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Marketing to

the right HECM borrower

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Understanding borrowers’ motivations pg. 22 CONNECTING WITH REAL ESTATE AGENTS pg. 24 + Michael McCully sits down in our hot seat pg. 20



REVERSE review

M ay 2 0 1 3

Big Corporations

Three Leading Reverse Mortgage Companies

What this could mean for the future of the HECM market

The Reverse Review May 2013



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Making it happen. Making it happen. That’s Urban Financial Group. Sales and marketing support. Operational, industry, and secondary market expertise. Training services. In fact, all itindustry, really takes That’s Urban Financial Group. Salesand andunderwriting marketing support. Operational, and to make success happen inTraining Reverseand Mortgage lendingservices. is choosing theall right partner. secondary market expertise. underwriting In fact, it really takes to make success happen in Reverse Mortgage lending is choosing the right partner.

» Put the power of our wholesale lending division behind you. » Put the power of our wholesale lending division behind you. NMLS ID# 2285 For mortgage professional use only, not to distributed to the general public. Urban Financial Group Corporate Office: 8909 South Yale Avenue, Tulsa, OK 74137; Urban Financial Group, Inc. may do business under the name REVERSE IT!, which is a DBA, or division of Urban Financial Group, Inc. Copyright 2013 Urban Financial Group, Inc. All Rights Reserved. NMLS ID# 2285 For mortgage professional use only, not to distributed to the general public. Urban Financial Group Corporate Office: 8909 South Yale Avenue, Tulsa, OK 74137; Urban Financial Group, Inc. may do business under the name REVERSE IT!, which is a DBA, or division of Urban Financial Group, Inc. Copyright 2013 Urban Financial Group, Inc. All Rights Reserved.

888-777-3311 | 888-777-3311 |



The Reverse Review May 2013

From the Editor players in our space will be exiting the business within the next five years.

What has changed in recent years? A lot.

Financial markets imploded and have been recovering, albeit slowly. We have seen two rounds of PLF reductions, an MIP

increase and the Standard fixed pulled off

the proverbial shelf. Most significantly, we are finally tackling the T&I delinquency

monster, governing utilization and further improving the risk to the MMI Fund.

A note from reza jahangiri

The simple fact is that we are still standing

and seniors still need our product, arguably

As I was reading

more now than ever. Borrowers will

acquisitions, a question popped up in my

product evolves, we will be able to provide

Jessica’s piece on the recent industry

mind: Were these last round of acquisitions a continuation of the reverse mortgage

musical chairs that we have witnessed in the past 10 years?

benefit from the presence of long-term, stable industry participants, and as the

our customers with an even more robust version of the HECM in years to come. Senior Publisher

today, the size and stature of current

industry players, the next round of product enhancement coming from the FHA later this year, and the industry’s status in

relation to the reset of the credit markets, I in terms of industry participant stability. In other words: I don’t think the top six

Reza Jahangiri


Erik Richard

Editor-in-Chief Jessica Guerin

Creative Director Traci Knight

Copy Editor

Kersten Wehde

Marketing Director alycia colacion

Printer The Ovid Bell Press Advertising Information phone : 630.207.3882 email : Subscriptions email :

Want to talk to Reza? Reach him at

© 2013 Reverse Publishing, LLC. All rights reserved. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, Reverse Publishing, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 3800 West Chapman Ave., Orange, CA 92868

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

Senior Publisher

t ay ec st onn c


Meet the Team

Editorial Content email :

{ Reza Jahangiri }

I don’t think so. Considering home values

believe we are going to see a new normal



Table of Contents 24 | Originating

TRR 5.13

Marketing to Real Estate Agents Tips for connecting with Realtors in your community Brian Cook

In this issue... 31 Ken Hignett Tech

27 | Underwriting I Have Red Shoes Remembering a time when the product offering was simple Ralph Rosynek

29 | Marketing

Co-founder of New View Advisors

22 | Originating What the HECM Were They Thinking? Understanding borrowers’ motivations Brien J. Brandenburg

A collection of recent facts and surveys affecting the reverse market

John Golden

46 Colin Cushman Last Word

36 | Legal Badges of Fraud How to spot a reverse mortgage scam Alexander J. Chaudhry

40 | Big Corporations Acquire Three

Leading Reverse Mortgage Companies


Want the online version?

What this could mean for the future of the HECM market Jessica Guerin

may 2013 W IE






Marketing to


INSIDE this issue


pg. 20




Large entities enter the reverse mortgage market.

cover SE

“Likely motivated by statistics about the country’s aging demographic and expectations for continued home price recovery, some investors are recognizing the product’s promise. In a time of uncertainty for the industry, these recent acquisitions serve as a reminder that the HECM market has substantial growth potential as millions of America’s baby boomers approach their retirement years.



Blessed Assurance When a property appraisal requires outside expertise


15 | Roundup

34 | Appraising


Reverse Market Insight

20 | Hot Seat Michael McCully


March year-to-date volume for top reverse lenders

Jessica Guerin


13 | Top Lenders Report

The new HECM app aims to illustrate the benefits of the loan.


Reverse Mortgage Daily

Generation Introduces nu62


Headlining stories of the past month

Marty Bell

33 | Tech


11 | Industry Update

Read about the association’s current initiatives.



The latest developments in companies across the reverse space

18 | NRMLA News

Scott Gordon

38 Teague McGrath


10 | Movers & Shakers

TRR heads to the big city for the association’s Eastern Regional Meeting.

Social Media for Loan Officers How online platforms can help build your business network


TRR has sparked some conversation online. See what our readers have to say.

16 | NRMLA in NYC


09 | NEW! Readers Respond


REVERSE review

M AY 2 0 1 3



Three Leading Reverse Mortgage Companies

What this could mean for the future of the HECM market



The Reverse Review May 2013


John K. Lunde

Marty Bell

J ohn K . L und e

Ma rty B e ll

mi c h ae l mccully

11 | Industry Update g John K. Lunde is president and founder of Reverse Market Insight, Inc., a performance data analysis and consulting firm specializing in the reverse mortgage industry. RMI clients include eight of the top 10 reverse mortgage lenders, plus investors, servicers and vendors to the industry. 949.429.0452

18 | NRMLA News g Marty Bell is NRMLA’s senior vice president of communications and marketing. This is Bell’s professional Act III after careers in books, journalism and the Broadway theater. Bell is the author of two novels and four nonfiction books, and his writing has appeared in publications including Playboy and New York magazine. Bell wrote and produced the awardwinning documentary film The Boys of Summer and produced 15 Broadway shows (including Ragtime, Fosse and Dirty Rotten Scoundrels) that won 27 Tony Awards.

20 | Hot Seat g Michael K. McCully is a cofounding partner of New View Advisors, a leading boutique investment bank and advisory practice formed in 2008. He has been an investment banker his entire career, most recently at Lehman Brothers, leading teams of professionals to buy, sell and operate portfolio companies. From 1999 to 2004, he was responsible for the acquisition, growth and sale of Financial Freedom Senior Funding Corporation. McCully graduated from Cornell University in 1981.

b r i en j . b r a nde nb ur g

B r i an c ook

r alp h r os ynek

22 | What the HECM Were They Thinking? g Brien J. Brandenburg is the vice president of the reverse mortgage sales and operations division of TowneBank Mortgage and a 14-year veteran of the reverse mortgage industry. Prior to joining TowneBank, Brandenburg was a regional manager and division manager for Wells Fargo Home Mortgage. He began his career in the business as an originator for Norwest Mortgage in June 1998.

24 | Marketing to Real Estate Agents g Brian Cook is the Puget Sound regional reverse mortgage advisor/director for Alpine Mortgage Planning. Cook has 13 years of industry experience as a reverse mortgage specialist and has worked in servicing and origination with industry trailblazer Seattle Mortgage. He has previously provided insight for Reverse Mortgage Daily and is a Washington State-certified Realtor clock-hours reverse mortgage instructor. 206.459.7777

27 | I Have Red Shoes g Ralph Rosynek is the vice president for National Correspondent Production at Reverse Mortgage Solutions. RMS is a premier provider of reverse mortgage servicing, a Ginnie Mae seller/servicer and offers mortgage banking support to the reverse mortgage industry. Rosynek is currently a member of the NRMLA board, co-chair of the Professional Development Committee and holds HUD HECM Direct Endorsement credentials.

s cot t g or don

ke n h i gn e tt

joh n golden

29 | Social Media for Loan Officers g Scott Gordon is the founder and CEO of Open Mortgage, LLC in Austin, Texas. Gordon is also a serial entrepreneur, investor, board member and author. Gordon is passionate about business mentoring, social media, mortgage marketing, senior finance and idea sharing.

31 | Its All About the Data g Ken Hignett is the senior executive vice president and chief information officer of Mortgage Information Services, Inc. (MIS). MIS is a national provider of title insurance, loan settlement services and valuations. Hignett, who has 30 years of experience in the industry, is a CPA and a Certified Information Technology Professional as designated by the AICPA. He served previously as the CFO of MIS.

32 | Blessed Assurance g John Golden is the national quality control manager for Landmark Network, Inc., an appraisal management company that services clients nationwide. Golden, a former certified residential and FHA appraiser, is currently on the HUD 203k consultant roster. He relies on a 13-year background in valuation and inspection in dealing with quality control matters. 888.272.1214 ext. 718

Michael McCully

Brien J. Brandenburg

Brian Cook

Ralph Rosynek

Scott Gordon

Ken Hignett

John Golden



Contributors M e g a n ha f e ns te i n 34 | Title Tip g Megan Hafenstein is the assistant VP of sales at Premier Reverse Closings (PRC), a national reverse mortgage title and settlement company based in Rocklin, California. Hafenstein manages accounts in 22 states from the company’s headquarters and works closely with operations to ensure that clients’ files are closed accurately. Prior to joining PRC six years ago, Hafenstein worked in the California Legislature after receiving her B.A. in political science from Cal Poly, San Luis Obispo.

Megan Hafenstein

Alexander J. Chaudhry

Ale x an d e r J. Ch au d h ry

te agu e mcgrath

35 | Badges of Fraud g Alexander J. Chaudhry is general counsel of FNC Title Services, a multistate title insurance agency. Chaudhry works on areas of real estate law that impact title insurance agencies with a specific focus on issues associated with HECMs. He is responsible for corporate and transactional matters, licensing, and regulatory and litigation concerns. He recently worked with state insurance enforcement officers on cyberthreat issues facing the title insurance industry.

Teague McGrath

Jessica Guerin

Colin Cushman

page 23



40 | Reverse Acquisitions g Jessica Guerin is the editor-inchief of The Reverse Review. She has worked on the editorial teams of Chicago Home & Garden, Chicago magazine and Time Out Chicago. Prior to joining the magazine, Guerin managed the marketing efforts for a commodity brokerage firm in the Chicago Board of Trade. She has a master’s degree in magazine publishing from Northwestern University and a B.S. in journalism from Boston University.

