking of manufactured homes – don’t forget the importance of addressing those out buildings and added or attached structures. While many homes have been upgraded by the addition of mudrooms, sunrooms, porches, balconies, and other additional square footage, it is important to note that these “add-ons” must be properly permitted, inspected and meet local codes as well as be included in the inspection report comments and property review. For what can a driver’s license be used? If it is current/valid and in force, and represents the state the borrower currently claims in connection with their primary residence, the “ID” can be used as a Patriot verification document, it can be used as a picture ID, it can be used to verify date of birth (remember if it has NOT expired). It’s only purpose if it is expired is another form of picture ID. Funds to close – as the declining value and rate combination continues to impact principal limits, more borrowers are having to come to the closing table with “funds to close”. Make sure you discuss the possibility with your borrower at the time of application if the preliminary numbers look “tight”, and begin the process of bank verification or alternative funds verification at that time, versus waiting for an appraisal to be completed with little or no chance of cost recovery if the borrower is unable to address the funds shortfall.

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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.

Paul Fiore - Successful Phone Sales, page 14 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.

Valerie VanBooven RN BSN - Driving Attendance to Your Next Reverse Mortgage Community Education Event....Putting More Butts in Seats, page 18 Valerie VanBooven RN BSN is a Senior Service Marketing Expert and the National Marketing Director for Next Generation Financial Services, a Division of 1st Mariner Bank. She is a professional speaker and the author of the books “Aging Answers” (2003) and “The Senior Solution” (2007). She can be reached at valerie@nextgenfinser.com. Please visit her website at www.NGFSRecruiting.com

H. Marc Helm - New, Personal Factors Impact Reverse Mortgage Demand, page 20 H. Marc Helm, Chief Operating Officer of Reverse Mortgage Solutions, Inc., Spring, Texas, has worked in the financial services and mortgage banking industry since 1976. Prior to joining RMS, Helm spent most of the last decade as Senior Vice President and Manager of Washington Mutual’s Loan Servicing Operations Group. He has chaired several committees within the MBA, including Loan Administration, Technology and FHA/VA Liaison. Sam Collins - How Can Lead Nurturing Win Over Senior Clients?, page 24 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 10 10

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HUD’s Summer Julep - Mortgagee Letter 2009-21 and - Joel Schiffman HECM-to-HECM Refinances, page 30 Joel Schiffman is a member with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. Mr. Schiffman can be reached at schiffman@wbsk.com or by telephone at 949.798.5570. HUD’s Summer Julep - Mortgagee Letter 2009-21 and - Fed Kamensky HECM-to-HECM Refinances, page 30 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. The Counselor’s Role, page 36 - Debbie German Debbie German is the Asst. Financial Counseling Manager at Springboard Consumer Credit Management Riverside, CA. Debbie has over 20 years experience in credit and debt, foreclosure prevention and is a former mortgage collections manager. Debbie is a AARP/HUD HECM Certified Counselor she also obtained Financial and Housing Counseling certification through the National Foundation for Credit Counseling. Visit Springboards website at www.credit.org Debbie can be reached at Debbie.German@credit.org or 800.449.9392 Preventing The Misuse of Reverse Mortgages, page 40 - Regina M. Lowrie, CMB Regina M. Lowrie, CMB has more than 30 years of mortgage banking experience. Ms. Lowrie is currently President & CEO of Vision Mortgage Capital, LLC, Affiliate of First National Bank of Chester County and is also President & Chief Executive Officer of RML Investments Inc. Regina is also Former Chairman of the national Mortgage Bankers Association. BOOK REVIEW: Piggy Bank Your Home Tap Into The Power of a - Sherry B. Apanay Reverse Mortgage, page 43 As Senior Vice President of Generation Mortgage, Sherry is responsible for the sales and training of Generation’s Wholesale Division and currently serves on three NRMLA Committees. Under her leadership, Generation’s Wholesale Division recently achieved a 233% growth, boosting Generation to the sixth largest, nationwide reverse mortgage lender. Phone 1.866.733.6085. Email sherry.apanay@generationmortgage.com Ask The Servicer, page 44 - Ryan LaRose Ryan LaRose is the Executive Vice President of Celink, an independent reverse mortgage subservicer. Ryan has over 12 years of servicing experience; exclusively in reverse mortgage servicing since 2005. In addition, Ryan is an active member of the NRMLA servicing and technology committees. Visit his website at www.CeLink.com or contact him directly at 517.321.5491. The Last Word, page 46 - Michael Banner Founder of LoanWell America, Inc., Michael is one of few Reverse Mortgage professionals accredited to teach continued education classes to CFP’s, CPA’s, attorneys & insurance agents. Michael has been interviewed by the Wall Street Journal, Tampa Bay Business Journal &the Reverse Mortgage Wire. A member of NRMLA’s State & Local Issues Committee & sits on the Board of Directors of FPA of Tampa Bay. For more information: Michael.Banner@loanwellamerica.com or 877.700.0555.

Successful phone sales â&#x20AC;&#x153;Once you have mastered the inner workings of the product and truly understand Reverse Mortgage 101, the most important part of selling this product successfully is building the emotional connection to your client.â&#x20AC;? 14 14

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Paul Fiore

September 09

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t has always been my belief that selling a reverse mortgage is not about how much someone qualifies for, how much you can make on the loan or the fact that this is a growing product in a struggling mortgage industry. Selling a reverse mortgage is all about your connection to your client in both an emotional as well as logical way. We should be committed to providing our clients with the highest level of service, personalized attention, and sound advice when looking into a reverse mortgage. We should not sell a client a reverse mortgage unless we have a clear understanding about how much a reverse mortgage can change their financial situation and more importantly that the client has decided that they believe a reverse mortgage is right for their individual situation. When I think about all the different sales jobs within various industries, I realize how lucky I am to be in the unique and special industry that is reverse mortgages. There are very few sales jobs that allow you the individual to both earn a living while also selling a product that can and does change people’s lives. In the 5 + years I have been in the reverse mortgage business, running a sales floor and training salespeople, I have been very fortunate to see how much this product can do to change the lives of our seniors. I am sure that there are many of us within this industry who can point to a special story of how a reverse mortgage changed the life of their clients. Many of us who have been in sales for a long time will also tell you how it changed our own life. The reverse mortgage is truly an emotional sale for both the salesperson as well as the clients. Whenever a new loan officer begins in this business, whether they are experienced mortgage professionals or not, I always talk about the challenge of the first 90 days. It is imperative for a person who enters this industry to understand that there is a significant learning curve to being a successful reverse mortgage professional. If you take the cold, analytical, by the numbers approach to selling this product without taking the time to understand what is most important to a client you will have moderate success at best. It is only when you get to the “emotion” of the sale that you can become a consistently successful loan officer. What is it that the client believes a reverse mortgage can do for them? Do they believe a reverse mortgage is truly something that will change their financial outlook? How will the product impact a client’s day-to-day life? These are just some of the questions that you need to answer through the discovery part of the sale.

