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INSIDE

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Embracing the New HECM

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TIPS FOR CLOSING PROBLEM LOANS PG. 22 CALCULATING EXPECTED RATES PG. 24 + ROBERT SIVORI SITS DOWN IN OUR HOT SEAT PG. 18

w

THE

REVERSE NOV/dec 2013

review


The Reverse Review Nov./Dec. 2013

Are you moving in the right direction?

More reverse mortgage loans are net using REVERSEVISION technology than all other systems combined. Learn what thousands of trusted lenders, brokers, principal agents and investors already know... REVERSEVISION is a powerful, yet easily mastered, tool that will accelerate your business service and performance.

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Energize your business:

Put the power of our wholesale lending division behind you.

Making success happen in Reverse Mortgage lending is easier when you work with the best in our business. With Urban Financial Group as your partner, you’ll have the resources and support of the industry’s #1 wholesale Reverse Mortgage lender.* It’s an empowering connection that can help you optimize your efforts and boost your sales.

• Call 855-77-URBAN (855-778-7226) • Explore our new wholesale and correspondent portal: ufgwholesale.com

* Since December 2011. Based on trailing 12 months’ endorsement volume. Source: Reverse Market Insight. NMLS ID# 2285. For mortgage professional use only, not to distributed to the general public. Urban Financial Group Corporate Office: 8909 South Yale Avenue,Tulsa, OK 74137; Urban Financial Group, Inc. may do business under the name REVERSE IT!, which is a DBA, or division of Urban Financial Group, Inc. © 2013 Urban Financial Group, Inc. All Rights Reserved.

reversereview.com

8 TRR

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The Reverse Review Nov./Dec. 2013

From the Editor give the industry the opportunity to

reintroduce the product and begin a new conversation with the public about its

l

Meet the Team

potential. For the first time in the product’s

Senior Publisher

forces to pool millions of dollars into a

Publisher

substantial financial pledge and input

Editor-in-Chief

the campaign aims to reshape the public’s

Creative Director

product.

Copy Editor

A note from jessica guerin

The mission is a bold one, declaring a

Marketing Director

In this last issue of 2013,

by 2018, but Kumbar and his team are

history, leading companies have joined united public relations effort. With this

from the industry’s top marketing experts, perception of the reverse mortgage

Otto Kumbar, CEO of Liberty Home

Reza Jahangiri Erik Richard Jessica Guerin Traci Knight

Kersten deck

goal to increase volume to 300,000 loans determined to advance this product so that

alycia colacion

Printer The Ovid Bell Press

Equity Solutions, reveals his detailed, five-

it can finally reach its true potential.

penetration. Some of you may have heard

Read more about the Extreme Summit in

Advertising Information phone : 630.207.3882 email : jessica@reversereview.com

campaign—called the Extreme Summit—

what you can do to aid the effort to teach

Subscriptions email : information@reversereview.com

Orleans, where Kumbar outlined his

a reverse mortgage can help them find

year plan to increase the HECM’s market

about this comprehensive public relations

our feature story on page 36 and find out

at NRMLA’s November meeting in New

hundreds of thousands of seniors how

plan before a sizable crowd of conference

financial security in retirement.

with unanimous enthusiasm from the

Editor-in-Chief

attendees. The presentation was met

group, as the need to elevate the product’s

{ Jessica Guerin }

reputation has long been established. Finally, it seems, the industry has a

cohesive plan to tackle this challenge. The Extreme Summit asserts that FHA’s recent revisions to the HECM program

sign up for the newsletter at reversereview.com.

Get the latest issue delivered directly to your inbox!

FIND US ON:

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ed

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

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

t ay ec st onn c

Feedback

Want to talk to Jessica? Reach her at jessica@reversereview.com.

Editorial Content email : jessica@reversereview.com

FACEBOOK AND LINKEDIN


Table of Contents

TRR 11/12.13

22 | Originating The Good, the Bad and the Ugly How to close problem loans Michael J. Weltman

In this issue... 24 Jeffrey M. Birdsell Originating

27 | Originating Reflecting on the Reverse Industry: Past, Present and Future Where we were and where we could go from here Mark Draper

29 | Marketing Upping Your Response Rate Targeting direct mail campaigns to reach seniors with mortgages

09 | Movers and Shakers

The latest developments in companies across the reverse space

11 | Industry Update

Headlining stories of the past month Reverse Mortgage Daily

12 | Report

October year-to-date volume for top reverse lenders and HECM endorsement stats through July 2013 Reverse Market Insight

14 | NRMLA News Marty Bell

17 | Roundup

What happens when a loan becomes due and payable

A collection of recent facts and surveys affecting the reverse market

18 | Hot Seat Robert Sivori

Ryan LaRose

34 | Spotlight Embracing the New HECM

Chief operating officer at Reverse Mortgage Funding LLC

Appraising

Jeff Bush

32 | Servicing Where the Servicing Ends

Read about the association’s current initiatives.

