the reverse review

THE

REVERSEreview

M A Y 2 0 1 1

Sherry B. ApAnAy

taking care of SenioRS

in need:A mission still possible?

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

in the rain

Rev

erse

Vis

ion

Sui

te

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.

| TRR4

The Report 7, 9

Ask the Underwriter 10

The Perspective 12

The Advisor 14 The Conversation 16

Ask the Appraiser 18

The Hot Seat 20

The Industry Roundup 22

The Resources 41

The Last Word 42

TRR 05.11

The Legal Brief Series 24A springtime review of new HECM Mortgagee Letters: ML 2011-01 & ML 2011-09.Fed KamensKy & Joel schiFFman

Taking Care of Seniors in Need 28A mission still possible?sherry B. apanay

Will Baby Boomers Go Boom or Bust? 34A look at the true feelings and concerns of the baby boomer generation. roger chiocchi

Living at Home Brings Peace of Mind 38Long-term care and reverse mortgages create the ideal partnership for seniors wanting to stay in their homes. michael Banner

24 28 34

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the Essentials

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the Core

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reversereview.com 8 TRR | 5

© 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 DirectortrizzlE knight

Speck check is for the bird. Sorry, Kersten.

News EditorBrEtt g. VArnEr

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

e

The customer is always right. Growing up I had many jobs in the retail and service industry where we lived by this motto. I heard every request in the book and ultimately… the customer always had to be right!

In our May issue we talk about educating the customer and, as Brett Varner puts it in this month’s Perspective, “presenting your argument in a way that corresponds with [the customers’] perspectives and needs.” Knowledge is power and the more you know, the better able you are to make a sound decision. Maybe the customers I had in the past didn’t have all the knowledge they needed to really be “right”… could it be the customer isn’t always right? In the case where additional education and further knowledge is needed, I believe this is very true.

Educating seniors is a theme throughout our entire issue this month. In The Advisor, Alain Valles provides tips on originating by mail. Both he and John LaRose, who wrote The Last Word, touch on the fact that the baby boomer generation

is becoming more and more tech-savvy. Our industry needs to take note of this and develop new ways of reaching out to seniors whether it is for the purpose of education or just to keep them informed. Michael Banner also writes a great piece on educating seniors about the benefits of long-term care. He comments that there are many misconceptions regarding long-term care that a little education and knowledge could clear up.

Whether the customer is right or not, it’s our duty to provide seniors with all the facts “in a way that corresponds with their needs” to help them understand what options are out there and allow them to continue living the life they want.

We’ve put together another great issue for you this month so sit back and enjoy all the hard work that went into our May issue of The Reverse Review.

Until next time,

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

| TRR6

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the Contributors

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Sherry B. ApAnAyTaking Care of Seniors

in Need pg 28

As Executive Vice President of Generation

Mortgage, Sherry is responsible for the

company’s wholesale and retail sales. With

experience in both divisions, Apanay has been working within the reverse mortgage

industry for the past 15 years and managed a

business division for the past 11 years. She is a

member of the National Reverse Mortgage

Lenders Association and serves as Co-Chair

for NRMLA’s Education Committee.

FeatureArticle

dave BancroFt The Conversation, pg 16

Dave Bancroft, former Executive Vice President and board 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

michael Banner

Living at Home Bring Peace of Mind, 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

roger chiocchi

Will Baby Boomers Go Boom or Bust?, pg 34

Roger Chiocchi is a lifelong advertising professional and writer. In his book, Baby Boomer Bust? How the Generation of Promise Became the Generation of Panic (www.babyboomerbust.net), he examines the factors underlying the economic meltdown of 2008/2009, utilizing his expertise in in-depth qualitative interviewing and analysis. Chiocchi is a graduate of Ithaca College and earned his MBA at The Wharton School and is currently a principal at marketing communications agency, Brandloft. www.brandloft.com

Fed KamensKy

The Legal Brief Series, pg 24

Fed Kamensky is an associate with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. [email protected] | 202.628.2000

John larose

The Last Word, pg 42

John LaRose is the Chief Executive Officer of Celink, the nation’s largest reverse mortgage subservicer. LaRose also serves on the Board of Directors of the National Reverse Mortgage Lender’s Association and is the co-chair of its Compliance Subcommittee.

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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AMERICAN ADVISORS GROUP 115

GENWORTH FINANCIAL HM EQUITY 114

URBAN FINANCIAL GROUP 98

GREAT OAK LENDING 83

NEW DAY FINANCIAL LLC 83

GUARDIAN FIRST FUNDING GROUP 82

PNC REVERSE MORTGAGE LLC 69

THE FIRST NATIONAL BANK 67

SECURITY ONE LENDING 66

1ST AAA REVERSE MORTGAGE 65

NET EQUITY FINANCIAL INC 59

M AND T BANK 56

MONEY HOUSE INC 53

FINANCIAL FREEDOM ACQUISITION 47

SUN WEST MORTGAGE CO INC 44

IREVERSE HOME LOANS LLC 41

MIDCONTINENT FINANCIAL CENTER 40

SUNTRUST MORTGAGE INC 38

PRIMELENDING A PLAINSCAPITAL 36

SENIOR MORTGAGE BANKERS INC 35

EQUIPOINT FINANCIAL NETWORK 35

ASPIRE FINANCIAL INC 29

ROYAL UNITED MORTGAGE LLC 26

NATIONWIDE EQUITIES CORPORATION 20

HOME SAVINGS OF AMERICA 20

TRIPOINT MORTGAGE GROUP INC 19

MAS ASSOCIATES 18

ENVOY MORTGAGE LTD 18

FIRST MARINER BANK 18

AMTEC FUNDING GROUP LLC 18

ALL FINANCIAL SERVICES INC 18

TRINITY REVERSE MORTGAGE INC 18

BRIAN A COLE & ASSOCIATES LTD 17

SOVEREIGN LENDING GROUP INC 17

REVERSE MORTGAGE SOLUTIONS INC 17

PLAZA HOME MORTGAGE INC 17

NETWORK FUNDING 15

CHERRY CREEK MORTGAGE CO INC 15

CHRISTENSEN FINANCIAL INC 15

ARAMCO MORTGAGE INC 15

ALLIED HOME MORTGAGE CAPITAL 14

AMERICAN PACIFIC MORTGAGE 14

the reverse review May 2011

the Report

March 2011 Top Lenders Report

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

1960

Bank of America, N.A.

CHARLOTTE

Endorsement 738

MetLife Bank, N.A.

Endorsement 682

One Reverse Mortgage LLC

Endorsement 186

Generation Mortgage Co.Endorsement 186

Lender Endorsements Lender Endorsements

| TRR8

scott peters The Hot Seat, pg 20

Scott Peters, President and CEO of Generation Mortgage, has 30 years of successful business leadership experience. Prior to Generation Mortgage, he held senior leadership positions with MassMutual, General Electric Capital Corporation, PRG, AT&T, CompuCredit Corporation, and Nortel Networks. Peters graduated from West Point, is a U.S. Army Veteran, and earned his MBA from California State Polytechnic University. Peters serves on the board of directors for NRMLA.

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

Joel schiFFman The Legal Brief Series, pg 24

Joel Schiffman is a member with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. [email protected] | 949.754.3010

Brett g. varner

The Perspective, pg 12

Brett G. Varner is the News Editor for www.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.

alain valles, crmpThe Advisor, pg 14

Alain Valles, CRMP is President of Direct Finance Corp., Hanover, MA, one of the leading reverse mortgage brokers in the country. Valles received a master’s in real estate from M.I.T., an MBA from The Wharton School, and graduated summa cum laude from the Univ. of Massachusetts. Valles’s mission is to improve the quality of life through responsible financing. [email protected] | 781.878.5626

Bill waltenBaugh, sra Ask the Appraiser, pg 18

Bill Waltenbaugh, SRA is a certified appraiser of 20 years. During these years, Waltenbaugh witnessed and experienced firsthand the many changes that occurred in the appraisal industry, from the advent of licensing to the implementation of HVCC. Currently, Waltenbaugh 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 Contributors

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We noticed last month that the broker/wholesale channel performed much better than retail/direct in a down month for the industry overall, and now we can remove that last qualifier. Broker/wholesale outperformed again in February, up 16.2% compared to just 0.6% growth for retail/direct.

Of course, given all the regulatory headwinds, we don’t really expect brokers to gain back all the ground they’ve lost in the past year, but they’re not dead yet (despite the many obituaries already written). Given the relative weakness in top 10 lenders’ retail business in March, we also suspect that we’ll probably see brokers make it a clean sweep of growth for the quarter when we see next month’s Wholesale Leaders report.

Brokers comprised 40.8% of all endorsements in February, down considerably from last year (55.5%) but up dramatically from the low of 33.7% in December.

