The Reverse Review

THE

REVERSEreview

A P R I L 2 0 1 1

AARP suit seeks to Reconcile HecM stAtute And Hud Policies

The software that ...... won’t leave you

in the rain

Rev

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ion

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ReverseVision

www.reversevision.com (919) 834 0070 [email protected] Inc. 3310 Pollock Place Raleigh, NC 27607-7006

ReverseVision is supported by more reverse mortgage lenders than any other software.

In these uncertain times, Freedom of Action can determine a company’s survival.

Strategically thinking companies choose ReverseVision because ReverseVision combines the highest independence with maximum compatibility.

ReverseVision protects its customers by giving them the maximum freedom of action.

The Report 7, 9

Ask the Underwriter 10

The Perspective 12

The Advisor 14

The Conversation 16

Ask the Appraiser 18

The Industry Roundup 20

The Resources 37

The Last Word 38

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A Strategic Plan for Success 22Leveraging business process improvement and advanced technology to position yourself for a better tomorrow.Seth hooper

Solidifying the Foundation 26AARP suit seeks to reconcile HECM statute and HUD policies.Brett G. Varner

The Tale of Regulators and Originators 32An uncanny resemblance to Greek mythology. Jim Cory

The Reverse Review’s Two-Year Anniversary 36

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22 26 32

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the Essentials

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the Core

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© 2011 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

Letter from the Editorl

Printer The Ovid Bell Press

Advertising Informationphone : 858.832.8320e-mail : [email protected]

Subscriptions and Editorial Contentphone : 858.217.5332e-mail : [email protected] : reversereview.com

Meet the Team

Publisher AmAn mAkkAr

Your greatest strength is knowing your greatest weakness.

Editor-in-ChiefEmily VAnnucci

“You’re trying too hard... try less.”

Copy EditorkErstEn WEhdE

I can’t read a menu, text or wedding invitation without proofreading it.

Creative DirectortrAy-c knight

I don’t even know how to spell my own name. Sorry, Kersten.

News EditorBrEtt g. VArnEr

“He who spends too much time looking over their shoulder, walks into walls.”

e

The Reverse Review made the short trip up to Newport Beach mid-March to attend the NRMLA West Show. It was great to see familiar faces and connect with readers and contributors, but our main goal in attending was to hear NRMLA’s update on the industry. We are at an unusual point right now, planning, predicting and anxiously awaiting rules to go into effect this month, and waiting for other ongoing issues to stabilize. I feel as if I’m sitting on the edge of my seat, waiting for news to break on an almost daily basis.

We at The Reverse Review are committed to bringing you the straightforward facts and reporting the news that matters most. We do just that this month in our feature concerning the AARP and HUD lawsuit, “Solidifying the Foundation,” written by Brett Varner. At the end of the article he writes, “Although the process of resolving this situation may create a period of instability or uncertainty for the reverse mortgage industry, the clarifications should help strengthen the foundation of the program for

the future.” This one statement really resonated with me. Although it is an uncertain time for the industry right now, we need to continue to work together and persevere because there is a great deal of people out there that need our help and we have the ability to change their lives in such a positive way. It’s my hope that the clarifications make our industry stronger and we can move forward with even greater momentum than before!

On a lighter note, amidst all the news, The Reverse Review is celebrating its two-year anniversary this month. Make sure to turn to page 36 for a look back at our successful year in review.

As always, we have a great issue for you this month, so sit back and enjoy all of the hard work that went into our April issue.

Until next time,

Editor-in-Chief{ e m i l y v a n n u c c i }

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the Contributors

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Brett G. VarnerThe Perspective, pg 12

Solidifying the Foundation, pg 26

Brett G. Varner is the News Editor for

reversereview.com. He has served the mortgage industry for 10 years in

leadership capacities in sales, marketing and operations. His unique

and knowledgeable perspective is focused on developing useful content and strategies in a forum of open and

lively debate. brett.varner@

reversereview.com

FeatureArticle

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DaVe BanCroft The Conversation, pg 16

Dave Bancroft, former Executive Vice President and Board of Director member at Security One Lending, is an industry expert in the origination of reverse mortgages. Bancroft was the Founder and President of Omni Reverse Financing Inc, specializing in government lending. Omni Reverse was one of the largest originators of HECM Mortgages in the country and was acquired by Security One Lending in 2009. [email protected] | 949.355.4653

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miChael Banner

The Last Word, pg 38

Founder of LoanWell America, Inc., Michael Banner is one of few reverse mortgage professionals accredited to teach continued education classes to CFPs, CPAs, attorneys and insurance agents. Banner has been interviewed by the Wall Street Journal, Tampa Bay Business Journal, and appeared on the Fox Business Network. [email protected] | 877.753.1705

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Jim Cory

The Tale of Regulators and Originators, pg 32

Jim Cory is Cofounder and CEO of Legacy Reverse Mortgage, a reverse mortgage originator in San Diego, CA. Cory began his reverse mortgage career 13 years ago and he serves on the Board of Directors for the National Reverse Mortgage Lenders Association. Cory has a Bachelor of Arts degree from the Pennsylvania State University and can be found on Twitter as @LegacyJim.

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Sue haVilanD, CrmpThe Advisor, pg 14

Sue Haviland is Co-founder of ReverseMortgageSuccces.com. She has been in the mortgage industry more than 25 years. Unlike many others, Sue originates reverse mortgages each and every day and has earned her Certified Reverse Mortgage Professional designation. If you would like to profit from the largest niche to ever hit the mortgage industry, grab the free course and profit-producing tips at reversemortgagesuccess.com.

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GENERATION MORTGAGE COMPANY 140

URBAN FINANCIAL GROUP 99

GUARDIAN FIRST FUNDING GROUP 92

SECURITY ONE LENDING 91

GENWORTH FINANCIAL HM EQUITY 90

PNC REVERSE MORTGAGE LLC 83

1ST AAA REVERSE MORTGAGE 70

FINANCIAL FREEDOM ACQUISITION 66

SENIOR MORTGAGE BANKERS INC 65

NET EQUITY FINANCIAL INC 63

M AND T BANK 57

GREAT OAK LENDING 55

NEW DAY FINANCIAL LLC 50

MIDCONTINENT FINANCIAL CENTER 43

FIRST NATIONAL BANK 36

IREVERSE HOME LOANS LLC 35

MONEY HOUSE INC 34

ALL FINANCIAL SERVICES INC 34

CHERRY CREEK MORTGAGE CO INC 29

SUNTRUST MORTGAGE INC 28

STAY IN HOME MORTGAGE INC 25

EQUIPOINT FINANCIAL NETWORK IN 24

MORTGAGESHOP LLC 23

NATIONWIDE EQUITIES CORPORATION 23

MAS ASSOCIATES 22

PRIMELENDING A PLAINSCAPITAL 22

ROYAL UNITED MORTGAGE LLC 21

SENIOR AMERICAN FUNDING INC 20

TRIPOINT MORTGAGE GROUP INC 20

FULTON BANK NATIONAL ASSOCIATION 19

APPROVAL FIRST HOME LOANS INC 19

REVERSE MORTGAGE SOLUTIONS INC 18

SENIORS REVERSE MORTGAGE 16

CHRISTENSEN FINANCIAL INC 16

TRINITY REVERSE MORTGAGE INC 16

UPSTATE CAPITAL INC 16

UNITED SOUTHWEST MORTGAGE CORP 15

AXIS FINANCIAL GROUP INC 15

ARAMCO MORTGAGE INC 14

ASPIRE FINANCIAL INC 14

ALLIED HOME MORTGAGE CAPITAL 14

AA MORTGAGE GROUP LLC 14

the reVerSe reView April 2011

the Report

February 2011 Top Lenders Report

1 2 3 4 5Wells FargoBank, N.A. Endorsement

1662

Bank of America, N.A.

CHARLOTTE

Endorsement 777

MetLife Bank, N.A.

Endorsement 444

One Reverse Mortgage LLC

Endorsement 295

American Advisors GroupEndorsement 155

Lender Endorsements Lender Endorsements

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Seth hooper

A Strategic Plan for Success, pg 22

Seth Hooper has more than 10 years of experience working in the reverse mortgage market and previously held the position of Director of Operations at First American Loan Production Solutions and Director of Reverse Mortgage Solutions at CoreLogic. He is currently the chair of MISMO’s® reverse mortgage workgroup. He has a Bachelor of Arts in history from the University of Colorado.

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John K. lunDe The Report, pg 7, 9

John K. Lunde is President and Founder of Reverse Market Insight, Inc., a performance data analysis and consulting firm specializing in the reverse mortgage industry. RMI clients include eight of the top 10 reverse mortgage lenders plus investors, servicers and vendors to the industry.rminsight.net | 949.429.0452

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ralph roSyneK Ask the Underwriter, pg 10

Ralph Rosynek has been The Reverse Review “Ask the Underwriter” columnist for more than two years. Rosynek is the Vice-President for National Correspondent Production at Reverse Mortgage Solutions, Inc. RMS is a premier provider of reverse mortgage servicing, a Ginnie Mae Seller/Servicer and offers complete mortgage banking support and services to the reverse mortgage industry. He is currently seated as a member of the NRMLA Board, co-chair of the Professional Development Committee and holds HUD HECM Direct Endorsement [email protected] | 708.774.1092

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Brian SaCKS The Advisor, pg 14

Brian Sacks is Co-founder of reversemortgagesuccces.com. He has been in the mortgage industry for over 25 years. Unlike many others, Brian originates reverse mortgages each and every day! If you would like to profit from the largest niche to ever hit the mortgage industry, grab the free course and profit-producing tips at reversemortgagesuccess.com.

