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HOW TO SELL LOANS IN A NEW HECM LANDSCAPE PG. 22 A LOOK AT THE AGING-IN-PLACE MOVEMENT PG. 32 +SCOTT NORMAN SITS DOWN IN OUR HOT SEAT PG. 20

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REVERSE april 2014

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{ the

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Reverse mortgages see an uptick in positive press as media outlets assess the program’s benefits in light of recent change.


Lighting your way in Reverse.

The Reverse Review April 2014

s s s s

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For further information, contact: Ralph Rosynek 281-404-7970 Email: rrosynek@rmsnav.com


reversereview.com

8 TRR

|3


The Reverse Review April 2014

From the Editor can better serve the senior demographic. Without their valuable contributions, our magazine would not be able to cover the industry with the scope and depth it demands.

l

Meet the Team Senior Publisher Reza Jahangiri

Publisher

Erik Richard

In the coming year, our team aims to bring you more content about how the reverse industry can expand its reputation as a smart financial planning tool and connect with a larger portion

A note from jessica guerin

This issue of TRR marks the magazine’s fifth year covering the

reverse mortgage industry. In the past year, we’ve seen the industry undergo substantial change, and with the help of our knowledgeable contributors, our team has worked hard to bring you quality information and insight into this ever-evolving market. I’d like to thank all of those who participate in our coverage by submitting articles that put their thoughts and ideas out there. These dedicated reverse professionals are doing their part to advance the industry by initiating conversation about how we

discussion by submitting your

Creative Director Traci Knight

Copy Editor

Kersten deck

Marketing Director alycia colacion

thoughts for publication, or by posting productive comments on our articles at reversereview.com. There are thousands of knowledgeable, committed reverse mortgage professionals out there who care deeply about the product they offer. If we put our heads together to discuss how we can advance this market, I am confident we can achieve great things. Editor-in-Chief

{ Jessica Guerin } Want to contribute to the conversation? Contact jessica@reversereview.com.

Printer The Ovid Bell Press Advertising Information phone : 630.207.3882 email : jessica@reversereview.com Subscriptions email : information@reversereview.com Editorial Content email : jessica@reversereview.com © 2014 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

sign up for the newsletter at reversereview.com.

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ed

Feedback is very important to us here at The Reverse Review. Send us your thoughts on this issue or comment online for a chance to see your perspective in print.

you to participate in this important

Jessica Guerin

t ay ec st onn c

Feedback

of the senior demographic. We invite

Editor-in-Chief

FACEBOOK AND LINKEDIN


Table of Contents

TRR 4.14

25 | Originating Time for a Spring Cleaning

Five tips to help you get your shop in order Joshua Shein

In this issue... 22 Paul Fiore Originating

28 | Appraising Appraisers See Changes to the Uniform Mortgage Data Program E REVIEW THE VERS RE R

ER EV

this issue

R SE

EVIE

RE V RS E VE

RE

E

E

INSIDE

R

E RS

Years!

John Golden

TH

TH

30 | Tech Safeguarding Your Computer Against Cyberattacks W

16 | NRMLA News

Read about the association’s current initiatives.

REVERSE Four key elements of the program to point out to potential clients Pooyan Fard

Last Word

32 | Spotlight Clarifying “Aging in Place” The National Aging in Place Council explains its mission and how the reverse community can get involved.

{ THE

Ashley Krapacs

Reverse mortgages see an uptick in positive press as media outlets assess the program’s benefits in light of recent change.

@

Want the online version? reversereview.com/magazine

jessica guerin

RE V

W IE

E TH

E REVIEW THE VERS RE R

EV ER

RS E

HOW TO SELL LOANS IN A NEW HECM LANDSCAPE PG. 22 A LOOK AT THE AGING-IN-PLACE MOVEMENT PG. 32

TRR Celebrates Five Years! this issue

E

INSIDE

TH

+SCOTT NORMAN SITS DOWN IN OUR HOT SEAT PG. 20

HE REVERSE REV IE W

Reverse mortgages see an influx of positive press

WT VIE RE

“Positive headlines are a major step in the right direction, but in order to create real change, professionals in the industry need to step up to ensure the conversation doesn’t die.

april 2014

cover SE

HECM MAKES

34 | The HECM Makes Headlines

W THE RE REVIE VE

FEATURE

Making a Case for Reverse Mortgages

Darren Stumberger

38 Jason McNamara

E RS

TRR celebrates five years of coverage in the reverse mortgage industry. Read a recap of the important issues we’ve covered this past year.

24 | Originating

The current HMBS landscape will force issuers to hedge subsequent securitizations.

VE

14 | It’s Our Anniversary!

VP of Sente Mortgage’s reverse mortgage division

review

RE

Reverse Market Insight

20 | Hot Seat Scott Norman

Ginnie Mae Issuers Face Increased Interest Rate Exposure

THE

HECM endorsement stats through January

31 | HMBS

A collection of recent facts and surveys affecting the reverse market

W

12 | Report A February’s P R I L 2Top 0 1 Lenders 4 Report and

Stu Sjouwerman

19 | Roundup

EVIE

Reverse Mortgage Daily

Learn how to protect yourself from a new malware circling the Web.

Marty Bell

R SE

Headlining stories of the past month

Underwriting

ER EV

11 | Industry Update

27 ralph rosynek

R

THE

The latest developments in companies across the reverse space

HE REVERSE REV IE W

09 | Movers and Shakers

EV ER

WT VIE RE

W THE RE REVIE VE

W IE

SE

HOW TO SELL LOANS IN A NEW HECM LANDSCAPE PG. 22 A LOOK AT THE AGING-IN-PLACE MOVEMENT PG. 32 +SCOTT NORMAN SITS DOWN IN OUR HOT SEAT PG. 20

E TH

New guidelines from Fannie Mae alter formatting guidelines and institute TRR an industry-wide Celebrates Five monitoring system.

THE

REVERSE APRIL 2014

review

{ THE

HECM MAKES

HEADLINES }

Reverse mortgages see an uptick in positive press as media outlets assess the program’s benefits in light of recent change.

reversereview.com

8 TRR

|5


The Reverse Review April 2014

Contributors

John K. Lunde

Marty Bell

Scott Norman

Paul Fiore

Pooyan Fard

J ohn K . L und e

Ma rty B e ll

s c ott n orman

12 | Industry Stats 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, rminsight.net

16 | 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 Scott Norman led the original campaign to amend the Texas Constitution to allow HECMs in 1999, when he founded the Texas Association of Reverse Mortgage Lenders. Norman has testified before the Texas Senate and House of Representatives and has worked with legislatures in California, Arkansas and Minnesota to craft legislation for senior homeowners. Norman served as president of the Austin Mortgage Bankers Association and the Texas Mortgage Bankers Association. He is a member of NRMLA’s Board of Directors.

pa ul f i or e

p ooyan far d

jos h u a s h ein

22 | Selling in the New World g As AAG’s senior VP of retail lending, Paul Fiore is responsible for the management and production of a 200-plus loan officer call center. Previously, Fiore served as chief learning officer for Senior Lending Network. He has spoken at various NRMLA and MBA meetings about the correct way to sell reverse mortgages over the phone.

24 | Making the Case for Reverse Mortgages g Pooyan Fard is a loan consultant with Redondo Mortgage Center. Fard has an MBA in international business and teaches MBA courses online. He has published several business research papers and has presented them at conferences and seminars around the country. In 2011, Fard published his first book, Student Satisfaction Checklist, which discusses innovative ideas for improving service quality. pooyan.fard@gmail.com

25 | Time for a Spring Cleaning g Joshua Shein joined Maverick Funding in 2012 to expand its national reverse mortgage network and establish its Maryland operations. Since then, Maverick Funding’s Reverse Mortgage Network has consistently been ranked among the top 10 national lenders. Previously, Shein was CEO and president of 1st Maryland Mortgage Corp/Great Oak Lending Partners. Under his leadership, the company became one of the fastestgrowing reverse mortgage companies in the U.S. He graduated cum laude from Ithaca College.

r al p h r os y ne k

joh n gold e n

s tu s jou werman

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

28 | Appraisers See Changes to the Uniform Mortgage Data Program 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. jgolden@landmarknetwork.com 888.272.1214 ext. 718

30 | Safeguarding Your Computer Against Cyberattacks g Stu Sjouwerman is the founder and CEO of KnowBe4, LLC, which provides Web-based Internet security awareness training to small and medium-sized enterprises. A data security expert with more than 30 years in the IT industry, Sjouwerman was the co-founder of Inc. 500 company Sunbelt Software, an anti-malware company that was sold to GFI Software. Sjouwerman has written four books, including Cyberheist: The Biggest Financial Threat Facing American Businesses Since the Meltdown of 2008. knowbe4.com

Joshua Shein

Ralph Rosynek

John Golden

Stu Sjouwerman

6

| TRR


Contributors da r r en s t umb er g er

Darren Stumberger

Ashley Krapacs

31 | Ginnie Mae Issuers Face Increased Interest Rate Exposure g Darren Stumberger, managing director at Stifel Nicolaus & Co., heads mortgage trading and is responsible for HMBS/ HREMIC, HECM and Jumbo reverse loan trading, distribution and risk management. Prior to Stifel, Stumberger held mortgage trading and finance positions at Goldman Sachs, Morgan Stanley and BofA Merrill Lynch. stumbergerc@stifel.com

as h le y kr apac s

Ja s on McNamara

32 | Clarifying “Aging in Place” g Ashley Krapacs is the administrator and policy associate for the National Aging in Place Council. Krapacs’ professional background prior to joining NAIPC was focused on writing, communications and information technology. She also studies law part time at the University of the District of Columbia David A. Clarke School of Law, with a focus on public service and advocacy.

38 | Fortitudine Vincimus g Jason McNamara is the chief executive officer of Celink, the nation’s largest reverse mortgage subservicer. McNamara is also a principal at Peer Advisors, an investment group focused on the senior housing finance market, and he serves on the Board of Directors of the National Reverse Mortgage Lenders Association.

Jason McNamara

page 23

comments we loved

“All of us have seen clients whose lives have been changed by taking out a reverse mortgage, and those changes are more than monetary; they are emotional. The less we focus on the money and the more we focus on the client’s need and goals, the more success we will have.” -Paul Fiore

There’s no such thing as a stupid idea. What do you want us to write about? Tell us! info@reversereview.com

Do yo have wu it take hat s?

Be a part of the conversation.Write for us! We are looking for new contributors. Share your thoughtful commentary with our readership today.

Email jessica@reversereview.com to learn more.

In today’s complex regulatory maze, knowledgeable and trustworthy vendors are crucial to your success. Not sure which direction to take or where to go?

WE CAN LEAD THE WAY!

