Keeping Your Reverse Experience “Non-Toxic” Regulatory Challenges Of Entering The Reverse Mortgage Business Weiner Brodsky Sidman Kider, PC page
“During these tumultuous times, when news articles referring to “mortgages” are frequently preceded by adjectives such as “toxic” or “troubled”, reverse mortgage participants have fared somewhat better than their forward brethren.” As more and more newbies enter the reverse mortgage space, many are entering with little to no prior knowledge of the intimate workings of this niche market. This month our feature article focuses on the topics related to FHA approval as well as non-FHA specific issues as they pertain to the closing of HECMs.
Publisher Aman Makkar Editor-in-Chief Erica English Copy Editor Harpreet Makkar Production Jason Westbrook Layout & Design Guenthoer Design Printer The Ovid Bell Press
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© 2009 The Reverse Review, LLC. All rights reserved. The Reverse Review, LLC is a California limited liability company and is the publisher of The Reverse Review magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, The Reverse Review, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 11440 W Bernardo Ct, Ste 220, San Diego, CA 92127
to fulfill our goal, we urge our readers to write to us and share your thoughts about what you would like to see in print each month. This publication would not be successful without you and we want to hear your ideas.
ducation: Being able to differentiate between what you do know and what you don’t. It’s knowing where to go to find out what you need to know; and it’s knowing how to use the information once you get it.” --William Feather WOOOHOOOO! We turned one! As we celebrate the one-year anniversary of the magazine, I am reminded of the first day we decided to take the leap of faith, which became The Reverse Review. At the time, one of our main goals was to take an industry, which was still very young as compared to the mortgage industry as a whole, and one where there was a lot of ignorance and misinformation, and educate people in our niche. As I reflect on the past year, I am very pleased with the progress we have made. We have focused month after month on trying to bring new and fresh information to our audience; information about sales & marketing tactics to help grow your business, as well as keeping you abreast of all the changes occurring in the industry. We have also been fortunate to expand our contributor base every month, which now provides us with monthly legal and servicing education.
Thank you to the staff of The Reverse Review for a wonderful and fulfilling first year of educating and communicating to the Reverse market. Thank you to our new creative designer, Wil Guenthoer, for making the magazine look phenomenal this month (we hope you all enjoy the new design and layouts). Finally, a special THANK YOU to the advertisers, contributors, and readers in helping us make TRR such a success. We could not have done this without you. Thanks for reading and see you all soon!
Erica English Editor-In-Chief
Aman Makkar Publisher
As we move forward, our goal continues to be education; the education of the new comers to the market, as well as the veterans. In order April 2009
14 Filling the Funnel Sam Collins
20 Age of Authenticity
30 Now, I Can Hear You.
Part Two of the Sales Conversation Monte Rose
Reverse Mortgage Training Program, PART III
Jacqueline Del Priore
24 FEATURE: Keeping Your
38 Creating a World Class
34 A Country in Crises Michael Banner
Reverse Experience “Non Toxic”
Weiner Brodsky Sidman Kider, PC
5 Note From the Editor
10 Ask the Underwriter
12 Industry Snapshot
44 Ask the Servicer
46 The Last Word: Dave’s TOP 9
contributors Ralph Rosynek - Ask the Underwriter, page 10
Ralph Rosynek is President and CEO of 1st Reverse as well as a HECM DE Underwriter. Mr. Rosynek has been involved in mortgage lending for over 30 years with the last 5+ years exclusively providing reverse mortgage lending solutions. To contact Mr. Rosynek or to learn more about 1st Reverse Financial Services, Please visit www.1streverse.com or call 877.574.1000.
John Lunde - Reverse Market Snapshot, page 12 John Lunde is President and founder of Reverse Market Insight, the premier source for market intelligence and analytics services in the reverse mortgage industry. RMI clients include five of the top ten reverse mortgage originators, both lender and independent servicers, as well as some of the largest financial services firms in the world. Find out more at www.rminsight.net or call 949.281.6470.
Joel Schiffman - Keeping Your Reverse Experience “Non-Toxic” - Regulatory
Challenges of Entering The Reverse Mortgage Business, page 24 Joel Schiffman is a member with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. Mr. Schiffman can be reached at firstname.lastname@example.org or by telephone at 949.798.5570.
Jim Milano - Keeping Your Reverse Experience “Non-Toxic” - Regulatory Challenges of Entering The Reverse Mortgage Business, page 24 James M. Milano is a Member of the law firm of Weiner Brodsky Sidman Kider PC. Jim is Co-General Counsel of the National Reverse Mortgage Lenders Association (NRMLA) and is nationally recognized as one of the leading lawyers in the area of reverse mortgage law. Jim can be reached at MILANO@wbsk.com or by telephone at 202.628.2000.
Valerie VanBooven - Age of Authenticity, page 20
Valerie VanBooven RN BSN is a Senior Service Marketing Expert and the National Marketing Director for Next Generation Financial Services, a Division of 1st Mariner Bank. She is a professional speaker and the author of the books “Aging Answers” (2003) and “The Senior Solution” (2007). She can be reached at email@example.com. Please visit her website at www.myseniorservice.com
Michael Banner - A Country in Crises, page 34 Founder of LoanWell America, Inc., Michael has been in the mortgage industry for 27 years. He is one of few Reverse Mortgage professionals accredited to teach continued education classes for CFP’s, CPA’s, attorneys & insurance agents. A proven senior advocate, he is a member of NRMLA’s State & Local Issues Committee and sits on the Board of Directors for the FPA of Tampa Bay. Michael has been interviewed by the Wall Street Journal, the Tampa Bay Business Journal, Sr. Market Advisor & The Reverse Mortgage Wire as well as numerous other Reverse Mortgage Internet sites. For more information: Michael.Banner@loanwellamerica.com or 877.700.0555
contributors Now, I can hear you. Part Two of the Sales Conversation, page 30 - Monte Rose Monte Rose has helped hundreds of seniors obtain a reverse mortgage during the past 17 years. He is an accomplished speaker and widely quoted industry expert, appearing in financial publications and nationally syndicated media. He was head of national retail sales for Financial Freedom Senior Funding Corporation. Monte is a Certified Senior Advisor and a Certified strengths Coach with Gallup University. For more information, call 800.516.0545 or e-mail firstname.lastname@example.org. Creating a World Class Reverse Mortgage - Jacqueline Del Priore Training Program, PART III, page 38 Jacqui Del Priore is the Director of MCTI (The Mortgage Career Training Institute), a company which specializes in reverse mortgage sales and product training. As former VP of Training and Development for World Alliance Financial, she has helped hundreds of reverse mortgage loan officers achieve success in our industry. For more information, contact Jacqui at 516-983-9396 or e-mail her at email@example.com. Filling the Funnel…Your Building Block to Success, page 14 - Sam Collins Sam Collins is the President of Sam Collins Reverse Marketing, LLC and Founder of REMALO, the Reverse Mortgage Association for Loan Officers. REMALO is a web based National sales, marketing, training, and full service center, created exclusively for Reverse Mortgage Loan Officers, Correspondents, Branch Managers, and key executives, and brokers. www.remalo.org or 877.262.7656 Ask The Servicer, page 44 - Ryan LaRose Ryan LaRose is the Executive Vice President of Celink, an independent reverse mortgage subservicer. Ryan has over 12 years of servicing experience; exclusively in reverse mortgage servicing since 2005. In addition, Ryan is an active member of the NRMLA servicing and technology committees.
Dave’s Top 9, page 46 - Dave Bancroft David Bancroft is the President of Omni Reverse Financing Inc. Mr. Bancroft is a leading industry expert in the origination of Reverse Mortgages, FHA & VA Government Loans and uses his extensive experience to help promote the Reverse Mortgage industry. OmniHome Financing was founded by Mr. Bancroft and his partners in 2002 to specialize in Government lending and is one of the largest originators of HECM Reverse Mortgages in the Country. www.omnireverse.com or 800.628.5093. Keeping Your Reverse Experience “Non-Toxic” - Regulatory Challenges - Fed Kamensky of Entering The Mortgage Business, page 24 Fed Kamensky is an associate with the law firm of Weiner Brodsky Sidman Kider, P.C. The firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. Mr. Kamensky can be reached at firstname.lastname@example.org or by telephone at 202.628.2000.
Ask The Underwriter
Happy Anniversary to You!!! Ralph Rosynek With April marking the 1st Anniversary of The Reverse Review and paper being the traditional 1st Anniversary gift, how fitting that we start off the month of April with killing more trees for paper to add to our HECM files! Time to lay in a supply of more toner! Mortgagee Letters 2009 -09, 10 and 11 did a last minute rush to the finish line in March 2009.
ML-2009-09 Adoption of Market Conditions Addendum (Fannie Mae Form 1004MC/Freddie Mac Form 71) and Appraisal Reporting Requirements for Properties located in Declining Markets Currently, all Federal Housing Administration (FHA) Roster Appraisers are required to report on housing trends in the Neighborhood section of the applicable property specific appraisal reporting form. The Uniform Standards of Professional Appraisal Practice (USPAP) mandate that an appraiser maintain documentation necessary to support all analyses, opinions and conclusions for each appraisal assignment in a work file. In order to ensure greater transparency and accuracy of appraisals performed for FHA-insured financing, FHA will adopt the Market Conditions Addendum (Fannie Mae Form 1004MC/ Freddie Mac Form 71, released November 2008). For all appraisals of properties that are to be security for FHA-insured mortgages and that are performed on or after April 1, 2009, the appraisal must include the Market Conditions Addendum. To read this mortgagee letter, the others listed below and any attachments in their entirety, please visit: http://www.hud.gov/offices/ adm/hudclips/letters/mortgagee/ view the 2009 letters and click on the letter of your choice. Mortgagee Letters from previous years can be found on the same page.
Underwriting Impact Comment: The operative words are “on or after April 1, 2009”. Your Underwriter suggests you send a copy of this mortgage letter to your appraisal vendors as it will impact all HECM appraisals. ML 2009-10 HUD’s Updated Policies on HECM Counseling, and Several New Requirements: The letter includes a reiteration that lenders are strictly prohibited from assisting a senior in scheduling counseling; borrowers are not to be pressured in any way and must contact a counseling agency at their own pace. Lenders must now provide a list of no fewer that 10 counseling agencies to every client, including 5 local agencies that are within the senior’s local area and/or state, with at least one agency within reasonable driving distance in order to provide face-to-face counseling if the senior so elects. In addition to the 5 local agencies, the other 5 agencies include National Foundation for Credit Counseling, Money Management International, CCCS of Greater Atlanta and the National Council on Aging and the AARP; in ML 2009-10, HUD provides toll-free numbers for these 5 agencies. HECM counselors must review a senior’s unique financial situation during the counseling session; the counselor must document the senior’s budget based on financial information provided by the senior (such as income, assets, debts, monthly expenses); this budget analysis, required by section 255 of the National Housing Act, mandates that the counselor evaluate and discuss with the senior any appropriate alternatives to a HECM loan. HUD revised the HECM Counseling Certificate to provide a space to record the method of payment for the counseling session, either “Upfront Fee for Counseling Session” or “Financed Fee for Counseling Session”, as well as a box to check if the fee has been waived. Underwriting Impact Comment: Pull your counseling information list NOW and revise it according to the new letter. • •
A good borrower safeguard would be to conduct a company review of the changes to HECM Counseling. Additionally, include a company position statement as to counseling requirements and guidelines for loan originators and HECM borrowers.