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Being a great salesperson within this industry is not about how fast you can close someone, it is about how much your clients trust and believe in you.

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The challenge in learning the proper way to sell a reverse mortgage begins on the first day. When you begin in this industry, it is imperative that you take the time necessary to learn the demographic to which you will be selling. It doesn’t matter whether you are going to be selling this product face to face or over the phone, without knowing your client base, you will never be able to relate to or understand them. What is it that is most important to our client base? What are the differences between the baby boomer generation and the WWII generation? As you go through training, whether it is company provided or on your own, think about why this product is designed the way that it is. Instead of looking at it as another product that you are going to sell, think about all of the features and benefits of this loan program and how that can positively impact a senior’s life. You want the client to emotionally see how much a reverse mortgage can benefit them but you must also see clearly how this program will change their financial future. Once you have mastered the inner workings of the product and truly understand Reverse Mortgage 101, the most important part of selling this product successfully is building the emotional connection to your client. It is important to realize, despite the wealth of knowledge that you may now have about the program, it all means nothing unless you get to know your client, their situation, and what they are looking to accomplish. Think about this, how important is what someone qualifies for when you don’t even know if they are eating three meals a day? The biggest mistake we make in sales is trying to close someone before they are ready and before we have earned the right to do so. Take the time to get acquainted with your clients, be patient and listen to them, learn what is most important to them and their specific situation. Being a great salesperson within this industry is not about how fast you can close someone, it is about

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how much your clients trust and believe in you. More than anything, whether you sit at someone’s kitchen table or sell this product over the phone, you are selling how much this product will impact a borrower’s life and how you will be the individual to help them achieve their goals. Learn and understand the situation, build rapport and trust with your client and determine if a reverse mortgage will be a part of the solution before you talk numbers with your clients. The best test in determining whether you have made a connection with your client is simple. Can you close your eyes and think about how your client is currently living? Are you able to clearly see the entire picture? Do you know how important their family is to them? What are the things that give them joy in their lives? What are the things that cause them pain? If there was one thing that they could change in their life, what would it be? Once you are able to clearly see the picture of your client’s current situation, close your eyes again and think about how that picture would change with a reverse mortgage. Do you see a difference? Write down what is different in the new vision of the future versus the current one. More than numbers, how are their lives going to be impacted by the reverse mortgage? I challenge and ask every one of my loan officers to do this PRIOR to selling the reverse mortgage to any client. This is a simple test, if

you cannot clearly see a vision in the future that has been impacted positively by the reverse mortgage; you should not sell one to your client. It is up to you to choose whether you take the short cut to selling a reverse mortgage or if you take the time necessary to truly learn the proper and ethical way to sell this fantastic product. Whether you sell a reverse mortgage face to face or over the phone, whether you have a celebrity spokesperson or you buy leads, whether you have a recognizable brand name or not, what matters more than any of that is whether you take the time to learn the proper way to sell a reverse mortgage. In a time when the economy has had such a negative impact on so many people’s lives, we can only be thankful and proud for being a part of an industry that can help soften some of those economic worries and improve the quality of our senior’s lives.

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John Railey, President - Homestar Mortgage, Inc.

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Valerie VanBooven

DRIVING ATTENDANCE

To Your Next Reverse Mortgage Community Education Event....Putting More Butts in Seats strong online social media marketing campaign is designed to do multiple tasks all at one time. The first is to develop relationships with consumers and other professionals in your area who may be future customers or referral sources. The second is to develop good quality back-links (link bait)- and in turn giving your primary website a legup in the search engines. If you are engaging in social media marketingand you should be- you can also use this platform to generate higher attendance rates at seminars and community education events. A Social Media Trifecta What drives the attendance surge? In the past year we’ve all become a lot more sophisticated about social media networking. Twitter, Facebook and blogging are essential to creating awareness and capturing registrations among consumers and professionals in your local area. How exactly do you do it? The approach is very straightforward. No deep, dark social media magic here. Consider: •

Blogging. Frequent blog posts in weeks and days prior

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serves to educate consumers and professionals and other blog visitors about the upcoming event. Whether the post focuses on another speaker recruited or an occasional countdown of days left until the event, every mention matters. Twitter: Experienced Twitterers are encouraged to answer, “what are you doing?” with frequent tweets about the upcoming event. Each tweet should include your URL. Facebook: Similarly, put a mention of the upcoming event in your Update fields, and mention the event in any “what’s new” kinds of messages added to your pages. Take advantage of widgets that automatically generate tweets as a blog post is published, fast-cycling the process of keeping both channels regularly updated with event news and promotion.

Where’s the Beef? The true power of social media comes in its ability to leverage the networks and connections of people who already have an affinity to your organization, brand, and event — and through them reach fresh, high-potential prospects. Business owners who are still asking ‘where’s the beef?’ are wasting time. You do not use these tools as just another way to mass market. You use them to target specific segments in an increasingly fragmented market. It’s a good way to reach people with common interests. Not large numbers of people, necessarily, but people who are very likely to have shared interests. If you regularly engage in social media marketing, you will find that as you establish yourself online, and build your audience, you will be spending less marketing dollars on print, and increasing your bottom line at the same time. This isn’t a fad or a quick fix, but a long-term commitment to a communication and marketing method that will exist for the foreseeable future. Engage now and don’t play catch up later!

September 09

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new personal

factors impact reverse mortgage demand

H. Marc Helm “The economic needs of these other three generations could increase the demand for reverse mortgages.”

Beyond the regulatory and financial conditions affecting reverse mortgage growth today, many personal factors are having an increasing impact on demand. Factors such as the lengthening life span, personal health and the likelihood of continued employment during the senior years – all are coming to the fore.

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Strategically thinking...

Strategically thinking companies rely on ReverseVision Freedom of Action ReverseVision is supported by more reverse mortgage lenders than any other software, giving customers maximum freedom of action.

Independence As an independent technology company ReverseVision gives its customers the highest flexibility and independence to grow their business.

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Although eligibility for reverse mortgages starts at 62, at that age seniors can look forward to living another 20, 30, even 40 years. So, when seniors divide a lump sum reverse mortgage payment into as many as 40 years, how open will they be to obtaining a reverse mortgage at age 62, if they can stall or postpone their needs by careful planning? Younger seniors may choose to delay taking out a reverse mortgage or determine that with extended life expectancies, they should opt for smaller monthly payments. In that case, what are the risks to originators, servicers and investors?

unlikely such forecasts will materialize, cutbacks or delays in implementation are possible, and this could increase financial pressure. In addition to potential threats to Social Security, employer administered and funded pension accounts for employees are also in some doubt. Many companies are reducing their contributions to those accounts or eliminating them entirely. If this goes on past the current economic downturn, there will be an increased need for reverse mortgages. Personal investments, too - especially in IRA and Roth retirement accounts - have been hit hard and may remain depleted for an indeterminate time, meaning reverse mortgages could present the only hope for many seniors.