Title - Settlement - Valuations

800.877.7557 ext 1222 www.mtginfo.com reversereview.com

8 TRR

|7


The Reverse Review April 2014

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

respond

readers

do you have something to say?

reversereview.com 8

Feature: The Extreme Summit

RS E

RE V RS E W THE RE REVIE VE

W

W THE RE REVIE VE

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this issue EVIE

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INSIDE R SE

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SELLING THE ADJUSTABLE-RATE HECM PG. 26 ELEVATING YOUR BUSINESS THROUGH LINKEDIN PG. 29 SUE HUNT SITS DOWN IN OUR HOT SEAT PG. 18

E

this issue

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INSIDE

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Hopes for the HECM in 2014

E TH

Changing the Public’s Perception

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NEW COMPLIANCE GUIDELINES IMPACT AMCs PG. 33 UNDERSTANDING THE NON-BORROWING SPOUSE ISSUE PG. 34 MARK BROWNING SITS DOWN IN OUR HOT SEAT PG. 22

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November/December 2013 “Great program, but please let me and other professionals who represent the product know what we can do in our regular daily routine. I really believe in a community outreach approach and the need to have the same message. This is not about any of us + helping the getting business; this is about all of us improving while + community.” THE THE TH

W

REVERSE REVERSE

- Jay A. Kaplan

review

JANUARY 2014

J U LY 2 0 1 3

01-2014

The

review

07-2013

Model As originators seek more avenues to connect with borrowers across the country, the centralized call center is helping some seniors complete the loan process over the phone.

HUD’s

Feature: HUD’s Charles Coulter Charles Coulter4 Talks HECM Policy TALKS HECM POLICY

The deputy assistant secretary for single family housing shares his thoughts on the evolution of the reverse mortgage program and the value it offers America’s seniors.

“Most likely the article of 2014! Nice job.” - jim veale

As alw

ays, fin

the latest

d all

and great

on reve

est article

s

rserevie

w.com.

Feature: The Call Center Model

“This really is the case across many industries. Customers can work with service providers who are located anywhere as long as there is proper phone/email/chat/communication capabilities. For this reason, the contact center agents are even more crucial. Customers don’t have the option to meet with someone face to face and have high expectations when speaking on the phone.” - Jason Napierski

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!

Feature: The Business of Being a Broker, September 2013 “I have been originating reverse mortgages for more than five years and they look nothing like they did when I started—pricing, product lenders. Does anyone remember when JB Nutter was king? I am a broker and work for myself, prospect, originate and process. The days of the broker shops are long gone and the consumer is paying the price with service and relationships. In the end everyone who wants to will survive, but it is so different and a lot of work!” –eriksd

“Thank you for your continued efforts in publishing and distributing The Reverse Review. There is so much negative being thrown at the reverse mortgage market right now. In spite of all of that, your magazine continues to promote the theme of highquality service to the senior. Please, stay the course!” - Tim Hawkes, Cherry Creek Mortgage

Something on your mind? Need to get something off your chest? Hate something we do? Love something we do? Letters to the editor may be emailed to jessica@reversereview.com. 8

| TRR


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

Hav e a c o mpa n y u p dat e y o u wou ld lik e t o s e e p u b l i s h e d?

FirstBank Mortgage Partners Hires Ed O’Connor to Lead Northeast Expansion FirstBank Mortgage Partners has hired Ed O’Connor to lead the expansion of its HECM division in the Northeast region. O’Connor is the former president and founder of New York-based Advanced Funding Solutions and previously worked for Generation Mortgage Company and Nationwide Equities. “Having a bank behind you is a tremendous asset in terms of your ability to do business on many different levels,” says O’Connor. “We are a good match in terms of how we think and the experience levels we bring together, so there is a tremendous synergy.”

Generation Mortgage Company Gains Approval in Missouri, Expands Reach to 49 States Generation Mortgage Company continues to expand its nationwide lending reach with the recent approval from Missouri. Missouri loans are now being accepted from all wholesale channels. This addition increases GMC’s total lending area to 49 states plus the District of Columbia. In addition, the company is able to offer broker processing services for 46 states plus D.C. due to the recent additions of Missouri, Rhode Island, Virginia and West Virginia.

Reverse Mortgage Funding Adds Craig Barnes as Corporate Trainer, John Burich as Regional Account Manager Reverse Mortgage Funding LLC has hired Craig Barnes as corporate trainer. Barnes will be responsible for the education of Reverse Mortgage Funding employees and partners across all business channels. He will design, develop, and deliver training materials and sessions for both internal and external audiences. “As Reverse Mortgage Funding continues

Email it to Jessica@reversereview.com.

to grow—adding employees, third-party originators, and new products to our portfolio—it is essential for us to have solid training in place,” says RMF President David Peskin. “We’re fortunate to have Craig join our team.” RMF has also hired John Burich as a regional account manager. Burich will be responsible for building and maintaining third-party originator relationships with brokers, credit unions and banks in the Northeast. “For more than 12 years, John has been working in the reverse mortgage industry, managing accounts in the Northeast and New England,” Peskin says. “We are pleased to have someone with his depth of experience come on board to represent Reverse Mortgage Funding in this important territory.”

ReverseVision Adds Mark Johnson as Customer Support Manager, Moves Joseph Rinner to Product Manager Reverse mortgage software and technology provider ReverseVision has hired Mark Johnson as customer service manager. Johnson, who has more than 20 years of reverse mortgage experience, replaces Joseph Rinner, who has moved into the role of product manager. Prior to joining ReverseVision, Johnson worked for Generation Mortgage Company, Financial Freedom and Unity Mortgage. By hiring Johnson, ReverseVision can now shift Rinner’s attention to designing new tools focused on helping originators achieve success. “ReverseVision is focused on serving its loyal base of reverse mortgage lenders with superior technology solutions and expertise across all aspects of your business,” says ReverseVision President John Button. “Adding Mark, a professional of unparalleled expertise, and better leveraging Joe’s origination background, help us better serve our clients and the industry.”

Liberty Partners With Financial Planning Software Provider Liberty Home Equity Solutions has partnered with PIEtech, the designer of MoneyGuidePro (MGP), a financial planning software for financial advisors, to integrate reverse mortgage loan calculations into the MGP software. This new feature will enable financial planners to incorporate the use of home equity through a reverse mortgage loan into retirement planning strategies. “Once I learned the facts about reverse mortgage loans, especially the FHA HECM program, I felt strongly that we need to provide our users with the ability to evaluate reverse mortgage loans as part of their financial planning process,” says PIEtech founder and CEO Bob Curtis. The partnership will also allow MGP users to obtain quotes for a HECM loan with monthly payment disbursement options as part of MGP’s Retirement Income feature, giving them the ability to view the impact a HECM loan may have on the probability of success for any client’s retirement plan.

TRR wants your company news! Send us your company’s latest s, initiatives, program hires, acquisitions and more, and be a part of our Movers & Shakers column.

Email jessica@ reversereview. com

reversereview.com

8 TRR

|9


The Reverse Review April 2014

DocuVault

Secure, Easy and Compliant Document Delivery We ensure compliance with ECOA requirements by providing a technology solution delivering both Landmark and non Landmark appraisals, AVM’s, Desk Reviews, Field Reviews, and valuable borrower education resources. DocuVault offers secure electronic or hard copy delivery via USPS priority mail with an added integration with the US Postal Service allowing for real time delivery updates with every appraisal.

Secure4Request, manage, and track document delivery through our secure portal.

Compliant4PDF document tracks when notice was sent to the borrower and when they accessed and/or downloaded their documents.

Borrower Education4Tools to help borrowers understand their appraisal and other valuation related documents.

Call toDay to request a demo of DocuVault. 10

| TRR

888.272.1214 4landmarknetwork.com


Industry Update

April Edition

Brought to you by:

an update of this past month’s breaking news

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

headlining news 1.FHA Regains Footing, Won’t

Require Treasury Bailout Next Year

FHA says it’s back on stable footing after the agency’s first-ever Treasury draw and does not expect to require Treasury assistance in 2015. As reflected in the Obama administration’s proposed budget for the coming fiscal year, both FHA’s forward and reverse mortgage lending programs are expected to be cash-flow positive. The HECM program is expected to have a negative subsidy rate of 0.23 percent, meaning that the program will sustain itself, performing slightly above its break-even point. Last year’s $1.7 billion bailout was largely attributed to losses in FHA’s reverse mortgage portfolio. “The budget estimates the Mutual Mortgage Insurance Fund will have a positive capital reserve balance of $7.8 billion,” FHA Commissioner Carol Galante said of the fund’s outlook following the budget release. // March 4, 2014

2.Senate Subcommittee

Examines Potential Retirement Crisis for Middle Class

A panel of policy experts testified before the U.S. Senate Committee on Banking, Housing & Urban Affairs to address whether the recession has prevented middle-class Americans from properly saving for retirement. According to Dr. Monique Morrissey, an economist at the Economic Policy Institute, more Americans will have to bolster their savings with additional sources of income as a result of the increasing shortcomings of traditional

retirement assets—such as 401(k) plans and IRAs—and mounting pressures on the future of Social Security. In her written testimony before the Senate subcommittee, Morrissey also said home equity and other forms of wealth may be tapped for retirement.

