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Do you have a theory on what is causing the tax and insurance defaults? Well, I think you can look at a couple of drivers. First of all, if you have a senior who is already in trouble and is facing foreclosure, and they take all the proceeds of the loan to pay off back taxes or to pay off the lender, continued on page 20

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What are some lessons you have learned about seniors, the market, and the business? Let’s start with seniors. When dealing with seniors, basically, it’s all about trust. They have to trust you and trust your organization or they are just not going to do business with you, period. And so I think it comes down to trust, understanding that you have trained loan officers, that you have a very compliant organization, and that you follow all the rules to the letter of the law. That, in itself, will continue to garner more and more trust because, at the end of the day, are we still doing reverse mortgages in spite of the articles? We certainly are, and it is because, I believe, the senior, first and foremost, trusts who they are doing business with. That is invaluable. And if you lose that trust, you need to

exit the business. I don’t profess to be an expert on seniors as a market itself, but I know that everything we read comes down to the trust factor. The market is there. The public sector is looking to the private sector for a solution to their epidemic of runaway Medicaid expenses and states’ financial crises. They were looking primarily at reverse mortgages as potential solution to alleviate some of the funding shortfalls to keep people in their homes and out of nursing homes. That holds true today.

product. No one in the business ever assumed that some seniors will not pay their taxes and insurance. There appears to be a systemic problem which is driving an increasing number of seniors to default on paying their taxes and insurance. And that is problematic for the program. O

tors. I remember attending several meetings I put together with large banks back in the early 1990s. There was a lot of hesitation by the banks because, essentially, they did not want to even consider the fact they were ever going to foreclose on a widow or a senior. And I think after the first 15 or 16 years, the press started writing a lot of positive articles about how reverse mortgages changed the lives of seniors. The industry, including the Mortgage Bankers Association, and our trade association, NRMLA, realized that more lenders, banks and other financial services companies will need to offer this product to the coming age and demographic changes this product is going to change lives for many seniors and help keep them financially independent. In the early days of marketing the HECM program, some lenders or brokers tried to offer other products in conjunction with the reverse mortgage which was not viewed as favorable for many seniors. Regulators and legislators began hearing of possible abuses and began changing laws to stop this kind of activity. I remember saying at the NRMLA meeting in San Diego about two years ago that: “If you think the line is long of people waiting to get into our business, the line will be twice as long of those waiting to regulate us.” That is where we are today. And then, of course, no one could have foretold where home values have gone over the last two years. This product has a tendency to rise to the top. It makes me cringe when I hear people say this is the next sub-prime crisis. First of all, the sub-prime loans never had any insurance. There is a lot more thought and design in this product than there has ever been in the sub-prime, as well as increased emphasis on the many consumer protections outlined for the seniors in the HECM program, counseling etc.

How about the business? What are some lessons you have learned about the business? Well, we all know capital is king. In this business, because the product is still so young even though it is 20-years-old, we are indebted as an industry to Fannie Mae. For the past 20 years until about 18 months ago, Fannie Mae was the primary investor in this product. It pioneered the secondary market and enabled many lenders to get in the business to help more than 500,000 seniors since 1989. What I learned about the business is that what Fannie Mae did in the previous 20 years was assume the rewards, as well as the risks, that go with the