Urban Financial Group (owned by Knight Capital) is notable as the only top 10 lender that has grown their broker/wholesale business in the past 12 months, a tall order given the declines wholesale has seen over that same span. g

INDUSTRY SUMMARY

Retail endorsement Growth

0.64%Wholesale endorsement Growth

16.25%Total endorsement Growth

6.47%

TRAIlINg Twelve - MONTH eNDORSeMeNTS

10,000

8,000

6,000

4,000

2,000

08 10 11 12 1 23 4 5 6 7

*Numbers Represent MonthsRetail Wholesale

* Figures Above Reflect Change from Prior Month

10

11

12

1

2

3

4

5

6

7

8

9

ToT

UniTS CHG% UniTS CHG% UniTS CHG%

2,783

2,692

2,465

2,900

3,358

3,969

3,405

2,976

4,004

4,343

4,049

4,075

-10.92%

-3.27%

-8.43%

17.65%

15.79%

18.2%

-14.21%

-12.6%

34.54%

8.47%

-6.77%

0.64%

3,038

2,813

2,086

2,404

2,521

2,672

2,558

2,307

2,547

2,207

2,413

2,805

-21.9%

-7.41%

-25.84%

15.24%

4.87%

5.99%

-4.27%

-9.81%

10.4%

-13.35%

9.33%

16.25%

5,821

5,505

4,551

5,304

5,879

6,641

5,963

5,283

6,551

6,550

6,462

6,880

-17.01%

-5.43%

-17.33%

16.55%

10.84%

12.96%

-10.21%

-11.4%

24.0%

-0.02%

-1.34%

6.47%

ReTAIl wHOleSAle TOTAl

February EndorsementsRetail and Wholesale Volumes - ReveRse MaRket InsIght

41,019 30,371 71,390


the Report

9

| TRR10


ask the Underwriter

A Spotlight on the Mortgagee Letters ralph rosyneK

Are we having fun yet? 2011 continues to demand our patience and ability to remain flexible in the

HECM market. With the resolution of broker compensation issues, the implementation of redefined access roles within the FHA approval process, the departure of many industry backbone lenders and a major shift in the retail and wholesale workforce, it is a wonder how we continue to focus on assisting senior borrowers with their desire to remain in their homes.

It is important to note that the remainder of 2011 does not appear to be any less turbulent. We will be watching for the resolution of budget issues in Washington and focus on counseling – again. Possible funding resources that provide a measurable offset to counseling fees our borrowers pay could potentially cause lack of counseling availability or delays in the scheduling process.

Pending resolution of a Financial Assessment tool for borrowers, ongoing loan limit issues and additional Dodd-Frank implementation of consumer protection and mortgage banking controls are just a few of the other items on our plate.

While your focus was elsewhere, several mortgagee letters were issued as detailed below:

Mortgagee Letter 2011-01 (Servicing-Related)

This Mortgagee Letter (ML) provides loss mitigation guidance for the resolution of Home Equity Conversion

Mortgages (HECM) that are delinquent due to unpaid property charges and mortgages wherein due and payable requests were previously deferred by HUD. The guidance in this Mortgagee Letter applies to all HECMs where the mortgagor is delinquent in paying property charges or the mortgagee has advanced corporate funds to satisfy an unpaid property charge on behalf of the mortgagor, or both.

It Is Important to note that

the remaInder of 2011 does not appear to be any

less turbulent. We WIll be

WatchIng for the resolutIon

of budget Issues In WashIngton and focus on counselIng – agaIn. Possible

funding resources that provide a measurable offset to counseling fees our borrowers

pay could potentially cause lack of

counseling availability or delays in the

scheduling process.


Mortgagee Letter 2011-02 (Quality Control- and TPO-Related)

This Mortgagee Letter clarifies FHA’s quality control requirements in light of recent changes to the lender eligibility criteria for participation in FHA programs (refer to Section 203 of the “Helping Families Save Their Homes Act of 2009” [HFSH Act]; Final Rule FR 5356-F-02, “Continuation of FHA Reform: Strengthening Risk Management through Responsible FHA- Approved Lenders”; and Mortgagee Letter 2010-20). ML 2011-02 also clarifies Quality Control requirements for:

3 servicing transfers and loan sales3 reporting of fraud and material

deficiencies 3 the required timeframes for

mortgagees to review rejected applications

All FHA-approved mortgagees, including those in sponsored relationships, must have a quality control plan that requires the review of loans that are originated or underwritten. For those mortgagees that have sponsored third-party originators, the quality control plan must require the review of loans originated and sold to the mortgagee by each of its sponsored third-party originators. Mortgagees must determine the appropriate sample amount of each sponsored third-party originator’s loans to review based on volume, past experience and other factors specified by the Department in Paragraph 7-6(C) of HUD Handbook 4060.1, REV-2.

In addition, sponsors must document:3 the methodology used to review

sponsored third-party originators 3 the results of each review 3 any corrective actions taken as a

result of their review findings A report of the quality control review and follow-up that includes the review findings and actions taken, and the procedural information (such as the percentage of loans reviewed, basis for selecting loans, and who performed the review), must be retained by the mortgagee for a period of two years. Quality control review records must be made available to HUD upon request.

Consequently, all FHA-approved mortgagees will be responsible for performing quality control reviews of their sponsored third-party originators. The procedures used to review and monitor sponsored third-party originators must be included in a mortgagee’s FHA-approved quality control plan. At a minimum, these procedures must include the requirements outlined in Paragraph 7-6 of HUD Handbook 4060.1, REV-2.

Mortgagee Letter 2011-09

This ML provides guidance to counselors and lenders regarding when:

3 a HECM counseling fee should be waived

3 activities performed by a HECM counselor that are included in the amount of time recorded on form HUD-92902; Certificate of HECM Counseling

3 allowing agencies to establish counseling fees based on certain criteria

Note: The provisions in ML 2008-12, under the subheading “Appropriate Charges,” are superseded by new guidance in this ML under the subheading “Appropriate HECM Counseling Fee Charges.” The remainder of ML 2008-12 remains in effect.

Mortgagee Letter 2011-16

On December 5, 2008, the U.S. Department of Housing and Urban Development (HUD) issued Mortgagee Letter (ML) 2008-38 to provide clarification to mortgagees regarding the requirements for repayment and termination of a Home Equity Conversion Mortgage loan.

HUD’s intent in issuing ML 2008-38 was to supplement and explain provisions contained in the regulations at 24 CFR §206.125 and HUD Handbook 4235.1 (Home Equity ConversionMortgages). Since there has been some uncertainty regarding the guidance in that ML, HUD is rescinding ML 2008-38, effective as of the date of this ML.

Basically, HUD is clarifying the confusion we have all experienced with regard to its original non-recourse policy. HUD has now restated its non-recourse (with reguard to HECMs) definition as borrowers or heirs will never be >> continued on page 41

HUD HaS noW ReSTaTeD its non-recourse (in context to HecMs) definition As borrowers or Heirs will never be responsible for owing More tHAn tHe vAlue of tHe HoMe wHen tHe reverse

MortgAge is repAid.

| TRR12


the Perspective

Success Training from a 3-Year-OldBrett g. varner

I always knew having children would present new and interesting challenges, but I never expected how it would test many of the sales

and communication skills I have learned over the years. As my son turned 3 a few months ago and he started to display some “strength” in attitude and cooperation, I was faced with how to successfully address his tests of authority with patient and consistent parental guidance.

Arguing with him one morning about picking up his toys, I suddenly realized that I was forgetting one of the most important tools in sales: perspective. Success in sales extends far beyond being the most polished presenter or being the most versed in your product; it comes down to being able to present information to a prospective client in a way that meaningfully addresses their needs and concerns. This extends beyond salespeople. Whether you are trying to convince a co-worker to help with a task, lobbying your employer for a needed resource or selling to client, most communications in business involve some form of persuasion, or sales.

To understand perspective, when I would question why things were done in certain ways, a mentor used to tell me, “There are many different ways of looking at an elephant.” The first time I heard it, I was quite perplexed as to how this was relevant. He claimed the saying came from open-air markets in India. The theory suggests that if several potential buyers are standing around an elephant for sale, each one will be looking at the animal from a different angle. The salesperson, in turn, must address each person from the viewpoint at the place they are standing. Additionally, the salesperson must guide the person to other viewpoints to highlight the features that most correspond to his need.

The saying illustrates that others do not always see things the same way, and no matter how well a presentation or argument is made, others will not understand it until it is presented in a way that corresponds with their perspective. To put it simply, persuading others to see the benefits of your argument requires the ability to provide the information they need to know to answer the questions they have, rather than the information you want to give them.

In training and managing salespeople, I have heard many presentations that are very detailed explanations of what a reverse mortgage is, how it works, and what the benefits are. When I hear this, my response is: I can teach a middle school student to memorize and recite the concepts of a reverse mortgage. That doesn’t mean they understand the application of it or how it impacts the older homeowner. In the seventh grade, I was required to memorize the Declaration of Independence and then recite it as part of an exam. I completed

...others do not alWays

see thIngs the same Way, and

no matter how good a presentation or

argument is made, others will not

understand it until it is presented in a way that corresponds with

their perspective.


the assignment without ever having to truly reflect on the power of those words.

It was several years later that the power of those words was brought to life for me. The teacher understood our perspective as burgeoning adults who didn’t have experience or knowledge to comprehend the events that led to the creation of that document. Through discussion and debate, we explored what we envisioned Thomas Jefferson and the other Continental Congress delegates went through in creating and adopting the revolutionary document. By understanding our perspective, the teacher was able to pique our interest in the topic that lead us to a deeper appreciation of the country and our responsibilities, especially as we were approaching our first opportunity to vote.

Later, that lesson helped me see that in sales, success is built upon relationships, and relationships are based upon interaction and understanding. When a salesperson is asked by a prospect, “What is a reverse mortgage?” and they respond with a five-minute monologue about the product, they risk pushing the prospect away by overwhelming them or confusing them, rather than developing relationship. It is basically telling the prospect, “I don’t know you or what you want, so I am going to show you how much I know.”

Developing relationship and perspective requires engaged, interactive conversation. This occurs when the person driving the conversation controls the length of periods they talk and asks leading questions to learn more about the other person. This is important because during conversation, many people find it difficult to listen for longer periods of time. When the one person begins speaking, the other tends to focus their listening at first, but then they begin to think about what they are going to say in response. The result is that salespeople lose the attention of their prospects,

and miss the opportunity to learn key information provided by the prospect related to their concerns.

The best method for managing a conversation is to keep responses as short and informative as possible, followed by a question for the prospect. As an example, if a prospect asks the catchall question,

What is a reverse mortgage?” A BRIEF RESPONSE SHOULD BE INTRODUCTORy, SUCH AS, “The reverse mortgage program provides older homeowners such as yourself a safe way to access the equity in their home for use as they see fit, without monthly payments. What do you think you would do with additional money if it were available to you?