46 | Last Word g Colin Cushman is the president and CEO of Generation Mortgage Company and a member of the NRMLA board of directors. Prior to GMC, Cushman served as the FHA’s director of portfolio analysis and was responsible for developing valuation models to support product development, premium pricing, risk management and operations. He also led the design of the HECM Standard and Saver products.

comments we loved

“If we can understand what our borrowers are thinking and what they are trying to accomplish, we can better serve their needs, regardless of whether they are a needs-based client or someone looking to improve their financial standing. Failure to find out ‘what the HECM they were thinking’ may cause you to approach many borrowers the same, selling the same benefits and results, and missing out on an opportunity that your competitors will enjoy because they have broadened their idea of whom a HECM can help.” -Brien J. Brandenburg

38 | Spotlight g Teague McGrath is the chief marketing officer at AAG and is responsible for the marketing campaigns featuring Senator Fred Thompson. Before joining AAG, McGrath was VP of marketing for Senior Lending Network (World Alliance Financial), where he refined the “Robert Wagner” brand and lead acquisition cost. McGrath was also a part of the KBC Financial Products Loan Derivatives desk, where he developed loan boarding systems and market/ industry reporting. McGrath spent 12 years at Australia’s No. 1 television network, Channel 9, as an executive producer.

Be a part of the conversation.

Write for us!

you at Do ve wh ? ha takes it

We are looking for new contributors. Share your thoughtful commentary with our readership today.

Email to learn more.



The Reverse Review May 2013

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Readers Respond The past few issues have sparked some conversation among readers online. Here are some of the responses we received.



Do you have something to say? 8

A Q&A with Barney Frank March 2013 “Great interview!!… As expected, Mr. Frank is brilliant but not always well informed. There is a huge difference. As to lump sums paid to seniors at funding and the expected results, Mr. Frank spoke in very wise terms. He also provides some good ideas on how to let Congress know that it is right to support the program by having those with positive experiences speak out to their representatives and Senators at media-covered events. Mr. Frank is as witty as ever. We may be on opposite ends of the political pole, but he understands how to poke fun at himself. He will be missed in the House and as a strong proponent of the HECM program.”–The Cynic “Well, everyone has their good side. Nice article, and thanks to Mr. Frank for all his support. Actually I hope he ends up on Fox. I love good fights and he and O’Reilly would be a great match every night.”–Reverse Pro

Will Losing the Traditional Fixed-Rate HECM Affect the H4P? By Michael Banner, March 2013

Why We Do What We Do By Joe Morris, March 2013 “This article should be required reading for originators, new and experienced: The new will understand the guiding value of the business and the experienced will be refreshed. Thanks, Joe!” –Atare Agbamu

“Joe, I appreciate this confirmation of my experience in the RM service for the last eight years.” –Brett Bayne

“Michael, a very well-written article. I could not agree more with your thoughts. Let them call us optimists, but the reality is that your prediction is a no-brainer!!!!” –Michael Cour

CHANGE IS GOOD. YOU GO FIRST. By Shelley Giordano, April 2013 Wonderfully insightful. Sounds like “pressure on the portfolio” isn’t getting through to some of these folks. I recall seeing a pledge of some type in a frame behind one of the advisors I met with that said they should offer advice only in the areas in which he or she is competent to do so, meaning that without our help, they are not competent to discuss the use of home equity, as this author clearly indicated. –WealthOne




“I love the magazine. I learn so much every month. I read it cover to cover.” –Susan Tamashiro

Comment on our stories online for a chance to see your thoughts in print. Be a part of the conversation about how we can better serve our seniors!

The Leadership Imperative By Mark Browning February 2013 “I think Mr. Browning’s analogy is spot-on. Not only are we swimming in the intellectual distractions of current and potential change and regulation and their effects on consumers and the future of our business, but we also risk treading water instead of freestyling across the channel with confidence. It is difficult right now to make marketing decisions and to feel confident that our own futures can be consistent with our pasts in this business. In some arenas it seems that Nero fiddles as Rome burns. The negativity of the publicity surrounding FHA’s risk-based insolvency; non-borrowing spouses having to leave their homes; and the CFPB alleging that seniors—to whom they have not spoken—are confused; causes us to posture defensively, sometimes thwarting our efforts and instincts to be passionate and aggressive, forward thinkers.” –RevMtgRep



The Reverse Review May 2013

Movers & Shakers Read about the latest developments in companies across the reverse space.

Hav e a c o mpan y u p dat e y o u w ou ld lik e t o s e e p u b l i s h e d?

Mortgage Cadence Promotes Jacob Petersen, Launches New Website Mortgage Cadence (MC), a leading provider of Enterprise Lending Solutions, document services, compliance and default technology for the financial services industry, has promoted Jacob Petersen to chief sales officer. In his new role, Petersen will oversee customer service operations for all of MC’s product lines. MC has also launched a new website. Visit to view the latest information on the company’s products and services for the reverse sector.

Generation Mortgage Company Names Sean Sievers as CFO, Introduces Broker Processing Services Sean Sievers has been named chief financial officer of Generation Mortgage Company. Sievers, who has more than 20 years of experience in the financial services industry, served most recently as senior vice president of SunTrust Bank and worked in the past for Countrywide and Freddie Mac. “The management team is excited to have a results-oriented leader supervise the financial division of our rapidly growing company and position us for continued growth in the reverse mortgage industry,” GMC said in a statement. GMC has also launched a new broker processing channel. Through this service, originators can work with an experienced reverse mortgage processor to close their loans for a $550 fee, charged only on funded loans. The service includes access to regular loan updates through a secure, user-friendly system.

Scott Norman Hosting The Sente Reverse Mortgage Show on Talk Radio Talk Radio 1370 has added a new program to its lineup: The Sente Reverse Mortgage Show, Presented by Scott Norman. The show, which debuted April 6, will air Sunday mornings from 7:30 to 10


Email it to

8:00, focusing on the facts and figures surrounding the reverse mortgage product and giving listeners the opportunity to participate. Norman is a longtime mortgage banker based in Austin, Texas, who has been a strong advocate for the HECM product in that state.

RM USA Hires Kelly McCabe as Director of Credit Reverse Mortgage USA, the eighth-largest reverse mortgage originator in the country, has hired Kelly McCabe as director of credit. In her role, McCabe will oversee the company’s mortgage banking division, including loan underwriting and processing. McCabe is a DE underwriter with 27 years of mortgage industry experience; she worked previously for MetLife and Security One Lending.

Open Mortgage to Offer Free Appraisals to Community Service Workers Texas-based Open Mortgage will offer free appraisals in June to those who work or have worked in service of their communities, including teachers, police officers, firefighters and paramedics. “Reverse mortgages can offer seniors a better quality of life,” said SVP Joe Morris, “and with up to $500 reimbursed back to the senior at closing, it is a true cost savings that they can use for other needs they may have.” In November, the company offers a similar deal to military families.

Land Home Financial Services Joins Forces with Golden Equity Mortgage Forward mortgage direct lender Land Home Financial Services has entered the reverse market through a partnership with Golden Equity Mortgage. CRMP and Golden Equity owner Colleen Moore will head the operation as the national director of Land Home/Golden Equity. “Land Home operates with the customer service philosophy and care required to be

a success with today’s reverse mortgage borrower. The owners of Land Home are wonderful and it is an honor to join them in expanding into this rewarding market,” Moore said.

NewDay USA Acquires Abacus Mortgage Training and Education Leading reverse mortgage lender NewDay USA has acquired Abacus Mortgage Training and Education. The acquisition will enhance NewDay USA University’s ability to teach loan officers how to better serve senior borrowers. Abacus founder Paul Donohue will join the leadership team at NewDay USA and serve as dean of NewDay USA University.

Nationwide Title Clearing Earn’s Inc. Magazine’s Hire Power Award Florida-based Nationwide Title Clearing was awarded a spot on Inc. magazine’s Hire Power Award. The award honors the fastest-growing, privately held U.S. companies that have played a substantial role in putting Americans back to work. NTC grew 85 percent in the last three years, currently employing 325 individuals as a service provider for some of the largest residential mortgage servicers in the country.

1st Financial Reverse Mortgage Announces Additional State Approvals in Georgia and Indiana 1st Financial Reverse Mortgage has been granted approval to issue both forward and reverse mortgages in Georgia and Indiana effective immediately. “1st Financial offers referral-based reverse mortgage professionals an outstanding combination of marketing support, strong operations and top-tier compensation in which to grow their practice,” said Regional Vice President Dennis Loxton. 1st Financial is recruiting reverse professionals in Texas, North Carolina, Illinois, Florida, Georgia, South Carolina, Indiana and Michigan.

Industry Update

May Edition

Brought to you by:

an update of this past month’s breaking news

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

headlining news 1.FHA to Congress: Give Us

Authority to Shore Up Reverse Mortgage Program

The FHA said it is committed to its reverse mortgage program and that it needs Congress to give it the authority to ensure its sustainability. Following the release of the FHA’s budget for fiscal year 2014, HUD Secretary Shaun Donovan said the reverse mortgage program is to blame for the FHA’s projected losses and that reforms will lead to its sustainability. If Congress grants the FHA the authority to modify the program, it would be able to make changes through Mortgagee Letters rather than endure a long rulemaking process, which is currently the only option. Donovan said the agency is committed to improving the program in order to assist older homeowners who need help covering the cost of living in retirement. // April 10, 2013

2.Obama Budget Includes

Funds for Housing Counseling, Though Future Remains Uncertain

President Obama’s budget outlined $55 million in funds for HUD programs, including reverse mortgage counseling. The amount, which is less than agencies had hoped for, is still more than the $42 million appropriated last year, $4 million of which was designated for reverse mortgage counseling. National intermediaries responded favorably to the news, noting that counseling funds had been eliminated from the budget altogether in 2011, but said the future is still uncertain. However, agencies said they are committed to providing counseling however it may be funded. // April 11, 2013

3.Twenty-Three States

6.Bloomberg: CFPB to Get

Nearly half of all U.S. states have adopted the nationwide mortgage loan officer test, a uniform state test designed to meet SAFE Act requirements. Through the new test, loan originators in these states who are seeking licensure with their state agency will no longer be required to take a second state-specific test, according to the National Mortgage Licensing System.

The CFPB is launching a massive data collection that will include information from 10 million American consumers. According to a report from Bloomberg News, the bureau will spend $20 million on the collection effort, using the funds to purchase anonymous consumer data from national service providers in an attempt to make more data-driven decisions. “The new U.S. consumer finance watchdog is gearing up to monitor how millions of Americans use credit cards, take out mortgages and overdraw their checking accounts,” the article states. “Their bankers aren’t happy about it.”

Abandon State L.O. Tests, Adopt New Streamlined Exam

// April 18, 2013

4.Reverse Mortgage Lenders Brace for Product Change

While some lenders say their marketing efforts won’t be dramatically impacted by the suspension of the fixed-rate Standard HECM, they do say that training will be essential. According to a poll conducted by Reverse Mortgage Daily, a majority believes at least 10 percent of business will be impacted, while almost a third believes that the fixed-rate suspension will reduce business by more than 20 percent. Many lenders also reported a need to increase training for loan officers on adjustable-rate loans. // April 14, 2013

5.Credit Ratings Group Says Reverse Mortgage Market Could Grow Rapidly

The reverse mortgage market could “grow rapidly,” according to a brief from credit ratings firm DBRS. Citing a growing level of home equity among the older population and 30 million baby boomers poised to enter retirement, the group said reverse mortgages could become the new home equity loan and vowed to follow the market closely and help work toward ensuring the safety and sustainability of reverse mortgage products.

