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this issue

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the HECM Purchase Process INSIDE

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How to Navigate

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With a CFPB Director in place, their mission is clear pg. 20 A look at how our industry is making a difference pg. 28 + Marc Helm sits down in our Hot Seat!

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THE

REVERSE February 2012

review

Another

A new concentration of regulatory power unfolds with impacts yet to be determined. By H. West Richards

Historic Moment in Regulatory

History


The Reverse Review February 2012

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The Reverse Review February 2012

From the Publisher traditional financing. But it was only after becoming a part of this industry that I truly felt a part of something bigger and more meaningful – part of a community. At the end of the day, just knowing that we are part of a greater solution helps me to keep going during those times when a home value comes in too low, a loan can’t close or a prospect can’t qualify.

A note from erik richard

As I sit to write my first note as publisher for The Reverse Review magazine, I’m reflecting on how honored I feel to be a part of such a strong, dedicated community. Recently, at the 2011 NRMLA convention in Boston, Premier Reverse Closings chose to hold its party at the famous Cheers bar. The selection seemed fitting since the theme song from the show was “Where Everybody Knows Your Name.”

This reminds me of the closeness we have in the reverse mortgage industry. We are a specialized community where everybody knows each other and works together for an incredibly rewarding goal: to help seniors live with dignity. Prior to my work in the reverse mortgage industry I worked in both real estate and

We have made a choice to be a part of such a rewarding and necessary endeavor to serve thousands of people who have little financial options and are relying on our service and our product to save their homes and life savings. I am confident that our path to growth as an industry is rooted in our continued sense of community. After all, we are an industry where many serve the dual roles of friend and competitor.

Publisher { Erik Richard }

Want to talk to Erik? Reach him at erik@reversereview.com

Meet the Team Senior Publisher Reza Jahangiri

Publisher

Erik Richard

Editor-in-Chief

Emily Vannucci

Creative Director Traci Knight

Copy Editor

Kersten Wehde

Publisher

Reverse review publishing Printer The Ovid Bell Press Advertising Information phone : 949.269.1600 email : advertising@reversereview.com Subscriptions email : information@reversereview.com Editorial Content email : emily@reversereview.com © 2012 Reverse Review Publishing, LLC All rights reserved. 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, Reverse Review Publishing, 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, 3800 West Chapman Ave., Orange, CA 92868

sign up for the newsletter at reversereview.com

ed

Feedback is very important to us here at The Reverse Review. Send us your thoughts on past articles or something that is on your mind and we will publish it in this section. information@reversereview.com

get up-to-date news and industry interviews

FIND US ON:

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t ay ec st onn c

Feedback

My passion and devotion to the reverse mortgage industry has a lot to do with the tremendous camaraderie that we all have with one another, as well as the greater good we are doing to serve seniors. We have the pleasure of helping a group of people who have spent a lifetime of working so hard and are so wise, yet at the same time are so dependent on our knowledge and desire to help them.

l

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Table of Contents

TRR 02.12 g

FEATURE

Underwriting

g

15 | Navigating the HECM Purchase Process

Secondary Market 

23 | 2012: Off to the Races in the Secondary Market

Common mistakes you should know about the HECM for Purchase.

As December finishes strong, we look ahead to 2012.

Ge neration M ortg age Tr a ining and Underwriting Team s

g

@

Want the online version? Check out reversereview.com/magazine

D a rre n S t u mbe rg e r

Originating

g

Servicing

16 | Lessons From the Kitchen Table

25 | is anyone home?

Reflecting on personal stories to ensure profitability.

Maintaining the relationship with borrowers requires professionalism and finesse.

Ala in Val les, CRM P

rya n l a ro se

g

Legal

g

27 | Ask the appraiser

19 | The Cost of Compliance

Understanding new regulations will help prevent additional costs. Jim Mil ano

20 | Regulatory Oversight for StateLicensed Institutions in 2012

With a director in place, the CFPB’s mission is now clear. Hay dn J. Richard s , J r .

Appraising

“While some argue that the structure of the CFPB affords the appropriate amount of oversight, others have suggested that the organizational oversight checks and balances are sorely lacking.”

32 | Another historic moment in regulatory history

A new concentration of regulatory power unfolds with impacts yet to be determined.

Reconciling comparable sales to determine a property’s value. A n n e -M a ri e S h e rid a n

g

Spotlight Article

28 | making a difference

A look at the positive impact our industry is making. M a rt h a mi l l e r Ech o l s F ra n k M e l e n d re z g re g g smi t h Bo b R e i se n

EV ER

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C EO o f R e v e rs e Mo rtg ag e S o lu ti o n s

this issue

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Featuring Marc Helm

INSIDE

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Br ought t o you by Reverse Mort gage D aily

The industry’s headlining stories of the past month.

38 | the  last word

E R E VI E W THE VERS RE R

- A LOOK BACK -

2011 Challenges & Successes.pg32

TH

b y R e v e rse Ma rk e t In sight

industry’s latest stats and rankings. Brou gh t to you

12 | the hot seat

WHERE THE SECONDARY MARKET IS HEADED IN 2012 By Darren StumBerger WHAT DOES IT TAKE TO SOLVE THE T&I DILEMMA? By JameS Wright

+ JEFF LEWIS SITS DOWN IN THE HOT SEAT!

HE REVERSE REV IE W

10 | industry update

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07, 09 | Stats The

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Essentials

Appointed Head of CFPB January 4th, 2012

RE V

h . w e st ric h a rd s

THE

REVERSE FEBRUARY 2012

review

Burn the ships! j o h n laro s e

ANOTHER

With the appointment of Richard Cordray, the CFPB is off to a fast start: By H. WEST RICHARDS

Historic Moment IN REGULATORY

HISTORY

february 2012

cover

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The Reverse Review February 2012

Contributors Want to write for this magazine? 2 Email emily@reversereview.com for more information

John K. Lunde

Marc Helm

J ohn K . L und e

MARC HE LM

07, 09 | The Industry Stats and Rankings g 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

12 | hot seat g A 30-years-plus veteran of the financial services and mortgage banking industry, Marc Helm serves as Chief Executive Officer of Reverse Mortgage Solutions, Inc., and as President of RMS Consulting, firms dedicated to servicing reverse mortgage loans and advising the mortgage industry on all aspects of operations, management and technology initiatives. Prior, Helm served as SVP at Washington Mutual.

A la i n vall e s , c r mp

ji m mi lan o

16 | Lessons From the Kitchen Tableg 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’ mission is to improve the quality of life through responsible financing. 781.878.5626 avalles@dfcmortgage.com

19 | the cost of compliance g Jim Milano is a partner with the law firm of Weiner Brodsky Sidman Kider. Milano’s practice focuses on financial services industry regulatory compliance matters, particularly with respect to reverse mortgage issues. Milano is nationally recognized as one of the leading lawyers in the area of reverse mortgage law, and is a frequent speaker on topics of interest to industry members at various trade association conferences and webinars.

Da r r en S t umb er g er

De n n i s Gas s oway

ryan lar ose

23 | tax tip g As the National Sales Executive for ICG Inc., the nation’s most diverse and customizable real estate tax service, Gassoway is responsible for business development at all levels of the loan servicing field. Prior to joining ICG Inc. in 2007, Gassoway held business development positions at Transamerica, Lereta and LandAmerica. In addition to many achievement awards, Gassoway is an honors graduate with a B.A. in marketing and finance.

25 | is anyone home? g Ryan LaRose is the Executive Vice President of Celink, an independent reverse mortgage subservicer. LaRose has more than 12 years of servicing experience exclusively in reverse mortgage servicing since 2005. In addition, he is an active member of the NRMLA servicing and technology committees. celink.com | 517.321.5491

Generation Mortgage Company

Alain Valles, CRMP

Jim Milano

Haydn J. Richards, Jr.

Darren Stumberger

Dennis Gassoway

Ryan LaRose

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23 | 2012: Off to the Races in the Secondary Market g Darren Stumberger, Managing Director at Knight Capital Group, heads Agency MBS trading and is responsible for HMBS/ HREMIC trading, distribution and risk management. Prior to Knight, Stumberger held mortgage trading and finance positions at Goldman Sachs, Morgan Stanley, Merrill Lynch, Standard & Poor’s and KBC Group NV. knight.com

GMC Tr ai ning and Un d e rw r i ting Te ams 15 | Navigating the HECM Purchase Process g At Generation Mortgage, our company vision is to be the leading reverse mortgage company by setting standards for client trust and customer service excellence. Our training and underwriting teams are key elements as we work toward this goal. In addition, we are a nationally credited business with the Better Business Bureau and very proud of our A+ accreditation. Guggenheim Partners, LLC is the controlling shareholder of Generation Mortgage Company.

Hay d n J. Ri c h ar d s , Jr. 20 | Regulatory Oversight for StateLicensed Institutions in 2012 g Haydn J. Richards, Jr. is Senior Counsel in Dykema’s Financial Services Regulatory and Compliance practice. Richards advises members of the financial services industry on state and federal regulatory matters. He has extensive experience with the S.A.F.E. Act, has been deeply involved with the development and testing of the Nationwide Mortgage Licensing System (NMLS), and is a member of the NMLS Industry Development Working Group.


Report December 2011

Top Lenders Report

12345 MetLife Bank, N.A.

One Reverse Mortgage Endorsement

1321

Lender

Endorsement

419

Urban Financial Group

Endorsement

357

Endorsements

Lender

Genworth Financial

Generation Mortgage Co.

