The Reverse Review July 2016

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VERSE R EV E RE

A guide to improving your game

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INSIDE THIS ISSUE | The ABCs of Reverse Mortgage Originating

THE

REVERSE review JU LY 2016

Around the

world in Reverse

A look at international home equity conversion

HOT S EAT

Scott Gordon sits down with TRR PG. 17

ORIG INAT ING

Walking a mile in your borrower’s shoes PG. 18

OR IGINATING

LAST WORD

PG. 20

PG. 31

Tips from top producers

Moving forward in reverse

Call today and schedule your free demo: 888.840.1600

The Reverse Review July 2016

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landmarknetwork.com 2 | TRR

Something

BIG is taking off!

American Advisors Group Presents:

The AAG Advantage Jumbo Reverse Mortgage Loan Available to our wholesale partners in select states, for properties up to $6 million.

Join the AAG family and get started in just 30 days. Call today to discover perks of partnership with the best in the industry!

866-964-1109 aag.com/wholesale Success is built on a solid foundation.

We’ve built ours by offering superior service to our partners and customers— powered by our drive for innovation and excellence, and delivered with the highest degree of integrity. .

8 TRR | 3 reversereview com

The Reverse Review July 2016

From the editor RE

V IE

E R EVE W TH RS

E

RS EW THE

A NOTE FROM JESSICA GUERIN

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VERSE R EV E RE

A guide to improving your game

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EVI ER

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VI

E

INSIDE THIS ISSUE | The ABCs of Reverse Mortgage Originating

THE

REVERSE review J U LY 2016

Around the

world in Reverse

A look at international home equity conversion

HOT SEAT

Scott Gordon sits down with TRR PG. 17

ORIGINATING

Walking a mile in your borrower’s shoes PG. 18

ORIG IN AT IN G

Tips from top producers PG. 20

JULY 2016

COVER

A look at reverse mortgage programs abroad

The concept of home equity conversion as a means to support retirement has a value so inherent that it defies geographic borders and crosses cultural lines. Around the world, countries are examining ways in which their citizens can access the equity they have worked so hard to build in order to finance their later years.

In this month’s feature story, Open Mortgage manager and noted finance author Dan Hultquist takes a look at reverse mortgage programs overseas.

From the equity release program in the U.K. to the housing pension plan in South Korea, we learn how various models have been designed to meet the needs of senior consumers. Perhaps by examining the structure of other nations’ plans, we can better assess our own program and its ability to meet our seniors’ needs.

L AST W O R D

Moving forward in reverse PG. 30

The fact that other nations have implemented home equity conversion plans drives home an important point: There is an undeniable need for this type of product. The ability to support oneself in retirement by tapping into hard-earned equity has great appeal.

Connect with me about how you can participate.

Reach me at jessica@reversereview.com

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SENIOR PUBLISHER

Reza Jahangiri PUBLISHER

Erik Richard EDITOR-IN-CHIEF

Jessica Guerin

CREATIVE DIRECTOR

Traci Knight

COPY EDITOR

Kersten Deck MARKETING DIRECTOR

Alycia Greer

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 © 2016 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 articles and advertisements 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.

JESSICA GUERIN

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.

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table of contents 07 / MOVERS & SHAKERS

The latest developments in companies across the reverse space

TRR 7.16

20 / ORIGINATING

20 24

Close More HECMs with Sales Tips from Top Producers A unique product, HECMs require a special sales approach

08 / STATS

May top lenders and HECM endorsement stats through April REVERSE MARKET INSIGHT

WENDY PEEL

22 / SPOTLIGHT

The ABCs of Reverse Mortgage Originating

10 / NRMLA NEWS

Read about the association’s current initiatives.

13 / ROUNDUP

A collection of recent facts and surveys affecting the reverse market

An alphabetical guide to improving your game PAUL E. SCHEPER

31 / LAST WORD

How to Move Forward with Today’s Reverse Mortgage New changes bring new challenges, but it’s all part of the industry’s evolution.

17 / HOT SEAT Scott Gordon

Founder and CEO of Open Mortgage

ROGER BEANE

18

31

18 / ORIGINATING

Walking a Mile in the Borrower’s Shoes What I’ve learned from turning 62 PHILIP E. LIPP

22

FEATURE

26 / AROUND THE WORLD IN REVERSE A look at international home equity conversion DAN HULTQUIST

YOU CAN DO IT!

REACH OUT TO US ABOUT WRITING FOR TRR. INFO@REVERSEREVIEW.COM

“As I researched foreign reverse mortgage plans, I found much of the information conflicting. Is it possible reverse mortgage programs around the world change as frequently as ours? The following is my best attempt to describe international home equity conversion. reversereview . com

8 TRR | 5

The Reverse Review July 2016

contributors JOHN K. LUNDE

8 | Stats g

John K. Lunde

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

SCOTT GORDON

17 | Hot Seat g

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

Scott Gordon PHILIP E. LIPP

18 | Walking a Mile in the Borrower’s Shoes g

Philip E. Lipp

Wendy Peel

Philip E. Lipp is the president of Allwest Mortgage and a founding director of the California Association of Mortgage Brokers. Lipp has worked in the mortgage business with his wife, Ilene, for 29 years, helping low-income, first-time homebuyers; supporting initiatives to prevent predatory lending; and assisting homeowners in foreclosure. Lipp has a B.A. from Antioch College and an MBA from Pepperdine University. He has a general contractor license and a real estate broker license.

PAUL E. SCHEPER Paul E. Scheper

Dan Hultquist

Roger Beane

22 | The ABCs of Reverse Mortgage Originating g

Paul E. Scheper (MBA, CSA) is a national field sales manager with Liberty Home Equity Solutions and the author of The ABCs of SelfImprovement: The Psychology of Improving. He is a graduate of Harvard University (psychology AB) with an MBA in finance from the University of Southern California. Scheper believes that the biggest room in the world is room for improvement (for everybody, especially for himself).

WENDY PEEL

20 | Close More HECMs with Sales Tips from Top Producers g

Wendy Peel is the VP of sales and marketing for ReverseVision, where she is tasked with communicating the company’s corporate goals and value proposition to the market. A highly seasoned technology sales and marketing executive, Peel is well-versed in promoting B2B technologydriven enterprise solutions. Peel graduated from the University of West Florida with a B.A. in communications/advertising.

DAN HULTQUIST

26 | Around the World in Reverse g

Dan Hultquist is a training manager at Open Mortgage and author of the book Understanding Reverse, which serves as an industry handbook and answers top questions about reverse mortgages. He maintains a regular blog on various related topics at understandingreverse.com, and is a Certified Reverse Mortgage Professional and co-chair of NRMLA’s Education Committee. Based near Atlanta, he is a Penn State graduate and obtained an MBA from Kennesaw State University.

ROGER BEANE

31 | How to Move Forward with Today’s Reverse Mortgage g

Roger Beane is the founder and CEO of Orange County, Californiabased LRES, a national real estate services company providing valuation management, REO asset management, HOA and technology solutions for mortgage bankers, lenders, servicers, credit unions and private investors. He leads a dedicated team of professionals committed to bringing real-world solutions impacting operational efficiency and institutional profitability to LRES client organizations. Prior to founding LRES, he was co-founder and executive vice president of Financial Asset Services.

BE A PART OF THE CONVERSATION. 6 | TRR

Share your ideas with your colleagues and be a part of the solution. Reach out to us at info@reversereview.com.

-

movers & shakers READ ABOUT THE LATEST DEVELOPMENTS IN COMPANIES ACROSS THE REVERSE SPACE.

HAVE A COMPANY UPDATE YOU WOULD LIKE TO SEE PUBLISHED?

Mortgage Cadence Announces Integration with DocuSign and eOriginal

Mortgage Cadence has integrated with award-winning electronic signature and Digital Transaction Management (DTM) provider DocuSign, Inc., and the vaulting, transaction and transferable records services of eOriginal, Inc. This new integration helps to expedite the mortgage origination process while creating a more streamlined, reliable and secure digital experience for borrowers, lenders and investors.

