THE
REVERSE MARCH 2011
review
INTERVIEW
TALK
Craig Corn Challenges the Industry to Seize Opportunities Brett G. Varner
The Threat of Theft
QC basics danger in
2011?
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TRR 03.11
20
24
30
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the Essentials Do Changes Made in 2010 Pose a Danger for 2011? 20 While positive changes were made in 2010, certain regulations enacted could create problems for our industry’s future.
John Smaldone
Craig Corn Challenges the Industry to Seize Opportunities 24 With the HECM Saver as a game-changer, MetLife’s commitment to reverse mortgages has never been stronger.
Brett G. Varner
The Underlying Threat of Identity Theft 30 By requiring businesses to implement identity theft programs, the Red Flags Rule protects those on both sides of the equation.
Mark Sisco
Life Estates: The Changes and Challenges 32 Recent changes made by Ginnie Mae bring new guidelines when processing a title for life estates.
Kristen Schnoebelen l
the The Report 7, 9
The Conversation
16
10
The Industry Roundup 18
The Perspective 12
The Resources 36
The Advisor 14
The Last Word 38
Ask the Underwriter
4 | TRR
Core
32
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. I started my editor’s letter last month
the challenges and opportunities that
on the front while we wait for the
24 to read the full interview with
by mentioning that all was quiet changes to come in April. Well, I
take that back. Overnight, it seems as if things blew up and now the
industry is talking. I feel as if every
offering a great outlook on the future of the industry.
National Accounts Manager
Between our regular columnists and
the majority of us don’t know what
I’m proud to bring you another great
the next turn in the road will be, we are going to keep on fighting and
working our hardest to pull through
what may seem like a tough time for the industry.
issue! I look forward to watching the changes and the road ahead of us
The Reverse Review!
issue!
hard work that went into our March
Subscriptions and Editorial Content phone : 858.217.5332 e-mail : information@reversereview.com website : reversereview.com
that occur in this marketplace,
have to be prepared for change; it’s
going to happen one way or another
and the only thing we can do is seize
Until next time,
Editor-in-Chief { emily
Printer The Ovid Bell Press Advertising Information phone : 858.832.8320 e-mail : advertising@reversereview.com
take advantage of any opportunities
really is no other way to put it. We
Brett G. Varner “He who spends too much time looking over their shoulder, walks into walls.”
ideas and opportunities for
Industry to Seize Opportunities”:
because change is a constant.” There
News Editor
unfold and welcome any comments,
Please sit back and enjoy all of our
“Ensure that you are positioned to
David Peck Changing the industry... one ad at a time.
our contributing authors this month,
Craig Corn says it best in this month’s feature, “Craig Corn Challenges the
T-Racie Knight I don’t even know how to spell my own name. Sorry, Kersten.
Craig Corn. It is an uplifting piece
conversation I have ends on an
uncertain but positive note. While
Creative Director
come out of it. Be sure to turn to page
vannucci
}
© 2011 The Reverse Review, LLC. All rights reserved. The Reverse Review, LLC is a California limited liability company and is the publisher of The Reverse Review magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, The Reverse Review, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127
l
the Contributors l
Dave Bancroft
Feature Article
1
David Bancroft, former Executive Vice President and Board of Director member at Security One Lending, is an industry expert in the origination of reverse mortgages. Bancroft was the Founder and President of Omni Reverse Financing Inc, specializing in Government lending. Omni Reverse was one of the largest originators of HECM Mortgages in the country and was acquired by Security One Lending in 2009.davebancroft@cox.net | 949.355.4653
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Craig Corn
Craig Corn Challenges the Industry to Seize Opportunities, pg 24
The Conversation, pg 16
1
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Sue Haviland, CRMP 2
2
The Advisor, pg 15
Sue Haviland is Co-founder of ReverseMortgageSuccces.com. She has been in the mortgage industry more than 25 years. Unlike many others, Sue originates reverse mortgages each and every day and has earned her Certified Reverse Mortgage Professional designation. If you would like to profit from the largest niche to ever hit the mortgage industry, grab the free course and profit-producing tips at reversemortgagesuccess.com. l
John K. Lunde
3
Craig Corn is a Vice President at MetLife Bank, N.A., responsible for the bank’s reverse mortgage business. He joined MetLife Bank when it acquired EverBank Reverse Mortgage LLC, where he was Co-president. He previously served as EVP of Financial Freedom Senior Funding Corp., and SVP in Lehman Brothers’ Fixed Income Division, responsible for its reverse mortgage efforts, including spearheading the first reverse mortgage securitizations ever completed in the U.S.
6 | TRR
3
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. 949.429.0452 | rminsight.net l
Ralph Rosynek
4 4
Ask the Underwriter, pg 10
Ralph Rosynek has been The Reverse Review’s “Ask the Underwriter” columnist for more than two years. He is an industry HECM consultant and trainer, leveraging many years of executive and owner skills and knowledge in the reverse mortgage space including HECM Direct Endorsement credentials. Ralph is currently a seated Director for NRMLA and co-chairs the Professional Development Committee. 708.774.1092 | rrosynek@yahoo.com l
5
Brian Sacks
5
The Advisor, pg 15
Brian Sacks is Co-founder of reversemortgagesuccces.com. He has been in the mortgage industry for over 25 years. Unlike many others, Brian orginates reverse mortgages each and every day! If you would like to profit from the largest niche to ever hit the mortgage industry, grab the free course and profit-producing tips at reversemortgagesuccess.com.
The Reverse Review March 2011
the Report
January 2011 Wells Fargo Bank of Bank, N.A. America, N.A.
Top Lenders Report
MetLife Bank, N.A. Endorsement 466
One Reverse Generation Mortgage LLC Mortgage Endorsement Company 322 Endorsement 122
12345
Endorsement
CHARLOTTE
1687
Endorsement
Lender
843
Endorsements
Lender
Endorsements
1ST AAA REVERSE MORTGAGE
102
STAY IN HOME MORTGAGE INC
24
GENWORTH FINANCIAL HM EQUITY
86
CHERRY CREEK MORTGAGE CO INC
20
SECURITY ONE LENDING
80
ASPIRE FINANCIAL INC
18
GUARDIAN FIRST FUNDING GROUP
69
FIRST MARINER BANK
18
URBAN FINANCIAL GROUP
65
FIRST NATIONAL BANK
18
AMERICAN ADVISORS GROUP
63
OPEN MORTGAGE LLC
18
M AND T BANK
59
UPSTATE CAPITAL INC
18
PNC REVERSE MORTGAGE LLC
57
TRADITIONAL HOME MORTGAGE INC
16
MONEY HOUSE INC
56
ALLIED HOME MORTGAGE CAPITAL
16
FINANCIAL FREEDOM ACQUISITION
55
AMTEC FUNDING GROUP LLC
16
IREVERSE HOME LOANS LLC
43
GATEWAY FUNDING DIVERSIFIED
15
NET EQUITY FINANCIAL INC
42
M AND I MARSHALL AND ILSLEY
15
SENIOR MORTGAGE BANKERS INC
37
MAS ASSOCIATES
15
SUNTRUST MORTGAGE INC
34
PRIMELENDING A PLAINSCAPITAL
15
NEW DAY FINANCIAL LLC
34
TRINITY REVERSE MORTGAGE INC
15
MIDCONTINENT FINANCIAL CENTER
33
TRIPOINT MORTGAGE GROUP INC
14
MORTGAGESHOP LLC
29
ROYAL UNITED MORTGAGE LLC
14
UNITED SOUTHWEST MORTGAGE CORP
29
SUN AMERICAN MORTGAGE
14
SENIOR AMERICAN FUNDING INC
28
HARVARD HOME MORTGAGE INC
14
EQUIPOINT FINANCIAL NETWORK
26
CHRISTENSEN FINANCIAL INC
14
SENIORS REVERSE MORTGAGE
25
SENIOR EQUITY FINANCIAL INC
13
TRR | 7
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the Contributors
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Kristen Schnoebelen
6
6
Life Estates: The Changes and Challenges, pg 32
Kristen Schnoebelen has been an Account Manager with Premier Reverse Closings since 2006. She covers part of Northern California, Oregon, Washington, Minnesota, Missouri and Hawaii. Her favorite part of her job is building relationships with loan officers and lenders, helping the senior community and working with incredible people.