ML 2009-11 Remember HECM for Purchase Mortgagee Letter, ML 2008-33, some of the provisions of ML 2008-33 are included in the new Mortgagee Letter 2009-11: With regard to HECM for purchase transactions, the maximum claim amount will be the lesser of: 1) the appraised value of the home; 2) sale price of the home; or 3) the HECM “loan limit”. HECM mortgagors may have only one principal residence at any one time; current HECM mortgagors that plan to sell their existing residence and use the HECM for purchase program to obtain a new principal residence must payoff the existing FHA-insured mortgage before the HECM for Purchase mortgage can be insured. HUD also provides guidance to prevent the practice known as “buy and bail” where the homebuyer purchases a more affordable home
with the intention to cease making payments on the previous mortgage. The monetary investment required may be met through the use of funding sources approved under HUD Handbook 4155.1, REV-5, section 2-10, except that (i) sweat equity, (ii) trade equity, (iii) rent credit or cash from the following parties may not be used: (a) a seller or any other person or entity that financially benefits from the transaction, or (b) any third party or entity that is reimbursed, directly or indirectly, by the seller or any other person or entity that financially benefits from the transaction. If a property has major property deficiencies (as outlined in ML 200911), all repairs of such deficiencies must be completed by the seller prior to closing. Lenders must examine HUD’s Limited Denial of Participation List (LDP) and the General Services Administration’s (GSA) Excluded Parties List System to determine whether the seller, real estate agent, builder, or other parties involved in the transaction, appears on either list. The reverse mortgage will not be eligible for mortgage insurance if the name of any party to the transaction appears on either list. Borrowers cannot obtain “gap” financing if there are is a lack of funds available to purchase the new home outright. This restriction includes subordinate liens, personal loans, cash withdrawals from credit cards, seller financing and any other lending commitment that cannot be satisfied at closing. With ML 2009-11, HUD included an Attachment showing several examples of the calculation of the required monetary investment that the senior must make in HECM for purchase transactions. Underwriting Impact Comment: Be very careful with verification of earnest money and funds to close. There still is not a firm, clear, definite, permitted (did I use enough adjectives?) conclusion on the subject of gifts from close family members. Your underwriter will advise you when a more clear statement on this topic is available. Perhaps the best approach for your first few purchases would be to make sure all parties are communicating; realtors, borrowers, processors, underwriters and closing/settlement agents alike. Besides new rules and guidance, the issue of incorporating new behaviors for all of the parties is a very big factor in the success of the transaction. Remember, many borrowers haven’t done a purchase in 20 years, most Realtors know how to get a “forward” purchase to close, most title/settlement agents are familiar with closing documents and requirements for a “forward” purchase, and lastly, for some investors, funding a loan on the day it is supposed to fund may be an excruciatingly painful endeavor. Oh, did I mention many of our loan originators are not from the “forward world” and we also have that new “live-pricing” lock your loan issue! Please be aware of the need for a 3 day right of rescission if the borrower is also bringing additional proceeds to the table to provide for a line of credit facility. Lastly, as we raise our glasses to The Reverse Review as the magazine enters its second year of publication, a special toast to the addition of another permanent fixture to the Magazine, Ryan LaRose, the man behind, Ask The Servicer. Ryan and I look forward to really starting some trouble with you, our readers, as we continue to tell you what you don’t want to hear, claim you didn’t know and scratch your head wondering “who the he$% came up with that great idea!” Cheers.
reverse mortgage industry snapshot Statistics Provided by Reverse Market Insight - February 2009
Top 10 Rankings by Region
10 Regions, ranked by HECM unit volume YTD. Including rank change from prior YTD, as well as growth rates. Also includes active lenders and growth
Lender Distribution by YTD Growth Rate
Lender distribution graph and table, showing number of lenders growing at various growth rates YTD vs. prior YTD, including volume attributable to each group of lenders. Client Notices 1)
Help improve data quality in the Reverse Mortgage industry. If you believe your company’s numbers on this report are inaccurate, please e-mail us (email@example.com) and we will review your feedback promptly. Please include your name, company and contact information along with a thorough description of the suspected inaccuracy. Thanks!
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24 Month Penetration and Unit Volume
2 year trend graph of monthly HECM unit volume and industry penetration against 62+ homeowner households nationally. Appendix 1) All statistics based on retail originations from HUDâ€™s Monthly HECM MIC reports 2) Loans are in unit volume, based on HUD reported mortgage insurance certificate issuance 3) Lenders are aggregated using HUDâ€™s lender identification numbers and unique lender names, along with feedback from reporting lenders HUD Regions and Corresponding States/Territories Region 1 - New England Connecticut Maine Massachusetts New Hampshire Rhode Island Vermont
Region 3 - Mid-Atlantic Delaware District of Columbia Maryland Pennsylvania Virginia West Virginia
Region 5 - Midwest Illinois Indiana Michigan Minnesota Ohio Wisconsin
Region 7 - Great Plains Iowa Kansas Missouri Nebraska
Region 8 - Rocky Mountain Colorado Region 2 - New York/New Jersey Region 4 - Southeast/Caribbean Region 6 - Southwest Montana Arkansas North Dakota New York Alabama Louisiana South Dakota Florida New Jersey Utah New Mexico Georgia Oklahoma Wyoming Kentucky Mississippi Texas North Carolina Puerto Rico South Carolina Tennessee U.S. Virgin Islands
Region 9 - Pacific/Hawaii Arizona California Federated States of Micronesia Hawaii Nevada Region 10 Northwest/Alaska Alaska Idaho Oregon Washington
filling the funnel...
Your Building Block to Success
ritical to your success in the reverse mortgage business is gathering leads. This gathering of leads, sorting and using lead information is necessary to begin interaction with your senior prospects. This process is called â€œFilling the Funnel.â€?
You see; leads are a powerful resource to have. Today’s leads are tomorrow’s origination, or next month’s, or next year’s. Therefore, it is important for you to understand the importance of your leads. One important concept for you as an originator or broker is the ability to create a workable senior prospect database. This database enables you to market to your prospects now and in the future. By putting your senior prospect leads in your database, you are securing a lucrative future for business, originations and ultimately referrals. The more senior prospect leads you have in your funnel, the more originations you’re going to have down the road. Why? Because you have the list and you are going to devote yourself to be constantly standing in front of them. Where Oh Where Has That Little Lead Gone? Question: What happens when prospective leads are not put into the funnel? Where do they go? Let’s say that you capture a reasonable amount of prospects and work the entire incoming leads. You discover there are some seniors who are ready to go now. So, what do you do with the rest of the leads who were not ready? My guess,
many of those leads may get lost! Why? It’s probably not intentional, but because of the overwhelming nature of just doing business and living life, many of those leads just get lost and unfortunately end up in the trash can or a scrap piece of paper, then lost forever. When I first started in the reverse mortgage business, I had hired a loan officer who was struggling. He had been working in the business for 6 months and had only closed 2 reverse mortgage loans. He came to me discouraged. I suggested he go back to his old leads and call them again, send them information, or touch base with them in some way. His response was “What Leads?” I mentioned he had been given over 100 prospects, “What happened to the other 98?” The loan officer stared at me and confessed, “I threw their stuff away. I didn’t think I would need it.” Well, I have to tell you this was a wake up call for my loan officer and for me. Sometimes that which causes you pain can make you stronger. What is the Price of Lost Leads? What is the ultimate result of a loss or discarded lead? Well, really there is only one answer to that question. You will have to seek out more leads. And thus, (if not corrected), the process will begin again. Yes, you’ll pour more money into purchasing leads, make the quick originations, loose or
discard the lost and if you are not careful, the process repeats itself again and again.
In this process, not only are you spending more money in marketing efforts, but in purchasing more leads you are leaving thousands of dollars of profits just sitting on the table.
ne important concept for you as an originator or broker is the ability to create a workable senior prospect database. This database enables you to market to your prospects now and in the future.
Let’s do a quick calculation. Let’s say you are spending $5000 per month on marketing for leads and you are able to generate 50 leads. Of those leads you generate immediately 5 originations, you gross $20K in origination fees and you feel pretty good. After 12 months you haven’t done too badly, but what about those 45 X 12 or 540 leads that were left on the table. Let’s say half of your leads or 270 were not qualified, but the remaining 270 had a chance, and you were able to close another 5% or 14 originations, which resulted in $70K of additional originations. Had you thrown the leads away or lost them, that additional income would be lost, and the business would have most likely gone to your competition. This is certainly something you cannot afford to let happen. You Don’t Have To Be Pushy To Be Successful!
This is so true in the reverse mortgage space. Senior clients can see through a pushy salesman. Your goal is to become the trust advisor through consultative approaches. When you start to understand the importance of every lead, you will notice your approach will change and your mindset creates a whole new set of values. Recognize what others are doing to close originations, toss out the bad and use the good. Your goal is to be polite even if the senior client is not ready to move forward. We all know our senior clients will not move forward until they are ready, not when you are ready. The secret is simple, steady as she goes with polite persistence. Capture your leads to capture more originations! Realization: no matter where your leads are generated from, you are not the only person trying to sell to the “hot” leads. Remember the need for leads is greater than the supply, so it is common sense to recognize two or more persons may be working the same lead to win the senior client’s business.
Here is the building block strategy for you to take away. Treat each and every senior prospect as if they were already your client and remember many will be. There is no way to gauge how much a prospective lead is worth in the future. Why take risks with potential dollars? Understand that leads are only worth the originations that come from them. But, in senior marketing, you never know when the origination will occur. Remember, your senior client’s are working on their schedule, not yours.
ere is the building block strategy for you to take away. Treat each and every senior prospect as if they were already your client and remember many will be. There is no way to gauge how much a prospective lead is worth in the future.
