Page 1

THE

REVERSE M AY 2 0 1 1

review

taking care of

SenioRs in need:

A mission still possible? Sherry B. Apanay


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TRR 05.11

24

28

38

34

l

the Essentials The Legal Brief Series 24 A springtime review of new HECM Mortgagee Letters: ML 2011-01 & ML 2011-09.

Fed Kamensky & Joel Schiffman

Taking Care of Seniors in Need 28 A mission still possible?

Sherry B. Apanay

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

Roger Chiocchi

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

Michael Banner l

the The Report 7, 9 Ask the Underwriter

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Ask the Appraiser

18

The Hot Seat

20

The Perspective 12

The Industry Roundup 22

The Advisor 14

The Resources 41

The Conversation

The Last Word 42

4

10

Core

16


Meet the Team Publisher

Aman Makkar Your greatest strength is knowing your greatest weakness.

Letter from the Editor

Editor-in-Chief

Emily Vannucci “You’re trying too hard... try less.”

l

e

Copy Editor

Kersten Wehde I can’t read a menu, text or wedding invitation without proofreading it. The customer is always right.

is becoming more and more tech-

retail and service industry where we

note of this and develop new ways of

Growing up I had many jobs in the 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

for the purpose of education or just to keep them informed. Michael Banner

term care. He comments that there

are many misconceptions regarding

long-term care that a little education and knowledge could clear up.

with all the facts “in a way that

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

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

seniors about the benefits of long-

you are to make a sound decision.

didn’t have all the knowledge they

News Editor

also writes a great piece on educating

Whether the customer is right or

Maybe the customers I had in the past

Trizzle Knight Speck check is for the bird. Sorry, Kersten.

reaching out to seniors whether it is

and needs.” Knowledge is power and the more you know, the better able

Creative Director

savvy. Our industry needs to take

not, it’s our duty to provide seniors corresponds with their needs” to help them understand what options are

Printer The Ovid Bell Press

living the life they want.

Advertising Information phone : 858.832.8320 e-mail : advertising@reversereview.com

out there and allow them to continue

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 { emily

vannucci

}

Subscriptions and Editorial Content phone : 858.217.5332 e-mail : information@reversereview.com website : reversereview.com © 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. .com 8 TRR | 5 Bernardo Drive Suite 450 San Diego, CAreversereview 92127


l

the Contributors Dave Bancroft

1

Feature Article l

Sherry B. Apanay

1

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. davebancroft@cox.net | 949.355.4653

Michael Banner

Taking Care of Seniors in Need pg 28

2

2

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. michael.banner@loanwellamerica.com |  877.753.1705

Roger Chiocchi

3

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. 6

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3

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

4 4

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. kamensky@wbsk.com | 202.628.2000

John LaRose

5 5

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

6

6

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


The Reverse Review May 2011

the Report

March 2011 Wells Fargo Bank of Bank, N.A. America, N.A.

Top Lenders Report MetLife Bank, N.A. Endorsement 682

One Reverse Generation Mortgage LLC Mortgage Co. Endorsement Endorsement 186 186

12345

Endorsement

CHARLOTTE

1960

Endorsement

Lender

738

Endorsements

Lender

Endorsements

AMERICAN ADVISORS GROUP

115

ASPIRE FINANCIAL INC

29

GENWORTH FINANCIAL HM EQUITY

114

ROYAL UNITED MORTGAGE LLC

26

URBAN FINANCIAL GROUP

98

NATIONWIDE EQUITIES CORPORATION

20

GREAT OAK LENDING

83

HOME SAVINGS OF AMERICA

20

NEW DAY FINANCIAL LLC

83

TRIPOINT MORTGAGE GROUP INC

19

GUARDIAN FIRST FUNDING GROUP

82

MAS ASSOCIATES

18

PNC REVERSE MORTGAGE LLC

69

ENVOY MORTGAGE LTD

18

THE FIRST NATIONAL BANK

67

FIRST MARINER BANK

18

SECURITY ONE LENDING

66

AMTEC FUNDING GROUP LLC

18

1ST AAA REVERSE MORTGAGE

65

ALL FINANCIAL SERVICES INC

18

NET EQUITY FINANCIAL INC

59

TRINITY REVERSE MORTGAGE INC

M AND T BANK

56

BRIAN A COLE & ASSOCIATES LTD

17

MONEY HOUSE INC

53

SOVEREIGN LENDING GROUP INC

17

FINANCIAL FREEDOM ACQUISITION

47

REVERSE MORTGAGE SOLUTIONS INC

17

SUN WEST MORTGAGE CO INC

44

PLAZA HOME MORTGAGE INC

17

IREVERSE HOME LOANS LLC

41

NETWORK FUNDING

15

MIDCONTINENT FINANCIAL CENTER

40

CHERRY CREEK MORTGAGE CO INC

15

SUNTRUST MORTGAGE INC

38

CHRISTENSEN FINANCIAL INC

15

PRIMELENDING A PLAINSCAPITAL

36

ARAMCO MORTGAGE INC

15

SENIOR MORTGAGE BANKERS INC

35

ALLIED HOME MORTGAGE CAPITAL

14

EQUIPOINT FINANCIAL NETWORK

35

AMERICAN PACIFIC MORTGAGE

14

18

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l

the Contributors Scott Peters

6

6

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.