9
Mark Sisco
7
8
The Underlying Threat of Identity Theft, pg 30
Mark Sisco is the RSD with West Star Lending and is the driving force of the retail sales and the training group of the Reverse Mortgage division. He holds a California Broker’s license and several other origination licenses and is an accomplished speaker, with over 18 years in the mortgage industry. 949.922.7859.
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John Smaldone
9 8
10
11
Do Changes Made in 2010 Pose a Danger for 2011?, pg 20
John Smaldone, founder of Taylor, Bean and Whitaker and former Senior Vice President of TransLand Financial Services Reverse Mortgage Divisions is the Executive Vice President of Hanover Financial Services, a consulting firm primarily in the reverse mortgage industry. With 42 years of mortgage banking experience, 10 years in reverse mortgages, John intends to remain in the reverse mortgage industry taking on long-term consulting assignments. johnsmaldone@charter.net
The Advisor, pg 14
Alain Valles, CRMP, is President of Direct Finance Corp, Hanover, MA. He has obtained the CSA designation, a master’s in real estate from MIT, an MBA from the Wharton School, and graduated summa cum laude from the University of Massachusetts. Alain’s mission is to improve the quality of life through responsible financing. 781.878.5626 | avalles@dfcmortgage.com
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8 | TRR
Alain Valles, CRMP
Brett G. Varner
The Perspective, pg 12 Craig Corn Challenges the Industry to Seize Opportunities, pg 24
10
Brett G. Varner is the newly appointed News Editor for reversereview.com. He has served the mortgage industry for 10 years in leadership capacities in sales, marketing and operations. His unique and knowledgeable perspective is focused on developing useful content and strategies in a forum of open and lively debate. brett.varner@reversereview.com
The Reverse Review March 2011
the Report
INDUSTRY SUMMARY Retail Endorsement Growth
8.47%
December Endorsements Retail and Wholesale Volumes
Wholesale Endorsement Growth
-13.35%
- Reverse Market Insight There’s one thing many lenders focus on at this time of year, and it’s the
Total Endorsement Growth
-0.02%
final rankings for our just completed year.
* Figures Above Reflect Change from Prior Month
Trailing Twelve Month Endorsements
• Wells Fargo is still the top overall lender and top retail lender, with
a combined market share of 24% including both retail and wholesale channels
• MetLife is the top wholesale lender, with 20.9% of all wholesale volume
• 1st AAA Reverse Mortgage is the top broker, averaging almost 100 loans per month
10,000
Congratulations to all three companies that led the way in a tough year for the industry.
8,000 6,000
This month’s report reminds me of a funny question someone once asked
4,000
me: If you have one foot in the freezer and one foot in the oven, would your head feel average?
2,000 0 1 2 3 4 5 6 7 8 9 10 11 12 Retail
Wholesale *Numbers Represent Months
RETAIL UNITS CHG%
WHOLESALE UNITS CHG%
TOTAL UNITS CHG%
10
3,171
-19.8%
4,450 10.89%
7,621 -7.96%
11
3,124
-1.48%
3,890
2.87%
7,014 -7.96%
12
2,783 -10.92%
3,038 -12.58%
5,821 -17.01%
1
2,692
-3.27%
2,813 -21.9%
5,505 -5.43%
2
2,465
-8.43%
2,086 -7.41%
4,551 -17.33%
3
2,900 17.65%
2,404 -25.84%
5,304 16.55%
4
3,358 15.79%
2,521 15.24%
5,879 10.84%
5
3,969
18.2%
2,672
4.87%
6,641 12.96%
6
3,405 -14.21%
2,558
5.99%
5,963 -10.21%
7
2,976
-12.6%
2,307
-4.27%
5,283 -11.4%
8
4,004
34.54
2,547
-9.81%
6,551
9
4,343
8.47%
2,207
10.4%
TOT
39,190
33,493
24.0%
6,550 -0.02%
72,683
As lame as the joke might be, it highlights the fact that averages can mask
a lot of variation under the surface. That is certainly the case in December, as we see that a flat volume month for the industry hid continued growth for retail (+8.5%) and a big decline for brokers/wholesale (-13.3%).
The most commonly cited reason in our conversations with clients is that new regulations are making it harder to compete as a broker without
closing your own loans. If that’s what is behind the recent shift toward
retail volume from broker/wholesale, it suggests that many brokers are
either aligning with larger firms or joining forces with others in the same position to close their own loans.
Either way, we’d expect to see the number of active lenders continue to
decline (or at least grow very slowly) even as volume increases, leading to a higher average loans-per-lender metric. And while we’ll be the first to
agree that this average doesn’t tell an individual company’s story, it does tell us a lot about the general state of the industry. g
TRR | 9
The Reverse Review March 2011
ask the Underwriter control plans for third-party originators. The status change from a
HUD loan correspondent to a sponsored
originator did not change or diminish the need for loan quality control procedures. For those companies participating in the forward loan market, there has been an
increase in the profile and perspective with which lenders are assessing loan quality
control activities among their customers. It is impossible to pick up an industry publication and be unaware that the
In a perfect origination world, loan QC guidelines would be required reading.
agencies, investors, consumer groups and regulators are all pointing fingers at each other over borrower default and loan
foreclosure issues. A large number of these loans are the result of the economy and
borrower inability to pay. However, recent buy-back and repurchase demands that have surfaced include loans with many other issues besides borrower payment default. Though the number of loans
involving QC issues from the onset of
Quality Control: Back to the Basics Ralph Rosynek
In last month’s column, information was provided suggesting increased lender scrutiny of quality 10 | TRR
origination has not been fully assessed, remediation of non-performing loans
involves a heavy analysis of all components of loan failure, including quality control.
How your company monitors its quality
control responsibility should be a primary concern. Your livelihood and the fate of
your family clearly rest upon your ability to provide, yet the undetected actions or failures of one or a few could abruptly
cause you to be in jeopardy of not meeting your personal responsibilities.
Quality control is a
function of everyone’s
performance in the life cycle
HUD has provided guidance over the years
of a mortgage loan. While it
effective QC program meets agency
familiar with your company
that maintaining an agency-compliant,
is suggested that you become
guidelines as well.
QC policy and procedure
In a perfect origination world, loan QC guidelines would be required reading.
again, additional QC
resources also exist in your
Many originators make the assumption
investor manuals, as well
How many times have we seen that the
guidelines. In going back
reputation of a company, and in some
review by considering the
that this process is in place and working.
as in agency and regulatory
actions of one or a few taint the entire
to basics for QC, start your
cases ultimately cause the operations of the company to discontinue?
following:
Does someone routinely review the forms that
I use?
How is customer privacy maintained? Look around the
Continuous changes mandated by law,
office. Are files left on desks or scattered
changes require constant compliance review.
policies and procedures for document
guideline, policy, regulation and market
If you are not responsible, who is? A good indication that there may be a problem
in this area is if you are using forms and
crossing out the year in required date areas, or having to strike out and initial pre-printed language.
Why do I have more or fewer documents than the checklist
requires?
The ability to update checklists
in several different areas? Are there
destruction and safeguards preventing
access to borrower information without
authorization? Who is permitted to alter
or change information once you submit an originated file?
Do you – or does anyone – carry confidential borrower information on laptops or remote servers?
Today’s information portability
and forms is almost instant. Utilizing
increases risk. Improperly secured laptops
of internal process issues.
significant concern when security measures
yesterday’s checklist is a definite indication
Why do borrowers leave messages for me that they are unable to get information on the status of their loan?
Knowing who
and how many people are handling your file is a very important premise of good customer service. Requests made of the
borrowers without your knowledge may be
an indication of a faulted origination as well as operations issues. How will you learn to correct your mistakes?
Are updates, program and regulatory changes routinely
communicated to all staff?
Information
and communication flow within your office is important to avoid mistakes and possible delays in the origination and processing of your loan. Many underwriting conditions
and remote information storage is a
are not in place to protect from theft or
misuse of this information. Blanket access to LOS and other operations systems without user permissions identified represents a
potential for resulting quality control breach
As the industry continues to move toward
electronic documentation, the risk for fraud increases. Having the reputation as the
“fixer” is not really a positive job attribute
and begs the question: At what point does the correction or alteration become fraud?
Who handles compliance? Is there someone who is focused on
reviewing QC reports, customer complaints, audit results and investor feedback? Believe it or not, in addition to protecting your
company, the information protects your
personal well-being. While the results of
these types of activities may identify needed areas of improvement or change, lack of
identified issues provides a false sense of security that the potential for QC breach could occur in the future.