While reverse mortgages have been marketed as a way for seniors to meet their financial needs, there may be new interest in using such funds to help children, grandchildren or even non-house-owning parents. The economic needs of these other three generations could increase the demand for reverse mortgages even when seniors donâ&#x20AC;&#x2122;t need a reverse mortgage to meet their own individual needs.

Can production keep pace?

Personal health and the future of health-related programs for seniors (Medicare, Medicaid, long-term insurance) will also impact how much money seniors will need. Doomsayers are predicting the potential bankruptcy of Medicare and also of Social Security. Although it is

In response to all this new need, one wonders whether production (origination) of reverse mortgages will be sufficient, hobbled as it is by several challenges, one of which could be a drop in the temporary maximum loan amount of $625,500 back to $417,000 next year.

An extension of the working years, at least on a part-time basis, has been one answer to growing economic needs, but for those unable to work or find employment, the need to tap property equity will grow.

Will banks; especially community banks, and also credit unions become active originators as their customers seek reverse mortgages? All these questions and issues continue to make the reverse mortgage business a complicated one; with many more factors playing influential roles than they do in the interestrate dominated forward mortgage business.

Operationally thinking...

House-related factors, from equity to taxes and insurance; state and federal regulations; even how reverse mortgages are viewed by seniors, by lenders and by potential investors can impact the market and its growth. Home values and the equity that can be tapped are important quite simply because these can limit the funds available and thus the attractiveness of a reverse mortgage – as in today’s market where home values and equity remain stagnant. Just as with a forward mortgage, those holding a reverse mortgage must pay property taxes as well as state and local taxes and fees, and homeowner’s insurance. At least some of these are certain to go up, although with possibly some exemptions for seniors. But this can mean greater needs for reverse mortgages.

Operationally thinking companies rely on ReverseVision Increased Productivity ReverseVision is a powerful collaborative software that increases productivity. Role-based business rules ensure quality and improve efficiency.

ROI (Return on Investment) ReverseVision fair pricing model guarantees a quick return on investment, increasing profitability. ReverseVision Inc.

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How Can Lead Nurturing

Win Over Senior Clients? Have you noticed that your marketing response is not what it used to be? If so, donâ&#x20AC;&#x2122;t feel bad youâ&#x20AC;&#x2122;re not alone. There are several reasons why your responses may be down. 1. 2. 3. 4. 5. 6. 7.

Competition Your marketing area Saturation Lack of education Same old stuff New guidelines Client fears

Sam Collins

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referrals worth several hundred dollars.

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For the cost of a card and a stamp, I had given her 3

There is one big thing I did not mention. Yes, things are changing among our senior client base. Clients are expecting more from you than ever before. That is to say, they don’t just want to know you are a reverse mortgage specialist, they want to know more about you and how you are different from the ten other loan officers who may have called them today. Let me give you an example of what happened to me. My wife and I treated ourselves to a special night out to dinner. The restaurant we visited was nice, the service was outstanding and the food matched the service. Our server continually asked if all was well and when she presented our bill, she politely asked if I would complete a survey. Next, she asked if I would just leave my name and address, pointing out that it was not necessary, but appreciated. I completed the questionnaire, giving her praise for the service and the great food. Three days later I received a

handwritten “Thank You” card signed by our server. By the end of the day, I had told 3 of my friends. For the cost of a card and a stamp, I had given her 3 referrals worth several hundred dollars. The lesson learned here is that showing gratitude does not have to be complicated and requires little effort, yet few are utilizing this simple concept. Stop doing the same thing everyone else is doing and start learning how to nurture your senior prospects and show them you care with appreciation marketing. So here is your first assignment and it’s so easy, you’re going to love doing it. 1. Take out a pen and write down the name of one person to whom you may have forgotten to say thank you, (preferably a

senior prospect), but it can be anyone. By doing this exercise, your sharpened sense of awareness will never leave you again. 2. Now think of somebody who could have thanked you, but did not. Maybe they were too busy, they may have forgotten, or life just got in the way. Here’s the point, you don’t want to do the same thing to someone else, leaving them wondering why you had not been grateful. 3. Next, write down the name of someone you could thank today. Do you know the impact you can have? It can be life changing. Most of us get the big picture Experience has taught me that most of us get the big picture in our reverse mortgage businesses. When we get hot leads we move quickly to get those leads closed. Other than the hot leads, the majority of our leads need our ‘hand’ holding. I classify these prospects as “nurtured leads”. Most of us tend to concentrate on the “hot” lead and do not realize the majority of our potential revenue is derived from leads that do not close immediately. For the most part we make contact with about 70% of our lead prospects, and of those around 43-50% may qualify on our first call, yet only 5-10% will close. Thus begins the long cycle from lead origination to a closed loan. Here is the tough part, no matter who you are, many of those other leads end up in what I call the ‘lead gap’ and disappear into the ‘black hole‘, never to be seen or heard from again. If you are lucky enough to be closing 15% of your qualified leads and you increase that number by as little as 5%, this small incremental increase can result in a huge increase in the number of closed loans and more bottom line profits for you over a 12 month period. However, it will never happen without a systematic approach and an understanding of what it takes to develop a lead nurturing approach. Success today requires a vibrant Lead Nurturing Program where you stay in touch with your “not ready” and prospective senior clients, until they are ready to close with you. Here are some ideas to get you thinking lead nurturing: • • • • •

Adopt a long-term approach to closing reverse mortgage leads. Track your leads persistently and systematically. Commit yourself to several means of communicating with your senior client. Automate your senior contacts into a logical and active database. Learn to “Lead Nurture” rather than using a constant sales approach.

We’re not finished, there is more to the equation if you are to earn the business and profits you want for yourself and your family. Are you a likeable person? If I were to ask you to take the likeability test, do you think you would pass?

Do you recall wanting something really bad? Maybe it was asking out your college sweetheart for your first date or maybe it was applying for that first job or trying to impress your boss with your know how? Yes we all have experienced situations in our lives where we had to be especially nice. Why? Because we knew if we used our charm, personality, and were extremely nice, more than likely, we would get what we wanted. You also knew that your likeability had to be sincere and honest; otherwise you would be seen as insincere and untrustworthy. Being liked by your senior clients is the lifeline of your business success. Surely, senior clients are only going to proceed with a reverse mortgage if they really like you. Why, because they don’t have to settle for you if you are not likeable. Yes, there is someone on the sidelines who is as nice as or nicer than you, just waiting to take the business. Evaluating your likeability factor is the key to improving your relationships and lead nurturing to your senior clients. What about others you might know other than just your senior clients? Yes, your colleagues and other business professionals want to be associated with someone they like. Have you ever received a phone call from someone and thought to yourself, “I’ll call them back later or maybe not at all?” Most likely if you liked them, you would call them back, but if you don’t like them, then most likely you will never call them back. Take a minute to think what it is your senior client or professional colleague will like about you? Next, think about what you could change about yourself to be more likable. After this, think about someone you really like and write down the things that really make you like them. Once done, this may be a good way to mirror and create your likability factor. Write it down now before you forget! Interesting! We have a tendency to like people who like us. Go figure! The next move is up to you. Yes, you have choices. You can be upbeat, honest, and fun to be with, confident, positive, attractive, thoughtful, interested, attentive, and well groomed; yes, it’s up to you. What do you like to talk about? If I were to ask you what you like to talk about, what would you say? I bet it’s your family, something you like to do, or yourself!