7

Ralph Rosynek

7

8

Joel Schiffman

8

11

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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 credentials. rrosynek@rmsnav.com | 708.774.1092

9

10

The Hot Seat, pg 20

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. schiffman@wbsk.com | 949.754.3010

Brett G. Varner

9

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, CRMP 10

The 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. avalles@dfcmortgage.com | 781.878.5626

Bill Waltenbaugh, SRA 11

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.”


The Reverse Review May 2011

the Report

INDUSTRY SUMMARY Retail Endorsement Growth

0.64%

February Endorsements Retail and Wholesale Volumes

Wholesale Endorsement Growth

16.25%

- Reverse Market Insight We noticed last month that the broker/wholesale channel performed

Total Endorsement Growth

6.47%

much better than retail/direct in a down month for the industry

overall, and now we can remove that last qualifier. Broker/wholesale

* Figures Above Reflect Change from Prior Month

Trailing Twelve Month Endorsements

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

10,000

for the quarter when we see next month’s Wholesale Leaders report.

8,000

Brokers comprised 40.8% of all endorsements in February, down

6,000

considerably from last year (55.5%) but up dramatically from the low of

4,000

33.7% in December.

2,000

Urban Financial Group (owned by Knight Capital) is notable as the only

0 3 4 5 6 7 8 9 10 11 12 1 2 Retail

Wholesale *Numbers Represent Months

RETAIL

WHOLESALE

UNITS CHG%

UNITS CHG%

10

-21.9%

11

2,692

-3.27%

2,813 -7.41%

5,505 -5.43%

12

2,465

-8.43%

2,086 -25.84%

4,551 -17.33%

1

2,900 17.65%

2,404 15.24%

5,304 16.55%

2

3,358 15.79%

2,521

4.87%

5,879 10.84%

3

3,969

18.2%

2,672

5.99%

6,641 12.96%

4

3,405 -14.21%

2,558

-4.27%

5,963 -10.21%

5

2,976

-12.6%

2,307

-9.81%

5,283 -11.4%

6

4,004 34.54%

2,547

10.4%

7

4,343

8.47%

8

4,049

-6.77%

9

4,075

0.64%

TOT

41,019

6,551

24.0%

2,207 -13.35%

6,550 -0.02%

9.33%

6,462 -1.34%

2,805 16.25%

30,371

same span. g

UNITS CHG%

5,821 -17.01%

2,413

12 months, a tall order given the declines wholesale has seen over that

TOTAL

2,783 -10.92%

3,038

top 10 lender that has grown their broker/wholesale business in the past

6,880

6.47%

71,390 reversereview.com

8 TRR

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The Reverse Review May 2011

ask the Underwriter 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

A Spotlight

on the Mortgagee Letters Ralph Rosynek

Assessment tool for borrowers, ongoing loan limit issues and additional DoddFrank implementation of consumer protection and

mortgage banking

controls are just a few of the other items on

10

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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.

our plate.

While your focus was elsewhere,

several mortgagee letters were issued as detailed below:

Mortgagee Letter 2011-01

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

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

(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.


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 s ervicing transfers and loan sales 3 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,

In addition, sponsors must document:

3 the methodology used to review

sponsored third-party originators

3 the results of each review 3 a ny 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

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.

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.

On December 5, 2008, the U.S.

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

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.

must be included in a mortgagee’s

HUD’s intent in issuing ML 2008-38 was

minimum, these procedures must include

contained in the regulations at 24 CFR

FHA-approved quality control plan. At a the requirements outlined in Paragraph 7-6 of HUD Handbook 4060.1, REV-2.

This ML provides guidance to counselors

amount of each sponsored third-party

Note: The provisions in ML 2008-12,

Quality control review records must be

the mortgagee by each of its sponsored must determine the appropriate sample

criteria

Mortgagee Letter 2011-16

mortgagee for a period of two years.

Mortgagee Letter 2011-09

third-party originators. Mortgagees

counseling fees based on certain

the review), must be retained by the

the quality control plan must require the review of loans originated and sold to

3 a llowing agencies to establish

and lenders regarding when:

to supplement and explain provisions §206.125 and HUD Handbook 4235.1 (Home Equity Conversion

Mortgages). 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.

3 a HECM counseling fee should be

Basically, HUD is clarifying the confusion

3 a ctivities performed by a HECM

to its original non-recourse policy.

waived

counselor that are included in the amount of time recorded on form HUD-92902; Certificate of HECM Counseling

we have all experienced with regard

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.

reversereview.com

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The Reverse Review May 2011

the Perspective and communication skills I have learned over the years.