Are there established preunderwriting QC checkpoints?
on a large scale.
From origination to file submission for
Are post-closing borrower “experience” questionnaires or inquiries made? Feedback from your
or routine verifications that are conducted
borrowers after their transaction is complete is an excellent source for evaluation of process changes, communication and
information failures and unknown QC
breach. From a marketing perspective, this communication represents another touch point in the development of referrals.
When was your last “how to” session? Is there someone in your
are the result of changes that were not
company who is a “graphic designer” – the
final approval.
Wite-Out and document-editing software
addressed prior to submission of the file for
document alteration is a very big issue.
go-to person who utilizes Liquid Paper,
as a routine part of their job? While there
are some limited instances where the use of
underwriting, are there certain activities to assess the quality and accuracy of the information being received and
processed? Many companies do little to
test the integrity of their files (as well as
the integrity of their employees), and wait or react until investor review and QC
measures are complete. Quality loan files exist when the QC procedure begins as
early as the pre-qualification process. More importantly, investor quality control at the time of underwriting is often assumed to be completion of the process. The reality
is that the QC process continues well into the future past underwriting, through execution, into servicing and, as we
mentioned above, even in loss mitigation. g
these products may be necessary, in general, TRR | 11
The Reverse Review March 2011
the Perspective The article was about Jim Olson, the owner
There have been, and will always be, those
Unless you are a true guitar aficionado,
in search of the financial gain, more or
and founder of James A. Olson Guitars.
you’ve probably never heard of him. He
has been making his guitars and exercising his passion for woodworking and music
for more than 40 years. He handles every aspect of production, from concept to
design to construction. At the height of
production, Olson only makes about 30 guitars per year.
“I was obsessed with it. It took way too
long to make for what I could get out of it [financially], but I kept doing it anyway,” he said. “Much like someone who is
playing the guitar, you persist at it because
question as to why you are, and intend to remain, in this industry.
12 | TRR
mortgage industry rebound. They are often frustrated by the time and effort required
to develop a successful business, and float out as quickly as they floated in.
successful production, but lack the
to a higher level. Some in this category
have short-term intentions, merely seeking to cash out on what they have built. In the reverse mortgage sector, they have been fueled by recent high returns from the
secondary market, but realizing that this is fleeting, are already looking to the horizon for the next thing.
you can’t imagine your world without it. I
These players are commodity players. It
it wasn’t smart.”
the product is immaterial. The overriding
wanted to pursue it in spite of the fact that
“Can’t imagine your world without it.” How many of you working every day
is about positioning and profitability and
theme is committing the minimum to gain the maximum, and then move on.
in the reverse mortgage industry have
The reverse mortgage industry does not
Being able to ascribe that type of passion
of all the growth potential that supporters
used that phrase in defining your career? to one’s work is, to me, what separates
existence, but more of a direct, revealing
a wading ground until other aspects of the
necessary commitment to raise their effort
behind his persistence.
posing an existential contemplation of your
floated into the reverse mortgage sector as
took many years to turn his craft into a credited his passion as the driving force
I read an article last month from the Fox Business Small Business Center that really got me thinking about why we in the reverse mortgage industry do what we do. I’m not talking about
satisfaction. Many of these types have
There are also those that have somewhat
profitable business, it was the way he
Brett G. Varner
less chasing dollars over a greater career
What really struck me in reading about Olson’s life was that even though it
Why Are You Here?
that ebb and flow around the industry
the great from the good. This industry
is too specialized and too limited, with a distinctive prospective clientele that
requires empathetic education and counsel for sustained success to come any other way.
In my years of sales and operation
management within the mortgage industry, I have worked with a wide variety of
players with a wide variety of motives.
support these types very well. Regardless tout, including the explosion of the
demographic as baby boomers age, the
reverse mortgage market continues to be a small, niche segment that is dwarfed
(and will continue to be dwarfed) by the
forward mortgage market. Each potential client commands an immensely larger
amount of time and effort to guide through
the education and decision-making process than many other comparable situations.
Unless there is an immediate and desperate
“Can’t imagine your world without it.” How many of you working every day in the reverse mortgage industry have used that phrase in defining your career?
made up a relatively small portion of their
At the end of the day, critical ingredients
in a mode of restructuring the mortgage
course, organization, time management
mortgage business. They are clearly
units in light of the housing crisis and necessary housecleaning resulting
from the Countrywide acquisition. The clichéd statement that they are shifting
resources to “core mortgage operations”
revealed simple corporate belief: Reverse
mortgages were just not a valued portion of their business, and were expendable.
For the “survivors” in the industry, those who have chosen to remain, there are a
number of reasons that may drive your
desire to remain in the battle. The obvious response is how much you love helping
need, many are content to marinate over
the product for substantial periods of time, extending the life cycle of the leads and
the return on funds invested to generate them.
seniors. This can be a very rewarding and emotional driving force for many people. I have been fortunate to speak with
many seniors who were able to resolve
difficult financial situations with a reverse mortgage. The relief and appreciation
So the question remains: Why do you continue to trudge along amidst the
limitations and challenges of a product
with limited scope that will keep receiving scrutiny among regulators and detractors? The recent announcement by Bank
of America that they decided to exit
the reverse mortgage business got me
wondering about this point. Many were
shocked by the announcement and were
concerned about what this would mean to the status of the industry, but the reality is that BofA just didn’t need the reverse mortgage product. Reverse mortgages
expressed by them can sustain you through other rough times.
Others may be driven by the professional
and consistent effort must be added to the
mix, but it is truly believing in the product you provide, the team you work with, and an affinity for the people you serve that
can lift you above the noise of doing just enough, and become (or continue to be) one of the best.
As for Olson, his story is a long and
winding road, but after decades of work
with minimal returns, he has maintained
his passion and found his road to success. He continues to be the only one involved
in the production of his guitars, and since 2000, they have been selling for $12,500 to $35,000 each. The guitars remain
in demand and his orders maintain a
backorder schedule of about one year.
Next time you see James Taylor perform,
you’ll likely see one of three Olson guitars that he’s been playing since 1989. You can see more about Olson’s work at olsonguitars.com.
challenges presented by the reverse
Olson’s advice to others is simple, yet
perspective, going through the process
and be willing to do it even when it is not
mortgage product. From a sales
of educating potential clients, helping to change their perspectives to see
the opportunities and then guiding
them through the process can create
speaks volumes: “Do it because you love it working, and if you love it enough and
you are dedicated enough, eventually you can succeed at it.”
a rewarding sense of victory. On the
Why are you here? Knowing your
tightened regulatory and underwriting
going when the weight of challenge tries
operations side, working through
guidelines to make sure loans pass muster, helping to manage your company’s risk
profile, and still getting loans closed, can bolster pride in one’s accomplishments.
?
of success are passion and persistence. Of
motivations and purpose can keep you
to hold you down. I’d love to hear your
story. Let me know what keeps the wind in your sails at
brett.varner@reversereview.com. g
Have a question for the Appraiser? Email questions to information@reversereview.com and look for your answer in an upcoming issue.
aa
TRR | 13
The Reverse Review March 2011
the Advisor Those incredulous real estate
Like many Americans,
experienced reverse loan
reverse mortgages are
Realtors think that
agents are not alone! Even
officers do not understand how the P-HECM can
improve the lives of seniors,
with the bonus of adding an entirely new referral source to the mortgage broker’s
database. Will you take the
lead and be the first P-HECM trusted advisor in your marketplace?
How It Works
Not all seniors want to stay
in their home. With children grown and gone, many find that a large home becomes
a liability and maintenance
challenge. They are ready to downsize, or perhaps move
into a more accommodating community. By utilizing a
“You Can Buy a Home
with a Reverse Mortgage?” Alain Valles, CRMP
“I didn’t know that!” That’s what
I heard last week from 12 owners of real
estate offices representing more than 110 agents. I had just given a presentation
called “HECMs for Purchase,” the use of a reverse mortgage to buy a new home.
14 | TRR
HECM for Purchase, they
won’t have to pay 100 percent cash for the home and can
reallocate that cash for other investments or uses. This
avoids the need for a new forward mortgage with
monthly payments at a time when the senior’s income
may be fixed. This is a huge
potential new market for real estate sales.