Endorsement

306

209

Endorsements

AMERICAN ADVISORS GROUP

184

REVERSE MORTGAGE SOLUTIONS INC

20

SECURITY ONE LENDING

172

PRIMELENDING A PLAINSCAPITAL

20

THE FIRST NATIONAL BANK

124

MONEY HOUSE INC

20

REVERSE MORTGAGE USA INC

100

NEW AMERICAN MORTGAGE LLC

19

NEW DAY FINANCIAL LLC

74

MAS ASSOCIATES

19

M AND T BANK

73

VANGUARD FUNDING LLC

18

WELLS FARGO BANK

70

NETWORK FUNDING

16

GMFS LLC

54

HARVARD HOME MORTGAGE INC

16

SENIOR MORTGAGE BANKERS INC

51

FIRSTBANK

14

ROYAL UNITED MORTGAGE LLC

33

SUN WEST MORTGAGE CO INC

14

NATIONWIDE EQUITIES

33

TOP FLITE FINANCIAL INC

14

NET EQUITY FINANCIAL INC

30

OPEN MORTGAGE LLC

13

PLAZA HOME MORTGAGE

30

MAVERICK FUNDING

13

SIDUS FINANCIAL LLC

29

METRO ISLAND MORTGAGE INC

13

CHERRY CREEK MORTGAGE CO INC

28

AMERICAN NEIGHBORHOOD MTG

12

EQUIPOINT FINANCIAL NETWORK

27

AMERICAN PACIFIC MORTGAGE

12

ASPIRE FINANCIAL INC

27

FIRST CENTURY BANK

12

GREAT OAK LENDING

21

OCEANFIRST BANK

12

Trailing Twelve Month Endorsements

INDUSTRY SUMMARY Retail Endorsement Growth

-11.77%

10,000

Wholesale Endorsement Growth

8,000

22.7%

6,000 4,000

Total Endorsement Growth

2,000 0 12 1 2 3 4 5 6 7 8 9 10 11 Retail

Wholesale *Numbers Represent Months

0.19%

* Figures Above Reflect Change from Prior Month

Endorsement

RETAIL

WHOLESALE

UNITS CHG%

12

4,343

8.47%

1

4,049

-6.77%

2

4,075

3

4,515

UNITS CHG%

TOTAL UNITS CHG%

2,207 -13.35%

6,550

-0.02%

9.33%

6,462

-1.34%

0.64%

2,805 16.25%

6,880

6.47%

10.8%

2,785 -0.71%

7,300

6.1%

4

3,704 -17.96%

2,415 -13.29%

6,119 -16.18%

5

3,106 -16.14%

2,079 -13.91%

5,185 -15.26%

6

3,535 13.81%

2,322 11.69%

5,857 12.96%

7

3,352

-5.18%

2,159

-7.02%

5,511

8

3,705 10.53%

2,099

-2.78%

5,804

5.32%

9

3,612

-2.51%

1,972

-6.05%

5,584

-3.79%

10

3,032 -16.06%

1,612 -18.26%

11

2,675 ‘-11.77%

1,978

TOT

43,703

2,413

22.7%

26,846

-5.91%

4,644 -16.83% 4,653

0.19%

70,549

reversereview.com

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The Reverse Review February 2012

Contributors

Anne-Marie Sheridan

Martha Miller Echols

A nne -ma r i e s he r i da n

Ma rth a Mi lll e r Ec h ols

f r an k me lendrez

27 | ask the appraiser g Anne-Marie Sheridan has been a senior staff appraiser with Landmark Network, a national appraisal management and lender services company, since 2008. Sheridan has more than 17 years of residential real estate appraising experience in Southern California. In addition to her work with Landmark, she manages an independent fee appraiser office where her team completes a wide range of valuation reports for banks, lenders and mortgage brokers.

28 | making a difference g Martha Miller Echols’ financial services career began more than 30 years ago with Citibank, where she managed bank branches for both Citibank and later Wells Fargo. In 2004 Echols made a life-changing transition and became a reverse mortgage consultant with Wells Fargo and realized her passion for helping seniors. Echols joined Security One Lending in September 2011 and has great respect for their commitment to the industry and clients.

G r egg S mi t h

Bob Re i s e n

H. We s t Ri chards

28 | making a difference g Gregg Smith is President and COO of One Reverse Mortgage. Smith is focused on the overall health of the company including driving key initiatives to increase loan volume, expanding the company’s reverse mortgage market share and managing the company’s operations team. Prior to One Reverse, Smith founded one of the nation’s first online mortgage companies, Access National Mortgage, which was subsequently sold to Webster Bank in 1999.

28 | making a difference g Bob Reisen has more than 35 years’ experience as a commercial and residential real estate lender, focusing on reverse mortgage originations exclusively since 2008. His experience as a TREC instructor and Stephen Minister help him provide high-quality consultive service to senior homeowners seeking financial independence and an understanding of the features and benefits of the reverse mortgage.

32 | Another historic moment in regulatory history g H. West Richards, Executive Director of the Coalition for Independent Seniors, served in the U.S. House of Representatives and held the distinction of serving as the youngest Chief of Staff in Congress. Richards later worked in association with the law firm of Troutman Sanders, LLP and then headed up business development for Arthur Andersen Business Consulting in Atlanta.

28 | making a difference g Frank Melendrez is a Sales Manager at American Advisors Group. Melendrez has more than 25 years of experience and expertise working in financial services, and has worked with Fortune 500 companies but has found a true passion in the reverse mortgage industry. He is a licensed California RE broker and has helped thousands of families achieve their financial goals.

Frank Melendrez

Gregg Smith

Bob Reisen

H. West Richards

j ohn la r os e

John LaRose

2

Want to write for this magazine? Email emily@reversereview.com for more information 8

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38 | the last word g 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.

Number

89M

The projected number of senior citizens in America by 2050. Right now there are around 40 million.

http://articles.latimes.com/2011/nov/06/opinion/la-oe-gelinas-babyboomers-retire-20111106


Saver market share

hecm endorsement trends

2%

% % % % %

0%

Looking for more statistics? Go to rminsight.net for all of the industry’s latest stats and rankings.

10/1/11

9/1/11

8/1/11

20%

16%

14%

12% $600.0

$400.0

$200.0

$0.0 7/1/11

6/1/11

5/1/11

4/1/11

3/1/11

2/1/11

1/1/11

12/1/10

11/1/10

10/1/10

9/1/10

8/1/10

7/1/10

6/1/10

5/1/10

4/1/10

3/1/10

2/1/10

1/1/10

11/1/11

$800.0

11/1/11

$1,000.0 10/1/11

$1,200.0

10/1/11

$1,400.0 9/1/11

$1,600.0

9/1/11

$1,800.0 8/1/11

Fixed

8/1/11

7/1/11

6/1/11

5/1/11

4/1/11

3/1/11

2/1/11

1/1/11

12/1/10

11/1/10

10/1/10

9/1/10

8/1/10

7/1/10

6/1/10

5/1/10

4/1/10

3/1/10

2/1/10

1/1/10 ARM

7/1/11

6/1/11

5/1/11

4/1/11

3/1/11

2/1/11

12/1/09

{ FIGURE }

02

1/1/11

12/1/09

Fixed Rate Percentage

hecm endorsement trends

01

12/1/10

{ FIGURE }

03 $ in the millions

initial principal limits

hecm endorsement

Report { FIGURE }

80%

75%

70%

65%

60%

55%

50%

Reverse Market Insight - Logo

October 9, 2009

PANTONE COLORS

reversereview.com 3005C Process Blk C

Brought to you by:

18%

REVERSE MARKET

INSIGHT

10%

8%

6%

4%

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The Reverse Review February 2012

Industry Update

February Edition

Brought to you by:

an update of this past month’s breaking news

News direct to you: The industry’s headlining stories at your fingertips. Want even more up-to-the-minute news? Visit reversemortgagedaily.com

headlining news 1.

DOJ Says OK to Cordray, CFPB to Begin Mortgage Exams in February // January 12, 2012 According to reports, the Consumer Financial Protection Bureau Chief Richard Cordray said examination of non-banks will begin in February. While there has been speculation around Cordray’s appointment, the Department of Justice announced that the recess appointment of Cordray was within the president’s legal power. The appointment, made by the president in the midst of a series of short pro forma sessions held by Congress, faced Republican opposition under the claim that the Senate was in session.

2. MetLife to Sell Bank

Unit to GE, Reverse Mortgage Business Stays // January 10, 2012

MetLife has decided to wind down all of MetLife Home Loans’ forward origination business and stop accepting applications. “MetLife has been in the process of marketing for sale its forward mortgage origination business, which includes our Institutional Lending Group. Regrettably, we have been unsuccessful in completing an acceptable transaction.” However, MetLife did release a statement saying it will still continue to originate reverse mortgages.

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3. HUD Announces New Key

Reverse Mortgage Leadership

// January 9, 2012 The Department of Housing and Urban Development announced the appointment of Charles Coulter to the position of Deputy Assistant Secretary in HUD’s single-family program office. The position formerly held by Vicky Bott has direct leadership over the Home Equity Conversion Mortgage program. Coulter most recently served as Vice President for business transformation for Freddie Mac. His experience in housing, real estate and finance spans 20 years.

4.

Tax Cut Extension Mandates FHA Premium Increase // January 8, 2012

Annual Federal Housing Administration reverse mortgage premiums could stand to rise following the passage by Congress of the payroll tax cut extension that took place in December. Just in time for Congress’s holiday recess, the tax cut extension passed, providing for an extension of the Social Security tax cut of 4.2 percent (initially set at 6.2 percent). The extension will be paid for in part by increasing guarantee fees charged to lenders by Fannie Mae and Freddie Mac.

5. New York Life Making

Move into Reverse Mortgages

// January 5, 2012 New job openings at New York Life confirm that the company plans to enter the reverse mortgage business. According to the job description, the company is looking for someone to “oversee all financial reporting and business

Have a news story for this section? Email your story to emily@reversereview.com

planning elements of its Home Equity Income Solutions (HEIS) business line.” New York Life describes its HEIS business as a “proprietary approach to the reverse mortgage market.” New York Life has several relationships with AARP to offer life insurance and lifetime income products to its members and a source who spoke with the company in Boston said it’s looking at doing the same thing with reverse mortgages.