The saying illustrates that others do

ago and he started to display some

or argument is made, others will not

I was faced with how to successfully

a way that corresponds with their

and consistent parental guidance.

others to see the benefits of your

Arguing with him one morning about

the information they need to know to

that I was forgetting one of the most

than the information you want to give

not always see things the same way,

As my son turned 3 a few months

and no matter how well a presentation

“strength” in attitude and cooperation,

understand it until it is presented in

address his tests of authority with patient

perspective. To put it simply, persuading argument requires the ability to provide

picking up his toys, I suddenly realized

answer the questions they have, rather

important tools in sales: perspective.

them.

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

Success Training from a 3-Year-Old Brett 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 12

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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

...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.

heard it, I was quite perplexed as to how

In training and managing salespeople,

came from open-air markets in India. The

are very detailed explanations of what a

buyers are standing around an elephant

what the benefits are. When I hear this,

the animal from a different angle. The

school student to memorize and recite

person from the viewpoint at the place

That doesn’t mean they understand

salesperson must guide the person to

the older homeowner. In the seventh

that most correspond to his need.

Declaration of Independence and then

this was relevant. He claimed the saying

I have heard many presentations that

theory suggests that if several potential

reverse mortgage is, how it works, and

for sale, each one will be looking at

my response is: I can teach a middle

salesperson, in turn, must address each

the concepts of a reverse mortgage.

they are standing. Additionally, the

the application of it or how it impacts

other viewpoints to highlight the features

grade, I was required to memorize the

recite it as part of an exam. I completed


the assignment without ever having to

and miss the opportunity to learn key

of those words was brought to life

The best method for managing a

perspective as burgeoning adults who

and informative as possible, followed by a

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

if a prospect asks the catchall question,

whether it is time to discuss the process

truly reflect on the power of those words. It was several years later that the power for me. The teacher understood our

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

information provided by the prospect related to their concerns.

conversation is to keep responses as short

question for the prospect. As an example,

where they are in the buying process and

What is a reverse mortgage?” a

of the reverse mortgage, or if additional

and the other Continental Congress

brief response should be

adopting the revolutionary document.

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?

delegates went through in creating and 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

introductory, such as, “The

interaction and understanding. When a

I know some will think that this response

is a reverse mortgage?” and they respond

but you shouldn’t be concerned about

product, they risk pushing the prospect

prospect to provide a meaningful answer.

them, rather than developing relationship.

questions, you learn more about the

know you or what you want, so I am

concerns are and the detailed information

salesperson is asked by a prospect, “What

insufficiently answers the question,

with a five-minute monologue about the

that until you know enough about the

away by overwhelming them or confusing

By controlling the conversation with

It is basically telling the prospect, “I don’t

person, what their specific needs and

going to show you how much I know.”

they need to properly evaluate the

Developing relationship and perspective

more information than they need, you

conversation. This occurs when the

they need in a nonthreatening sales

product. Rather than flooding them with

requires engaged, interactive

are conversationally providing the details

person driving the conversation controls

approach.

leading questions to learn more about the

Utilizing this approach should result

during conversation, many people find

summation that demonstrates that you

of time. When the one person begins

the prospect is looking for from the

listening at first, but then they begin to

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

the length of periods they talk and asks

other person. This is important because

in the ability to make a very direct

it difficult to listen for longer periods

have listened and understood the benefits

speaking, the other tends to focus their

reverse mortgage. For example,

think about what they are going to say in response. The result is that salespeople lose the attention of their prospects,

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

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The Reverse Review May 2011

the Advisor Should you meet in person?

g

a borrower face-to-face is to create

options, discuss which option will best

Second call The purpose of

The principal reason for meeting

this call is to share possible HECM

greater trust. It also gives me a

meet the senior’s goals and educate the

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

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

easier to explain disclosures and collect

promising to overnight

documentation.

the loan package with

accompanying disclosures

But the opportunity costs of all that

drive time (not to mention fuel cost and

application materials on a certain date.

Then there are the times when the senior

hour-plus.

feels pressure to “entertain” by cleaning

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

g

not sure the senior really wants to hear

having the senior sign the disclosures,

focus on explaining the loan package,

all my stories.

reviewing the required supporting

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

arrive home feeling jet-lagged. But

do everything by mail and claim great

25 minutes.

borrower satisfaction. 14

| TRR

Third call Now it is time to

hard to swallow. And sometimes I’m just

options after reviewing the information

recently I’ve talked to loan officers who

Estimated call time: 30 minutes to 1

their home or providing food that can be

Top Secrets of Originating by Mail

Alain Valles, CRMP

commitment to review the

inherent driving dangers) are reason

enough to explore originating by mail.

Originate by Mail?

and information, and a

provided. Estimated call time: less than

3

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.


?

Need assistance from the Advisor?

Send your question to advisor@reversereview.com and it may be addressed in the next issue.

Communication options

More 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 faceto-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.