I know some will think that this response insufficiently answers the question, but you shouldn’t be concerned about that until you know enough about the prospect to provide a meaningful answer. By controlling the conversation with questions, you learn more about the person, what their specific needs and concerns are and the detailed information they need to properly evaluate the product. Rather than flooding them with more information than they need, you are conversationally providing the details they need in a nonthreatening sales approach.

Utilizing this approach should result in the ability to make a very direct summation that demonstrates that you have listened and understood the benefits the prospect is looking for from the reverse mortgage. For example,

Based upon our conversation today, if the reverse mortgage could pay

off your current mortgage and provide additional funds that you could use to visit your grandchildren more often, that would be a great benefit to you. The response reveals where they are in the buying process and whether it is time to discuss the process of the reverse mortgage, or if additional questions remain.

With my son, I was growing more frustrated with him because no matter how good my explanation was about why I needed him to do something or change a behavior, he responded with the same question: “Why?” My competitive nature convinced me that I could win this battle (and by the way, you can’t win against a 3-year-old). I realized that I was telling him what I needed him to hear, not what he needed to hear, and I was letting him control the debate by asking questions. By changing my tactics and providing simple answers and asking him questions, the results are changing.

The child is learning, and that process of self-discovery only comes from experience. By challenging me, he learns the boundaries of his behavior (an important societal lesson). He also communicates things to me that he may not know how to put into appropriate words, such as being overtired, needing attention or wanting comfort.

So I have returned my focus to communication. The experience of parenthood is wondrous in many ways, but just as in business and other interactions, it has reaffirmed my belief that success in relationships requires a willingness to see things from others’ perspectives, listen intently and adjust my words to match the balance between what I want to say and what they need to hear. g

| TRR14


the Advisor

Originate by Mail?alain valles, crmp

I am an “old-school” reverse mortgage broker in that I originate my loans in person, often driving two hours each way, investing three hours with my client and sometimes meeting a second or third time. I often arrive home feeling jet-lagged. But recently I’ve talked to loan officers who do everything by mail and claim great borrower satisfaction.

Should you meet in person?The principal reason for meeting a borrower face-to-face is to create greater trust. It also gives me a better understanding of the senior’s environment, including any physical limitations, competency concerns, and condition of the property. It’s a chance to respond to body language. And it’s easier to explain disclosures and collect documentation.

But the opportunity costs of all that drive time (not to mention fuel cost and inherent driving dangers) are reason enough to explore originating by mail. Then there are the times when the senior feels pressure to “entertain” by cleaning their home or providing food that can be hard to swallow. And sometimes I’m just not sure the senior really wants to hear all my stories.

Top Secrets of Originating by Mail Time to change my thinking! My discussions with successful “by mail” loan officers resulted in the following tips to share with you:

Use a three-call & mail approach

g FIRST CALL An introductory conversation explaining the loan officer’s goal of sharing information about HECMs and learning what the senior would like to accomplish. The goal of this call is to capture the borrower’s age, estimated property value, and current mortgage balance. The call ends with setting a time for the next call to discuss particular options after reviewing the information provided. Estimated call time: less than 25 minutes.

g SECOND CALL The purpose of this call is to share possible HECM options, discuss which option will best meet the senior’s goals and educate the senior about how the HECM process works, including the requirement of a counseling session. When the senior desires to move forward, this call

ends with the loan officer promising to overnight the loan package with accompanying disclosures and information, and a

commitment to review the application materials on a certain date. Estimated call time: 30 minutes to 1 hour-plus.

g THIRD CALL Now it is time to focus on explaining the loan package, having the senior sign the disclosures, reviewing the required supporting documentation, and explaining how to schedule the counseling session or call. Assuming this call ends well, the senior agrees to a time schedule to complete counseling and to mail back the loan package in the provided, prepaid overnight envelope.

Presentation is key Make sure your loan packages are orderly, have your disclosures in large font, and are numbered. Provide a checklist of how the loan process flows and what documents are needed, and make sure you have a compliant list of HECM counselors. Including educational materials as well as a single-page summary of the borrower’s goals is appreciated.

PReSenTaTion iS key: provide A cHecklist of How tHe loAn process flows And wHAt docuMents Are needed.3


Communication optionsMore and more seniors are computer savvy and many are creating their own Facebook pages to keep track of the grandkids. GoToMeetings and Skype are growing avenues to explain all those forms as well as having a face-to-face conversation for those with webcams. Have your support staff or processors join the call to let the senior know there’s a team eager to help them. Sending an “office team” picture helps to warm the relationship.

Supporting documentation Make it easy for the borrower. Explain specifically what is needed and go the

extra step by identifying places they can go to make copies, such as the local library or office

supply store. Sometimes the inability to get a copy of a driver’s license can hold up a file for weeks.

Stay in touchCommunicate frequently throughout the entire process. The senior needs to know what’s going on and must never be made to feel like they’re just a number or have

been forgotten. A weekly call from the loan officer is critical to monitoring the borrower’s emotions and addressing any new questions or issues.

Which is the best approach?In the end, both. Being proficient at originating both in person and by mail is probably the best solution. I’m adding to my infrastructure systems that will better allow me to eliminate hours of driving while improving productivity and reducing costs. Maybe it’s time you try too. Please forward your thoughts and tips. I’d love to hear them!

[email protected] g

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

?

| TRR16


the Conversation

Tiger Blood and Adonis DNAdave BancroFt

The Appellate Court’s decision to squash the postponement and drive forward the compensation changes reeks of the work of The Warlock. Only one with tiger blood running through his veins could possibly harness the power to blind the

truth and force an agenda that will harm an already ailing industry. The double helix of Adonis DNA went on full display as the Federal Reserve Board flexed its rhetoric and somehow won the most recent showdown. Am I the only one recognizing the similarities of Charlie Sheen’s antics and the way this whole thing is going down? The core of the law is being created on idealism and grounded with a skewed perception of what seems right. Like Charlie and the Goddesses, you would like to think that two is better than one, but in reality that is not the case. These laws are being created to curb the perceived outrageous greed of the originator that perpetrates every transaction and will somehow, like rehab, cleanse the industry of its evil ways. C’mon, truth be told, the products that were abused are gone and for the most part so are the thieves that stole our industry’s integrity.

I find it disappointing that the court sided with the Board, which presented nothing new and echoed its original stance. Sidestepping real issues like consumer access and limited competition while pointing fingers and saying the other side did not do enough to show true cause. Am I the only one appalled that the court was molasses-slow and eleventh-hour late to stay the order, but is now lightening-fast to put it back in play? Whatever happened to proper due diligence, weighing the pros and cons and coming to a proper conclusion? Too many times I have found in business that good intent can have bad consequences.

Making a decision merely to make a decision is typically a poor choice.

Unfortunately, the real impact this law is going to have is that the consumer will pay more at closing. Decimating compensation in business is counterproductive. Restrictions in this industry will only usurp the true spirit of business and stymie growth. In essence, without the flexibility to offer more product choices and cost options, the consumer suffers. Most rate sheets today show little difference in rebate

between the lowest of interest rates and the highest of interest rates and that goes for both the forward and reverse mortgage products. In the past you could present a higher rate if cost was an issue and use the rebate on the backend to absorb the third-party fees or even the origination to stay competitive. Or if rate was the issue, you could lower the rate and increase the origination, but the consumer had the choice.

Now we will be driving loans to lenders not based on relationships or proven processes or even exceptional service but on loan amount only, can anybody see a problem with this? As Charlie has found out in Detroit and again in New york, what seems like a good idea sometimes spirals into a sea of boo’s and walkouts. Hopefully this industry can reverse the action and bring back some sort of sense to the compensation models before the damage is deadly. I am hopeful this much-maligned legislation will be overturned in time but until then may the Trolls fight on! g

unfortunately,

the real

Impact thIs

laW Is goIng

to have Is that

the consumer

WIll pay more

at closIng. Decimating

compensation in business is

counterproductive. Restrictions in this industry will only

usurp the true spirit of business and stymie growth.

reversereview.com 8 TRR | 17www.appraiserloft.com

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| TRR18


ask the Appraiser

WhenRepairs Are NeededBill waltenBaugh, sra

We recently received a question for our knowledgeable appraiser, which is addressed in this month’s 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.

QUESTIONWhy have appraisers become so picky about repair items such as minor peeling paint on structures and even fences? To be honest, I was a little confused when I first read your question. The way it’s phrased makes it sound like something recently changed; that appraisers are now singling out more repair items than they did in the past. A lot of things have changed, but the way concerns like peeling paint are reported isn’t one of them.

Before I go any further, I need to clarify a few things. Conditioning an appraisal and making the value subject to repair has a lot to do with the assignment type, the intended use and the intended user(s). In other words, what is the purpose of the appraisal and who is relying on the results? This is important because the intended user has some say as to how these concerns are addressed. Do they want to know what the property is worth before repairs are made or what it is worth after repairs are made? The appraiser can complete the report either way but the fact that the condition currently exists remains unchanged. Just because a client

isn’t interested in having a condition concern repaired doesn’t keep it from affecting the subject’s appeal, value and/or marketability.

The way a condition concern is reported for an FHA assignment completed for HUD can be very different from how it is

completed for a conventional lender for a conventional

assignment. That’s because HUD has specific policy regarding condition, how it is reported and whether repairs are required before closing.

Based on the question above, I can assuredly assume your inquiry has to do with FHA assignments because peeling paint and how it is addressed is a well-known HUD concern. As such, to provide clarification and to be sure everyone is on the same page, I will answer your question from HUD’s perspective regarding an FHA-insured mortgage-related transaction.