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Bill waltenBauGh Ask the Appraiser, pg 18

Bill Waltenbaugh, SRA is a certified appraiser of 20 years. During these years, Bill witnessed and experienced firsthand the many changes that occurred in the appraisal industry, from the advent of licensing to the implementation of HVCC. Currently, Bill is the Chief Appraiser at AppraiserLoft, a nationwide Appraisal Management Company, and writes a weekly blog called “For What It’s Worth.”

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The first month of 2011 brought us back to a familiar theme from last year as broker/wholesale endorsements outpaced retail in a down month for the industry overall. We saw this pattern several times last year, particularly as the industry volume growth tapered off in September and October.

• Broker/wholesale endorsements for January came in at 2,413 units, up 9.3% from December but down 45.8% from a year ago

• Retail endorsements totaled 4,049 units, down 6.8% from last month but up 27.7% from last year

• Brokers contributed 37.3% of all units, up from 33.7% last month but down from 58.4% a year ago

The divergence between channels is particularly striking this month because retail was entirely responsible for the industry decline. It’s way too early to attribute the weakness to BofA’s exit (we won’t see that effect until at least March or even April endorsements), so we can probably expect some bounce-back from retail in February results if our client conversations are any indication. Indeed, BofA has had its two best endorsement months since February 2010.

What’s most interesting is that broker/wholesale business has grown very little from the lowest levels in 2010 for BofA, while retail has recovered with the rest of industry. We’ve heard from several people in the industry that this directly related to the decision not to pursue certain types of broker/wholesale business. There was a wide divergence among other top 10 lenders in January, as Genworth and Urban both saw strong recoveries from what now look like hiccups in December, while Financial Freedom (editor’s note: who has just recently exited the industry as well) had the most notable decline to a multiyear low. g

INDUSTRY SUMMARY

Retail endorsement Growth

-6.77Wholesale endorsement Growth

9.33total endorsement Growth

-0.34%

TRAIlINg Twelve - MONTH eNDORSeMeNTS

10,000

8,000

6,000

4,000

2,000

08 10 11 12 12 3 4 5 6 7

*Numbers Represent MonthsRetail Wholesale

* Figures Above Reflect Change from Prior Month

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12

1

2

3

4

5

6

7

8

9

tot

units cHG% units cHG% units cHG%

3,124

2,783

2,692

2,465

2,900

3,358

3,969

3,405

2,976

4,004

4,343

4,049

-1.48%

-10.92%

-3.27%

-8.43%

17.65%

15.79%

18.2%

-14.21%

-12.6%

34.54%

8.47%

-6.77%

3,890

3,038

2,813

2,086

2,404

2,521

2,672

2,558

2,307

2,547

2,207

2,413

-12.58%

-21.9%

-7.41%

-25.84%

15.24%

4.87%

5.99%

-4.27%

-9.81%

10.4%

-13.35%

9.33%

7,014

5,821

5,505

4,551

5,304

5,879

6,641

5,963

5,283

6,551

6,550

6,462

-7.96%

-17.01%

-5.43%

-17.33%

16.55%

10.84%

12.96%

-10.21%

-11.4%

24.0%

-0.02%

-1.34%

ReTAIl wHOleSAle TOTAl

January EndorsementsRetail and Wholesale Volumes - ReveRse MaRket InsIght

40,068 31,456 71,524


the Report

TRR | 9

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ask the Underwriter

Making Yourself aCompletePackage ralph roSyneK

You wake up one morning and catch the news, read an email or leave an afternoon staff meeting and suddenly,

your focus has just changed. Joblessness can happen at any time, with little or no warning. Isn’t it ironic: Your focus and priorities (remaining in your home and maintaining financial stability) have just aligned with the customer base you serve!

Recent business decisions and industry changes affecting both the reverse mortgage space and mortgage lending in general have impacted quite a number of individuals, resulting in a significant forced employment movement of a large sector of the reverse mortgage production workforce.

About a year and a half ago, I too experienced joblessness. Interestingly enough, now that I have actively rejoined the reverse mortgage workforce, what started as a moment of reflection ended as a personal underwriting of that time frame in my life. For those of you just experiencing the joblessness effect, I thought I would share some “ability and willingness” perspectives that resulted from my underwriting experience of termination.

First and foremost, notice my denial of the exit and termination of my former employer’s participation in the reverse mortgage lending market (and the loss

of my job!). I realize now, I took a much less dramatic approach to the reality of my situation by calling it something other than unemployment. Yes, I don’t think I ever said or admitted I was unemployed.

Was it my age, arrogance or fear that led me to believe my situation was a short-term, temporary state and soon I would be employed?

“Soon” slowly turned into weeks, and might have lasted longer. Yes, I “looked,” but what was I looking for and how was I looking? It wasn’t until I took a good look in the mirror that I realized I needed to do more to accelerate “soon” into “now.”

So, my first word of advice is to stop what you are doing, take a deep breath, and “look into a mirror”– the resolution to your unemployment is in your plan and completely within your control.

When was the last time you visited with your resume? Many of us have been with our employer for a number of years and somewhere on a storage disc or in a folder at the bottom of

a drawer is the document that bespeaks our qualifications and achievements – the resume.

For most, keeping up your resume is not a priority or a Top 10 chore. Your

...take a deep breath, and “look into a mirror”– the resolution to your unemploy-ment is in your plan and completely within your control.

TRR | 11

resume is a key component of your plan to seek employment. Take a moment and do some advance work on this document before you merely add the job you just lost and blitz it to your entire contacts list. Presentation styles change; references, achievements, and most importantly your

goal or vision statement need to be updated. Type “resume” into the Google search engine and spend some time looking through the

various offerings and expertise that will spruce up the presentation of your skills and knowledge before you hit the streets.

Write an effective and brief (but descriptive) cover letter for your

resume with a very positive ending – tell your reader or recipient you are the candidate

they are looking for to enhance their team.

Network your resume and search on steroids. Since your last job search,

new opportunities to communicate your availability have opened up; you have more contacts;

and the market has grown despite your employer’s exit. More importantly, employers are embracing electronic communication channels in a much more aggressive form. Social networking and online job listings have replaced the old days of newspaper want ads and snail mail resume delivery. Phone calling is still effective, but technology is becoming a preferred method of communication.

Have you ever considered a headhunter? Utilizing the services of a recruiter

can expand your networking circle considerably; increase your access to a wider range of potential employers; and provide you with

needed feedback as to your suitability, skills and knowledge matching to available positions.

You will notice I haven’t mentioned the formalization of a plan other than working on your resume and networking. Drawing a box and looking for a specific fit is a very limiting and perhaps dangerous activity in the early stages of job searching. Yes, you should know your basic needs, abilities, likes and dislikes, but be flexible and open-minded.

As opportunities arise, you may be presented with a unique or unusual interview opportunity; not exactly what you were just doing. Many employers and job recruiters seek individuals who have core knowledge and skills as a basic requirement and look to the interview process to discover a heavy overlay of ability to be creative, innovative and “re-trainable” as very desirable attributes for a new employee.

Lastly, you have reworked your resume, network and contacts; don’t forget

to rework yourself and your appearance.

Drop the attitude, fear and disbelief. How many times have you been told to draw two boxes to identify problems and resolutions? Seems stupid, but actually this is a very therapeutic activity when it comes to improving yourself. List all of your job fears, negative thoughts, and shoulder chips that you are feeling or experiencing in the first box. You know these are going to hamper your job search.

In the second box list those qualities, attitudes and positive pluses you bring to a new job. Post your list by the phone (or better yet the refrigerator – eating and gaining weight isn’t a good idea at this point!) and clean up the first box as quickly as possible, unless you would rather get another unemployment check than a paycheck.

Now, go look in the mirror one more time. Is this the way you looked on the second to the last day of your last job? Would you hire the person in the mirror? If you are not positive about what you

see, I know funds may be tight, but take some time and update yourself. Very few employees are hired solely on looks, but

there is a visual component to our decision-making process. Do you need a new hairstyle, makeup, wardrobe or shoes (yes, shoes do say something)? Be honest. Sometimes, a slight change in appearance, a new suit or new shoes adds just the right amount of “extra” to you and your resume to complete the package.

To those of you in the job market, I feel your pain, have recently walked in your shoes and wish you speedy success in finding a new job. I can tell you it does happen, and the process, while unsettling at times, is part of your ongoing character build. A personal note to Marc Helm at Reverse Mortgage Solutions, Inc., and to his partner Bob Yeary, whose advice (“There are very few positions available for ex-Presidents and CEOs”) was followed by the jointly offered opportunity to work for RMS as the Vice President of National Correspondent Production: my sincerest thanks. g

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the Perspective

In Adversity, a Team’s Strength is RevealedBrett G. Varner

Brooks Conrad, a bench player for the Atlanta Braves, was thrown into prominence late last season when several key

injuries thrust him into an unexpected role wherein he helped guide the team to the playoffs. Then it all came crashing down. In a key divisional series game against the San Francisco Giants, Conrad made three crucial errors, the last giving the Giants the winning run in the ninth inning. San Francisco went on to win the World Series, while Atlanta’s season came to an end.

Everyone has been in situations where crucial mistakes, either made by themselves or someone else on their “team,” led to losing a loan or a client. Often in these situations, instead of seeking solutions or correction of the issue, people seek blame. It is far easier to point a finger than to take responsibility for a result, which then leads to disputes between team members rather than cooperation. In the heat of the moment, people forget that isolated mistakes are unavoidable. Handled immediately, honestly and appropriately, most clients are understanding and appreciate the efforts to resolve the issue. Working together to resolve these issues helps ensure that such instances do not turn into repeated mistakes.