6.

Obama to Name Cordray CFPB Chief in “Defiant” Power Move // January 4, 2012

President Obama appointed Richard Cordray as head of the Consumer Financial Protection Bureau. The announcement came after months and months of battling between Democrats who support of the consumer bureau and Republicans who have staunchly opposed its leadership structure. The nomination most recently failed a vote of the Senate on December 8. With a director, the CFPB can fully wield the power intended for it under Dodd-Frank.

industry news

7. HUD Grants $2 Million for Housing Counseling Training // January 17, 2012

The Department of Housing and Urban Development announced this week that it will award $2 million to fund housing counseling training. “We are pleased that Congress heard our arguments for the vital role housing counseling plays and restored funding for housing counseling in HUD’s Fiscal Year 2012 budget. We are now working to ensure these resources are used as effectively as possible and


Industry Update this training will help us do that,” said HUD Secretary Shaun Donovan.

8.

Celink Becomes Reverse-Only, Transitions Away From Forward Business // January 12, 2012 Beginning as a forward mortgage servicer in 1979, Celink has announced that as of year-end 2011, it became a reverse-only operation. “It was time for us to focus all of our corporate resources on a singular product,” said John LaRose, Celink founder and CEO. “Given the new mortgage landscape and the ever-increasing population of retiring boomers, we saw the subservicing of reverse mortgages as defining and directing Celink’s future.”

9.

Urban Hires Former Generation Exec to Run Wholesale and Retail // January 6, 2012 Urban Financial has announced that it has hired Sherry Apanay, former Generation Executive Vice President, as well as Kristen Sieffert, former acting President of EquiPoint Financial. In their new roles, Apanay will lead Urban’s wholesale and retail channels and Sieffert will be responsible for directing project management across the company as well as coordination of Urban’s retail call center operations.

10. NRMLA Launches Entirely New

Consumer Reverse Mortgage Website

// january 3, 2012 Launched as part of a new consumer campaign coined “Borrow with Confidence,” NRMLA has begun the soft launch of a new consumer-facing website that will serve as a resource for reverse mortgage borrowers as well as lenders. The new site, reversemortgage.org, provides indepth resources for borrowers who are considering a reverse mortgage. “We view reversemortgage.org as an entirely new site,” says Peter Bell, NRMLA president and CEO. “The look is new, the content is new, and there are many new educational tools included.”

11. EquiPoint to Wind Down Reverse

Mortgage Business // December 20, 2011 As of the end of 2011, EquiPoint has closed its reverse mortgage business, and its loan officers are seeking new opportunities. The San Diego-based company was acquired in October 2010 by insurance provider LTC Global, and has since operated a team of loan officers under the leadership of its parent company.

reversereview.com

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The Reverse Review February 2012

THE HOT SEAT

20 things you need to know or may have been wondering february 2012

the hot seat From what he wanted to be as a child to what he believes was the greatest setback for the industry, we get the personal and professional facts from Marc Helm, CEO of Reverse Mortgage Solutions, in our monthly edition of The Hot Seat.

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marc PERSONAL

Reverse mortgage solutions CEO

>

 When I was younger I wanted to be a doctor and then a lawyer … my, how boring that would have been!

>

 I can’t go without Southern comfort food at least once a month.

>

 When I was a kid we were very poor, and learned that opportunities are not

 My parents taught me how to value hard work and respect people from all walks of life.

given but made. > >

 The best job I’ve ever had is the one I have now.

 The worst job I’ve ever had was marriage and family counseling. It brought up way too many problems and too few answers.

>

 My parents taught me how to value hard work and respect people from all walks of life.

>

 I’ve never forgotten my fallen comrades from the Vietnam War.

>

 I always remember to be thankful for the blessings I have been given.

>

 The best lesson I’ve ever learned was “Mean what you say, say what you mean, but don’t be mean when you say it.”

>

 A good friend is one of your most valued assets.

>

 The best purchase I’ve ever made was my wife Sally’s engagement ring … 37 years and counting.

PROFESSIONAL >

 The biggest challenge in the reverse mortgage industry is the lack of a diversified secondary market.

>

 The future of reverse mortgages is in our hands.

>

 The greatest setback for our industry was Fannie Mae exiting the business.

>

 I am optimistic about the reverse mortgage industry because it is a program that will demand broad-based future support.

>

 If I could change one thing about the reverse mortgage industry it would be the functionality of T&I defaults.

>

 Reverse mortgage professionals can best support the public image of reverse mortgages by being truthful about the benefits and limitations of a reverse mortgage.

>

 The most important influence technology will have on reverse mortgage is cost-effectiveness. >

Reverse mortgage professionals can best support the public image of reverse mortgages by being truthful about the benefits and limitations of a reverse mortgage.

 The most important thing seniors should understand about reverse mortgages is the terms to which they have agreed.

>

 I would encourage a family member to consider a reverse mortgage because it could be right for them.

reversereview.com

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The Reverse Review February 2012

“Our focus is to give you the tools and support

that you need to be successful”

• Credit Union Partner Program • Pat Boone, National Spokesperson • Top $ Compensation Plan • Personal Website • Quick Compensation One week after the loan funds • Excellent Fulfillment Team

• Reverse Fortunes - Free Membership • Marketing Expense Reimbursement • Jumbo Reverse Program • Quality Branded Marketing Materials • America CE Institute Continuing Education Program

To receive a Security One Media Kit visit www.S1Lemployment.com 14

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clarify

Underwriting

Like what you see? Find all of our archived articles about underwriting at reversereview.com

KEY DIFFERENCES Seller-paid Closing Costs " The seller can only pay their prorated share of taxes or HOA dues, and fees that are required to be paid for the seller’s benefit.

Current Residence " If the borrowers want to keep their existing home as a second home or investment, they need to document sufficient income to cover payments for both properties. That includes any principal, interest, taxes, insurance and HOA or condo dues, as well as the taxes, insurance and other property charges on the new property.

Missing Documents " Although the FHA Amendatory Clause is a required part of the contract, it’s very frequently overlooked. The disclosure “For your protection, get a home inspection” is required and also usually forgotten.

spotlight

Can repairs be completed after closing? " No. All repairs must be completed and paid for by the seller before closing the loan. No repair escrows will be established.

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While the HECM for Purchase program has been around for more than three years now, many still find it problematic or challenging. Most of the underwriting guidelines mirror those of traditional HECMs, but we have isolated a few key differences and common mistakes that need to be noted as you navigate through the HECM purchase process:

New Construction " The home must be 100 percent complete and the Certificate of Occupancy issued prior to the initial application, case number assignment and appraisal.

Missing or Non-allowable Fees " Pay close attention to the following fees that are commonly missed or overlooked: Owner’s Title Policy, Transfer Taxes and Homeowners Insurance. Review the purchase contract to see what additional fees will be required. Often, the sales contract is written to include seller contributions toward closing costs. This is not allowable under the HECM for Purchase program.

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Prior to the passing of Housing and Economic Recovery Act of 2008, seniors did not have this alternative to buy a primary residence with HECM loan proceeds. On October 20, 2008, the Federal Housing Administration released Mortgagee Letter 2008-33, offering guidance on this new option.

Sales Contract " A certified copy of the sales contract with all exhibits and addenda will be required, prior to underwriting, as contracts are often amended multiple times.

COMMON MISTAKES secondary market

T

he HECM for Purchase is a unique home loan program for homebuyers 62 and older. It allows them to purchase a primary residence with no required monthly mortgage payment. Title to the property is transferred to the new mortgagor, who will then occupy the property as a primary residence within 60 days of the closing. In the end, the HECM first and second liens must be the only liens against the property.

Monetary Investment " The Principal Limit Factors are the same, meaning the lender is lending the same amount toward a Purchase as to a traditional HECM. However, because the borrower has no equity in the home, they must bring a sourced monetary investment to closing.

Home Warrantee " On reverse mortgages, HUD does not allow the seller to purchase a home warrantee for the borrower.

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Tra i n i n g a n d Un d e rw rit in g T ea ms

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Navigating the HECM Purchase Process Gen e rat io n M ort gag e

Timing " It would be wise to allow for a minimum of 60 days from application to closing. It is important to inform all parties of this and extend the contract as necessary.

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Occupancy " Because HECMs are specifically designed for a principal residence, occupancy must be established within 60 days.

Property Address on Counseling Certificate " If there is no sales contract at the time of counseling, the borrower’s current address will suffice. Otherwise, the subject property may be on the counseling certificate. Because they are generally not living in the subject property, the mailing address on the loan application will be their current residence, while the subject property will be the home on which they have a sales contract. Borrower will then occupy the home within 60 days of closing.

While the HECM for Purchase is a great solution for many seniors, the underwriting of this product requires special care. In addition, the program is ever changing as the industry and HUD address remaining questions about purchase guidelines. We hope this summary has helped to clarify this loan program for you. x

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The Reverse Review February 2012

learn

originating

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Lessons From the Kitchen Table Ala in Vall e s , CRMP

A

lmost every loan appointment offers a life lesson and a tip on how to generate more business. Each reverse mortgage comes with a personal story. It may be a happy one, such as when grandparents are proudly taking out a reverse mortgage to pay for a grandchild’s college education. Or it may be heart-wrenching, as in the case of a guardian using reverse funds to support a parent with Alzheimer’s. Every story leads me to reflect on how I’m leading my life. I’m also cognizant of the fact that I must use my resources wisely to ensure lasting profitability. After each appointment I make notes of what I should adjust to efficiently have each client reach a decision in moving forward with a reverse mortgage. Here are a few 16

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of my favorite stories. Hopefully, they will help you.