Financial Data for 10 Million Consumers

// April 18, 2013

7.CFPB Cracks Down on

Senior Financial Professional Designations

Highlighting the widespread use of designations like Accredited Retirement Advisor (ARA), Certified Senior Advisor (CSA) and Certified Specialist in Retirement Planning (CSRP), among roughly 50 designations in total, the CFPB released a report to Congress indicating the market is confusing and risky for seniors. The bureau is now working with federal and state regulators to monitor professional markets that use special designations to show they are qualified to work with senior consumers. In light of the lack of supervision and enforcement of senior designations, the CFPB has made several recommendations to Congress in an effort to streamline the process and reduce confusion around the issue, including the implementation of training standards to obtain the designations, setting standards of contact for those who hold them and increasing supervisions and enforcement. // April 18, 2013

// April 11, 2013


| 11

The Reverse Review May 2013

STAR BORN ComeA share theIS stage and learn how you can be a reverse mortgage star

Visit our booth at NRMLA West. Reverse mortgages were designed to be a valuable financial tool for seniors, allowing them to age-in-place. The nu62SM app makes it easy to explain how a reverse mortgage, tailored to their specific needs, can be used as a financial planning tool. This app will open up the reverse mortgage market to a whole new audience, as the benefits can be quickly and easily demonstrated on the spot. For more information contact: -BVSB5SPZt8IPMFTBMF%JWJTJPO$PPSEJOBUPSt5PMM'SFFtMBVSBUSPZ!HFOFSBUJPONPSUHBHFDPN

Proud member of: Š 2013 Generation Mortgage Company, 3565 Piedmont Road NE, 3 Piedmont Center, Suite 300, Atlanta, GA 30305 — 866-733-6090. NMLS #1319. For our state(s) legalese, visit: 12 | TRR

Report March 2013

Top Lenders Report

Y ear - to - D ate E n dorseme n t V olume

12345 Liberty Home Equity



Security One Lending

American Advisors Group

One Reverse Mortgage

Urban Financial Group

























































































































Reverse Market Insight - Logo October 9, 2009

Brought to you by:




Process Blk C

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


| 13



The Reverse Review May 2013


Landmark Network is the most responsive and customer-friendly appraisal management company with excellent followup and first-rate appraisers who treat my borrowers with respect and go above and beyond to educate them about the appraisal process. Their dedication is much appreciated.

The Landmark Difference is providing outstanding customer service that is all about being there for you and handling your questions and concerns in a professional, courteous and expert manner, every time you contact us. Our goal is to exceed your expectations every time. So give us a try and experience the Landmark Difference for yourself. 14 | TRR

- Jerry, Reverse Mortgage Specialist

CALL TODAY or visit us online. Collaberate with us today and focus on your needs!

888.272.1214 *Landmark Network, Inc. is a fully licensed and compliant AMC and in accordance with individual state regulations pays the appraiser for work completed, regardless of whether or not payment has been secured from the client.


Follow us @LandmarkAMC © 2012 Landmark Network, Inc. All rights reserved.


Here is a look at the latest

news and stats

affecting the market.

this month


Get up-to-date retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.

M ar k et T rends

H ome E quity Facts

Home prices increased nearly 10% from last year.

Senior home equity continues to rise.

Home prices nationwide have increased 9.7 percent year-over-year in January, marking the highest increase since April 2006, according to CoreLogic. January’s numbers also indicate the 11th consecutive month of increased national home prices. On a month-overmonth basis, prices in January rose 0.7 percent from December. Pending data from CoreLogic also indicates that February’s numbers will follow the upward trend.

Senior home equity increased by $50 billion between the third and fourth quarters of 2012, according to the NRMLA/ RiskSpan Reverse Mortgage Market Index. According to the report, the jump is driven by an increase in the aggregate value of seniors’ homes. Over the past year, the total amount of senior home equity increased $117 billion, or 3.8 percent, while their home values increased $97 billion, or 2.3 percent.

M ortgage N ews

A recent report reveals new facts about senior homeowners. According to the Social Security Administration, nearly a quarter of the nation’s seniors still have mortgages, and home expenditures rose across the board.

20 percent of senior homeowners have mortgages, a slight increase from 2005 data. Approximately 35 percent of income is spent on housingrelated items.

the senior agenda

The New York Times says today’s retirees want to age in place. According to a recent article, retiring Americans are making plans to age in place and will reside in areas with services designed to accommodate their needs as they age. Recognizing this trend, cities are building infrastructures that will enable seniors to access public markets, transit lines and parks without driving, the article says, adding that software developers are also catching on, engineering devices that will assist in remote care for the elderly. According to the article, new projects are emerging as a result of a noted trend: “the desire to stay in one’s home as long as possible and the interest in living in big-city neighborhoods or suburban downtowns.” A G I N G I N P L A C E FA C T S

A new study by the MetLife Market Institute and the Stanford Center on Longevity analyzes a senior’s ability to age in place. The study concludes that housing that is accessible, affordable and adaptable to an individual’s changing needs as he or she ages is essential to creating a livable community. It found that approximately 29 percent of U.S. homeowners age 65 and older live in homes built before 1950, many of which do not include features that improve accessibility for older individuals. The study also reported that more than one-third said they were not confident their current home will remain affordable as they age, and that seniors not able to cover their housing costs may be forced to relocate to low-cost housing or nursing homes.

H E C M stats

Endorsement numbers jump in March. HECM endorsements climbed 20.8 percent in March to their highest level since June 2011. According to Reverse Market Insight, this impressive rebound from the low levels of the past few months is the result of an increase in consumer demand and a sustained level of higher home prices. With 8,593 endorsements, March marks the highest level of endorsements since June 2011, when Wells Fargo issued its last month of HECM originations. The increase in consumer demand is measured by a higher percentage of case number conversations, according to RMI, which notes that the conversation rate rose to 79 percent, a level also not seen since 2011.


| 15

The Reverse Review May 2013


Meets in NYC 1


late March for NRMLA’s Eastern Regional Meeting & Finance and Investor Forum. Guests attended panel discussions to hear industry leaders sound off on a range of issues affecting the space, and in the evenings they attended networking events to mingle with colleagues from across the country.

Highlights of the two-day event included: 3 A presentation by members of HUD, during which Director Karin Hill asserted the department’s goal to make the necessary policy changes to ensure the long-term health of the MMI Fund 3 A look at the diversifying investor base of HMBS securities by Dan Lichtenberg of Bank of America 3 Talks about how reverse professionals can sustain profitability in a changing market



3 A panel of academics who discussed current projects that are propelling new research about the benefits of the reverse mortgage program


1. HUD’s Karin Hill shares HECM updates from the department 2. Scott Norman of Sente Mortgage with The Reverse Review’s Jessica Guerin 3. Security One Lending’s Rhiannon Behnke with Nancy Cannon and Ronald Heath of TowneBank Mortgage 4. Moneyhouse’s Sandy Tennekoon with NRMLA’s Marty Bell


5. Jim Milano (Weiner Brodsky Kider) and John LaRose (Celink)


6. Joe McParland, Ellen Connors and Peggy Whalen from Direct Finance Corporation 7. Randy Davis (Dollar Bank), Patti DeGennaro (Lender’s Reverse Closings) and Ray Chartier (Dollar Bank) 8. Otto Kumbar (Liberty Home Equity Solutions), Reza Jahangiri (AAG), Marc Helm (RMS), Peter Bell (NRMLA) and Colin Cushman (Generation Mortgage Company) participate in a panel discussion on the state of the industry. 9. RMS’ Bob Yeary and Nationwide Equities’ Glenn Wallace

6 9



10. Adam Salti (Associated Mortgage Bankers), Paul Fiore (AAG) and Kevin Blakeney (Associated Mortgage Bankers)


11. Financial planning expert Barry Sacks with Security One Lending’s Shelley Giordano 12. Jean Nobel (Urban Financial Group), Sarah Aaronson (NRMLA), Cheryl Chargin (AAG) and Alycia Colacion (The Reverse Review)


13. S  enior Settlement Services’ Paul Lovegrove with Urban Financial Group’s Kevin Lee 14. Reverse Market Insight’s Topher Theissen and John McCue


15. Anthony Lopes (Cambridge Credit Counseling), Patrick Fay (Live Well Financial) and George Downey (Harbor Mortgage Solutions)


12 15


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The Reverse Review May 2013


On the Docket NY Conference Brings Industry Together

Hundreds of companies with their own paths seemed to come together around innovative ideas to bolster the reverse mortgage business at NRMLA’s Eastern Regional Meeting & Finance and Investor Forum in New York on March 19 and 20. “I was really impressed with the creative thinking,” said first-time attendee Stephanie Moulton, an Ohio State University public policy professor who is part of a team conducting a new research study funded by a MacArthur Foundation Grant.

The themes that united the 270 industry professionals in attendance included: * Avid support of HUD’s effort to make the necessary policy changes to ensure the long-term health of the Mortgage Mutual Insurance Fund * A need for additional research to provide strong and detailed evidence of the value of the product to help overcome our society’s retirement funding gap * A look at the product through the eyes (and software) of financial advisors to help reverse professionals engage them as advocates “Has the program stayed on course?” Lorraine Geraci of Urban Financial Group asked while leading a session about the intent and creation of the HECM by the FHA. The environment in which the program exists has changed since its inception more than 20 years ago, NRMLA President and CEO Peter Bell explained on a panel of industry leaders, so the program has adjusted to meet the 18


changing needs of an evolving society. Originally envisioned primarily as a method to help older seniors in a familyoriented society remain in their homes, reverse mortgages now must also serve the needs of baby boomers whose retirement expectations have been disrupted by the recession and need to view home equity as a planning tool, as well as a much larger population of single people and a significantly longer average life span. “We need to ask ourselves, what is the ultimate consumption? What is the best possible use and utility for this product?” said Colin Cushman, CEO of Generation Mortgage Company. “And we need to change our sales strategy to reach out to a broader market.” “The retirement funding gap is trillions,” said Michael Gordon of the burgeoning new member company Longbridge Financial in an interview conducted by reporter Clea Benson of Bloomberg News. “There is no asset other than home equity that can fill that gap.” During the two days of sessions, Gordon and others called for a better understanding of the people who do not respond to the product and a better understanding of what drives tax and insurance defaults. “This program is important to more than just the people who work in it,” said Karin Hill, who oversees HECM as director of single-family program development at FHA.

“It is a larger issue than just us. It is the key to aging in place, which an overwhelming majority of American seniors want to do.” There was a general consensus among speakers that the recent moratorium placed on fixed-rate, full-draw loans as a means to limit the stress on the insurance fund was not a case of “the sky falling.” “Losing the Standard fixed-rate HECM may give us an opportunity to get back to the core of the program,” said Patty Wills of Retirement Life Funding, reiterating a frequently touched-upon theme: We need to focus more on helping seniors obtain long-term solutions to funding longevity rather than short-term fixes for current problems. Highlights of the sessions included researchers and brothers Barry and Stephen Sacks demonstrating the need for reverse mortgages to be incorporated into the software used by financial planners; a snapshot of a diversifying investor base in HMBS securities offered by Dan Lichtenberg of Bank of America; and a panel of academic researchers moderated by Chris Mayer, chief credit officer and economist at Longbridge Financial, who said, “From an academic perspective, it is easy to see why this product is incredibly important. So how do we get from theory to practice and build the market?”