HUD has general acceptability criteria for all FHA-insured mortgages. To

qualify, a property must meet minimum property requirements mandated by HUD. Before 2006, these requirements were fairly strict and included general maintenance items, cosmetic items and even concerns over normal wear and tear. To qualify for FHA-insured financing, it wasn’t uncommon to find repairs for items such as cracked window glass,

minor plumbing leaks like leaky faucets, defective floor coverings such as badly

condItIonIng an

appraIsal and

makIng the value subject to repair has a lot to do with the assignment type, the intended use and the intended user(s).


soiled carpet and even the removal of debris from the crawl space.

On December 19, 2005, HUD revised their minimum property requirements and limited their concerns to items that affect the safety of the occupants and the security and soundness of the property. Let me be very clear: This doesn’t mean inferior cosmetic items shouldn’t be reported within the appraisal; it simply means HUD doesn’t require these items to be repaired to be eligible for an FHA-insured mortgage. All condition concerns still need to be reported and, if necessary, accounted for in the final value by making adjustments in the appropriate approaches.

If an item is found that affects the safety of the occupants and the security and soundness of the property, the appraiser should make the report “subject to” the repair of that item. Since the value is made “subject to,” no adjustment is necessary and the value reported is reflective “as if” the repair was already complete. Once the repair is completed, an inspection is made to verify acceptability and the condition is cleared for closing.

When it comes to defective surfaces including peeling, scaling or chipping paint, HUD requires all defective paint, both interior and exterior, to be corrected if the home was constructed before January 1, 1978. However, there

is some confusion when it comes to peeling paint on exterior surfaces. All exterior surfaces, despite the age of the home, require repair when the exterior finish and materials are unprotected. That’s because unprotected exterior surfaces will eventually become soundness concerns without current

maintenance. All exterior surfaces include, but are not limited to: g garages g storage sheds g decks g porches g railings g eaves g windows g doors g fences

Whether interior or exterior, it is the appraiser’s responsibility to provide a detailed description and exact location of the deficiency and condition the appraisal “subject to” repair.

At the end of the day, one would expect a decline in repair requirements given the changes made in 2006. If you are finding

an increase in the number of defective paint repair requirements, the only explanation I can offer is tied to changes in appraiser independence. It wouldn’t surprise me if loan production staff applied a little pressure to appraisers to overlook what they considered minor defective paint concerns in the past. Now that there is a stronger firewall between the appraiser and loan production, appraisers may feel more at ease identifying these legitimate and required repairs. g

Karen Keating recently became the first Title

Professional to become a Certified Reverse

Mortgage Professional

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“I have been in the mortgage business for about 12 years...(and) used a number of title companies. My experience with Tradition had been the best in my mortgage life.

They are responsive... professional and careful with my clients.

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Tradition Title Agency

Providing our clients with Knowledge, Experience and Trust.

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

| TRR20

t h e

hot

s e a t

From his favorite website to his outlook on the future of the reverse

mortgage industry, we get the personal and professional facts from

Scott Peters, President and CEO of Generation Mortgage, in our

monthly edition of The Hot Seat.

hothotU

SeatSeatC C

20 questions - things you need to know or may have been wondering -MAY 2011


scott

> My favorite website is ESPN.com. > My favorite magazine (besides The Reverse Review) is Men’s Health.> When i was younger I wanted to be a professional tennis player.> every morning I thank God for my life, wife, children, family and friends.

> i’ll never forget the first time I jumped out of an aircraft while leading soldiers on a mission in the military.> The best job i’ve ever had is the one I have now; I get to work with the great

people at Generation Mortgage and truly help our senior customers.> My parents taught me to help everyone that I possibly can.> The best lesson i’ve ever learned is to always tell the truth.> a good friend is one you can trust and who accepts you for who you truly are.> My favorite book is The Greatest Game Ever Played, which taught both sports and life lessons.

> The future of reverse mortgages is bright because the need for seniors to fund their longevity is growing as more and more baby boomers qualify for this product.

> Ten years from now the reverse mortgage industry will be stronger because our product will be more mainstream and genuinely valued as an appropriate retirement planning tool.

> if i could change one thing about the reverse mortgage industry, it would be to add escrow accounts to help solve default problems.

> i am optimistic about the reverse mortgage industry because as more Americans learn what a reverse mortgage can do for them or a family member, the more it will become an accepted financial tool.

> People should seek a career in the reverse mortgage industry because it allows one to personally witness the positive impact a reverse mortgage can have on people’s lives.

> i entered this industry because I wanted the opportunity to lead a company whose main goal is to help seniors.> Reverse mortgage professionals can best support the public image of reverse mortgages by always putting

the senior client’s needs first. This means providing superior product education and service carried out with honesty and integrity.

> The most important thing financial advisors can learn about reverse mortgages is that they are not “expensive,” nor simply a product of “last resort.”

> industry growth is dependent upon better educating consumers about what the product can do for those who are eligible.

> i would encourage a family member to consider a reverse mortgage because if the need is there and they meet the criteria, it could be life-changing for all family members. In fact, I have recommended the product to my own family members who now have a reverse mortgage.

P E R S O N A L

P R O F E S S I O N A L

Generation MortGaGe

PRESIDENT & CEO

When I was younger I wanted to be a professional tennis player.

| TRR22


the Industry Roundup

industryroundup May edition

Movers k shakersrobert ryan:

Following the departure of David Stevens, FHA Risk Manager, Robert Ryan was named Acting Commissioner.

texas MortGaGe bankers association: Announced its 10th annual Reverse Mortgage Day, to be held in Houston on September 7-8. The event will be co-hosted by NRMLA.

GeorGe Lopez: The Missouri governor appointed this James B. Nutter & Company Vice President to the Residential Mortgage Board. He will serve a term ending October 10, 2013.

LeGacy reverse MortGaGe: Jim Cory stepped up from his role as President to become CEO. Todd Ausherman was named to replace Cory. He will also assume the role of Chief Operating Officer.

reverse Fortunes:

Added functionality to their customer relationship manager to allow for direct import of client information directly into MetLife’s loan origination system.

nrMLa:

The Annual Washington Policy Conference, scheduled for May 10-11 at the L’Enfant Plaza Hotel in Washington, D.C., highlights the important relationship between the industry and government representatives. With key officials from HUD and other agencies discussing current regulatory issues, NRMLA encourages attendees to schedule meetings with their congressional representatives to show their support for the industry.

up-k-coMershuD rescinDs ML 2008-38: Relating to the lawsuit filed by AARP, HUD released Mortgagee Letter 2011-16, which rescinded the narrowed definition of “non-recourse” to exclude non-arm’s length transactions. The policy is somewhat in limbo as HUD referred mortgagees to the statutes pending further guidance from HUD.

cLearpoint creDit counseLinG soLutions: Announced a merger with Consumer Credit Counseling Service of New york. The addition, pending regulatory approval, will expand ClearPoint’s counseling services into their 12th state. The move will give them 10 locations in the state of New york.

urban FinanciaL Group:

As the wholesale/broker channel strives to battle back with consecutive months of surpassing retail in percentage growth, Urban has the distinction of being the only Top 10 lender whose broker/wholesale channel has grown in the past year.

DouG heyen:

Heyen was hired by FirsTrust Mortgage as Reverse Mortgage Specialist to lead the addition of reverse mortgages to their product menu.

What happeneD?huD cuts counseLinG FunDinG:

Grant funding for housing counseling programs became a victim of spending cuts as Congress approved a final budget for 2011 that eliminated $88 million in counseling funding, $9 million of which was for reverse mortgage counseling.

inDustry Job cuts: As the mortgage industry continues through a process of contraction and consolidation, industry employment has dropped by an additional 5.9 percent from a year ago and 51 percent from the peak in February 2006.

Lo coMpensation ruLe: Despite lawsuits by NAMB and NAIHP, along with efforts by multiple other organizations and officials calling to delay it, the Loan Originator Compensation rule went into effect on April 5, 2011.

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


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

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

Sherry B. ApAnAy

MichAel BAnner

roger chiocchi

Fed KAMenSKy

Joel SchiFFMAn

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.

| TRR24

ith winter ending, the snow melting, and love back in the air, there seems to be no better time for reviewing the Home Equity Conversion Mortgage (HECM) Mortgagee Letters released by the United States Department of Housing and Urban Development (HUD) during the first quarter of 2011. Fortunately, with so many other regulatory changes impacting the industry, the volume of HECM-specific Mortgagee Letters issued by HUD remained manageable, with only two letters, ML 2011-01 and ML 2011-09, published during the first quarter.


the Essentials

The Legal Brief SeriesA springtime review of new HECM Mortgagee Letters:

ML 2011-01 & ML 2011-09.Fed KamensKy & Joel schiFFman

¶

W


Notwithstanding the foregoing, following the end of the quarter, and as this article went to press, HUD published ML 2011-16, a significant missive concerning the proper application of the non-recourse provisions in the HECM loan documents. Given the importance of that subject, we will review ML 2011-16 in a later article in this series.

Reflecting a degree of scrutiny and concern by HUD risk managers with the overall level of HECM loans in tax or insurance default status, which reached approximately 13,000 loans according to an August 2010 report by HUD’s Office of Inspector General, the very first Mortgagee Letter published by HUD in 2011 provides important guidance to lenders and servicers on the handling of these delinquencies. ML 2011-09 deals with a more prosaic (if no less controversial) subject, namely the fee amount that can be charged for HECM counseling. Both Mortgagee Letters are important developments in the near-constant evolution of the HECM program, requiring the attention of industry participants in springtime, while the bees are buzzing, no less than any other time of the year.