Converting the Funnel
Assuming by now you have determined how to fill your funnel, you need a plan to make sure you cultivate all those “not so hot” leads. You should also realize that managing your funnel is a mammoth task and is one of the primary reasons why leads go in the trash or just get plain lost. The secret to lead conversion mastery is dependent on your ability to execute faithfully. I know you have heard it before; however, the secret is really no secret at all. To master the funnel you must master follow up. When you choose to execute your follow up, you are committing to interacting with your senior client. In order to interact, you must have a message and a reason for your client to really get to know you and interact with you.
self crazy; and three, continue to lose money on unconverted leads that slip through the funnel. The old days of just picking up the phone and getting an appointment are gone. Oh yes, you might get luck here and there, but this business in not for the faint of heart, it’s hard work and smart work. The arena of competition has proven they want the business also. So, don’t immediately think your senior prospect doesn’t have choices and don’t think they immediately see the value of you and a reverse mortgage. The senior client wants to be shown not told. To establish the value and relationship your senior client needs to know exactly what they will be receiving and exactly how it is going to impact their lives. It’s not about you; it’s about them. Bottom line, if you fail to move your prospect through the funnel, you’re not going to get the opportunity to make money. So why should your senior client choose you to do business with. What have you offered them that others can’t? Usually, the answer is nothing. For example, if one dentist hands every client a toothbrush and the other dentist does the same, there is no difference. However, if you are handed a toothbrush, an egg timer, and a two-minute demonstration, you have been offered something of value. So most of us are not giving our prospective client the “why me” answer they desperately want. “Choose me” because I’ll give you a free toothbrush” is not a good reason for picking a dentist. Your senior prospects are looking for value. Value they don’t typically find in a sales or marketing message. This value creation is where most of us go astray and fail to differentiate ourselves. Conversion techniques to keep the funnel flowing You must add Value in order to add Revenue
Many of you are probably using the old fashioned method of follow up. Maybe you are using a file folder system, a notebook, sticky notes, or the “I’ll remember to call them back system.” If you are still using the latter and it is working for you, then keep doing it. However, even the brightest and most knowledgeable of originators find it impossible to remember all their “non-active” clients. Why? Because in order to keep your pipeline full, your business requires many potential clients and our client is not on the same schedule as us. Establishing a consultative follow up system requires patience. However, it requires you use some form of technology. Yes, you need some form of automation to keep up. If not, you are going to do three things; one, continue along the same old path getting the same old results; two, drive your-
Please keep one thing in mind; content rich materials. Let’s face it not all of your materials will contain valuable information, but most of it should. The information has to be relative and be of interest to your senior client. The value I am talking about is any knowledge you can impart to your senior prospect that they will appreciate. For example, rather than the same old same old approach, you could send a report that explains the difference between adjustable and fixed rates or a report about the growth of technology among seniors and how knowing that will help them. What if you were the one person to educate your client? It would certainly set you apart. Keeping your name in front of the prospect can only be one with follow up. Your prospect will think of your consideration
every time they see your name. All the while you are building trust. This strong relationship will carry on once they become clients.
ing who might be stealing your business and feeling good about yourself when you helped your client by saving their home or improving their way of life.
The trust is the value they receive without the hard sell.
Show your senior clients you care by creating a systematic approach to each and every prospect. Become a fanatic about your follow up and hold yourself and your team accountable for each step and each contact.
So, your first step to becoming the welcomed guest is to be that person who is invited to all the parties because you are fun and interesting. This could be you—the person everyone wants to be around. Creating valuable content does not have to be complicated either. You already know a lot about reverse mortgages, throw in some fun facts, interesting success stories, and you’ll quickly have a fan club. Often when I visit a client, they tell me they have the Sam Collins pile of information. Yes, they actually have folders with all the information I have sent them. Now, that’s a fun feeling to see all my stuff there and guess who got the business!
There are many CRM systems and even manual systems that will provide you with the right tools to fill your funnel and keep it full with a steady flow of qualified and interested prospects. We use a rich content infused system for our follow up. There are many systems out there and choices. Will all your prospects actually do a reverse mortgage? No, but many will eventually. All you need to do is make sure you are at the end of the funnel waiting!
At the risk of overloading you with the funnel, I saved the best conversion technique for last because I am so excited to tell you about it. Show… don’t just tell. Wouldn’t it be nice if you had the time to personally approach each one of your prospects? Wouldn’t it be great if you could sit in front of your prospects and share with them all the good stuff about how a reverse mortgage can help change their lives? Imagine being face to face without driving yourself crazy wonder-
Your Cash Flow Matters. “
We use eCommission to generate cash ﬂow for marketing HECM for purchase and higher loan limits. I highly recommend them.
Tony Garcia, founder and board member NRMLA - CEO LibertyStreet Financial Group
eCommission has impressed me with the speed and ease of their service. We have a large inventory of loans to get through. Accessing some of these commissions ahead of closing is very helpful.
John Railey, President - Homestar Mortgage, Inc.
877.882.4368 ext. 866 April 2009
Late 2008 and early 2009 have delivered a lot bad news, bad press, scams of grand proportion, and as a result consumers are more wary and skeptical than ever. On the other hand we also have seniors who are in desperate need of cash flow because they have lost more than half, if not all of their nest egg.
Marketing Reverse Mortgages in the â€œAge of Authenticityâ€? VALERIE VANBOOVEN RN BSN April 2009
As sales people and marketers of Reverse Mortgages, we find ourselves in a situation where it’s more important than ever to educate consumers about our products and services, as well as establish credibility and trust along the way. Even more important than establishing our credibility is maintaining our credibility- making sure that every time we close a Reverse Mortgage – it’s for the right reasons, and has “suitability” written all over it. There’s also never been a more important time to educate the prospect’s family. Sons and daughters are fiercely protective of their parents in times like these, and sometimes fiercely protective of their perceived inheritance (whether that be appropriate or not!). Recently an email was sent to me about class action lawsuits and Reverse Mortgages. I’m not sure where it came from or who wrote it, but it became very apparent that down the road we will see more of this. This is the reason why it’s a good idea to have a one price policy for all of your HECM customers. Although some companies allow loan officers to sell higher margin products and receive higher commission, taking the stance that a one price strategy provides fair value for the client, company and loan officer is the right approach. The message: “Do the right thing, or start putting those commission checks in your personal “defense fund.”, Brett Carter, Founding Partner NGFS/1st Mariner Bank. Marketing in the Age of Authenticity - Come Out from Behind the Curtain The methodology for marketing our products and services in the “Age of Authenticity” has changed dramatically in only a matter of months. For those of you who have yet to enter the Social Media Marketing landscape, the time to get involved is now. I see your competition working hard on their blogs, Twitter posts, Facebook business pages, Squidoo, Scribd, and other accounts that not only increase their visibility on all search engines, but also allow them to educate prospectsand beat the pants off of you in the online marketing space. Some other important points to keep in mind: • Online “social media marketing” means personal first, business second. When setting up a Facebook account, a blog or any other means of communication, let people know who you are as a person- your passion for seniors, your reason for being in this line of work. All of that information allows you to then talk about business, and convey a message of trust. No more hiding behind the corporate “we”. On the other hand, we don’t want to know about your messy divorce, or any other personal
problems. Keep it all smiles and butterflies and rainbows for the general public. • Your “About Us” page on your main website needs to change. Gone are the days of the corporate “we” unless you are Coca Cola or Pepsi. “About Us” needs to be “About You”. Your name, your face, your personal/professional bio needs to be highlighted instead of a picture of your office building. • “Contact Us” better mean what it says. If your “Contact Us” page is a “form” that does not give the phone number or email address or mailing address of your office, you are doing yourself and your clients a disservice. There is nothing worse than wanting to talk to someone, only to be faced with an online form to fill out and no direct email or phone number. Don’t hide behind your website. Laws Change, Products Change, the Only Constant is Change In the last 6 months we have seen good and not-so-good legislation pass regarding the HECM product. Marketing messages have changes, loan limits and product offerings have all changed more than once. Companies who offer the Reverse Mortgage have entered the space and then disappeared. Loan officers have left the business, or been laid off as a result of the current economic situation. Big local names are exiting stage left. There is no doubt that consumers might be a little confused. Take this opportunity to be a world-class expert on the subject, offer education offline and online. Get out there and make a difference in your community. Funnel marketing dollars to programs that work to provide solid no obligation information. Show your staying power. One Bad Apple Spoils if for the Whole Bunch Finally, in the “Age of Authenticity” all eyes are on this industry. The media thrives on the one case that they can find highlighting a senior and family who feel they have been duped. Don’t be the bad apple that spoils it for the whole bunch. We need to share the hundreds of stories about seniors’ lives who have been changed for the better. Grab those testimonials and blog about them, post them on your website, write press releases about them (with permissions), and share the good stories that the general public needs to hear. There is a lot of opportunity for all of us in 2009 and beyond, let’s start sharing the message online and offline as much as possible with passion, credibility, and vision.
During these tumultuous times,
when news articles referring to “mortgages” are frequently preceded by adjectives such as “toxic” or “troubled,” reverse mortgage participants have fared somewhat better than their forward brethren. Not surprisingly, recent statistics published by FHA suggest that new forward players are entering into the reverse arena at an unprecedented pace. For example, during the first six months of 2008, over 1,000 new originators entered into the business, representing an 86% growth rate, while overall volume grew just 5%.1 1
ReverseIQ Newsletter, September 12.2008, Reverse Mortgage Insight, Inc.
As new reverse mortgage market participants embark upon their reverse mortgage journey, the first hurdle they must overcome is obtaining all necessary regulatory approvals. Consequently, as a useful refresher for those already in the business and a primer for those entering, we focus in this article on many of the regulatory approval requirements and related issues that impact new reverse mortgage participants as they step into the reverse mortgage space. Since most reverse mortgages originated on the market today are Federal Housing Administration (FHA) insured Home Equity Conversion Mortgages (HECMs), we cover several topics related to FHA-approval. In addition, we also address certain non-FHA specific issues that apply to all reverse mortgage lenders and originators, whether they originate FHA-insured HECMs or non-FHA insured proprietary reverse mortgages. FHA Mortgagee Approval In order to participate in the origination and funding of, and investing in, FHA-insured loans, including the FHA-insured HECM, one must be FHA-approved. Under FHA parlance, an approved entity is a “mortgagee” and there are four different classifications of mortgagees: non-supervised mortgagees, supervised mortgagees, loan correspondents (which can be either supervised non-supervised) and investing mortgagees. Non-supervised mortgagees (i.e., mortgage lenders) are non-depository financial entities that have as their principal activity the lending or investment of funds in real estate mortgages. A non-supervised mortgagee may originate, underwrite, purchase, hold, service, and sell FHA-insured mortgages and submit applications for mortgage insurance. Non-supervised loan correspondents are non-depository financial entities that have as their principal activity the origination of FHA-insured mortgages for sale or transfer to one or more “sponsors” that underwrite the mortgages. Sponsors must have Direct Endorsement (DE) authority (as discussed below). Supervised mortgagees are financial institutions that are members of the Federal Reserve System, and financial institutions whose accounts are insured by the Federal Deposit Insurance Corporation (FDIC), or the National Credit Union Administration (NCUA), such as banks, savings associations, and credit unions. Supervised mortgagees may originate, underwrite, purchase, hold, service and sell FHA-insured mortgages as well as submit applications for mortgage insurance. As is the case with supervised mortgagees, supervised loan correspondents are also either members of the Federal Reserve System or financial institutions whose accounts are insured by FDIC or NCUA. The difference, of course, is that supervised loan correspondents may only originate FHA-insured mortgages for sale or transfer to one or more sponsors that underwrite such loans.