// March 12, 2014

3.HUD to Launch Quality

Assurance Plan, New Lender Fees

In an effort to strengthen FHA’s lending programs, officials have announced that a new administrative fee would apply to all FHA lenders, both forward and reverse. The agency is working to improve quality assurance among its lender partners, HUD executives said in presenting the proposal. “[The FY 2015 budget] proposes authority for FHA to collect an administrative fee, which will help FHA further its Quality Assurance efforts by expanding its capacity to more effectively monitor loans and also transform its business processes,” HUD wrote. “The new QA framework is designed to increase lender confidence across the spectrum of borrowers,” said HUD Secretary Shaun Donovan in a call with reporters following the budget release. “FHA will accept an administrative fee to commit to these QAs in place in a way that will enable lenders to eliminate some of their credit overlays.” FHA has not yet specified how the fee will be implemented or its amount. // March 6, 2014

4.Wall Street Journal:

Adjustable-Rate Mortgages Regain Popularity Adjustable-rate mortgages (ARMs) are rising to a popularity reminiscent of the

pre-crisis era, but lenders assure that the borrower requirements are much different than before, according to the Wall Street Journal. While the previous popularity of ARMs hinged upon their low initial rates, now financial executives quoted in the WSJ

say they are focusing on borrowers with “strong credit” who are using the loans to take out jumbo mortgages. During the fourth quarter of 2013, ARMs comprised 31 percent of mortgages in the $417,001 to $1 million range—up from 22 percent a year earlier and the largest percentage since 2008, according to data provided by Black Knight Financial Services. The rise in ARM utilization arrives seven years after the start of the housing crisis, during which 22-25 percent of subprime ARMs were in foreclosure each quarter from the start of 2009 through 2011, the article notes. // March 18, 2014

5.State Campaign Points

to Importance of Reverse Mortgages in Long-Term Care

A state and federal initiative launched in 2012 has led to a report on long-term care financing, including the use of reverse mortgages to help Americans fund longevity. The Own Your Future initiative in Minnesota was launched in 2012 to make recommendations to lawmakers on paying for long-term care. The use of reverse mortgages is among the recommendations developed by the state initiative. “The current long-term care financing marketplace consists of insurance products, home equity options such as reverse mortgages, and health and retirement savings plans,” the report states. Advocates have developed action items for improving the perception of and access to reverse mortgages among Minnesotans. // March 17, 2014 reversereview.com

8 TRR

| 11


The Reverse Review April 2014

Report February 2014

Top Lenders Report

12345 Liberty Home Equity

Endorsement

838

American Advisors Group

754

Endorsement

660

Endorsement

Lender

12

S1L / RMS

Endorsements

One Reverse Mortgage

Urban Financial Group

Endorsement

Endorsement

357

332

Lender

Endorsements

PROFICIO MORTGAGE VENTURES LLC

195

UNITED SOUTHWEST MORTGAGE CORP

13

ASSOCIATED MORTGAGE BANKERS INC

82

SUCCESS MORTGAGE PARTNERS INC

13

CHERRY CREEK MORTGAGE CO INC

48

SENIOR MORTGAGE BANKERS INC

13

UNITED NORTHERN MORTGAGE BANK

45

EASTERN BANK

13

MAVERICK FUNDING CORP

37

ATLANTIC BAY MORTGAGE GROUP LLC

13

GMFS LLC

36

BANK OF ENGLAND

12

MONEY HOUSE INC

35

CHRISTENSEN FINANCIAL INC

12

NET EQUITY FINANCIAL INC

35

EVOLVE BANK & TRUST

12

M & T BANK

34

FIRSTAR BANK

12

SUN WEST MORTGAGE CO INC

30

LEADER ONE FINANCIAL CORP

12

TOWNEBANK

29

VANGUARD FUNDING LLC

12

MORTGAGE SERVICES III LLC

27

STERLING SAVINGS BANK

11

OPEN MORTGAGE LLC

26

FULTON BANK NA

11

ADVISORS MORTGAGE GROUP LLC

25

ASPIRE FINANCIAL INC

11

AMERICAN PACIFIC MORTGAGE

24

AMERICA FIRST FEDERAL CREDIT UNION

11

FIRSTBANK

24

BARRINGTON BANK AND TRUST COMPANY 10

SOUTHERN TRUST MORTGAGE LLC

23

DAS ACQUISITION CO LLC

10

LIVE WELL FINANCIAL INC

22

GATEWAY BANK MORTGAGE Reverse Market Insight - Logo

10

NATIONWIDE EQUITIES CORPORATION

20

MORTGAGESHOP LLC

19

TOP FLITE FINANCIAL INC

19

NATIONSTAR MORTGAGE LLC

18

NORTH AMERICAN SAVINGS BANK

18

PLAZA HOME MORTGAGE INC

17

MANN MORTGAGE LLC

17

HIGH TECH LENDING INC

17

HOMESTREET BANK

16

CS FINANCIAL INC

16

FIRST PRIORITY FINANCIAL INC

15

GATEWAY FUNDING

15

MAS ASSOCIATES LLC

15

MCM HOLDINGS INC

14

PEOPLES BANK

13

| TRR

PANTONE COLORS

October 9, 2009

Brought to you by:

REVERSE MARKET INSIGHT

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

3005C

Process Blk C


Report HECM Endorsement Stats Through January 2014 INDUSTRY SUMMARY

Trailing Twelve Month Endorsements

RETAIL

Retail Endorsement Growth

6,000

7.52%

Wholesale Endorsement Growth

4,000

39.04%

2,000

Total Endorsement Growth

19.68%

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

*Figures above reflect change from prior month

Wholesale *Numbers represent months

WHOLESALE

TOTAL

UNITS

CHG%

UNITS

CHG%

UNITS

CHG%

Feb

2,818

-7.09%

2,017 -6.23%

4,835

-6.73%

Mar

3,318 17.74%

2,494 23.65%

5,812 20.21%

Apr

3,145

-5.21%

2,568

2.97%

5,713

-1.7%

May 2,823 -10.24%

2,498

-2.73%

5,321

-6.86%

Jun

3,002

6.34%

2,335

-6.53%

5,337

0.3%

Jul

3,232

7.66%

2,511

7.54%

5,743

7.61%

Aug 3,125

-3.31%

2,248 -10.47%

5,373

-6.44%

Sep 2,735 -12.48%

1,782 -20.73%

4,517 -15.93%

Oct

2,510

-8.23%

Nov

2,734

8.92%

Dec

2,594

-5.12%

Jan

2,789

7.52%

TOT

1,676

4,186

-5.95%

1,629

4,223

-16.5%

-9.86%

5,054 19.68%

2,265 39.04%

34,825

-7.33%

4,685 11.92%

1,951 16.41%

25,974

60,799

{ FIGURE } 70%

Fixed Rate Percentage

60% 50% 40% 30% 20% 1/1/14

12/1/13

11/1/13

10/1/13

8/1/13 7/1/13

9/1/13

7/1/13 6/1/13

6/1/13

5/1/13

4/1/13

3/1/13

1/1/13 11/1/12

2/1/13

10/1/12

9/1/12

8/1/12

7/1/12

6/1/12

5/1/12

Fixed

ARM

$1,200.0 $1000.0 $800.0 $600.0 $400.0 $200.0

12/1/13

11/1/13

10/1/13

9/1/13

8/1/13

5/1/13

4/1/13

3/1/13

2/1/13

1/1/13

12/1/12

9/1/12

8/1/12

7/1/12

6/1/12

5/1/12

4/1/12

3/1/12

2/1/12

$0 1/1/12

in the millions

initial principal limits

hecm endorsement

02

10/1/12

{ FIGURE }

4/1/12

3/1/12

2/1/12

10% 1/1/12

hecm endorsement trends

01

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The Reverse Review April 2014

T

R

our anniversary! R It’s We’re celebrating five years of coverage.

thank you

from the editor

Our 5/13

Acquisitions in the Reverse Mortgage Sector

What this could mean for the future of the HECM market “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.”

I would like to thank our valued community of readers, writers and advertisers for helping to make this magazine the leading publication for reverse mortgage professionals. Our dedicated staff works hard every day to bring you valuable content, insight and news to keep you informed of the numerous issues that continue to affect this ever-changing industry. Without feedback and contributions from people like you, we would not be able to successfully accomplish this goal. Thanks for supporting us along the way!

6/13

The Cost of Compliance Reverse Mortgage

Lenders grapple with mounting operational costs in a hyperregulated world “Since its inception in July 2011, the CFPB has set out on a mission to oversee financial products and services for consumers to ensure fair and transparent practices… As many in this sector attempt to adhere to new regulations enacted by the agency, they have seen the cost of business skyrocket as they spend time and money grappling with mounting compliance concerns.”

7/13

The Call Center Model

As originators seek more avenues to connect with borrowers across the country, the centralized call center is helping some seniors complete the loan process over the phone. “While the traditional, feet-on-the-street approach is still the foundation of many successful reverse mortgage operations, some are watching the notable rise of the centralized call center model with interest.”

TRR celebrates five years.

14

| TRR

8/13

Servicing HECMs

The business and challenges of servicing reverse mortgage loans “As a loan designed for a protected class of borrowers, reverse mortgages require a heightened level of sensitivity and attention when it comes to servicing the loan… In this environment, reverse mortgage servicers must continue helping senior borrowers manage their loans post-closing, while artfully navigating the complicated rules surrounding a program in flux.”

5

9/13

The Business of Being a Broker

Reverse mortgage brokers are working hard to find a profitable niche in today’s evolving marketplace. “While the past few years may have been rough for some brokers, many have powered on, determined to make it over this hurdle and get to the other side. Most insist that the broker’s role in the reverse mortgage market is essential, and that once program changes are solidified and the industry adapts, the market will see a greater penetration rate as more consumers turn to the product.”


“I would be shocked if a private market doesn’t develop for this type of purpose, just because the demographics are so compelling. When you look at the fact that you have an aging population, you have a virtual elimination of the five benefit plans, stress on the Social Security program—people are going to need to leverage their home equity as a way to retire in a way that comes close to their standard of living pre-retirement.” – Charles Coulter “I do sense that there’s this mountain we need to get over and the promised land is on the other side. That mountain may vet out a lot of people, a lot of originators and a lot of companies that don’t want to climb it, but I think it creates great opportunities for those who are left.” – Mike Gruley

to

an

“While it is true that, until sells something, no one gets paid, properly investing in compliance in the current environment could expose a company to undue risk and loss. To the extent that they have not already started to do so, in thinking through this strategy, reverse mortgage executives must begin to view compliance as an investment and not merely an expense.”

th

ni

er

2 2 2

things we’ve read

someone appnot

H

versar y

ev

er

se

vi y ew

re

– Jim Milano

“I think our new strategy, at least on a macro level, needs to focus on how a reverse mortgage is a flexible retirement planning tool, and how people from all walks of life have utilized a reverse mortgage… People need to know that there are successful individuals [using HECM loans] and that getting a reverse mortgage is not a sign of failure, but quite the contrary: It’s a sign of successful planning and strategizing. If I were to choose a tag line, it would be: ‘I’m a success and I chose a reverse mortgage.’” – Shannon Hicks

10/13

HECM Revamp

An in-depth look at FHA’s overhaul of the reverse mortgage program and what it means for the future of the industry “In effect, FHA’s recent guidelines revamp the HECM as we once knew it, creating a new type of reverse mortgage product that, by demanding a slower consumption of home equity, caters to a different type of borrower. With these new guidelines in place, originators will be forced to connect with a more planningoriented consumer looking for a strategic financial tool to support retirement, rather than selling the product as a crisis-management tool for a more needs-based borrower looking for fast cash.”

11-12/ 13 The Extreme Summit

The industry unites to launch a nationwide public relations campaign to alter the perception of reverse mortgages. “The Extreme Summit is the industry’s name for a five-year initiative to increase volume and penetration. It’s built on the difference between how customers and non-customers perceive the product… It’s our turn to take on this challenge for one of the greatest products ever invented and help seniors live a more secure retirement.”