ML 2011-01

On January 3, 2011, the FHA issued Mortgagee Letter 2011-01 (ML 11-01), providing guidance to FHA-approved lenders and servicers on how to handle HECM loans with delinquent property charges (i.e., real estate taxes, ground rents, flood and hazard insurance premiums and special assessments). ML 11-01 applies to HECM loans where the borrower has failed to pay property charges or the lender has made a corporate advance of property charges on behalf of the borrower, or both. ML 11-01 also applies to HECM loans where HUD has previously granted a deferred

due and payable status due to delinquent property charges.

According to ML 11-01, a loan is considered delinquent when the mortgagee receives notice of the mortgagor’s failure to pay a property charge. At that point, the loan cannot be assigned to HUD pursuant to the assignment option under FHA insurance. HECM lenders must begin to work with the borrower to cure the delinquency as early as possible. Lenders must inform the borrower that the loan is delinquent within 30 days of the first missed payment for property charges. A lender may not submit a due and payable request to HUD until the lender exhausts all loss mitigation options. Available loss mitigation options include, but are not limited to:

oneEstablishing a repayment plan (pursuant to a repayment schedule provided by ML 11-01);

twoContacting a HUD-approved Housing Counseling Agency (HCA); and

threeRefinancing the delinquent HECM loan into a new HECM loan, if sufficient equity in the borrower’s home to satisfy the existing loan and outstanding property charges is available.

ML 11-01 requires HECM lenders to send a Property Charge Delinquency Letter, providing the borrower with 30 days to respond and cure the default. For loans delinquent as of January 3, 2011, lenders must send the letter by April 29, 2011. For loans that become delinquent after that date, lenders must send the letter as soon as the lender receives notice of a missedpayment for property charges. ML 11-01 provides a model letter for use by HECM lenders. Although HUD allows lenders to vary the model letter to a certain extent, the letter must contain the substantive information provided in ML 11-01.

Mortgagees must offer borrowers a repayment plan for reimbursement of property charges advanced by the mortgagee. The due dates for repayment plans, depending on the amount of the advance, must be consistent with the time periods set forth in the chart below:

If the mortgagor provides evidence to the mortgagee that they are unable to repay the advance within the allotted repayment timeframe, mortgagees may, at their discretion, extend the repayment schedule up to 24 months, irrespective of the amount of the advance. HUD has not clarified >>

ml 2011-01: Mortgagees must offer borrowers a repayment plan for reimbursement of property charges advanced by the Mortgagee.

corporate aMount aDvanceD repayMent scheDuLe$1 - $500 Up to 3 months

$501 - $1,000 Up to 6 months

$1,001 - $5,000 Up to 12 months

$5,001 or more Up to 24 months

| TRR26

the nature of the evidence necessary to show that the mortgagor is unable to repay within the specified timeframe, but leaves it to the mortgagee’s discretion, so long as the documentation collected by the mortgagee clearly supports its decision.

Pursuant to HUD’s publication of responses to frequently asked questions on March 30, 2011, HUD clarified that the advance amounts specified in the chart should not include calculated interest on the amounts advanced, and that such repayment plans should be made available to pre-existing delinquencies, irrespective of the age or amount of such delinquency. Repayment plan agreements must also be signed by the borrower.

As of January 3, 2011, lenders must report all delinquent loans to HUD (including loans on a repayment plan and loans in a deferred due and payable status). Initially, lenders were required to submit an Excel file via email to [email protected] by February 7, 2011, pursuant to special formatting requirements provided in ML 11-01. Lenders are also required to provide HUD with notice of current delinquencies in a monthly Excel file or by manually updating HUD’s IACS system as delinquencies occur.

HECM lenders must send a due and payable request to HUD’s National Servicing Center if the borrower is unwilling to reimburse the lender for property charges, or if the lender exhausts all available loss mitigation options and the borrower is unable to cure the loan. ML 11-01 requires lenders to include documentation supporting their efforts to resolve the delinquency in the lender’s due and payable request. Lenders also must inform the borrower that he or she has 30 days to respond to the due and payable

notice. ML 11-01 requires lenders to include certain information in the due and payable letter to the borrower, including all available options to cure the delinquency and avoid foreclosure.

ML 2011-09

On February 4, 2011, the FHA published Mortgagee Letter 2011-09 (ML 11-09), providing guidance to FHA-approved counseling agencies and HECM lenders on the amount and the waiver of a HECM counseling fee. ML 11-09 became effective March 7, 2011.

HUD previously indicated in Mortgagee Letter 2008-12 (ML 08-12) that a HECM fee of $125 per counseling session is considered reasonable. ML 11-09 overrides this provision of ML 08-12, authorizing counseling agencies to charge more than $125 per session. According to ML 11-09, HECM counseling agencies may establish a fee structure as long as the fee is reasonable and customary; does not exceed a level commensurate with the counseling services that are provided; and is not being charged to pay for the service that is already funded with HUD’s grants or other funds. The fee structure must be included in the counseling agency’s work plan and must be disclosed to the borrower during intake. In any event, a borrower may not be turned away because of an inability to pay a HECM counseling fee.

ML 11-09 also provides that HECM counseling agencies should not collect a HECM counseling fee at the time of the counseling session if the borrower’s income

is below 200 percent of the Federal Poverty level. However, counseling agencies may charge such borrowers a HECM counseling fee at the time of loan closing provided the borrower has been advised during the counseling session of the amount of the fee. ML 11-09 also describes procedures for determining the borrower’s ability to pay a HECM counseling fee, including the documentation required for waiver of the fee.

According to ML 11-09, only the actual time spent on providing counseling to the borrower (in person or by telephone) may be recorded on the HECM Counseling Certificate. Time other than actual counseling (such as intake, putting together the information packet, and follow-up) may not be included on the HECM Counseling Certificate but

can be included when determining the cost of HECM counseling.

Although ML 2011-01 and ML 2011-09 are not the last words we are likely to hear from HUD concerning property charge delinquencies or counseling, they do reflect important changes in the operation of the HECM program. Since both Mortgagee Letters are already effective, lenders, servicers and counselors should ensure that appropriate processes and procedures are in place to fully comply with these new directives. g

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

hud prevIously

IndIcated In mortgagee letter 2008-12 (ml 08-12) that a heCM fee of $125

per counseling session is

considered reasonable. ML 11-09 overrides this provision of ML 08-12, authorizing counseling agencies to charge more

than $125 per session.

ML 2011-01: a LenDeR May noT SUbMiT a DUe anD PayabLe ReqUeST To HUD UnTiL THe LenDeR exHaUSTS aLL LoSS MiTiGaTion oPTionS3

| TRR28


in need:


Sherry B. ApAnAy


in need:A mission still possible?

| TRR30

he reverse mortgage industry has undergone

significant changes since I first entered it nearly 20 years ago. In the early 1990s, the number of reverse mortgages funded was in the dozens, not thousands, as is the case today, and our mission was a very passionate pursuit of “taking care of seniors in need.” I still believe our industry’s primary mission is to take care of seniors. However, in these constantly changing times with incredibly volatile financial markets, it seems highly appropriate to ask ourselves, “How well are we doing?”

Financially Rewarding, Emotionally Satisfying

I could wallpaper my entire home with the testimonials I’ve read over the years from seniors whose lives were positively affected when they made the decision to get a reverse mortgage. One of my favorite stories is of an elderly widowed woman who cried at her HECM closing and said her loan officer was an “angel sent from God!” She was overwhelmed by the independence and peace of mind that her reverse mortgage afforded her. Amazingly, her story was not unique and the impact this had on those of us in the industry was profound. The knowledge that we were doing something good, to provide a solution to someone who had no good answers, was intoxicating. It brought real meaning to our lives.

One of the best salesmen I’ve ever known in the reverse mortgage industry

is a man I had the privilege of working with for several years. He saw it as his responsibility to share his vast financial knowledge with his senior clients. He continually preached that your first job in sales is to listen.

He would spend hours on the phone with clients before he made the trip to their home. There, he would use an approach called “The Kitchen Table.” He would meet face-to-face with his potential clients to listen and lead them through the specifics of how a reverse mortgage might provide a solution for whatever need they had. He never rushed the application – even when the senior expressed a desire to move forward. He listened and explained each disclosure to ensure his customer was comfortable with their decision. Mind you, he knew how to ask for the decision and he trained many others how to follow his lead. But, the difference is that the “sale” was not

a FeW earLy chanGes

contributed to our industry’s survival.

Fast ForWarD a FeW years and you’ll find that evolution continued within our industry: some good changes, and some perhaps not so good, depending on your perspective.

Reforms allowed the application or counseling to be conducted in person, which was also later allowed over the phone. Finally, face-to-face counseling was no longer required.

the oRIgInatIon fee for a heCM loan was increased from

a flat fee of $1,500 to 2 percent of the Maximum Claim

amount.

nrMlA (National Reverse Mortgage

Lenders Association) was formed.

Before NRMLA, we had no collective

voice and certainly no ability to affect

any positive changes

within our small

industry.

nrMLa

‘90sAROUND THE

MID-1990s,

THE TWO MAJOR

LENDERS/SERVICERS

BEGAN TO TRAIN AND

ACCEPT LOANS FROM

FHA-APPROVED

MORTGAGE

CORRESPONDENTS

(BROKERS).


his main goal. The driving force for him each day was simply serving the senior.

In our industry’s founding years, the loan officer who found success was not your typical high-powered salesman. This salesman was more like a social worker, spending double or triple the time with a client than his counterparts in the “forward” mortgage world. However, this was not really seen as a negative.

When you have a higher mission and receive rewards beyond monetary gain, your priorities shift.