The answer doesn’t matter; the point is we all like to talk about something we like. When you call a senior client, what do you think they want to talk about? I guarantee it’s not about you! Yes, we all like to talk about things that interest us. Talk about your senior client, give them what they want and incorporate this into your new marketing approach of appreciation and lead nurturing. The answer is simple; stop talking about yourself and let your senior client talk about themselves. Listen to their every word, make notes, and ask questions to dive deeper into building your rapport and nurture your relationship with them. Lead nurturing, appreciation marketing, pampering, call it whatever you want. But when you make up your mind to really make it work in every aspect of your walk, talk, and marketing efforts, you are going to do a double WOW! This really works. What next, TOMA! If I mention baseball or basketball, what is the first name that comes to your mind? Yes, it is favorite team or favorite player. Why do you think this happens? It’s called TOMA, “Top of the Mind Awareness.” Important things and certain people who come to mind instantly do so because they have made a connection and they come to mind immediately. For Example, ‘reverse mortgage marketing’, oh yes, Sam Collins (a shameless plug), but you get the idea.

This is where you want to be, the Grand TOMA, Top of the Mind Awareness! Yes, when someone mentions reverse mortgage, they immediately think of you. Now let’s take this whole concept to the next level. The concept of multiples is explained well by Tommy Wyatt and Curtis Lewsey in their book, Appreciation Marketing. Let’s assume you are the best at lead nurturing and appreciation marketing and throughout your life you have accumulated over 1000 raving senior fans. Alright, let’s cut that back to say 200 senior raving fans.

Now let’s take your 200 raving fans and say you closed 24 reverse mortgages, but that leaves you with 176 raving fans that have done nothing. When you average it out, you are doing 2 loans per month, but your goal is to do 4 loans per month. Now enter the psychology of TOMA, top of the mind aware. Would it be safe to say, even though you only closed 24 loans from your 200 raving fans, maybe those 200 have their own 200 fans that know and like them? Again, let’s be realistic and scale their raving fans down to 20. Now we are talking about your 200 raving fans times their 20 raving fans, which expands your TOMA to 4,000 warm connections. Then consider how much it would cost you to become top of the mind awareness to 4000 raving fans? A lot! At this point, you will want to determine the amount of success and income you want to achieve. Here are the keys to make sure your raving fans are being nurtured: 1. How many seniors do you have in your contact manager system? 2. What is the quality of seniors you have in your contact manager? In other words, do they like you and do they trust you? Are they talking about you? 3. Do the people in your contact manager remember who you are? The following is an example from John Adler, author of Beach Money. If I ask you to draw a straight line between two dots, how many lines do you get? You got it, one. Now, add another dot, we’re up to two connections. Next, add a fourth dot and our connections grow to six. Now take it to the next level, five, and our connections grow to ten. Now imagine that each dot is one of your senior clients. Can you imagine the possibilities? Can you see how lead nurturing and showing your clients appreciation can grow your business? Things are changing. The playing field is no longer as simple as 1, 2, and 3. Making a go of it today requires you to cover every detail, dot every “i” and cross every “t”. Business as usual is gone. Lead nurturing and appreciation are in! Are you ready? The great Zig Ziglar says, “You can have everything you want, if you just help enough people get what they want.” Try it, I guarantee you’ll be amazed!

CampusMBA Reverse Mortgage Central The complete Reverse Mortgage Lending training solution for the real estate finance industry. Increase your reverse mortgage business with CampusMBA’s Reverse Mortgage Central. This collection of valuable educational resources provides the most comprehensive set of solutions for getting you up to speed on successful and responsible lending of reverse mortgage loans. for Your staff All Reverse Mortgage Central courses listed here can also be offered on site at your location or online at your convenience. Start increasing your business today. Call (800) 793-6222 (select option 3), or visit www.campusmba.org/reversemortgages to learn more. upcoming Public courses reverse mortgage LiVE online Workshop series November 2009 Part 1 of 3, November 3, 2009 Part 2 of 3, November 10, 2009 Part 3 of 3, November 17, 2009

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self-paced Web-based course reverse mortgage Primer To learn more or register for these programs visit www.campusmba.org/reversemortgages or call (800) 793-6222 (select option 3).

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HUD’s Sum

mmer Julep Mortgagee Letter 2009-21 and HECM-to-HECM Refinances

Weiner Brodsky Sidman Kider P.C. Providing a little refreshing news to help us weather the dog-days of summer, the U.S. Department of Housing and Urban Development (HUD) recently issued its latest missive on Home Equity Conversion Mortgage (HECM) refinances, clarifying its application to HECMs that previously didn’t qualify. On June 30, 2009, the Federal Housing Administration (FHA) issued Mortgage Letter 2009-21 (ML 09-21) correcting and clarifying that certain HECMs that have been assigned to HUD are eligible for refinance in a so-called “HECM-to-HECM” refinance transaction. In this article, we explore the statutory underpinnings of the so-called “stream-line” HECM-to-HECM refinance transaction, how the program works, affording seniors substantial costs savings on mortgage insurance premiums, the technical changes instigated by ML 08-21 and its reigning successor, ML 0921, and related state law issues. At the outset, the authors wish to thank FHA for keeping our minds from becoming too languid during these hottest, sultry days of the year, and, of course, for affording us the opportunity to share with you HUD’s “Mortgage Letter” tonic, rejuvenating as a julep, to combat the never-ending precession of the equinoxes. The statutory genesis of “stream-lined” HECM-to-HECM refinance transactions have its origins in the American Homeownership and Economic Opportunity Act of 2000 (enacted on December 27, 2000, the “AHEOA”), reportedly the last piece of federal legislation signed by then President Bill Clinton. Section 201 of the AHEOA authorized the FHA to insure a HECM loan that refinances an existing FHA-insured HECM loans (i.e., a HECM-to-HECM” refinance). Applicable provisions of AHEOA permit waiver of independent HECM counseling under certain conditions and require mortgagees to provide seniors with an anti-churning disclosure, which