All signed documents are tracked, retrieved and stored in the Mortgage Cadence Enterprise Lending Center or Loan Fulfillment Center, ultimately driving additional tasks and keeping the lender on-platform and focused on the lending process. “Most borrowers today—whether millennials or baby boomers—are accustomed to doing just about everything online,” says Trevor Gauthier, president of Mortgage Cadence. “In order to increase borrower satisfaction, lenders require tools that allow them to originate and close mortgages digitally. Integrating with DocuSign’s and eOriginal’s best-in-class eSignature and eClosing solutions, along with our proprietary loan origination and document preparation and delivery solutions, allows us to provide an incredibly robust service to our clients and their borrowers—a testament to our dedication to the mortgage industry.”

email it to jessica@reversereview.com

AAG Extends Jumbo Reverse Mortgage

AAG has released its jumbo reverse mortgage loan, called the AAG Advantage, to its wholesale partner network in California. With AAG Advantage, California brokers and loan officers may originate reverse mortgages through AAG on properties valued at up to $6 million, versus the FHA loan limit of $625,500 associated with a traditional HECM loan. The AAG Advantage was initially launched in select states by the company’s retail channel last September. The loan will roll out to other states through both retail and wholesale platforms in future phases. “We’re pleased to now offer the AAG Advantage to our wholesale partners in California, where many of their clients’ property values tend to be higher,” says Kimberly Smith, senior vice president of wholesale lending at AAG. Smith continues, “With AAG Advantage and our solid network of California wholesale partners, we can help extend reverse mortgages to a greater number of seniors, provide them access to more funds and help them age in place with increased security and peace of mind.”

ReverseVision Teams Up with Factual Data to Provide Integrated Credit Reporting Solutions to Users of RV Exchange LOS

ReverseVision has partnered with Factual Data to provide integrated credit reporting solutions to users of RV Exchange (RVX) loan origination software (LOS). Credit information supplied by Factual Data is available in RVX as of the system’s most recent update on April 18. “Through our partnership with Factual Data, RVX users will enjoy

streamlined access to the critical credit information they need to identify qualified borrowers,” says ReverseVision’s vice president of sales and marketing, Wendy Peel. “While a borrower’s ability to qualify for a reverse mortgage does not hinge on his or her numerical credit score, the new Financial Assessment rules require reverse mortgage lenders to carefully consider the borrower’s ability to meet financial obligations,” Peel says.

“That’s why offering lenders the ability to order credit supplements from within RVX is such a critical advantage of this integration.”

Open Mortgage Launches Reverse Mortgage Wholesale Operation on ReverseVision’s RV Exchange LOS

Texas-based mortgage lender Open Mortgage has launched its reverse mortgage wholesale operation on the RV Exchange (RVX) loan origination software (LOS). A full-service mortgage lender, Open Mortgage has been a homeequity conversion mortgage (HECM) retail lender since 2010, originating its reverse mortgage production via the RVX LOS. “As competition heats up, mortgage brokers are eager to add a product that differentiates them in the marketplace, but they may not know where to start,” says Sharon Falvey, director of sales operations for Open Mortgage. “Thanks to our experience as an RVX-enabled HECM retail lender, we are ideally positioned to serve those mortgage brokers through a combination of unparalleled customer service and technology infrastructure while they become reverse mortgage experts themselves.”

reversereview . com

8 TRR | 7

The Reverse Review July 2016

stats May 2016

Top Lenders Report

12345 American Advisors Group

Finance of One America Reverse Reverse Mortgage

Reverse Mortgage Funding

Liberty Home Equity

Endorsements

Endorsements

Endorsements

Endorsements

Endorsements

796

330

316

275

225

Lender Endorsements

164

Lender Endorsements MONEY HOUSE INC

11

SYNERGY ONE LENDING INC

150

MORTGAGESHOP LLC

9

104

BROKER SOLUTIONS INC

9

76

GEORGETOWN MORTGAGE

9

67

FIRSTAR BANK 8

HOME POINT FINANCIAL CORPORATION

66

TOTAL MEDIA MANAGEMENT LLC

8

49

SOUTHERN TRUST MORTGAGE LLC

7

FIRSTBANK 49

FRANKLIN FIRST FINANCIAL LTD

7

REVERSE MORTGAGESCOM INC

45

NOVA FINANCIAL & INVESTMENTS CORP

6

43

PEOPLES HOME EQUITY INC

6 6

LIVE WELL FINANCIAL INC HIGH TECH LENDING INC

NATIONWIDE EQUITIES CORPORATION RMS/SECURITY ONE LENDING OPEN MORTGAGE LLC

FAIRWAY INDEPENDENT MORTGAGE CORP PLAZA HOME MORTGAGE INC

40

PACIFIC RESIDENTIAL MORTGAGE LLC

SUN WEST MORTGAGE CO INC

36

SUCCESS MORTGAGE PARTNERS INC

6

UNITED NORTHERN MORTGAGE BANKERS LTD 34

VANGUARD FUNDING LLC

6

CHERRY CREEK MORTGAGE CO INC

33

UNITED MORTGAGE CORP

6

6

5

5

ADVISORS MORTGAGE GROUP LLC

32

WILLOW BEND MORTGAGE CO

THE FEDERAL SAVINGS BANK

31

YADKIN VALLEY BANK AND TRUST

AMERICAN PACIFIC MORTGAGE

28

THE MONEY STORE

LONGBRIDGE FINANCIAL LLC

26

PREMIER MORTGAGE RESOURCES

PROFICIO MORTGAGE VENTURES LLC

25

MANN MORTGAGE LLC

MCM HOLDINGS INC

20

HOMEBRIDGE FINANCIAL SERVICES INC

5

UNITED SOUTHWEST MORTGAGE CORP

20

HOMEOWNERS MORTGAGE ENTERPRISE

5

SUN AMERICAN MORTGAGE CO

19

GATEWAY FUNDING DIVERSIFIED MORTGAGE

5

19

DIRECTORS MORTGAGE INC

5

19

COMMUNITY FIRST NATIONAL BANK

5

19

COLONIAL SAVINGS

4

TOWNEBANK 16

FBC MORTGAGE LLC

4

PEOPLES BANK

FULTON BANK 4

M & T BANK

BANC OF CALIFORNIA BANK OF ENGLAND

15

5

5

AMERICAN NATIONWIDE MORTGAGE COMPANY 13

BEST CAPITAL FUNDING

VIP MORTGAGE INC

4

4

4

RESOLUTE BANK

13

12

GUILD MORTGAGE COMPANY

12

QUONTIC BANK FSB

LAND-HOME FINANCIAL SERVICES 8 | TRR

CARROLLTON MORTGAGE CO

4

stats HECM Endorsement Stats Through April 2016 { FIGURE }

01

PURCHASE

$1,200

REFI STANDARD

$800 $600 $400 $200

{ FIGURE }

3/1/16

2/1/16

1/1/16

12/1/15

11/1/15

10/1/15

9/1/15

8/1/15

7/1/15

6/1/15

5/1/15

$0 4/1/15

DOLLARS IN MILLIONS

HECM ENDORSEMENT INITIAL PRINCIPAL LIMITS

$1,000

02

HECM ORIGINATORS (FHA & NON-FHA)

INDUSTRY SUMMARY

TRAILING TWELVE MONTH ENDORSEMENTS 6,000

INDUSTRY SUMMARY

MO. 5

2,477

-4.62%

1,793 -5.38%

4,270

-4.94%

Retail Endorsement Growth

6

2,971 19.94%

2,324 29.62%

5,295

24.0%

7

2,694

-9.32%

0.3%

5,025

-5.1%

8

2,929

8.72%

2,820 20.98%

5,749 14.41%

9

2,589 -11.61%

2,080 -26.24%

4,669 -18.79%

10

2,427

-6.26%

1,901 -8.61%

4,328

-7.3%

11

2,467

1.65%

1,553 -18.31%

4,020

-7.12%

12

2,524

2.31%

1,705

9.79%

4,229

5.2%

1

2,199 -12.88%

1,690 -0.88%

3,889

-8.04%

2

2,645 20.28%

1,932 14.32%

4,577 17.69%

3

2,669

0.91%

1,857 -3.88%

4,526

-1.11%

4

2,465

-7.64%

1,775 -4.42%

4,240

-6.32%

-7.64%

4,000

Wholesale Endorsement Growth

-4.42%

2,000

Total Endorsement Growth

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

Wholesale *Numbers Represent Months

-6.32%

* Figures Above Reflect Change from Prior Month

RETAIL UNITS CHG%

TOT

31,056

WHOLESALE UNITS CHG%

2,331

23,761

TOTAL UNITS CHG%

54,817

%%%%% LOOKING FOR MORE STATISTICS? Go to rmsinsight.net for all of the industry’s latest stats and rankings.