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 touch

Sending an

Communicate frequently throughout

picture helps to

to know what’s going

“office team” warm the

relationship.

the entire process. The senior needs 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! avalles@dfcmortgage.com g

reversereview.com

8 TRR

| 15


The Reverse Review May 2011

Unfortunately,

the Conversation

the real 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

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.

seems right. Like Charlie

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.

16

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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

the highest of interest rates and that

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

nothing new and echoed its original

processes or even exceptional service

sided with the Board, which presented stance. Sidestepping real issues like

consumer access and limited competition other side did not do enough to show

possibly harness the power to blind the

that the consumer will pay

I find it disappointing that the court

while pointing fingers and saying the

blood running through his veins could

this law is going to have is

goes for both the forward and reverse

perpetrates every transaction and will

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

Unfortunately, the real impact

reality that is not the case. These laws

outrageous greed of the originator that

Dave Bancroft

poor choice.

between the lowest of interest rates and

are being created to curb the perceived

Adonis DNA

make a decision is typically a

and the Goddesses, you would like to

think that two is better than one, but in

Tiger Blood and

Making a decision merely to

not based on relationships or proven

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

true cause. Am I the only one appalled

sometimes spirals into a sea of boo’s and

eleventh-hour late to stay the order, but

reverse the action and bring back some

that the court was molasses-slow and

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.

walkouts. Hopefully this industry can

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


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8 TRR

| 17


The Reverse Review May 2011

ask the Appraiser If you have any appraisal-related questions,

isn’t interested in having a condition

reversereview.com and we will address

affecting the subject’s appeal, value

please email the appraiser at information@ your question in an upcoming issue.

concern repaired doesn’t keep it from and/or marketability.

QUESTION

Why 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.

Bill Waltenbaugh, SRA

We recently received a question for our knowledgeable appraiser, which is addressed in this month’s column. 18

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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

Before I go any further, I need to clarify

When Repairs Are Needed

The way a condition concern is

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

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

and who is relying on the

meet minimum property

results? This is important

requirements mandated

because the intended

user has some say as to how these concerns are

addressed. Do they want

by HUD. Before 2006,

Conditioning an appraisal and

to know what the property

making the value is worth before repairs subject to repair has are made or what it is a lot to do with the worth after repairs are assignment type, the made? The appraiser can intended use and the complete the report either intended user(s). way but the fact that the

condition currently exists

remains unchanged. Just because a client

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


?

Have a question for the Appraiser? Email questions to information@reversereview.com and look for your answer in an upcoming issue.

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

aa

is some confusion when it comes to

an increase in the number of defective

exterior surfaces, despite the age of the

explanation I can offer is tied to changes

paint repair requirements, the only

peeling paint on exterior surfaces. All

in appraiser independence. It wouldn’t

home, require repair when the exterior

surprise me if loan production staff

finish and materials are unprotected.

applied a little pressure to appraisers

That’s because unprotected exterior

to overlook what they considered

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.

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

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At the end of the day, one would expect

a decline in repair

requirements given

the changes made in

2006. If you are finding

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reversereview.com

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| 19


hot

Seat U

C

C

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

the

hot seat 20

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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.


scott PERSONAL

Generation Mortgage

president & CEO

>

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

>

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.

people at Generation Mortgage and truly help our senior customers.

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

PROFESSIONAL >

The future of reverse mortgages is bright because the need for seniors to fund their longevity is growing as

>

Ten years from now the reverse mortgage industry will be stronger because our product will be more

>

If I could change one thing about the reverse mortgage industry, it would be to add escrow accounts to help

>

I am optimistic about the reverse mortgage industry because as more Americans learn what a reverse mortgage

>

People should seek a career in the reverse mortgage industry because it allows one to personally witness the

>

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

more and more baby boomers qualify for this product.

mainstream and genuinely valued as an appropriate retirement planning tool. solve default problems.

can do for them or a family member, the more it will become an accepted financial tool. positive impact a reverse mortgage can have on people’s lives.

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

>

Industry growth is dependent upon better educating consumers about what the product can do for those who are

>

I would encourage a family member to consider a reverse mortgage because if the need is there and they meet

“expensive,” nor simply a product of “last resort.” eligible.

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.

reversereview.com

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| 21


The Reverse Review May 2011

the Industry

Roundup

industryround up edition

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 mov er s k sh a k e rs Robert 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.

U p- k- C o m e r s HUD Rescinds ML 2008-38:

Heyen was hired by FirsTrust Mortgage as Reverse Mortgage Specialist to lead

the addition of reverse mortgages to their product menu.

W h at H a p p e n e d ? 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,

which rescinded the narrowed definition

additional 5.9 percent from a year ago and

HUD released Mortgagee Letter 2011-16,

industry employment has dropped by an

of “non-recourse” to exclude non-arm’s

51 percent from the peak in February 2006.

in limbo as HUD referred mortgagees to

LO Compensation Rule:

HUD.

along with efforts by multiple other

ClearPoint Credit Counseling Solutions :

it, the Loan Originator Compensation rule

length transactions. The policy is somewhat the statutes pending further guidance from

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

Urban Financial Group:

As the wholesale/broker channel strives

to battle back with consecutive months of surpassing retail in percentage growth,

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Doug Heyen:

Relating to the lawsuit filed by AARP,

locations in the state of New York.