1/14

HUD’s Charles Coulter Talks HECM Policy

The deputy assistant secretary for singlefamily housing shares his thoughts on the evolution of the reverse mortgage program and the value it offers America’s seniors. “Given the relative complexity of the HECM product, I think it’s a perfectly natural process for us to evaluate it and to make changes... I would expect us to continue to evaluate both the HECM program and our other programs on a periodic basis and make changes as necessary to ensure that they work well from a consumer perspective and ensure that they work well in terms of the economics of the MMI Fund.”

2/14

Reaching a Broader Audience

Reverse professionals reassess their marketing approach in light of HUD’s new guidelines. “The old marketing strategy embraced by many lenders in the industry largely focused on helping seniors tap their equity to access a lump sum of tax-free cash, and this message appealed most strongly to a needs-based audience. Now, lenders are examining how they can revise their message to connect with a more planningoriented senior.”

3/14

How to Survive in a New HECM World What reverse professionals can do to stay afloat in the wake of product change “While it’s clear that those in this industry maintain a strong belief in the benefits of the reverse mortgage program, no one seems to deny the fact that there is a challenging road ahead for professionals in the space. For those attempting to stick it out, it’s all about staying afloat in these turbulent waters until the tides shift and business rebounds.”

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The Reverse Review April 2014

NRMLA News

On the Docket:

Who Is Our Market? We’ve heard a lot of discussion amongst the membership about the need to persuade financial planners not to ignore reverse mortgages because of the product’s cost. Since HUD began implementing the latest set of HECM program changes, we’ve heard about a shift from need-based to want-based customers, from those burdened with debt to those responsibly planning retirement.

AARP Sues HUD Again Over NonBorrower Spouse Issue The AARP Foundation Litigation group, on behalf of four additional non-borrowing surviving spouses, has sued HUD again in the U.S. District Court in the District of Columbia (Plunkett v. Donovan, filed February 27, 2014). This lawsuit follows its successful suit against HUD, in this same court, in Bennett v. Donovan. In the earlier Bennett case, the court ruled that the portion of the National Housing Act related to nonborrowing spouses “means what it says: the (HECM) loan obligation is deferred until the homeowner’s and the spouse’s death.” In the earlier Bennett case, the court ordered HUD to 16

| TRR

fashion appropriate relief to implement that requirement. Although, as noted by NRMLA in prior Weekly Reports, HUD is reportedly going about doing just that, though it has yet to release a Mortgagee Letter or any other formal announcement describing its plan. The most recent complaint filed in the Plunkett case argues that “time is of the essence” when it comes to protecting affected nonborrowing spouses, and essentially that HUD is taking too long to address the issue. The AARP Litigation group has asked the court to take immediate action through the issuance of an injunction against HUD that instructs the department to protect the four named plaintiffs and the “class” they represent from being displaced (through foreclosure actions) from the homes in which they

The goal we’ve set for the Extreme Summit national educational campaign is to expand volume from 50,000 to 300,000 loans within four years. In order to achieve this, the ad hoc committee of company marketing heads and NRMLA’s senior staff are managing the effort day to day, working to hone in on the audience that can provide us the best chance for the most volume. Here’s where we’ve landed: By all reports, fewer than 8 percent of Americans engage financial planners. At the same time, about 50 percent of Americans have little or no savings. But it’s that 42 percent in between these two groups that is our sweet spot, those Americans over the age of 62 with some assets, including a home, but not enough assets to give them complete security.

reside. The class for which the Plunkett lawsuit requests protection is defined in the complaint as one that “includes any current or future surviving spouse of a (HECM) borrower who was married to a borrower at the time the (HECM) mortgage was consummated, was not listed as a borrower on the mortgage, and where the lender states that the mortgage is due and payable due to the death of the borrower, and the subject property has not been sold to a third party.” On behalf of that class, the complaint in Plunkett seeks injunctive relief protecting them from displacement from such homes. The Plunkett complaint was filed recently and HUD has not yet responded to it, nor, of course, has any “class” been certified or any injunction issued.

Rasky Baerlein Merges Rasky Baerlein Strategic Communications, which conducts public relations efforts for NRMLA, has merged with Prism Public Affairs, vastly increasing the size of its staff and resources in Washington. The new firm, Rasky Baerlein/Prism, will have Larry Rasky as chair and CEO, as well as Prism leaders Dale Leibach and Amanda Deaver in prominent roles.

New Acting DAS February 28 marked Charles Coulter’s last day as Deputy Assistant Secretary (DAS) at the Department of Housing & Urban Development. We welcome the new Acting DAS, Kathleen Zadarecky.


NRMLA News Current and future retirees need to re-examine their views and consider including a reverse mortgage in their retirement plan, because the three legs of the traditional retirement “stool” (Social Security benefits, pensions and personal savings) have been considerably weakened, according to an article in the March edition of the Journal of Financial Planning. In their article, “Retirement Trends, Current Monetary Policy, and the Reverse Mortgage Market,” University of Wisconsin-Superior associate professors David W. Johnson, Ph.D., and Zamira S. Simkins, Ph.D., state that the recent recession has eroded retirement portfolio values and increased retirees’ dependence on Social Security. “The long-term solvency of the Social Security system, however, is uncertain. Thus, having alternative sources of retirement income is important. Reverse mortgages are one possible alternative,” they say. A lack of planning and unrealistic expectations about future costs of basic health care and long-term care has placed many retirees in an untenable financial position, further strengthening the argument for using reverse mortgages. The article highlights the fact that Americans tend to store more than two-thirds of their wealth in their homes, which implies that housing, as a retirement asset, will grow in importance in the future. The article grows the trove of favorable research to appear in the past few years from Boston College’s Center for Retirement Research, Texas Tech, the Sacks Brothers and, most recently, Jerry Wagner.

Insurance Fund Performance Improving

Barely six months after the U.S. Treasury injected $1.7 billion into the Mutual Mortgage Insurance Fund to offset projected HECM losses, the Obama administration released a proposed fiscal year 2015 budget that forecasts a more positive long-term outlook for the program. HECM was scored with a negative credit subsidy of .23 percent, which equates to a $35 million surplus for the 2015 book of business. That means insurance premiums, plus other collections by FHA, are forecasted to exceed payouts on insurance claims by that amount. At the conclusion of the current fiscal year (September 30, 2014), HECM is projected to make an estimated $55 million.

NEWS FROM NRMLA

New Academic Report Reconfirms Value of RMs as Retirement Funding Option

brought to you BY MARTY BELL: national reverse mortgage lenders association

FHA is projecting HECM endorsements to total $15.86 billion in 2015, compared with $13.49 billion in 2014.

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The Reverse Review April 2014

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Roundup

Here is a look at the latest

news and stats

affecting the market.

th i s m o n th

{

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

R e t i r e m e n t Fa c ts

N u m b e r Cr u n c h

More than half of U.S. households are at risk of not being able to maintain their standard of living in retirement.

The National Retirement Risk Index (NRRI), utilized by the Center for Retirement Research at Boston College, measures the percentage of working-age American households at risk of not being able to maintain their standard of living in retirement. As of 2010, the NRRI indicated that 53 percent of homeowners who worked until age 65 and annuitized all of their financial assets, including the proceeds from a reverse mortgage on their homes, were still at risk. According to the Center for Retirement Research, the only real solution is to save more and work longer.

1Olderinadults3

T h e S e n i or A g e n da

Seniors aren’t thinking enough about their finances in retirement. A typical 65-year-old couple will need approximately

$305,000 to cover out-of-pocket health care costs in their lifetime, according to the Employee Benefit Research

Institute. Despite this, the research indicates that most people save less than they should, fail to properly

understand the cost of health care in retirement, and tend

to underestimate their life expectancy. The institute’s 2012 Retirement Confidence Survey found that 56 percent of

workers have not taken the time to calculate how much money they will need to live comfortably in retirement.

H o u s i n g Mar k e t S tats

Number of underwater mortgages drops to lowest level in years. For the first time in several years, the percentage of U.S. homeowners with negative equity in their homes fell below 20 percent, reaching to 19.4 percent in the fourth quarter of 2013. According to the Zillow Negative Equity Report, negative equity has decreased for seven consecutive quarters, meaning that nearly 4 million homeowners are no longer underwater on their mortgages.

These markets showed the highest levels in home value appreciation in December: • Las Vegas 28.1% • Riverside 28% • Sacramento 23.4% • Detroit 21% • San Francisco 19.7%

over the age of 60, which equals more than 23 million seniors, still live with economic insecurity. -National Council on Aging

S e n i or T r e n ds

Americans are living longer than ever before. The number of Americans age 65 and older has reached approximately 35 million, comprising 13 percent of the total population, according to a report released by the National Institute on Aging. Comparatively, the number of older Americans was just 3.1 million in 1900. According to the report, America’s older population is expected to double by 2030, reaching approximately 70 million. In 2000, the average life expectancy for Americans age 65 was 83.

reversereview.com

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The Reverse Review April 2014

the

THE

REVERSE

hot

review

seat

april 2014

Scott

From his favorite job and his most memorable vacation to his thoughts about the reverse mortgage industry, we get the personal and professional facts Sente Mortgage

VP, reverse mortgage division

20

| TRR

from Scott Norman, VP of the reverse mortgage division of Sente Mortgage, in this month’s edition of The Hot Seat.


P E R SO N A L > Ten

years from now I will be entering my

25th year in the reverse mortgage space, so I hope I will be hitting my stride by then. > Something

nobody knows about me is

>

If I could trade places with someone for a day, I would choose Joe Demarkey or Reza Jahangiri.

> If

I could time travel, I would be in

Philadelphia in 1776.

that I was a high hurdler for the University of Texas. > My

favorite vacation was in Rome, Italy.

> My

celebrity crush is Keira Knightley.

> My

first car was a 1985 Ford Bronco.

> The

craziest thing I’ve ever done was

quit a mortgage company that I owned to go into the reverse mortgage business. >

If I could meet anyone, past or present, it would be General Ulysses Grant, immediately after Lee surrendered at Appomattox.

> My >

favorite movie is Patton.

I never miss an episode of The Blacklist or Homeland.

> When

I was a kid I wanted to play

shortstop for the University of Texas. > My

favorite job was president of the

Texas Mortgage Bankers Association. > My

parents taught me that character is

more important than reputation. > My

favorite time of the day is sunset.

> My

iPod go-tos are Waylon Jennings and

Willie Nelson. >

I’ve never had a cup of coffee.

> The

Professional > The

future of reverse mortgages is

ahead of us. > The

greatest setback for our industry

was the exit of Wells Fargo, Bank of America and MetLife. > People

Something nobody knows about me is that I was a high hurdler for the University of Texas.

should seek a career in the

reverse mortgage industry because there is a retirement crisis in America. > I

am pessimistic about the reverse

mortgage industry because our current fate rests in the hands of the federal government to an unhealthy degree. > I

entered this industry because Jim

Mahoney told me it would change my life— and it has. > Industry

growth is dependent upon

better communicating to CPA firms and wealth management offices around the country that monetizing home equity as a retirement option is a good, safe idea.