A Small Gift of Appreciation The senior was a recent widower. During our initial phone conversation it was clear he was still grieving. I listened to his stories about his wife and their love for their cat, Morris. In preparing for my first meeting with any client I always try to think of a small gift to give at the end of my meeting. I brought cat treats to this man, which nearly brought him to tears. This small gesture quickly created a bond between us and demonstrated that I am a good listener. I always carry a “pop-by” bag with little gift items that cost less than $2, such as a candle, a fly swatter,

an outdoor thermometer with oversize numbers, and – the most popular one every year – a turkey baster. More often than not, the senior still has the family over for dinner and a new turkey baster always comes in handy. I will stop by prospective, current, and past reverse clients and my referral sources with these “popby” gifts. It reaffirms that I am not just about the transaction, but that I am living up to my promise of staying in touch and being their hub to other trusted advisors. My goal is to give 10 pop-by gifts a week and try to keep the visit to 10 minutes or less. My conversation follows the rhythm of asking how they are doing, sharing how much I appreciate our relationship, and then reminding them that I’m

I always

carry a “pop-by” bag with little gift items that cost less than $2, such as a candle, a fly swatter, an outdoor thermometer with oversize numbers, and – the most popular one every year – a turkey baster. More often than not, the senior still has the family over for dinner and a new turkey baster always comes in handy.

Going to the source I’m also cognizant of the fact that I must use my resources wisely to ensure lasting profitability. After each appointment I make notes of what I should adjust to efficiently have each client reach a decision in moving forward with a reverse mortgage.


originating never too busy for their referrals. My challenge is justifying driving an hour for a short visit to hand someone a silly gift. But I can assure you, the person is grateful, and more often than not, they say, “What a coincidence – I know someone that might need a reverse mortgage…”

Ac c o r d i n g t o Alain

Don’t assume that because you explained everything that the other person actually understood what you said. I’m always trying to improve my explanation of complicated reverse mortgage terms with different analogies.

The Biggest Loser

Don’t assume that because you explained everything that the other person actually understood what you said. I’m always trying to improve my explanation of complicated reverse mortgage terms with different analogies. I’m sure you’ve done a great job explaining how the unused portion of the line of credit grows only to be asked when the “interest income” is deposited into their checkbook note (email me if that doesn’t make sense to you).

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The other technique I use to minimize word confusion is to have my client mirror back what I just explained. If they’re off a bit, I re-explain it using different words or examples. It’s my responsibility to make sure they understand how a reverse works.

spotlight

The confusion came when I called the senior after her counseling call and detected a very perturbed tone. I asked how the counseling session went and she responded that the counselor said she would have a line of credit close to $150,000 or a large monthly check and was mad that I hadn’t shared those options. I was a bit confused. But after a little investigation, I found out that the counselor had asked the borrower if there were any “liens” on the property. Since my borrower didn’t know that a mortgage is a lien,

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In this case, I nearly lost a loan because of a simple misunderstanding. My borrower owed about $150,000 and we were hoping the reverse would cover the current mortgage. I explained that there would be little available in terms of a line of credit or tenure plan. She fully understood.

Now I ask the same question in different ways, such as, “Do you have a mortgage, equity line, line of credit, lien, or a second mortgage?” The funny part is the senior will say “no,” but when I ask the final question (whether they would owe money to someone if they sold their house), they quite often say, “Yes, I owe the local credit union $40,000…”

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He had caught me off guard, but I responded with, “Why not just sell your home?” He laughingly said, “What do you think I am – crazy? My son-in-law is in the trades and it will take months to finish the in-law apartment and there’s no way I’m sleeping on this couch for six months.” He understood the associated mortgage costs and felt they did not outweigh the quality-of-life balance.

Word Confusion

she answered “no,” which led the counselor to state that more funds were available.

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When I stressed that a reverse is a long-term solution, he cut me off again and said in an agitated tone, “Listen, as soon as I get my reverse I’m going to list my house to sell.” I’d be lying if I didn’t think that was the “biggest loser” plan. But he continued, “You’re in my daughter’s house. I’m going to get a reverse, pay off my daughter’s mortgage, give the extra money to my son-in-law to build a full in-law apartment, then sell my home and invest the profit.”

Moral of the story: I was the “biggest loser” for assuming I knew what’s best for a borrower. Now I always ask lots of questions in order to better understand people’s goals and I never assume I know what’s best. I start my appointments with, “If I had a magic wand, what would be your best-case scenario if you got a reverse mortgage?” The answers will help guide you on what to focus on during your meeting. The other benefit of opening with this question is that it encourages your client to start talking and sharing their story. Don’t tell my teenagers, but I use the same “magic wand” technique on them with some success and try my best not to assume I know what’s best for them.

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This appointment started with a question: “How long will this take?” The senior wanted to be done in 40 minutes so that he could watch his favorite television show, The Biggest Loser. I explained that I might need more time and the client cut me off, saying he had already met with other companies and just wanted to get the paperwork under way.

Whether you’re a new originator or seasoned veteran, taking a little extra time to take note of a person’s wants and fears, giving a small token of appreciation, and not jumping to conclusions that you know what’s best will serve you well in building your referral network and just might help with your personal relationships too. x reversereview.com

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The Reverse Review

RMS introduces the

February 2012

newest path to success.

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adapt

legal

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Act. Authority over these laws passed to the CFPB on the designated transfer date, July 21, 2011.

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One can only hope that, as the CFPB issues new regulations, other regulators and administrators such as HUD adapt with the mortgage industry to properly understand and correctly implement these new rules in their review of government lending programs. While the cost of compliance will increase due to the new CFPB regulations required by the Dodd-Frank Act, that cost should not be further increased due to a lack of understanding or an incorrect view of these new rules by administrators reviewing mortgagee compliance in government lending, such as the FHA HECM program. x

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spotlight

New rules, while designed to further inform and implement statutory changes, often raise questions about the very laws they are designed to implement, thus creating unintended side effects.

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The Dodd-Frank Act consolidated various federal agencies’ powers and transferred them to the CFPB in order to implement the “enumerated consumer laws.” These laws include such federal consumer credit statutes as the Equal Credit Opportunity Act; the Fair Credit Reporting Act; the Fair Debt Collection Practices Act; portions of the Gramm-Leach-Bliley Act (which governs consumer financial privacy); the Home Ownership and Equity Protection Act; the Home Mortgage Disclosure Act (or HMDA); the Real Estate Settlement Procedures Act; the S.A.F.E. Act; and the Truth in Lending

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s we face a deluge of required regulatory promulgations, the cost of compliance will increase. The powers transferred to the new Consumer Financial Protection Bureau (CFPB) by the Dodd-Frank Act, and the number of new regulations that it must issue will continue to overwhelm the mortgage industry, including the reverse mortgage industry.

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Jim M i la n o

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The Cost of Compliance

While the mortgage industry successfully digested “revised RESPA” (effective January 1, 2010) and new loan originator compensation rules (effective April 2011), the DoddFrank Act also made significant changes to some of these enumerated consumer laws. Some statutory changes include an “ability to repay” underwriting requirement for forward mortgages (and a qualified mortgage safe harbor exception to those requirements), additional loan originator compensation rules, new servicing disclosures for variable rate loans, “qualified written requests” and forced placed insurance, and a significant increase in the number and types of data elements to be reported under HMDA. These statutory changes become effective in January 2013, unless the CFPB implements final regulations prior to then, in which case the effective date of the statutory changes could be pushed back to as late as January 2014. However, in order to finalize regulations before January 2013, the CFPB must first propose and then receive comments on such rules. The Dodd-Frank Act also requires the CFPB to engage in “RESPA/TILA reform” and propose for comment a combined RESPA TILA disclosure by July 2012. In short, the CFPB is in the midst of massive amounts of rule writing, and those proposed rules are coming to the email inboxes of mortgage company compliance officers soon.

One area or law that did not transfer to the CFPB is the authority and administration of FHA-insured loan programs by HUD, which maintains authority over mortgagees for FHA program-related lending items, such as approval and program compliance. In the experience of the reverse mortgage industry, however, HUD auditors continue to struggle with new rules, such as the interplay of revised RESPA and FHA lending programs. For instance, some HUD auditors continue to be confused over the difference between a RESPA origination charge and a HECM origination fee. Mortgage Letter 2009-53 clearly recognizes, however, that the sum of all fees and charges from origination-related services in box 1 on page 2 of the new Good Faith Estimate (GFE) may exceed the specific origination fee caps set for government programs (such as a HECM origination fee). When a government program requires that lenders provide more detailed information to specify distinct origination fees and charges, lenders may itemize these charges in the empty 800 lines of the HUD-1, to the left of the column.

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The Reverse Review February 2012

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Regulatory Oversight for StateLicensed Institutions in 2012 Hay d n J. R ic h a r ds , J r .

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s 2011 came to a close, mortgage companies faced an uncertain regulatory landscape, with challenges arising from increased compliance costs and significant changes to federal and state laws and regulations. Exacerbating those challenges, President Obama’s January 5 recess appointment of Richard Cordray as Director of the Consumer Financial Protection Bureau (CFPB) immediately vested the Bureau with profound regulatory powers that it did not enjoy without a Director in place. With that appointment, the compliance directive for mortgage companies is now clear: Devote greater resources to managing compliance or face enforcement pressure from multiple regulatory sources. On the same day of Mr. Cordray’s appointment, the CFPB announced the launch of its Non-Depository Supervision Program. In explaining the program, Peggy Twohig and Steven Antonakes suggested that the CFPB’s intent is to expand its existing bank supervision plan to ensure “that banks and non-banks play by the same rules.” The CFPB suggests that “consistent supervisory coverage will help level the playing field for all industry participants to create a fairer marketplace for consumers and the responsible businesses that serve them.”