22

May

Urban has the distinction of being the only Top 10 lender whose broker/wholesale channel has grown in the past year.

Despite lawsuits by NAMB and NAIHP, organizations and officials calling to delay went into effect on April 5, 2011.


the

E

Essentials

The Essentials | i’sen sh l | - your monthly source of in-depth information, industry updates, highly opinionated views and at-your-fingertips news. S h e r ry B. A pa n ay Michael Banner Roger Chiocchi F e d K am e n sk y J o e l S c h i ffma n

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 emily@reversereview.com to start the conversation.

reversereview.com

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| 23


The Reverse Review May 2011

the Essentials

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

Fed Kamensky & Joel Schiffman

W 24

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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.


Notwithstanding the foregoing, following the end of the quarter, and as this article

went to press, HUD published ML 2011-

due and payable status due to delinquent property charges.

16, a significant missive concerning the

According to ML 11-01, a loan is

provisions in the HECM loan documents.

mortgagee receives notice of the

proper application of the non-recourse

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

considered delinquent when 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.

ML 11-01 requires HECM lenders to send

the borrower to cure the delinquency

providing the borrower with 30 days to

HECM lenders must begin to work with 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:

one

the fee amount that can be charged for

Establishing a repayment plan (pursuant

Letters are important developments in

11-01);

HECM counseling. Both Mortgagee

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

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

to a repayment schedule provided by ML

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

three

a Property Charge Delinquency Letter,

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 missed

payment 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:

Refinancing the delinquent HECM loan

If the mortgagor provides evidence to the

equity in the borrower’s home to satisfy

the advance within the allotted repayment

into a new HECM loan, if sufficient the existing loan and outstanding property charges is available.

mortgagee that they are unable to repay 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 >>

premiums and special assessments).

Corporate Amount Advanced Repayment Schedule

the borrower has failed to pay property

ML 11-01 applies to HECM loans where

$1 - $500

Up to 3 months

charges or the lender has made a

$501 - $1,000

Up to 6 months

on behalf of the borrower, or both. ML

$1,001 - $5,000

Up to 12 months

$5,001 or more

Up to 24 months

corporate advance of property charges 11-01 also applies to HECM loans where HUD has previously granted a deferred

reversereview.com

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| 25


the nature of the evidence necessary to

notice. ML 11-01 requires lenders

within the specified timeframe, but leaves it

the due and payable letter to the

show that the mortgagor is unable to repay

to the mortgagee’s discretion, so long as the documentation collected by the mortgagee clearly supports its decision.

to include certain information in

borrower, including all available options to cure the delinquency and avoid foreclosure.

Pursuant to HUD’s publication of responses

ML 2011-09

30, 2011, HUD clarified that the advance

On February 4, 2011, the FHA

include calculated interest on the amounts

2011-09 (ML 11-09), providing

to frequently asked questions on March

amounts specified in the chart should not

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.

published Mortgagee Letter 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.

As of January 3, 2011, lenders must report

HUD previously indicated

loans on a repayment plan and loans

(ML 08-12) that a HECM fee of

all delinquent loans to HUD (including in a deferred due and payable status).

Initially, lenders were required to submit an Excel file via email to HECMAdmin@

hud.gov 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

in Mortgagee Letter 2008-12

$125 per counseling session is

considered reasonable. ML 11-09 overrides this provision of ML

is below 200 percent of the

HUD previously indicated in Mortgagee Letter 200812 (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.

08-12, authorizing counseling

agencies to charge more than $125 per

session. According to ML 11-09, HECM

counseling agencies may establish a fee

| TRR

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 followup) may not be included on the

HECM Counseling Certificate but

can be included when determining the cost of HECM counseling.

from HUD concerning property charge

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.

HECM counseling fee at the time of the

26

counseling fee at the time of loan

commensurate with the counseling services

and customary; does not exceed a level

inform the borrower that he or she has 30

3

charge such borrowers a HECM

Although ML 2011-01 and ML 2011-09 are

ML 11-09 also provides that HECM

days to respond to the due and payable

counseling agencies may

structure as long as the fee is reasonable

resolve the delinquency in the lender’s due and payable request. Lenders also must

Federal Poverty level. However,

counseling agencies should not collect a counseling session if the borrower’s income

not the last words we are likely to hear

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.