Overcoming Realtor Perceptions
Many real estate agents
fall prey to the same myths that reverse mortgage
professionals have been
trying to overcome for years.
Like many Americans, Realtors think that reverse mortgages are only for poor people, that the homeowner loses equity or control of the property, that reverse mortgages are expensive, that there will be nothing left for the children, etc. These objections and misperceptions must be overcome using education-based responses.
only for poor people, that the homeowner loses
equity or control of the property, that reverse
mortgages are expensive, that there will be nothing left for the children, etc. These objections and
misperceptions must be
overcome using educationbased responses.
Real estate agents are also
curious as to why a senior would go the reverse
mortgage route to buy a
home when they may be
able to pay cash or take on
a new mortgage. It is a case
of better cash management. By utilizing a P-HECM,
the borrower can conserve cash and, in many cases,
improve their retirement security.
Many in the real estate
business are aware of the financial pressures older homebuyers face, and
the difficulty of obtaining traditional mortgage
financing for seniors. Having the P-HECM
option gives a real estate
agent a powerful new tool to help older buyers.
Building Realtor Relationships
the Seniors Real Estate Specialist (SRES)
for real estate professionals in your market
Don’t oversell the P-HECM, and don’t try
database and create a new source of leads.
loan officers! Instead, focus on teaching
will need to become a teacher, educating
potential buyer might be sending, such as,
The market potential is huge. Of the 5
Make yourself known by volunteering
the payments,” or “We want to move but
less than 2,000 were P-HECMs. Why?
meetings of local real estate offices, or
These are indications that the homeowner
associations. Add as many Realtors with
they already possess.
designation as possible to your database.
Becoming the go-to expert on P-HECMs is a great way to expand your referral
to force real estate agents into becoming
But it does require effort on your part. You
the Realtor to listen for clues that a
local real estate agents about P-HECMs.
“We’d love to downsize but can’t afford
to make presentations at the weekly staff
our house is our retirement security.”
to speak at monthly meetings of Realtor
does not understand how to use the equity
?
Tutor the real estate agent on how to
respond to these signals by presenting the P-HECM option. Make yourself available to explain the process and benefits to the
senior buyer. An hour of consulting could pay off in a tidy reverse mortgage.
million home purchases made last year Because “I didn’t know that…” g
Need assistance from the Advisor?
Send your question to advisor@reversereview.com and it may be addressed in the next issue.
A Unique and Unlikely Referral Partner Sue Haviland, CRMP and Brian Sacks
story we knew immediately this was something we wanted to learn more about. The new referral source was a bankruptcy attorney.
This gentleman met with a senior client who came to him seeking his advice on filing a Chapter 7 bankruptcy. After the initial
consultation he concluded that it was not in this client’s best
interest to file bankruptcy but rather to seek another alternative.
To this attorney’s credit, he went the extra mile for this senior and
started making some calls looking for a reverse mortgage specialist. He wanted to find out for himself if a reverse mortgage was an
appropriate alternative for this client. Indeed it was. We were able to help this senior eliminate the troublesome debt and establish a line
Last month, my article for The Reverse Review focused on my theory of having a smaller number – but a higher quality – of referral sources. I must
of credit with the remaining reverse mortgage funds. This attorney has since introduced us to others in his field and we are educating
them as well. Keep in mind, all we are asking is for the bankruptcy
attorney to refer those clients he/she cannot help. We are not asking
say, I received many comments on this stance. Some were positive
them to turn away any business they would otherwise have, quite
felt I had gone over the cliff. That’s OK; it’s all about having an open
in negotiating a lower payoff on some of the debt they have
and agreed that they would implement the same strategy. Others
the contrary: Now the attorney may be able to assist the borrowers
discussion.
incurred. The borrower’s credit rating is saved by using a reverse
I have discovered one type of referral source that Brian and I will
hero for recommending a positive resolution to the problem.
call from a title representative who we have both known over the
Perhaps you already have a bankruptcy attorney or two in your
an introduction to a reverse mortgage specialist. When we heard the
referrals you can add to your list. g
certainly be cultivating going forward. A few weeks ago we got a
years. He had received a request from another professional seeking
mortgage instead of the bankruptcy and the attorney looks like a
professional circle. If not, there is one more source of quality
TRR | 15
The Reverse Review March 2011
the Conversation Mortgage’s acquisition by the largest
is profitable, or shed a revenue maker and
attention while validating our industry. It
department for the sake of redeploying
bank in America garnered tremendous
was a double-decker jack that gave every
company in the arena a reason to celebrate and pine to be the next
portfolio builder for my financial services
manpower. I’m no conspiracy theorist, but this move has me scratching my head and wondering out loud about
Seattle. Whispers had
the underlying motives.
the purchase price
We have all read about the
near $200 million,
Countrywide issues, the
legitimizing the true
arrival of the HECM
line, while stamping the quality of our product
as Grade A. Now I feel like Belfort, lying still
on the Octagon canvas, wondering what
just happened. How
could BofA forfeit a
game they practically owned? Or throw in the towel from the
corner, even though the judges had them up on
The Devil is in the Details Dave Bancroft
all scorecards?
I’m no conspiracy theorist, but this move has me scratching my head and wondering out loud about the underlying motives.
Something stinks. This
oddly similar to the blow BofA threw at the reverse mortgage world by announcing its departure. It wasn’t too long ago Seattle
16 | TRR
continued scrutiny of the
Merrill Lynch purchase. But to bullet-hole the Reverse
Mortgage Division to start
up a Legacy Asset Servicing department out of the blue? Come on. From the people I know there, this came as a surprise and secrets in
this industry at this level are rarely executed with precision.
My gut feeling is telling
me that this has a lot more to do with the future of
this product than anybody
thing has the nagging
is caring to discuss. I
scent of a four-day-old
bologna sandwich found between the seats of a truck in Charlotte, North Carolina. I
am having a terrible time gulping down what just
happened …
it doesn’t add
Did you see mixed martial artist Anderson Silva’s left foot cave into Belfort’s chin Saturday night? The strike seemed
foreclosure problems and
up.
Here is what
I do know: I don’t
throw away things
that aren’t broken. I
don’t sacrifice a whole
division of a company that
know many lenders were
elated by this news, smiling widely at the fortuitous opportunity to get at the BofA
orphaned loans. But I don’t see it that way. This closure has to be autopsied. We can’t
be too quick in writing it off as a casualty of the foreclosure mess while not pinpointing the real cause of death. Did anybody else
find interesting Paul Ryan’s response to the State of the Union address? Or the frontpage news that Republicans propose to
slash $74 billion in funding to a whole slew of government programs? The devil is in the details. g
TRR | 17
The Reverse Review March 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?
March
Find it here m overs k sh akers American Advisors Group: Capitalizing on a
successful 2010, AAG relocated into a new 22,000-square-foot corporate facility with plans to continue growth in 2011.
1st AAA Reverse: Opened the year
sustaining their position as the top non-
lender producer with 102 endorsed reverse mortgages for January.
NCOA, HUD & NRMLA: In response to the
Sun West Mortgage Company: Reported
that it has issued more than $6 billion in
reverse mortgage-backed securities since its inception in 1980. This Southern Calfornia based company has successfully built a
strong technology platform in ReverseSoft, a product that provides industry partners with a seamless solution to securitize the HECM product.
U p- k- C o m ers Jeff Benjamin/Investment News: Finally, an
T&I delinquency concerns, these three
industry publication for financial advisors,
program designed to help borrowers
forward-looking perspective at integrating
organizations collaborated on a pilot
navigate options to assist with maintaining their borrower obligations. The results will guide lenders and services in determining
written by one of their own, presented a
a reverse mortgage into a client’s overall financial retirement plan.
best practices for resolving these issues.
Consumer Financial Protection Bureau:
John Smaldone: Joined Hanover Financial
the rules and regulations surrounding
Services as Executive Vice President to
provide consulting services to companies
in, or looking to enter, the reverse mortgage market. John is a 42-year industry veteran with more than 10 years in the reverse mortgage sector.
Urban Financial Group: Opened a new
20,000-square-foot corporate office in Tulsa,
OK, to accommodate growth of their reverse mortgage operation and goals of reaching a
20 percent market share in the industry. This follows the recent acquisition of Guardian First Funding Group.
18 | TRR
Charged with consolidating and simplifying financial services and products, including
reverse mortgages, the CFPB launched their website, announcing, “We are open for suggestions” (consumerfinance.gov).