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obligations, state examiners review mortgage companies for compliance with both federal and state laws and regulations. To the extent violations of state or federal laws occur, state regulatory agencies will take action against companies for violations of both state and federal law. Thus, the CFPB’s supervision simply adds another level of oversight in an industry that has been reeling for some time due to the heavy weight of new laws and regulations. CFPB examinations will likely be based on risk profiling of active participants in the mortgage space. The CFPB has stated that it will assess risk to consumers by considering various factors, including “volume of business, types of products or services, and the extent of state oversight.” Because the CFPB has limited resources, it likely will focus upon larger mortgage lenders that operate in a significant number of jurisdictions. It is unlikely that the CFPB will devote a significant amount of resources to examining small mortgage brokers or modest correspondent lenders. It is important to note that, regardless of size, the CFPB may require nondepository institutions to prepare reports on their respective activities, which will allow it to better target its examination efforts.

The extension of its supervision program to non-depository institutions will result in the CFPB’s examination of non-bank entities for compliance with federal laws, such as the Truth in Lending Act and the Equal Credit Opportunity Act. While this non-bank supervision process will even the playing field by ensuring that all companies conducting The CFPB also will coordinate its actions mortgage business are supervised with other federal and state regulatory by the CFPB, what appears to be agencies. In order to achieve cooperation forgotten is that state-licensed nonwith various state regulatory agencies, depository institutions are already the CFPB, together with the Conference subject to extensive examination by of State Bank Supervisors, developed state regulatory agencies. As any state-licensed mortgage company understands, state regulatory agencies have Ac c o r d i n g t o hay dn extensive licensing While this non-bank supervision process will even the playing and examination field by ensuring that all companies conducting mortgage processes. As part of business are supervised by the CFPB, what appears to be their examination and forgotten is that state-licensed non-depository institutions are compliance review already subject to extensive examination by state regulatory agencies.


legal a Memorandum of Understanding (MOU) that allows state regulatory agencies to share information with the CFPB. As of January 5, 2012, 42 states and Puerto Rico had agreed to the MOU.

That coordination, which likely will continue to streamline the collective enforcement efforts of the regulatory agencies, coupled with technological advances available to regulatory agencies, presents a more challenging regulatory atmosphere for all industry participants in 2012. x

3 3 3

No repairs too large or too small

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We specialize in repairs needed prior to closing

THE L E RESO NDER’S U GETTIN RCE FOR G MORT REVERSE GAGE S TO CLOS E

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3

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Repairs done … Ready to close!

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State-licensed mortgage companies should also expect significant changes to the Nationwide Mortgage Licensing System & Registry (NMLS) in 2012. During spring 2012, the NMLS will be updated to accommodate license types that do not apply to mortgage activities. For example, collection agencies, consumer loan companies, and debt settlement companies will be among the companies that could be licensed through the NMLS, if

In short, mortgage companies are counseled to devote greater resources to their mortgage compliance activities. Federal and state regulatory agencies are increasingly coordinating their efforts.

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State-licensed non-depository mortgage institutions also must be aware of their heightened regulatory scrutiny by their respective state regulatory agencies. Increasingly, state regulatory agencies are making use of ComplianceEase’s ComplianceAnalyzer software to evaluate loan-level compliance. In 2012, state-licensed institutions can expect a greater number of regulatory agencies to request that they submit loan file data for electronic review. Further, state regulatory agencies

their respective regulators elect to participate in the system. Regulated institutions and individuals should be aware that the NMLS will now make certain compliance actions that mortgage companies entered into with regulatory agencies publicly available to consumers through the NMLS Consumer Access website. underwriting

Non-depository mortgage institutions should expect that their respective regulatory agencies will actively cooperate with the CFPB.

will continue to make use of their Multi-State Mortgage Examination process and it is more likely that larger state-licensed institutions will experience one of these examinations. The examinations likely will be more limited in scope than previously conducted multi-state examinations. However, decreasing the scope of multi-state examinations will provide increased resources to allow for a greater number of targeted examinations.

We finance our work and are paid at closing spotlight

IHG works on a national level

In Partnership with BayState Properties

877.906.3946 | www.independencehousing.com reversereview.com

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The Reverse Review February 2012

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HMBS

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Who, if anyone, is eligible to receive the Mortgage Insurance Tax Credit and/or Mortgage Interest Tax Credit when a reverse mortgage is paid off by a borrower OR by the estate or family member after the last borrower has passed away? - Jerry Tomlin, CRMP

spotlight

The macro environment remains under pressure with no immediate credible solutions to address Europe’s debt crisis, sovereign downgrades and Washington, D.C. in gridlock. However, Mortgages have done especially well the first 10 trading sessions of the year. Expect this to continue given the technicals and subdued callability of collateral.

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g o in g t o t h e so u r c e

sovereign downgrades and Washington, D.C. in gridlock. However, mortgages have done especially well the first 10 trading sessions of the year. Expect this to continue given the technicals and subdued callability of collateral. Prepayment speeds saw a fairly sizable uptick in December. Through our lens, we’re seeing speeds up 20-25 percent month over month. Additionally, there were some pretty glaring differences in performance among GNMA issuers. Overall, the universe of standard HMBS is tracking well below the HECM prepay curve at roughly 70 percent. For 2011 fixed rates, we’re seeing one-month speeds come in at roughly 2.5 cpr with adjustable rates at 5.62 cpr. Meanwhile, 2010 fixed rates came in at 3.67 cpr, which generally looks like 45 percent of the pricing curve, and floaters 6.45 cpr and roughly 80 percent of

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O

n the heels of a strong December 2011, fixed HECM spreads have continued to tighten here amid a fairly furious rally in rates in the first few weeks of January. Floaters have continued to underperform, with IOs still well bid. Issuance in 2011 finished just shy of $10 billion with another $3 billion of HREMIC issuance. Demand for HMBS and structure has been broad-based among the asset manager community. We also saw another $215 million securitized in December, consisting of fixed and floating rate strips and IO. Reverse mortgage pools, strips and IOs remain cheap here versus other U.S. government-guaranteed assets, with further room to tighten as long as rates behave. The macro environment remains under pressure with no immediate credible solutions to address Europe’s debt crisis,

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Da rre n S t u m b er g er

the pricing curve. The 2009 fixed-rate one-month speeds came in at 6.79 cpr, and 2009 floating rate collateral came in 4 cpr. One trend that hasn’t changed is fixed-rate speeds coming in materially lower than adjustable rate speeds in 2011. Additionally, with more than 300 million HECM Saver issuances in 2011, Saver speeds have come in much faster compared to Standard, as expected. Again, there are notable differences among the GNMA Issuer community, but looking at the first full year of data on Saver, it’s pretty much a foregone conclusion that Saver borrowers prepay faster. Lastly, we’re hopeful that by the time this article is published, Yieldbook will be released, which should help liquidity and account sponsorship. x

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2012: Off to the Races in the Secondary Market

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Only the borrower would receive any type of credit. If the last borrower is deceased, then the 1098 form goes out in the name of the estate, and not the heirs’. Have a question for this column? Email information@reversereview.com

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The Reverse Review February 2012

DEDICATED TO THE REVERSE MORTGAGE INDUSTRY AMERICA’S REVERSE TITLE. OUR NAME SAYS IT ALL.

For more information, contact Bob Beverly, National Sales Director at: 24 | TRR

727.481.3626 EMAIL rbeverly@amrevtitle.com WEB www.amrevtitle.com DIRECT

Proud member of NRMLA


monitor

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Want to comment on this article? Comment online at reversereview.com

Is Anyone Home?

Return Mail

rya n la ro s e

O

The occupancy requirements and annual certification process provide a valuable service to the investor, insurer and borrower. Lenders can assist in this process, and ultimately create a better experience for their borrowers, by firmly setting expectations on the front end. Loan origination is an opportune time to educate new borrowers on the occupancy verification processes that are in place to protect them – and the viability of the reverse mortgage program. x

spotlight

Going to the source

appraising

“Warning: Section 1001 of Title 18 of the United States Code makes it a criminal offense to make a willfully

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Around the anniversary of loan closing, servicers must mail an annual Occupancy Certificate asking borrowers to sign and attest to the fact that the home remains their principal residence. Borrowers are required to return this signed certificate to their servicer promptly (typically within 30 days). Every servicer has their own variation of an Annual Occupancy Certificate, but HUD requires one piece of standard language be present on all:

This required HUD language is strong, and vitally important. Servicers rely solely on the borrower to be completely truthful about their occupancy status when signing and returning this document. When a borrower is absent from the primary residence for longer than 12 months, or indicates that they have permanently moved from their primary residence, the servicer must seek HUD’s approval to call the loan due and payable. Once HUD approval is received, the servicer mails a demand letter to the borrowers requiring them to either repay the loan in whole or cure the default by reoccupying the home as their principal residence.

Consider for a moment how sensitive a servicing agent must be when fielding calls from very irate borrowers wanting to know why the follow-up to a simple piece of returned mail could result in their loan being called due and payable. What appears to be routine and standard follow-up must be handled with finesse and professionalism by the servicer.

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Annual Occupancy Certificates

false statement or misrepresentation to any department or agency of the United States government as to any matter within its jurisdiction.”

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Servicers use two primary methods to monitor occupancy status: annual Occupancy Certificates and Return Mail. HUD requires accurate tracking and follow-up without exception, and the task of monitoring occupancy requirements is a key component of the servicing function. It can be time-consuming and may require extensive and sensitive follow-up with borrowers.

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lder Americans no longer think of themselves as older, and “Baby, [they] were born to run!” A demographer once quipped, “Boomers are going to be 18 til they die!” Reverse mortgages provide many borrowers with the autonomy they seek under one simple condition: the home must remain their primary residence.

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For various reasons, borrowers may move in and out of their homes at different times throughout the year. When a piece of mail (typically a monthly statement) is returned by the post office to the servicer, the returned mail serves as a red-flag indicator that there may be an occupancy issue with the property. Certainly not all cases of returned mail result in an occupancy default. Borrowers may be traveling, or may have forgotten to inform their servicer to forward their statements to their winter home, or to the son or daughter who is handling their affairs. Whatever the reason for returned mail, servicers use the occasion to reach out to borrowers to validate whether there is a valid occupancy default.