ML 2011-01: A lender may not submit a due and payable request to HUD until the lender exhausts all loss mitigation options


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28

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taking care of

SenioRs in need:

A mission still possible? Sherry B. Apanay reversereview.com

8 TRR

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Financially Rewarding, Emotionally Satisfying

is a man I had the privilege of working

I could wallpaper my entire home with

knowledge with his senior clients. He

from seniors whose lives were positively

sales is to listen.

mortgage

to get a reverse mortgage. One of my

He would spend hours on the phone

undergone

woman who cried at her HECM closing

to their home. There, he would use an

it nearly 20 years ago. In the early 1990s,

sent from God!” She was overwhelmed

He would meet face-to-face with his

was in the dozens, not thousands, as is

that her reverse mortgage afforded her.

through the specifics of how a reverse

very passionate pursuit of “taking care

the impact this had on those of us in the

whatever need they had. He never rushed

industry’s primary mission is to take care

that we were doing something good, to

expressed a desire to move forward. He

changing times with incredibly volatile

no good answers, was intoxicating. It

to ensure his customer was comfortable

he

with for several years. He saw it as his

responsibility to share his vast financial continually preached that your first job in

the testimonials I’ve read over the years

reverse

affected when they made the decision

industry has

favorite stories is of an elderly widowed

with clients before he made the trip

significant changes since I first entered

and said her loan officer was an “angel

approach called “The Kitchen Table.”

the number of reverse mortgages funded

by the independence and peace of mind

potential clients to listen and lead them

the case today, and our mission was a

Amazingly, her story was not unique and

mortgage might provide a solution for

of seniors in need.” I still believe our

industry was profound. The knowledge

the application – even when the senior

of seniors. However, in these constantly

provide a solution to someone who had

listened and explained each disclosure

financial markets, it seems highly

brought real meaning to our lives.

with their decision. Mind you, he knew

are we doing?”

One of the best salesmen I’ve ever

many others how to follow his lead. But,

appropriate to ask ourselves, “How well

A few early changes

contributed to our industry’s survival.

‘90

known in the reverse mortgage industry

The origination fee for a HECM loan was increased from a flat fee of $1,500 to 2 percent of the Maximum Claim Amount.

s

Around the mid-1990s, the two major

lenders/servicers began to train and accept loans from

NRMLA (National Reverse Mortgage Lenders Association) was formed.

any positive changes within our small industry.

correspondents

| TRR

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.

voice and certainly no ability to affect

mortgage

30

the difference is that the “sale” was not

Before NRMLA, we had no collective

FHA-approved

(brokers).

how to ask for the decision and he trained

NRMLA

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.


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.

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

When you have a higher mission and

our industry grew, the opportunities for

your priorities shift.

early issues of greed with unscrupulous

receive rewards beyond monetary gain,

In our industry’s founding years, the loan officer who found success was not your

Surviving the Middle Years

salesman was more like a social worker,

Our little cottage industry continued

a client than his counterparts in the

solutions for older homeowners, always

typical high-powered salesman. This

along for more than a decade, providing

spending double or triple the time with

expecting that “next year” we’d see an

“forward” mortgage world. However,

explosion of acceptance and growth. As

this was not really seen as a negative.

helping seniors grew. We fought a few 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. >>

wall street

2000

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.

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

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

that baby boomers

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.

’09-’10

seem much

more likely

to use reverse mortgages

than the WWII

generation and those before.

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| 31


“Suitability” – The New Catchphrase

There’s also the 2010 Wall

2010. Obviously, the smaller

I firmly believe our industry’s

calls for a reverse mortgage

study designed to determine

industry have been the

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

Street Reform bill, which

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.”

possible solutions to make

mortgage lenders from also

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” lenderborrower

interaction?

32

| TRR

If lenders can’t survive

or limitations on reverse

The 2008 FHA reform bill,

their own financial decisions,

most adversely affected.

whether any “conditions

lenders simply providing borrowers education and

brokers and lenders in our

which banned reverse

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

in our current economic

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.”

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

the number of active lenders

and ask the probing questions

and December 2010. RMI

every senior is truly served

10 lenders grew as a share

with the positive feeling that

percent in January 2010 to

provided a good solution for

between December 2009

that are necessary to ensure

also reported that the top

and every loan leaves us

of retail volume from 40.5

we’ve made a difference and

64.5 percent in December

a senior in need. g


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8 TRR


The Reverse Review May 2011

the Essentials

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

W 34

| TRR

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.”


He drops the dictionary on the beach and

Oh yeah, and one other thing: Our

Bah-dah-dah-dah-dah-bump.

the music begins.

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,

cherished 401(k)s and IRAs have tanked.

The bad news: Almost half the people we talked to

Bust? How the Generation

As part of the research for my book, Baby Boomer Bust?

estimated that the value

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.

The good news: Almost

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

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.

by 10-30 percent in the previous 12 months.

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

than the population at large, thereby

dependent on the housing market coming

anything, our panel was more upscale giving us a good “acid test” of the impact of the recession.)

do you plan to pay for your retirement?”

our homes diminish, and even if Social

of their homes declined

made as a result of the downturn. (If

plans as formally defined (unless

employee). We’ve seen the value of

ride that escalator as well?

for my book, Baby Boomer

I asked our online panel many questions,

perhaps you’re a union worker or public

their homes. Could the baby boomers

As part of the research

our generation generally doesn’t have

pensions or defined-benefit retirement

bank on the appreciation in the value of

but one of the most important was, “How

The sassiest answer? The lottery.