New members


Directors Mortgage Lake Oswego, Oregon

JTS & Co. Columbus, Missouri

Vintage Lending Salt Lake City, Utah

Peggy Whalen, Direct Finance Corp. Norwell, Massachusetts

Daniel Matthews, Direct Finance Corp. Norwell, Massachusetts

George Downey, Harbor Mortgage Solutions Braintree, Massachusetts

Reverse mortgages do not exist in a vacuum. They are part of a bigger picture that includes: • Planning the right retirement funding package • A cabinet department (HUD) with many priorities • A securitization industry • The aging-in-place movement The most effective selling of reverse mortgages is not just about the numbers and the product’s rules and regulations; you need to be able to put the product in context, to paint The Big Picture. Join your colleagues, government officials, researchers and other distinguished speakers for NRMLA’s Western Regional Meeting, where we will focus on using The Big Picture to attract clients and grow the industry. Plus, attendees can earn CRMP credits and attend extensive networking opportunities. Visit to register and book your hotel room.

brought to you BY MARTY BELL: reverse mortgage lenders association, our consumer website that includes member listings, had a record 17,359 unique visitors in March.

Consumer information materials: NRMLA has fulfilled member company orders for 3,700 copies of “Your Roadmap to Reverse Mortgages” and 6,100 copies of “Should Mom and Dad Get a Reverse Mortgage?”

Upcoming Events NRMLA Western Regional Conference May 14-15 Hyatt Regency Hotel Irvine, California

First National Aging in Place Council Conference June 13-14 Washington, D.C. Information at


The Conversation Continues in Irvine



NRMLA member

NRMLA Annual Meeting & Expo November 4-6 Roosevelt Hotel New Orleans, Louisiana

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The Reverse Review May 2013


things you need to know or may have been wondering may 2013

the hot seat From his first job and his favorite movie to his thoughts about the reverse mortgage market, we get the personal and professional facts from Michael McCully, co-founder of New View Advisors, in our monthly edition of The Hot Seat.



Michael New View Advisors Co-founder


My favorite vacation was a family trip to Iceland last June. The sun never set, there are only 320,000 residents, it has rich history and it’s a spectacularly beautiful geological marvel.


If I were a professional athlete I would be a tennis player. I’ve been playing since I was 7 years old.


My first car was a 1957 Chevy two-door sedan with no motor that I purchased for $500 when I was 15. I put in my own 283 small-block and had it registered to drive by the time I had my license at 161/2.


My favorite movie in my youth would have been a toss-up between American Graffiti and Animal House. Today, it’s Gladiator or The Shawshank Redemption.


I never miss an episode of The Colbert Report.


When I was younger I wanted to be a chemist. My dad is a research biochemist and physician, and he’s still working full time at 79.


Every morning I do 60 pushups, 130 situps, make my own coffee and breakfast, and read print editions of The Wall Street Journal and The New York Times.


When I was a kid I played drums in a few different bands.


My first job was painting houses. My hardest job was working at Pier 4 restaurant in Boston.


My parents taught me dignity, modesty and independence.


My iPod go-to is Evanescence and No Doubt, and Hendrix and Deep Purple for throwbacks.

If I were a professional athlete I would be a tennis player. I’ve been playing since I was 7 years old.

Professional >

Industry growth is dependent upon homeowners with discretionary financial resources believing reverse mortgages are an acceptable tool for comprehensive financial planning. For example, MetLife estimated 3 million to 5 million seniors have HELOCs; we need to convince borrowers such as these that reverse mortgages are a legitimate alternative.


The biggest challenge in the reverse mortgage industry is the negative publicity produced from product misconception, flawed design and substandard marketing. We as an industry need to continue improving perception through best practices, ongoing product development and relentless education.

My first job was painting houses. My hardest job was working at Pier 4 restaurant in Boston.


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The Reverse Review May 2013


originating What the HECM Were They Thinking? Brien J . Bra n de nb ur g what borrowers were thinking when they inquired? Why would someone choose to apply for a HECM? If we can better understand the answer to these questions, we will have more success in growing our own businesses and understanding of the overall benefits of the HECM product.


hose of you who thought that I would address the decisionmaking process of the recent HUD change to eliminate the fixedrate Standard HECM, you have come to the wrong place. I will leave that examination to others. Instead, I would like to discuss the thought process of potential reverse mortgage borrowers and their advisors—what were they thinking when they looked into a reverse mortgage, and what influenced their decision to either proceed with the loan or to not move forward? What factors are considered when borrowers choose between a fixedand adjustable-rate HECM? If we can decipher what they were thinking, we can better determine effective marketing and sales approaches so that we can better serve potential borrowers who inquire about our products. We often read about how to better market to our customers, or how to do a better job of selling the benefits to borrowers, their families and potential referral partners. Why have we not examined the question of



For this article, let’s set aside the needs-based borrower who is trying to get out from under an expensive mortgage payment, needs to pay credit card or medical bills, or is in a similar situation. We all understand that those situations give rise to an immediate need, and the only real question at that point pertains to preferences regarding the rate and terms of the HECM. Let’s think instead of a borrower who may be interested in setting up a rainy day fund, using home equity to enhance lifestyle, or someone who would consider a HECM as a financial tool in planning for future disbursement of their retirement savings. If we can think in this manner, we can better advise potential borrowers of the power of a HECM when borrowers cement future access to home equity by leaving it to grow in a line of credit, negating risk of another home value decline by ensuring access to these funds.

Do you market the HECM as a way to ensure access to liquidity when needed for home or car repairs, unexpected bills, future homeowner’s insurance and property taxes without having to jump through hoops in getting a loan that is based upon someone’s credit profile and income? What happens when a spouse dies and Social Security income declines, preventing the surviving spouse from living in the manner and style to which they have become accustomed? We all know many seniors do not want to sell their homes and move. Setting up a rainy day fund now, locking in home equity at today’s value with the potential for growth in a HECM line of credit, ensures the ability to quickly access cash when it could be most needed. When someone is living in their golden years and realizes that they don’t have the income to enjoy some of the things they thought they would enjoy during retirement, what is their thinking in using home equity as a way to fund those dreams and desires? I had a customer who lived in Guilford County, North Carolina, and served in World War II, the Korean War and Vietnam before retiring after more than 30 years in the Army. He enjoyed a good quality of life and had enough income to pay all his bills and even go on vacation to his timeshare in Florida every year. He called me because he and his wife wanted to travel to

According to brien So often we read about how to better market to our customers, or how to do a better job of selling the benefits to borrowers, their families and potential referral partners. Why have we not examined the question of what borrowers were thinking when they inquired? Why would someone choose to apply for a HECM? If we can better understand the answer to these questions, we will have more success in growing our own businesses and understanding of the overall benefits of the HECM product.


Brien J. Brandenburg: NMLS# 455476 TowneBank Mortgage: NMLS# 512138


7 Reverse Leads


If we can understand what our borrowers are thinking and what they are trying to accomplish, we can better serve their needs, regardless of whether they are a needs-based client or someone looking to improve their financial standing. Failure to find out “what the HECM they were thinking” may cause you to approach many borrowers the same, selling the same benefits and results, and missing out on an opportunity that your competitors will enjoy because they have broadened their idea of whom a HECM can help. x



The last customer I’ll talk about decided not to pursue a HECM. He inquired because he had a mortgage payment and was curious about how his life would be altered if he eliminated this payment through the use of a HECM loan. After investigating his options, he chose not to move forward because he was thinking about his heirs and he had a strong desire to leave them a legacy. He even went so far as to tell

me years later that he had discussed the HECM with many of his fellow seniors, and he found that the desire to leave a legacy to heirs is a strong and compelling reason many seniors don’t take advantage of a HECM, even if there would likely still be something left over. Incidentally, even though this customer didn’t take a HECM with me, he has referred many others to me over the past 10 years.


I had another couple who also wanted to enjoy a more robust retirement. Their thinking was to use the fixedrate loan and take all the cash

immediately for two main reasons. The first was that they feared rates would climb soon due to the state of our economy. They didn’t trust that their home value would remain as high as it was and they wanted to lock in access today. Secondly, they wanted to use the money now to purchase a vehicle, do some home repairs and put some cash in the bank. The potential for negative arbitrage was of no concern to them as their heirs were doing fine and ensuring a legacy was unimportant to them.


Europe, where they had many friends from his days in the military. He didn’t have the income necessary to make those trips, and it was a dream he and his wife thought would go unfulfilled. Both were approaching 80, and he knew the time was growing short when he and his wife could physically make the trip. His thinking was, and I quote him, “I don’t have any children to leave my estate to, so why not spend it on something I’ve always dreamed of doing but didn’t think I could afford?” He had no immediate need, only a dream and a desire. When we talked about his options, his thinking was that a line of credit, with credit-line growth potential, was ideal for him to use his equity and have it last long enough to see all the places he wanted to see one more time before leaving this earth.

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The Reverse Review May 2013

originating you need to. We have no knowledge of them, and there is just nothing out there for Realtors.” So began my path to becoming a certified real estate clock-hours instructor. The key to expanding the reach of the reverse mortgage product will be changing public perception. As an originator, perception is often the greatest barrier to gaining more business within my community. If part of your marketing plan includes working with local seniors, educating the people working within your community also has to be part of your business plan.

Marketing to Real Estate Agents Bria n C o o k


ast year an associate was teaching a class in our conference room to a group of 20 Realtors about various mortgages and programs available to homeowners and buyers, including reverse mortgages. He asked that I come in and answer some questions for the group as a longtime reverse mortgage originator. I answered typical questions about the product and made light of some of the facts and myths about reverse mortgages: who owns the title, how does the loan work, what options are available, etc. One of the Realtor’s mothers actually had a reverse mortgage and she shared a bit about her mother’s experience. Many had no idea how a senior utilizes and benefits



from this type of loan and knew only what they had read or heard in the media. The group became more interested once I started to discuss how the reverse mortgage can assist seniors in transition, enabling them to downsize through the use of a HECM for Purchase. Most of the Realtors did not even know this product existed, and those who did had no knowledge about the details of a Purchase transaction. I could see the wheels turning as the group became more engaged in our discussion about this product. A pivotal moment occurred when one of the Realtors asked, “Do you offer a reverse mortgage class? If you don’t,

Many people in the industry promote their business by offering seminars or workshops for seniors. This is highly encouraged, but it does limit your reach to the senior demographic. To increase referrals, originators need to establish relationships with those who are in contact with or are working directly with seniors: financial planners, CPAs, elder law attorneys, home care agencies, etc. However, I see a huge potential with another demographic: Realtors. Realtors have an extended reach in our communities and regularly connect with seniors and their families. I spoke with several Realtors for this article who agreed that there is great potential for a partnership between real estate professionals and reverse mortgage specialists. Mindy Garner with Coldwell Banker Bain’s Elder Move Alliance acknowledges that improving the real estate community’s negative perception of the product will be key to connecting with Realtors and encouraging them to engage the reverse mortgage market. “Knowing what reverse mortgages are really capable of doing for seniors can help Realtors with their clients by [explaining how HECMs can help them] reach their goals as well as figure out future goals,” Garner says. “Realtors run into different people and

originating the more Realtors understand how they can help people and why, the more they can pass this information on to others.”

Tips for becoming a real estate clock-hours certified instructor:

\\ Host your class somewhere unique— it doesn’t have to be in a conference room. If there are just a few people, take them for coffee or meet at a park.


\\ Provide the CE provider a reverse mortgage course curriculum. They might help you submit the information for state approval and offer to assist in initial classes.