informs the mortgagor of the total cost of the refinancing transaction and the new principal limit. Most importantly, the new law lowers the borrower’s costs for a HECM to HECM refinance transaction by providing a lower up-front mortgage insurance premium (MIP). Section 201 of the AHEOA directed HUD to issue implementing regulations within 180 days of its enactment. HUD thereafter, on March 25, 2004, published its interim rule amending Title 24 CFR Part 206 by adding 24 CFR Part 206.53. The new interim rule implemented the HECM to HECM refinance insurance authority and mandated the form and substance of an “anti-churning disclosure.”. Unfortunately, the specific wording of the interim rule limited FHA’s refinance authority to “presently insured HECMs”, thereby, as discovered in retrospect, excluding HECMs that have already been assigned to HUD from being eligible for refinancing. As a result, on September 4, 2008, the HUD issued regulations making a technical correction to the HECM regulations found in 24 Code of Federal Regulations (CFR) Part 206, extending FHA’s HECM refinance insurance authority and the benefit of a reduced initial mortgage insurance premium (MIP) to HECM loans that were previously assigned by the lender to HUD when the loan reached 98% of its maximum claim amount. HUD also issued HECM-to-HECM refinance guidelines in Mortgagee Letter 2004-18. In particular, ML 08-21 announced that HUD would insure all HECMs that are originated for the purpose of refinancing an assigned loan that is not in a due and payable status for reasons that cannot be corrected, such as death of the last mortgagor or conveyance of title

September 09

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by all mortgagors, but closed on or after October 6, 2008, the effective date of the rule. HUD’s latest HECM Mortgage Letter, ML 2009-21, corrects, clarifies and replaces ML 04-18, and became effective on its publication date, June 30, 2009. Reduced Mortgage Insurance Premium Under ML 2009-21, and as previously provided, FHA will collect a reduced up-front MIP of two (2%) percent of the increase in the maximum claim amount (i.e., the difference between the maximum claim amount for the HECM-toHECM refinance and the maximum claim amount for the existing HECM being refinanced). However, HUD clarifies in this latest mortgage letter that: “[A] senior borrower may obtain a reduced up front MIP only in a HECM-to-HECM refinancing secured by the same home that serves as collateral for HECM loan being refinanced. Thus, for instance, seniors that currently have a HECM loan cannot obtain a reduced upfront MIP by replacing their current HECM (and home) with a new HECM for Purchase for a new home.” Anti-Churning Disclosure Requirements (Timing of Delivery Depends upon TILA Classification of Loans as Open or Closed End Credit) With ML 09-21, HUD revised and published a new form HUD-92901 “Home Equity Conversion Mortgage (HECM) Anti-Churning Disclosure.” The prospective senior borrower (or mortgagor) must sign the Anti-Churning Disclosure and the lender-mortgagee must include the Disclosure in the FHA case binder. The Anti-Churning Disclosure is designed to help illustrate whether the HECM refinance will provide a tangible benefit to the mortgagor, and requires the mortgagee to provide the mortgagor its best estimate of: (i) the total cost of the refinancing to the mortgagor; and (ii) the increase in the mortgagor’s principal limit, as measured by the estimated initial principal limit on the HECM refinance less the current principal limit on the existing HECM. The “current principal limit” is the remaining loan amount the mortgagor could withdraw from the existing HECM. As part of a HECM-to-HECM refinance transaction, the mortgagee must provide a best estimate of funds available to the mortgagor minus any closing costs and other fees. For HECM-to-HECM refinance transactions that are open end credit, as defined under the federal Truth-in-Lending Act (TILA), the mortgagee must provide the prospective senior borrower with the Anti-Churning Disclosure form

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“

Seniors that currently have a HECM loan cannot obtain a reduced upfront MIP by replacing their current HECM (and home) with a new HECM for Purchase for a new home.

”

concurrently with the RESPA-required Good Faith Estimate (GFE), as specified under RESPA’s Regulation X, 24 C.F.R. 3500.7.

For HECM-to-HECM refinance transactions that are closed end credit, as defined under the federal Truth-in-Lending Act (TILA), mortgagees must provide the prospective senior borrower with the Anti-Churning Disclosure concurrently with such other disclosure forms that can be provided in lieu of the GFE under HUD’s RESPA regulations at 24 C.F.R. 3500.7(h), i.e., Important Terms disclosures required under TILA and Regulation Z, section 226.5b, in connection with open end credit secured by a consumer’s dwelling. Housing Counseling Requirements As a cornerstone of the HECM Program, applicable regulations require HECM mortgagors to receive counseling from an independent third party entity. However, for HECM refinance transactions, mortgagors can waive and opt out of the HECM counseling requirement provided all three of the following conditions are met: (i) the mortgagor has received the required HECM Anti-Churning Disclosure form; (ii) the increase in the mortgagor’s principal limit exceeds the total cost of the HECM refinance by an amount equal to five (5) times the cost of the transaction (Block #1 on Anti-Churning Disclosure Form); and (iii) the time between the closing on the existing HECM and the application for refinancing does not exceed five years. If a prospective senior HECM borrower opts out of HECM counseling, the mortgagee must estimate the increase in the mortgagor’s principal limit and include that estimate in the FHA case binder in order to document that the senior meets

reversereview.com

the conditions for waiver of counseling. An exhibit attached to ML 09-21 illustrates how to calculate the total cost of HECM refinance. The exhibit also illustrates how to determine whether the counseling is waiveable.

“Reverse Fortunes is... reintroducing reverse mortgages for the 21st century.” Michael Flanders, California Mortgage Resources Inc.

Information Provided to Mortgagees Originating HECM–to– HECM Refinance Loans In order to provide the required Anti-Churning Disclosure on a HECM- to-HECM refinance, the originating mortgagee must contact the current HECM Servicer and obtain the following information: (i) the maximum claim amount for the existing HECM; (ii) the current principal limit of the existing HECM, and (iii) the payoff amount for the existing HECM.

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For HECMs that have not been assigned to HUD, the originating mortgagee can obtain the name of the servicing mortgage through FHA Connection, HUD’s online system for approved mortgagees, at the Case Number Assignment screen. Additional contact information for servicing mortgagees is available in FHA Connection under the Approval List screen or at HUD’s website http://www.hud.gov/offices/ hsg/sfh/hecm/hecmservlist.pdf. For HECMs that have been assigned to HUD, the name of HUD’s contract servicer, C&L Service Corp./Morris-Griffin Corp.’s (CLS-MGC) is displayed in FHA Connection at the case number assignment screen.

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After obtaining required information from the servicing mortgagee, the originating mortgagee must then input this information into the Home Equity Conversion Mortgage Calculation Software and complete the Anti-Churning Disclosure Form.

“

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September 09

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The Ultimate Resource for Ordinary people. Extraordinary results. Reverse Mortgage Originators 33 33

Payoff of Existing HECM Loan

State Law Issues

A critical element of any refinance transaction is payoff of the existing loan. On a HECM- to -HEMC refinance, the Servicing mortgagee is responsible to payoff the existing HECM. For non-assigned loans, the servicing mortgagee is responsible for: (i) ensuring all outstanding advances are properly recorded prior to paying off the existing HECM; (ii) terminating the existing HECM from HUD’s Insurance Accounting Collection System (IACS); (iii) ensuring that the first mortgage is released; and (iv) notifying CLS-MGC to release HUD’s second mortgage of record. This is only possible by providing documentation that the first mortgage has been paid in full or a copy of the lien release that was sent for recording.