And what about

housing? Our parents’

generation

practically

went to the

housing investment. Of course, that’s all 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 >> reversereview.com

8 TRR

| 35


savings that would accumulate with

to retire based upon the current value of

years through other means than greater

a mere 6 percent or 7 percent a year, our

A prevailing thought was expressed

How baby boomers plan to fund their retirements

value of what we stashed away would

of retirement has become further and

(They were able to pick several sources from a list of options.)

average citizens in this country.” And

?

deferred taxes over the years and ride the never-ending rise of the stock market; at

financial advisors told us, the cumulative 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

their assets.

by one of the respondents: “The idea

further away for the average and belowanother told us: “I will not be able to

wealth would have allowed.”

?

style cottage with a water view on

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

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.

themes in my survey of this vaunted

According to Dr. Ronald Manheimer,

Center for Creative Retirement at UNC

generation.

Let’s start by tackling the veritable

800-pound gorilla in the room: retirement.

A Less-ThanIdyllic 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 36

| TRR

61% 

Social Security

Nantucket.

401(k)s

retire and maintain my present lifestyle.”

should start looking for that little shingle-

63%

former Executive Director of the NC

Asheville, “There are several studies

and surveys out there done by academic researchers and financial services

?

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.”

companies that paint a dire picture of

Employment Angst

In the aggregate this is probably true,

Worrying about staying employed is

boomers’ ability to retire soon or ever. 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

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


Employment Angst

say his job is tenuous, too, because it’s

workforce is covered by such plans – the

work for a small business and feel secure

contribution plans like 401(k)s, which in

not only concerned about their jobs – that

dependent upon the travel industry”; “I 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”;

rest of us have to rely upon defined-

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

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

asymmetrically punish the middle and lower socioeconomic classes during

busts, leaving millions jobless, many without homes, health insurance, or adequate savings.

some potential opportunities, but beware of the pitfalls as well. Here are some things to take into consideration: Insecurity Over Retirement

doesn’t look good. They are worried-

pension programs (based on studies I’ve seen, only about 20 percent of today’s

I

Institutional Distrust

Coming off the meltdown I saw a

of boomers directed toward “traditional institutions” – banks, Wall Street, big

business, the real estate industry and government.

opportunity for reverse mortgages to

profits during booms and, likewise,

research, I would posit there are four

virtual evaporation of defined-benefit

markets.

very rich with tremendous windfall

Boomers have been “doing the math”

of the baby boomer generation: a) the

for their losses in the stock and housing

Many of the conditions spawned by

of today asymmetrically reward the

the forces underlying the predicament

main elements behind the current plight

that they might never be able to make up

economy we live in. The business cycles

The current mindset of boomers presents

of baby boomers today. Based on my

at the end of their prime earning years

tremendous wave of mistrust on the part

1 percent of the population controls 43

And, from perhaps the luckiest person of

future may hold, it’s useful to examine

lose their job. Boomers fear since they’re

many disproportionate dollars (the top

the income/wealth scale suck up so

Tapping Into the Market

To get an accurate gauge of what the

about getting hired again should they

been relatively unscathed.”

The Enemies Within

is, if they are employed – but also worry

in the U.S. – the top few percentiles on

and “I own an ad agency which has so far

the bunch: “I have a pension.”

Most boomers in their mid-50s or so are

since the meltdown and, for most, it to-horrified about whether they can

ever retire. To a certain extent, a reverse mortgage can be positioned as one of

the economic meltdown provide an

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

several tools to help them address this problem.

Forty-seven percent of our total boomers group expressed some sort of fear or discomfort about their employment status going forward.

reversereview.com

%

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The Reverse Review May 2011

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.

38

| TRR

A

Michael Banner

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.


No consultant is looked to more in a

Obviously health and safety issues for

endeavor but may be well worth the

advisor.

over their desire to remain at home, but

independence and live where they feel

senior’s life as their long-term care

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

the senior must take precedence even

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

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

may be declining is a very obtainable

built-in seat.

the home is a very viable option for many

Install handrails in the shower,

for this has always been to assume that

the hallways.

goal. Bringing professional services into

Medicare and some type of Medicare

supplemental policy would cover these services, but in fact that is not true.

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.

medications, check vital signs and attend

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.

3

your home on a weekly basis to monitor 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

Install ramps between bedrooms and living areas of the home.

4

many families worldwide.

theory is not a sales pitch for reverse

next to the toilet and possibly in

seniors. The standard thought process

Having a health care professional come to

The Use Your Home to Stay at Home

with a step-in shower with a

portion of their lives when their health

the elderly population is by far the largest segment of long-term care and touches so

of what can be done: Replace an old-fashioned tub

deserves to be discussed.

often confused with long-term care

Here are a few examples

secure place for them to be during this

But this is an important subject and it

is that the long-term care industry is

most comfortable.

them. Making their home a safe and

regulations continue to tighten around us.