31 Joni Pilgrim

Tips for marketing the revised product

42 Richard Mandell Last Word

Scott Gordon

20 | Originating Less Is More Does limiting the HECM’s scope open the door for more opportunity? Philip E. Lipp

November / december 2013 W IE

E TH

E REVIEW THE VERS RE R

EV ER

INSIDE this issue

E

RE

VE

E RS

Embracing the New HECM

TH

THE

+ ROBERT SIVORI SITS DOWN IN OUR HOT SEAT PG. 18

HE REVERSE REV IE W

TIPS FOR CLOSING PROBLEM LOANS PG. 22 CALCULATING EXPECTED RATES PG. 24

W THE RE REVIE VE

RS E

RE V

cover WT VIE RE

W

A look at the industry’s new PR campaign

SE

“Every great product in history had to battle and overcome obstacles to become widely adopted… 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. The reverse mortgage is not right in every situation, but it can help many more people than we’re helping today.

EVIE

Otto Kumbar

R SE

The industry unites to launch a nationwide public relations campaign to alter the perception of reverse mortgages.

@

Want the online version? reversereview.com/magazine

ER EV

36 | The Extreme Summit

R

FEATURE

THE

REVERSE NOV/DEC 2013

reversereview.com

review

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The Reverse Review Nov./Dec. 2013

Contributors

John K. Lunde

Marty Bell

J ohn K . L und e

Ma rty B e ll

Robe rt s i vo ri

12 | Top Lenders Report 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

14 | 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.

18 | Hot Seat g Robert Sivori is the chief operating officer of Reverse Mortgage Funding LLC. Before joining RMF, Sivori was a vice president at MetLife, responsible for the strategic planning group. Previously he served as copresident of EverBank Reverse Mortgage and spent many years building a distinguished record at BNY Mortgage Company, where he held various roles, including president. Sivori currently serves on NRMLA’s board of directors.

p hi l i p e . l i pp

mi c h ae l j. w e ltman

Je f f r e y M. B i r d s e ll

22 | The Good, the Bad and the Ugly g Michael J. Weltman is a sales manager for FirstBank. Weltman, who has 12 years of experience in the reverse mortgage business, is treasurer of the Mortgage Bankers Association in Tallahassee, Florida. He has also served as president of a local real estate board in Wakulla, Florida; holds a broker license and real estate instructor license; and has a license with the Florida Department of Financial Services.

24 | What to Expect When You’re Expecting g Jeffrey M. Birdsell is product manager for ReverseVision. Birdsell, who has more than 20 years of experience in the reverse mortgage industry, previously served as CIO for Financial Freedom and designed one of the first reverse mortgage software applications, the Reverse Mortgage Analyzer. Birdsell was also an original NRMLA board member and is a certified mortgage banker with the Mortgage Bankers Association.

ma r k dr a p er

je f f bu s h

jon i p i lgrim

27 | Reflecting on the Reverse Industry: Past, Present and Future g Mark Draper is a reverse mortgage professional who has spent six years serving the New Jersey, New York and Pennsylvania markets. His philosophy is to listen to each customer’s needs and respond efficiently and effectively. Draper focuses on building long-term relationships with his referral partners as a professional, experienced, trusted and knowledgeable resource. 732.447.6217, mdreversemortgage@gmail.com

29 | Upping Your Response Rate g Jeff Bush is the president of overflowworks.com, a direct mail company that has handled more than 1 billion direct mail pieces in the mortgage industry. Bush is the former owner of a mortgage banking company that closed more than 5,000 loans from 2000 to 2007, using direct mail campaigns as its primary source of lead generation. He has more than 20 years of experience in direct mail marketing. jeffbush@overflowworks.com

31 | Reverse Mortgage Customer Service Teams g Joni Pilgrim is the co-founder and director of sales and marketing for Nationwide Appraisal Network, an award-winning appraisal management company located in Tampa, Florida.

Robert Sivori

Philip E. Lipp

Michael J. Weltman

Jeffrey M. Birdsell

Mark Draper

Jeff Bush

Joni Pilgrim

6

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20 | Less Is More g 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 lowincome, 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.