I have always believed that teams live and die together. If they are not working together to constantly improve, then they are doomed to fail. In mortgage originations, teams extend beyond one’s own company to include service providers, wholesalers, and

anyone associated with the processing and underwriting of a loan. The “team” must be able to rely on and trust one another in order to provide clients with the highest level of care and service, especially with reverse mortgages.

A coordinated origination process is like a well-designed assembly line. Each step in the process is dependent upon the other steps. When one breaks down, the process fails, and since many in the process rely on closings for revenue, everyone loses. However, there is a difference between an individual mistake and pattern of poor work. Solutions are rarely found when an incident is portrayed as a global failing.

The result is a team that loses cohesion, trust and confidence in one another.

Following that unbelievable game, Conrad stood at his locker and acknowledged, “I felt like I let everyone down.” He also stated that you have to stand up and take responsibility rather than seek blame. In response, a group of veteran players on the team surrounded him and reminded him how important he had been to their season. The result of the day was unfortunate, but it should not be allowed to take away from the fact that his efforts helped fuel their run to the playoffs.

The Braves look forward to the coming season with confidence and faith in one another, primarily because they addressed adversity as a team. Can you say the same about your team? g

I have always believed that

teams live and die to-

gether. If they are not work-ing together to constantly

improve, then they are

doomed to fail.

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the Advisor

A New Perspective on Lead GenerationSue haVilanD, Crmp anD Brian SaCKS

This past month, The Reverse Review received a question via the Ask the Advisor channel and we are happy to address these questions

as they come in. If you have any marketing-related questions, please email the advisor at [email protected] and we will address your question in an upcoming issue.

This inquiry was a particularly interesting one and we chose it to be the topic of this month’s article. Are there any reputable lead sources that members use?

I do want to thank the person who submitted that question because it sparked some spirited debate in our offices at Reverse Mortgage Success. What follows is our response:

There are some good as well as bad lead companies, but unfortunately we don’t have one in particular we can recommend to you. WHY?

In our experience, what may be a good lead source today may turn out to be a horrible one tomorrow. But the answer is actually much deeper than that. Here is a point you always need to remember when it comes to lead generation: It’s all about who is chasing whom. To be more direct, it’s all about getting clients to chase you!!!

There are several issues to consider when you purchase leads. Keep this list handy if you are buying leads as any part of your business.

How many others has that lead been sold to?

How was that lead obtained? What I mean by that question is, how did that person identify themselves as

being in need of your services? With the senior population there is often a very long wait between the time someone inquires to learn about the program and the time they actually consider a loan application.

What has this person been told or promised by the lead company?

What information has the lead provider obtained and how? Did they get an approximate property value? The borrower’s age? What is their motivation for obtaining a reverse mortgage? Or are they just shopping and you are the next call on their list?

Many who buy leads are often disappointed, mainly because they are looking for a deal “right now” and many of these leads will take time to develop. Unlike those who are looking for a forward mortgage, many seniors feel they need to investigate and have some time to make a decision.

So what can you do instead of or in addition to buying leads? Since this is all about how to generate new business, let’s explore some ways of getting prospects to chase you!

Start networking with other professionals who could recommend your services. Really get to know their business and how you can help each other. Sue did a video interview with one of her financial planning partners and he put it on his website and promoted it via a call with his clients. This cost her nothing but her time and positions her as the reverse mortgage expert in her local market.

TRR | 15

Begin a direct mail campaign aimed at your target audience. Be consistent.

Create a website that offers information and a special report, which is the sales message you would be using when they call, offered as a special report. (We love this strategy and it works.) Use your site as a mechanism to communicate

with your prospects and promote your other activities (see # 4 and #5).

Use some free PR techniques and contact your local newspapers, radio and TV stations (Brian was recently interviewed on Maryland Public Television) to give them an update on the HECM program and the new Saver option, as well as some pros and cons. Or offer them a few myths and facts about the program. Every day there are news stories about how boomers and seniors are experiencing challenges and haven’t saved enough for retirement. Use that hook to contact the media and let them know that a reverse mortgage could be a solution.

Speak to professional groups like attorneys, accountants, and even church or other religious leaders. (This is another strategy we love and have even developed an entire campaign to support.)

We recommend that you pick no more than three activities to implement and monitor the success of each before moving on to another. We could go on and on here but the point is that you need to start thinking and implementing ways to get prospects chasing you. Once you do, you may never choose to purchase leads again. g

Need assistance from the Advisor?Send your question to [email protected] and it may be addressed in the next issue.

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the Conversation

TheIrishGoodbyeDaVe BanCroft

Is anybody else astonished by the ridiculously swift decline in back-end pricing? I can’t believe how far it has fallen since November and how quiet the response has been. This type of behavior reminds me of my old roommate Jordan

in San Diego. On several occasions partying late into the night in Pacific Beach, he would just vanish from the group without a peep and head home. Concerned at first, I was quickly informed by professionals that this informal exit is called the “Irish Goodbye.” Although the diagnosis was in, it still bothers me when something important goes away into the night without a sound. This decline highlights another turn in this roller-coaster ride our industry has been on for some time now.

If you have been following the markets lately, you have seen some interesting behavior. First, we have watched lenders try to grow by luring brokers into their ranks with fearful predictions of the future. Talk of “broker begone” is scary but truth be told, it isn’t happening. I can’t deny its allure; I was even punch-drunk enough to write an article on it and encourage the “instant family.” But as soon as that went to print, the investor appetite for HECM mortgage-backed securities skyrocketed and wholesale departments declared war on each other. Lender conversations halted with brokers while account executives stormed CFOs’ offices and demanded price-matching to save

coveted relationships. Back-end pricing spiked like TV ratings for Jersey Shore once Snooki got punched. Innovative

lenders implemented new offerings to attract business, such as axing the servicing fee and ridding the origination altogether. The broker bonanza was in full swing.

Then, almost as fast as it came, the back-end has vanished into a mere image of itself. We have seen pricing rebates drop in some cases by two-thirds and now rumblings of lender-broker pairings are hot again. Right now interest rates are on the rise and origination fees are a necessity. The lowest fixed-interest loan is on the curb and no straight answers are coming from the window as to why the loss of appetite. Some are saying that a couple of buyers are sidelined, AWOL, reducing competition and price, while others point to the BofA exit as a cause. We

will never get a straight answer, like why those birds fell from the sky, or why millions of fish went belly-up in that Redondo Beach harbor. Regardless, the health of this industry is catching cold and too many have quietly disregarded the shrinking rebates. We can never accept revenue reduction without the proper exit interview. I believe many just experienced their first “Irish Goodbye.”g

Then, almost as fast as it came, the back-end

has vanished into a mere image of it-

self. We have seen pricing rebates drop in some cases by two-thirds

and now rumblings of

lender-broker pairings are hot again.

TRR | 17

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NEW!

| TRR18


ask the Appraiser

The Difference Is in the DetailsBill waltenBauGh

The Reverse Review is excited to debut its new column: Ask the Appraiser. We recently received a question for our knowledgeable appraiser

which is addressed in this months column.

If you have any appraisal-related questions, please email the appraiser at [email protected] and we will address your question in an upcoming issue.

We have a home we own outright that has a protested tax appraisal decreased to $227,000, although similar homes on the block are appraised for $240,000-plus. For planning purposes, can we expect an appraisal for a reverse mortgage coming up with a similar figure? In general terms, the answer is no. There are too many unknowns to confidently rely on this information for planning purposes. That said, it wouldn’t surprise me if an appraisal for your reverse mortgage produced a similar result. Now that I got my political answer out of the way, let me get to the specifics. There are two reasons why this information shouldn’t be relied upon for planning purposes.

We simply don’t have enough information about time frames,

market trends or any differences between the subject and the other appraised properties on the block.

Although assessed values are often market-based, they’re

not good indicators of current market value for lending purposes because they can be dated and are developed with a different focus.

Because markets tend to change over time, appraisers will

assign a specific date to the values noted in their reports. In appraisal terms, this date is known as the effective date

and it refers to the point in time the appraiser developed

their analysis and conclusions. In this case, the date of the tax

appraisal and the effective dates of the

other appraisals on the block are not

provided. as such, even if the values are

accurate and the other properties are

similar, any change in market conditions

would not be accounted for.

In addition to effective dates and market conditions, other concerns such as curb appeal, site size, square footage and design need to be considered when valuing a property. To do this, an appraiser will compare the subject’s features and amenities to other properties in the area that sold recently. When a difference is noted, a market adjustment is made to the sales price of the comparable property to account for the variation. The adjusted value of these properties assists the appraiser in estimating the market value of the subject property. Even if the other homes on the block were recently appraised, they may differ from the subject with respect to condition, utility and appeal. Without accounting for these differences, the values of the other properties are not reflective of the subject. In addition, only market-tested and confirmed closed sales should be used for this process.

TRR | 19

Applying this same procedure to the appraised value of other properties in the area is not an acceptable appraisal practice.

The term “value” can have many meanings in real estate. That’s why appraisers specifically define the type of value being appraised within their reports. In the example noted above, the value of $227,000 is the product of a tax assessment. Although many assessed values are market-based, they are only completed periodically or when a property transfers or is improved. Different effective dates create the same concerns noted above. Finally, since this value is being used to estimate tax liability, an extra effort to be fair and consistent is made. In areas where taxes are based according to value, homeowners can appeal the assessed values if they believe they are wrong. However, for obvious reasons, appeals only occur if the owner feels the value is too high. I haven’t come across a homeowner yet who wanted to appeal their assessed value for being too low. In short, given the purpose of the assessed value and the

concerns to be equitable, it’s not reasonable to rely on this valuation for planning purposes.