Brought to you by Reverse Market Insight reversereview . com

8 TRR | 9

The Reverse Review July 2016

nrmla news BROUGHT TO YOU BY NRMLA STAFF

L E G I S L AT I V E U P D AT E S

THUD Appropriations On May 24, the Appropriations Committee in the House of Representatives passed the Fiscal Year 2017 Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill that includes $38.7 billion for HUD programs.

The appropriations bill provides $55 million for housing counseling and extends FHA’s authority to continue insuring Home Equity Conversion Mortgages when the new federal fiscal year begins on October 1. The full House must now vote on the legislation.

The Senate passed its own THUD Appropriations bill. If the House of Representatives passes a bill, the two versions will have to be reconciled and signed into law before the new fiscal year begins on October 1. If that doesn’t happen, then Congress must pass a continuing resolution that keeps the government running at current funding levels.

IF YOU’D LIKE TO JOIN US in

our effort to promote the facts about reverse mortgages as a member of NRMLA’s Blog Squad, please email Jenny Werwa

JWERWA@DWORBELL.COM.

N R M L A C A R E F U L LY R E V I E W I N G H U D PROPOSED RULE NRMLA has convened subject matter experts from every segment of the industry to help analyze HUD’s expansive proposed rule entitled Federal Housing Administration (FHA): Strengthening the Home Equity Conversion Mortgage Program.

“HUD’s leadership has continually voiced its support for the HECM program throughout the Obama administration as the department has sought to put it on a sounder financial footing,” said Peter Bell, NRMLA President & CEO. “These proposed regulations are another step in this process of strengthening the program, an effort that has been underway for a few years now. In developing the regulations, HUD has to consider the perspectives of many stakeholders—homeowners, housing counselors, lenders, consumer advocates and GNMA investors, to name a few. It is not an easy task to balance the needs and concerns of all.”

The proposed rule, published in the Federal Register on May 18, seeks to codify existing regulations published by FHA via Mortgagee Letter following the enactment of the Reverse Mortgage Stabilization Act of 2013, and also proposes changes that would impact the industry.

“Now we must all digest what has been proposed, project the potential impact and provide thoughtful comments back to HUD for its further consideration. We welcome this opportunity,” says Bell. NRMLA will provide future updates as we analyze the proposed rule. The 60-day public comment period ends July 18, 2016.

TA K E A S TA N D

Against Elder Abuse Each year an estimated 5 million, or 1 in 10, older Americans are victims of elder abuse, neglect or exploitation. According to the Administration for Community Living, for every case of elder abuse or neglect reported, as many as 23.5 cases go unreported.

As professionals who work closely

with older adults, we have a special responsibility to be able to recognize the signs of elder abuse, especially of financial exploitation, and provide victims with resources to find the help they need.

As part of World Elder Abuse Awareness Day (WEAAD) on June 15, the National Aging in Place Council and the National Reverse Mortgage Lenders Association hosted a free online tutorial to provide professionals with strategies for keeping older adults safe from financial predators.

A recording of the webinar can be downloaded from NRMLAonline.org.

Launched on June 15, 2006, by the International Network for the Prevention of Elder Abuse and the World Health Organization at the United Nations, WEAAD provides an opportunity for communities around the world to promote a better understanding of abuse and neglect of older persons by raising awareness of the cultural, social, economic and demographic processes affecting elder abuse and neglect.

10 | TRR

DOWNLOAD FROM NRMLAONLINE.ORG

nrmla news REVERSE MORTGAGES IN THE NEWS 2 “Why a Reverse Mortgage Could Be Right for You” is a video segment featuring bestselling author Jane Bryant Quinn, who explains why her opinion of reverse mortgages has changed during an interview with Donna Rosato, a senior writer for Money. New rules for reverse mortgages have removed some of the pitfalls that made them problematic in the past, says Bryant Quinn, and financial planners are learning to use them in creative ways.

2 Aging Today, the American Society on Aging’s newspaper, published an article by Alicia Munnell, Director of the Center for Retirement Research at Boston College, who writes, “Accessing home equity will become increasingly important in a world where retirement needs are expanding, and the retirement system is contracting… For older adults who want to remain in their homes, reverse mortgages offer a way to do that by using home equity.”

2 “Four Ways to Create Your Own Pension,” a Kiplinger article by Scott Hanson, CFP, a financial advisor and co-founder of Hanson McClain Advisors, recommends reverse mortgages as one of four ways to create a monthly income stream. Hanson McClain Advisors is a financial planning and investment advisory firm with over 4,000 clients nationwide.

CrossCountry Mortgage, Inc., Mandeville, Louisiana

4

Here’s a look at the sentiment of reverse mortgages in media coverage from the month of May. This analysis is from PR Newswire’s Agility Media Monitoring Platform:

NRMLA welcomes its newest members:

4

2 In a column titled “Reverse Mortgages Don’t Make Sense for Everyone,” nationally syndicated personal finance writer Scott Burns responded to a reader’s concerns about the level of home equity that can be depleted by a reverse mortgage. The reader spoke of an acquaintance in her 90s, who got a reverse mortgage while in her 70s. She can no longer support herself and needs to sell her home. But the loan balance exceeds what the home is worth, so she has no equity to put herself into a nursing home or hire caregivers. While sympathetic, Burns pointed out that the situation could have been avoided if the acquaintance had sold her property sooner, when there was still plenty of equity. “Instead, she lived many years, independently, in a home she wanted to stay in,” he wrote. “The issue here isn’t the tool; it’s that she has lived longer than her home equity could support. Reverse mortgages are a financial tool. They are not a free lunch.”

NEW MEMBERS

Alliance Financial Resources, LLC, Phoenix, Arizona

NEW CRMP

TRANSITIONAL LICENSING On May 23, the House passed bipartisan legislation that would allow loan originators to obtain a temporary license when transitioning to another financial institution or moving to another state. The SAFE Transitional Licensing Act of 2015 (H.R. 2121) is currently pending action in the Senate.

NRMLA congratulates James Peter Christopoulos for achieving the status of Certified Reverse Mortgage Professional.

Christopoulos has over 35 years of FHA lending experience, including the past three years working for Silex Financial Group, Inc., headquartered in Hawthorne, New Jersey.

reversereview . com

8 TRR | 11

The Reverse Review July 2016

We make it easy to offer reverse.

S

R F Turnkey.

White glove concierge service.

Education for you & your prospects.

877-721-3847

#customerservice #integrity #loyalty #diligence #compassion

www.rfslends.com 12 | TRR

NMLS #1025894

HOME EQUITY

SENIOR AGENDA

HALF OF OLDER AMERICANS ARE HOUSE-RICH BUT CASHPOOR.

In a survey on aging by the Bipartisan Policy Center,

-The Urban Institute

A LOOK AT THE NEWS AND STATS AFFECTING THE MARKET

{

GET UP-TO-DATE retirement facts, home price stats, senior trends and HECM market developments in The Reverse Review’s monthly Roundup.

{

50% of all homeowners over 62 have more than half their net worth tied up in home equity.

THIS MONTH

M ON EY MATTER S

Housing and health care comprise half of senior expenses.

SPENDING FOR HOUSEHOLDS AGE 75 AND OLDER:

are using home equity as a source of retirement income

--Transamerica Center for Retirement Studies survey of 2,000 retirees

“What I’d really like to do is stay in my current residence for as long as possible.”