The most memorable moment in my life was when I was invited to have breakfast in the White House to talk about the reverse mortgage industry.

most memorable moment in

my life was when I was invited to have breakfast in the White House to talk about the reverse mortgage industry. > The

best purchase I’ve ever made was,

without question, my wife’s engagement ring. > My

favorite book is Team of Rivals by

Doris Kearns Goodwin.

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The Reverse Review April 2014

EVOLVE

originating Selling in the New World Paul F io re

T

here is one thing we can all count on when working in the reverse mortgage industry: change. In the 11 years that I have been in this business, not a year goes by where we haven’t experienced multiple changes, whether it is fundamental changes to our product, simple PL adjustments or huge changes, such as the looming Financial Assessment. Once we all accept that change is constant, we can focus on how we adapt in order to be successful. Let’s face it: If we don’t adapt to our changing market, we are faced with a future that leads to failure. We have a choice as an industry: We can be the next Netflix or we can be the next Blockbuster Video. Over the last year, we have gone through two major changes to our offerings, both of which impacted the products we had to sell as well as how borrowers can access their funds. When both of these changes were announced, we were given a small window to learn the changes and how to properly communicate them to our borrower base. Since AAG has traditionally been a call center-based organization, we spent a great deal of time educating ourselves on the changes, the impact to the client and, most importantly, training our sales staff on how to sell in the new environment. When the fixed Standard went away, the industry adjustment back to the LIBOR-based ARM was pretty quick. At AAG, we focused our attention on the things that matter most to the client—not necessarily how much money they could get, but how that money could be applied to their current financial situation and help them achieve their financial goals. We focused on the foundation of reverse mortgages and what they were truly designed for, to help a senior age in place, using that as a starting point for all of our conversations with clients. Finding out what a potential client is hoping to accomplish with a reverse mortgage should be your No 1. priority. If you focus your attention on this and help them determine if the reverse mortgage is the proper tool to help them achieve those goals, many of the challenges we face with regard to product change and PL cuts become less daunting. Does a reverse mortgage make sense for the

22

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borrower? Once you can answer that question, you can properly communicate how it works and how it will help accomplish their goals. Once utilization and MIP changes were announced, we were faced with another challenge. First, we had to eliminate a product option, and then we had to tell the borrower how much money they would be allowed to access and that it could be more expensive. I am sure many people wondered, “How am I supposed to sell that?” And I bet quite a few still do. The truth is, these were necessary changes to ensure the long-term viability of the product. As I have said to many people who think the reverse mortgage has lost value to the consumer, what other product do seniors have access to that utilizes the equity in their homes to help them in their retirement years while not requiring a monthly payment? What other product gives our client base the ability to have the money they need today to take care of their most pressing financial obligations, and more importantly, gives them access to more money in the future as they continue to own their home? Consumers have options for their financial future that do not include a reverse mortgage, but there are still so many who could benefit tremendously from this product. Better yet, there are even more consumers who could benefit from the reverse mortgage but who discount it as a product for


originating According to paul “Our industry has an opportunity to change the perception of the reverse mortgage through proper education and messaging if those of us who sell this tremendous product truly believe in its benefits. All of us have seen clients whose lives have been changed by taking out a reverse mortgage, and those changes are more than monetary; they are emotional. The less we focus on the money and the more we focus on the client’s need and goals, the more success we will have.”

appraising

The key to selling anything successfully in the long term is believing in the product you are selling. If you believe that a reverse mortgage is an effective financial tool that can help today’s seniors accomplish their retirement goals, you are on your way. Selling is all about the psychology of the person promoting the product and the consumer considering a purchase. If you believe in the reverse mortgage and you present the product with excitement, they will feed off of your energy. Never make a reverse mortgage only about how much someone qualifies for; make it about how that money will improve their lives. When you marry those concepts, you navigate these changes and future changes better than most. x

*

underwriting

Our industry has an opportunity to change the perception of the reverse mortgage through proper education and messaging if those of us who sell this tremendous product truly believe in its benefits. All of us have seen clients whose

lives have been changed by taking out a reverse mortgage, and those changes are more than monetary; they are emotional. The less we focus on the money and the more we focus on the client’s need and goals, the more success we will have.

originating

only the destitute. These are the clients we need to reach and help educate. Focus your energy and efforts on the value a reverse mortgage can provide to our seniors and not on what used to be. Remember, most people inquiring about a reverse mortgage are looking into it for a reason. The better you are at discovering their need and highlighting the real benefits of the product, the better you can sell in any environment. Don’t look at utilization as a negative; look at it as a way to ensure that a consumer has access to funds that they need both today and tomorrow. Don’t look at the increase in MIP on high utilization as a negative; look at the lower cost on the lower utilization as an opportunity to show seniors who don’t have significant mandatory obligations that a reverse mortgage can be an effective retirement tool.

going to the source

tech hmbs

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spotlight

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888.383.8885 ops@quickcert.org Telephone counseling nationwide

reversereview.com

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The Reverse Review April 2014

originating

Making a Case for Reverse Mortgages Pooyan Far d

L

oan origination is all about knowing your clients and finding the best possible solution for them. The loan agent needs to do a thorough assessment of the clients’ current financial situation and then match their needs with the most suitable product. As always, the more complicated a product is, the more education is required for the consumer to fully understand the pros and cons. A reverse mortgage is a rather complicated financial tool, and that is why only certain agents have the ability to find the right client for these types of loans. Despite the large benefit provided by the loan to older individuals, only 2.1 percent of eligible homeowners had HECMs in 2011. Bequest motives, house price risk, interest and insurance costs are some of the reasons for the astoundingly low take-up rate. An important question for loan originators is how to reach this untapped market. Let’s review some facts that will lead us to the right answer. Research shows older homeowners are less likely to borrow as they age because it is either too costly or they don’t meet the income requirements. As a result, many retirees end up selling their homes in order to overcome large expense

24

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shocks during their later years in life. In such a constrained environment, a product designed to give senior borrowers access to their home equity without requiring a monthly payment can be the perfect answer. In order to be able to present the benefits of reverse mortgages to tentative clients, one should highlight the four major ways that a reverse mortgage differs from conventional mortgages and how it is designed to help retirees. I’ve put together a list of points to help loan agents better communicate the benefits of this product to potential clients.

one

As the name implies, a reverse mortgage works in the opposite way of a conventional mortgage loan. Explain to homeowners that this means they can tap into the home equity they have accumulated, and instead of submitting a monthly payment, they can receive a monthly payment. Because the loan amount is based on how much equity a homeowner has in their home, these loans are designed for older homeowners who have accrued substantial equity during their lifetimes.

two

Explain that government-insured HECM loans have different requirements than conventional mortgage loans, such as a minimum

age of 62 and a repayment of the loan based on home value. These requirements have been set because many older homeowners do not qualify for conventional mortgages due to income-based requirements. HECM loans have no such requirement.

three

Point out that HECM loans are nonrecourse loans, meaning borrowers are insured against substantial drops in house prices. This feature of the loan alleviates one of the main concerns expressed by older homeowners who fear that utilizing their home equity through a reverse mortgage could mean they might lose their homes.

Four

Finally, and most importantly, household characteristics such as wealth, income and health are very important determinant factors for an older homeowner’s decision about whether to borrow. Having the option of a reverse mortgage will help them solve the so-called “retirement saving puzzle” and enable them to utilize their equity for expenditure shocks when necessary. Overall, the reverse mortgage could be a great solution for the aging population who may benefit from the features and flexibilities of this type of loan. Originators should present a clear roadmap to make a case for reverse mortgages to their eligible candidates. x


originating

Time for a Spring Cleaning

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

Jos h u a S h e in

F

* Go through your adversed loans and

5. Refresh your operations and back-office flow

4. Look at your own success

* Do the math on your success and on your loan officers’ success. How much time is being put into the business? Is your time managed efficiently? What is the best use of your time to produce the

help you and your business. It will help you work smarter, with better service, which means you have a better chance of closing more loans and earning more income—a win-win all around! x

reversereview.com

8 TRR

| 25

spotlight

* Re-examine the flow your loans take from top to bottom. From the proposal to the package of documents for the borrower’s signature, look at it all with a fresh eye. How does the presentation look? Clear your head and look at it as if you were a senior. Does your presentation look professional? What could or should be added or changed? Likewise, when your loan goes into processing, how is that flow? Efficient? Are the roles and responsibilities of your loan officer, assistants, processors, etc., clearly defined? Is 3. Marketing there a clean, clear and updated checklist, * Do a firm analysis of your marketing and is it being followed on each file by over the past year. How much money did each person who touches it? Updating you invest and in what types of marketing? and reviewing these items can and should What were your conversions as a percenthelp you close more loans in less time. age and in real dollars? With UPBs lower In any business, time flies and we now, the math may not add up the way it often find ourselves swamped with did last year. Reassess whether your apemails and calls. Schedule the time, proach in the past was truly effective and ideally in limited blocks, every few profitable, and analyze how it will work in days to do this top-to-bottom review. 2014 and beyond. Many of the old rules Set a goal to have it done over a set are changing in our industry and a new timeframe and stick to it. It can only approach may be needed. your closed loans, and search through any on-hold loans you may have. Give the adversed and on-hold loans a fresh look. Have the property values changed and increased in that market? Could the other factors that prevented these loans from closing in the past now be overcome? For the closed loans, reach out again to these borrowers. We all know that the followup on closed loan borrowers is essential, but we often do not do it enough or at all. There are referrals there!

hmbs

Our days are often hectic and the weeks—and months and years—can fly by. Then one day, you wake up and realize how quickly time has passed. So set aside an hour or two, sit down at your desk and try these five tips for helping you determine what has worked for your business and what has not worked over the past year. Most importantly, assess how you need to change to make the most out of 2014.

2. Database cleanup (loans)

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As the nice weather approaches and we are finally getting into our groove with the revisions to the HECM product, it is time to take a fresh, clean and new look at everything. A topto-bottom analysis of your business, your performance and your future plan is overdue. Whether you are an individual loan officer, a branch manager or a company owner, it is essential to set aside time during your busy day to not only reflect, but to crunch the numbers and tweak your business for success.

clean it up. Purge the old, stale and dead data. Cross-reference how often and how recently your clients have been contacted. Decide how much of your database is still clean and usable, and establish a marketing plan to reach out again to potential clients. A customized, personal letter could be a good start.

best results? How much did you spend on your marketing and was it profitable for you and your company? Often, when loans are closing and everyone is busy, this analysis is overlooked. What is your funnel to closing more loans? How many leads, referrals or appointments do you require to close more loans? How much of an investment is that and what return will you get from it?