Consider for a moment how sensitive a servicing agent must be when fielding calls from very irate borrowers wanting to know why the follow-up to a simple piece of returned mail could result in their loan being called due and payable. What appears to be routine and standard follow-up must be handled with finesse and professionalism by the servicer.

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The Reverse Review February 2012

Do you have what it takes? It takes a lot to create an attention-grabbing, informative article and we know there are people out there who can get the job done. The Reverse Review is on the hunt for contributors to join the team and be a part of the industry’s premier publication.

Email information@reversereview.com to start the conversation and possibly see your name in print! 26

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THE

REVERSE review


value

appraising

Have a question for our appraiser? Email us at information@reversereview.com and your question will be answered in our next issue

Ask the Appraiser A nne -Mar i e S he ri d an Ac c or d i n g t o a n n e- m a r i e

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When an appraiser is reconciling comparable sales, they do not average the sales. Each sale is looked at individually, analyzed based on research and driveby data, adjusted for differences and then reconciled as to how it compares to the subject property. x

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spotlight

When comparables are plentiful (in a new housing tract, for instance), it will

It is up to the appraiser to individually weigh each comparable and reconcile the differences, which include the condition and quality of improvements; both the effective and actual age; seller concessions; location; lot size; lot utility; unique amenities including water features; accessory dwellings; etc. All these factors need to be individually weighted, adjusted in the sales comparison approach and reconciled to the subject.

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Averaging comparable sales may appear to be a way to arrive at an appraised value, but averaging comparables is not a good appraisal practice or approach to value.

Depending on the area, there may be a wide range of values, lack of sales and over-improved or under-improved dwellings. The appraiser may be forced to go outside of the area for comparables, or use dated sales, sales with a large variance of living area or lot size, or even both. Each

situation is as unique as each home is individual.

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- Submitted by Anthony Gatto

appear as though the appraiser is averaging the comparables, but the sales comparison approach to value’s purpose is to determine the most similar sales to the subject, reconcile the differences and arrive at an appraised value.

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Averaging comparable sales may appear to be a way to arrive at an appraised value, but averaging comparables is not a good appraisal practice or approach to value.

W

hen an appraisal comes in below the majority of adjusted comparables, how does the appraiser determine the value? Should he take an average of the comparable values?

originating

go ing to the source

The adjustments are determined by various techniques: trend analysis, matchedpairs analysis or simple surveys of the market. The appraiser always tries to find the most similar and recent sales, but it is not always possible. The most similar sale may be at the lower end of the market or the higher end and therefore the appraiser will give most consideration to those comparables. General price trends, including analysis of listings and current pending sales, are also analyzed and reconciled.

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The appraiser may be forced to go outside of the area for comparables, or use dated sales, sales with a large variance of living area or lot size, or even both. Each situation is as unique as each home is individual.

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The Reverse Review February 2012

spotlight article An in-depth look at the positive impact our industry is making.

uary febr ion t edi

1 first story

Martha miller Echols Security One Lending

M

ost days my career as a reverse mortgage consultant feels more like a ministry than a job. I’ve had the pleasure of helping many seniors enjoy their “golden years.” Peter in particular comes to mind; he was referred to me by a colleague who had a friend working at a nearby hospital. I first met Peter in the psychiatric ward of the county hospital. He was extremely depressed and had attempted to end his life. During our first meeting he shared how his home, finances, health and relationships were in shambles. I explained how he could use the reverse mortgage to pay off his debt, taxes, fix up his home, provide a modest monthly income to help him eat healthier and fulfill his financial obligation to his exwife. Instantly, I saw a smile of relief on Peter’s face. He began to envision how this program could help him put his life back together. Over the next few weeks I met with Peter at his home, which was cold because some of the windows were broken. His bathroom floor was rotting, and he had the neighbor’s water hose sticking through his kitchen window as his only source of running water.

This month’s Spotlight features stories from the industry.

Want to see more articles like these? Go to reversereview.com

Making a Difference Last February The Reverse Review ran a human-interest piece that illustrated the positive impact reverse mortgages were making on the lives of seniors. We received so much positive feedback about the piece that we’ve decided to give it another go one year later. While there has been significant change within the industry, the themes of the stories remain the same. Reverse mortgages are still making an overwhelmingly positive impact on the lives of seniors; providing them with a new outlook on life. 28

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We quickly completed the reverse mortgage and Peter was able to rebuild his home and his life. With a healthier outlook on life, he was able to reconnect with his daughter. Last year Peter invited me to his 70th birthday party. His home looked great and was filled with friends. He even belted out a few songs on his piano for me! Peter is really living life with gusto now, and even campaigned for a seat on the local city council. It’s an honor to help seniors transform their lives with the benefits of a reverse mortgage. Many clients have told me this program helps them sleep better at night, which is the greatest compliment of all. x


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Frank Melendrez American Advisors Group

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third story

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ne of my favorite parts of my job is hearing from our clients about how a reverse mortgage helped change their lives. We help people avoid financial issues, pay off debt, and give

them a little extra breathing room in their day-to-day budget. All of these stories inspire us to continue to serve our clients and provide them with the best customer service in the industry.

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Gregg Smith One Reverse Mortgage

My wife and I recently had the pleasure of dining with Vincent and I am blessed to be able to call Vincent my friend. I look forward to maintaining that friendship and hearing more of Vincent’s new adventures. I feel secure that an AAG reverse mortgage has provided the many benefits only a reverse mortgage could deliver and has afforded Vincent the ability to look forward to the memories he’s making today. x

appraising

With the financial freedom provided by his reverse mortgage, Vincent has now increased his capacity to live a fuller life. He has shared with me time and again that his

servicing

Vincent’s case was complicated by a poorly structured trust and POA, as well as the fact that his wonderful wife was living in a nursing home and remained on the title. The title company raised all kinds of legal objections to the loan, but I was determined not to let Vincent down. I knew how much this reverse mortgage meant to him. AAG supported my persistence and we were able to successfully complete Vincent’s reverse mortgage transaction.

secondary market

Vincent was not ready to “go quietly into that dark night,” as he put it. There were still goals he wanted to accomplish. He had yet to fulfill his dream of returning to the WWII battlefield where he fought as a 19-year-old soldier. He was looking for that second wind in life, which was unobtainable because of his current financial situation.

Not only did Vincent accomplish his goal of revisiting the battlefield and paying his respects to his fellow soldiers, he located the exact foxhole he once lay in, and even learned he was a celebrity in and around Bastogne. A local brewery named its beer, Airborne Beer, after Vincent, and the museum contains some of Vincent’s items, including two yellow parachute pieces – with his handwriting still present – that he used to wrap cigarettes as a gift to a local family on Christmas.

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Unfortunately, Vincent’s wife of 62 years has been fighting her own nine-year war with Alzheimer’s and dementia. She is no longer competent and has been living in a long-term care facility for the past three years. Vincent was feeling the need to spend as much time with his wife as possible, but the realities of their finances became a hurdle.

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I will never forget Vincent Speranza, a World War II veteran who coincidently served at the same time as my father. Not only did Vincent and I bond over my father and their shared experiences, he also changed my life by leading by example and showing me what a man of integrity embodies.

I will never forget Vincent Speranza, a World War II veteran who coincidently served at the same time as my father. Not only did Vincent and I bond over my father and their shared experiences, he also changed my life by leading by example and showing me what a man of integrity embodies.

underwriting

t American Advisors Group (AAG), we take great pride in building a personal relationship with each and every customer. That special fostering of relationships results in the best part of my job: changing a senior’s life for the better.

reverse mortgage changed his life. He now spends as much time with his wife as he wishes and is able to travel to Europe each year to spend time with friends and comrades. I think one of the most moving stories I heard was the postwar guilt Vincent carried for more than 65 years for not visiting the cemetery in Bastogne, Belgium, the site of the Battle of the Bulge. On his first trip back he was able to resolve that guilt and visit, in his words, “the true heroes.”

One of my most memorable stories regards a gentleman named George from Texas. One day, just before we were getting ready to close on his reverse mortgage, he called me and was very upset. 8 reversereview.com

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The Reverse Review February 2012

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spotlight article He told me that his computer crashed, and he could not pull up some of the documents I emailed to him. He was very relieved when I told him it was no problem. I could easily get him hard copies of the closing documents, and he did not have to worry about trying to access the documents I emailed him.

Bob Reisen 1st Reverse Mortgage USA

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bout 50 years ago Mr. and Mrs. Baker purchased farming acreage south of San Antonio near Poteet, TX. For many years they worked the land together, but with the death of Mr. Baker, much of the property was sold off, leaving 34 acres on which Mrs. Baker currently lives.

secondary market

Mrs. Baker, who is now 76 years old, worked outside the home to earn extra money after her husband passed away, but she has been unable to do so in recent years. The increasing cost of living and the need to hire in-home support have made it difficult for Mrs. Baker to get by on her fixed income. She didn’t want to break up her acreage any further, but also didn’t want to sell her home and move into town. Mrs. Baker’s greatest fear was that she would be forced to sell the homestead and downsize, which would mean giving up much of her cherished family memorabilia.

servicing appraising

Borrowing against her property wasn’t an option for Mrs. Baker. Although she owned her home free and clear, she didn’t have enough income to qualify for a mortgage and, even if she did, the fear of not being able to meet her monthly mortgage payments was a serious concern for her. Around the time it looked like she had run out of options, a friend introduced her to the option of a reverse mortgage.