\\ Don’t do a PowerPoint presentation. Remember high school? Unengaging presentations can be snoozefests. Show videos, provide cartoons or create crossword puzzles.

\\ Have a regular scheduled class every month, preferably a Tuesday or Wednesday (Realtors are often busy on the weekends).


\\ Ask local Realtors where they obtain their CE credits and inquire with that provider. Many state-certified CE providers will offer courses to become an instructor.

\\ Provide a binder of the curriculum and related materials for every attendant and include your contact information or business card. This will provide a valuable reference source for their office bookshelf, easily locatable if a client is interested in pursuing a HECM.

\\ Make the class more like a workshop. Don’t worry about sticking to the curriculum as much as providing an interactive environment where attendees can ask questions and share ideas.


\\ Check with your state. Persons able to teach certified clock-hour classes vary from state to state. Many states allow any interested individual to attend the necessary classes and apply for instructor certification.

Teaching a successful class:



\\ Provide a sign-in roster and make sure attendees include their cell numbers, not their office numbers—Realtors can change offices frequently.

\\ Team up with a title/escrow office. Some title offices will market your class to their real estate lists for you, and some will even provide a meeting area or sponsor lunch after your class.

\\ Realize who is more engaging or supportive during the class. These are your advocates. Follow up and schedule a meeting with them over coffee; explore the potential to co-market with them.

\\ Offer a free one-on-one class to a Realtor you work with and obtain feedback.

\\ Have fun. You want your attendees to remember YOU, not how boring the class was.



A reverse mortgage clock-hours class is a great introductory way for Realtors to obtain direct knowledge of the reverse mortgage, and reverse mortgage professionals can take advantage of this opportunity by teaching a class.

As an originator looking to increase business and connect with referral sources, connecting with Realtors in your community could go a long way, making you the go-to person for any reverse mortgage needs. By becoming a certified real estate clockhours instructor, you are providing a resource for Realtors to obtain continuing education credits, and can enlist professionals in your community to be educated advocates for the reverse program. x



Marketing to and networking with Realtors is a great way to not only help change product perception and understanding, but also increase your referrals and build trust. Realtors can sometimes be perceived as individuals

Realtors looking to enter the baby boomer niche can find a great amount of opportunity in those looking to downsize or move in retirement, and knowledge of the HECM product would be helpful when working with this demographic.

Each reverse mortgage clock-hours class is like a workshop, with the instructor reviewing a planned curriculum before presenting scenarios for the class to dissect and discuss. Specifically addressing the details of the HECM for Purchase product is certain to garner the class’ attention, although I’ve also found that many Realtors are interested in the details of a HECM Saver as well.


The majority of Realtors are not educated about reverse mortgages. Dan Faulkner Jr. with John L. Scott Real Estate agrees that most professionals in his line of work are unaware of the details of a HECM. Faulkner says even he was uneducated about the product before meeting me about a year ago. “There is not a high amount of understanding about reverse mortgages in the real estate industry,” he says. “Mostly because of a possible lack of trust.”

looking to “move” property and make a profit. But Garner insists that many Realtors are sensitive to their clients’ needs and would find value in their knowledge or reverse mortgages. “People have different needs. The reverse mortgage and reverse mortgage Purchase can be a tool in the toolbox for Realtors to use,” she says.

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The Reverse Review May 2013



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Underwriting I Have Red Shoes Ralp h Ros y n e k


Yes, Mr. and Mrs. Borrower, I have red shoes. Let’s just hope that our brief move to enhance our line of simple red shoes did not cause the product line to ultimately be discontinued due to manufacturing defects. x


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The industry goal has not changed: We still aim to provide an option for older Americans to remain in their homes and maintain financial independence. But perhaps we moved too far from the original product design. I wonder if sometimes we are not our own worst enemy when it comes to trying to meet everyone’s needs.


Addressing scenario or exception requests has increased underwriter frustration, because in many of these situations the full file is not provided to the underwriter for review. Subsequently, borrowers who were hopeful that they would receive an exception have not been properly

Because underwriting turn-times may be impacted and an exception review process may cause additional delays, originators are urged to keep on top of changing or amended guidelines. Setting borrower expectations, gathering complete information and documentation, and communicating accurate file processing and underwriting turn-times is critical to maintaining positive attitudes for all parties involved.


Unfortunately, this new pair of red shoes just isn’t the same. The former “one size fits all” sales and manufacturing specs of the initial red shoes have been drastically altered, impacted by a continuous stream of product enhancements, safeguards, more focused design and recognition of (or recovery from?) manufacturing defects that arose in the past few years.

Overall, there has been a noticeable increase in the number and complexity of “scenario” inquiries to underwriters. Many of these scenario assistance queries are the result of the implementation of new overlays and lender guideline interpretations. Further complication has arisen. While many of the overlays equate to hard and fast guideline changes, there is a gray area in that borrower ineligibility could be offset if the lender grants an exception based on certain supporting or mitigating circumstances and with the proper documentation.

prepared for the fact that all of their information and documentation presented must also “grid.” Denial of the file for reasons other than an exception complicates borrower and market acceptance of the reverse mortgage product, which gives rise to an additional concern.


I thought his comment presented an interesting perspective. Basically, the HECM portfolio was, for most of its existence, a singular product type: a pool of adjustable-rate loans. The rapid rise of the fixed-rate product impacted a 20-plus-year history of ARM product availability, and now that we’ve seen its rapid fall we seem to have returned to offering only red shoes again.

In other words, while today’s HECM product reflects a return to the product offering of the past, today’s eligibility and qualification guidelines have significantly changed. Continuing efforts to correct manufacturing defects to date have resulted in a substantial increase in originator uncertainty as to who and what actually qualifies for a HECM transaction. Additional changes to guidelines and proceeds availability are also being contemplated in the near future.



ecently, a seasoned colleague and I had a chance to catch up and walk down the HECM memory lane. Fondly, we remembered the time when our responses to borrower inquiries regarding HECM product options, features, benefits, costs, pricing, pre-qualification and origination were less complicated and largely standardized. It was a simple product back then. My colleague summarized the offering quite succinctly, saying it was as easy as, “I have red shoes.” There was nothing more to it.



The Reverse Review May 2013

visit our website to read about current issues in the reverse mortgage industry! The Reverse Review’s website offers complete access to all of the magazine’s content in a clean and crisp format. Read the latest issue or peruse the archives and access important stories from past editions.


Find out how you and your company can be a part of the TRR team! | TRR


REVERSE review

marketing Social Media for Loan Officers Sc ot t G o rd o n


Step one Set up a LinkedIn profile.

Step three Establish a professional Facebook page.


Facebook is easy to set up, but it has to be professional. You may want to consider creating two Facebook accounts, one for clients and establishing professional relationships, and the other for family and friends.


In the past it was enough to get out and “press the flesh” or deliver donuts. But in our ultra-busy life, most people don’t have time to stand and talk, and fatty donuts turn people off. We have entered the digital age, which means working, and even living, on our smartphones and iPads. So if you aren’t being found and becoming known through the Web, you are behind the times.

While some find this new form of interaction scary, there is great news for loan originators. It is easy to get started small, and then add a little more at a time. Before long, you can build an amazing online presence. In my new book, Social Media for Loan Officers, I outline the steps you can take to help build your own social media empire. You need to start building credibility now, because Google awards more visibility to pages that have been around longer.


What has changed is how you get known, and how people come to like and respect you. Nowadays, you need to be found—and liked—online.

Successful loan officers have always built networks of clients. That remains true today, only now many of them build that network and maintain it through social media, or Web-based platforms for social interaction. The most common forms of social media are Facebook, LinkedIn, blogs and Twitter.

After joining LinkedIn, you should consider creating your own mortgage blog, not because you are an aspiring author, but because the blog will make your name searchable on Google, and that is how borrowers will find you. Google needs to see your blog, with local contact information, so your name can appear in search results.


Being popular requires becoming known and being well liked. People have to discover who you are and what you can do for them, and then they must like you. There are many aspects to being liked, including your knowledge, quality of service, the value you bring, availability, manners, looks and attitude. This has always been true.

Reverse mortgage folks may think their clients are not online, but they are wrong. A 2010 study by the Pew Research Group showed computer usage by seniors is at an all-time high. Grandma is on Facebook, so watch what you post!




loan originator’s career is a popularity contest, and it always has been.

This may sound like a lot, but you can eat an elephant one bite at a time. Do a little each day or each week and you will get there. Good luck in the digital popularity contest! x b View a video on my blog about how to create a successful LinkedIn profile.




Step two b Create a blog.


LinkedIn is your online resume. Even if you meet someone in person, don’t be surprised if they return home and look you up on LinkedIn. If you aren’t there, or have no picture or a lame profile, borrowers will question your experience.

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The Reverse Review May 2013

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It’s All About the Data Ken H ign e t t


going to the source

Virtually all current loan origination systems work on a relational database (if yours doesn’t, it’s time to look for an update) and the settlement service provider’s system should likewise sit on a relational database. This allows all data to be identified by a loan number, order number, borrower name, property address, etc., which facilitates the easy and accurate transfer of data between systems.



Virtually all current loan origination systems work on a relational database (if yours doesn’t, it’s time to look for an update) and the settlement service provider’s system should likewise sit on a relational database. This allows all data to be identified by a loan

When you look at the total loan origination process, it is clear that people make the transaction work, but effective use of the data allows them to work faster and more accurately, creating a smoother and more reliable experience for the borrower. x


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number, order number, borrower name, property address, etc., which facilitates the easy and accurate transfer of data between systems. If the integration is configured properly, this also means that the appropriate user in each system is notified immediately of any changes in the data and can take appropriate action, including using the data feed to display and examine the related document. Another good example of effective integration is the processing of the lender’s closing instructions. There is a document involved here, but if we want fast and accurate preparation for the closing, the related data should flow directly from the lender’s system to the settlement service provider’s system for inclusion in the closing statement and related documents.


real time in both directions between systems. In addition, our people must be able to access the electronic versions of all documents required to close a file. Whether the document is a payoff demand, lien release or something else, the document must be present even though the data is what we really use. While it is certainly necessary to examine the document for validity, if the corresponding data is present, it can be included in the process with a button click and it will always be correct. In short, if data exists electronically, it should be incorporated. For example, when a payoff demand is obtained, the data should appear in HUD’s system and the lender’s loan origination system at the same time and without any effort on the part of our people.


In keeping with our definition of effective integration, all processes should encompass the movement of both data and documents between systems. If our people are truly going to have exactly the actionable data they need, and also the tools with which to take appropriate action, our integrations must involve properly tagged and identified data flowing in



e have spent a great deal of time and energy in the loan origination and settlement services industry discussing the benefits of the application of technology, particularly real-time integrations. We take these terms for granted, and we each have a unique understanding of what they mean. I think that we all run the risk of forgetting that all of the work involved in the loan origination and settlement services is performed by humans, not machines. This means that what we are really talking about when we use the terms “technology” and “system-to-system integration” is giving people exactly the data they need, when they need it. It’s about providing them with the tools to take the appropriate action regarding that data. This is effective technology that improves both the speed and reliability of the process by supporting the activities of people.

The Reverse Review May 2013




GMC Introduces nu62 Jes s i c a G u e rin

“Nu62 shows brokers and borrowers both the risks and rewards of different consumption patterns,” says GMC President and CEO Colin Cushman, who worked as director of portfolio analysis for the FHA before joining GMC in February. “It makes the options transparent and easy to understand for the first time ever.”