SUBPAR SAVINGS MOST AMERICAN ADULTS ARE NOT DOING MUCH TO PREPARE FOR RETIREMENT.

A Northwestern Mutual Planning Study revealed that of 2,000 people 18 and older:

NUMBER CRUNCH

11% of retirees say... they

88% OF SENIORS SAID:

Q UOTED & N OTED

“A reverse mortgage can be a prudent option for some retirees, especially for those who wish to remain in their homes and who have high levels of home wealth but lack sufficient retirement savings and income… Coordinated efforts across government agencies to strengthen the role of home equity in providing retirement security could help to increase awareness of reverse mortgages.”

-The Bipartisan Policy Center’s Report of the Commission on Retirement Security and Personal Savings

44%

have taken no steps at all to prepare for retirement

reversereview . com

8 TRR | 13

WE KNOCK OUT THE

The Reverse Review July 2016

COMPETITION

Experience | Excellence | Commitment | Pride

PRC has been FIRST IN REVERSE 15 years running. We are proud to be the first national title and Settlement Company to specialize in reverse mortgages. Our dedicated team of professionals offers the experience and knowledge to smoothly close reverse transactions—correctly. Having closed more than 150,000 reverse mortgage loans, PRC understands the importance of comprehending all HUD and lender guidelines.

TOLL FREE: (800) 542-4113 | www.PRClosings.com 14 | TRR

NEW NATIONAL

SPOKESPERSON AAG names Tom Selleck its new spokesperson. The actor will appear in national campaigns to help spread awareness about reverse mortgages.

AAG has announced that actor Tom Selleck will serve as its new national spokesperson. The announcement will kickstart a multifaceted marketing campaign in which Selleck will deliver a new message about the benefits of a HECM with the goal to educate older Americans, their families and their caregivers about the loan.

Creative Officer Teague McGrath says the company searched for a partner that homeowners could connect with.

“Our research reinforced the widespread recognition and respect that Tom Selleck has garnered among Americans and acrosse generations,” McGrath says. “We believe he is the best candidate for the job and we’re thrilled to have him on board.”

Selleck is an Emmy and Golden Globe award-winning actor who AAG CEO Chief Reza Jahangiri says Selleck brings a critical is well-known for his star role on TV’s Magnum P.I. in the 1980s— sense of relateability. “I am confident and his trademark moustache. He that Tom, with his stature and credhas acted in numerous feature films, ibility, will greatly assist us in continuincluding 1987’s highest-grossing ing the conversation about the impormovie, 3 Men and a Baby, and played I STRONGLY BELIEVE THAT tance of home equity in retirement the leading role in the popular planning,” Jahanrigi says. “He has Jesse Stone TV movies based on the IT IS IMPORTANT FOR MANY been a welcome guest in American Robert B. Parker novels. He currently AMERICANS 62 AND OLDER, households for nearly 50 years and stars as NYPD Commissioner Frank his record of service speaks for itself.

Reagan on the hit TV show Blue AND JUST AS IMPORTANTLY We’re proud he’s part of the team.”

Bloods.

FOR THEIR FAMILIES, TO KNOW THAT A REVERSE MORTGAGE CAN HELP THEM STAY IN THEIR HOMES WITHOUT GIVING UP THEIR OWNERSHIP. ”

Born in Detroit, Michigan, in January 1945 to a homemaker and an executive/real estate investor, Selleck and his three siblings spent the end of their childhood in Sherman Oaks, California. In his early 20s, Selleck worked as a model while attending USC on a basketball scholarship. At 22 he joined the California Army National Guard, where he served in the 160th Infantry for six years before pursuing an acting career.

Leading reverse mortgage lender AAG has spent months searching for a spokesperson since the passing of its longtime brand ambassador Senator Fred Thompson last year. AAG Chief

Selleck says he is looking forward to his new role as spokesperson and believes strongly in the value that reverse mortgages bring America’s seniors.

“I am pleased and proud to be working with AAG. It was, after all, Fred Thompson who sparked my interest in reverse mortgages,” Selleck says.

“I strongly believe that it is important for many Americans 62 and older, and just as importantly for their families, to know that a reverse mortgage can help them stay in their homes without giving up their ownership.” reversereview . com

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The Reverse Review July 2016

16 | TRR

SCOTT GORDON

Founder and CEO

From his favorite TV show and his first job to the craziest thing he’s ever done, we get the scoop from Scott Gordon, founder and CEO of Open Mortgage, in this month’s edition of The Hot Seat.

>

Ten years from now I’d like to be retired, skiing and

>

traveling. But I’m afraid I’d be bored without a day job. >

a bachelor’s and master’s in software engineering. At

Something very few people know about me is that

75 he earned his third degree, a master’s in pure math.

Never stop learning!

and pit orchestra, and was the drum major.

My favorite vacation was a drive around the entire

>

day.

in Greenland. They are both amazing countries.

My celebrity crush is Neil DeGrasse Tyson. I have

>

those same painful changes have made the product better and should open the door to bigger adoption

The craziest thing I’ve ever done was either

going forward. We are very excited about the future.

parachuting or paragliding. Both were really fun. >

I never miss an episode of Blacklist.

>

I’ll never forget marrying my wife, Tana, on the Kona

>

My favorite website is YouTube. You can learn anything there.

My favorite time of

by Realtors and financial planners is going to change

>

capabilities. Boy, did I not realize how this niche

fresh and the day is all

>

I always avoid saying

My first job was scooping poop at my parents’

boarding and grooming kennel. I didn’t want to, but

I entered this industry because I thought it would be a good niche product to add to our lending

the morning. The air is

“always” and “never.” >

our industry.

the day is first thing in

possibilities.

Ten years from now the reverse mortgage industry will be much bigger. Acceptance and understanding

coast of the Big Island, at sunset. It was a lovely day. >

The greatest setback for our industry has been

the repeated changes to our laws and guidelines. But

heard him speak and he is brilliant. >

If I could trade places with someone for a day, I would choose our Maine Coon, Spike. He sleeps all

coast of Iceland with a few days at the Ilulissat Icefjord

>

The best lesson I’ve ever learned was to never

stop learning. My dad was a dog groomer but earned

I was a band nerd in high school. I was in jazz band

>

I CAN’T GO WITHOUT C H O C O L AT E .

S E R I O U S LY.

product would change our lives at Open Mortgage! >

The most important thing financial advisors can learn about reverse mortgages is all of the ways

it can be an additional tool in their tool belt. It allows them to do a better job, and be a better, more capable planner. They are about to change our world.

my parents made me, and it taught me the ability to

WHAT SCOTT THINKS

make myself do things I need to get done. >

When I was younger I wanted to be a physicist.

I took the Drake physics scholarship test and was

invited to apply to MIT. Invited, but no scholarship, so I didn’t go. I became a software engineer instead. >

My favorite book is Stranger in a Strange Land by Robert Heinlein.

People should seek a career in the reverse mortgage industry because it feels good to help others. But don’t enter this field if you can’t put the senior first in every decision. reversereview . com

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The Reverse Review July 2016

ORIGINATING

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REFLECT

RR

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Walking a Mile in the Borrower’s Shoes

By Philip E. Lipp

What I’ve learned from turning 62

pay for health insurance. Can they keep working long enough to get coverage through work? And if they are not working any longer, which plan can they afford?

Another rub for the 62- to 66-year-olds is if they decide to take Social Security now, they receive less money. If they wait it out past age 66 for every year they delay, their monthly payment will grow 8 percent. So waiting to age 70 will get them about one-third more money.

I always knew it was a good idea for a salesman to take a customercentric point of view. Well, after 32 years in the mortgage business (the second half of which was spent selling reverses), I am doing exactly that. I finally qualify for a reverse mortgage. Now I understand what my clients are going through.

Now that my clients are also my peers, I find I am much more interested in learning what they are currently doing if they are now retired. Since I am approaching retirement myself, I want to get ideas of how to spend that time— or, in some cases, how not to spend that time.

I am also up to speed on how Social Security works, so I understand how it might factor into my clients’ overall 18 | TRR

financial picture. I have Medicare now, so I can relate on that front as well. (Boy, is that a huge savings from the plan we used to have.