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The increasing cost of living and the need to hire in-home support have made it difficult for Mrs. Baker to get by on her fixed income. She didn’t want to break up her acreage any further, but also didn’t want to sell her home and move into town.

and we help others ensure their retirement is everything they wanted it to be. We help them live a more comfortable lifestyle than would have been possible without their reverse mortgage. Whatever the circumstance, we are glad to be able to make a difference in our clients’ lives. x

legal

fourth story

These kinds of stories from our clients reassure us that the hard work and dedication we put into this industry really do pay off. We help some clients avoid financial nightmares,

The reverse mortgage helped George with his finances and eased some of his stress.

originating

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The reverse mortgage helped George with his finances and eased some of his stress. He was very happy with how easy it was for him to qualify for the reverse mortgage, and there was always someone at One Reverse Mortgage to talk to about any questions or concerns he had through the process.

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I remember how relieved he was when I told him that there was nothing to worry about with his closing documents. His wife of 40 years was always the one to take care of anything that needed to be done with their finances, and George was at such a loss when she passed away. He was

overwhelmed by the financial issues for which he was now responsible.

At first she thought it was too good to be true, as it presented the perfect solution. A reverse mortgage would allow her to use the value of her property to pay for needed repairs to her home and personal services for things that she is no longer able to do for herself. In short, it would allow her to continue to live at her home safely and without worry. Today, Mrs. Baker is a very happy person! She is thankful she is able to remain in her home and live without worrying about how she will make ends meet. This past year she enjoyed a wonderful Christmas with her family. Most importantly, she has been able to let go of her financial concerns and looks forward to spending many more years at home on her beloved homestead. Now that is what reverse mortgages are all about! x

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A p p o i n t e d Hea d o f CFP B J a n u a r y 4 , 2 0 1 2


r i c h a r d c o r d r ay

Another

Historic Moment in Regulatory

History

f GAME ON With the appointment of Cordray, the CFPB is off to a fast start.

A new concentration of regulatory power unfolds with impacts yet to be determined. By H. West Richards reversereview.com

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The Reverse Review February 2012

In a surprise move, President Obama installed Richard Cordray as the head of the Consumer Financial Protection Bureau (CFPB) by exercising a controversial recess appointment measure. Now that the CFPB has a director, it is no longer limited in its ability to affect the regulatory landscape. The CFPB will enjoy very broad powers enabling it to make sweeping changes on the regulatory horizon and the reverse mortgage industry is certain to feel the effects soon. The appointment of Cordray to the Consumer Financial Protection Bureau has triggered a concentration of unprecedented and unpredictable regulatory power into the hands of one institution, and to a certain extent, one man. While some argue that the structure of the CFPB affords the appropriate amount of oversight, others have suggested that the organizational oversight checks and balances are sorely lacking.

: Background // Before we examine what has transpired, it is important to review some of the background leading up to these events, as well as revisit the structure and mission of the CFPB itself. The circumstances behind the creation of the CFPB are important to understand before we embark on any sort of assessment of the new regulatory climate the CFPB is likely to impose. Obviously, the genesis of all of this can be found in the financial crisis of 2008, which many claim was due to a poorly implemented regulatory apparatus responsible for incentivizing bad behavior throughout the entire mortgage ecosystem. The stated aim of the resulting Dodd-Frank legislation is to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end “too big to fail,” to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes. “… to protect consumers from abusive financial services practices” is the part that spawned the creation of the Consumer Financial Protection Bureau.

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The CFPB is headed by a single director, appointed by the president and confirmed by the Senate, and holds office for a term of five years. The director may continue to serve after the expiration of his or her term until a successor has been nominated and confirmed. Should the president choose to appoint the director during a congressional recess, the director will not need Senate confirmation, and will be limited to a one-year term. The director, and the bureau, are structured to be fully independent and are not subject to direct oversight by the Fed or any other federal financial regulator, Congress or the executive branch. The CFPB’s single director is a significant departure from the design of most other prominent consumer and investor protection regulators at the federal level. The leadership of agencies like the Securities and Exchange Commission, the Federal Trade Commission and the Federal Deposit Insurance Corporation is vested in bipartisan, multimember commissions.

: What is the Bureau’s Mission? // As stated on its website, “the central mission of the CFPB is to make markets for consumer financial products and services work for Americans whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.” The CFPB will enforce 18 federal consumer financial laws and penalize companies that violate the law. Among the laws the CFPB can enforce are, inter alia, the Fair Credit Reporting Act; the Fair Debt Collection Practices Act; the Credit Card Accountability Responsibility and Disclosure Act; and the Truth in Lending Act; the Real Estate Settlement and Procedures Act. Enforcement (Dodd-Frank Act §§ 10511055) Power to conduct investigations, hold hearings, and initiate litigation. 4Investigative powers similar to those of the FTC, including the power to issue subpoenas and civil investigative demands calling for the production of documents, things, written responses, and depositions.


4Authority to institute “cease-anddesist” proceedings whereby a regulated entity may be required to appear at a hearing within 30 to 60 days to show cause why a cease-anddesist order should not issue. 4Option to file suit within a three-year statute of limitations. Available relief includes rescission and reformation of contracts, refunds and return of property, restitution, disgorgement, damages and other monetary relief, public notification, and severe statutory penalties.

former attorney general from Ohio with a very strong pro-consumer track record. Some say his consumer focus remains unmatched by any other AG in the United States. Warren, using her status as the creator of the CFPB and President Obama’s first choice for the position, has made it clear that she is a staunch supporter of Cordray. This unusual move by the president tests the limits of his executive authority to fill the post without Senate approval.

the Congress’ role in providing a check on the excesses of the executive branch.” House Speaker John Boehner, an Ohio Republican, called the appointment an “extraordinary and entirely unprecedented power grab” by the president.

Alternatively, Barney Frank (D-MA), ranking member of the House Financial Services Committee and coauthor of the Dodd-Frank bill on financial reform, stated, “The president’s appointment of Richard Cordray to be the director of the Consumer Financial : More Background Protection Bureau calls and Context // It for congratulations – both was always President to the president and to Obama’s intent to have American consumers, who Elizabeth Warren become will now get the fullest the CFPB’s first director. measure of the protection After all, it was Warren promised to them in who spearheaded the idea, the financial reform bill design and implementation which we passed last year. of the organization. Republicans’ complaints Unfortunately, Congress about the president’s was not prepared to President Obama nominated Cordray to be the CFPB’s first director in July, almost one year after enactment of the Dodd-Frank financial regulatory law created the decision to make this recess make such a controversial agency. Republicans blocked Cordray’s confirmation by the Senate in December. appointment are equivalent nomination given severe to objections leveled by concerns made public Senator Shelby, who serves as the arsonists at people who use the fire door by the Republicans. In spite of this ranking member on the Senate banking to escape a burning building.” opposition, President Obama has committee, summed up the Republican managed to keep Warren on board in a position in a July 21, 2011, Wall Street supervisory role at the CFPB as special Having failed legislatively to block Journal article affirming continued assistant to the president and special the creation of an independent opposition to a centralized structure, advisor to the treasury secretary. As an consumer bureau (independent from noting that both the Securities Exchange alternative to Warren, President Obama undue influence from the financial Commission and Federal Deposit selected Cordray, who was singled out industry), Republican senators bent the Insurance Corporation had executive because he had responded to the most Constitution out of shape by hijacking boards and that the CFPB should be citizen complaints by any state attorney the confirmation process to weaken the no different, and that absent this type general in the entire U.S. Warren is CFPB in ways they were unable to do of board oversight structure, the CFPB now running for the U.S. Senate seat in through legislative process. director will have unprecedented powers. Massachusetts.

:

What has transpired? // The president has leveraged the sparingly used “recess appointment” mechanism to appoint Richard Cordray as the executive director of the newly formed Consumer Financial Protection Bureau. The “recess appointment” mechanism allows a president to bypass the Senate nomination process but limits the appointee to a one-year term. As mentioned above, Richard Cordray is a

The president’s decision drew quick criticism from Senate Republican leader Mitch McConnell, who stated that the president “arrogantly circumvented” the American people and upended “longstanding” practices that limited recess appointments. McConnell further stated, “Breaking from this precedent lands this appointee in uncertain legal territory, threatens the confirmation process and fundamentally endangers

President Obama has responded in an entirely appropriate way to their refusal to consider a nomination, not because of any flaws in the nominee, but because they are frustrated that they are unable to repeal, or weaken, a duly passed statute. Even the most extreme opponents of consumer protection have not raised any serious objection to Cordray’s qualifications, and he has in fact been supported in a bipartisan way by many of those with whom he has worked 8

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The Reverse Review February 2012

There are some at CIS, for example, who believe that this is actually an opportunity for the industry to consider threading the needle with both the administration and Capitol Hill.