“We need to expand the marketplace beyond the needs-based consumer,” he says. “What we’ve been missing is a comprehensive way to understand the loan and explain it to borrowers. This will facilitate that process.” GMC released the app to its partner community last month, and the company said it plans to make it available to the industry at large in the coming months. x






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“It’s a multidimensional, customized planning tool designed to help seniors plan for the consumption of their home equity,” Cushman says, adding that the “consume later” function caters to the idea of using the HECM as a financial

Cushman, who assisted in the design of the Standard and Saver products while working for the FHA, says the launch of nu62 coincides perfectly with the recent moratorium on the fixed-rate Standard HECM. Nu62, he says, will help reverse professionals educate potential borrowers about the nuances of the adjustable-rate HECM. He says that although the new app took six months to develop, “It’s been in my head for six years.”


The app asks users to enter their name, age and home value; select the type of loan they prefer, either the Saver fixed or the Standard ARM; enter the total for any existing liens on the property; and then select the rate at which they plan to consume the loan proceeds. The data is compiled in a graph to illustrate how each of these factors impacts the borrower’s access to equity.

planning tool. The graph also illustrates the difference between a traditional and reverse mortgage as a point of comparison for the user.



eneration Mortgage Company has launched a new app in the hopes of repositioning the HECM as a flexible financial tool for retirees. Called nu62, the app graphically plots the correlation of home equity to personal consumption to home equity credit growth over a specific period of time. The idea is to provide users with a new view of aging in place, demonstrating through

dynamic charts how borrowers can utilize home equity based on consumption preferences.


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The Reverse Review May 2013


Blessed Assurance

cracks along the interior walls, misaligned doors that do not open or close properly, and unlevel floors. In this case, the appraiser would complete the report “Subject to Required Inspection” by a structural engineer or other qualified foundation professional.

Joh n G o l d e n


n the appraisal of residential real estate, there are several basis points available to the appraiser regarding the completion of the report. The most common basis is “As Is,” which is utilized when there are no repairs, modifications or required inspections to the subject property.

improvements under construction, repairs or inspections (and requirements thereof) have been completed; and the value opinion rendered must be consistent with the property condition(s) as described in consideration of these hypothetical conditions.

Other alternate basis points include:

There is often a great deal of confusion and inappropriate underwriting requests associated with the “Subject to Required Inspection” basis. Appraisers are often asked to review inspection reports, bids for repair/ modification or other information that has been provided by an independent, qualified professional because the appraiser has deferred to this professional based on their expertise.

Subject to Completion Per Plans and Specs4Utilized for proposed construction or when the subject is currently under construction Subject to Repairs or Alterations4 Utilized when there are deficiencies that require correction, such as items that prevent a property from meeting FHA’s minimum property requirements Subject to Required Inspection4 Utilized when there are conditions or issues that are beyond the expertise of the appraiser and as such it must be deferred to an independent, qualified professional These alternate bases require the appraisal report to be completed on hypothetical conditions that the 34



In some cases, appraisers are asked to include statements within the report confirming that once the recommendations of the qualified professional are met, the property will meet HUD’s minimum property requirements. An example of this would include a situation in which the appraiser noticed during inspection what appeared to be stress cracks along the foundation walls, similar

Asking the appraiser to submit a statement of this nature can be problematic. The appraiser does not possess the professional expertise to determine or diagnose issues related to the structural integrity of the property. As such, he also cannot make any guarantees or assurances within the report regarding these professional recommendations. Doing so would be inconsistent with the deferment to the qualified professional and could also open the appraiser up for a great deal of liability related to the recommendations or the work completed. When an appraiser defers to a qualified professional, he has essentially removed himself from the equation with regard to the issue at hand. Therefore, it is the responsibility of the underwriter to determine whether the recommendations of the qualified professional were fulfilled and if the subject property is able to meet HUD’s minimum property requirements. The appraiser may subsequently be contracted to revisit the subject property for verification that the work associated with the recommendations has been completed—provided, of course, that the appraiser feels qualified to make such a verification (i.e., that a roof has been replaced based upon the recommendation of a licensed roofer). Otherwise, the qualified professional may need to be contracted to revisit the property and make such verifications for the underwriter’s satisfaction. x

title tip 8

Megan Hafenstein What information can I provide upfront to make my loans close more efficiently and quickly? When you open your order, make sure to include as much information as possible. The more information, the better! The details you send will help us to eliminate possible judgments or liens that may show up, especially with a common name.

The basics 3The borrower’s full name, including a middle initial


Don’t forget to note 3If the borrower is in bankruptcy

Detailed borrower information for submission should include 3The borrower’s written authorization, which is necessary to release payoff information for most payoff lenders 3The borrower’s credit report (if possible)—with financial institutions merging and many mortgages transferring service providers, credit



3A  full copy of any Trust and any amendments or Power of Attorney (POA) related to the transaction for title approval 3A  certified death certificate if there is a deceased party on title Have a question for this column? Email














3If the dwelling is a manufactured home

3The most current Good Faith Estimate (GFE)


3The borrower’s date of birth and a note regarding any children of the borrower who may have the same name (i.e., Sr. or Jr.)

3If you are aware of other parties that will need to be removed from title

reports can be a great resource to track down payoffs, and can be especially helpful in locating a servicer for an old, closed loan that still needs to be released from title


3The borrower’s Social Security number

3If the borrower’s competency is questionable, and if a POA/Trust is involved





toll-free: 800.542.4113

back to back


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The Reverse Review May 2013


legal Badges of Fraud Ale x a n d e r J . C ha udhry


oday’s uncertain economic environment has led an increasing number of seniors to access their home equity through reverse mortgage products as a way to ease their financial situation. As a result, senior homeowners are increasingly becoming a prime target for dishonest actors. According to the FBI, HECM-related fraud is occurring in every region of the United States and has the potential to substantially increase as demand for this product rises in demographically dense senior locations. Last month, I wrote about financial abuse of the elderly by family members holding a power of attorney and suggested certain measures reverse mortgage professionals could take to help combat this problem. This article reviews other common types of reverse mortgage fraud and tips for best practices that will help safeguard your company. At its core, reverse mortgage fraud is an illegal act that occurs when perpetrators falsify, omit or fabricate information in order to obtain a loan that strips legitimate or inflated equity from the collateral. In many of the reported scams, the elderly victims are identified through local religious groups and investment seminars. The seniors are often offered 36


free homes, investment opportunities, or foreclosure or refinance assistance, but in reality, they are being used for property flipping and other criminal schemes. Reverse mortgage professionals should be aware of these illegal schemes so they can better identify potential fraudulent transactions. Property Flipping Schemes Equity theft schemes are the most common method used by mortgage fraud perpetrators to exploit HECMs. In this type of fraud, perpetrators identify and acquire foreclosed, distressed or abandoned properties. The scammers recruit “straw buyers” to purchase these properties who commit occupancy fraud by fraudulently stating they will occupy the property as their primary residence. Next, the schemers recruit senior citizens to “purchase” the property from the straw buyer. But there is no exchange of money. Instead the property is simply transferred from the straw buyer to the senior citizen by quit-claim deed for no consideration. After the senior is on title, the fraudsters instruct the senior to obtain a HECM with the aid of a fraudulently inflated appraisal. The appraisals are typically inflated by arranging for cosmetic repairs to the property or documenting repairs

that were never actually performed. Investigators have noted appraisals as high as 1,000 percent of the actual fair market value of the home. The loan proceeds are then pocketed by the criminals after closing. To combat this type of scheme, reverse mortgage professionals should be extra vigilant when any of the following red flags appear: O The borrower has a recent deed to the property with no or nominal consideration. Consider requiring a six- or 12-month seasoning requirement for property ownership to reduce fraud. In addition, be extra cautious if the borrower explains that he or she received the property “free” from a special government program. Fraudsters often convince the unsuspecting senior that new government programs provide free homes to qualifying seniors. Conduct an additional investigation to reduce the likelihood of fraud. O The borrower has a recent deed to the property that shows consideration, but there is no recorded purchase money mortgage. If the acquisition deed into the current vested owner is not accompanied by a concurrent purchase money deed of trust or mortgage instrument, exercise


Distressed Non-Senior Mortgagors


what to watch for BE AWARE OF THESE FLAGS RED

Utility bills that are not in the applicant’s name





( The mailing address is different from the property address. Request an explanation and conduct proper diligence if you notice that monthly

In today’s financial environment, perpetrators are continuously becoming more creative in their schemes. Reverse mortgage professionals should know how to spot and identify these potentially troublesome transactions. By being aware and following these best practices, you can help safeguard the program for the senior citizens who rely on HECMs to provide for them in their old age. x


Distressed mortgagors who are under the age of 62 will sometimes ask senior parents, other family members or friends to take out a HECM loan for them. One condition for a borrower to obtain a HECM is that they live in the subject property as their primary residence. The distressed mortgagor might add the senior citizen to title in order to meet this requirement. In some cases, distressed mortgagors will even assume the identity of the senior citizen and obtain the

( The property has existing liens taken out by someone other than the senior. If the HECM proceeds are being used to pay off an existing mortgage in the name of someone other than the senior, be sure to verify occupancy. Consider requiring a written explanation from the borrower detailing why they are using loan proceeds to satisfy another’s debt. Although there is nothing per se wrong with paying another person’s obligation, this red flag coupled with other factors, such as a recent quit-claim deed adding the senior to title, may warrant additional investigation.

( Rushed Transactions. Be cautious if a customer requires you to move quickly to close his or her loan without providing you sufficient time to ask appropriate questions and request backup documentation. A rushed transaction may be acceptable if there are no other red flags present. However, always be wary of these situations. Crooks may not want to provide you with an opportunity to analyze the transaction. Use your best judgment to determine whether the transaction requires you to take another look at the file or obtain additional documentation.


( Utility bills that are not in the applicant’s name. Look for any utility bills and other monthly statements that are not in the borrower’s name or that have amounts too little for a person occupying the home full time as their primary residence. If there is any doubt about occupancy, consider sending an agent to conduct a visit to the property to verify whether the senior citizen is in fact living in the property. You should also examine the appraisal photos to make sure the home looks like it is lived in full time.


O Pay close attention to the methodology used in the appraisal. Be vigilant for comparable sales that are outdated or in dissimilar neighborhoods. Look for the use of a cost approach for a property that is not new construction. Lenders can and should independently verify the value of the comparable sales used in the appraisal by using thirdparty or online resources, such as the Multiple Listing Service. However, note that today’s thieves are sophisticated enough to infiltrate these types of databases and manipulate the sales information. It is therefore essential to continually train your underwriters and appraisal reviewers on these types of red flags and other pertinent issues to help prevent losses resulting from inflated and fraudulent appraisals.

Be vigilant and request backup documentation and explanations for any of the following red flags:

statements or other paperwork related to the HECM loan do not correspond with the senior’s property address. For example, if there are discrepancies between the credit report and loan application, consider utilizing a third party to perform additional research on the property and applicant. You can also call the applicant directly and ask pertinent follow-up questions for reassurance that the transaction is not fraudulent.


HECM without the senior’s knowledge by submitting fraudulent paperwork to apply for and obtain the loan.


caution. It is rare that any individual will be in a position to purchase real estate without financing. Require a plausible written explanation as to the terms and circumstances of the transaction and request follow-up documentation as appropriate.