1st Reverse Mortgage USA: In response
to increased demand from regional and community banks, credit unions and mortgage bankers, the Lakewood,
Colorado-based firm expanded their
account executive team by adding Joe
Breheny, Jack McGovern, Scot Mountcastle and Randy Storm.
W h at Hap p ene d ? Bank of America: As part of the refocusing
of their mortgage resources on “core
operations,” BofA announced plans to exit the reverse mortgage market, going from
the No. 2 producer of wholesale and retail reverse mortgage to out of the game.
Fox & Friends: Stirring up a frenzy of anger
and frustration, Fox News aired a poorly
structured segment on the T&I delinquency
issue with reverse mortgages. A subsequent follow-up left much to be desired, but
NRMLA continues to work with Fox to
ensure future reports have access to accurate information.
Seattle Mortgage: Less than a year after
re-entering the reverse mortgage market,
Seattle decided to close down the division. Due to the banking crisis, Seattle went through a $50 million recapitalization
effort, which appears to have required a restructuring and the shutting down of non-core business units.
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. John Smaldone B r e t t G. V a r n e r Craig Corn M a r k S i sc o Kristen Schnoebelen
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.
TRR | 19
The Reverse Review March 2011
the Essentials
Do Changes Made in 2010 Pose a Danger for 2011? While positive changes were made in 2010, certain regulations enacted could create problems for our industry’s future. John Smaldone
L
ast year was a year many of us would like to forget. We all saw and experienced many changes, especially in the reverse mortgage sector. With the industry preparing for changes to come, we take a look back at what may have had a hand in creating a shift in the future of our industry.
20 | TRR
Shighlights gThe SAFE Act affected the entire mortgage banking industry. It is now March and we are still wrestling with the agony of conforming to it. gThe reverse mortgage industry experienced a tremendous amount of bad publicity, much of which was unjustified. Because of this, many of our seniors started to mistrust reverse mortgage specialists and the program itself.
gOur politicians became the proclaimed savior of the senior citizen. They thought they had all the answers about reverse mortgages. In reality, we all know that is not the case!
gThe Health Care Reform Bill and the Financial Regulatory Reform Bill were passed in 2010. Both were not favorable to our industry or for the stability of our country.
gHome values declined further. The reverse mortgage industry came up against major shortfalls with the principal limit amounts. Consequently we had to watch many seniors lose their homes through foreclosures.
gThere were major changes to the Good Faith Estimate (GFE). It has taken on a new look with changes that are confusing to both the senior and the loan originator.
gThere was a reduction in the principal limit calculations, which in many cases favored younger seniors over the older ones. Many seniors were considering a reverse mortgage, thinking they were going to get a certain amount, then found themselves in a shortfall position. g2010 brought the lowest interest rates in 50 years.
gThe November election changed the political balance in the House, which now favors the Republican Party. There was a major shift of faces in the Senate. However, the balance of power still favors the Democrats. gWe saw one of the largest number of bank failures throughout the country to date. 2011 could be a record-breaking year for failures, much greater than 2010.
However, 2010 did bring promises for the future of the reverse mortgage industry. It has been predicted that
into 2011. We saw the creation of the HECM
was signed into law, more than 1,000 pages
line standards. The major difference is the
issued. Many more pages of regulations,
every day in 2011, a statistic that is projected
product for the industry.
70 million baby boomers). The number of
The Saver is not for everyone, but the
but still close to the staggering number
of equity in their home and do not need the
many opportunities for the right people
costs, which are not associated with the
approach it the right way.
industry knows there is a place for the Saver
Looking Ahead
and more where it will fit in.
10,000 baby boomers will be turning 65
to continue for the next 19 years (close to
Saver, which is an alternative to our old-
lower closing costs and lower principal limit factors. The new program is truly a niche
of regulatory proposals and final rules were upward of 5,000, are expected to come. We must look at what this bill will do to small community banks, mortgage banking in
general, the reverse mortgage industry and
our entire financial system. Can small banks
baby boomers turning 62 this year is smaller,
program is ideal for those who have plenty
of 70 million. This brings to our industry
maximum payout bringing lower closing
and financial institutions, providing we
other reverse mortgage products. The
The Financial Regulatory Reform Bill
and as time goes on we will realize more
restrictions, causing many banks to go
We experienced changes in our product in the latter part of 2010, which have carried
On January 3, 2011, less than six months
after the Financial Regulatory Reform Bill
survive the overregulation attack? Can we
as a country survive our federal government controlling our free, capitalist society?
spawned a tsunami of new rules and underwater.
This will be a significant challenge for a bank of any size, but for the smaller >>
TRR | 21
bank, which typically has only 30 to 40
I have said this many times: The Financial
On January 24, the American Bankers
impact regulations of this regulatory burden
the American people and our great nation.
associations asked the chairman of the
employees, it will be overwhelming. The
will be felt by the millions of individuals,
families, and businesses that rely on their
local bank to meet their saving, borrowing, and financial services needs.
I wrote an article for The Reverse Review in
October 2010 on the Financial Regulatory Reform Bill explaining how it would
impact the reverse mortgage industry and
Regulatory Reform Bill is disastrous for
Never has a bill been passed that has given
the federal government more authority and
power over our entire financial system than
this bill. The Consumer Financial Protection Bureau (CFPB), a spin-off of the bill, has the authority to target and destroy the reverse
mortgage business as we know it. We have started to see the damage it can cause!
our country as a whole. Due to the bill’s
It is unfortunate the American people knew
the topic a bit more:
wee hours of the morning with legislators
immense impact, I would like to delve into
Argentina was once a thriving country with
wealth and a strong economy. Argentina fell into the trap we are heading into. Today the people of Argentina have an inflation rate
beyond comprehension and are controlled by the government – a government that is disorganized, inefficient and has a selfcentered agenda.
22 | TRR
so little about the bill. It was passed in the
having little idea what they voted for. Now that some of the facts are coming out and parts of the bill are starting to come to
fruition, people are realizing how dangerous this bill is and will be for the country’s economy, banking industry and entire financial system.
Association (ABA) and the state bankers Senate Banking Committee and House
Financial Services Committee to convene hearings on the current environment
affecting banks, particularly community banks. As you read the letter on the following page you will sense the
frustration and concern the ABA and
community bankers throughout the country have of losing their independency. As our community banks continue to fail and
merge with larger banks one starts realizing what the intent of the Financial Regulatory Reform Bill is. This bill will only put us
one more step closer to socialism than we already are.