So why did I say I wouldn’t be surprised if the mortgage appraisal was similar to the values noted above? Well, if the effective dates of these appraisals are recent and the other homes on the block are similar to the subject, it would stand to reason the mortgage appraisal would have a similar value. The difference in value between the tax appraisal and the other appraisals on the block are less than 6 percent. Values this close tend to lend some credibility to one another. However, obtaining an appraisal from a qualified local appraiser is the only way to tell. g

Have a question for the Appraiser?Email questions to [email protected] and look for your answer in an upcoming issue. a? a

Karen Keating recently became the first Title

Professional to become a Certified Reverse

Mortgage Professional

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Even if the other homes on the block were recently appraised, they may differ from the subject with respect to condition, utility

and appeal. Without accounting for these differences, the values of

the other properties are not reflective of the subject.


the Industry Roundup

industryroundup April edition

movers k shakerssarah hulbert: Joined 1st Reverse Mortgage USA as Retail Business Development Manager. In her new role, she will be responsible for overseeing growth and development of their retail reverse mortgage business.

security one lending, inc.: Hired former Bank of America executive Ron Fletcher as Senior Vice President of national performance. His primary role will be to expand the company’s retail sales force. They also announced the hiring of recording artist Pat Boone as a national celebrity spokesperson.

bob emerling: Joined American Advisors Group as Director of Risk and Compliance. He will be responsible for overseeing quality control and compliance for the company.

doug douglas: Was named Chief Financial Officer of NewDay Financial. Douglas will be responsible for strategic planning, cash management, accounting and financial analysis.

up-k-comersreverse mortgage solutions, inc.:

Announced major expansions into reverse mortgage originations by launching new correspondent and retail channels. To support the correspondent channel, RMS hired Ralph Rosynek as Vice President, National Correspondent Production Manager; and Ellie Johnson as Vice President, Correspondent Operations. Rosynek is also The Reverse Review’s “Ask the Underwriter” columnist. On the retail side, RMS added Gary Bauch as Senior Vice President, National Sales Executive, Reverse Mortgage Division; and Audra Pickens, Vice President, Regional Sales Executive in Texas.

national senior home equity: After securing capital investment commitments of $5 million, Bart Johnson and Tony Garcia have teamed up to form this new entity with the goal of consolidating market share by providing new options for brokers to grow their businesses.

What happened?Financial Freedom: Announced plans to close all reverse mortgage origination channels. In a letter to business partners, CEO Michelle Minier cited the regulatory environment and the often used phrase “focus on the bank’s core businesses” to describe the closure.

david stevens: FHA commissioner announced his resignation from the agency effective March 31. Following a tumultuous period at the agency, Stevens later announced that he has accepted a position as president of the Mortgage Bankers Association.

aarp: Raising claims that HUD inappropriately redefined “non-recourse” in Mortgagee Letter 08-38 and questioning the variance in the definition of “homeowner” in HECM statues and HUD policy, AARP filed a lawsuit that stirred up a frenzy of anger and frustration; and Fox News aired a poorly structured segment on the T&I delinquency issue with reverse mortgages. A subsequent follow-up left much to be desired, but NRMLA continues to work with Fox to ensure future reports have access to accurate information.

namb & naihp: Independent actions that were later consolidated, the two organizations filed lawsuits seeking temporary and permanent injunctions against the Loan Originator Compensation Rule. The move follows calls by many industry groups, including NRMLA, to delay implementation of the rule to provide additional time for compliance guidance.

Wells Fargo: Stopped offering reverse mortgages through their wholesale channel. The move was not surprising as the leading retail producer had made little effort to sustain meaningful wholesale reverse mortgage production.

a roundup of this past month’s breaking news: Who moved where; Why a company closed its doors; Who is new to the industry?

Find it here

20 | TRR

TRR | 21

the EssentialsThe Essentials | i’sen sh l | - your monthly source of in-depth information,

industry updates, highly opinionated views and at-your-fingertips news.

J im Cory

Seth hooper

Brett G. Varner

E

It takes a lot to create an attention-grabbing, informative article and The Reverse Review is very fortunate to

have worked hand in hand with industry leaders over the past couple of years. We are always searching for new

writers and industry-related articles. If you are interested in contributing your views and have what it takes to

intrigue our readers, we would love to hear from you! Email [email protected] to start the conversation.

22 | TRR

et’s face it: Nobody is immune to the impact of the current housing crisis. While reverse mortgages offer older Americans a way to tap home equity during retirement, the collapse of the mortgage market in

2008 has led to major changes that impact consumer choices, according to a new report from the AARP Public Policy Institute. ¶ “For homeowners who are ’house-rich, but cash-poor,’ reverse mortgages can be a

lifeline that enables older people to remain independent while meeting basic needs,” said the report.


the Essentials

A Strategic Plan for SuccessLeveraging business process improvement and advanced

technology to position yourself for a better tomorrow.

Seth hooper

TRR | 23

“However, declining home values and the resulting collapse of the mortgage markets have had a major impact on all aspects of reverse mortgages.”

The release of additional products like the HECM Saver may bring additional choices to consumers, but it has also made reverse mortgages more complicated, leading to more scrutiny from Congress and regulatory agencies charged with protecting consumers. In recent years, Congress has passed two consumer protection laws in response to unsuitable financial products being sold along with a reverse mortgage.

One concern highlighted in the report is the fact that reverse mortgage borrowers are getting younger in recent years. “The trend toward borrowing at earlier ages raises concerns about the long-term impact of reverse mortgages on financial security.”

With more borrowers taking out lump sums at closing, the report says that “more research is needed on the consequences of reverse mortgages for long-term financial security. Providing safe and affordable reverse mortgage options and improved counseling and disclosures will be crucial in establishing the consumer confidence needed for expansion of this important financial option.” said the report.

Despite the challenges, that doesn’t mean that all has to be gloom and doom by any stretch of the imagination. Success in the reverse world is yours for the taking if you know how to excel. What do I mean? There’s a common statement that talks about the futility of doing the same thing twice and expecting a different outcome. My hope in penning this article is that the reverse mortgage lending professional does not get caught up in this trap. You need to start by looking at what has happened in the world of forward lending.

When the market crashed, what did forward lenders do? Did they innovate? No. Did they think proactively about the future? No. They went into what can best be characterized as survival mode. They chose to do nothing

and ride it out. That strategy was far from successful. On the other side of the coin, innovation is rewarded. Now is the time to innovate. For example, when the Mortgage Disclosure Information Act hit in 2009, many forward lenders opted to implement electronic upfront disclosures as a way to comply. That’s fine, but many did not take this opportunity to look holistically at their technology and all of their point-of-sale procedures. As a result, when changes were mandated on the Good Faith Estimate (GFE) and tolerance levels were enforced between the GFE and the final HUD last year, many lenders had to go back to the drawing board. Innovative forward lenders that revamped their entire point-of-sale initially had a much easier time.

Surely we have some ideas on how you can improve your reverse mortgage operation and position yourself for success, but instead of tooting our own horn, we decided

to reach out to the larger players involved in reverse mortgages today and put them on the spot to see what they are seeing and doing to weather this storm.

John Lunde, PResIdent of ReveRse MoRtgage InsIght, described the reverse market as turbulent. He said, “Last year volume declined 35 percent while the number of companies originating reverse mortgages declined 35 percent, and BofA recently exited the reverse market. The other side of the story is the introduction of the HECM Saver program—it is a significant piece of the future of reverse lending, but it requires a great deal of changes for reverse originators to tap into its enormous potential.”

PeteR engeLken, BusIness dIvIsIon PResIdent of genWoRth fInancIaL hoMe equIty access, Inc., pointed out, “This is a dynamic time for the reverse mortgage industry. For the first time in a few years, interest rates are rising and there are new regulations on the horizon that will impact how lenders and loan originators do business. While interest rates remain well below historical levels, since October 2010, bond prices have been falling and interest rates have been rising, with investors selling bonds and buying stocks. This has resulted in significant market volatility and rapid rate increases over the last 60 days. Concurrently, lenders and loan originators are preparing for the implementation of changes in compensation structures under Regulation Z that take effect April 1.

Communication and education are critical during this period to ensure consumers and business partners understand the external factors driving product, pricing and policy decisions,” he continued. “We will be conducting a series of webinars for our business partners focusing on the secondary market, product changes and implications of Regulation Z.” >>

The release of additional

products like the HECM Saver may bring additional choices to con-

sumers, but it has also made reverse mortgages more complicated...

24 | TRR

Jeff BIRdseLL, 19-yeaR IndustRy veteRan and vP of PRoduct ManageMent ReveRse MoRtgage seRvIces at MoRtgage cadence, added, “To put everything into perspective, we’re in the first non-growth phase that the reverse market has encountered. One of the reasons for this is the amount of money that people can get for their homes in this current market. Low appraisals generate less cash for the borrower to use to cover the first mortgage. One of the biggest challenges, though, continues to be the lack of understanding of this product in the marketplace. We have come a long way in the last 10 to 15 years, but the majority of our senior population, and their advisors, still need to be educated on how reverse mortgages really work.”

We pressed further to get a true snapshot of market conditions today. Are things improving? Are they still gloomy?

( l u n d e In the last four months volumes are up 27 percent compared to the same time as last year. We’ll see a 20 percent increase from 2010. HECM Saver will be a big part of the volume growth.