Surviving the Middle Years

Our little cottage industry continued along for more than a decade, providing solutions for older homeowners, always expecting that “next year” we’d see an explosion of acceptance and growth. As

our industry grew, the opportunities for helping seniors grew. We fought a few early issues of greed with unscrupulous home repair scandals and ill-advised sales from consultants outside our niche industry. yet, I’m proud to say the reverse mortgage industry handled these issues swiftly and decisively and implemented guidelines and disclosures to ensure loopholes were addressed and seniors remained protected. >>

on a year-over-year basis, reverse mortgage volume has been declining. overall, the total reverse mortgage volume fell 35 percent to 72,748 in 2010, compared to 111,924 in 2009, according to RMI data. this marked the second consecutive year of decline. It’s difficult to pinpoint all the contributing factors – the most obvious, however, is the drop in home prices in recent years. the

decline in home equity resulted in a large proportion of potential borrowers – those who couldn’t borrow enough to repay their primary mortgages – completely ineligible for reverse mortgages. Reduced equity also made reverse mortgages less attractive for other borrowers by making it less likely that they could borrow enough to offset the upfront costs.

A dramatic shift toward younger reverse mortgage borrowers in the past few years, and particularly in the most recent year. Reverse Mortgage Insight (RMI) reports that in 2000, there were more borrowers age 76 than any other age with that figure dramatically shifting downward – 74 in 2003, 71 in 2006, and 63 in 2009. RMI goes on to point out

that baby boomers seem much

more likely to use reverse mortgages than the WWII generation and those before.

No face-to-face meetings for the application process brought new marketing approaches and channels to our industry. Call centers, purchasing leads, or cultivating your own leads via the Internet becAMe successful And tHe “on-tHe-street” loan officer providing personal service to seniors began fading from business plans.

Wall Street investors enter the market and force Fannie Mae to

meet the market with premiums available for FHA HECM loans.

For the First time, back-end premiums are available to

augment the origination fee and provide additional money for

marketing budgets, while attracting new lenders, new investors

and expansion for many in the industry.

20

00

in our inDustry’s FounDinG years, the Loan oFFicer Who FounD success Was not your typicaL hiGh-poWereD saLesMan. THIS SALESMAN WAS MORE LIkE A SOCIAL WORkER, SPENdING dOuBLE OR TRIPLE THE TIME WITH A CLIENT THAN HIS COuNTERPARTS IN THE “FORWARd” MORTGAGE WORLd. HOWEvER, THIS WAS NOT REALLY SEEN AS A NEGATIvE. WHEN YOu HAvE A HIGHER MISSION ANd RECEIvE REWARdS BEYONd MONETARY GAIN, YOuR PRIORITIES SHIFT.

’09-’10

wall street

| TRR32

“Suitability” – The New Catchphrase

I firmly believe our industry’s integrity remains intact, but it’s most troubling that we seem to find ourselves in a defensive position these days. With so many new financial regulations and state reverse mortgage laws, it feels like the mindset has become contrary, and the very people and lenders who sacrificed to see the industry grow are now perceived as the “bad guys.”

The concept of “suitability“ has become the new industry catchphrase. Instead of lenders simply providing borrowers education and possible solutions to make their own financial decisions, lawmakers, as well as other consumer advocacy groups, seem intent on “protecting seniors from themselves.”

Consider one report issued by the National Consumer Law Center (NCLC), which suggests the implementation of a “suitability standard” requiring lenders to offer reverse mortgages that are in the best financial interest of their clients. Would not a standardized approach steer us too far away from the more one-to-one sales consultation that so naturally occurs with our “Kitchen Table” lender-borrower interaction?

There’s also the 2010 Wall Street Reform bill, which calls for a reverse mortgage study designed to determine whether any “conditions or limitations on reverse mortgage transactions are necessary or appropriate for accomplishing the purposes and objectives of this title, including protecting borrowers with respect to the obtaining of reverse mortgage loans for the purpose of funding investments, annuities, and other investment products and the suitability of a borrower in obtaining a reverse mortgage for such purpose.”

The 2008 FHA reform bill, which banned reverse mortgage lenders from also selling annuities to seniors, addressed the part about funding investments. But, with a suitability standard, lenders would be on the line to demonstrate that a loan was appropriate for a borrower – seemingly possible to determine only in the case of borrower foreclosure. If it turns out that the loan was not “suitable,” then the lender would face financial penalty; the amount still undetermined awaiting completion of the study.

This less-than-positive business climate has most

certainly contributed to the significant decline in the number of active reverse mortgage lenders. RMI reports a 47 percent decrease in

the number of active lenders between December 2009 and December 2010. RMI also reported that the top 10 lenders grew as a share of retail volume from 40.5 percent in January 2010 to 64.5 percent in December

2010. Obviously, the smaller brokers and lenders in our industry have been the most adversely affected. If lenders can’t survive in our current economic and legislative reality, the senior will ultimately suffer! Fewer brokers and fewer lenders translate into fewer choices and less “free market competition” that historically provides better options for people. I’m hopeful that our industry is successful in working with lawmakers to find a balance in regulation and a balance of protection that ultimately leaves us better.

Continuing to Make a Difference

For an industry that initially grew and evolved so slowly, it hit warp speed in more recent years. As an industry veteran, I’ve been privileged to be a part of something special, a part of our history, and to have performed a job that made me proud, providing positive solutions to seniors in need.

I believe all of us committed to ensuring the future success of our industry must follow one mandate: Accept the responsibility to truly listen and ask the probing questions that are necessary to ensure every senior is truly served and every loan leaves us with the positive feeling that we’ve made a difference and provided a good solution for a senior in need. g

i FirMLy beLieve our inDustry’s inteGrity reMains

intact, but it’s Most

troubLinG that We seeM to

FinD ourseLves in a DeFensive

position these Days. WITH SO MANY NEW FINANCIAL

REGuLATIONS ANd STATE REvERSE

MORTGAGE LAWS, IT FEELS LIkE THE MINdSET HAS BECOME

CONTRARY, ANd THE vERY PEOPLE

ANd LENdERS WHO SACRIFICEd

TO SEE THE INduSTRY GROW

ARE NOW PERCEIvEd AS THE

“BAd GuYS.”

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 businesses

Jason Levy

reversereview.com 8 TRR | 33TRR | 33

HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Mar-keting Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RE-SPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compli-ance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Dis-cuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILAHECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Mar-keting Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RE-SPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compli-ance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Dis-cuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA

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 fieldSue 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 businesses

Jason Levy

HMBS

as “Holy Grail”of

fixed-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 for

ORIGINATORS

3SECRETS

for REFERRALS

customers

CHANGING:

WHAT LENDERS

MUSTdo

Things are always better looking

IN REVERSE.Advertise with The Reverse Review | [email protected] | 858.832.8320

THE

REVERSEreviewA P R I L 2 0 1 1

AARP SUIT SEEKS TO RECONCILE HECM STATUTE AND HUD POLICIES

| TRR34

e’ve all seen the commercial. The late Dennis Hopper, a revered icon of the Easy Rider days of the 1960s and a poster boy for the “love generation” – aka the baby boomers (although not technically one himself) – is standing on a beautiful beach with calming, azure water; warm, soothing sands; puffy clouds; and a hint of an inviting, uninhabited island on the horizon. He’s wearing a black collared shirt and a pair of ultra-cool, understated shades,

and sports a small salt-and-pepper goatee. Holding a tattered dictionary, he reads the definition of the word “retire”: “to withdraw, go away, disappear.” Then in his inimitable, sort of aloof, rebellious voice, he announces, “Time to redefine.”

W


the Essentials

Will Baby Boomers Go Boom or Bust?

A look at the true feelings and concerns of the baby boomer generation. roger chiocchi


He drops the dictionary on the beach and the music begins. Bah-dah-dah-dah-dah-bump.

Bah-dah-dah-dah-dah-bump. With the opening chords to “Gimme Some Lovin’” by the Spencer Davis Group—classic 1960s rock—pulsating underneath, Hopper goes on to tell us that, “Your generation is definitely not headed for bingo night. In fact you can write a book about how you’re going to turn retirement upside down.” Unfortunately, it looks like we’re not going to turn retirement upside down in quite the way that Hopper and Ameriprise, the sponsor of the ad, envisioned. We’re going to turn it upside down because most of us are pulling our hair out in a state of outright panic and shock

The Way We Were

Most of our parents had pensions, Social Security and the value of their homes to fund their retirements, creating a certain expectation in their children that our post-career lives would be somewhat comfortable as well. Unfortunately, our generation generally doesn’t have pensions or defined-benefit retirement plans as formally defined (unless perhaps you’re a union worker or public employee). We’ve seen the value of our homes diminish, and even if Social Security—a sort of transfer payment from the next generation to ours—is still around when we need it, the maximum payment (currently about $3,000 per month) doesn’t really excite anyone.

Oh yeah, and one other thing: Our cherished 401(k)s and IRAs have tanked. As part of the research for my book, Baby Boomer Bust? How the Generation of Promise Became the Generation of Panic, I conducted a survey of a broad spectrum of baby boomers in spring 2009—when the effects of the economic downturn of 2008/2009 settled in, after the initial shock and numbing period. Because the online sample was not random, the results are not projectable to the entire population, but nonetheless, they provide us with a broad-scale qualitative snapshot of the feelings, behavior and the adjustments baby boomers made as a result of the downturn. (If anything, our panel was more upscale than the population at large, thereby giving us a good “acid test” of the impact of the recession.)

I asked our online panel many questions, but one of the most important was, “How do you plan to pay for your retirement?” The sassiest answer? The lottery.

And what about housing? Our

parents’ generation practically

went to the

bank on the appreciation in the value of their homes. Could the baby boomers

ride that escalator as well? The bad news: Almost half the people we talked to estimated that the value of their homes declined by 10-30 percent in the previous 12 months. The good news: Almost 60 percent of the baby boomers I talked to own their homes and think they will be fine in terms of being able to make their mortgage payments going forward. Surprisingly, only about 8 percent fear that their houses are “underwater.”