January 24,
2011
SABA Letter
son ble Tim John rban Affairs The Honora using, and U o H , g in k an nB Committee o Senate s United State D.C. 20515 Washington, r Johnson:
every f all sizes in o s k an b g n e nti hearings at th ions, represe ade associat tee convene tr it g m in m k e o th C an b d g ned ks an ankin The undersig the Senate B affecting ban t at en th m t n es o u ir q v en ting to re e the current state, are wri ss to examin re g n o C th 2 11 ticular. outset of the banks in par y it n u m m reatening the future of co e severely th ar at th es g n e shared alle number of ch e country hav g th n t ti u n o u h o g u m ro a and ers th e facing ks’ activities utions. Bank an it b All banks ar st f o in w at ie re v g re r ture of these endous rictive in thei long-term fu e facing a trem e overly rest ar ar s k at th an b s l n al io , aminat e new regula s. In addition stories of ex eir costs. Th r conclusion th ei th se ea in f cr o ry in ts to n y ic ou ntl often contrad will significa en greater am at ev th g s in n d o ti an la u em d ew reg agencies are ese issues has amount of n ination of th en regulatory b h m w e co e m h ti T a especially tivity. tions come at munity bank d lending ac m se co ea a cr g in in d at er tion an and made op capital reten challenging y el em tr ex g made lendin serve ability to pre difficult. r ei th n o ti es qu ry costs. beginning to ially, regulato y banks are ec it p n es u , m d m an , co mber of time, ressure erger. The nu For the first m f examiner p o r o ce le fa sa e re th dence in need to explo their indepen they feel the et y ears. s, k an b lthy e next few y th er v o ly These are hea al ramatic may shrink d ate Budget these banks efore the Sen b ed at st y tl n y ernanke rece ons is directl rman Ben B nity instituti u ai h m C m e mv co co e er e es es th in of th As Federal R ill undertake and survival w n io ss at re g rv n o se C re an st d this the p rings to under y efforts that Committee, ea er h v ld co o re h ic ss m re e econo t that Cong eneral, and linked with th very importan industry in g is g it in , k d an en b e at th To th ng placed on ing months. s that are bei re u ss re p ry the regulato articular. y banks in p on communit ery gs on these v ou on hearin y h it w g in ard to work dustry. We look forw e banking in th r fo es su is important
Dear Senato
Sincerely, American Bankers Association Alabama Bankers Association Alaska Bankers Association Arizona Bankers Association Arkansas Bankers Association California Bankers Association Colorado Bankers Association Connecticut Bankers Association Delaware Bankers Association Florida Bankers Association Georgia Bankers Association Hawaii Bankers Association Heartland Community Bankers Association Illinois Bankers Association Illinois League of Financial Institutions Indiana Bankers Association Iowa Bankers Association Kansas Bankers Association Kentucky Bankers Association Louisiana Bankers Association Maine Association of Community Banks Maryland Bankers Association Massachusetts Bankers Association Michigan Bankers Association Minnesota Bankers Association Mississippi Bankers Association Missouri Bankers Association Montana Bankers Association Nebraska Bankers Association Nevada Bankers Association New Hampshire Bankers Association New Jersey Bankers Association New Mexico Bankers Association New York Bankers Association North Carolina Bankers Association North Dakota Bankers Association Ohio Bankers League Oklahoma Bankers Association Oregon Bankers Association Pennsylvania Bankers Association Puerto Rico Bankers Association Rhode Island Bankers Association South Carolina Bankers Association South Dakota Bankers Association Tennessee Bankers Association Texas Bankers Association Utah Bankers Association Vermont Bankers Association Virginia Bankers Association Washington Bankers Association Washington Financial League West Virginia Bankers Association Wisconsin Bankers Association Wyoming Bankers Association Members of the Senate Banking Committee
We have many challenges ahead of us in
The need for reverse mortgages has never
than anything, we must protect our seniors
good news on the horizon for the reverse
as an industry. We must meet the challenges
mortgage gives them! g
2011 and in the years to come. There is
mortgage industry. As stated earlier in this article, thousands of seniors are turning 62 years of age every day, and that trend is
expected to continue for the next 19 years.
been stronger. We have a lot to capitalize on
facing us head on. We need to be united and
from losing the valuable benefits a reverse
resist whatever may come upon us.
We must act as a single unit and defend our industry. However, more important
TRR | 23
TALK
INTERVIEW
Craig Corn Craig Corn Challenges the Industry to Seize Opportunities With the HECM Saver as a game-changer, MetLife’s commitment to reverse mortgages has never been stronger. Brett 24 | TRRG. Varner
=
! We think HECM Saver is a game-changer. We think that the product is going to open up the eyes of many consumers who had dismissed the reverse mortgage product of the past, and I also think it is going to open up the eyes of many financial advisors and other trusted advisors who had dismissed the HECM Standard product. We believe the applicability of the HECM Saver is significant.
E
$ However, I would say MetLife Bank is a major player in the reverse mortgage space and one of our guiding principles is education. Let’s face it, the best consumer is a well-educated consumer and the same holds true for the financial and trusted advisors.
However, if you stack up the HECM Saver – and I’m talking specifically about the HECM Saver ARM versus a HELOC – we believe it compares exceptionally well when you think about things like overall interest rate, costs, and the line of credit growth on the HECM.
6 Understanding where and how home equity can play a role in this can help people make better, or at least more informed decisions.
I think that’s probably the message that I would put out there for others: Ensure that you are positioned to take advantage of any opportunities that occur in this marketplace, because change is a constant.
CRAIG CORN SAYS...
he recent
In light of this
Craig has been an integral
Bank of America of
ongoing period of rapid
helped Lehman Brothers
announcement by their plans to exit
the reverse mortgage
business came as a shock to many in the industry, and has caused concern about
the strength of the industry and the HECM products. Their exit also shines a
spotlight on MetLife Bank
as an industry leader in both the wholesale and retail channels. MetLife Bank
will inevitably need to step up, visibly increasing their
leadership role, and fill the void created.
announcement and the
regulatory change within the reverse mortgage industry, I had the opportunity to talk with MetLife Bank
Vice President Craig Corn, who is in charge of the
company’s reverse mortgage division. I had sought to
discuss the impact of Bank
of America’s announcement on the industry, but what I
found was that BofA’s move had virtually no impact on MetLife’s plan nor their
positive outlook on where the industry is moving.
player since 1998, when he shape the secondary market for reverse mortgages. He
has been an executive leader for Financial Freedom, BNY Mortgage and EverBank Reverse Mortgage.
Recognizing the challenging road the industry has been
through, Craig spoke of the status of the industry and
opportunities that lie ahead, with a specific focus on
the HECM Saver product.
Speaking to those who have persevered through these
challenging times, he looks
ahead with an encouraging and refreshing sense of
26 | TRR
enthusiasm for the reverse mortgage market.
( BRETT
You have such a long
education, marketing, training and loan
history in the reverse mortgage industry.
originators will be the institutions that are
we are in such a period of rapid change,
that were made last October with the
Given that perspective and the fact that
going to take advantage of the changes
what is your viewpoint on the overall
introduction of the HECM Saver.
months, or at least the near term?
( BRETT
status of the industry and the next 12
( CRAIG
The next 12 months, that’s
Let’s explore that a little
bit. Obviously the industry, especially
HUD, looked at the introduction of the
tough, but I’ll start with the following: At
HECM Saver with great anticipation.
reverse mortgage space. We think all the
really pushing for it to have a significant
the HECM Saver out last October is going
impact or are you really looking at its
MetLife Bank, we’re very bullish on the
At NRMLA in November, they were
work that the industry did in order to get
impact. Are you already seeing that
to make a very significant difference in the
applicability as it becomes more visible?
direction of the reverse mortgage industry.
CRAIG SAYS
is going to open up the eyes of many
consumers who had dismissed the reverse mortgage product of the past, and I also think it is going to open up the eyes
of many financial advisors and other
trusted advisors who had dismissed the HECM Standard product. We believe
the applicability of the HECM Saver is significant.
So, I know you wanted to talk a little
bit about Bank of America, but frankly, whether Bank of America was in the
space or not, those are our prospects. We think this creates an incredible
opportunity, not just for MetLife Bank,
but the entire industry. Those institutions that understand how to reposition their
MetLife Bank who were part of the
re-engineering efforts with FHA. We
obviously had a sense before the launch
date in October that this product might be coming. So we had the ability to position ourselves prior to the launch date and it’s had an immediate impact on our
to absorb this new product.
In my opinion, we’ve only scratched the that the product is significantly different
overall older American population as
changer. We think that the product
exciting because there are people at
surface. Let me explain why. It’s not just
well, it’s a very small segment of the
We think the HECM Saver is a game-
starting point on October 4, and that’s
happening. It just takes them a little longer
served that segment of the market very
rate with homeowners over the age of 62.
That’s obviously from a zero percent
increase of business on their side also
customer. Some would characterize it as
evidenced by the 2 percent penetration
percent of our retail business.
to the take, but we see the percentage
a very specific type of older American
Although I think that the product has
right out of the gate, approaching 20
correspondents might be a little slower
designed in the past really catered to
other options, and that’s unfortunate.
Well, it’s become a
significant part of our retail production
retail production. I think our brokers and
The way the product was structured and
the individual who didn’t have many
( CRAIG
than what we have originated in the past;
At MetLife Bank, we’re very bullish on the reverse mortgage space. We think all
the work that the industry did in order to get the HECM Saver out last October is going to make a very
significant difference in the direction of the reverse mortgage industry.
it is the entire mindset of the industry,
ranging from counselors who now have a new product they need to understand to loan officers who have historically been approaching a very specific segment of
the older American population. Now they have to start working with a completely
different segment of the population as it relates to the HECM Saver product. It is
not just that the product has changed; it’s
the entire mindset of the education efforts at the consumer and trusted advisor
levels. So, MetLife going from zero to
20 percent in a very short period of time
without a tremendous amount of change in the way we do business, speaks to the
merit of the product appealing to people who might not have been previously attracted to the old HECM product.