( e n g e l k e n In the short run, we expect reverse mortgage growth opportunities to be limited by external market conditions such as lower home values and higher interest rates. However, the consumer need for the product remains strong, especially during these challenging economic times. The changes implemented by HUD in 2010 in terms of product and consumer safeguards will serve as foundations for sustainable, long-term growth. We are very excited about the long-term growth potential of the industry.

( b i r d s e l l Whether the current market is up or down relative to the past, there continues to be a tremendous

untapped need and market for reverse. The next big thing will certainly be the HECM Saver program.

( e n g e l k e n Since its introduction in October 2010, the HECM Saver product, which features lower upfront fees but lower loan limits, has grown significantly. The HECM Saver represents almost 20 percent of our retail volume. We are very excited about the introduction of the HECM Saver product in 2010. It has helped reverse mortgages gain greater media attention and as a result, we are seeing more and more financial publications and research discussing the benefits of reverse mortgages as part of a broader financial planning strategy for seniors in all income segments.

Things are not all bad. Many of the 80 million baby boomers have reached 62, the minimum eligible age for HUD reverse mortgages. This demographic 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.

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, opening up more properties and equity that would qualify for reverse mortgages.

As we examine both the pros and cons

associated with the current reverse mortgage market, we thought that it was critical to ask our reverse mortgage originators how lenders can get the most out of the positive elements running through the space, and at the same time, turn some of the negative trends into positives. The overriding answer that we got was that it is critical to automate in order to thrive nowadays.

( l u n d e The reverse marketplace can benefit greatly from scalable technology that creates great efficiencies through the use workflow automation and the utilization of imaging. These solutions can quickly reduce the cost of originating reverse mortgages. Another potential area where technology matters is when it comes to providing more consumer-facing tools.

( e n g e l k e n Technology can play a critical role in streamlining the decision process for consumers and in driving process efficiencies for lenders and loan originators. Lenders can use technology to better illustrate the true benefits of reverse mortgages for consumers based on their own personal financial situations and as part of a comprehensive retirement strategy. Today, most consumer-facing tools focus on illustrating the funds available for borrowers under a reverse mortgage.

( b i r d s e l l The best thing that technology can do for reverse mortgages is bring a greater level of efficiency to the overall process. Technology allows for scalability. To go back to an earlier point, there still needs to be a great deal of education to bring about greater awareness. Technology can help us there, too.

( e n g e l k e n There may be opportunities in the future to use software tools to illustrate the benefits

25TRR |

of incorporating a reverse mortgage to preserve and grow consumer wealth as part of an overall retirement plan. Technology is also critical to driving efficiencies by automating manual processes that may help reduce paperwork and ultimately support shorter turnaround times.

Sure, technology can be a huge helper, but what type of technology will get you the most bang for the buck? A fully integrated technology platform can deliver true efficiency, which is vital to profitability for today's reverse lenders.

The elements of a fully integrated technology platform include and provide specific benefits when applied correctly.

When housing prices stabilize (and even, dare I say, begin to increase) and all of those new baby boomers enter the market, reverse lenders have to be ready for them.

Reverse lenders have to use technology to craft a better, more efficient, more compliant process in order to take advantage of a very fluid market. There is no better time to start

planning for this and put these solutions in place. g

first: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. This will

eliminate or significantly streamline manual or

disparate processes.

Workflow automation improves efficiency.

The automation of many business

processes results in the elimination of

many unnecessary steps, which reduces

the overall cost per loan exponentially.

It also offers better process control.

You get improved management of

business processes achieved through

the standardization of working methods

and the availability of audit trails, which

significantly improves compliance.

A byproduct of this approach is improved

customer service. It’s important to

remember that consistency in the

processes leads to greater predictability

in customer response levels. In the end,

a total technology solution will give you

flexibility. Software control over processes

enables ease of configuration that is in

line with changing business needs and

constantly changing rules and regulations.

A focus on business processes leads to

streamlining and simplification, thereby

reducing errors.

second: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.

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.

third: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.

The solution should include a number

of out-of-the-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. Along

the same lines, intelligent forms creation

enables lenders to dynamically create initial

disclosures and closing packages and

deliver them securely to the borrower or

settlement agent. The central idea is that

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.

AARP suit seeks to Reconcile HecM stAtute

And Hud Policies.

On March 8, 2011, AARP filed a lawsuit against the u.s. department of housing and urban development (hud). The lawsuit, filed on behalf of

three surviving spouses of hecM borrowers, alleges that hud inaccurately and illegally interpreted the definition of “non-recourse” and “homeowner” in establishing

hecM policies. aaRP suggests that the result of the lawsuit could have national implications because it will determine if non-borrowing spouses can avoid foreclosure and

have the right to stay in homes that are underwater. this is something, they state, that borrowers had paid insurance premiums to avoid.

AARP conducted a study on the FHA-insured HECM

program in 2006 and released their report,

“Reverse Mortgages: Niche Product or Mainstream Solution,” in December 2007. In the report, AARP first publically raised their concerns

about how HUD was applying

these definitions in implementing

their policies. It appears that in creating

their recommendations, AARP was giving HUD a “friendly warning” about these policies with the goal of encouraging them to correct the problematic discrepancies.

The resulting lawsuit could then be seen as the culmination of AARP’s frustration that HUD’s policies continued to run afoul of their interpretation of the statute. In order to protect their constituency, and seek to have the appropriate application of the language clarified, they may have felt that litigation would provide the clearest possible remedy.

In light of hundreds of pages of regulatory language, it may be hard to imagine, but this case, with major implications for the

program and the industry, is essentially a debate over the specific language in two sentences. AARP suggests that HUD’s policies and practices related to “non-recourse” and “homeowner” may have effectively created administrative law that overstepped the authority given to them in the statute. The allegations claim that the statute is unambiguous and clear in establishing the definition of these terms, and that HUD abandoned long-standing rules in establishing arbitrary changes to the policies and practices that run contrary to the statute.

In Section 1-3(C) of the HUD Handbook, “non-recourse” as it relates to HECM is stated to mean: “the HECM borrower (or his or her estate) will never owe more than the loan balance or the value of the property, whichever is less; and no assets other than the home must be used to repay the debt.” AARP, along with industry participants, have long believed that this protection to homeowners is an unconditional benefit afforded to borrowers when they execute the HECM. It is essentially the basis of the FHA mortgage insurance for which borrowers have paid significant premiums for this protection.

There is debate as to when HUD began interpreting this provision as only applying to when the estate sells the

UD was granted the authority to create an FHA insurance program for reverse mortgages by Section 255 of the Housing

and Community Development of 1987, signed by President Ronald Reagan on February 5, 1988. The subject of the debate that has resulted in the AARP lawsuit involves these definitions that are drawn from two subsequent regulations that laid out the framework of the Home Equity Conversion Mortgages (HECMs) to be insured by the FHA. The first is the statute within United States Code that defines HUD’s authorization to create an insurance program, U.S.C. Title 12, Chapter 13, Subchapter II, Section 1715z-20. In this case, AARP has focused specifically on Subjection (j), which serves to protect a homeowner from displacement, and creates the definition of“homeowner” in the dispute.

The second regulation in the debate is the HUD Handbook 4235.1 released in August 1989 and revised through Handbook 4235.1 REV-1 in September 1994. Again, the subject of contention is narrowed down to a single subsection, Chapter 1, Section 3, Subsection C, wherein the definition of “non-recourse,” as it relates to FHA insurable HECM loans, is established.

“non-recourse” as it relates to hecm is stated to mean: “the hecm borroWer (or his or her estate) Will never oWe more than the l oan balance or the value oF the property, Whichever is less; and no assets other than the home must be used to repay the debt.”

TRR | 29

home, not when they desire to retain it, which then requires repayment of the full outstanding balance regardless of home value. HUD has indicated that they believe this has always been their interpretation of the statute, but the practice began to come to light sometime in 2006 or 2007. The AARP report published in December 2007 indicated that HUD had never announced that its non-recourse practice varied from the policy in the HECM Handbook. It called on HUD in “Recommendation 5” (page 111) to “clarify that the HECM non-recourse limit means that borrowers or their estates will never owe more than the value of the home.”

HUD did not respond to the AARP recommendation until Mortgagee Letter 2008-38 was issued in December 2008. The stated goal was to issue “clarification regarding borrower’s recourse for repayment of HECM loan debt and termination of a HECM mortgage.” The letter stated that program participants had mistakenly inferred that the language in the handbook included situations when the estate desired to retain the home. It then states that the intended meaning of the provision is “simply that if the borrower (or estate) does not pay the balance when due, the mortgagee’s remedy is limited to foreclosure and the borrower will not be personally liable for any deficiency resulting from the foreclosure.”

Therefore, in cases where the home is sold, the non-recourse provision only applies to “arm’s length” transactions

when the home is sold for less than the balance of the reverse mortgage. HUD made it clear issuing ML 08-38 did not amount to a change in policy; only a clarification wherein the heirs were not unduly afforded the ability to purchase the property as a method to avoid paying the full balance of the HECM. A reason for this definition, some have suggested, is that in a “non-arm’s length” transaction, heirs or estates may actually seek to artificially reduce the value of a home for the sole purpose of taking advantage of the non-recourse provision, or at least receive the unfair dual benefit of retaining the home and paying the lesser balance of the HECM.

The second component of AARP’s lawsuit focused on this sentence defining “homeowner” in the U.S. Code. Subsection (j), titled, ”Safeguard to prevent displacement of homeowner,” states that in order to insure a HECM, it must defer repayment of the loan until “the homeowner’s death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary. For purposes of this subsection, the term ‘homeowner’ includes the spouse of a homeowner.”