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Now it is time for spring cleaning.

* Go through your CRM database and

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We all experienced the challenges and changes this past winter in our business and industry. Our business models, projections and plans have been modified and updated in light of these changes from HUD and in the overall marketplace.

1. Database cleanup (leads)

originating

inally, at least for those of us in the eastern half of the country, the snow is over (we hope) and we are all starting to thaw out. It has been a long, cold and snowy winter, but the sun is making an appearance and we are re-energized for the spring and summer.


The Reverse Review April 2014

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ASSESS

Reviewing the Results Ral p h R o s y n e k

Want to see more stories like this? Visit reversereview.com.

hmbs spotlight

From the results, we attempted to determine if there was an identifiable

So, where do we go from here? It appears that a majority of the respondents acquired their initial reverse product training from their companies and regularly participate

in continuing education classes, most of which were conducted in a webinar format. Given the length of time most of the respondents have been originating reverse mortgages, it would be fair to assume that most of that company training came from Financial Freedom during its high point and the large banks that were once involved in the space. Sadly, those companies no longer actively participate in this sector and the financial and staffing resources that supported the training of so many in this space have ceased to exist. But have they been replaced?

tech

As a longtime participant (this is the definition of “seasoned,” not “old”!) in the reverse mortgage space, the overall survey results provided some clarity as to the developing maturity of our workforce. The lack of a need for HECM basics and a greater need for more detailed, focused education relating to transactional, sales and marketing processes on a continuing basis was expressed in many of the freeform responses.

What surprised us most was the plethora of comments expressing a greater need for guidance regarding communication with the borrower and resource material to help explain the Financial Assessment process to clients. There were also a number of responses about concerns with how to quantify the results of the assessment into a meaningful conversation with the borrower and how to determine next steps with both the borrower and the underwriter when reviewing the assessment results.

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The survey revealed an overall need for a continuous stream of education and training, not only in regard to Financial Assessment, but across a broad spectrum of reverse-related topics. Of particular interest was the fact that 81 percent of our respondents defined themselves as loan originators, and 73 percent of respondents said their sole focus was on reverse mortgage origination.

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In preparing the questions for our survey, we tested some assumptions and attempted to verify our views on education and training in the reverse mortgage market. We also sought to gain insight into how industry participants felt about their preparedness for HUD’s pending Financial Assessment.

baseline for the complexity of the financial analysis education that is needed to support professionals in this space. Judging from the responses, education and training on basic credit report and tax return analysis is not necessary, as many reported a high level of familiarity with such documents. Considering the fact that approximately 45 percent of the respondents reported five to 10 years of reverse origination experience, one could assume that many people received their base training from the fundamentals of borrower qualification undertaken during training for forward loan origination prior to their switch to reverse only.

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’d like to thank those readers who took the time to respond to our survey in the last issue of TRR. Your contribution was most appreciated. We saw participation from professionals across all aspects of the reverse industry.

As we continue in this series of articles regarding the implementation of Financial Assessment, we will take a closer look at the components necessary to elevate the skills and knowledge of professionals in this business. We will also focus on communication, message delivery and the ability to provide meaningful dialogue with borrowers as additional support to our readers. x reversereview.com

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The Reverse Review April 2014

appraising Appraisers See Changes to the Uniform Mortgage Data Program Joh n G o l d e n

value

An example response for a detached, one-story property would be: DT1; Ranch. The new guidelines also outline standardized response formatting and approved abbreviations for condominium properties, which require a description of the attachment type followed immediately by the property’s number of levels (indicated by the letter “L”), a semicolon and a description of the condo building. For condominium property types, the attachment abbreviation choices are: g DT: detached structure g RT: row/townhouse g GR: garden g MR: midrise g HR: high-rise g O: other An example response for a two-story townhouse condo would be: RT2L; Twnhse.

T

here were several announcements at the end of the 2013 calendar year related to components of the Uniform Mortgage Data Program (UMDP) that affected appraisal practices at the beginning of this year. The Uniform Appraisal Dataset (UAD) component of the UMDP provides common requirements for appraisal and loan delivery data. Its purpose is to improve the quality and consistency of appraisal data for loans delivered to Fannie Mae and Freddie Mac, to define required fields for appraisal submission, and to standardize definitions and responses for a key subset of fields on appraisal reports. While the UAD has been in place for several years, standardization and specific formatting of two additional

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fields within the Sales Comparison Approach of the appraisal report went into effect earlier this year. Below are details about the new guidelines: New Style Standards A new, standardized response format set forth in the guidelines includes approved abbreviations describing a property’s attachment type, followed immediately by the structure’s number of stories, a semicolon and a description of the structure. Attachment type abbreviation choices include:

Instructions have also been spelled out for properties that have garages or carports. In such cases, the appraiser would indicate the number of car spaces, which would be immediately followed by an approved abbreviation describing the type of off-street parking. In the event there are multiple types, they should be listed in a singlestring response. Off-street parking abbreviation choices are: g ga: attached garage g gd: detached garage g gbi: built-in garage

g AT: attached structure

g cp: carport

g DT: detached structure

g dw: driveway

g SD: semidetached structure

g none: no off-street parking


appraising An example response for a property that has a two-car, attached garage with double-car driveway, one-car detached garage and a single-space carport would be: 2ga1gd1cp2dw. The order in which these details are listed is specific in accordance with the new style standards.

g cv: covered g op: open

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Fannie Mae intends to work directly with appraisers who exhibit a pattern of

hmbs

A nationwide title and settlement company servicing the reverse mortgage industry.

spotlight

A BETTER CHOICE!

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g g: garage

HUD has formally adopted all UAD requirements, and so the above-mentioned standardization and formatting standards are fully applicable on FHA-related files. In regard to Fannie Mae’s new monitoring system, it remains to be seen exactly what impact, if any, it will have on the status of FHA roster appraisers, or if any of the information related to the Appraiser Quality Monitoring list will be shared between the two organizations. x

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For condominium property types, off-street parking abbreviation choices are:

The other major announcement this year was specified in Lender Letter 2013-10, in which Fannie Mae confirmed that it began collecting appraisal data through components of the UMDP in 2011, and shared information on a new Appraisal Quality initiative based upon its new ability to identify certain inaccuracies and inconsistencies in appraisers’ reports. Examples of such issues would be sales data or the size of a comparable within the Sales Comparison Approach that stands out against information collected on the same comparable in other appraisal reports. Another example that would draw Fannie Mae’s attention would be an appraiser’s classification of a property’s condition for a comparable sale on a transaction that was different from several unrelated reports in which the same comparable was utilized.

minor inaccuracies or inconsistencies. However, repeat offenders or those with more egregious issues will have all of their submitted reports subjected to a post-purchase review. Fannie Mae also retains the right to refuse appraisal reports completed by appraisers whose work has been deemed consistently problematic. Earlier this year, Fannie Mae issued a working Appraiser Quality Monitoring list for its approved seller/servicers to keep them informed of appraisers whose work the agency will no longer accept.

originating

Condominium buildings also have style standards to indicate the type of offstreet parking available. In this instance the number of car spaces would be followed immediately by an approved abbreviation describing the type of parking. In the event there are multiple types, they should be listed in a singlestring response.

An example response for a condo with a single open car space and a single garage car space would be: 1g1op.

Our dedicated team of professionals has the experience and knowledge to smoothly close reverse transactions. Through years of experience, FNC has gained valuable knowledge by building strong relationships with reverse mortgage lenders and brokers, as well as the borrowers we service. We firmly believe that our clients deserve the best treatment, and that is why FNC is where reverse mortgages take center stage.

240-864-4844

fnctitle.com reversereview.com

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The Reverse Review April 2014

PROTECT

tech Safeguarding Your Computer Against Cyberattacks Stu S jo u w e rma n

C

ybercrime has gone pro, but many industry folks have not realized their companies could be seriously damaged by this. By now, you may have heard of ransomware. This is malicious software that takes your data hostage, encrypting it so you can’t use it, then forcing you to pay a fee to get it back. Since late 2013, a new wave of cybercrime, called CryptoLocker, has taken off. The cybercriminals trick users into opening an attachment, which encrypts all their PC and network files. The only way to get the files back is pay a ransom typically around $300. The ransom fees require payment in Internet currency like Bitcoin, as these transactions are untraceable. In the last quarter of 2013, more than 250,000 computers were infected with Cryptolocker, realizing $30 million in revenue. And it’s getting worse. In February 2014, the University of Kent reported 41 percent of those infected pay the ransom. The Fast Way to Get Your Files Back Is to Pay the Ransom A law firm in North Carolina was infected when an employee fell for the CryptoLocker social engineering attack disguised as an email from AT&T with a malicious attachment that was mistaken for a voicemail message from their phone answering service. Their IT tried to disinfect the machine, but that made things even worse by preventing decryption. They then tried to pay the ransom, but it was too late because they had tampered with the malware. 30

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“I’ve Lost Eight Years’ Worth of Work” CryptoLocker attacks are very successful and the culprits do not discriminate when selecting their targets. (Even the town hall of Greenland, New Hampshire,was recently subjected to an attack. Town Administrator Karen Anderson said, “The results have left us with documents that are no longer readable; I’ve lost eight years’ worth of my work.”) A local police department in Swansea, Massachusetts, was forced to pay two bitcoins (current value totaling more than $1,000) to buy back sensitive files that were encrypted. Your Antivirus Is Not Going to Help Malware researchers from almost all antivirus companies are furiously working on a way to prevent this from occurring, and some are able to block it from running, but these bad guys are very sophisticated. They change their malicious code all the time, and your antivirus might catch it today but not tomorrow. Antivirus companies are not able to decrypt the files; only the CryptoLocker malware can successfully complete the decryption. How does this malware get installed on a workstation? Users are tricked into opening an infected email attachment. The bad guys are pulling out all the stops, using a variety of social engineering tactics to convince unsuspecting victims. Most recently, they’ve used tracking information from DHL, UPS, FedEx and USPS to encourage users to click, but there are many phishing attacks that include information designed to look as if it

originated from a bank or government agency. What Happens When a User Opens the Infected Attachment? 3 They are presented with a CryptoLocker splash screen. 3 It will encrypt files on the network where the user has modify permissions. 3 They are asked to pay ransom of $300 or more via GreenDot, MoneyPaks, Bitcoin, CashU, paysafecard or Ukash. 3 CryptoLocker will set a timer to decrypt the files if the user decides to pay the ransom. 3 If the timer expires, the software uninstalls itself and the data is lost. How to Prevent This From Happening Two things: First, make sure you always have a recent backup. Wipe and rebuild the machine, and restore the files. This typically requires an average of three hours of administrative work. Second, put all employees through mandatory security awareness training. This educates them about the devastating effects of opening an infected attachment. Train employees so they know enough to stay away from suspicious attachments. x


secondary

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Ginnie Mae Issuers Face Increased Interest Rate Exposure Da rre n S t u m b er g er

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The product mix has recently shifted over to fixed line of credit and pay option loans, which present more interest rate exposure to Ginnie Mae issuers. We were seeing 70 to

80 percent floating rate with the balance mostly fully drawn fixed rate. With these new loans, issuers essentially have exposure to interest rates moving higher in subsequent years as they will need to fund borrower disbursements and securitize those pieces into new Ginnie Mae pools. In order to mitigate this risk, Ginnie Mae issuers will need to utilize hedging instruments that will effectively insulate against these tails reaching securitization below par (which are the prices where disbursements are made). We shall see how this plays out. x

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Given the lack of HECM origination, tightening has been led by dealers, however, the tightening has followed other agency MBS sectors into 2014 tights. Prepays continue to come in slow and stable, with seasoned fixed-rate speeds slowing down to 1 to 2 conditional prepayment rate, which translates to roughly 20 percent of the HECM prepayment curve. Libor prepays, although quicker, still slow down to between 40 and 50 percent of the HECM prepayment curve with seasoning.