Rushed Transactions


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The Reverse Review May 2013

spotlight article How should reverse mortgage lenders


grapple with pending product changes?

on editi

At times, the creative marketing process in the reverse space is a clearly defined set of parameters. At others, subtleties continue to create a murky misalignment of intent and response. The proposed changes this year are designed to ensure the program’s safety and security with all responsible lenders holding hands to be on board. Yet it is clear that previous borrowers with any tax and insurance default history, or others who retain very little debt but still want all their funds up front, may be denied access in the new reverse world. It is now up to the industry to not shy away from its responsibility and use the new guidelines (once they’re confirmed) to build a better picture of the ideal reverse mortgage borrower. Of course, the intended product changes are being designed to smooth these corners of the marketing spectrum while improving the FHA’s balance sheet, but it does beg the question: What are we now? Which socioeconomic segment of the senior community does the government, the FHA and other influencers of this program really want this loan to serve?

With FHA changes to the HECM program pending, lenders must prepare to adjust their marketing agendas. But with regulations set to impact who exactly can utilize a HECM loan, lenders are left to wonder...

What Are We Now?

By Teague McGrath


t is already well documented that the reverse mortgage industry is set to change again this year. For most participants, that means a modification of their processing and underwriting standards, different products to consider and new economics to calculate. For those involved in marketing, the new reverse landscape is forcing us to think more about who this loan program is meant to serve, and how best to develop the appropriate messaging in a tightening net of eligibility. 38


In the past, pressure to ensure we were soliciting the “right” kind of borrower meant a constant grappling of who that really was. Coupled with undeniable forces from the sales floor, which is providing constant feedback on what’s working and what’s not, the message began to gravitate toward the core customers who converted the best: mainly, a senior who needed funds to pay off an existing mortgage or cover additional household expenses. Now that understanding may be more difficult. Together with new product guidelines, the marketing message has to find new ways to appeal to seniors who may not otherwise have considered a reverse—the clients of financial planners and wealth management advisors, for instance, as well as potential homebuyers using the underutilized HECM for Purchase. With this come more B2B marketing, new relationships and, potentially, a very different kind of borrower. On the consumer front, the dilemma remains but now with a little less focus on the guideline fringes. Should we include any mention of those seniors who desperately need the funds to stay

spotlight article



At the very least, the negative perception of this product will dissipate as the new guidelines process more “vanilla” lenders and sensational media opportunities decline. Maybe it will be the push we need to crest that elusive “tipping point” of senior acceptance—that tipping point that we all know is out there. x


| 39



The impending changes cement the long-term sustainability of the reverse mortgage program, but it’s going to be another interesting ride as we center our marketing aspirations while negotiating the new economics. Certainly, it was those very ends of the spectrum that provided the loan numbers to support many reverse businesses and therefore players with less knowledge and experience of the product’s nuances may struggle. But it also means that many seniors who would responsibly use a reverse mortgage to age in place—using their

only asset, their equity—might be denied their loan and fall through society’s cracks. Aren’t they the stories that make this program meaningful for those that do it day in and day out? Without a doubt, they provide the testimonials that have the most dramatic consumer impact, offering strong, persuasive counter stories to negative media attacks. It’s ironic that these same borrower stories are also the ones the media focuses on when such borrowers fall into trouble.


The proposed changes have also highlighted the way in which it is becoming increasingly appropriate for the HECM program to decide how senior homeowners should be “allowed” to spend their hard-earned equity. Even for a Democrat, this is hard to swallow! There is no doubt that every borrower should be held to normal loan obligations and be

accountable for any shortfall, but is it the industry’s responsibility to tell them how to spend those funds? Furthermore, is it irresponsible of the marketer to use images of a couple sailing if it might then influence a borrower to buy a boat and sail away with their newfound wealth without any consideration for their potential needs further down the road?


in their homes but are in danger of default? Alternatively, do we market to the credit-worthy, financially stable boomers who are all too easily accused of throwing their money away in the name of a “retirement lifestyle”? As an advertisement is constructed, are you sending the wrong message by saying, “no credit score required” and “tax-free cash”? Is a photo of a smiling, attractive (young?) couple enjoying a sunny day sailing on a yacht too aspirational and “lifestyle” as to give the wrong impression? Are such images soliciting unwelcome scrutiny?

The impending changes cement the long-term sustainability of the reverse mortgage program, but it’s going to be another interesting ride as we center our marketing aspirations while negotiating the new economics.”


Teague McGrath is the chief marketing officer at AAG and is responsible for the marketing campaigns featuring Senator Fred Thompson.

Limiting draws in some way at origination to ensure that borrowers have access to cash for longer periods of time



Establishing set-asides or a type of escrow to ensure that borrowers’ tax and insurance obligations will be met


going to the source

Instituting a type of financial assessment during the origination process to determine if the cash flow afforded by the HECM loan will be sufficient to create long-term financial stability for the potential borrower



According to Karin Hill, the director of HUD’s single-family program development, the agency is considering several changes to the HECM program. The ideas to the right are being considered to address recent statistics on life expectancy, the noted decrease in the average age of borrowers, and the problem with tax and insurance defaults. If any or all are instituted, they will impact the way lenders can market the loan to potential borrowers.


The Reverse Review May 2013

Big Corporations Three Leading Reverse Mortgage Companies

What this could mean for the future of the HECM market

Written By 40 | TRR Jessica Guerin

In the past several months, two publicly traded companies have entered the reverse mortgage market.

Walter Investment Management Corporation came onto the scene when it completed its purchase of RMS in November, and then, just two months later, solidified its long-term presence in the market by announcing its intent to acquire Security One Lending. Meanwhile, Ocwen Financial Corporation pursued an acquisition of Genworth Financial’s reverse mortgage division, announcing the deal’s completion just last month. This recent interest in the reverse mortgage market has left many in the industry to wonder what’s in store for the space, which has endured a tumultuous few years as big banks entered and left, regulatory action intensified and volume dipped. While the future does hold promise, the current landscape remains plagued by uncertainty as lenders await pending changes to the product, which HUD has said will come sometime this year. But despite these challenges, the entrance of corporations like Walter and Ocwen confirms that some investors maintain a solid belief in the profit potential of the HECM market, regardless of pending modifications to the product. Likely motivated by statistics about the country’s aging demographic and expectations for continued home price recovery, some investors are recognizing the product’s promise. In a time of uncertainty for the industry, these recent acquisitions serve as a reminder that the HECM market has substantial growth potential as millions of America’s baby boomers approach their retirement years.

Walter Buys RMS In November, Walter Investment Management Corporation (NYSE: WAC) completed its purchase of Reverse Mortgage Solutions (RMS) in a transaction totaling $122 million. The purchase price—which represented

Reverse Acquisitions

four times RMS’ expected core earnings for 2012—was a significant sum that surprised some in the industry, while those familiar with RMS’ strong and diversified presence in the space said the hefty price made sense. In addition to its substantial reverse mortgage servicing operations, Texas-based RMS maintains healthy correspondent, REO management, wholesale and retail channels. The company also upped its presence in the secondary market since the big banks left the space, issuing $1.1 billion in securities in the first half of 2012. Industry analyst Jeff Taylor, founder of Wendover Consulting, said RMS’ varied operations are exactly what made the company so valuable. “RMS was building a war chest of reverse mortgage servicing. They are a huge aggregator, and they issue Ginnie Mae securities. Therein lies a significant amount of value,” Taylor said. “They aren’t just an origination company, and their crown jewel is their ability to issue securities and service them and aggregate for wholesale clients.”

says it has pioneered a “disciplined approach” to underwriting and that it operates a high-touch servicing platform, describing its specialty as “offering creative, structured solutions to owners of less-than-prime, non-conforming and other creditchallenged mortgage assets.” Walter Chairman and CEO Mark J. O’Brien said the company’s presence in the reverse market will be supported by its existing operations on the forward side. “The acquisition of RMS creates a natural extension of our forward platform into the reverse mortgage space and will allow us to capitalize on the customer overlap between the two entities,” O’Brien said in a public statement announcing the deal’s completion. O’Brien has stressed to investors the company’s belief in the potential of the reverse mortgage market. “The sector has very attractive long-term growth prospects and is currently undergoing significant structural change, providing us with an opportunity to capitalize on those dynamics,” he said.

Michael McCully of New View Advisors agrees. “They were a oneof-a-kind opportunity,” McCully said, pointing out that RMS is unique because it is a servicer, a special servicer, an issuer, an originator and a technology provider. “No one else can say that they have all of the attributes that RMS has.”

According to McCully, Walter’s move will enable RMS to expand in ways it could not under its former owner. “Walter is a savvy company, and they recognize opportunity,” McCully said. “Having more capital to combine with their expertise was something RMS needed to be able to grow aggressively, to issue adjustable-rate HMBS and to take advantage of other dislocations in the market.”

Based in Tampa, Florida, Walter services a diversified loan portfolio that totals $82 billion through its subsidiary, Green Tree. The company

Taylor agrees that the move was a smart one for RMS. “They had been for sale for some time and looking for the right partner, a partner who wanted 8


| 41

The Reverse Review May 2013

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to enter the space with adequate capitalization and wanted to build a business,” he said. “I think it was the perfect fit.”

Walter Pursues Security One Not long after its acquisition of RMS, Walter announced its intention to expand its presence in the space with the purchase Security One Lending (S1L). The definitive agreement, which was announced in January and finalized on May 1, closed for as much as $31 million, a purchase price that comprises $20 million in cash plus up to $11 million to be paid based on Security One’s achievement of certain performance benchmarks in one year’s time. According to Walter, the acquisition represents 1.2 times Security One’s projected pro forma EBITDA for 2013. San Diego-based Security One Lending runs both retail and wholesale operations, originating just under 5,000 reverse mortgage loans with an aggregate unpaid principal balance of more than $700 million in 2012. In late 2012 the company beefed up its operations by hiring nearly 90 reverse specialists from MetLife when the bank left the space. With a 300-plus sales force, the company was listed as No. 2 on Reverse Market Insight’s latest Top Lenders list. O’Brien said the move to acquire Security One was intended to enhance RMS’ origination program. “This addition is a key step in achieving our previously stated goal to increase the retail mix of RMS’ originations business,” he said in a January press release. “This acquisition creates a combined platform with diverse, established originations channels without significant overlap.” According to Taylor, the deal amounts to a natural synergy. “Walter saw it as an opportunity to have boots on the ground,” Taylor said. “They’re vertically integrated now, so Security One can originate at the kitchen table and, at the end of the day, it winds up in a security that RMS issues and goes into a bond.”

going to the source Mark J. O’Brien Chairman and CEO of Walter Investment Management Corp. “The sector has very attractive long-term growth prospects and is currently undergoing significant structural change, providing us with an opportunity to capitalize on those dynamics.” Walter has indicated that it may make more acquisitions in the space down the road. Already, the company has secured a $100 million credit line with the Royal Bank of Scotland to support funding obligations, and just last month, it purchased $12 billion in reverse mortgage servicing rights from Wells Fargo, a move that will double the size of RMS’ servicing portfolio.