Contributors

Ryan LaRose

Scott Gordon

rya n l a r os e

s c ott gor d on

Otto K u mba r

32 | Where the Servicing Ends g Ryan LaRose is president and COO of Celink, an independent reverse mortgage subservicer. LaRose has more than 12 years of servicing experience and has worked exclusively in reverse mortgage servicing since 2005. In addition, he is an active member of the NRMLA servicing and technology committees. 517.321.5491, celink.com

34 | Embracing the New HECM 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.

36 | The Extreme Summit g Otto Kumbar is the CEO of Liberty Home Equity Solutions. Kumbar, who worked previously as business leader for Liberty, has been in the mortgage industry since 2001, working as Genworth’s managing director for Latin America, CEO of Australia and managing director for mortgage insurance in Europe. Kumbar also worked for General Electric, where he held various positions in GE Plastics, Industrial Systems, Global Exchange Services and GE Mortgage Insurance. Kumbar attended Rensselaer Polytechnic Institute.

Otto Kumbar

Ri c hard Ma n dell 42 | 2013: The Year of Change g Richard Mandell is CEO of One Reverse Mortgage, LLC, and is responsible for the dayto-day operations of the country’s fastest-growing reverse mortgage company.

ou Do y what have kes? it ta

Richard Mandell

before we begin 11

pg.

Texans Vote “Yes” to the HECM for Purchase

All FHA reverse mortgage products will now be available in the “loan” star state.

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.

FIND OUT HOW YOU CAN BE A PART OF THE INDUSTRY’S NEW PUBLIC RELATIONS CAMPAIGn PG.36

page 34

comments we loved “By switching things up, HUD has created a new playing field for those in the reverse space. Originators who can master the new rules and develop an innovative business approach will succeed. Remember, the first to market always wins market share.” -Scott Gordon

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

8 TRR

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The Reverse Review

The

Nov./Dec. 2013

Best Place to

Grow Your Reverse Mortgage

Business

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

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

ReverseVision Launches New Education Platform, Hires Rob Katz as EVP of Sales

Reverse mortgage technology provider ReverseVision has launched ReverseVision University (RVU), an online education platform designed to teach mortgage professionals about the reverse industry. In addition to teaching users how to better service HECM borrowers, RVU will offer education credits from the Nationwide Mortgage Licensing System and credits for NRMLA’s CRMP distinction. ReverseVision has also announced the hiring of Rob Katz, who will join the company as executive vice president of sales. Katz has more than 15 years of experience in mortgages and mortgage technology.

Urban Financial Group Expands its Wholesale Team Tulsa-based lender Urban Financial Group has added three new members to its wholesale team. Anneta Pope will join Urban as vice president, business development manager. Pope, who worked previously for Generation Mortgage Company, will manage the continued growth of Urban’s wholesale production and will work on increasing efficiencies across the company’s sales platform. Dori Himes and Nicole Holman have joined Urban’s wholesale sales support team. “I’m very excited about the future of Urban Financial Group and our plans to grow and evolve our business,” said CEO Steve McClellan. “We’re well-positioned to capitalize on the significant opportunities in the reverse mortgage market, and to help our wholesale and correspondent partners do the same.”

Email it to Jessica@reversereview.com. Sharon Gleason Joins NCOA as Chief Development Officer

Generation Mortgage Company Continues Growth, Receives Award From Atlanta-area BBB Generation Mortgage Company (GMC) has continued its nationwide expansion by hiring new retail branch managers and loan officers across the U.S. GMC is also expanding its wholesale division, adding new partners who are seeking access to its nu62 software tool. In September, GMC won two Torch Awards—one for marketplace ethics and another for community service—from the Better Business Bureau serving metro Atlanta, Athens and Northwest Georgia. “At Generation Mortgage, we are committed to having a positive impact on our industry, our customers and our community, and we are extremely proud to have our efforts acknowledged,” said GMC President and CEO Colin Cushman.

The National Council on Aging (NCOA), a nonprofit service and advocacy organization for older adults, has hired Sharon Gleason as chief development officer. In this role, Gleason will help NCOA enlist the support of corporate, foundation, and individual partners and donors to aid in the organization’s goal to improve the health and economic security of older Americans. Gleason has 18 years of experience managing and leading nonprofits and has helped raise more than $30 million for local, national and international nonprofits.