“In order to mitigate this risk, Ginnie Mae issuers will need to utilize hedging instruments that will effectively insulate against these tails reaching securitization below par (which are the prices where disbursements are made).�

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Spreads are 50 basis points in spread from year-end, meaning that dollar prices are 3 to 4 points higher. Sponsorship of IOs has improved over the past four to six weeks, with new entrants coming in for bonds after a several-month hiatus. Yields for fixed and floating IOs are in several hundred basis points in 2014. Expect further tightening into summertime.

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MBS spreads continued to tighten into late March with fixed-rate HMBS trading 44 to swaps (roughly 111 dollar price) for corporate settle, and Libor HMBS trading at 56 discount margin (roughly 108 dollar price).


The Reverse Review April 2014

spotlight article

Providing seniors with the resources they need to age in their homes

Clarifying “Aging in Place” b y A s h l e y K r apac s

w

In month’sthe is dition,

we he a Natio r from th e nal Ag ing Place Counc in il.

W

hat is “aging in place”? A term of art, a nuanced phrase, but what is it really?

At its simplest, aging in place is a choice—the choice of aging Americans to remain in their family homes, to downsize and move into smaller residences, or to join retirement communities. Aging in place comes in many different flavors, but at its core is that choice. The aging in place movement provides seniors with the support and resources they need to have options, to appreciate those options and become aware of what is available to them. The key to utilizing these options is to take a holistic approach, to thoroughly understand each aspect of what often becomes an overwhelming maze. The National Aging in Place Council (NAIPC) spearheads a movement to provide aging Americans with the services, security, support, resources and comfort to remain in the home of their choice as they grow older. Our mission is to organize aging in place and to transform it from an abstract idea 32

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into a lifestyle supported on a multitude of fronts. We aim to increase awareness of aging in place; create useful solutions and tools to help boomers and seniors plan and facilitate their choice; to explore the role of the private sector and small businesses to further the agingin-place agenda through economic growth, job generation and the creation of products and services; and to stimulate a public policy approach that will benefit individual citizens, families and our society as a whole. Aging in place represents the coming together of businesses, federal and local government, and both the forprofit and nonprofit sectors to provide a better life for more people. It is an acknowledgment that, by ourselves, we cannot make as much of a difference in anyone’s life as we can together. This involves housing, health care and wellness, personal finance, transportation, academia, community involvement and social interaction, as well as the organization of one’s everyday affairs. It includes advice, education, socialization, empathy and mutual support.

Almost 90 percent of people over 65 say they want to live in their homes and communities as long as possible, according to a report by the AARP Public Policy Institute and the National Conference of State Legislatures. A whopping 80 percent believe they will stay in their homes until they die. For some, friends and a familiar setting are the main draw, and for others, it’s an emotional attachment to the house and setting. But all too often, the support and the home-based services are not easily accessed to make this possible, especially for those caught in the middle—neither qualifying for public entitlements nor able to pay for services critical to enabling them to remain in their homes and communities. Increasingly, policymakers and local leaders are recognizing the benefits of providing such services. They are recognizing that the costs are far lower and the social benefits much higher in helping someone to age in the home than to go into a care facility. Until recently, there was no national approach to aging in place, no federal


spotlight article

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in place

?

tech

What is the National Aging in Place Council?

hmbs

NAIPC is a 501(c)6 trade association comprising senior service providers, businesses of all sizes, government agencies and consumer advocate organizations concerned with the aging population and how to provide needed services to them in their own homes. NAIPC has been in existence for 10 years and currently has local chapters in 17 cities, plus individual members throughout the country.

reversereview.com

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NAIPC members in the reverse mortgage industry understand the diverse ways their product can assist with aging in place, and the better that aging-in-place providers in other fields understand the benefits of a reverse mortgage—especially as part of a well-managed retirement portfolio—the more they understand the ways reverse mortgages can impact their own seniororiented businesses and provide them with much-needed options. NAIPC chapter involvement from reverse mortgage professionals is a win-win proposition that benefits not only the members and their businesses, but also the communities they serve. x

=

Aging

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Members of NAIPC understand the maze and work every day to help their clients navigate it. Our members are providers in fields that cover the spectrum of services that seniors may need to age in place: technology companies, caregivers, financial planners, geriatric care managers, nonprofit stakeholders, home modifiers, elder law attorneys and reverse mortgage professionals, to name a few. Our members are not only experts in their respective fields, but are also well versed in the scope of aging-inplace services. Organized into chapters nationwide, NAIPC members form local senior support networks. They learn about other chapter members’ businesses and services so that they are better able to serve their own clients and can confidently make referrals to other trusted, vetted professionals. They both advocate and educate. They set themselves apart by trying to understand as much as possible every corner and crevice of the maze in their local communities.

All NAIPC chapters include at least one reverse mortgage professional—not surprising, since HECMs can play an integral role in successfully aging in place. Particularly for seniors who are asset-rich but income-poor, a reverse mortgage can be the key to a long-term financial strategy. A reverse mortgage can be used to buy a new home better suited to a senior’s current needs. It can be used to cover the costs of Universal Design home modifications. It can be used to pay for health insurance for seniors who retire before they are Medicare-eligible, or to finance emergency medical costs, long-term care, or even technology products that enable seniors to stay comfortably in their homes.

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policy agenda, and no national outcry to expand participation. In 2013, NAIPC began to change that. We gathered our membership at an annual meeting, followed by a meeting of policy experts for an Aging in Place Summit to discuss and strategize the process of filling these voids and figuring out the aging-in-place maze.

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The Reverse Review April 2014

hecm

{the

W

hen HUD released changes to the HECM program last fall, it incited a wave of headlines as news outlets across the country attempted to explain how the revisions could impact senior consumers. On the whole, the media coverage has been notably positive, as financial experts and FHA representatives touted the changes as a step in the right direction, further regulating the industry and making the loan safer for consumers. In effect, the new guidelines presented an opportunity for the industry to launch a fresh conversation with the public about how a reverse mortgage can benefit retirees looking to achieve financial security. The question now is how can the industry sustain this momentum and propel it even

makes headlines} Reverse mortgages see an uptick in positive press as media outlets assess the program’s benefits in light of recent change. by Jessica Guerin

further? Everyone agrees that in order to raise the product’s penetration rate, we must improve the public’s perception of reverse mortgages. Positive headlines are a major step in the right direction, but in order to create real change, professionals in the industry need to step up to ensure the conversation doesn’t die.

Tracking the Coverage As part of the industry’s Extreme Summit PR campaign, NRMLA has been diligently tracking the HECM’s press coverage in an effort to better gauge the public’s evolving perception of the program. Although the association has been monitoring press coverage for the past four years—assuming what it calls a “war room” approach by aggressively responding to media inaccuracies—it is now tracking each article’s number of impressions, meaning the estimated number of people who read the piece based on circulation statistics.

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Liberty Home Equity Solutions CEO Otto Kumbar, who is spearheading the Extreme Summit campaign, says the uptick in positive press is both a result of the changes and of the campaign’s media outreach efforts. “The industry, working through NRMLA, has helped FHA make the product significantly better for consumers and safer for the government to insure,” he says. “NRMLA and the Extreme Summit have been proactively engaging the press on the changes and the positive implications for consumers and the government.” Generation Mortgage Company CEO Colin Cushman says the program changes have helped the media see the product in a different light. “The new HECM regulations have required the industry and the media to rethink the role the product should play in the overall economy. Before last October, most lenders relied on the lump-sum disbursement of cash as their primary

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Since the release of HUD’s changes, NRMLA has reported the following positive to negative impressions from media outlets both big and small:

The Extreme Summit’s goal is to promote a 3:1 ratio of positive coverage in the press. But as NRMLA’s Marty Bell reported at the association’s New York meeting in in March, the numbers have exceeded that goal and the product has been generating more positive press than perhaps ever before, with the positive reports considerably outweighing the negative.

December Positive: 2 Negative: 3

November Positive: 18 Negative: 5

February Positive: Negative:

January

March

Positive: Negative:

Positive: Negative:


sales strategy,” he says. “Since the regulations essentially eliminated that sales driver, the media now has the ability to report more on the value offered by the HECM program rather than on the downside risk of suboptimal use of equity… Another motivation for the positive coverage is the overall shift toward positioning HECMs as a financial planning tool, which is resonating with the media.”

Experts Weigh In Part of the campaign’s effort to push for positive media attention includes the funding and promotion of academic research about the HECM. In the past several months, two reports were published in the Journal of Financial Planning that detailed the HECM’s utility in retirement planning. These reports led to impactful headlines in the Journal— an important publication targeting a key professional demographic for the industry—and provided credible, unbiased information for those reporting on the product for mainstream media outlets. In December, the Journal published an article titled “The 6% Rule,” by Gerald Wagner of Ibis Software. In the piece, Wagner plays off what financial planners refer to as the 4% Rule, which dictates that a retiree can withdraw 4 percent from their portfolio in the first year, increasing subsequent annual withdraws to accommodate costof-living changes, and not deplete the portfolio throughout a 30-year retirement. Wagner creates what he calls the 6% Rule, which demonstrates how a retiree can utilize a reverse mortgage in order to make an initial draw of 6 percent and still maintain a high rate of spending success for 37 years. In another recent Journal article, financial experts David W. Johnson, Ph.D., and Zamira S. Simkins, Ph.D., explain how HECMs are likely to play a pivotal role in retirement planning in the coming years because of the recession’s impact on traditional retirement assets. Outlining the details of the loan, the authors claim that

The new HECM regulations have required the industry and the media to rethink the role the product should play in the overall economy.

needs-based while the borrowers has program has really struck had a negative a chord with reputation in writers and the past, this will likely lead may change to additional as more coverage in people turn mainstream to it. “Current publications.” and future retirees need The Media Takes to re-examine Colin Cushman Note their views and consider While including NRMLA’s a reverse press audits mortgage as a part of their retirement review coverage in all media outlets plan,” their report concludes. across the country, it’s the larger, more popular outlets that garner the According to Kumbar, studies like most impressions and therefore have these are essential to getting financial the largest impact. In the past two advisors to understand the benefits of months, a handful of articles have been the HECM. “They help the financial published in major outlets that refute planning community decide under misconceptions about the product, which consumer circumstances outline the recent regulatory changes a reverse mortgage helps,” he and explain how the HECM could be a says. “They also drive a broader viable solution for some seniors. understanding that reverse mortgages should always be considered in everybody’s retirement planning.”