As its name implies, an investing mortgagee is an organization, including a charitable or not-for-profit institution or pension fund, which invests in FHA-insured mortgages with funds under its own control. An investing mortgagee may purchase, hold, and sell FHA-insured mortgages, however, an investing mortgagee may not submit applications for mortgage insurance. Finally, it is important to note that an FHA “mortgagee” approval only applies to the legal entity that is the actual applicant and does not cover any of its subsidiaries or affiliates. A subsidiary or an affiliate of an approved mortgagee must apply for FHA approval separately. General Requirements for FHA-Approved Mortgagees Now that we understand the different types of approved mortgagees, let’s review the general requirements for each type as well as the specific requirements for different forms of business organization. A non-supervised mortgagee must maintain a warehouse line of credit adequate to fund the mortgagee’s average 60-day production pipeline, but no less than $1 million. The line of credit must be issued directly to the mortgagee. In lieu of a warehouse line of credit, FHA permits non-supervised mortgagees to provide evidence that it has entered into a mortgage funding program with a financial institution that provides for table funding or concurrent funding of all mortgages originated by such mortgagee. A non-supervised mortgagee is also required to spend a majority of its time and assets in the production of real estate mortgages and in the lending or investment of funds in real estate mortgages, or a directly related field. Unless organized as a not-for-profit entity or otherwise approved by FHA, these principal activities must contribute at least one-half of the entity’s gross revenues. With few exceptions, both supervised and non-supervised mortgagees must originate, close, fund, and submit mortgages for FHA insurance endorsement in their own names. A mortgagee may not perform only a part of the loan origination process, such as taking the loan application, and routinely transfer the underwriting package (appraisal report and/or mortgage credit package) to another mortgagee, except between a loan correspondent and its sponsor, and a principal and its authorized agent (discussed below). A loan correspondent may process an application and submit it to one of its sponsors for underwriting. Again, its sponsor must have DE authority (discussed below). The loan correspondent may close the loan in its own name, or in the name of the sponsor that underwrites the loan. [However, be mindful that in certain states applicable law may require that an originator that closes loans in its own name, hold a mortgage lender license. Further some states prohibit an originator from closing loans in its own name unless the entity also funds the loan with its own funds.] Most importantly, an FHA-approved loan correspondent may not underwrite the loan. That is the job of a
As new reverse mortgage market participants embark upon their reverse mortgage journey, the first hurdle they must overcome is obtaining all necessary regulatory approvals.
mortgagee with direct endorsement authority acting as the correspondent’s sponsor. Without prior HUD approval, an investing mortgagee may not service insured mortgages and must arrange for an approved supervised or non-supervised mortgagee to service all its insured mortgages. An investing mortgagee must meet the following requirements: (a) it must have lawful authority to purchase insured mortgages in its own name; and (b) it must have available, or have arranged for, funds sufficient to support a projected investment in real estate mortgages of at least $1 million. For example, a $1 million line of credit is acceptable.
Without prior HUD approval, an investing mortgagee may not service insured mortgages and must arrange for an approved supervised or non-supervised mortgagee to service all its insured mortgages.
With regard to loan servicing, each mortgagee that services or sub-services FHA insured single-family mortgages must be an approved mortgagee and must follow the requirements of HUD Handbook 4330.1. Net Worth Requirements In addition to the above requirements, FHA-approved mortgagees and loan correspondents must meet specific net worth requirements for initial FHA approval and in order to maintain that approval. For initial approval, a supervised or non-supervised mortgagee must have an adjusted net worth of at least $250,000 in assets acceptable to HUD. After the first year of its approval, the minimum net worth requirement for a supervised or non-supervised mortgagee increases based upon the volume of its FHA insured mortgage business. A loan correspondent must have for initial approval, and must maintain, an adjusted net worth of at least $63,000, plus $25,000 for each FHA approved branch office up to a maximum required adjusted net worth of $250,000. Moreover, all FHA approved mortgagees and loan correspondents must have and maintain liquid assets of at least 20 percent of their adjusted net worth, up to a maximum liquid assets requirement of $100,000. Non-FHA Approved HECM Advisor Program – No Longer Permitted The Housing and Economic Recovery Act of 2008 (or HERA) added Section 255(n)(2) to the National Housing Act (or NHA), requiring all parties that participate in the origination of FHA-insured HECMs to be approved by HUD. According to Mortgagee Letter 2008-24, which implemented Section 255(n)(2), beginning with FHA case numbers assigned on or after October 1, 2008, only FHA-approved mortgagees may participate in and be compensated for the origination of FHAinsured HECM loans. Mortgagee Letter 2008-24 explained that the origination of a HECM loan must be performed by FHA approved entities including: (1) a FHA-approved loan correspondent and sponsor; (2) a FHA approved mortgagee through its retail channel; or (3) a FHAapproved mortgagee working with another FHA-approved mortgagee. These changes eliminated the so called “HECM Advisor” program under which a non-FHA-approved entity previously could provide certain limited services to a borrower in connection with a HECM loan in return for a limited broker fee. FHA Direct Endorsement Authority As previously noted, direct endorsement (or DE) authority is an additional level of FHA approval available to supervised and non-supervised mortgagees. DE authority enables an FHA-approved mortgagee to underwrite and close an FHA loan before submitting the loan to HUD for insurance endorsement. Under the DE program, approved lenders underwrite and close mortgage loans without prior FHA review or approval. In the case of HECMs, Mortgagee Letter 95-54 provides that mortgagees who have not closed at least 50 HECMs (which have been fully insured), whether or not they currently have DE approval for forward FHA loans, must submit five (5) HECM test cases to its respective
HUD Homeownership Center (or HOC) for pre-closing review prior to endorsement for insurance. While it does not appear that the FHA regulations or mortgagee letters specifically call for any particular type of application or specific form of request to be submitted to HUD for such HECM approval, the various HOCs have established informal processes to obtain HECM DE approval. Because the HOCs appear to desire a letter “application”, mortgagees obtaining HECM approval should submit a letter to its applicable HOC requesting HECM DE approval and include with such submission its FHA approval letter from HUD’s home office in Washington, D.C., showing both that is an FHAapproved mortgagee and that it has already obtained its “general” DE approval to underwrite FHA-insured single family “forward” mortgage loans. If the underwriting and processing of these 5 HECM test cases is satisfactory, HUD will grant the mortgagee unconditional authority to participate in the DE program for HECMs. After a mortgagee has completed the required test cases and has received unconditional HECM DE approval from one local HUD office, unconditional DE approval will be granted for all HUD-approved branch offices of the mortgagee. Principal-Agent Relationship As noted above, the Principal-Agent relationship is an exception to FHA’s general requirement that FHA-approved mortgagees must originate, close, fund, and submit mortgages for FHA insurance endorsement in their own name. In the Principal-Agent relationship, an authorized agent may perform any part of the HECM origination process, including underwriting, on behalf of its principal. However the loan must be closed in the name of the principal. The principal in the relationship can only be an FHA approved non-supervised mortgagee, supervised mortgagee, or government mortgagee (i.e., a governmental institution or a GSE that is approved as an FHA mortgagee). FHA approved loan correspondents may not serve as a principal. Similarly, the authorized agent can only be an FHA approved nonsupervised mortgagee or supervised mortgagee. FHA approved loan correspondents cannot serve as an authorized agent. FHA permits a great deal of flexibility in structuring a Principal-Agent relationship, and either party can originate or underwrite the loan as long as they have the appropriate approval authority. The Mortgagee Approval Handbook (Handbook 4060.1 REV-2) provides that since the authorized agent typically underwrites the loan, its FHA lender ID number should be shown in the sponsor field of an FHA case file. Also, since the principal typically takes the application, the Mortgagee Approval Handbook provides that its ID number should be placed in the originator field of the case file. The relationship must be set up on the FHA Connection, and the authorized agent typically sees that this is done. When the duties assumed by the principal and agent vary, set-up of the loan on FHA Connection can be problematic and consultation with a subject matter expert is recommend.
Each mortgagee is responsible for the origination and/or underwriting processes they perform. The loan must be closed in the name of the principal, although either party may submit the closed loan for insurance for the benefit of the principal. The amount of the origination fee each party receives is a contractual matter to be determined by the two parties, subject to RESPA and other applicable laws. The aggregate amount of the origination fee is capped under applicable HECM regulations and Mortgagee Letters. Employees of FHA-Approved Mortgagees FHA also has strict rules concerning the employees of mortgagees. The Mortgagee Approval Handbook provides that employees must be under the direct supervision and control of an FHA approved mortgagee. The mortgagee must be able to demonstrate the essential characteristics of the employer-employee relationship upon inquiry by HUD. Compensation of employees may be on a salary, salary plus commission, or commission only basis and includes bonuses. All compensation must be reported on Form W-2. Independent contractors are not acceptable originators of FHA insured mortgages. In addition, employees who perform underwriting and loan servicing activities may not receive commission income. A mortgagee may employ full-time or part-time (less than the normal 40 hour work week) staff. Although employees of a mortgagee may have other employment, including self-employment, such outside employment may not be in mortgage lending, real estate or a related field. Consistent with this position, an informal letter was issued by the Atlanta Home Ownership Center (or HOC) on October 5, 2006, providing that an individual acting as an FHA loan originator employee cannot act as an active real estate broker and originate FHA-insured loans. The informal letter did go on to provide, nonetheless, that loan officers of a FHA-approved lender not involved with FHA financing may concurrently originate loans and act as a real estate broker. Note, however, that some states’ laws prohibit or place limits on real estate brokers also acting as mortgage brokers in the same transaction, and other restrictions, including those under RESPA, may be applicable. Also, on August 30, 2007, HUD’s Office of Lender Approval issued an informal letter stating that HUD does not prohibit an individual that maintains a real estate broker or sales agent’s license from being employed as a loan officer by a mortgagee as long as the FHA-approved lender has controls in place to ensure that the individual does not make use of their real estate broker or sales agent’s license. The letter went on to reiterate the guidance provided earlier in the October 5, 2006 letter that these HUD requirements do not apply to those individuals employed by the mortgage lender who do not participate in FHA related activities.