At issue is whether the non-borrowing spouse of a HECM borrower is afforded the protections of this provision even if they are not a signatory to the HECM loan. HUD has long insured transactions where a borrower’s spouse was either excluded from title and the HECM loan, or removed via a Quit Claim Deed (QCD) in the

processing of a HECM loan. This scenario typically occurs in cases where a spouse is either below the age of 62 and cannot qualify for the HECM, or one borrower is younger and qualifying based upon their age would provide insufficient funds to accomplish their borrowing needs. Persons in these cases, in addition to the QCDs (if applicable), were also typically required to sign disclosures acknowledging their position as a non-borrower, even resulting in a “Non-Borrowing Resident” form that had to be signed by any non-borrowing person residing in the home, whether they were a spouse or not.

HUD essentially interpreted “homeowner” to be interchangeable with “mortgagor” and “borrower.” Accordingly, any of the three terms would only include the spouse when they remained on title to the home and were a party to a transaction. This practice allowed for loans to be insured in cases where a spouse was not a party to the transaction.

The goal of the recommendation in AARP’s 2007 report was to encourage HUD to return the application of “non-recourse” to be unconditional, where a homeowner can never owe more than a home is worth without further interpretation. The result being, no matter how the HECM loan was resolved, the amount paid to the lender would be the lesser of the HECM loan balance or the appraised value (or sales price approved by the lender and HUD).

in light oF hundreds oF pages oF regulatory language, it may be hard to imagine, but this case, With major implications For the program and the industry, is essentially a debate over the speciFic language in tWo sentences.

“non-recourse” as it relates to hecm is stated to mean: “the hecm borroWer (or his or her estate) Will never oWe more than the l oan balance or the value oF the property, Whichever is less; and no assets other than the home must be used to repay the debt.”

| TRR 30

AARP’s lawsuit involves three plaintiffs that were non-borrowing spouses to HECM borrowers. In all three cases, the borrowing spouse has passed away and the plaintiffs are subsequently defending foreclosure actions under the “due and payable” provisions of the HECM. One plaintiff claims he was removed from title without his knowledge when the HECM was executed. By revising the definition of “non-recourse,” the suit alleges that the plaintiffs will have suffered substantial hardship if they are forced to pay the full balance of the reverse mortgage in order to retain their home. The lawsuit also claims that the “Safeguard to Prevent Displacement of Homeowner” section of the U.S. Code precludes a spouse from being displaced via foreclosure, even if they were not named on the mortgage. The lawsuit attests that HUD has never recognized this important provision.

The lawsuit seeks to gain an injunction against ML 08-38, restoring the original language and establishing the legal definition of the terms according to the statute, and also seeks damages for the plaintiffs.

AARP has stated that they believe the clarification amounts to a breach of contract between borrowers and lenders and a breach of insurance contract between HUD and borrowers, the second of which negates a primary reason for the insurance premiums that are paid through the loan.

Additionally, should the court affirm the claim that HUD inappropriately interpreted the definition of “homeowner” in the statute, it could lead to a determination that non-borrowing spouses had their property rights improperly terminated through QCDs that were executed in the processing of HECM loans. Ultimately, the QCDs that the plaintiffs executed could be deemed void, thereby reaffirming their rights to the properties and bringing into question the validity of the HECM liens against the properties.

At the NRMLA West conference in mid-March, President Peter Bell discussed NRMLA’s position on the claims in the lawsuit, as well as their actions, as the situation unfolded since even before the

release of ML 08-38. He noted that the first mention of including the “non-arm’s length” requirements in the definition of “non-recourse” first appeared in a 2006 counseling training session that included a Statement of Policy from HUD. In August of that year, NRMLA took a position to protect the unconditional definition of “non-recourse.” NRMLA counsel James Brodsky noted that NRMLA began a period of heavy engagement with regulators to restore the original definition. NRMLA suggested that the potential for limited abuses could be mitigated in valuation process requirements, and it was an unfair practice to treat heirs differently than others when it came to applying the non-recourse provisions.

In issuing ML 08-38, HUD reaffirmed its position of narrowing the definition and NRMLA continued to advocate for restoring the original. NRMLA believes that this can be simply resolved by replacing ML 08-38 to make “non-recourse” unconditional, but include appropriate safeguards to ensure a fair and reasonable process of property valuation in “non-arm’s length” transactions.

1Plaintiff 1:

Delores J. Moore from Covington, Indiana. Age 79.

She married Mr. Moore late in life and was never added to the deed

to the home or the HECM mortgage.

She is defending against a foreclosure action in Fountain County, Indiana Circuit Court.

Plaintiff 2:Leila Joseph from Brooklyn,

New York. Age 77.

She was removed from the deed to the property when herhusband, suffering from

dementia at the time, entered into the reverse mortgage.

Mrs. Joseph is defending a foreclosure action in the Supreme Court of Kings County, New York.

Plaintiff 3:Robert Bennett from

Annapolis, Maryland. Age 69.

He had jointly owned the home with his wife since 1981.

Unbeknownst to him, he was removed from the deed when the HECM was executed. His wife, who was seriously ill at the time,

died the following month.

Mr. Bennett faces a foreclosure action in Circuit Court

in Anne Arundel County, Maryland.

2 3

this laWsuit has pointed at cracks in the Foundation oF the hecm program, but it may very Well lead to a process oF strengthening the program and hoW it helps seniors Finance their retirement.

the details oF the plaintiFF’s involved in the laWsuitFactsthe

TRR | 31

In regard to the definition of “homeowner,” Bell indicates a more problematic issue that essentially is the result of “poor drafting language” in the statute that didn’t accurately reflect the legislators’ intent. NRMLA has taken the position that it is reasonable to infer that the meaning of “homeowner,” “mortgagor” and “borrower” can be considered interchangeable. Accordingly, NRMLA supports HUD’s interpretation that their definition reflects the true intentions of the statute, thereby making the non-borrowing spouse allowable in insurance contract.

The problem, Bell points out, is that due to the nature of a statutory definition versus an administrative interpretation, this is an issue that most likely cannot be resolved through negotiation and will need to be adjudicated by the court. Should the claim prevail, Bell suggests that a potential outcome would be for HUD to amend rules no longer allowing for a spouse to be excluded from title in a HECM transaction. He acknowledges that this creates potential for lost volume and some borrowers with greater need being limited by this application, but this is unavoidable if the term “homeowner” is determined to be as broadly applied as the lawsuit portends.

NRMLA has offered to be a broker in this lawsuit, helping HUD and AARP reach a consensus on addressing the issues. NRMLA believes that the best course of action would be for the organizations to focus on legislative efforts that seek to amend and clarify the statutory language, rather than leaving it up to the courts.

Since AARP believes that this case could have national implications, in addition to clearly changing the

application of these rules, their initial objective could be to create precedence on which future cases are able to base their claims. Even though AARP had made their opinions known in 2007, it has come to the point of litigation due to perceived lack of clarity in the statutory language. When it comes to interpreting legislative intent, it usually can only be resolved by either legal or legislative action.

In the first likely action in the case, the court may issue injunctions ceasing foreclosure proceedings against the plaintiffs until the case is litigated. Due to potential precedent created by the case, HUD could then consider imposing a broader moratorium on similar actions pending resolution of the lawsuit.

The ramifications could fundamentally change the HECM program. This amounts to the first major lawsuit against the HECM program. If the lawsuit prevails and becomes a precedent for additional lawsuits, lenders and HUD could be forced to pay damages to borrowers and

estates that were negatively impacted by HUD’s interpretation. Additionally, they could be required to amend the existing HECM loans to comply with the clarified rules. Depending on perceived risks to the HECM

insurance fund, HUD could also consider additional limitations to the

program.

Even with the potential direct impacts of the litigation, a major concern for the industry is the resulting media coverage

and the potential negative impact on the reputation of the product among the public. Each step in the litigation process will be covered in varying light by the media. Media outlets will likely turn to legal and financial analysts, who may or may not fully understand the HECM program and the lawsuit, to discuss the merits of the issues at hand. Detractors, such as the Consumer Union, may use this lawsuit as a way to substantiate the dangers of the program they have previously portrayed. The litigation may seek to clarify the law, but industry participants could be portrayed as complicit in HUD’s actions.

This lawsuit has pointed at cracks in the foundation of the

HECM program, but it may very well lead to a process of strengthening the program and how it helps seniors finance their retirement. Although the process of resolving this situation may create a period of instability or uncertainty for the reverse mortgage industry, the clarifications should help strengthen the foundation of the program for the future. A period of pain for the industry may be necessary to avoid problems as the program matures. At the end of the day, it is better to have an industry that continues to grow on a solid foundation of clear rules rather than on a shaky foundation of poor regulation and supervision. g

| TRR 32

n Greek mythology, Hera is known as the wife and sister of Zeus, the goddess of women and marriage. HERA, in the world of reverse mortgages, however, was written into law on July 30, 2008, as the passing of the Housing and Economic Recovery Act. The summer of 2008 was a turbulent time for mortgages, home values and the global economy overall, with the world on the cusp of a major economic correction. I


the Essentials

The Tale of Regulators and Originators

An uncanny resemblance to Greek mythology.

Jim Cory

TRR | 33

HERA was the beginning of a tremendous amount of regulation in the mortgage business, with a great deal of it pertaining to the Federal Housing Administration, and more specifically the HECM reverse mortgage product. Each change, beginning with the HERA regulations and ending, for now, with the Federal Reserve Board’s rule on compensation set for April 1, 2011, has forced mortgage originators to adapt.

To see what regulatory hurdles lie ahead for the mortgage originator, one must review the past. And while reviewing the recent history of regulation, it helps to remember the words of Alexis de Tocqueville, who once remarked, “EvEnts CAn MovE FRoM thE iMPossiblE to thE inEvitAblE without EvER stoPPing At thE PRobAbly.”