In addition to FHA requirements for HECM-to-HECM refinance transactions, lenders and other mortgage originators should consider how state residential mortgage loan rules could apply to the transaction. Among other things, the mortgage lending laws of several states require a lender to demonstrate a “net tangible benefit” to the borrower in a mortgage loan transaction. Many states’ net tangible benefit laws apply only to so-called “high cost” or “covered” loans (such as when the APR and/or points and fees in connection with the loan exceed certain thresholds). However, reverse mortgages are exempt from most (but not all) such state “high cost” home loan laws.

For assigned loans, CLS-MGC is responsible for: (i) ensuring all outstanding advances are properly recorded prior to paying off the existing HECM; (ii) terminating the existing HECM from the Single Family Mortgage Asset Recovery Technology (SMART) system; and (iii) ensuring both the first and second mortgages are released within seven (7) business days after the receipt and processing of the full payoff amount for the loan. FHA Connection will reject prior HECM case numbers if the loan status is “terminated” or “due and payable.”

In any event, approximately one dozen states’ net tangible benefit requirements apply more broadly beyond the “high cost” context, and also apply to reverse mortgage transactions. When a reverse mortgage is used to refinance and pay off a “forward” mortgage, thus eliminating the requirement that the senior continue to carry a monthly mortgage payment obligation of loan principal and interest, more often than not, a “net tangible benefit” to the borrower can be established. However, in a HECM-to-HECM refinance transaction, the borrower already enjoys the benefit of not being required to make monthly mortgage payments and therefore additional advantages may be

“

HECM-to-HECM refinances can afford seniors an affordable means of converting a larger portion of the equity they have built-up over years of homeownership. That is particularly true now, due to higher FHA loan limits.

”

required to establish a bona fide “net tangible benefit” to the borrower.

can be reached at milano@wbsk.com and schiffman@ wbsk.com, respectively.

************

This article provides only an overview of some of the federal and state laws and regulations that may affect reverse mortgage lending 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.

As we’ve discussed, HECM- to -HECM refinances can afford seniors an affordable means of converting a larger portion of the equity they have built-up over years of homeownership. That is particularly true now, due to higher FHA loan limits. As this hot, torrid summer of FHA’s $625,500 nationwide loan limit winds down (which currently is available only through year-end), HUD’s clarification of the rules surrounding HECM- to -HECM refinances, and our sharing these tidbits with you, like a mint julep, could hardly be more timely. By Jim Milano 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. and Newport Beach. Additional information can be found at www.wbsk.com or by telephone at 202.628.2000. Messrs. Milano and Schiffman

September 09

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The ‘Counselor’s Role

The major objective of HUD- approved counseling agencies is to counsel seniors, their families and other advisors on the reverse mortgage program. Their goal is to make them feel comfortable by personalizing the information about the reverse mortgage program to fit the seniorsâ&#x20AC;&#x2122; needs, as well as educating them about the program. Seniors are made to feel like they are active participants in the counseling session. The most important role of a counselor is to educate the senior in order to meet their financial needs and long-term goals. Testimonial: This is a letter that I feel should be written. I have been dealing with several counselors in your offices for the past several weeks. I am trying to obtain a Reverse Mortgage for my mother, and unfortunately, there have been many obstacles. I have made several phone calls and I wish to commend everyone that I spoke to for their courtesy and help. At no time did I feel that I was bothering them. The counselors went out of their way to help me in this trying process and I wanted you to know how grateful I am for their kindness. Thank you and the counselors that I spoke

with for their help and courtesy. It is appreciated very much. - Client in Monmouth County, New Jersey I just wanted to express my gratitude towards your counselors for taking the time to help me with my mom and my loan problems. The counselor spent so much time on it, even though there were other things to do and we really appreciated it. Thank you so much! - Client in Riverside Country, CA I would like to say Thanks for taking time out to help me in my extreme situation. There should be more people out in this world like your counselors. - Client in Riverside Country, CA The HECM counseling session is comprised of many components per HUD protocol and HUD guidelines. Topics covered during the educational counseling session include, eligibility requirements, loan features, options, loan costs, tax implications, alternatives to Reverse Mortgages, and after closing the loan, such as keeping the property taxes and homeowners insurance current at all times unless they have decided to have funds from the loan withheld to ensure these payments are made, making sure the home is well maintained and repaired, advising the senior to make sure all the loan documents are carefully read to make certain the information was understood. However, the most important component is to ensure the senior is educated in order to make a well-rounded and informed decision. Agencies must maintain high standards in meeting seniorâ&#x20AC;&#x2122;s goals and expectations without endorsing, promoting, or representing any specific product or lender. A trained HECM counselorâ&#x20AC;&#x2122;s major responsibility is to ensure the delivery of quality and educational counseling. The counselor should remain objective as well as sensitive when educating the senior on the reverse mortgage products. The need for a reverse mortgage is typically based on personal and financial goals as well as alternatives and implications of a reverse mortgage.

A series of topics surrounding the counseling session must be covered, including costs to obtain the loan, alternatives to a reverse mortgage, such as senior resources, community- based programs, public benefits, and selling and moving options. It is also important for seniors to understand their needs as well as the steps in the lending process. Testimonial: I would like to express my thanks and admiration for a fine job the counselors are doing and the reverse mortgage counseling provided. Counseling those of us who need financial help regarding the pros and cons of a Reverse Mortgage was one of the most helpful things offered. The counselor enabled me to see the pluses and minuses of the various scenarios available. The counselor was very professional and competent and yet expressed empathy for my particular circumstances. - Client in San Diego, CA Testimonial : I wanted to thank you for your counselor’s kindness and attention in the past several weeks, and particularly my appreciation and gratitude to your counselors. They were more than helpful in ferreting-out some of my concerns and the cordiality extended to their availability to answer any of my subsequent questions I might have at a later time. For individuals in my particular situation, I find it comforting that your company recognizes the unique concerns of your clients and that your organization is empathetic to each individual. Thank you again for the services that you provide. - Client in Riverside Country, CA The main objective and primary importance is that the senior is able to understand the concepts being presented to them throughout the educational counseling session. As the market expands within the reverse mortgage sector, increased publicity is playing a larger role in the educational phase of reverse mortgage counseling. Therefore, more seniors are educating themselves about the product prior to their counseling session. Common questions asked by seniors pertain to costs, specifically the mortgage insurance premium and the benefits involved. Once the counselor explains the