Each mortgagee is responsible for the origination and/ or underwriting processes they perform. The loan must be closed in the name of the principal, although either party may submit the closed loan for insurance for the benefit of the principal.
Direct endorsement underwriters are subject to the same limitations. An underwriter may not work on a part-time basis for any other mortgagee, even underwriting conventional mortgage loans. In addition, an underwriter may not underwrite loans for a parent or subsidiary of the underwriter’s approved employer. State “Forward” Mortgage Approval Requirements – Apply to Reverse Mortgages Almost every state has mortgage lending requirements that apply to mortgage lenders and mortgage brokers. Reverse mortgage transactions, including FHA-insured HECM loans, offered on the market today are first lien residential real estate secured transactions. Therefore, reverse mortgage originators, including FHA-insured mortgagees, need to be aware that state “forward” mortgage lending laws also apply to those entities or persons conducting reverse mortgage operations, unless an entity enjoys preemption or is exempt, as discussed below. Because state “forward” mortgage approval requirements generally apply to reverse mortgages, participants in the reverse mortgage business must have all appropriate licenses for the state in which they wish to conduct reverse mortgage activities. Accordingly, state licensed mortgage originators who wish to operate on a nation-wide basis must obtain licenses from state regulators in most U.S. jurisdictions, unless an exemption applies. Some states may offer an exemption from licensing for entities that are FHA-approved, maintain a minimum net worth or post a bond. However, the number of states that offer exemptions from licensing to mortgage lenders and mortgage brokers has decreased over the past several years, and that trend is likely to continue. As discussed above, under FHA rules, an approved loan correspondent may close FHA-insured HECM loans in its own name with its own funds. If an FHA-approved loan correspondent does so, it would generally be acting as a mortgage lender, rather than as a mortgage broker, for state mortgage licensing law purposes. Therefore, a FHAapproved loan correspondent who closes a HECM loan in its own name with its own funds would generally need to obtain a mortgage lender license under state “forward” mortgage laws, unless otherwise exempt. Note, also, that federally chartered entities, such as national banks regulated by the Office of the Comptroller of the Currency (or OCC), and federal savings associations regulated by the Office of Thrift Supervision (or OTS), and their operating subsidiaries, may rely on federal banking laws and regulations to preempt the application of state mortgage licensing requirements. SAFE Act - Loan Originator Licensing and Registration As part of Congress’ efforts to promote uniformity and enhance consumer protection, HERA included the Secure and Fair Enforcement for Mortgage Licensing of 2008 (or SAFE Act). The most significant element of the SAFE Act is the requirement that all loan originators, including those that work for state or federally chartered depository institutions, must be licensed or registered. Unless states enact loan originator licensing laws, consistent with the SAFE Act, federal rules supplied by HUD will apply. States generally are required to enact such SAFE compliant laws by or before July 2009 (with a few states having until July 2010). Most states’ legislatures are drafting and enacting such laws now and the effective dates of those laws are looming. Under the SAFE Act, loan originators must be licensed (if employed by a state licensed mortgage company) or registered (if employed by a state or federally chartered depository institution, or a subsidiary of such institution if the subsidiary is regulated by a Federal banking agency) and maintain a unique identifier through a nationwide licensing system. The SAFE Act defines the term “loan originator” as an individual that takes a residential mortgage loan application and offers
or negotiates mortgage terms. Administrative and clerical personnel, as well as processors and underwriters, are not considered loan originators, unless they otherwise meet the definition based upon the activities they perform. State licensed loan originators must also satisfy the following minimum standards under the SAFE Act: (i) they may not have had an originator license previously revoked; (ii) they may not have pled guilty or been convicted of a felony during the seven year period prior to licensing, or at any time if such felony involved fraud, dishonesty, breach of trust or money laundering; (iii) they must demonstrate financial responsibility, character, and general fitness; (iv) they must satisfy pre-licensing educational requirements and pass a written test; (v) they must clear a background check, which includes submitting fingerprint cards, personal history and experience information, and an authorization to obtain a credit report; (vi) they must meet either net worth or a surety bond requirement, or pay into a State fund. State Reverse Mortgage Specific Approval Requirements In addition to FHA approval (for entities wishing to originate FHAinsured HECM loans), state “forward” mortgage approval, and loan originator licensing/registration under the SAFE Act, as discussed above, several states have enacted specific statutory requirements for reverse mortgage originators and/or reverse mortgage loan programs. Several states have laws that address reverse mortgages in one way or another. Most of these states do not have separate approval requirements for reverse mortgage programs or originators, however, some do. States that have specific requirements for reverse mortgages generally fall into one of two broad categories: (A) states with comprehensive schemes that require separate approval of reverse mortgage originators and/or reverse mortgage programs, as well as imposing consumer disclosure and other substantive requirements and lending restrictions; and (B) states that impose substantive requirements or limitations without a separate approval requirement. For instance, laws in North Carolina, New York and Tennessee fall into the first category. North Carolina requires entities that make reverse mortgage loans to obtain approval from the North Carolina Commissioner of Banks. This requirement applies even if the entity has already obtained “forward” mortgage approval in such state, or is exempt from the “forward” mortgage law. Note, also, that the North Carolina Office of Commissioner of Banks’ takes the position that brokering of reverse mortgages is prohibited in North Carolina (as outlined in the Commissioner’s March 11, 2005 Declaratory Ruling 2005-01). Tennessee and New York similarly require entities that originate reverse mortgages in that state to submit a letter application along with other information showing the lender’s financial responsibility and other information pertinent to the lender’s loan programs. The New York approval requirements are onerous and require lenders to originate loans with certain substantive limitations. As in North Carolina, the reverse mortgage approval requirements in Tennessee and New York apply even if the entity is also licensed (or exempt) under “forward” mortgage laws in such states. However, note that New York’s reverse laws specifically exempt FHA-insured HECM loans. The reverse mortgage laws in Iowa and Massachusetts also contain detailed substantive rules, including disclosure requirements and lending limitations, however, reverse mortgage originators in such states are not required to obtain a separate regulatory approval at the entity level. Instead, Iowa and Massachusetts require originators to submit their proposed reverse mortgage loan program(s) to the state regulator for approval before the originator can offer the program to seniors in such states.
Note that in Iowa, the state regulator has previously approved certain adjustable interest rate HECM programs to be offered to seniors in such state. Thus, lenders wishing to offer such adjustable interest rate HECM loans in Iowa would need to file a notification with the Iowa regulator, without the need to go through a separate program approval process. In Massachusetts, the state regulatory agency has taken the position that lenders presently must submit all of their programs, including FHA-insured HECM programs, for approval, even if the same program has previously been approved for another lender. Also, note that the Massachusetts regulator takes the position that the HECM for Home Purchase loan program requires separate approval, or an amendment to the originator’s existing loan program approval if the originator’s existing program approval did not include HECM for Home Purchase loans. California law falls into the second category. While there is no separate reverse mortgage licensing requirement, California law imposes requirements upon reverse mortgage transactions and originators, including prohibited practices, such as limits on “cross selling” or “tying” of annuities, and foreign language and other disclosure requirements. Other states with laws or regulations that address reverse mortgage in some way, some of which may impact the originator’s approval requirements, include Arkansas, Colorado, Delaware, Hawaii, Illinois, Maine, Minnesota, Missouri, Nebraska, Rhode Island, South Carolina, South Dakota, West Virginia and Wisconsin. Finally, Texas has specific and detailed requirements for reverse mortgages that appear in the Texas State Constitution. However, as in California, there is no separate reverse mortgage originator licensing requirement in Texas, although “forward” mortgage licensing or regulatory approvals can and do apply in Texas. As we have seen above, mortgage companies entering into the reverse mortgage space are subject to numerous regulatory approval requirements. These include FHA mortgagee approval (for entities wishing to originate FHA-insured HECM loans), state “forward” mortgage approval, loan originator licensing/registration pursuant to the SAFE Act, and reverse mortgage substantive and specific originator and/or program approval, where applicable. These barriers to entry may be high, but not insurmountable, and can best be understood and implemented by working with seasoned subject matter experts who have special expertise in the reverse mortgage arena. Working with these experts will facilitate full compliance with these requirements and help ensure that both your initial and continuing forays into the reverse mortgage world will be blessedly “un-troubled” and “non-toxic.” This article provides only an overview of some of the federal and state laws and regulations that may affect reverse mortgage lending and finance matters. Although the practice of Weiner Brodsky Sidman Kider P.C. is national in scope, attorneys within our firm do not actively practice law in all jurisdictions, and these materials are not intended to and do not provide legal advice. Because of the generality of this article, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. By Fed Kamensky, Joel Schiffman and Jim Milano, of the law firm of Weiner Brodsky Sidman Kider, P.C. The law firm serves as General Counsel to the National Reverse Mortgage Lenders Association and advisor to reverse mortgage lenders and industry participants throughout the nation. The firm has offices in Washington, D.C., Newport Beach and Dallas. Additional information can be found at www.wbsk. com or by telephone at 202.628.2000. Messrs. Kamensky, Schiffman and Milano can be reached at firstname.lastname@example.org, schiffman@ wbsk.com, and email@example.com, respectively.
Now, I can hear you.
Part Two of the Sales Conversation
By Monte Rose
alespersons earn the right to be heard by demonstrating uncommon awareness of the prospect’s dilemma coupled with world-class expertise and timely intervention.
fixated upon an arbitrary home value or benefit dollar amount, it’s your job to offer objective perspective.
All are essential to achieve maximum sales impact. Awareness without expertise is weakness, and expertise without awareness is dangerous. The former is nothing more than the proverbial “pat on the back”, while the latter is like a surgeon performing a tonsillectomy when the patient needed an appendectomy. Close, but no cigar.
Tardiness, which is born of timidity, bankrupts the opportunity to serve. I am not referring to your ability to be “on time” for an appointment. I am speaking of a prevailing reticence to boldly move the conversation forward for the sake of the prospect’s good. If your physician checks your heart and finds a blocked artery, he or she will say, “This is serious, and we need to take care of this right away.” That’s not being “pushy”; it’s timely intervention. Top performers embrace the risk of appearing “pushy” in order to serve their prospect’s best interests. In the March installment (Can you hear me, now?), I discussed the first two phases of the sales conversation: 1) the relational, and 2) the conceptual. The relational phase paves the way for trust, and the conceptual phase establishes the qualitative foundation for agreement. Now, let’s examine the “nitty gritty” phases of our communication challenge: 3) the practical and 4) the tactical. VIABILITY The sales conversation moves through various levels of agreement. The practical phase focuses upon a quantitative reality. You’re determining the viability of your solution. Does the program provide enough benefit to solve their problem or meet their objective? Yes, No, Maybe?