( BRETT
You talk about
applicability. A lot of the media reports tend to talk about how the new HECM
TRR | 27
is so great because of the reduced costs,
amount of older Americans, those
but in the application that you are
seeing, is it really more of the flexibility and the fact that it goes more head-to-
head against traditional loans, like the
approaching or already in retirement,
have a significant amount of their assets
CRAIG SAYS
in what I would call home equity. And
we all know that when people are trying
Home Equity Line of Credit (HELOC)?
( CRAIG
to assess retirement income planning,
typically they and their advisors tend to
Well, I think you’re going
look at the investable assets, or the liquid
down a very important path. There is
assets. Things like stocks, bonds, cash,
some research that we’ve gathered from
401k and Social Security income are the
our colleagues at the Mature Market
traditional sources of income that people
Institute, in conjunction with the National
focus on as it relates to this planning.
Council on Aging, that suggests that
We feel that home equity is an important
the number of people who have taken
part of the retirement income planning
out HELOCs, and specifically first lien
process and that it needs to be considered
HELOCS, versus reverse mortgages
when you’re looking at a holistic
is a significant multiple. What that
retirement income plan.
tells me is that there are people who
have looked at the traditional reverse
( BRETT
That concept requires
mortgage, with the higher upfront costs,
a fundamental shift in the mindset of
lower upfront costs would be a more
you see the education effort occurring
those financial and trusted advisors. Do
and decided that the HELOC with the
more at the grassroots level, with
attractive proposition for them. However,
originators networking with those
if you stack up the HECM Saver – and
advisors, or on a larger scale, such
I’m talking specifically about the HECM
as NRMLA working in concert with
Saver ARM versus a HELOC – we believe
financial advisor industry groups?
it compares exceptionally well when you think about things like overall interest
rate, costs, and the line of credit growth
on the HECM. Additionally, the fact that
( CRAIG
it is government-insured is important, as
features and how well they stack up
lenders were shutting down available
believe, is an opportunity to penetrate
there was a time from 2007 to 2009 that lines of credit on HELOCS, which, of
course, can’t happen on a HECM due to a component of the government
insurance. Of course, the fact that the
against the HELOC. The result, we
that segment of the older American population very significantly.
( BRETT
One of the big points
HECM doesn’t have a payment has
I have made previously has been the
of a reverse mortgage against HELOCs
technical aspects of the product, but
always been one of the big selling points and traditional mortgage products that do. When you stack it up like
that, it is a very favorable comparison
training of loan officers and not just the how it applies to a meaningful financial plan for seniors as well.
You’re 100 percent right
for the HECM Saver. Accordingly, we
( CRAIG
reposition those points of distribution
a lot of ways, maybe even a bigger
think that as institutions like ours can
and that’s a great segue to what is, in
that have traditionally offered HELOCS,
applicability of the HECM Saver, and
and I specifically mean the banks, and demonstrate to them the benefits and
28 | TRR
that’s in the context of retirement
planning. We know that a significant
I can’t really speak to
what NRMLA might do. However, I
would say MetLife Bank is a major player in the reverse mortgage space and one of our guiding principles is education.
Let’s face it, the best consumer is a welleducated consumer and the same holds
true for the financial and trusted advisors. Taking the retirement income planning a little bit further, here are some things that are very important. There are
a tremendous number of decisions
that people have to make as they are
approaching, or are in, retirement. For
example, there’s the question of whether to take out Social Security at age 62 or
defer it to a later age. That’s an important decision that thousands and thousands of older American homeowners have to make every day. That’s such an
important decision and without really
understanding your entire financial
picture, you may not be best positioned
to make a decision that is the appropriate decision. Understanding where and how home equity can play a role in this can
( BRETT
doesn’t that put a lot of pressure on
planning advice, it probably should come
versed, not just in the reverse mortgage
the loan officer.
the originators themselves to be better products, but also how they
help people make better,
fit in a larger plan and what
or at least more informed
those retirement decisions
decisions. We talk a lot
people face are?
about the idea of how
people can use a reverse
( CRAIG
TALK
mortgage to bridge the
income gap that is created decides to defer Social Security in order to
maximize their benefits.
Just to illustrate, let’s say take $1,000 a month of
Social Security at age 62,
INTERVIEW
but if they defer until age 70, they might be able to
get $2,000 per month. That’s an important decision. If the decision is to defer, they would likely need other sources of
income to bridge the gap created by not taking Social Security at an earlier age.
Why not consider a reverse mortgage to fill that income gap?
In the past, the traditional reverse
mortgage with the significant upfront costs, utilized for a relatively shorter
time period that the deferral period may be, could be seen by some consumers
(and perhaps more importantly, financial advisors) as an expensive proposition. But a HECM Saver, with significantly reduced upfront costs … that’s a
completely different conversation. And I
think that’s just one of many applications that trusted advisors and financial
advisors are going to start looking at once they understand what a HECM Saver
is all about, and the applicability it may have in retirement income planning.
from the financial advisor, not necessarily
( BRETT
Before I let you go, are
there any encouraging words of wisdom you might have for the industry and to the many dedicated people who have
persevered through challenging times?
You bring
up a good point. There are
when an individual
that someone is able to
sound, thoughtful retirement income
That being true,
Well, as I said before,
regulations out there that
( CRAIG
as it relates to the Housing
mortgage space and our commitment
HERA, and the requirement
am personally pleased that at MetLife
as it relates to mortgage
advantage of the market environment
reverse mortgage originators.
that I would put out there for others:
were established back in 2008
we’re very, very bullish on the reverse
and Economic Recovery Act,
to this space has never been stronger. I
of firewalls and safeguards
Bank, we are uniquely positioned to take
originators, and specifically
and I think that’s probably the message
I think it makes sense that if a
Ensure that you are positioned to take
loan officer wants to be the best LO they
advantage of any opportunities that occur
not only their
constant. g
can possible be, they have to understand
in this marketplace, because change is a
consumer, but also the intermediaries they may be
working with.
Whether they are
financial advisors, CPAs, banks or
such, that’s just
common sense. It’s
obviously important the LOs understand their customer and understand their
referral network. At the end of the day – and this is really
important – financial
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advisors should
know their customer better than any
reverse mortgage
loan officer. In the
context of providing
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TRR | 29
The Reverse Review March 2011
the Essentials
The Underlying Threat of Identity Theft By requiring businesses to implement identity theft programs, the Red Flags Rule protects those on both sides of the equation. Mark Sisco
30 | TRR
T
he Red Flags Rule is enforced by the Federal Trade Commission (FTC), the federal bank regulatory agencies, and the National Credit Union Administration. The Red Flags Rule, in effect since January 1, 2008, requires many businesses and organizations to implement a written Identity Theft Prevention Program designed to detect the warning signs – or “red flags” – of identity theft in their dayto-day operations, take steps to prevent crime, and mitigate the damage it inflicts. By identifying red flags in advance, businesses
will be better equipped to spot suspicious patterns when they arise and take the
necessary steps to prevent a red flag from
Just getting something down on paper won’t
How to Comply:
escalating into a costly and hurtful episode of identity theft.
The Red Flags Rule protects those on all sides of the equation and describes how
certain businesses and organizations must develop, implement, and administer their Identity Theft Prevention Program. Now more than ever, we as an industry need
to embrace these regulations to weed out the undesirables that prey upon seniors. Remember, fraud comes from all areas,
including those that it is set up to protect. Just because they are seniors does not
mean they are all honest. The same goes for lenders and brokers/TPOs, and here
is where negative situations can arise. The larger the company, the better chance of
fraud within its organization, whereas the
smaller company can go undetected. Fraud
can come from within an institution as well
as outside an institution and is all around us – more than 9 million Americans’ identities are stolen each year.
Determining Who Must Comply With the Red Flags Rule The Red Flags Rule applies to financial
institutions and creditors. The rule requires you to conduct a periodic risk assessment
to determine if you have covered accounts. If you have covered accounts you will
h
your program must include reasonable policies and procedures to identify the red flags of identity theft you may come across in the day-to-day operations of your business. Red flags are suspicious patterns or practices, or specific activities that indicate the possibility of identity theft. For example, if a customer has to provide some form of identification to open an account with your company and presents an ID that looks like it might be a fake, that would be a red flag for your business.
h
Secondg
your program must be designed to detect the red flags you’ve identified. For example, if you identified fake IDs as a red flag, you must have procedures in place to detect possible fake, forged or altered identification.
need to implement a written agreement. The program must be designed to
prevent, detect and mitigate identity theft in connection with the opening of new
accounts and the operation of existing ones. Your program must be appropriate to the size and complexity of your business or
organization and the nature and the scope of its activities. A company with a higher
risk of identity theft or a variety of covered accounts may need a more comprehensive program.