I think one of the greatest misconceptions

investment for a senior to maintain their

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 longterm 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. >>

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8 TRR

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– that truly benefits the client, protecting

For those of you who are not involved in the longterm 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. A linked product is defined as one that

Does it make sense to fund these monthly

within the same policy. It could be the

of a reverse mortgage? Well, even though

offers two separate financial vehicles

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.

insurance premiums with the proceeds this may appear to be a simple “yes or no” question, it is not.

The answer to this question depends on many variables:

g g

the age and health of the clients; 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

Is it logical for a person to secure a

fixed-rate reverse mortgage and use the

medical expenses.

proceeds to fund one of these products?

The answers to these questions determine

I must say that in most cases it is not a

term care insurance makes sense for that

I have done much research on this and 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.

if using a reverse mortgage to fund longindividual 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 shortsighted and narrow-minded.

Still, as these products continue to evolve,

Improper cross-selling – cross-selling of

of returns and the multiples they offer.

that does not truly benefit the client’s

we should all stay informed on the rates

And what of the traditional long-term

care insurance products; the five-, sevenand 10-year pay periods?

products to earn a fee or a commission quality of life on a long-term basis – is

wrong, unethical and immoral. But the

cross-selling of a product – any product

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.

40

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l

the Resources Information at your fingertips. A listing of advertisers and contributors featured in this issue. l

l

l

AppraiserLoft

iReverse Home Loans

Brandloft

Loan Well America loanwellamerica.com 727.669.1705

rmsnav.com 888.918.1110

Celink

Mortgage Cadence

Tradition Title

Direct Finance Corp

Reverse Market Insight

Weiner Brodsky Sidman Kider, P.C.

appraiserloft.com 877.229.7799 brandloft.com 203.857.4141 celink.com 517.321.9002 dfcmortgage.com 781.878.5626

Generation Mortgage generationmortgage.com 404.995.5500

continued from page 11

ireverse.com/employment 800.486.8786

mortgagecadence.com 888.462.2336

reversemarketinsight.com 949.429.0452

Reverse Mortgage Crowds

And an Oops! While a mortgagee letter is forthcoming,

potential impact to our industry and

Management International, National Council on Aging and National

legislation and regulation. It is not too

late to join a large fellow constituency to make our voice heard.

list of five local counseling agencies,

relaxation. The number of unresolved

in addition to all seven national intermediaries.

providing both the latest update and

approved counseling agencies:

customers of current and proposed

As summer approaches, our focus

Lenders are still required to provide a

that lenders must provide to prospective the addition of three nationally

and their staff members on matters of

Foundation for Credit Counseling.

On May 10-11, NRMLA will host the

HECM clients was updated with

wbsk.com 202.628.2000

Counseling Solutions and Neighborhood

on March 28, 2011, the FHA Connection

list of national counseling intermediaries

traditionta.com 631.328.4410

their leaders to assist in educating them

These agencies join CredAbility, Money

mortgage is repaid.

RMS

Springboard Nonprofit Consumer

Reinvestment Corporation.

value of the home when the reverse

reversevision.com 919.834.0070

reversemortgagecrowds.com 800.604.6535

Credit Management, ClearPoint Credit

responsible for owing more than the

Reverse Vision

annual Washington Policy Conference, forecasts to various issues that could

affect our continuing service to senior

borrowers. Attendees will also be visiting

slightly changes to include family and 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

reversereview.com

8 TRR

| 41


The Reverse Review May 2011

the Last

Word on landline telephones. The ability to tweet,

speaking with a borrower, and touch points

come easily, and for many, never came at all.

with this product. Technology provides speed,

Skype, text, bank electronically or email did not

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

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.

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?

reconfigured to appeal to Boomers who have 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

request. The numerous touch points of the

demands of this new demographic, while

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

Emblematic of this group was overwhelming

their money.

interactions with people in the same room or

Reverse mortgage servicing agents are highly

| TRR

electronic means only, servicers might not

At present, when a borrower wants to draw funds, they are required to submit a written

42

When borrowers access funds through

been making major lifestyle and corporate

reverse mortgage borrower. Reverse mortgage

acceptance of authority. They prefer social

a concerned servicing agent’s “gut feeling.”

and closed on financial transactions without the makeup and dynamic of the “typical”

When the reverse mortgage product was created, its primary audience was persons born between 1925 -1945, often referred to as “The Silent Generation.”

technology cannot match the effectiveness of

Mandated counseling sessions may have to be

ever leaving their family room. We’re changing

John LaRose

efficiency and reliability, but the best-designed

and all forms of electronic communications. Boomers have refinanced home mortgages

The Times, They Are a-Changin’

between servicers and borrowers are critical

skilled at detecting harmful nuance when

the challenge of adapting to the needs and

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, betterquality 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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The Reverse Review  

May issue of The Reverse REview