“I understand you want $1200 per month; however, as we’ve looked at your income and expenses, it appears that $800 would still provide a positive cash flow cushion for you. Wouldn’t you agree?” “I will definitely do my best to make this happen for you, but there are some factors that neither you nor I control. If we end up with $800 per month, you’ll still be able to breathe much easier, won’t you?” It is in the practical phase of the sales conversation that you describe and explain the details of the program. Discuss the features, monetary potential, and restate the experiential benefits. You’ll set reasonable expectations. You’ll handle concerns. You’ll ask for the order. CAUTION The effective salesperson maintains their “tuned in” high awareness status during this portion of the conversation. Reading the body language of the prospect. Keeping the conversation lively and alive. Sensing when the prospect has “had enough.” The “art” part of sales energizes the practical phase, as well as the relational and conceptual phases. Don’t become inattentive and disconnected during the discussion of the details. It’s easy to do. Resist the temptation to spew facts and fine print. Look them in the eyes. Are they engaged? If they’re bored, change the pace of the conversation or move on to another aspect of the program. Answer their questions, but take care that you don’t pontificate simply because “you know ______ “ and want to impress them.
I want to emphasize the word, enough. If your prospect has set the expectation bar higher than is realistic or necessary, you will need to help them re-calibrate. If they’re April 2009
The sales conversation moves through various levels of agreement. The practical phase focuses upon a quantitative reality. You’re determining the viability of your solution.
There are two basic objectives in the practical phase: • Determine if your solution is “what’s best for them,” and if Yes, • Obtain agreement to get started, today. PROCESS The tactical phase is about mechanics. Filling out the application is the first step in the loan process; and working through the paperwork is no small challenge. Have you ever experienced a situation where the prospect balked at signing “all those papers?” That is exactly the reason I consider this a critically important selling opportunity. It’s during these moments that you’ll reconfirm the value of the program. By this time, you and/or the prospect(s) may be emotionally and mentally exhausted, but you must bring your “A” game to this phase of the sales conversation.
The effective salesperson maintains their “tuned in” high awareness status during this portion of the conversation. Reading the body language of the prospect. Keeping the conversation lively and alive.
FORMULATE A PAPERWORK GAME PLAN
I found that by creating a routine that included a logical organization of the paperwork, I could keep everyone focused during this final stage of the sales sequence. Here’s my suggestion.
First, explain and request the list of items you’ll need the client to provide. Prepare a single sheet in advance and have it in your file. Include two copies (him/her).
HUD Foundation Specialists
Next, complete the 1009.
Manufactured Housing Troubleshooters
“This is the application. Generally, it’s the primary document that gives my firm your permission to gather the facts on your behalf.” Next, the 72 hour disclosures
Foundation Inspections, Upgrades & Repairs Engineer Certifications
The numeric disclosures specific to your new client contain the “good news.” “These are good faith estimates of your benefit and the costs.” Celebrate the fact that they’re receiving money or eliminating monthly payments or creating an emergency fund via the credit line. Restate, the experiential benefit. “Won’t it be great when you __________?” “What’s the first thing you’ll do when you receive your money?” “When you get to _____, you must promise to send me a postcard.” Next, the generic credit and mortgage disclosures Why? These are the least threatening pieces of paper in the stack of 100. “These disclosures are common to most mortgages. They confirm to you a wide variety of
information…from vendor contact information to “how you should be treated” according to federal law.
• BE the expert, don’t just pretend to be; become one. Know the fine print regarding process, disclosures and documents.
Next, the reverse mortgage specific disclosures and requests for information Now, move through the remaining paperwork. Memorize a succinct and truthful explanation for each form. State your explanation or definition and gently move the process along. Remind them, that as they continue to review the disclosures, if they have a question…”Simply give me a call.”
• Practice reflective listening. “It sounds like you worry each month about meeting your expenses, am I hearing you correctly?” It’s a conversational tool that clarifies and validates the client’s story. • Keep in mind the relational question: Does the prospect find me approachable? • Keep in mind the conceptual question: Does the prospect find my solution conceivable?
Next, show them the specimen copies of the security instruments Explain the two Notes and two Deeds of Trust arrangement. Reinforce the value of the federally insured stature of this program. Help them appreciate the protection of this feature.
• Keep in mind the practical question: Does my solution provide enough security? • Keep in mind the tactical question: Does my process instill confidence?
Last, give them the counseling options Explain the safeguards of the program, and give them the contact information for counseling vendors. Create an intentional paperwork flow. Confirm the sale along the way, thanking them for the opportunity to work on their behalf. The tactical phase gives you an opportunity to calibrate the magnitude and scope of their initial decision. If it’s just an application then it’s not a “big deal” in terms of magnitude and scope. Take care to “seed” realistic expectations regarding time and benefit amount. Want to be heard? •
Be direct and honest, but gracious.
• Look people in the eye and smile. • Don’t interrupt. Always let your prospect, borrower, or client finish his/her sentence. Just because they take a breath, doesn’t mean they’re finished speaking. • Use simple, plain language. Avoid industry jargon. Explain everything clearly and concisely, and don’t invent noise. Don’t answer questions that perhaps are not essential or that they’re not asking.
A Country In
one of us can pick up a newspaper, turn on the television or go online without being reminded that we are surrounded by crises… The Mid East crisis, the energy crisis, the Wall Street crisis and of course the one most talked about…the Main Street crisis. Each one of these crises have something in common, they are going to take a long time to fix.
However, there truly is a crisis that no one speaks about. It’s the crisis that is affecting the seniors of our nation everyday. It is a crisis that is as serious as the ones mentioned above. Except this crisis hits even closer to home, it affects our parents, our grandparents and our favorite aunts & uncles. Can the Reverse Mortgage possibly be one of the best solutions to this crisis? Let’s see… Barbara Stucki is one of the nation’s leading researchers in the field of private sector financing for long-term care. With over 12 years of work in finding ways to pay for long-term care, Dr. Stucki has been quoted or her work cited by USA Today, Money Magazine, Bloomberg News, Kiplinger’s Personal Finance Magazine, and Reader’s Digest New Choices Magazine among others. Currently, Dr. Stucki is the Project Manager for the National Council on the Aging, where she heads a national initiative that is identifying ways to increase the use of reverse mortgages to pay for long-term care services and insurance. Prior to her work at NCOA, Barbara was a policy analyst for the American Council of Life Insurers, with publications including Passing the Trust to Private Long-Term Care Insurance and Making the Retirement Connection: The Growing Importance of Long-Term Care Insurance in Retirement Planning. She has also worked for six years on consumer issues for seniors as a policy analyst at AARP. Dr. Stucki is currently Section Editor for the CSA Journal. She also chairs the Editorial Board for the American Society on Aging’s Business Forum on Aging, serves on the board of the American Association of LTC Insurance, and is a member of the National Academy of Social Insurance. She has testified on long-term care financing issues before Congress, as well as addressing state legislators, aging organizations, and service providers on the looming long-term care crisis. Dr. Stucki is President and Founder of the Kenning Group, a consulting company that provides independent research on long-term care financing and mature consumers. Barbara’s training is in anthropology and gerontology and she has a doctorate degree from Northwestern University. I have never had the pleasure of meeting Dr. Stucki and hope that I get the honor one day very soon, but can we all agree her level of expertise in the problems today’s seniors face is second to none? In 2005 Dr. Stucki created a 104 page comprehensive plan entitled Use Your Home to Stay at Home – Expanding the Use of Reverse Mortgages for Long-Term Care- A Blue Print for Action.1 Let’s take a look; In 2000, the nation spent $123 billion a year on long-term care for those ages 65 and older, with the amount likely to double in the next 30 years. Nearly half of those expenses are paid out of pocket by individuals and only 3 percent are paid for by private insurance; government health programs pay the rest. According to the study, of the 13.2 million who are candidates for reverse mortgages, about 5.2 million are either already receiving Medicaid or are at financial risk of needing Medicaid if they were faced with paying the high cost of long-term care at home. This economically vulnerable segment of the nation’s older population would be able to get $309 billion in total from reverse mortgages that could help pay for
long-term care. These results are based on data from the 2000 University of Michigan Health and Retirement Study. “There’s been a lot of speculation whether reverse mortgages could be part of the solution to the nation’s long-term care financing dilemma,” said NCOA President and CEO James Firman. “It’s clear that reverse mortgages have significant potential to help many seniors to pay for long term care services at home.” According to the study, out of the nearly 28 million households age 62 and older, some 13.2 million are good candidates for reverse mortgages. “We’ve found that seniors who are good candidates for a reverse mortgage could get on average $72,128. These funds could be used to pay for a wide range of direct services to help seniors age in place, including home care, respite care or for retrofitting their homes,” said Project Manager Barbara Stucki, Ph.D. “Using reverse mortgages for many can mean the difference between staying at home or going to a nursing home.” Seniors can choose to take the cash from a reverse mortgage as a lump sum, in a line of credit or in monthly payments. If they choose a lump sum, for example, Stucki said that they could pay to retrofit their home to make kitchens and bathrooms safer and more accessible – especially important to those who are becoming frail and in danger of falling. If they choose a line of credit or monthly payments, an average reverse mortgage candidate could use the funds to pay for nearly three years of daily home health care, over six years of adult day care five days a week, or to help family caregivers with out-of-pocket expenses and weekly respite care for 14 years. They could also use it to purchase long-term care insurance if they qualify.
Can the Reverse Mortgage possibly be one of the best solutions to this crisis?
“Up until now, though, most of these seniors have not tapped the equity in their homes -- estimated at some $1.9 trillion -- to pay for either preventive maintenance or for services at home,” noted Peter Bell, executive director of the National Reverse Mortgage Lenders Association. Noting that the average income of men aged 65 and over is $28,000 and $15,000 for women, he added, “This study shows that unlocking these resources can help millions of ‘house rich, cash poor’ seniors purchase the long-term care services they feel best suit their needs.” Just one year later, in March 2006 @ the Medicaid Commission Meeting, The National Council on the Aging presented; Promoting Aging in Place Through Greater Use of Reverse Mortgages.2 This study showed the following: Challenges of aging in place •
Fixed incomes and limited liquid assets may not be enough to pay for services and supports, along with everyday expenses.
Hard to manage the family budget when unstable health makes the need for funds unpredictable.
Seniors with impairment often have diverse needs, such as transportation, home modifications and repairs, and help with daily activities.
Families cannot do it all. Nor can the government.
Home equity –A new financing option •
About 82 percent of seniors are homeowners. Among older homeowners, 74 percent have no mortgage.