Listen to this: With Medicare and a supplemental health plan, I have 100 percent coverage, no co-pays to see a doctor and an annual deductible of approximately $150. The last year I had commercial coverage, my annual deductible was $8,000. Oh, and I almost forgot, with my supplemental Medicare plan, I get a free gym membership—hot cha cha!)

Now that I am of qualifying age, I’ve learned that folks who are between 62 and 65 years old are in a tough place.

They don’t yet qualify for Medicare and so they have to figure out how to

But that’s not all. There are physical limitations that come along with this age milestone.

I understand how it feels to have arthritis in different parts of my body and not be able to do all of the physical things I used to be able to do. I used to love working in my garden, but now it’s not worth the backache.

My hearing and vision aren’t what they used to be either.

Don’t get me wrong, I’m not looking for sympathy; life is pretty darn good.

It’s just that it’s different and I’m different.

ORIGINATING Here’s something else: I am contemplating what I want to do with the last chapter of my life.

I started taking piano lessons to learn jazz, blues and rock and I joined a standup comedy class because it seemed like a fun thing to try to do.

What about your clients?

Let me tell you, they are not some alien beings that walk the earth. They are real live people who have had a long life with many experiences. They might not be ready to sign up for a reverse mortgage today, but it might be worthwhile to explore some different scenarios with them to show how the product could work for them in the future.

I also ask questions about their estate plans. Do they have a will or a trust in place? How about a health care directive and a durable power of attorney? If not, why not? I discuss the benefit of trying to get this all down on paper today, so that tomorrow can run a lot smoother when they hit a few more bumps in the road. Those few bumps are a matter of “when,” not “if.”

Ask questions about their plans and find out about their family. Will they be staying put or are they planning to move? Do they get along with their kids and can they rely on them? What do they plan to do or what are

I don’t try to sell folks on the product; I just want to see if it makes sense for them in any meaningful way. After all, I’m not ready for it today and they might not be either. I just need to understand their lives better to know if it’s the right choice for them now or later.

Go ahead and put yourself in their shoes. If you are lucky, you might just get there yourself someday. n

SPOTLIGHT

In summary, I’ve learned that at this stage in life, perhaps it’s good to branch out and try

they doing with their time if they are retired? What did they always want to do when they were younger, but never got around to doing?

ORIGINATING

Oh, and this is big. My wife and I are traveling to places all over the world. We always wanted to go, but family obligations, work and a million other things kept us from going. Now we have gone to Europe and Asia, and have visited some beautiful places right here in the United States.

Now that my clients are also my peers, I find I am much more interested in learning what they are currently doing if they are now retired.

Since I am approaching retirement myself, I want to get ideas of how to spend that time—or, in some cases, how not to spend that time.”

new things, something I wouldn’t have guessed from the other side of my 60s.

LAST WORD

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The Reverse Review July 2016

ORIGINATING

Close More HECMs with Sales Tips from Top Producers

By Wendy Peel

A unique product, HECMs require a special sales approach The HECM is a unique product that requires a unique sales approach. Some might even say the tactics required to close a HECM deal are more akin to those used in the financial services sector than in mortgage banking. To test this theory, I asked sales experts from some of the top-producing reverse mortgage lenders how they take a page from professionals like financial planners, investment advisors and insurance agents to seal the deal. 1 1 PARTNER WITH A FIDUCIARY g“The financial services business is all about relationships,” says Joshua Shein, senior director of Home Point Financial, based in Ann Arbor, Michigan. “Likewise, successful reverse mortgage loan officers rely on established referral partners to generate qualified leads. HECM referral partners include the usual suspects, like real estate agents and homebuilders, but reverse mortgages also have unique referral channels—like certified financial planners, wealth managers, senior advisors and retirement planners.

Teaming up with a fiduciary who has earned his clients’ trust can be a foot in the door to developing long-term borrower relationships.”

In April, the Department of Labor issued a new rule expanding its definition of “fiduciary” to include financial advisors who provide investment advice and retirement planning services. By law, fiduciaries must offer advice that serves their clients’ best interests and disclose any conflicts of interest. Industry experts speculate that the rule will compel financial advisors to present 20 | TRR

clients with a wider array of financial products, including HECMs, instead of exclusively steering them toward investment products that generate commission for the advisors.

Loan Wizard” tool that quickly converts prospects into borrowers. Premium features, available for a fee, include a loan comparison tool and enhanced property, loan and borrower reporting.

2

3

GET ORGANIZED WITH TECH g“A good financial planner is organized, and so is a good reverse lender,” says Michael Hicks, reverse mortgage divisional manager for Willow Bend Mortgage, based in Plano, Texas.

“Having the right technology is key to running your business like a welloiled machine. Today’s reverse lenders can choose from a wide array of lead generation and contact management tools to help them generate more loans, faster. Systems built specifically for the reverse mortgage industry, like RVSA, even enable loan officers to pull contact data directly into the LOS and begin originating a loan with the click of a button.”

MAKE IT A FAMILY AFFAIR

ReverseVision Sales Accelerator (RVSA) is a web-based CRM that shares a database and integrates seamlessly with ReverseVision Exchange (RVX) LOS. ReverseVision offers a free version of RVSA with basic features including email marketing support, contact and activity management, and a “Create

gFinancial planners often advise older clients to bring their adult children— especially those designated powers of attorney or estate executors—to planning meetings. Similarly, “HECM lenders need to involve the family early,” says Julie Colangelo, reverse mortgage training manager for Essex, based in Orange, California. “It may seem like a time-consuming approach, but in reality it saves time and increases the odds of closing. Spouses need to understand that they have rights whether they’re listed on the loan or not. The kids need to know their parents aren’t being taken advantage of. And the parents want to make sure their decision won’t negatively impact the kids.”

ORIGINATING The 2013 Family & Retirement: The Elephant in the Room study by Merrill Lynch and Age Wave found that “being a burden on family” is a top retirement concern among older Americans. HECM lenders should address this concern head-on with the whole family by clearly explaining the rights of non-borrowing spouses and the heirs’ options for settling a HECM loan. Lenders should also point to the extensive body of academic research that indicates using a HECM to extend the life of an investment portfolio helps the borrower retire more comfortably and leaves the heirs with a more generous estate value at end-of-life.

4

CREATE A SENSE OF URGENCY gHECM loans are intimately associated with two topics people hate to talk about: money and death. As retirement and estate planners can attest, people often put off talking about these issues, or they may become defensive or uncooperative.

“To overcome borrower procrastination, I focus on the financial security and peace of mind that come with acting sooner, rather than later, and use models to demonstrate why waiting doesn’t pay,” says David Weinstein, senior loan officer and reverse mortgage division manager for Concord Mortgage Group, based in Westerville, Ohio. “Then I set clear expectations for each step to be accomplished and make those steps as easy as possible for the client to complete.” n

SPOTLIGHT

Visual aids or calculators that use real client data to demonstrate the positive impact of a HECM on estate value may be the most effective way to explain this “sequence of returns” strategy. And even though borrowers must complete reverse mortgage counseling with a HUD-approved professional, lenders are responsible for ensuring borrowers thoroughly understand their obligations under the terms of a HECM loan.

5

ORIGINATING

BE A TEACHER gThe best financial planners don’t just create financial plans; they make them easy for clients to understand.

Lenders also play a critical role in client education—and because HECM loans are such a specialty product, lenders usually have to educate the borrower’s financial planner as well.

“The HECM program has evolved, and today’s reverse mortgage is no longer a loan of last resort,” says Sharon Falvey, director of sales operations for Open Mortgage in Austin, Texas.

“Rather, it’s a financial tool that enables borrowers to hedge against poor stock market performance by tapping into home equity and protecting other retirement investments. There is a level of sophistication to this approach that requires education of both the borrower and fiduciary.”

LAST WORD

reversereview . com

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The Reverse Review July 2016

SPOTLIGHT IN THIS MONTH’S EDITION

RR

WE REVIEW THE BASIC PRINCIPLES OF REVERSE MORTGAGE ORIGINATION

The ABCs of Reverse Mortgage Originating

An alphabetical guide to improving your game

july 2016

WANT TO SEE MORE ARTICLES LIKE THIS?