Thus begins our love story between regulators and originators, opening in the summer of 2008…

(Author’s note: I am not an attorney and many of the rules and dates have been abbreviated or perhaps even paraphrased incorrectly, both to keep the reader’s attention with brevity of explanation, and because of my general ignorance. Enjoy.)

* * *

ACT 1 the First date (2008)

HERA was signed into law on July 30, 2008, and was composed of several acts, all meant to bolster the flagging housing market, find a solution for Fannie Mae and Freddie Mac, and protect consumers and homeowners. As a reverse mortgage originator, the piece I remember most was the FHA Modernization Act. This act, among other things, allowed for an increase of FHA HECM limits to $417,000 on a nationwide basis beginning November 2008. There would be no more querying the FHA limit website for the lending limit in an obscure county, and more

importantly, the overall maximum lending limit for HECMs had been increased by more than $50,000. We were in love!

But HERA is also known as a jealous and vengeful goddess; she brought with her the MDIA and the SAFE Act. The MDIA and the SAFE Act, with most parts implemented in 2009 and 2010 respectively, were far away, little noticed, and of no concern to the general mortgage originator in 2008.

* * *

ACT 2 marriage and the First Fight

(2009)

The American Recovery and Reinvestment Act of 2009, or ARRA, was signed into law on February 17, 2009, a meaningless acronym on an innocuous date. The ARRA changed the HECM national mortgage limit from $417,000 to $625,500, an increase of 50 percent. This was a great moment for the legions of reverse mortgage originators, as it ushered in a wave of new and refinance business. Originators contacted applicants that formerly could not be helped, as well as those that refused the smaller HECM reverse mortgages. The reverse mortgage business was booming.

However, while the reverse mortgage side of the industry was doing well, thunderclouds were gathering ahead for the overall mortgage industry. Now Governor Andrew Cuomo, the same Andrew Cuomo

many of us remembered from his days as HUD Secretary, had stepped back into the housing ring, this time as Attorney General of New York. In order to cease an investigation into their practices by Mr. Cuomo’s office, Fannie Mae and Freddie Mac agreed to the Home Valuation Code of Conduct, or HVCC. In short, it said that an originator could no longer order an appraisal directly from an appraiser. This seemed like a good way to create appraiser independence, but carried with it a host of issues, most notably an increase in cost for the consumer. Thunderclouds indeed, but not affecting FHA and the reverse mortgages they insured just yet…

One year to the day after the passing of HERA, the Mortgage Disclosure Improvement Act, or MDIA, was finally

implemented. Soon after implementation, the acronym MDIA began to be pronounced “Medea,” most assuredly after Medea, the wife of Jason and the Argonauts. The tales of Medea are known to be confusing and disparate, much like the similarly pronounced act, however most tales have Medea murdering someone over some disclosure of information.

Here we have our second act passing with the best of regulatory intentions but a number of unintended consequences that would eventually affect the consumer. Many would agree that some parts were good, such as requiring redisclosure when the deal changes by a certain

threshold; and others were not so good, like mandatory wait times of several days >>

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| TRR 34

and rules about acceptance of documents through mail, fax, email and courier delivery. The love affair was not over, but the cracks were spreading in the foundation of the relationship.

September 30, 2009, was probably the busiest day in reverse mortgage history. After moving the HECM insurance fund in with the FHA fund, and due to horrific home value losses, it was determined by HUD that the previously subsidy negative (federal-speak for profitable) HECM program now was subsidy positive (federal-speak for broke). Approximately 10 days earlier, it was made clear that HUD intended to cut principal limits for new, unlogged applications as of October 1, 2009, by 10 percent across the board. This was a change that had to happen to preserve the program, but it was a major blow to consumers who saw the lending proceeds severely decrease with no accompanying decrease in rate or fees. Later, in the first quarter of 2010, originators saw the deleterious effects of this policy change, as new reverse mortgage applications fell by as much as 40 percent (many have postulated that falling home prices made up quite a bit of this drop in volume, however it is difficult to argue that the drop in principal limits didn’t cause much of this downturn).

* * *

ACT 3 the honeymoon is deFinitely over (2010)

This act begins with significant changes taking hold on January 1, 2010, with HUD, via RESPA, making sweeping changes to the Good Faith Estimate, or GFE. Now an official form was created, intending to show the consumer the exact details of their loan, its rate, features and costs. The new GFE, while welcomed by some, had two obvious fatal flaws. First, calculation of origination charge is often impossible to read correctly, even by an experienced originator. Added to

this was a rule saying a bank or lender (and even if you’re not the lender, provided you can table fund) doesn’t have to disclose the origination charge. Second, the document was created with no signature line! Shady originators rejoice! Nice originators finish last. This new GFE at the time was seen as a potential watershed moment for mortgage originators, however after a few months it just became one more regulation to follow.

2010 also saw the brunt of the work for the SAFE Act, though part of HERA in 2008 (remember her?), had a multiyear, staggered implementation. The SAFE Act called for all non-bank mortgage originators to be licensed through a national database, known as the Nationwide Mortgage Licensing System. While this system has great utility for consumers and even some positive features for originators, it caused a massive increase in licensing fees for everyone in our industry, except bank employees. Many would agree that the SAFE Act and creation of the NMLS was a good thing overall, but again costs increased and again the banks were able to avoid a significant part of the cost and regulation.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law on July 21, 2010. Returning to the Greek mythology analogy, if HERA were Hera, then surely this would be Zeus, the mightiest of Olympians. As the implementation of most aspects of “Zeus” will not occur until after the publishing of this article, it is still largely unknown how it will affect the regulatory environment. One pertinent piece of it is the Mortgage

Reform and Anti-Predatory Lending Act, which contains future regulatory hurdles such as another round of the loan originator compensation reform, rules on high cost

mortgages, HVCC revisions (sorry, Governor Cuomo), and loan modification regulations. Dodd-Frank is still hotly debated, especially regarding the creation of the Bureau of Consumer Financial Protection and the lack of “too big to fail” legislation. However, many are no doubt wondering how anything in this bill could possibly fail if

authored by Senator Christopher Dodd and Congressman Barney Frank.

Also in 2010, additional rules were passed or proposed and pending implementation, at the time of this article’s publishing, including changes to Regulation Z to be briefly addressed below, FTC Rulemaking regarding mortgage advertising, and numerous state-specific regulations.

FHA mortgages saw some new specific regulations in 2010 as well, as a previously released FHA Mortgagee Letter regarding condominium financing was implemented after several delays. On February 1, the “spot condo” approval process was eliminated, replaced with the requirement that any condominium must have the entire project approved in order to be eligible for FHA financing. Condominium financing, already struggling, was dealt a vicious blow.

Fourteen days later FHA implemented its own form of the HVCC, which basically required brokers and lenders to order appraisals through appraisal management companies. This was another regulation

As with every previous counseling change, the industry groaned

as the counseling system, which as usual was not broken, was

fixed yet again.

i

TRR | 35

with the best intentions but some unintended consequences for the consumer, as appraisal prices increased and the quality of appraisals began to differ.

On September 11, FHA implemented the new HECM Counseling protocols, designed to help borrowers and improve the counseling. As with every previous counseling change, the industry groaned as the counseling system, which as usual was not broken, was fixed yet again.

Faced with another budget shortfall and subsidy request, FHA made four additional reverse mortgage changes effective October 4, 2010. I First, the HECM Saver was introduced with lower fees and a lower principal limit to drive safer growth and offset losses. II Second, the principal limits were reduced for all borrowers but with heavier effects on the older seniors. III Third, the monthly FHA Mortgage Insurance Premium was increased from 0.5 percent to 1.25 percent. And in a complete surprise to the industry, FHA lowered the HECM factor floor from 5.5 percent to 5.0 percent, meaning that at the current low rates, customers would feel less MIP impact and could actually benefit from the principal limit changes. Very Promethean indeed, although disturbing to the gods of the secondary market.

As 2010 came to a close, brokers and smaller lenders were given one final parting shot, the Implementation of Final Rule FR 5356-F-02, know as FHA Reform…

* * *

ACT 4 you did What??? – no, seriously, What did you do? (1/1/2011 – 3/31/2011)

Most of the FHA reform was implemented January 1, 2011. One rule that came with it was that it took away the FHA “mini-Eagle,” meaning that brokers were stripped

of their FHA licenses, supposedly a way to increase oversight of FHA originators. The rule renames the brokers Third-Party Originators, or TPOs, and puts them under the supervision of the lenders. The accepted reasoning is that FHA was too thinly staffed to monitor all of the licensed brokers, however it seems odd that oversight was increased by no longer overseeing. Many in the broker community thought this could be the end of the broker, only to find this rule, like the GFE a year before, was just one more hurdle that was cleared fairly quickly.

All of this history takes us to the next regulatory hurdle, the Loan Originator Compensation Final Rule by the Federal Reserve Board. As of publication, this rule is fittingly set to be implemented on April Fool’s Day, 2011, the perfect date for such a confusing rule. Many believe that this rule is the biggest game-changer yet; the rule that will turn the entire mortgage originator world upside down. It is meant to be an easy, simple way to prevent mortgage originators from pushing products that aren’t in the best interest of the consumer. Now that most risky mortgage products (I swore I wouldn’t write the word “subprime.” oops…) are no longer offered and basically eliminated entirely, many have remarked that this is like trying to close the barn door after the cows have already left.