Over half the net worth of seniors is tied up in their home and other real estate (over $2 trillion).
New Medicaid eligibility rules –home equity cannot exceed $500,000 (up to $750,000 at state discretion).
Reverse mortgages can promote “aging in place” and reduce the risk of Medicaid spend-down and costly institutional care.
Ways to tap home equity •
Sell the house and move
Conventional home equity loan or line of credit. A familiar product that may have lower closing costs. May not qualify Banks look at income and debt. Risky – May lose house if cannot make monthly payments.
Single purpose loans – State or local programs to help with home repairs or property tax deferral.
Best for those who can stay at home for several years. No income requirement. No monthly payments. Borrowers have a right to continue to live in home as long as they pay their taxes, insurance and repairs. New strategy to build resilience for elders at risk of needing Medicaid •
Strengthen family care giving. Pay for extra help to reduce physical and mental stress. Provide to unpaid caregivers.
Pay for preventive measures.
Keep the home livable. Fund home repairs and maintenance. Pay for adaptive devices, home modifications.
Support Communities Strengthen ties of reciprocity and reduce isolation. Maintain or revitalize neighborhoods. Enable elders to stay active and involved.
The information quoted above is staggering. If it doesn’t tell you that the emerging reverse mortgage industry can be the one largest single contributor to relieving the crises that the seniors of this nation are going through every day, then you are in the wrong industry! The “Senior Care Crisis” may not have the glamour or the emotion to ever be front-page news, or the lead story on your favorite cable TV news show, but it’s real and it touches all of us in a very personal way. Wouldn’t it be incredible for organizations like the Financial Planning Association (FPA), the National Association of Health Underwriters (NAHU) and the National Association of Insurance and Financial Advisors (NAIFA), the Society of Certified Senior Advisors (CSA) were to educate their millions of associates on the reverse mortgage product? Wouldn’t it be incredible if the mega giants of the long term care insurance world, who have already thrown their hats into the reverse mortgage industry, like Met Life and Genworth would mobilize their 100,000+ agents to bring this product to their senior book of business? Wouldn’t it be incredible if you & I could play a large role in all of this? Well, guess what? We are!
THE INDUSTRY STANDARD SINCE 1995 The Industry Standard is not just a slogan. Six of the top 10 reverse mortgage originators use Ibis Software for their websites, retail and wholesale businesses. Those lenders are using:
Loan origination modules include CRM, Quick Quote, Proposal, Application, Underwriting, Documents, Closing, Pipeline Reports, and Cost Templates. Plus Broker and Correspondent Management. Full state speciﬁc application and closing packages can be stored, printed, and emailed.
Ibis Quick Quote:
Bilingual consumer calculators, already in use at: • www.rmaarp.com • • www.wellsrm.com • and many other websites Ibis also provides:
A complete counseling package for HUD-Approved reverse counselors. For more information, visit
Or call (800) 566-5077
Have a very productive month. Make a difference in as many seniors’ lives as you can… http://www.goldengateway.com/static/ggfs/pdf/NCOA%20Study %202005 2 April 2009 http://aspe.hhs.gov/medicaid/mar/BarbaraStucki.pdf 1
Reverse Mortgage Training Program
Jacqueline Del Priore 38 38
Welcome back to our discussion of creating a comprehensive and effective training program to maximize performance within your organization. You may access parts one and two of this series at www.reversereview.com in our February and March issues.
In this part, the loan officer will be vividly describing each element of the loan in a meaningful way to the borrower as well as explaining how each aspect should be important or exciting to them. Here is a wonderful exercise to teach the loan officers to maximize success with each sale. April 2009
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In our last segment, we reviewed the sales process in great detail. We learned that the first part of the sales process was a fact-finding mission to uncover the borrower’s wants and needs; this is achieved through strategic listening and asking of open-ended questions. We spoke about the second part of the sales process where the loan officer will match the features of the loan to the benefits it will provide specifically for the client. We said that by using the best loan structure to customize the loan to a particular borrower’s situation, the loan could become a vehicle to meet those wants and needs. In this part, the loan officer will be vividly describing each element of the loan in a meaningful way to the borrower as well as explaining how each aspect should be important or exciting to them. Here is a wonderful exercise to teach the loan officers to maximize success with each sale. Have them fold a piece of paper in half lengthwise. On the left hand side, let them list all the features of the loan. On the right side, directly across, have them list the benefit directly derived from that feature.
Will pay off mortgage
No check to write . Creates $900 cash
Provides $3000 lump sum
Fix hole in roof so won’t get wet while watching TV!
$200 term payment
Quit job at Wal-Mart today
Creates credit line
Not assessed interest until used money for emergencies. Fix deck in spring
Credit line growth
Makes more credit available as time goes on
Loan can change with you as you do
Low interest rate
Closing Costs Financed
Few out of pocket expenses
Terms guaranteed. No worries.
No prepay penalty
Leave home to kids
It would look something like the list to the right.
Why this is important to you…..
Now teach about bridging features to benefits. A bridge is used to perk up a borrower and have them give you their full attention. Here are some great bridges:
Why you’re just going to love this is… Why you should be excited is…. Why this is so great…. Using our example above: FEATURE
Our loan will provide you with a check for $3000 shortly after closing.
Mr. Greenjeans, what this is finally going to do for you is…
Allow you to fix that crazy hole in the roof that’s been letting the rain in on your Sunday afternoon football games!
Ask for Feedback: Isn’t that exciting? Elaborate: You won’t have to move your recliner ever again! Using the borrower’s name in the bridge is very helpful.
It keeps them focused and lets them know that some important information is coming up. Have your loan officers practice bridging features to benefits while in class. The best salespeople do this naturally, but it is a practiced technique that creates an expert! Speaking in this format can become second nature. It creates a design for the sales call.
While training, watch for the structure of the presentation, making sure the feature is tied properly with a bridge and give accolades for using the proper emphasis, the client’s name, vivid description and great bridges that really call attention to the benefit. To further enhance effectiveness, a salesperson can order the benefits in the presentation to have the most impact. Lead with something exciting like, “Congratulations! You can quit your hated job at Wal-Mart!” Let that sink in. It’s like winning the lotto! Then go on to explain slowly and carefully bridging each feature to benefit. A great way to lead into the close is to choose which benefit will cinch the deal and lead into the application. Let it be the cherry on top of the cake! Loan officers will encounter objections during this part of the process. Teach them to embrace objections! Answering objections is a part of establishing trust. If a customer didn’t trust you, he would be reluctant to voice his objections. These are great opportunities to help the borrower better understand the product. If a customer cares enough to voice an objection, he wants to be sold. So, in a real way, this is actually a buying signal. If he didn’t want to progress, he would just thank you and hang up. Once you teach your loan officers to expect objections, you must help them to be prepared. Here’s a great workshop idea that’s fun and competitive. Collect the most frequently heard objections amongst your staff and form teams. Have the teams work individually on outlining the best way to address each, then hear them out and all can vote on which ones are best. Further refine them if needed by sometimes combining two great answers. Create a collection of all the best counters for each objection giving credit to the team that came up with the winning ones. Combine all the objections and answers into a booklet which can be used as a great job aid and for future trainings. The loan officers will have taken pride in creating it and will be excited about refining it. Closing costs should be mentioned in the sales presentation. I don’t think you can move to the application stage without having the client agree to these charges. I train the loan officers to group the settlement charges into three parts, The MIP, the origination fee and the third party fees.
Strategically thinking companies rely on ReverseVision Freedom of Action ReverseVision is supported by more reverse mortgage lenders than any other software, giving customers maximum freedom of action.
Independence As an independent technology company ReverseVision gives its customers the highest flexibility and independence to grow their business.
3310 Pollock Place • Raleigh, NC 27607 www.reversevision.com (919) 834 0070 • firstname.lastname@example.org
Have the loan officers practice explaining that the MIP goes straight to HUD and is the most important closing cost since it provides for the unique non-recourse feature. The origination fee encompasses all the lender may charge as they are regulated and restricted by HUD and the third party fees such as title, recording, appraisal, etc. are charged to the borrower exactly as they are charged to the lender and are necessary to the transaction. While a loan officer should know how to explain all fees on the GFE, they should not have to do so unless prompted during the disclosure review. Here is a way to assume the next step. If a client is hung up on settlement charges, assure them that when they go through the documents, they will have an opportunity to review the good faith estimate, which will detail all fees. The objective of the second part of our sales process is to close the sale by setting an appointment to take the mortgage application. Set the table for the application. As borrowers ask questions during the sales presentation, say, “Later, when we go through the loan application, I can show you where this is described in great detail”. This is also great for addressing objections and, therefore, serves a dual purpose. For instance, if a client was concerned about what prompts a maturity event, we would want to address this concern during our sales presentation briefly, but set the table for the loan application by explaining that later during the application process we will be perusing the Important Terms document that describes in detail all that we are speaking about. If we were to begin with the end in mind, we would set about this process with the thought that we are listening carefully for buying signals from the client as well as leading them into the application process. If the feedback from the borrower is that they understand and are enthusiastic about the benefit the HECM can provide and it is believed that all objections have been properly addressed, moving on to the next stage of the process is in order. Our process will look something like this: FACT FINDING MATCHING RESULTS TO BENEFITS LOAN APPLICATION COUNSELING
Post your sales process in your training room. It is a road map for success. Make sure to train the goal for each part.
Post your sales process in your training room. It is a road map for success. Make sure to train the goal for each part. The loan application or ‘disclosure review’ should be a confirmation of everything in our sales presentation and borrowers should be eager to see this in writing. Make application appointments only when the borrower is fully sold with the full expectation of signing. The borrower should be fully prepared for their appointment by the loan officer’s prompting for collecting the necessary documents. The loan officer should explain the application process to the borrower in detail as the next step and move to make the in-person or phone appointment. All necessary signers should be present for the appointment and have ample time set aside. A separate appointment for the disclosure review is wise and very necessary when the application is being taken by phone. It should be confirmed the day prior and the docs should arrive on time. Here are a few helpful hints for sending the docs through the mail. Put the borrower’s copy in a separate envelope taped shut. Provide the client with a prepared return envelope and your company pen to sign. Clearly indicate where each borrower should sign and date. Fill out the application and have the loan officer sign where they should before sending the package out. Give the borrower a list of the documents they will need to return with the application. This promotes borrower confidence. Make sure the names are spelled correctly. These details really count! Help your loan officers have fabulous disclosure reviews by training them well. Create a disclosure review workshop. Go through the process in class by providing the students each with a sample application. Let them mark it up properly. Have them sign where indicated. Have them X where the borrower signs. Ask questions about each document and have them answer. Have the loan officers read the Important Terms Disclosure. They need to know what’s on there including where to find the history of the index. This is helpful sales information. I’ve created a wonderful disclosure review tool and you can too! Just put an application in a three ring binder. As the pages are turned, the left side will be blank. This is where the quick explanation for the page to the right can be written. You can also list important points to remember on this page. For example the “quick explanation” to the left of the TALC might read: “As you can see, the longer you keep this loan,
the more cost effective it becomes. This disclosure is provided for just this purpose. It wouldn’t be a great loan for you if you were keeping it just two years, but look at how the annual loan cost decreases as time goes on.” Let the loan officers highlight those items that they want to draw attention to during the disclosure process. This book is especially helpful to new loan officers and gives them amazing confidence for getting through those long disclosure reviews.