So with cautious optimism, it looks as if baby

boomers will get some return on their housing investment. Of course, that’s all dependent on the housing market coming back in future years, what they actually paid for their house, how long they’ve held it, how many refinancings they have been forced—or will be forced—to do, and of course, their employment now and in the future. As one baby boomer told me, despite the fact that their loan-to-value ratio is only at about 20 percent, “it’s all dependent upon staying employed.” Another added, “The answer is based on the condition of my husband’s employment. With difficulty I could maintain my home with my present salary, but any cost increases would force me to sell it or find a second job.” And now for the coup de grâce. We invested in a magical panacea called a 401(k), which was designed to incent >>

as part of the research for my book, baby boomer bust?

how the generation of Promise Became the generation of Panic, I conducted a survey of a broad spectrum of baby boomers in spring 2009—when

the effects of the economic downturn of 2008/2009 settled in, after the initial shock and numbing period.

| TRR36

savings that would accumulate with deferred taxes over the years and ride the never-ending rise of the stock market; at a mere 6 percent or 7 percent a year, our financial advisors told us, the cumulative value of what we stashed away would double every 10 to 12 years. Mesmerized, we ogled the spreadsheets. Jesus Christ, honey! In 2020, our 401(k) will be worth $3 million. Maybe we should start looking for that little shingle-style cottage with a water view on Nantucket. Then the bottom fell out.

The 14,000 Dow from 2007 became the 6,700 Dow in March 2009. Down more than 50 percent. The Dow has subsequently recovered, but many of us boomers had to borrow from our savings and portfolios during this time to fund our daily living. So when the market rebounded, guess what? We had less of a financial base to rebound from. Without a doubt, the economic downturn of 2008/2009 wreaked havoc on the lives, dreams, aspirations, consumption habits and net worths of our cherished baby boomer generation. I found a number of interesting and sometimes frightening themes in my survey of this vaunted generation. Let’s start by tackling the veritable 800-pound gorilla in the room: retirement.

A Less-Than-

Idyllic

Retirement

More than 30 percent of the baby boomers I talked to told me, “Frankly, I don’t think I’ll ever be able to retire.” About 43 percent of them thought they were OK before the current economic downturn but now doubt their ability

to retire based upon the current value of their assets.

A prevailing thought was expressed by one of the respondents: “The idea of retirement has become further and further away for the average and below-average citizens in this country.” And another told us: “I will not be able to retire and maintain my present lifestyle.”

According to Dr. Ronald Manheimer, former Executive Director of the NC Center for Creative Retirement at UNC Asheville, “There are several studies and surveys out there done by academic researchers and financial services companies that paint a dire picture of boomers’ ability to retire soon or ever. In the aggregate this is probably true, though most will eventually retire either because they want to or have to. They will simply adjust … not painlessly, but resignedly. People will have to sell their homes and move into apartments or low-cost condos. They will have to find satisfaction and meaning in their later

years through other means than greater wealth would have allowed.”

How baby boomers plan to fund their retirements (They were able to pick several sources from a list of options.)

? 63% 401(k)s

? 61% social security

? 41% Personal Wealth

? 35% sale of existing Residence

? 28% had some sort of Pension

So exactly how adequate – or inadequate – are these resources to fund a decent retirement? The Center for Retirement Research at Boston College estimated that as of 2008, the average family approaches retirement with only $60,000 in retirement savings – downright shocking, isn’t it? So for most baby boomers, the dream of retirement as that frolic on the beach with Dennis Hopper is exactly that: a dream. No wonder 17 percent of baby boomers told me, “I plan to work until I drop because I have to.”

Employment Angst

Worrying about staying employed is an anxiety all boomers can relate to these days. Forty-seven percent of our total boomers group expressed some sort of fear or discomfort about their employment status going forward.Comments such as, “My husband works for a modest-sized company and I would

more than 30 percent of the baby boomers I talked to told me, “frankly, I don’t thInk I’ll ever be able to retIre.” about 43 percent of them thought they were ok before the current economic downturn but now doubt their ability to retire based upon the current value of their assets.


say his job is tenuous, too, because it’s dependent upon the travel industry”; “I work for a small business and feel secure for now but I think I’ll be laid off next winter if things don’t pick up”; “Had to lay off most of the people who work for me and change assignments”; and “I work for my town as an art instructor … I assume my job could be cut at any time” set the tenor of the group.

Another boomer told us, “We are toward the end of our earning potential. My husband and I are really feeling some major downturns financially. We were forced to pay our taxes on credit cards – at 22 percent … If we lose our house it will be the last one we own. My hubby is 56 years old … he now repairs metal roofs by himself. He cannot find someone to hire him outright … again, I emphasize a baby boomer is at the end of their earning potential. What now?”

However, all was not so bleak. Several boomers told us that things were going quite well: “I’m actually turning down work, I’m so busy”; “I run a $4 million software company which is growing”; and “I own an ad agency which has so far been relatively unscathed.”

And, from perhaps the luckiest person of the bunch: “I have a pension.”

The Enemies Within

To get an accurate gauge of what the future may hold, it’s useful to examine the forces underlying the predicament of baby boomers today. Based on my research, I would posit there are four main elements behind the current plight of the baby boomer generation: a) the virtual evaporation of defined-benefit pension programs (based on studies I’ve seen, only about 20 percent of today’s

workforce is covered by such plans – the rest of us have to rely upon defined-contribution plans like 401(k)s, which in most cases are an inadequate alternative); b) the high divorce rate, which in many cases takes one economically viable household unit and creates two household units, at least one of which is usually economically fragile (in most cases, the woman’s); c) the extremely skewed inequality of income and wealth in the U.S. – the top few percentiles on the income/wealth scale suck up so many disproportionate dollars (the top 1 percent of the population controls 43 percent of the nation’s financial wealth) that the rest of society is left with too few dollars to adequately cover life’s necessities; and d) the boom-and-bust economy we live in. The business cycles of today asymmetrically reward the very rich with tremendous windfall profits during booms and, likewise, asymmetrically punish the middle and lower socioeconomic classes during busts, leaving millions jobless, many without homes, health insurance, or adequate savings.

Tapping Into the

Market

The current mindset of boomers presents some potential opportunities, but beware of the pitfalls as well. Here are some things to take into consideration:

InSECURITy OvER RETIREMEnT

Boomers have been “doing the math” since the meltdown and, for most, it doesn’t look good. They are worried-to-horrified about whether they can ever retire. To a certain extent, a reverse mortgage can be positioned as one of several tools to help them address this problem.

EMPLOyMEnT AngST Most boomers in their mid-50s or so are not only concerned about their jobs – that is, if they are employed – but also worry about getting hired again should they lose their job. Boomers fear since they’re at the end of their prime earning years that they might never be able to make up for their losses in the stock and housing markets.

InSTITUTIOnAL DISTRUSTComing off the meltdown I saw a tremendous wave of mistrust on the part of boomers directed toward “traditional institutions” – banks, Wall Street, big business, the real estate industry and government.

Many of the conditions spawned by the economic meltdown provide an opportunity for reverse mortgages to play the hero. But Seller Beware: Boomers have been overhyped and oversold for years. In the ’80s, it was all about the “good life.” In the ’90s, they watched their 401(k)s inflate with the tech boom and the so-called “productivity dividend” that would fuel the market for years, even decades. In the early 2000s, they were inundated with messages telling them what a paradise retirement will be while simultaneously having their pockets picked by near-usurious interest rates on their credit cards. Then we all hit the proverbial wall and reality set in.

Be honest, straightforward and discuss the pros and cons. If a reverse mortgage is not right for a potential customer, tell him or her so. you may lose that one sale, but it will be recovered in droves as the positive word of mouth circulates: “At last, someone we can trust!” g

I

FoRTy-Seven PeRCenT of our totAl booMers group expressed soMe sort of feAr or discoMfort About tHeir eMployMent stAtus going forwArd. %

| TRR38

s most of you know, I feel very strongly that educating the trusted senior advisors in this nation on the true strengths of the reverse mortgage is the single most important factor of our industry’s survival and growth. Until we show the financial community that the reverse mortgage is not just a “needs-based product” or “product of last resort,” the struggles we are all facing right now will continue, or even worsen.A


the Essentials

Living at Home Brings Peace of Mind

Long-term care and reverse mortgages create the ideal partnership for seniors wanting to stay in their homes.

michael Banner


No consultant is looked to more in a senior’s life as their long-term care advisor.

In the past I have written about the relationship of long-term care and reverse mortgages and I was very surprised at the negative comments I received. I have referred to the Use your Home to Stay at Home study that was completed by Dr. Barbara Stucki and the National Council on Aging (NCOA), endorsed by many major players in our industry, including the Met Life Mature Institute. I was still accused of using this study as a “sales pitch” for reverse mortgages.

Fear and ignorance (that’s right, I said it) seem to be running rampant in our great industry as guidelines and new regulations continue to tighten around us.But this is an important subject and it deserves to be discussed.

I think one of the greatest misconceptions is that the long-term care industry is often confused with long-term care insurance. And of course, if we talk about any insurance in the same sentence as a reverse mortgage, the fear I mentioned above turns into pure panic as the thought of cross-selling sends everyone into their homes to hide under their beds. But we will leave this subject for last.

The truth of the matter is, the long-term care industry has many facets of which insurance is just one. In-home care (which is not always covered by Medicare), for the elderly population is by far the largest segment of long-term care and touches so many families worldwide.

The Use your Home to Stay at Home theory is not a sales pitch for reverse mortgages in any way, shape or form. It ultimately offers alternatives to a senior who may not be ready or willing to go into a retirement home.