First
g
h
Thirdg
your program must spell out appropriate actions you’ll take when you detect red flags.
h
Fourthg
your program must address how you will re-evaluate your program periodically to reflect new risk from this crime.
reduce the risk of identity theft. That’s why
the Red Flags Rule sets out requirements on
how to incorporate your program into daily operations of your business. Your board
of directors (or a committee of the board)
has to approve your first written program, or in the case of a TPO your acting lender
and FHA will be the one to approve. If you do not have a board, approval is up to the
senior-level employee. Your program must state who’s responsible for implementing and administering it effectively. Because your employees have a role to play in
preventing and detecting identity theft, your program must also include appropriate staff training. If you outsource or subcontract parts of your operations that would
be covered by the rule, your program
must address how you’ll monitor your contractors’ compliance.
The Red Flags Rule allows you the flexibility to design a program appropriate for
your company in regards to its size and
potential risk of identity theft. While some businesses and organizations may need
a comprehensive program that addresses a high risk of identity theft in a complex organization, others with low risk of
identity theft could have a more streamlined program.
Because your employees have a role to play in preventing and detecting identity theft, your program must include appropriate staff training. In my opinion, you must be aware that your program addresses all areas of concern. As more approved FHA lenders entertain the
TPOs in the wholesale arena, make sure you abide and do your part in the elimination of
fraud within and outside your organization. g
The Reverse Review March 2011
the Essentials
Life Estates: The Changes and Challenges Recent changes made by Ginnie Mae bring new guidelines when processing a title for life estates. Kristen Schnoebelen
32 | TRR
V
esting, vesting! 1, 2, 3! When it comes to vesting, there are so many options. Trusts, joint tenancy, community property, tenants in common, life estates. What to choose? Only your borrower and their attorney can make that decision. If they do have their property vested in a life estate, a reverse mortgage is not always a lost cause. There could, however, be potential issues that may ultimately delay or prevent closing.
Life Estate (lif-i’stat):
&
A form of ownership of real property. It can be created by any of the methods of voluntary transfer allowed by law, i.e., by deed, or by testamentary disposition (leaving property at one’s death, most often through a will). Also known as an estate for life, it vests title into one or more persons for the life of “someone.” That someone can be one or more of the grantors, one or more of the grantees, or one or more of some entirely unrelated third party (or parties).
Ginnie Mae recently made some changes
creating roadblocks along the way.
or future interest in the property; his life is
for the Home Equity Conversion Mortgage
remainderman’s liens against the property.
the life estate is determined.
in regards to the certification requirements (HECM) and the Mortgage Backed Securities Program (HMBS).
These changes include:
1 2
to verify the promissory note is executed by the holder of the life estate; t he security instrument is executed by the holder of the life estate and any future interests (sometimes referred to as the remainderman);
Another potential roadblock is a
Any liens against a remainderman will
attach to the subject property, and must be
addressed during the transaction. Examples include a son or daughter’s child support liens or past-due student loans.
A life estate can be created in two ways:
It may be granted outright or it may be reserved via deed.
t he intervening assignments reflect such mortgagors; and
A typical deed creating a life
the title insurance lists such mortgagors as holding title.
•
3 4
Life estate consists of two parties: the life tenant (the person who owns the property until a specified event occurs)
and the remainderman (the person who
acquires ownership of the property upon the demise of the person upon whose life the
duration of the life estate is measured). The remainderman is also the holder of either a “future estate” or an “estate in reversion.”
The borrower’s children are typically named as remaindermen, some of whom could be difficult with regards to signing off, thus
estate by grant might say:
“John Jones, a single man, grants to
Susie Smith a life estate for the term of her natural life.”
In this case, Susie is the life tenant and John is presumed to be the remainderman who owns the estate in reversion and will reacquire title upon the death of Susie. •
“John Jones, a single man, grants to
Susie Smith a life estate for the natural life of Bill Woods.”
In this case, Susie is the life tenant
and owns the property until Bill Woods
passes away. John is presumed to be the
remainderman and title will revert to him upon the death of Bill. Bill has no present
merely the yardstick by which the length of
•
“John Jones, a single man, grants to
Susie Smith a life estate for the natural
life of Bill Woods, with the remainder to Ralph Baker.”
In this case, Susie, the life tenant, owns
the property as long as Bill, the yardstick, is alive. When Bill dies, the property goes to
Ralph, the remainderman. Neither John, the grantor, nor Bill, the yardstick, has present or future interest.
Obviously, there are numerous variations of the standard theme. A life estate is
essentially stating one person owns the
property until a designated person dies,
whereupon title is vested into a (usually) predetermined person.
A life estate, an estate in reversion, and a
future estate are all interests in real property. Those interests can be bought, sold, gifted, leased, or encumbered. They’re similar to
full ownership interest, unless the creating document contains restrictions to the
contrary. In most cases the life tenant is
responsible for taxes and general upkeep on the property, but this can vary also.
A life estate can be terminated by merger of the “estate for life” and the “estate in
reversion.” A deed from the life tenant to the remainderman would merge the interests, and vice versa. >>
TRR | 33
Enhanced Life Estate
(en’hans-lif-i’stat)
also known as “Lady Bird” Deed A variation of a life estate that allows the creator to buy, sell, gift, lease, or encumber, etc., without the consent of the remianderman. Allows the owner to deed the property to their children (or whomever they choose), and still gives the ability to sell or take out a loan on the property, including a reverse mortgage. Also allows the property to be free of liens against the reminderman’s creditors.
Both the life tenant and the
encumber, etc., without the consent
execute loan documents. The
the owner to deed the property
remainderman will need to
remainderman may execute in
counterpart (outside of closing) but
your lender may require otherwise. For specific lender requirements, check with the underwriting
department or your relationship manager.
Another deed you might see that
is similar to a life estate is a “Lady
to their children (or whomever
they choose), and still gives the
ability to sell or take out a loan on the property, including a reverse
mortgage. The enhanced life estate also allows the property to be free
of liens against the reminderman’s creditors, which can be another roadblock.
Bird” Deed. This is another term
Although most lenders will loan to
estate, which is only available in a
estate, check with your underwriter
or a nickname for an enhanced life select few states. The name came
from Lady Bird Johnson, because
President Johnson supposedly used this type of deed to leave property or land to his wife. An enhanced
life estate deed is a variation of a
life estate, however this type allows
the creator to buy, sell, gift, lease, or
34 | TRR
of the remianderman. This allows
a property currently held in a life prior to accepting applications. If you need help closing a reverse
mortgage in a life estate, or simply have questions, please contact us at 800.542.4113 or find us
on Facebook at facebook.com/ premierreverseclosings. g
l
the Resources Information at your fingertips. A listing of advertisers and contributors featured in this issue.
l
l
l
AppraiserLoft
MetLife Bank, N.A.
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appraiserloft.com 877.229.7799
Celink
celink.com 517.321.9002
800.607.0366
metlife.com
reverserateleads.com 888.399.1859
Mortgage Cadence
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mortgagecadence.com 888.462.2336
Direct Finance Corp.
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dfcmortgage.com 781.878.5626
Hanover Financial Services hanoverfinancial@charter.net 865.980.3583
iReverse Home Loans ireverse.com/employment 800.486.8786
reversevision.com 919.834.0070
RMS
prclosings.com 800.542.4113
rmsnav.com 888.918.1110
Reverse Market Insight
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reversemarketinsight.com 949.429.0452
Reverse Mortgage Crowds reversemortgagecrowds.com 800.604.6535
traditionta.com 631.328.4410
West Star Lending weststarlending.com 949.922.7859
Reverse Mortgage Success reversemortgagesuccess.com 410.557.0294
Number
1 in 5 36 | TRR
Number of people expected to be 65 years old by the year 2035. - The New York Times, “The Aging of America�
www.nytimes.com/interactive/2011/02/04/business/aging-population.html?ref=business
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Things are always better looking
E S R E V RE 011 FEBRUARY 2
HMBS
3
for
IN REVERSE.
The Reverse Review March 2011
the Last
Word
The Last Laugh anonymous
38 | TRR
While we normally leave you with the Last Word, we recently received this cartoon and
thought we could part ways on a comical note, leaving you with the Last Laugh.
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TRR
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42 | TRR