See them at reversereview.com.

By Paul E. Scheper

W

HAT’S THE BIGGEST ROOM IN THE WORLD? It’s the room

for improvement. This is true for all of us (especially for me). With this in mind, here are the 26 keys to becoming or remaining a top-flight HECM originator according to the letters of the alphabet. I should probably start with Z and end with A so that it’s in reverse order, but my editorial committee (led by my wife and three pugs) decided to start with A for attitude and end with Z for zeal.

Attitude g We originators need to have a blood type called B Positive. Our customers go through a lot of ups and downs in life, and we often ride part of that journey with them. We have to embrace Charles Swindoll’s famous quote, “Life is 10 percent what happens and 90 percent how we react to it.”

A bad attitude is like a flat tire—you can’t go anywhere until you change it. Nothing is easy, but being in the reverse mortgage industry still delivers a great sense of purpose that inspires me, even on days that don’t go particularly well.

Bendability g Bendability is the ability to roll with the punches, to adapt, to be flexible in your approach. It’s important to 22 | TRR

listen to what the customer wants and to evaluate what they need, and to create a customized solution that fits their needs. As originators, we need to be flexible like Gumby.

Commitment g To be an originator in this industry, you have to be committed, not just involved. You have to be all in. There are so many things to learn, so many challenges and crazy things that pop up in your files, that you have to give 100 percent of your attention. It’s impossible to dabble with originating reverses because it requires originators to be relentless and committed to learning something new each day so that the next HECM client can benefit.

SPOTLIGHT shots you don’t take.” Make that extra follow-up call and don’t worry about rejection.

Focus on how you are going to transform the senior client’s life with a reverse mortgage.

Goals Discipline

Fear g Some originators fear rejection and are sometimes reluctant to follow up and follow through. What motivates me is the fear my clients have (i.e., outliving their money), which is much more frightening than making a few extra calls to disagreeable prospects. As Wayne Gretzky used to say, “You miss 100 percent of the

Joy g A reverse originator has an exciting and invigorating challenge each day: How do I bring joy to another client today? Senior homeowners are looking for ways to live in their homes forever and sustain a comfortable life during their retirement years.

When we offer HECMs to clients, we are offering them a sense of freedom, safety, liberty, control, comfort, independence and confidence. But ultimately,

g Knowledge is not power; applied knowledge is power.

HECM originators need to apply what they know. Use it or lose it. But the key is to impart this knowledge to our clients in a loving, caring way. My mom used to say, “People don’t care how much you know. But they know how much you care.”

When helping our senior clients, you cannot fake it until you make it. That’s why I love originating HECMs; I see so many nice clients and I am part of an industry with awesome originators who love and adore their clients.

Learning g Legendary UCLA basketball coach John Wooden could have taught a reverse mortgage training class in one quote: “It’s what you learn after you know it all that counts.” We have to keep improving, learning and getting better each day so that we can help our senior clients reap the benefits of a reverse mortgage. Learning how to help educate senior homeowners on ways they can avoid outliving their money—that’s why we are all doing what we do. 8 reversereview . com

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LAST WORD

g Without strategy, execution is aimless. Without execution, strategy is useless. As an originator, I realize I can always improve in my execution—the actual “doing” of things. Like many of us, I often know what to do, where to do it, how to do it and why to do it. I just don’t do it all of the time.

Execution is doing it.

g It’s important to stay sharp, eat right and exercise.

The best originators I’ve worked with always have a balance of mind, body and soul. In order to deliver improved financial health to our clients (i.e., a better life, a healthier retirement plan), we need to be healthy ourselves.

If you feel healthy, you can work more effectively, which means you see more people and are able to help them improve their lives.

Knowledge

SPOTLIGHT

Execution

Health

g Walt Disney once said, “I only hope that we don’t lose sight of one thing: that it was all started by a mouse.” Similarly, reverse mortgages all started with one purpose: to help older Americans convert part of the equity in their homes into a monthly stream of income or a line of credit so they would not outlive their money. Originators have to collaborate with their customers and use their collective imaginations to solve the most important puzzle for most homeowners: how to use the reverse mortgage as a financial tool that helps them remain in their homes forever.

we are offering joy to our customers. We need to choose joy ourselves so that we can spread the joy to our senior client.

ORIGINATING

g It takes discipline to be a top-flight originator. You have to continually read articles and blogs, attend “lunch and learn” webinars, read industry publications, and brush up on the changes and updates concerning the HECM program (i.e., mortgagee letters, bulletins, NRMLA updates). Discipline is the bridge between goals and achievement.

g An originator without a goal is like an explorer without a compass. Set SMART goals: Specific, Measurable, Aligned, Realistic and Timely. The late Yogi Berra could have trained many reverse mortgage originators with this famous Yogi-ism: “If you don’t know where you’re going, you’ll probably end up there.”

Imagination

The Reverse Review July 2016

SPOTLIGHT

Mistakes g Frank Sinatra used to sing, “Regrets, I’ve had a few… But I did it my way.”

With reverse mortgage originators (including me), I would tweak this lyric: “Mistakes, I’ve had a few, but I did it my way.” Everybody makes mistakes. Maybe you calculated something wrong, said something incorrectly or delivered the wrong document by accident. The key is to learn from your mistake and never repeat it. Mistakes make us better.

Learn from other people’s mistakes, learn from your own. As my best friend from Texas once said, “Mess up, ‘fess up, fix up.”

Now g As an originator, I’d be a millionaire if they would have paid me a dollar for each time I had a great idea and took no immediate action. Do it now, and do it before the law of diminishing intentions takes over. The key to originating is to work harder now. Follow up now.

Network now. Run the numbers now. Don’t be like my dad, who used to joke, “I’ll stop procrastinating… starting tomorrow.” Do it now.

Opportunity g The best originators are the luckiest originators. Luck is when preparation meets opportunity. Top originators are always prepared and always in the right place, at 24 | TRR

the right time, with the right people.

Perseverance g Originating HECMs is really, really tough.

Endorsement volume has dipped, new rules have emerged and regulatory headwinds have come our way in recent years.

However, the demographics and the financial pressures facing today’s retirees still create an enormous opportunity for all reverse originators. Be like Jim Valvano and don’t give up… Never, ever give up.

Remember that the snail eventually made it to Noah’s ark. Persevere, work hard, be positive and get up off the canvas when you’re knocked down.

Question g If I could only give one bit of advice to HECM originators, it would be to ask questions, lots of questions. Ask your clients, “What do you hope to accomplish with a reverse mortgage?” Even better, ask, “If you don’t choose a reverse mortgage, how is your life going to get better?”

Questions are the logs that fuel the fire. Asking the right questions is just as important as having the answers. Your questions will help educate your client and help them get what they want.

Responsibility g As a HECM originator, I sometimes wonder how I could have done better.

I’ve originated forward loans since 1983 and

HECMs since 2004 and, because I’m human, have occasionally played the “blame game,” where I blamed circumstances, bad luck, bad vendors and bad processors on my poor production. However, my life is so much easier and more fun now that I take 100 percent of the responsibility and give 100 percent of the credit to others when my loans go well. As Harry Truman famously said, “It’s amazing what you can accomplish if you do not care who gets the credit.”

The key is take responsibility for everything you do (or don’t do) as you work to originate loans.

Sacrifice g Mick Jagger once sang, “You can’t always get what you want, but if you try sometimes, you just might find you get what you need.”

For HECM originators, this is so true. The key is to sacrifice some time on weekends and during the evenings to get caught up, to get ahead, to learn more, to solve problem files.

Teachable g John Fogerty of CCR would be a great reverse mortgage celebrity, but an even better HECM originator because of his great lyric, “Put me in, coach, I’m ready to play… today!” We have to be coachable, teachable and eager to learn. Heck, even Michael Jordan needed a coach. The great ones want to improve, to receive constructive feedback, to learn better ways to help our senior customers.