Obviously health and safety issues for the senior must take precedence even over their desire to remain at home, but there are tens of millions of seniors who are quite able to age in place but are not aware of the services available to assist them in that goal, and if they are aware, they feel as if they are unable to afford them. Making their home a safe and secure place for them to be during this portion of their lives when their health may be declining is a very obtainable goal. Bringing professional services into the home is a very viable option for many seniors. The standard thought process for this has always been to assume that Medicare and some type of Medicare supplemental policy would cover these services, but in fact that is not true.

Having a health care professional come to your home on a weekly basis to monitor medications, check vital signs and attend to basic needs certainly has a cost to it, but in comparison to the average cost of a living facility in this nation, it is a very viable option.

Making a senior’s home safer and easy to navigate can also be an expensive

endeavor but may be well worth the investment for a senior to maintain their independence and live where they feel most comfortable.

Here are a few examples of what can be done:

Replace an old-fashioned tub

with a step-in shower with a

built-in seat.

Install handrails in the shower,

next to the toilet and possibly in

the hallways.

Install ramps between

bedrooms and living areas of

the home.

If the master bedroom is located

upstairs, a chairlift can make life

so much better.

These are just a few options of what can be done for a senior to allow them to stay in their home and have the peace of mind to know they are safe.

Now, let’s talk about the elephant in the room. Is it legal, ethical or moral to use the proceeds from a reverse mortgage to purchase long-term care insurance?

For those of you who are not involved in the long-term care insurance industry, it is being totally reshaped at this point in time (much like the mortgage industry). Major carriers have withdrawn from the market, premiums are being increased at record levels and present products are being scrutinized. yet many great long-term care insurance products still exist. Let’s look at a few of the options available today.

Certain linked products have gained popularity over the last 18-24 months. >>

obvIously health and safety Issues for the senIor must take

precedence even over theIr desIre to remaIn at home, but there are tens of millions of seniors who are quite able to age in place but are not aware of the services

available to assist them in that goal, and if they are aware,

they feel as if they are unable to afford them.

4

3

| TRR40

A linked product is defined as one that offers two separate financial vehicles within the same policy. It could be the combination of long-term care insurance and life insurance, or it could be the combination of long-term care and an annuity product.

These products are single-premium, and require a sizable upfront investment. They offer “multiples” of coverage for long-term care and life insurance depending on the client’s age and health. In the case of the linked annuity product, there is usually a guaranteed interest rate of return as well.

Is it logical for a person to secure a fixed-rate reverse mortgage and use the proceeds to fund one of these products? I have done much research on this and I must say that in most cases it is not a good decision. There are times it may make sense but under most circumstances the long-term costs of the reverse mortgage outweigh the potential benefits of the policy.

Still, as these products continue to evolve, we should all stay informed on the rates of returns and the multiples they offer.

And what of the traditional long-term care insurance products; the five-, seven- and 10-year pay periods?

Does it make sense to fund these monthly insurance premiums with the proceeds of a reverse mortgage? Well, even though this may appear to be a simple “yes or no” question, it is not. The answer to this question depends on many variables:

g the age and health of the clients;

g the amount of the monthly

premiums;

g the amount of the benefits of the

proposed policy;

g their present level of income and

assets;

g and whether they have allocated

a certain amount of their assets

for long-term care or unplanned

medical expenses.

The answers to these questions determine if using a reverse mortgage to fund long-term care insurance makes sense for that individual scenario. To take a position of yes or no on this very important decision without knowing all the facts above (and more) is not only wrong; it is short-sighted and narrow-minded.

Improper cross-selling – cross-selling of products to earn a fee or a commission that does not truly benefit the client’s quality of life on a long-term basis – is wrong, unethical and immoral. But the cross-selling of a product – any product

– that truly benefits the client, protecting his current assets and offering protection against the ever-rising costs of health care in this country at a time when the client’s assets are diminishing – is well worth considering!

Reach out to the long-term care experts in your community. We may not be qualified to answer many of the questions listed, but they are. Don’t turn a blind eye to helping seniors in this fashion because the phrase “cross-selling” brings fear to so many in our industry.

The bottom line is modern medicine and scientific breakthroughs have extended life spans way beyond what was predicted. This fact has brought the reverse mortgage from relative obscurity right to the forefront of the industry. Unfortunately it has also brought us under the microscope of certain members of Congress and regulators to make sure we do what’s right. That is why we must always put the client’s needs first.

Suitability, suitability, suitability…

That same modern medicine and those same scientific breakthroughs are also causing the long-term care insurance industry to totally rethink their product. We serve the same people! We have the same goals! Shouldn’t we be working together?

Here’s my best advice, which I learned from Tony Robbins: “The mind is like a parachute; it works best when it is open.”

Have a great month and let’s help as many seniors, in as many ways as we can. g

i THink one oF THe GReaTeST MiSConCePTionS is tHAt tHe long-terM cAre industry is often confused witH long-terM cAre insurAnce.

for those of you Who are not Involved In the long-term care Insurance Industry, it is being totally reshaped at this point in time (much like the mortgage industry). Major carriers have withdrawn from the market, premiums are being increased at record levels and present products are being scrutinized. yet many great long-term care insurance products still exist.


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Direct Finance Corpdfcmortgage.com

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Tradition Titletraditionta.com

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Weiner Brodsky Sidman Kider, P.C.

wbsk.com202.628.2000

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

responsible for owing more than the value of the home when the reverse mortgage is repaid.

And an Oops!

While a mortgagee letter is forthcoming, on March 28, 2011, the FHA Connection list of national counseling intermediaries that lenders must provide to prospective HECM clients was updated with the addition of three nationally approved counseling agencies:

Springboard Nonprofit Consumer Credit Management, ClearPoint Credit Counseling Solutions and Neighborhood Reinvestment Corporation.

These agencies join CredAbility, Money Management International, National Council on Aging and National Foundation for Credit Counseling. Lenders are still required to provide a list of five local counseling agencies, in addition to all seven national intermediaries.

On May 10-11, NRMLA will host the annual Washington Policy Conference, providing both the latest update and forecasts to various issues that could affect our continuing service to senior borrowers. Attendees will also be visiting

their leaders to assist in educating them and their staff members on matters of potential impact to our industry and customers of current and proposed legislation and regulation. It is not too late to join a large fellow constituency to make our voice heard.

As summer approaches, our focus slightly changes to include family and relaxation. The number of unresolved issues begs our continued interest and support. If you are unable to participate in the Policy Conference, before you dig out the flip-flops and travel brochures, take a moment to write your state leadership and voice your opinion on the matters that could potentially affect your ability to pay for that vacation when the charge bills arrive! g

continued from page 11

| TRR42


the Last Word

The Times, They Are a-Changin’ John larose

When the reverse mortgage product was created, its primary audience was persons born between 1925 -1945, often referred to as “The Silent generation.” Emblematic of this group was overwhelming acceptance of authority. They prefer social interactions with people in the same room or

on landline telephones. The ability to tweet, Skype, text, bank electronically or email did not come easily, and for many, never came at all.

The Boomers (1946 -1964) are coming into our industry and they are nothing like their parents! Boomers grew up during the Civil Rights and women’s movements, and against the backdrop of the Vietnam War. In a 180-degree turn from their parents, Boomers questioned all authority. Who can forget the riots and escalating tension surrounding the Vietnam War at Chicago’s 1968 Democratic National Convention (“Hell no, we won’t go!”)?

I’m a Boomer, and we will not “go gently into that good night.” We are comfortable with any and all forms of electronic communications. Boomers have refinanced home mortgages and closed on financial transactions without ever leaving their family room. We’re changing the makeup and dynamic of the “typical” reverse mortgage borrower. Reverse mortgage servicers must adapt to this population of tech-savvy consumers. Boomers will want statements via email, electronic access to their loan data, and will prefer access to their funds electronically (debit cards). These demands will create great challenges for servicers: How can we implement safeguards to protect these borrowers now and as they age? The reverse mortgage industry is in for some profound changes.

At present, when a borrower wants to draw funds, they are required to submit a written request. The numerous touch points of the current servicing process create, by specific design, internal safeguards against fraud and theft. Occasionally, servicers discover family members forging borrowers’ signatures, and worse yet, third parties coaching borrowers to create draws for the express purpose of stealing their money.

Reverse mortgage servicing agents are highly skilled at detecting harmful nuance when

speaking with a borrower, and touch points between servicers and borrowers are critical with this product. Technology provides speed, efficiency and reliability, but the best-designed technology cannot match the effectiveness of a concerned servicing agent’s “gut feeling.” When borrowers access funds through electronic means only, servicers might not uncover inappropriate fund distribution until after the fraud has been committed. When borrowers receive monthly statements through secure email, the servicer will no longer receive return mail – a critical red flag of a potential occupancy issue. If reverse mortgage loan servicing becomes an entirely electronic process, what additional safeguards can be put in place to protect our borrowers?

Mandated counseling sessions may have to be reconfigured to appeal to Boomers who have been making major lifestyle and corporate decisions for decades. Financial products can be researched online and obtained by online application or a quick trip to the bank. In a short time, borrowers are able to access what can be a formidable amount of funds. A financial product that requires personal attendance at a lengthy counseling session, followed by a test, may be perceived as a hindrance rather than help. I foresee Boomers protesting and questioning protective rules and regulations and demanding that congressional representatives remove the obstacles to freely obtaining a reverse mortgage.

The reverse mortgage industry is faced with the challenge of adapting to the needs and demands of this new demographic, while continuing to acknowledge that cognitive skills can be lost with age and that some protection is not entirely out of order. Boomers are more health-conscious and will enjoy a longer, better-quality life than their parents. Let’s make sure the reverse mortgage product does not make itself extinct by failing to adapt to this massive change in our market. g


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