Ocwen Enters the Market Walter isn’t the only public company stepping into the reverse space. Last month, Ocwen Financial Corporation (NYSE: OCN) finalized its purchase of Genworth Financial’s reverse mortgage division in a transaction totaling $22 million in cash. As part of the deal, the lender changed its name earlier this year from Genworth Financial Home Equity Access to Liberty Home Equity Solutions. The new name references the company’s former moniker, Liberty Reverse Mortgage, as it was known before Genworth purchased the company in 2007. Liberty is a leading lender in the reverse mortgage space, topping Reverse Market Insight’s recent list of lenders. Ocwen CEO Ronald M. Faris said the company sees significant opportunity in the reverse mortgage market. “We believe this promising market offers enormous long-term growth potential, and this purchase positions Ocwen to capture that growth,” Faris said in a statement announcing the deal. A financial services holding company, Ocwen services and originates mortgage loans with a mission to “provide solutions that help homeowners and make our clients’ loans worth more.” The Atlanta-based company has offices in several states across the U.S. and in India, Uruguay and the Virgin Islands. As one of

the largest mortgage servicers in the country, Ocwen’s portfolio includes $128 billion in loans as of the second quarter of 2012, a sum it acquired by buying the servicing rights formerly owned by Residential Capital, Ally Bank and Homeward Residential, among others. In a statement to TRR, Ocwen said the company strongly believes in the potential of the HECM product. “Ocwen Financial Corporation believes the reverse mortgage industry is a promising market that offers significant long-term growth potential. We acquired Liberty Home Equity Solutions because of its strong historical performance, national footprint and highly experienced team,” the company said. “We are excited about Liberty’s prospects for further growth.” Liberty CEO Pete Engelken said the company plans to expand under its new ownership. “Liberty will continue to look for opportunities to help seniors and grow our business through retail, wholesale and correspondent lending. Ocwen brings to us a deep understanding of the mortgage industry with infrastructure and resource support to help further our growth plans,” he said. “With a focus on innovation, technology, capital markets and operational excellence, I expect Ocwen to help Liberty drive the growth of the reverse mortgage industry, including the development of improved products, pricing, securitization, liquidity and infrastructure.” Ocwen is also a Ginnie Mae-approved issuer, a fact that may elevate Liberty’s rate of issuance. Engelken said the company has been an active HMBS issuer since 2011 and will continue to assess its involvement in the HMBS market. “We will continue to 8


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The Reverse Review May 2013

evaluate secondary market outlets and we will be issuing Ginnie Mae securities as needed to support our business growth,” he said. Engelken also said the company does not expect any potential program changes to have a negative impact in the product’s growth potential. “We expect Liberty and other lenders in the industry to evolve product features, origination processes and underwriting guidelines as we have over our 20-plus year history. Any future FHA modifications will have a positive impact on the reverse mortgage industry’s sustainability over the long term,” he said. “As part of Ocwen, we expect to gain access to increased liquidity and resource support to help fuel our growth plans, including opportunities to launch new proprietary products that will enable us to tap into new customer segments.” From his perspective, McCully said Ocwen’s move appears to be strategic and long-term. “Ocwen brings a lot of resources that a straight private equity firm might not possess, like servicing, mortgage expertise and systems, so in some ways it’s more of an add-on to their existing infrastructure,” he said. “It’s a vote of confidence for the industry that a party such as Ocwen would be willing to enter the space.” McCully said Ocwen’s entrance into the reverse mortgage space is likely to benefit the industry as a whole. “They’ll bring more servicing capacity to the industry, which it has needed,” he said. “I think Ocwen will be opportunistic and creative and will bring more vitality and more solutions to the industry over time.”

Nationstar Eyes Servicing Acquisitions Nationstar Mortgage Holdings (NYSE: NSM) is another corporation that has shown interest in the reverse mortgage market. While it hasn’t made any moves on the origination side, the company has upped its presence in the reverse servicing sector. Nationstar bought Bank of America and MetLife’s reverse mortgage servicing rights after 44


both companies left the space, and it now has one of the largest reverse servicing portfolios in the country. Recently, the company raised more than $200 million in capital and said it plans to pursue more acquisitions in mortgage servicing, although it refrained from specifically naming acquisitions in the reverse sector. But, according to Reverse Mortgage Daily (RMD), Nationstar executives have stated an interest in the market and may choose to up their presence in the arena. Quoting Nationstar CEO Jay Bray in a quarterly call with analysts, RMD said the company noted opportunity in the reverse sector. “I think that [reverse mortgages are] an area of growth. Clearly not close to what we can do on the forward side. And then longer-term, if you think about again the demographics of the country and politically how important that product could become over time, I think it is a strategic space for us to seriously consider to invest in,” Bray said.

What This Means for the Future of the HECM Market The entrance of larger corporations into the reverse mortgage space appears to be a welcome development from all sides and a positive indication of the product’s promise. These latest developments suggest that investors are being swayed by more than just demographics. As a unique type of loan that allows borrowers to access their home equity, the HECM can be strategically leveraged as a smart financial planning tool to support a senior’s needs in retirement. If lenders can move beyond the needs-based population and find a way to access the discretionary borrower—and the financial planners who advise them—the loan could become a commonplace financial tool. New investors in the reverse mortgage market seemed to have recognized this possibility and what it could mean for the industry down the road. “It’s a healthy sign to see outside investors buying into reverse mortgage origination and servicing companies,”

said John K. Lunde of Reverse Market Insight. “Beyond the validation of the space, it challenges existing companies to sharpen up their business models— whether it’s to prepare to sell themselves or simply compete against competitors with newly enlarged capital bases.” In effect, big companies like Walter and Ocwen will bring some muchneeded liquidity back to the HECM market. “Well-capitalized, nonbank, public companies are entering into the space, and that was sorely needed when the big banks left,” Taylor said, adding that some lenders struggled to handle the surge in volume that followed in the wake of big bank exits, and with larger entities investing, lenders might have access to additional warehouse lines to fund future growth. Some in the industry are hopeful that these recent acquisitions will rejuvenate the market for investments in the space, even despite the current low volume. According to McCully, the recent dip in volume may not be such a deterrent. “The industry’s volume is, unfortunately, less than half of what it was at its peak, but I think that for those who are contrarians, it’s a great opportunity to make an investment because prices are not as high, and everybody still sees the longterm trends and the demographics,” McCully said. “So as an institution, if you’re a believer in those trends, this might be an excellent time to be investing in the space.” Still, others point out that HUD’s pending changes to the program could put the brakes on movement for a while as investors might pause to observe the impact before writing any checks. According to McCully, these pending changes could be problematic. “HECM is at risk of becoming a marginalized product for a very select group of people,” McCully said. “Without more effort to overturn negative publicity, educate financial planners and appeal to discretionary borrowers, if the product continues to be curtailed, then no matter how ambitious and long-term thinking

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October 9, 2009


going to the source john k. lunde president

and founder of Reverse Market Insight, Inc. “It’s a healthy sign to see outside investors buying into reverse mortgage origination and servicing companies. Beyond the validation of the space, it challenges existing companies to sharpen up their business models—whether it’s to prepare to sell themselves or simply compete against competitors with newly enlarged capital bases.”


Process Blk C

the industry is, at some point it becomes too small to become meaningful for new entrants in the space. Of course, this might open the door for the return of proprietary products,” he said, adding, “HUD’s mission was never to serve 100 percent of any given market.” Regardless, Walter and Ocwen have proved to be unfazed by this looming uncertainty. According to RMD, Walter execs told investors earlier this year that any program changes are unlikely to impact volume, citing the potential for “explosive growth.” Taylor said their willingness to buy in at such a time does mean something. “The demographics are overwhelming,” he pointed out. “I think they’re prepared to weather the storm.”

Now that there’s been an increase in investor interest, many are left wondering if more acquisitions are on the horizon.

your origination network from an acquisition, then it makes sense because you don’t need to double your cost structure to do so.”

McCully said future interest from outside investors would also be enhanced by home price appreciation. “Even if it’s modest— 1 or 2 percent annual growth, as long as home values are collectively increasing rather than decreasing, then that creates additional opportunity,” he said.

Lunde said the consolidation of both origination and servicing/issuing by one outside company—as seen in both the Walter and Ocwen acquisitions—is an interesting trend that may alter the future landscape of the space. “That is a similar strategy that the industry has seen before from Financial Freedom a decade ago,” Lunde said. “It resulted in one of the most dominant franchises we’ve seen in the RM market, helping to power the industry to its record volume levels in 2008 and 2009. Only time will tell if the current consolidation and investment portend a similar volume expansion.” x

McCully also said he anticipates continued consolidation in the industry, not just because of capital concerns, but also as a means to mitigate operational expenses. “In a shrinking industry, the best way to continue to make the product profitable is to reduce costs,” McCully said. “One of the ways to reduce costs is to reduce overlap. If you can double the size of

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The Reverse Review May 2013


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Reaching Our Potential Col in C u s h m a n


n 2006, the reverse mortgage industry originated more than 50,000 loans for the first time, and by the end of 2007, that number had risen to more than 100,000. That held steady in 2008 and 2009. But in 2012, we dropped to originating just over 54,000 loans. Volume has been cut in half in three short years. Why? There is one little-discussed theory that has a major bearing on the decline. I believe the introduction of the closed-end, lump sum loan changed the sales strategy of the industry in a way that reduced the value proposition to the borrower. The original intent was to provide a product that could help seniors age in place, but the emphasis on the closedend, lump sum loan changed the market’s perception of the product. In the public’s view, a reverse mortgage means that a lender gives a senior cash in exchange for the senior’s house. The public thinks that a reverse mortgage is only for seniors who are in desperate situations and not required for seniors who are in stronger financial positions. Generation Mortgage Company research shows the reality behind the perception. A recent GMC borrower survey showed that 70 percent of borrowers took out a reverse mortgage to rectify an unsustainable situation.

“If we adjust our sales strategy to show seniors exactly what a reverse mortgage is and how it can provide extremely valuable supplemental retirement income through a transparent presentation, we will greatly expand our target market while achieving the mission to help the nation’s seniors age in place. 46


That is not the only issue facing the industry; it is also subject to continued regulatory scrutiny. The FHA has been watching the industry for years and, last month, we lost the ability to offer seniors the fixed Standard product. Fixed Standard has made up roughly 70 percent of the overall production volume every year for the last three

years. Furthermore, the FHA has made comments signaling that more changes could be coming. Still, we can reduce the need for additional regulation by broadening our transparency, providing proper education to potential borrowers and their heirs, and devising tools to assist prospective borrowers in planning to age in place. If we take those steps, borrowers making educated and planned decisions regarding their home equity consumption will greatly increase the probability of successful aging in place, which is the original intent of the program. The potential market for reverse mortgages is enormous. Approximately 80 percent of seniors say they want to age in place, and about half are considering using their home equity to help fund retirement. At this point, there are 24 million households with residents age 62 or older, and half of those hold more than 50 percent of their net worth in home equity. If we adjust our sales strategy to show seniors exactly what a reverse mortgage is and how it can provide extremely valuable supplemental retirement income through a transparent presentation, we will greatly expand our target market while achieving the mission to help the nation’s seniors age in place. This mission is too critical to only assist roughly 50,000 borrowers. Let’s go out and show the public that they have misunderstood reverse mortgages for too long and let’s show them the virtues of the reverse mortgage. If we are able to do this, we will not only alleviate concerns about the industry, but also ensure that reverse mortgages are recognized as the smart retirement tools that they are. x

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The Reverse Review May 2013  
The Reverse Review May 2013  

A magazine for professionals in the reverse mortgage industry