If you have the technology, record a particularly great review and play it for your staff. Listening to call recordings is a great way for loan officers to learn and can be really fun! When the application is done, the expectation for counseling should be set. Make sure the loan officer is aware of the counseling process and how to correctly explain the procedure. Here are some helpful hints to get through counseling. Ask the borrower to write down any questions that may result from counseling or anything that they don’t understand. Call the borrower when the counseling is done so that these items can be reviewed. Provide the borrower with a stamped self-addressed envelope to return the Counseling Certificate to you. Put a bright sticky on the envelope reminding them to sign the certificate! I know that there is great debate about whether to do counseling prior to the loan application. I am fond of doing counseling after the loan application. My thought here is that I want the primary relationship to be between the loan officer and the client. A counselor is not a sales person, nor should they be. I always think it’s best for the borrower to understand the benefit of the loan before entering into the realm of counseling. I’ve seen borrowers scared and confused by counselors too often and then the borrowers are unreceptive to what the loan officer might have to say. That is a great shame. Better to build trust by letting the loan application be a confirmation of everything they were told by the salesman on the phone. Then, the borrower can go on to tell the counselor why they want the loan! If our goal is to cultivate clients for life then communication must be the name of the game. The borrower should hear from you frequently. Call to say you received the Counseling Certificate. Call to say when to expect a call from the appraiser and how payment is to be made. If at all possible, attend closings and always call to congratulate your borrower on closing. It’s cause for celebration. Celebrate the completion of training as well. Present your employees with training certificates and let them be a badge of honor. Document all the procedures you can and let everyone have a hand in refining them. Allow leadership to prevail by having those who are great in some aspect of the process make their own training presentations and promote them so they will be well received. Create a culture of education and excellence to thrive and remember to have fun along the way! April 2009
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3310 Pollock Place • Raleigh, NC 27607 www.reversevision.com (919) 834 0070 • email@example.com
What are a reverse mortgage borrower’s occupancy requirements? Misunderstanding and confusion often surround a borrower’s reverse mortgage occupancy requirements. The topic is a timely one! The return of warm weather signals the migratory return of “snowbirds” to their primary residences north of the MasonDixon Line. (The term “snowbirds” refers to those fortunate individuals who spend the winter months in a much warmer climate.) A condition of all reverse mortgages is the stipulation that the borrower live in the property as their primary residence. Borrowers are allowed to leave the primary residence for designated periods of time such as: rehabilitation from an injury in an off-site facility; extended visits to family or extended vacations; or their own “snowbird” migration to warmer climates through the winter months. There are stated restrictions on how long they are allowed to be absent from the property and certain attestations that must be made on an annual basis. The general rule of thumb used in servicing is that the borrower is allowed to be absent from the property for up to 12 months before the loan is considered to be in default. Here’s an interesting exception. If a borrower is travelling on a mission trip, HUD may allow them to be away from the primary residence for longer than 12 months. An important cautionary note: Borrowers should always seek HUD approval before leaving on any mission trip that is anticipated to extend beyond 12 months. HUD reserves the right to deny this type of request. These timelines and guidelines provide borrowers with the freedom to travel and enjoy life away from their primary residences without violating their loan covenants. Occupancy guidelines are in place primarily to protect the investor (Fannie Mae or others) and insurer (HUD). As the property itself is the only real collateral on a reverse mortgage, servicers must monitor occupancy status vigilantly. Vacant or abandoned properties can quickly fall into disrepair, and the result is diminished property value - a loss for all. How is the reverse mortgage occupancy requirement monitored? There are two primary tools that servicers use 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 timeconsuming, and from time-to-time, requires extensive and sensitive follow-up with borrowers. Annual Occupancy Certificate Around the first anniversary of loan funding, and every year thereafter, servicers must mail out an Occupancy Certificate to borrowers asking them to sign and attest to the fact that the property remains their principal residence. Borrowers are required to sign this certificate and return it to their servicer in a prompt fashion (typically within 30 days). Each servicer has their own variation of an Annual Occupancy Certificate, but HUD requires one piece of standard language be present:
ask the servicer
“Warning: Section 1001 of Title 18 of the United States Code makes it a criminal offense to make a willfully false statement or misrepresentation to any department or agency of the United States government as to any matter within its jurisdiction.” This required HUD language is strong, yet vitally important. Servicers rely solely on the borrower to be completely truthful about their occupancy status when signing and returning this document. If a borrower was absent from the primary residence for longer than 12 months, or indicates that they have permanently moved from their primary residence, then the servicer must seek HUD’s approval to call the loan due and payable. Once approval from HUD is received, the servicer mails out a demand letter to the borrowers requiring them to either repay the loan in whole, or cure the default by re-occupying the property as their principal residence. Return Mail As previously stated, borrowers may move in and out of their homes at different times throughout the year, and for various reasons. When a piece of mail addressed to the borrower gets returned by the Post Office to the servicer, the returned mail (typically a monthly statement) 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! The borrower could be in the midst of traveling; or the borrower may have forgotten to inform their servicer to forward their statements to their winter home or to the son or daughter who handles their affairs. Whatever the reason for return mail, the servicer uses the occasion to reach out to the borrower to validate that there might, or might not be, a valid occupancy default. Consider how sensitive a servicing agent must be when fielding calls from very irate borrowers wanting to know why the followup to a simple piece of returned mail could result in their loan being called due and payable! There is an inherent nervousness in some reverse mortgage borrowers, and what appears to be routine and standard follow-up must be handled with finesse and professionalism by the servicer. The occupancy requirements and annual certification process provides 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 setting expectations on the front end. Loan origination is the 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. I look forward to receiving any questions you may have regarding servicing at: firstname.lastname@example.org. Please remember: there is no such thing as a stupid question! No doubt, the question you ask will have been in the minds of other readers as well. If you wish to remain anonymous for my response, just let me know.
FINANCIAL SERVICES, LLC
WILMINGTON SAVINGS FUND SOCIETY,
A Subsidiary of Wilmington Savings Fund Society, FSB 877.574.1000 1streverse.com
877.882.4368 www.ecommission.com/ mortgageadvance.html
the last word Dave’s TOP 9 - Dave Bancroft
Congratulations to Reverse Review on its 1st anniversary, and thank you for taking a chance on all of us. I have always admired the few who take chances when I would have balked, or who have risked when I would have held back. It is an incredible feat to be the pioneer with the first industry magazine and to accomplish it with professionalism and style. Here’s to many more years of success and may this periodical reach the masses and continue to educate those both within our industry and beyond. I am pleased to have the opportunity to provide a few thoughts for this month’s special edition. I believe 2009 has opened the door to wonderful opportunities for those of us with the fortitude to persevere through difficult times. Allow me to present my Top 9 for 2009: Number 1: Washout – Like a stain on your favorite shirt, may it leave as fast as it appeared. This year has seen an incredible number of newbies to the industry exit as quickly as they came in when they realized it was harder than it looked. This benefits all of us, the pioneers of the industry, as our positions as care takers of our clients and industry strengthen the integrity and reputation of this fine product. Number 2: Education is Spreading – For the first time, I am being approached by other professionals asking questions about this product without the negative stigmas or the ignorant stereotypes. We are cracking through real barriers as these professionals begin to realize that this product can enhance their client’s lives and their own businesses. We also are finally seeing a change in news spin as some pieces on news programs show the ability of the product to positively change lives. Number 3: Financial Crisis Equals New Opportunity – Sometimes the darkness exposes the light from the crack in the door that allows for our escape. If not for the terrible losses in the markets, many professionals may not have been forced to search out and open their eyes to alternatives for them and their clients. This time of hardship has showcased our product like never before and demonstrates its power to provide self-sufficiency and better living. Number 4: New HECM Products – The HECM for Purchase product has given the Reverse Mortgage new validity. Striking against the misconception that the product takes a senior’s home, it shows the ability to provide one. More diversity with this product will provide more options and will appease a greater following. With Fixed and LIBOR products gaining traction, and the anticipation of new Co-op and condominium rules, this year should continue to provide a wider selection to choose from.
Number 5: Low Rates Continue – It is fantastic to see interest rates maintaining in low territory and this should continue to hold while the economy strives to find its way back to solid footing. These rates are allowing clients to maximize their benefit and provide more people the opportunity to take advantage of the program. Look for this trend to continue through the year. Number 6: Jumbo Product Anyone? – As 1st Reverse flirts with a large value proprietary product, maybe it will whet the appetite of insurance companies or big banks and they will begin to see this niche as a viable opportunity. We’d love to see it happen and hopefully, we’ll see more as the year progresses. Number 7: Technology is Catching Up – Although an LOS system well-integrated with the calculators and CRM are still vaporware, we are seeing good progress. The technology is maturing as lenders accept E-submissions, LOS systems, like Reverse Vision and IBIS, continue to improve and websites become more interactive. Improvements in the quantity and quality of available data are improving our ability to properly evaluate available information and estimate home values. I can see a horizon where the paperwork disappears and clients provide e-signatures via their own computers, saving stress and writer’s cramp. Number 8: Government Supports Reverse Mortgage – Rarely does anything worthwhile happen fast; slow and steady wins the race. Where government entities previously shied away from changes to the HECM product in new legislation or guidelines, they now are becoming advocates. Congress, the President and HUD all seem to be expressing support for making this product more widely available. Recent legislation has increased lending limits, provided greater product diversity, which is assisting growth. Of course, we can only help but be concerned about potential state limitations and regulations that may cause many to pay the price of an ignorant few. Hopefully, the state legislatures see the light and follow the lead of the federal government. Number 9: Satisfaction is High – Only the mix of the right product with the right people can lead to an approval rating well over 90%. I can’t wait for the day when our clients go from whispering their success stories to screaming them from the top of the trees. The sound will rattle loose all the caged misconceptions and free an entire population. The day will come when Reverse Mortgages will be a pillar of retirement and be viewed as an important element of any sound financial retirement plan. The Reverse Review celebrates its first year, and the industry celebrates a bright future. Those who remain are the committed few who help us grow this far. Keep up the good work and here is to another successful year.
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