Reza Jahangiri, CEO of AAG and The Reverse Review’s senior publisher, says research is an important part of changing the public’s perception as well. “Research studies are one of the key ingredients to educating the public on the HECM program. The more research that is done on the efficacy of the product, the better we can shift the mindset of finance professionals and seniors at large,” he says. “We all know the facts cut in our favor and how useful of a tool the HECM can be, so I think it’s hugely important to have as many studies conducted as possible on the impact of the product.” Cushman agrees that academic research is essential, and says it plays an important role in grabbing the media’s attention. “Research reports raise the profile of HECMs in the minds of the media and provide an automatic news hook upon which writers can build their own stories. It is very common for the media to discuss new or alternative uses for an existing product, so the ‘new idea’ that HECMs can benefit a wider audience than just

The New York Times is among them, publishing an article titled “Retiring on the House” in mid-February that refuted the misconception that reverse mortgage lenders take an equity share in the borrower’s house. The article pointed out that lenders like Generation Mortgage Company are working hard to demonstrate the product’s ability to help retirees meet long-term financial goals. “As baby boomers age, reverse mortgages are expected to gain popularity as a means of covering living expenses,” it stated. A month later, Reuters published its own report, also noting that the HECM market will likely gain steam in the coming years. “Brokers and bankers say the 77 million retiring baby boomers will likely help fuel further growth in the loans in the coming years, making the business a growth spot in a home loan market where volumes have recently been declining,” it stated. Titled “U.S. Retirees Return to Reverse Mortgages, Big Banks Stay Away,” the piece explained how FHA’s program changes have made the loan safer for reversereview.com

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The Reverse Review April 2014

CHANGING PERCEPTIONS ABOUT CONVERSION MORTGAGES.

Anyone can talk about the advantages of strategic home equity use, but only nu62 actually demonstrates how your clients can put their home equity to work to support a better retirement. nu62.com is the only public website that provides you the tools SM

to allow your prospective borrowers to plan their optimal use of home equity over time and understand the impact of their utilization decisions. It’s your new resource to open minds about the conversion mortgage – and close more loans.

nu62 is the only financial tool of its kind, and it is available only from SM

Generation Mortgage Company. To learn more, please contact us at 1.800.560.2394, or visit us at www.nu62.com/rr2

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©2014 Generation Mortgage Company. 3565 Piedmont Rd. NE, 3 Piedmont Center, Suite 300, Atlanta, GA 30305. NMLS ID#1319, www.nmlsconsumeraccess.org. All rights reserved. nu62 is a service mark of Generation Mortgage Company. Patent Pending. nu62 is a service mark of Generation Mortgage Company. Patent Pending. TRR For state(s) legalese, and restrictions visit www.generationmortgge.com/statelegalese and www.nu62.com


consumers, and that the product, now offered by specialized lenders instead of big banks, can be a viable option for select retirees. “For some homeowners, reverse mortgages can fill a real need.” Finally, at the end of March, the Wall Street Journal published “A Kinder, Gentler Reverse Mortgage.” The piece outlined the details of the loan, also stating that HUD’s changes have made the product safer for consumers by preventing homeowners from spending the loans proceeds without reserving enough for property taxes and insurance. It includes input from financial experts who call the changes positive and explain that the loan is a solid option for some seniors looking to age in place. Articles like these are hugely important to the product’s growth. “The themes in these articles often get picked up by other news outlets and

bay. The non-borrowing spouse issue is one sticking point in particular that may continue to draw the ire of media pundits, and until HUD implements guidelines to curtail this problem— which the agency says it’s working on—there is little the industry can do. Just before press time, an article appeared in The New York Times’ Dealbook section that discussed children of HECM borrowers who were facing foreclosure on their deceased parents’ homes just weeks after their passing, forcing them to muddle through a “bureaucratic maze” to keep the home. Articles like this one serve as a reminder that, while the needle has moved in a slightly more positive direction in the last six months, the industry still has a ways to go before things turn around. Still, professionals can take some action to help sustain this positive

period of time,” Kumbar says. “We also need to help everyone understand how the product has changed. It is literally a new reverse mortgage, and the ‘new’ designation is important to let people take another look at a product they may have only partly understood.” Cushman says that to maintain this momentum, reverse professionals need to publicize the good work they do. “It is important that the industry be open with the media and take advantage of opportunities to communicate success as it occurs,” he says. “The recent positive coverage shows that writers are open to viewing HECMs in a new light, but the industry has a long way to go to overcome the negative press coverage garnered in the past.” According to Jahangiri, in order to overcome the challenges and grow this market, reverse professionals need

Changing public perception is almost alwaysa marathon. We need to maintain a steady pace over a long period of time. We also need to help everyone understand how the product has changed. It is literally a new reverse mortgage, and the ‘new’ designation is important to let people take another look at a product they may have only partly understood. Otto Kumbar local papers that combine it with a consumer story in their area,” Kumbar says. “With all the myths about reverse mortgages still rattling around from decades ago, current news stories help consumers make the best choice for their particular circumstances based on today’s facts.”

Sustaining the Momentum While this latest surge of press coverage is promising, not all of the reports are positive. Many spell out the pros and cons of the program, with some concluding that despite recent regulatory safeguards, the loan is still complicated and costly. Such reports are unlikely to disappear entirely, even after HUD’s Financial Assessment introduces further consumer protections to help keep headline-grabbing foreclosure tales at

momentum. According to Kumbar, originators can participate by spreading the word. “This can be as simple as sharing reprints of the national stories, or finding outlets that are interested in a local twist on a national story,” he says, adding that it’s also important to talk about the product with “influencers” in their areas, including financial planners, Realtors and community leaders. Cushman agrees. “The most important thing we can do is create third-party advocates among consumers and financial planners, who can then also serve as sources for the media,” he says. But revamping the product’s reputation will be a prolonged effort. “Changing public perception is almost always a marathon. We need to maintain a steady pace over a long

to focus in the future and continue to work in the best interest of the seniors they serve. “It’s important to think long term. We need to not look at today’s earnings, but at the longevity and future of our product. We know we are not hitting the product penetration levels that we should be reaching based on our demographic’s needs. That will change as long as we think several steps ahead and make sure we do what is best for seniors, not profits,” he says. Cushman says that the demographics will work in the industry’s favor. “I think we’ll see an increasing amount of media coverage around retirement issues as more baby boomers enter their 60s, and that translates into a greater number of opportunities to tout the benefits of HECMs.” x reversereview.com

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The Reverse Review April 2014

last word

EMERGE

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Fortitudine Vincimus Jaso n M cNam a r a

I

n 1914, British explorer Sir Earnest Shackleton and his 27-man crew set sail in the hopes of being the first expedition to cross Antarctica. To recruit his crew, Shackleton provided the following notice: “Men wanted for hazardous journey. Small wages. Bitter cold. Long months of complete darkness. Constant danger. Safe return doubtful. Honour and recognition in case of success.” How fitting that the day I met Jim Mahoney in November 2009 and heard the history of the reverse mortgage industry, I just so happened to be reading the book Endurance: Shackleton’s Incredible Journey. Shackleton’s wooden ship was named Endurance after his family motto, Fortitudine Vincimus, which is Latin for “By endurance we conquer.” If you have not read the book, everyone in the reverse mortgage industry should. In summary, the Endurance becomes trapped in the ice of the Weddell Sea and is crushed, leaving the crew to survive until they rescue themselves 21 months later after an amazing 800-mile journey. Not a single man is lost despite the unthinkable odds against them, thanks to Shackleton’s unwavering leadership and the crew’s relentless perseverance.

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Back to that November day: I had recently sold my company and had the opportunity to present a home equity product idea to Jim that I felt could complement the HECM product and help grow the industry. I’m not sure if I persuaded Jim to return to the industry he had helped build, or if he persuaded me to get into the industry (probably the latter), but regardless, it was one of those life-changing days that I will always remember. Al Benedetti came aboard to complete our team and Peer Advisors was ready to set sail. Of course, our journey ultimately took us to Celink, specifically to John and Ryan LaRose. I had started to wonder why Peer Advisors had not found the right partner given our efforts, but after meeting with John and Ryan in 2012, that question was answered. The connection with the LaRoses was immediate; Peer Advisors had found the treasure we had been looking for buried in the snow in Lansing, Michigan. John LaRose has provided years of thoughtful and consistent leadership to our industry. He embodies the eloquent ambassador you wish to have as your representative. In March’s Last Word, Bart Johnson suggested that “doing great by doing good” should be our industry’s mantra. John LaRose is a living testament to that mantra. John has provided Celink with a rock-solid foundation on which to grow, built on integrity, passion, ethics and trust. He makes choices for the right reasons, always thinking about long-term objectives versus short-term gains. John knows no other way; it’s how he is wired. His commitment to Celink’s future and his

marriage of 46 years to his wife, Tara, are further examples of his inspiring character. Thank you, John, for your contributions to the HECM industry. We also found another treasure in Ryan LaRose. Ryan encompasses his father’s values and leadership while incorporating a reverse mortgage knowledge base like no other. His understanding of reverse mortgage servicing is not only an asset for Celink and its partners, but an asset for our industry as we look to educate and create new stakeholders, expand our product offerings, improve our partner and agency relationships, and inspire borrower trust and satisfaction, which is mission critical in today’s social, consumer-focused economy where our customers become the marketing and PR department. I am very excited to be a part of this industry and I look forward to working with all of you. Despite the many program changes, we have a positive momentum building as a result of new products and marketing initiatives like the Extreme Summit. These efforts not only change the conversation, but also broaden the conversation to include new stakeholders that will open doors of opportunity we may have not previously explored. Perhaps the industry’s current situation could be compared to that of Shackleton’s journey on the Endurance. So remember, while the captain and his crew may not have done what they originally set out to do, they ended up accomplishing so much more. x


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The Reverse Review April 2014

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The Reverse Review April 2014