Understanding g Stephen Covey and my wife, Gigi Scheper, have taught me the key to selling reverse mortgages.

Covey said, “Seek first to understand, and then be understood.” Heck, that’s why I’ve been lucky enough to be married almost 35 years. Speaking of my wife, her comment on this is the best: “Ever notice that the words LISTEN and SILENT contain the same letters?”

SPOTLIGHT

Valor

Why

g HECM originators need to look back, reflect on and x-ray their past performance in order to get better. Taking a self-assessment every so often is the key to being a successful originator. We need to look back to learn and look forward to grow.

Change is not an option, but growth is. The best way to

Yearn g It’s important for reverse mortgage originators to yearn for improvement in all areas—taking a better loan application, asking better questions, learning to utilize technology better, and basically working smarter and harder. We need to burn to yearn and learn before we can earn. Yearning is desire on steroids. We need to yearn to help our clients live a better, more joyful life.

Zeal g As Emerson once wrote, “Nothing great was ever achieved without enthusiasm.” This is so true with originating HECM loans.

R E V E R S E R E V I E W. C O M

THE

REVERSE review

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Send us your company’s press releases or email us news of your latest venture, and we’ll consider printing it in the next issue.

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LAST WORD

S E N D Y O U R N E W S T O J E S S I C A @ R E V E R S E R E V I E W. C O M

When you’re with clients, you need to “mirror and match” their style and adapt to how they want to be educated.

Pompoms and confetti are good at football games, but not always at the kitchen table. However, let’s never forget what Zig Ziglar once said: “For every sale you miss because you’re too enthusiastic, you will miss a hundred because you’re not enthusiastic enough.”

Each day, it’s OK to be like Jim Harbaugh and “attack this day with an enthusiasm unknown to mankind.” But it’s just as powerful to display a silent, understated zeal like Gandhi, whose words still ring eternal: “Be the change you want to see in the world.” n

SPOTLIGHT

g To be a premier HECM originator, you must continually remind yourself of your why. Why am I in this

X-Ray

grow is to reflect, examine your past, change course and improve.

ORIGINATING

g Valor is courage and bravery sprinkled with integrity and character.

To be a HECM originator, you need to live with valor.

It’s an honor to help our clients and to be in this worthy and respected business. Valor is simply the willingness to be afraid, and to act anyway. The NRMLA Code of Ethics should be applied in our interactions with our clients and our colleagues with relentless valor. We have to always be strong and to not only do things right, but to also do the right thing.

space? Why do I do what I do? Why is this worth it to me and to my clients? Simon Sinek’s book Start With Why is awesome for this very purpose. It’ll help you bounce back from a bad day with one simple solution: Be relentless toward your “why.”

Know your purpose, know your why.

The Reverse Review July 2016

Around the

world in Reverse

A look at international home equity conversion

BY DAN HULTQUIST

I was sitting in my hotel room overlooking the city of Nanchang, in southeast China. From 250 feet up, much of the city’s skyline was within my view. Of course, homeownership is quite different in mainland China, but I couldn’t help but wonder, in a city of more than 5 million people, how many of the elderly live in these massive high-rise buildings as far as the eye can see? Are they as ill-prepared for retirement as we are in the States? How did the one-child policy impact retirement planning in a culture that almost exclusively relies on the young to provide for the old?

26 | TRR

Like many reverse mortgage professionals, it doesn’t take long before my mind drifts to home equity conversion. What other countries have reverse mortgages? What are they called there? Do the media and the public in these countries misunderstand the intent of their programs as well? Do they face the same challenges we face?

I found that what we call a Home Equity Conversion Mortgage or a reverse mortgage in the United States is often labeled as “equity release” overseas.

However, equity release is a broad category of financial products, and it can have multiple meanings.

For example, in America it is rare to see mortgage products in which the homeowner sells, or gives up title to, their home. As reverse mortgage professionals, we have to constantly reassure homeowners that with the HECM product, the homeowner retains title and ownership of the home over the life of the loan. With a HECM, the estate has the ability to sell or refinance the home upon the borrower’s death. In several other countries, giving up ownership is the expressed purpose of their equity release program. These are often called “home reversion schemes.”

While we would object to the use of the word “scheme,” it doesn’t have the same negative connotation abroad. Home reversion is simply another form of equity release.

As I researched foreign reverse mortgage plans, I found much of the information conflicting. Is it possible reverse mortgage programs around the world change as frequently as ours? The following is my best attempt to describe international home equity conversion.

CANADA As it turns out, I’m not the only one curious enough to research the world in reverse. Financial blogger Martin Andelman explored the topic of international reverse mortgages in his 2014 article titled “Views on Reverse Mortgages from Around the World.”

Andelman discusses the Canadian Home Income Plan (CHIP), noting that rampant misinformation in America convinced Canadians to change their marketing of the product. In fact, while promoting CHIP, the

Seniors’ Lending Centre even warns homeowners about Internet searches that could mislead them.

“When doing your research,” the Centre warns, “be sure you are reading about the Canadian experience.”

It appears their educational efforts have paid off, as the Reverse Mortgage Programme is gaining traction.

UNITED KINGDOM The British call it a “lifetime mortgage” or “equity release,” and once again, the product is available to homeowners 55 and older. One notable—and attractive—difference is the ability to protect, or set aside, a portion of one’s home value as an inheritance for family members.

Fifty-five seems to be a magic number for CHIPs, as that is not only the minimum age, it is also the maximum principal limit factor percentage—up to 55 percent of the home’s value.

HONG KONG While Hong Kong is technically an administrative region of the People’s Republic of China, it operates as an autonomous territory.

Its Reverse Mortgage Programme was introduced in 2011 and appears to be similar to the HECM product. However, like many international equity release programs, the payouts received by the homeowner tend to be structured in term payouts, similar to those of a forward mortgage (10, 15 or 20 years). And, like the Canadian product, it is offered only to those 55 and older.

The Hong Kong Mortgage Corporation encourages banks to offer the reverse mortgage product by acting as the insurer in the way FHA covers any shortfall when a HECM loan matures.

The population in Hong Kong is aging, just as it is here in the States, and more people are now exploring the product and learning how it works.

“Like many reverse mortgage professionals, it doesn’t take long before my mind drifts to home equity conversion.

What other countries have reverse mortgages?

What are they called there?

Do the media and the public in these countries misunderstand the intent of their programs as well?”

Like many foreign products, principal limits are low in the U.K. when compared with our HECM product. Principal limit factors are 25 to 30 percent at age 65, with a maximum of 50 percent for older homeowners. However, the lifetime mortgage may provide higher factors based on the homeowner’s specific medical diagnosis.

The U.K.’s industry association is called the Equity Release Council (formerly known as Safe Home Income Plans, or SHIP). The council aims to make sure that the various products are safe, and member firms sign a Statement of Principles similar to our NRMLA Code of Ethics.

While we have become accustomed to explaining the non-recourse feature of the HECM product, most lifetime mortgages offer a more aptly named protection called “the no-negative-equity guarantee.”

NEW ZEALAND Banks in New Zealand offer reverse mortgage products known as Home Equity Release (HER). While products vary in term and name (there’s one called the Advance Loan), generally, one must be 65 8 reversereview . com

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The Reverse Review July 2016

Canada

INTERESTING FACT

to qualify. New Zealand’s Ministry of Social Development provides a code of standard for offering equity release loans for member firms, but to my knowledge, banking membership only includes Heartland, HSBC and SBS. Heartland Bank partnered with U.S.-based Reverse Focus in a consulting agreement in September 2015. Reverse Focus’ efforts helped the New Zealand bank increase production and streamline operations and sales methodologies for its HER product.

Reverse Focus president Shannon Hicks notes, “Consulting with Heartland was a rewarding experience as they faced similar hurdles to the ones our industry overcame in the U.S. in the early days of reverse mortgage lending.”

“The key role that home equity plays in retirement crosses borders and cultures.

We are pleased to see the opportunity New Zealand seniors have to access their equity,” adds Hicks.