feature of the MIP, the senior understands the protection benefit being provided in the program. • Additionally, what happens if I run out of money and/ or equity? Seniors want to be reassured they will not be required to leave their home if they deplete funds or the balance of the loan is higher than the value. Seniors are advised of the default conditions. • Is my line of credit safe given the current economic situation? Seniors are very insecure about this feature. Again, they are looking for reassurance that the credit line will not diminish due to market values declining. Many seniors are refinancing their HECM loans from an adjustable rate HECM to a fixed rate HECM and at this point, many seniors understand the program and its benefits and seek security through the fixed rate option. HECM for purchase Seniors are beginning to understand the benefit of the HECM for purchase as a way to invest in real estate either by purchasing a second home or moving from their children’s home back into their own home, once again regaining their independence. Seniors are utilizing the HECM for purchase to downsize from a large home. Or have decided the maintenance is too much to take care of, the senior chooses a senior friendly home and community. Seniors are advised the HUD approved counseling agency is an independent third- party having no connection to the lenders or the process of the loan. Furthermore, the counselors are available to assist the senior and family members or advisor as they progress toward their housing goals. The reverse mortgage industry continues to prepare for the expanding educational needs of the upcoming “Baby Boomer” generation as they prepare to enter their retirement years. “Our people improve the lives and financial well-being of individuals and families by providing quality financial education and counseling”. “Those who teach must never stop learning”

September 09

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Advertorial by Mortgage Bankers Association

Regina M. Lowrie, CMB The senior population in the U.S. is steadily growing, bringing with them a whole new set of financial needs. In 2030, the baby boomer generation will be 65 and older, making up nearly one in five U.S. residents according to the Census Bureau. This will be a significant portion of the U.S. population and points to the potential for extraordinary growth in the reverse mortgage industry. As these homeowners enter retirement, it is becoming more and more evident that they need access to a new range of financial options. As their incomes become limited, and expenses grow due to the heightened cost of living; the reverse mortgage will become an increasingly popular tool available to those who want to use the equity they have built up in their homes to cover unanticipated expenses. However, with every opportunity comes the chance for misuse. There is growing concern that an increasing number of seniors will take out a reverse mortgage without fully understanding the terms of the product, and will end up weakening, rather than strengthening their financial well being. Though MBA recognizes the concerns surrounding this product, it is too important an option to keep out of the marketplace. In an ongoing effort to ensure that the integrity of the reverse mortgage industry is upheld while still allowing for its availability to those who could really benefit, MBA created a task force of industry thought leaders charged with creating model legislation designed to help protect consumers. The task force’s goal was to compile one set of uniform guidelines that every state could enact to protect both consumers and lenders. The bill can be used as a guide for state legislators who are introducing or considering reverse mortgage legislation. One potential concern with reverse mortgages pertains to the issue of cross selling. In the majority of cases, a borrower has chosen to take out a reverse mortgage to help supplement their income and cover expenses. In this case, investing the money derived from the reverse mortgage into an annuity or similar financial product would probably not be the best decision. MBA believes it should be against the law for the reverse mortgage lender to sell a borrower an insurance annuity or similar financial product as a condition for obtaining the loan and has included such a provision in the state bill. Of course, it is ultimately up to the borrower how they choose to spend these funds, which highlights the importance of another provision in the model bill regarding counseling. As with any financial product, it is important to understand the terms, benefits and risks associated with the loan. The MBA state model bill requires that reverse mortgage lenders refer the borrower to a HUD approved counseling agency for either face to face or telephone counseling prior to taking out a reverse mortgage. Reverse mortgage lenders should only work with

borrowers who can certify they have received counseling from a HUD-approved agency. This helps to ensure the borrower is making an informed decision based on what is right for their specific situation and the lender has a sense of security knowing the borrower understands the process before making this decision. It is also helpful for the borrower to be proactive by educating themselves on the product. On MBA’s consumer financial literacy site, www.homeloanlearningcenter.com, they can visit a consumer-focused Reverse Mortgage Lending Resource Center to learn the general facts about reverse mortgages. The site also contains additional resources with further information as well as contact information for HUD approved counselors. Just as it is important for consumers to empower themselves with knowledge of the reverse mortgage product, it is just as important for lenders to remain up to speed on the latest regulations and information impacting the reverse market. That’s why MBA created a Reverse Mortgage Lending Resource Center for lenders on MBA’s website at http://www. mortgagebankers.org/IndustryResources/ResourceCenters/ ReverseMortgage.html. Here reverse mortgage lenders can view the latest news and updates in the reverse mortgages industry, as well as learn about events such as MBA’s Reverse Mortgage Lending Conference. The more involved our members are in the broad discussion, the stronger this industry will be. In addition, CampusMBA, MBA’s educational division, offers “Reverse Mortgage Central”, a complete package of training courses for reverse mortgage professionals. Reverse mortgage professionals can learn the basics behind the product and the originations process through live online workshops and guided web based courses. These are just some of the things MBA is already doing to remain on the forefront of this ever-changing segment of the mortgage lending industry. We know the reverse mortgage can be a crucial tool for some homeowners, one that is too important to see disappear from the market. As reverse mortgage lenders, we have an obligation to our customers and to the community to offer a variety of options to fit borrowers’ needs while upholding the strong standards that drive our businesses. As MBA continues to work to pass the model state bill we hope to have one set of unified standards to help borrowers and prevent misuses of the product, while fostering smart innovation for the benefit of such an important generation of Americans.

September 09

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book review

Piggy Bank Your Home Tap Into the Power of a Reverse Mortgage Written by Dennis Haber, Esq Reviewed by Sherry B. Apanay Upon opening the book the first impression is one of “simplicity” and when tackling such a complex product designed for older homeowners, that “simplicity” offers great insight. The concept of a reverse mortgage is really not that hard to explain or understand but it’s the details that can get you! For that reason, the layout of Piggy Bank Your Home is genius. Part 1 provides an extensive overview of the basic concepts of how a reverse mortgage works. Additionally, and perhaps most importantly, it advises older homeowners to carefully review all options available and to “take their time”, enlist trusted advisors and consider carefully the suitability and appropriateness of the reverse mortgage as it applies to them. Piggy Bank Your Home is written in a way that will empower older homeowners with confidence if or when they decide to explore a reverse mortgage as a solution to their needs. Part 2 provides easy to understand answers to a very comprehensive list of questions. Mr. Haber remarks, “Some clients have said they don’t know what to ask!” I, for one, can understand that! There are so many details to consider and having a list of 52 questions outlined for you with the answers is priceless. Part 3 provides great insight into our industry, its evolution and survival. Piggy Bank Your Home should be required reading for every loan officer interacting with senior borrowers and it certainly should be the first choice for any older homeowner or anyone researching solutions for aging loved ones.