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when he was attorney general of Ohio. The installation of Cordray as director means that consumers will now be protected against a full array of financial practices. This does not mean that the majority of payday lenders, or check cashers, or people involved in transmitting cash remittances, are dishonest or unscrupulous. It does mean that in any business, there will be those who will try to take unfair advantage of consumers, and those consumers will now have a strong, well-constructed, independent agency to which they can turn in those cases.” The leadership in the Senate also had a perspective around the recess appointment of Cordray. Senate Banking Committee Chairman Tim Johnson (DSD) released the following statement in response to the White House’s announcement of President Obama’s recess appointment of Cordray to be the first director of the Consumer Financial Protection Bureau. “With Richard Cordray leading the Consumer Financial Protection Bureau, Americans will finally get the consumer protections they deserve. Cordray is eminently qualified for the job, as even my Senate Republican colleagues have acknowledged. As Banking Committee Chairman I look forward to working with Cordray and the CFPB as he moves forward on implementing long-overdue consumer financial protections for all Americans. It’s disappointing that Senate Republicans denied him an up-or-down vote, especially when it’s clear he had the support of a majority of the Senate.” The key trade associations have also seen fit to voice their opinions. In an email sent to the trade association’s membership, MBA President and CEO David H. Stevens pointedly failed to congratulate Cordray on his new position and warned that the recess appointment would only create a new round of partisan conflict. 36

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“This action promises to further exacerbate the political tensions between Democrats and Republicans,” wrote Stevens, who served as Obama’s commissioner of the Federal Housing Administration before joining the MBA in April 2011. While stating that the MBA has “taken steps to establish a positive working relationship with the CFPB’s leadership, including my own personal outreach to Mr. Cordray,” Stevens added that the trade group supported the Senate Republican position of reconfiguring the CFPB’s organizational schematics and federal accountability. “MBA continues to support the need for important structural changes to the CFPB, namely that the director’s position be replaced by a five-person commission, that the CFPB be subject to the normal congressional appropriations process, that CFPB rules be subject to review by the Office of Management and Budget, and that votes to overturn CFPB decisions by the Financial Stability Oversight Council take a simple majority rather than a two-thirds vote,” Stevens continued. “In short, the CFPB’s influence on the financial services sector will be unprecedented, and MBA will continue to urge that appropriate institutional checks and balances be in place to ensure that the CFPB’s authority is used wisely and judiciously.” Tom Donohue, President and CEO of the U.S. Chamber of Commerce, expressed his concerns about the Cordray recess appointment on his organization’s website. “To say we are disappointed in the move by the president today would be a gross understatement,” Donohue wrote. “This controversial appointment is unprecedented, constitutionally questionable, and puts the authority of the director and the validity of the bureau’s work in legal jeopardy. What’s more, it ignores repeated calls to reform the bureau by restoring basic checks

and balances. The Senate has already made it clear that structural changes are needed before a director can be confirmed, and the executive branch has defied convention to undermine that process. Today’s move by the President robs Congress of its one opportunity to provide a check on the CFPB’s broad and largely undefined reach.” The U.S. Chamber of Commerce has no immediate plans to sue over the Cordray appointment. The American Financial Services Association had something much different to say. “I want to make it perfectly clear, we are not suing our regulator,” Bill Himpler, Executive Vice President for federal affairs at the American Financial Services Association, told an audience of bank lawyers on Tuesday. This trade group’s membership includes primarily nonbank installment and automotive lenders. During a panel discussion about the newly organized and highly empowered CFPB, Himpler offered some rare industry praise for the agency’s staff and for President Obama’s political instincts in appointing Cordray. “I have to tip my hat to the president,” Himpler said. “This was a great political


play. It plays to the themes he was running on,” primarily “cleaning up Wall Street.” “There is a receptivity [by the CFPB] to learn and that’s very refreshing,” Himpler said. “They want to get it right so to a certain extent that creates a level of comfort, but there are other signals that still leave lingering heartburn.”

: What happens next? // It has been pointed out by CIS legal and legislative advisors that, “… unless the appointment is successfully challenged, this recess appointment would open up a whole range of powers to the bureau, including the power to regulate non-bank players and the authority to act under the ‘unfair, deceptive, or abusive’ provisions in the Dodd-Frank Act.” It has been determined by some that a constitutional challenge to the president’s recess appointment is indeed possible. However, just how would such a challenge come about? It seems unlikely that any of the large financial institutions regulated by the CFPB would undertake such a move, and one may suspect there would be political sensitivity to this issue from the major consumer financial services trade associations. It seems more likely that one or more members of the Senate might challenge the appointment in court. Or perhaps a smaller non-bank lender might be motivated to do so. Alternatively, a financial services trade association may wait and take aim once the CFPB has done something to impact an industry negatively. We will need to wait and see if the constitutional issues surrounding this appointment will be litigated, either in an offensive way in the near future, or later in time as a defensive measure by a target of the CFPB’s regulatory or enforcement efforts. Given the rather controversial manner in which the president has appointed the director, some seem persuaded that the administration believes that its political goals are better served by taking a hard-line, confrontational stance with

respect to the CFPB. If there is to be a political payoff to the administration from taking this risk, it would seem to require the CFPB to be visibly active in rulemaking and enforcement activity this year. Indeed, the official White House announcement of the appointment trumpets the president’s “decisive” action and states that “the American people will have a consumer watchdog fighting tooth and nail on their behalf.”

: How should the Reverse Mortgage Industry Respond? // In terms of a path forward, perhaps it would be wise for the industry to embrace the CFPB sooner rather than later. There are some at CIS, for example, who believe that this is actually an opportunity for the industry to consider threading the needle with both the administration and Capitol Hill, viewing Cordray’s appointment as an opportunity for the industry rather than just another negative development. Why not embrace the CFPB and tout the reverse mortgage industry’s pro-consumer benefits? Why not point out the existing consumer safeguards already in place, such as federally mandated housing counseling and other protections? Why not consider sending a positive, nonpartisan message to Cordray and his team so we can continue to cultivate a productive relationship with both the executive branch and the legislative branch of the government? Cordray voiced some encouraging words when addressing the U.S. Chamber of Commerce. “What I want to say to business is, they should embrace the bureau,” he said, adding, “Not only are we going to protect consumers but we are going to support the honest and responsible businesses in the financial marketplace from unscrupulous businesses who undercut them with impunity.” Some other positive news is that in the last two weeks Director Cordray has

reached out to about 100 people at banks, trade associations and consumer groups to make introductions and get feedback. Among those at the top of the banking food chain he has spoken with are Bank of America CEO Brian Moynihan, Citigroup CEO Vikram Pandit, JPMorgan Chase chief Jamie Dimon, US Bancorp CEO Richard Davis and PNC Financial Services Group’s James Rohr. Cordray has also spoken with leaders of consumer groups such as the Consumer Federation of America and Public Citizen, as well as trade groups like the American Bankers Association and the Consumer Bankers Association. It is important that Director Cordray reach out to the banks, as they are some of the most skeptical of the CFPB inside the financial services arena. Some have speculated that the president will be counting on the CFPB director to demonstrate some “wins” during election season that illustrate the effectiveness and importance of the CFPB as an enforcer of consumer protections. I believe we can expect this to indeed be the case. I also anticipate that the CFPB will be motivated to move as quickly and as efficiently as possible. Regardless of the partisan political thrashings likely to ensue, the CFPB is here to stay and as an industry we must deal with this new reality. In addition to cultivating a positive relationship with the CFPB we must put forth an effort to help it shape the best sort of public policy possible. Furthermore, the industry must continue its mission to secure support on Capitol Hill as our best insurance against any unfair or destructive regulation emerging on the horizon. With more than 10,000 U.S. citizens turning 65 every 24 hours, the number of older Americans coming to rely on the reverse mortgage industry will steadily increase. It remains incumbent upon the industry to help protect, preserve and promote the financial independence of America’s seniors by making every effort to ensure that the industry itself remains a viable option. x reversereview.com

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The Reverse Review February 2012

Opinion

last word

Want to comment on this article? Comment online at reversereview.com

Burn the Ships! joh n la ro s e

A

s a veteran of military service in Vietnam, I’m drawn to military history and the connections that can be made between military discipline and civilian life. One story in particular came to mind as preparation for this column began. Around 2,000 years ago, Julius Caesar and his naval armada set out to conquer England. England was a great distance from Rome and the Celts were skillful and aggressive soldiers. The Roman ships held a finite number of soldiers, yet there were hundreds and thousands of the enemy. In addition, if Caesar and his men planned to retreat, they would have to sail back across the channel, cut off from relief or additional supplies. As the Roman ships drew near the coast, the enemy could be seen lining the Cliffs of Dover, eagerly awaiting battle. Caesar is said to have directed the ships away from the cliffs, and after a valiant effort, the Romans established a beachhead, though one entirely surrounded by Celtic soldiers. According to legend, Caesar then made an incredibly daring move. He knew his men were tired and he questioned their commitment and resolve. As long as the Roman ships remained along the coast, there would be thoughts of retreat. Caesar ordered the ships to be burned. This way, there would be no escape, no retreat. If the Roman soldiers were going to be pushed back, it would be into the sea, and thus to be pushed back would be to perish. Caesar needed commitment from every one of his soldiers and

he needed them to realize that defeat was not an option. They had come to conquer – and stay. Over the past three years it feels like the reverse mortgage industry has been under siege. I hesitate to use the term “enemy” to describe well-intentioned legislators who attempt to add layers of redundant legal protections at the state level that already exist at the federal level, or investigative reporters who can’t seem to ferret out a positive reverse mortgage experience to save their souls, or regulatory zealots who treat seniors like children that require constant protection. These folks are not enemies from foreign lands to conquer or defeat; they are as interested in protecting their territory or turf as we are in defending ours. They have been around since the first reverse mortgage closed and they aren’t going anywhere soon. So how do we disarm them? How do we make peace? In 2011, the NRMLA board and its members strongly recommended that lenders incorporate financial assessment tools into the reverse

The simple truth, so often overlooked by media pundits, is that reverse mortgages have provided countless seniors with essential and safe financial solutions. 38

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mortgage qualification process. This was a proactive and constructive response by the reverse mortgage industry to the destructive tremors experienced on the forward side, and now reverberating on the reverse side. These tools will help mitigate new Tax & Insurance defaults, a true threat and a real enemy to our industry, and should help address the fears of those regulatory zealots who have witnessed far too much predatory behavior within the forward mortgage industry. Of equal importance, the “Borrow with Confidence” campaign is an effort to rally reverse mortgage professionals and educate consumers. The simple truth, so often overlooked by media pundits, is that reverse mortgages have provided countless seniors with essential and safe financial solutions. It’s easier to do battle when an enemy is as clearly identified as it was for those Romans standing on the ships, or those Celts standing along the cliffs. The true jewel of the story, and the thing Caesar knew, is this: The greatest enemy can be our very own defeatist attitudes and our desire to retreat or run away when confronted with great challenges. “Burn the ships!” We come in peace. The reverse mortgage industry is here to stay. x


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The Reverse Review February 2012

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