AUSTRALIA New Zealand’s neighbor, the land Down Under, also offers equity release products, and the reverse mortgage is one that has gained popularity. There are various product names, with one bank offering an “Equity Unlock Loan.” That product and others are monitored through their industry trade association called the Senior Australians Equity Release Association of Lenders (SEQUAL).

As is the case with other countries, Australian homeowners have the option to maintain full ownership of their home with a reverse mortgage, or they can participate in a Home Reversion, which is a form of Shared Sale Agreement.

According to SEQUAL, the Shared Sales Agreement “gives the senior homeowner a cash amount today in return for selling an agreed share of the future proceeds from the sale of their home.” Alternatively, the reverse mortgage is more closely aligned with HECM guidelines, and customers have the protection of a no-negative-equity guarantee under federal law.

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The location of the home, whether rural or urban, may impact the amount that the homeowner qualifies for in Canada.

Hong Kong INTERESTING FACT

More than one property may be used and, with the bank’s approval, rented properties may even qualify for a reverse mortgage.

United Kingdom INTERESTING FACT

Equity Release calculators may ask the question, “Have all applicants smoked 10 or more cigarettes (or 3 oz. of tobacco) per day for the last 10 years?”

New Zealand INTERESTING FACT

Only three banks offer reverse mortgages in New Zealand. Since 2008, the number of reverses has decreased, while the average loan amount has grown.

SOUTH KOREA According to a 2013 Bloomberg report, many older Koreans began obtaining reverse mortgages as a hedge against property value declines. In Korea, they call them JooTaekYeonKeum, which translates to “housing pension.” Their reverse mortgage program has grown rapidly since its introduction in 2007.

Housing pensions are insured by the Korea Housing Finance Corporation and the program requires homeowners to be at least 60 years old and to have paid off their home.

Shannon Hicks reported on the progress of Korea’s reverse mortgage program this spring, noting, “What is unique is that unlike the U.S., the South Korean government is taking proactive steps to promote the loan product.” He continues, “While the U.S. may be the frontrunner in creating the reverse mortgage, our government remains reluctant to advocate the loan.”

INDIA India is one of several countries where the reverse mortgage faces cultural challenges.

To Indians, the home is more than an investment; it is a family-owned asset.

Australia

INTERESTING FACT

Principal limit factors for an Australian reverse mortgage begin at 15 percent for a homeowner age 60, and are capped at 45 percent for a homeowner age 90.

South Korea

INTERESTING FACT

Only 515 borrowers joined South Korea’s reverse program when it was instituted in 2007. But, by 2014, the total number of borrowers reached 20,000.

The program’s size now rivals the HECM’s.

India

INTERESTING FACT

A lump-sum distribution from a reverse mortgage is only available for medical purposes.

China

INTERESTING FACT

China’s reverse mortgage program faces unique hurdles because the government leases property to citizens with a 70-year cap. Also, property is traditionally passed on as an inheritance.

65). Their predicament is complicated by a diminished younger generation that is culturally obligated to take care of their elders.

In addition, the one-child policy in China created what some call the 4-2-1 crisis: four grandparents and two parents being supported by one child.

So, on one hand, the reverse mortgage is a perfect fit for millions of homeowners without a sufficient pension or without children to support them. In addition, for those with no children, there is no bequest incentive, and the future ownership of the property is of little concern. However, the Chinese culture is one that greatly values the home as a bequest to one’s child. This may be the country’s largest hurdle.

China is actually in its third attempt at rolling out a successful reverse mortgage program. The first, in 2006, was a government-run “house-for-pension” plan.

The second, in 2011, was a program offered through banks, but it was slow to catch on.

This third attempt is being offered through insurance companies and is more closely related to the HECM. The homeowners must be 60-85 years old and reside in cities approved for this pilot program: Beijing, Shanghai, Guangzhou or Wuhan.

IN CONCLUSION

Every effort is made to preserve that asset for future generations.

Nevertheless, reverse mortgages are offered for individual homeowners age 60 and older, or a co-applicant spouse who may be younger. Also, the subject property must have at least 20 years of life left. In addition, most reverse mortgages in India are structured for a fixed period of 10 to 20 years with relatively low payouts. As such, there has always been a concern about outliving the funds. One solution to this problem is called a reverse mortgage loan enabled annuity, which allows a homeowner to receive a lifetime annuity.

CHINA As it turns out, mainland China has been attempting to answer some of my questions with a form of reverse mortgage called “House-for-Pension.”

Existing traditional pensions in China are insufficient in the same way our Social Security now replaces less of our needed income during retirement.

But China is experiencing an aging crisis that is quite extreme when compared with our crisis with the baby boomer generation. It’s not simply their increased longevity and massive numbers (more than 200 million Chinese are over age

When I offered to write this article, my intention was to interview Mr. Edward Szymanoski, an original architect of the HECM program and international ambassador for the reverse mortgage.

Sadly, he passed away this spring, and the world lost a great advocate for the product.

His work still impacts the HECM program as well as equity release programs abroad.

While my list of international equity release programs isn’t complete, the common thread was recognizable as I researched each one: The HECM program is referenced as the catalyst for products assisting older homeowners internationally. We are the innovators, and older homeowners worldwide have benefited from our example. n reversereview . com

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The Reverse Review July 2016

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ASSESS

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How to Move Forward with Today’s Reverse Mortgage

By Roger Beane

years. Twenty years’ worth of insurance and taxes can add up to a large sum of money.

Since Financial Assessment, lenders have had to underwrite loans much more strictly, and some of the product’s new safeguards are causing frustration among seniors. For instance, lenders now have to retain a reserve account from the proceeds of the loan in order to pay all property taxes and insurance over the remaining life of the loan, and this ultimately means a lot less cash back to the senior for the loan. This Life Expectancy Set-Aside, similar to an escrow account, is causing seniors to rethink the product as an option or delay their decision until they are even older. The older the senior is, the less money they will have to set aside. In the case of seniors who get a loan at age 65, their life expectancy is another 20

“Evolutionarily speaking, the product is performing exactly the way the industry expected. People are more educated on the reverse mortgage, and that knowledge has positively impacted their comfort level with the product.” reversereview . com

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drawbacks that come at their own expense. This has led to a decrease in originated reverse loan volume.

SPOTLIGHT

As it has seasoned, the reverse mortgage has become fairly well-known among average borrowers, and more seniors are considering it a viable retirement source of cash. The eligible age population continues to expand; 4,000-5,000 seniors become ageeligible for a reverse mortgage every day. Evolutionarily speaking, the product is performing exactly the way the industry expected. People are more educated on the reverse mortgage, and that knowledge has positively impacted their comfort level with the product. However, seniors are guarded and becoming increasingly frustrated since HUD’s Financial Assessment was enacted April 27, 2015. While the reverse mortgage is now a safer product than ever before, there is a sense among seniors that it has serious

While there was an overall decline in reverse mortgage volume directly following Financial Assessment’s rollout, there will always be a demand for the product. To accommodate this demand while working under its stricter guidelines, there are some key ways the industry can take advantage of this new era of lending. It is in the industry’s best interest to strictly focus on reverse mortgage candidates who are somewhat funded or well-funded for retirement.

Also, lenders must underwrite to the rules and not make any exceptions, or take exceptions to the absolute minimum. They must be diligent about ensuring taxes and insurance are paid up to date (which the set-aside account takes care of) and that the borrowers are still living in the property. n

ORIGINATING

New changes bring new challenges, but it’s all part of the industry’s evolution

It does not help that lenders are dealing with a group of people who want to maintain a set lifestyle. Historically, there are two types of reverse mortgage borrowers: one who wants to continue to travel and relax with family members, and the other who seeks to improve quality of life by repairing their home or paying for medical expenses. Both types want to spend their money now, which is why they are particularly exasperated by the reserved set-aside account.

The mortgage industry is constantly changing in efforts to protect itself and its senior customers, and frustration comes with change. The industry, and the seniors themselves, must learn to adapt.

The Reverse Review July 2016

You are their face of

freedom.

A reverse mortgage can be the difference between financial stress and financial freedom. Give your reverse mortgage holders the service they deserve with Celink. celink.com | (844) 228-2101 32 | TRR