The basis of the rule, and please remember that your author is no attorney, is that for fixed-rate loans (of course more risky adjustable rate mortgages aren’t included), loan originators and brokers cannot be compensated based on loan terms, including rate, aside from the size of the loan.

Additionally, compensation cannot be paid to a broker if the borrower is compensating the broker as well. The fact is, at time of this publication, no one really knows for sure what this exactly means, except that rate sheets, originator compensation plans and even business plans are already being altered.

What we do know for sure comes from H.L. Mencken, who once said, “There is always an easy solution to every human problem – neat, plausible, and wrong.”

Due to this rule, some banks are dropping wholesale programs and restructuring their loan originators to work more on a salary basis. Every lender has a different idea on how to compensate brokers and their loan officers. Lenders are approaching brokers and individual mortgage originators to join them as branches in their regular retail operations. And some brokers are joining with lenders, while others are staying put to see how the dust settles.

Amid all this chaos, and looking back to all of the previous game-changing events, many cannot help but see the possibility that this rule, like the others, could just be much ado about nothing. This author looks forward to reading this paragraph after therule’s implementation and laughing, either at the madness of the current environment, or himself.

* * *

ACT 5 the Future (4/2/2011 and Beyond)

What will the future hold for the love between the mortgage regulator and reverse mortgage originator? Will the heavy pendulum of regulations swing back and loosen things up? No one can answer these questions, however a few things are for certain: Reverse mortgage originators will be there to cheer the victories, quietly lament the defeats, and do our best to care for our customers. And like almost every regulation since our beloved HERA, the new regulations will increase the cost of mortgage financing for our dear customers.

Cheers to the survivors of this torrid affair! g

i

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| TRR 36

THE

REVERSEreview

June 2010

Local PR Can Extend National Efforts, But Do Your Homework!Justin Meise

page

16The media is a major source of information, especially in the promotion of products. Even reverse mortgages are dependent upon good coverage. Because any and all mediums are subject to positive and negative information, all mortgage industry participants need to play a role in positive reinforcement through the media. Beginning with grassroots efforts, Justin Meise suggests some ways in which everyone can help develop positive media coverage for the reverse mortgage industry.

THE

REVERSEreview

J U L Y / A U G U S T 2 0 1 0

SURVIVINGIn The ReverseMortgage IndustryTodd Walters

THE

REVERSEreview

S E P T E M B E R 2 0 1 0

REVERSE MORTGAGES: AN ORIGINATOR’S TALE

Simple and easy marketing strategies can improve your credibility in the reverse mortgage field

Sue Haviland

THE

REVERSEreview

O C T O B E R 2 0 1 0

EMBRACING CHANGE:How brokers can successfully market the

HECM Saver in their businessesJason Levy

!HUD

%ETHICS ADVISORY

2010-01

THE HECM SAVER

AND SALVATIONA parable on ML 2010-34 and

NRMLA ethics advisory 2010-01

Fed Kamensky and Joel Schiffman

THE

REVERSEreview

N O V E M B E R 2 0 1 0

save the industry?

can it

$

THE

REVERSEreview

D E C E M B E R 2 0 1 0 / J A N U A R Y 2 0 1 1

Q THE SAFE ACT:

WILL IT SERVE ITS PURPOSE?

The industry anxiously awaits the changes that come with

the passage of the SAFE Act.John Smaldone

10 WAYSto become the

“GO -TO” PERSON

The Industry’s

2011RESOLUTIONS

+newlookyear

HMBS

as “Holy Grail”offixed-income securities

A CONVERSATION WITH NEW VIEW ADVISORS’ JOE KELLY.

ATARE E. AGBAMU

THE

REVERSEreview

F E B R U A R Y 2 0 1 1

REFORMS:consequences forORIGINATORS

3SECRETSfor REFERRALS

customersCHANGING:WHAT LENDERS

MUSTdo

THE

REVERSEreview

M A R C H 2 0 1 1

TALKINTERVIEW

Craig Corn Challenges the Industry to Seize Opportunities

BRETT G. VARNER

THE THREAT OF THEFT

QC basicsdanger in 2011?

THE

REVERSEreview

May 2010

To Be, Or Not To Be: FHA Loan Correspondents Face a Looming QuestionWeiner Brodsky Sidman Kider, PC

page

18In April, HUD reformed some of the FHA regulations, and developed the “Final Rule”. This change takes effect on May 20, 2010, and brings new regulations that FHA loan correspondents must understand and abide by, which can quickly become overwhelming. In an effort to help originators and lenders see the light in these changes, Joel Schiffman and Fed Kamensky, of the law firm of Weiner Brodsky Sidman Kider, P.C. explain the upcoming shift.

t r r

thank youI would like to extend a big THANK YOU to all

of our readers, authors and advertisers of the

magazine. You are the ones that make our jobs

here exciting, fascinating, mind-boggling (at

times) and ever-changing. We pour everything

we have into each issue of The Reverse Review

magazine in hopes that it will be well received

among the community of our readers and

hopefully we’ve lived up to that goal. This year

has flown by and has been nothing but fun!

Happy anniversary, The Reverse Review –

here’s to another great year to come.

THE

REVERSEreview

April 2010

How Medicaid’s Estate Recovery Can Help You Make New FriendsJonathan Neal

page

18Those of us in the Reverse Mortgage Industry are here because we truly care for Seniors and want to see them enjoy their golden years. As such, this is also true for those who seek to provide seniors with Long-Term Care Insurance. As the saying goes, “two minds are better than one”, so why not put our heads together in order to offer Seniors products that benefit them in the long run. This month, Jonathan Neal focuses on the idea of Reverse Mortgage and Long-Term Care Insurance professionals coming together in order to provide Seniors with sound knowledge and advice on another use for their Reverse Mortgage funds which they may not have considered in the past.

year anniversary

year in revieW

from the editor

jonathan nealHow Medicaid’s Estate

Recovery Can Help You Make New Friends

-april

Fed kamensky /joel schiFFman

To Be, or Not to Be: FHA Loan Correspondents Face a

Looming Question-may

justin meiseLocal PR Can Extend National

Efforts, but Do Your Homework!-june

todd WaltersSurviving in the Reverse

Mortgage Industry-july/august

sue havilandReverse Mortgages: an Originator’s Tale

-september

jason levyEmbracing Change

-october

Fed kamensky /joel schiFFman

The HECM Saver and Salvation-november

john smaldoneThe Safe Act:

Will It Serve Its Purpose?-december/january

atare e. agbamuHMBS as “Holy Grail” of

Fixed-Income Securities-February

brett g. varnerCraig Corn Challenges

the Industry to Seize Opportunity

-march

TRR | 37

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l

the ResourcesInformation at your fingertips. A listing of advertisers and contributors featured in this issue.

12,020 Number of pages The Reverse Review has printed in the two years that it has been in publication.

Number

the AnniversaryThe Reverse Review is celebrating its two-year anniversary this month –

here is to many more successful years to come!

| TRR 38


the Last Word

The “Eyes & Ears” of the Senior Generation miChael Banner

The future of the reverse mortgage industry depends on education. How many times have we heard that? But just whom do we need to educate? Obviously we need to educate

the seniors, the actual people this great product can help in so many ways. The majority of our industry think we need to get the word to the seniors; I happen to disagree (strongly).

The mortgage industry, reverse or conforming, has never been and never will be the “eyes and ears” of the senior generation. And when you add into the equation what Wall Street has done to the mortgage industry’s reputation the last few years, thinking that we can suddenly become the delivery vehicle, is arrogance at best. Recession, principal reductions, low appraisals and increased MIPs aside, it’s just not happening. We are not the messengers to carry the true strength of this great product to the masses.

Then who are the “eyes and ears” of the senior generation? An even better question may be: When any product is introduced to the financial community, how has it gotten to the masses? Hmmm.

How about the 1.1 million insurance agents that includes long-term care agents, Medicare supplement agents and hundreds of thousands of financial advisors? How about more than 1 million attorneys? How about the 55,000 certified financial planners or how about those 630,000 registered reps that are dealing with the losses their senior clients have taken in their investment portfolios in recent years? Or how about the several million home care providers that deal with seniors every day and have to hear them say, “We know we need the home care but we simply can’t afford it.”?

Why is so much of our industry so afraid of reaching out to these other segments of the mainstream financial world? Every time I ask this question I get the same answer. If we

teach all of them about reverse mortgages then they may – are you ready? – CROSS-SELL!!!

This industry has become so scared of cross-selling that it has convinced itself that it’s a bad thing, but it’s not. The truth is, used correctly, a reverse mortgage can help millions of seniors afford home health care services and long-term care insurance premiums that otherwise would never be available. How about a line of credit for seniors that are experiencing record low rates of returns on their CDs, savings or annuities? Why should their quality of life suffer in their retirement years? Guess what: Seniors don’t discuss these matters with their “mortgage guy”; they discuss them with their “trusted financial advisor.” We are not the delivery vehicle; the groups mentioned above are and always have been. We need to become their eyes and ears!

Why hasn’t our industry befriended the real estate industry? The majority of the 1.2 million licensed Realtors in this nation are not even aware that the purchase mortgage exists. In my opinion, the purchase reverse mortgage is a sleeping giant juts waiting to be introduced to the masses...via the real estate industry.

Building a large and successful referral base is just not easy. But if we don’t convince the mainstream financial community that the reverse mortgage deserves to be considered a mainstream product then I truly fear we may be the bottom rung of the financial ladder for many years to come. And we don’t deserve that, this great industry doesn’t deserve it and most importantly the millions of seniors we could be reaching absolutely don’t deserve it! Let’s stop being afraid of something bad happening and start doing lots of good. g

TRR | 39

| TRR 40

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