ask the servicer

By Ryan LaRose

“If a borrower files for bankruptcy, how does it impact their reverse mortgage?” As with most questions surrounding reverse mortgages, the answer is, it depends. Essentially, it depends on what the person’s definition of “impact” is – which I will explain later in this column. The decision to file for bankruptcy is painful and difficult for anyone who owns a home – regardless of what type of mortgage they may have. Bankruptcy statistics released earlier in August showed that over 1.2 million Americans filed for bankruptcy protection from June 2008 to June 2009, up 25% from the prior year. From 2007 to 2008, national totals increased a whopping 31.4%. The continuing sluggish economy was noted as the primary factor for the increase, and experts estimate that figure may reach 1.5 million bankruptcy filings over the next 12 months. It’s interesting to note in light of the current debate on health care reform that the American Journal of Medicine identifies unpaid medical bills as one of the main reasons in at least 60% of personal bankruptcies in the United States. When most people read stories or statistics on bankruptcy in the news, images may pop in their heads of a “down on their luck” family. It could be the husband or wife, who have unfortunately lost their job, or they may be going through a divorce, or as stated above, may be facing a medical catastrophe and are now faced with the difficult task of staying on top of their financial obligations with either little or no income. The senior population is certainly not immune to these types of swings in the economy. Personal issues such as the death of a spouse or medical coverage shortfalls can impact them deeply. As most of you are very aware, a large percentage of this age bracket is on some form of fixed income: monthly social security and, if they are fortunate, some 401(k) or pension funds to help supplement their living expenses. My next-door neighbor is a perfect example. She is a 74-yearold widow, lives in a modest home, and whose sole source of income is social security. Once she has paid her bills each month, she is left with about $120 of disposable income. Small swings in gas or propane fuel prices may not be of large concern to you and me, but cause her considerable stress over whether she will be able to continue to afford to live in her home. She is literally on the brink at any given point in time, and is just an oil price spike away from having to file for bankruptcy protection. Bankruptcy filings on reverse mortgages do not differ drastically from those with forward mortgages. The attorney still needs

to protect the lender and investor’s interest in the property by filing the appropriate documents with the bankruptcy court. Servicers typically have bankruptcy monitoring programs in place – either through an in-house service, or outsourced to a third party vendor. Various software reporting packages are also available that can alert servicers to bankruptcy filings very quickly, so that proper action can be taken. Once the necessary documents are filed, the attorney’s primary role is to then monitor the bankruptcy and report to the servicer when it is dismissed or discharged. It is important to note that the filing of bankruptcy by a reverse mortgage borrower does not result in the loan being called due and payable. However, as I mentioned in my opening comments, there are still some unique “impacts” when a reverse mortgage borrower files for bankruptcy. Once the servicer is notified of the filing, they must suspend any disbursements from the loan. This includes any scheduled payments as well as unscheduled draw requests from the borrower’s line of credit (if they have one). If the servicer were to disburse funds from the loan after the bankruptcy filing, they would be increasing the amount of the borrower’s debt – which is not allowed under bankruptcy protection laws. The only exception is if the bankruptcy court approves a motion from the borrower to withdraw funds from their reverse mortgage. Also, in most States, when the bankruptcy is completed, the costs for the bankruptcy attorney fees are capitalized to the borrower’s loan balance. Once the bankruptcy is dismissed or discharged, the borrower is then allowed to access any funds they have available on their loan. Another unique characteristic is how the filing of bankruptcies by the heirs of the borrower (after the borrower has died), can affect foreclosure actions. In cases where the estate was given the maximum amount of time extensions allowed under HUD guidelines (1 year from the date of death) or the executor of the estate was non-responsive, the servicer must initiate a foreclosure action to take title to the property for the investor. That said, most foreclosure attorneys are very reluctant to proceed with a reverse mortgage foreclosure action if one of the heirs to the property files for bankruptcy. In speaking with one of the foreclosure attorneys we have worked with on several cases like this, there is an argument that could be made that even though the heir does not yet own the property, they may still have a legal interest in the property. Therefore, in their legal opinion, the filing of bankruptcy should suspend the foreclosure action. It is important to note that this may cause delays for servicers in the foreclosure process, but it is eventually resumed once the heir’s bankruptcy file is dismissed or discharged. 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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FINANCIAL SERVICES, LLC

SUBSIDIARY OF WILMINGTON SAVINGS FUND SOCIETY, FSB

A Subsidiary of Wilmington Savings Fund Society, FSB 1streverse.com 877.574.1000

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appraiserloft.com 877.229.7799

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loanwellrm.com 877.700.0555

www.generationmortgage.com 866.733.6085

www.mortgagebankers.org/ rml09.htm 800.793.6222, ext 3

mortgagecadence.com 888.462.2336

www.ngfs.net 888.973.8377

nrmlaonline.org

rminsight.net 949.429.0452

Tradition Title 631.328.4410 www.traditionta.com

PremiumReverse.com 800.854.8673

reversevision.com 919.834.0070

wbsk.com 202.628.2000

reversefortunes.com 866.592.2096

remalo.org 877.262.7656

www.rmsnav.com 281.791.7674

www.credit.org 800.449.9392

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the last word

We are the industry that allows seniors to have a “cash reserve” for the first time in years, a little “piece of mind” in these terribly volatile financial times.

Michael Banner So, who are we? Are we the industry Senator McCaskill says we are? The majority of us are taking advantage of seniors. Are we the industry Consumer Reports says we are? The next financial fiasco. Are we the industry top U.S. bank regulator John Dugan said we are? The next subprime product (Oh, I forgot…he really didn’t mean to say that…). So what do you think? Who are we?

We are the industry that allows seniors to take that dream vacation, buy that motor home, play golf or tennis or do what ever makes them happy at this point in their lives. We are the industry that takes the pressure off the children wondering, “how are we going to help Mom & Dad?” We are the industry that allows seniors to assist their children and grand children while they are still alive to enjoy the act. The list just goes on and on…. anyone of you reading this could probably add many more. So bring it on Senator McCaskill! Bring it on Mr. Dugan. Keep writing your trash Consumer Reports because we’re not going away. We’re going to keep doing what we do and we’re going to scream it from the rooftops every chance we get.

Here is who we are! We are the industry that allows seniors to maintain or in many cases increase their present lifestyle.

We’re going to help so many Moms, Dads, Grandmothers, Grandfathers, Aunts & Uncles have a better quality of life that all our adversaries will have left to say is “ whoops, I guess we were wrong, good job!”

We are the industry that swoops in like a superhero and prevents a senior’s home from being foreclosed on and then says “you’ll never have to worry about a house payment again for the rest of your life!”

That’s who we are!

We are the industry that allows seniors to have the finest long-term care insurance available when they thought they could never afford it.

AND THAT’S THE LAST WORD! Have a great month and let’s help as many seniors as possible!

We are the industry that gives seniors a choice of remaining in their home when they thought they could not otherwise afford it. We are the industry that allows seniors to remodel their home and make it safer and easier to navigate in their later years. We are the industry that allows seniors to have the finest in-home care when they need it, not just when they can afford it. We are the industry that allows seniors to payoff their present mortgage, their auto loan and their credit cards and live their retirement years with no monthly debt service. We are the industry that allows seniors to afford the rising costs of their medicines, their taxes, their insurance, gas & groceries.

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reversereview.com

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