Reverse Mortgage Funding Expands Operations, Opens New York Office

Reverse Mortgage Funding LLC (RMF) has opened a second office in Melville, New York, which RMF President David Peskin will head. Colleen Pirraglia, formerly an underwriting and fulfillment manager for MetLife, will head the fulfillment team, and Michael Mooney, also formerly of MetLife, will lead the third-party origination sales team. “Right now, we have an incredible staff made up of many former colleagues. We’re currently accepting applications for additional sales and operations professionals,” said Peskin. “We are very happy with our growth and look forward to recruiting new members.” Interested candidates should send their credentials to Linda Dellutri at careers@reversefunding. com.

TRR wants your company news! Send us yo’sur

company latest initiatives, programs, hires, acquisitions and more, and be a part of our s Movers & Shaker column.

Email jessica@ reversereview. com

reversereview.com

8 TRR

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The Reverse Review Nov./Dec. 2013

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Š2013 Generation Mortgage Company. 3565 Piedmont Rd. NE, 3 Piedmont Center, Suite 300, Atlanta, GA 30305. NMLS ID#1319. All rights reserved. nu62 is a service mark of Generation Mortgage Company. Patent Pending. For our state(s) legalese, visit www.generationmortgage.com/statelegalese


Industry Update

Nov./Dec. 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

Mortgage Bankers Association for their tireless efforts.”

1. FHA to Extend Reverse

3. CFPB Launches Tool to

HUD will extend the implementation date for the financial assessment of reverse mortgage borrowers, FHA Assistant Secretary Carol Galante said in a speech delivered before attendees at NRMLA’s annual meeting in New Orleans. The length of the extension was not specified, but Galante’s remarks suggested that the start date will extend past the original January 13 deadline. HUD is currently reviewing public comment on the financial assessment rule and a request for clarification from NRMLA. “We need to have some extension of time here to ensure the financial assessment piece can be implemented precisely and correctly,” Galante said. “We will extend the time period. I can’t yet tell you how long. We were on furlough for two weeks. We’ve just gotten the comments and are looking at the changes. We want to ensure you have a little more time— but not a lot,” Galante said.

The CFPB has launched a tool designed to help consumers connect with local housing counseling agencies, including those who offer HECM counseling. The tool uses a search box and mapping function that allows consumers to view the 10 closest counseling agencies to their ZIP code. In conjunction with the tool’s release, the bureau published guidance for lenders on how to provide mortgage applicants with a list of local homeownership counseling agencies.

Mortgage Financial Assessment Start Date

// November 4, 2013

2. Texas Votes “Yes” to Allow

Reverse Mortgage for Purchase Product

Texas residents have voted to change the state constitution to allow for all FHA reverse mortgage products under state rule. Advocates have long campaigned for Prop 5, a measure that would allow for the HECM for Purchase in the state. Texas is the last state to approve the Purchase program. “Tonight was a clear and decisive victory for the industry,” said Scott Norman of Austin’s Sente Mortgage, who has worked with industry members as well as federal and state government toward the change. ”All the credit goes to NRMLA and the Texas

// November 6, 2013

Match Consumers With Reverse Mortgage Counselors

// November 10, 2013

4. HUD Adapts Foreclosure

Process for Reverse Mortgages

HUD has updated the schedule of claimable attorney fees and reasonable diligence timeframes for imitating foreclosure on FHAinsured loans, including HECMs. Announced via mortgagee letter on October 28, the changes will apply to all cases in which legal action to initiate foreclosure occurs on or after November 1, 2013. The changes limit the amount of fees attorneys can claim and require servicers to prosecute foreclosure within a specific timeframe. // November 4, 2013

5. Reuters: FHA Healthier than $1.7 Billion Treasury Draw Suggests

FHA is healthier than its recent $1.7 billion draw from the U.S. Treasury suggests, HUD Secretary Shaun Donovan said in a Reuters article. The infusion from the Treasury does not reflect the current health of FHA’s Mutual Mortgage Insurance (MMI) Fund, Donovan said, as the agency has worked to decrease

losses in its portfolio and housing has risen since the November 2012 actuarial review, which revealed the MMI fund had a $16.3 billion shortfall. “This was an accounting transfer that has not yet caught up with reality. It’s based on the housing market more than a year ago, and doesn’t reflect policy changes we’ve made since then,” Donovan said during a conference sponsored by the Mortgage Bankers Association. // November 4, 2013

6. FHA Chief: Following Losses, Agency on Road to Recovery

Losses stemming largely from FHA’s reverse mortgage program sparked debate among House Democrats and Republicans as FHA Chief Carol Galante responded to questions on the agency’s capital position. Testifying before the House Financial Services Committee, Galante spoke of the agency’s current position and projected stability due to its current loan portfolio and those made following the housing crisis. Galante noted the past losses attributable to reverse mortgages but noted the positive position going forward. // October 29, 2013

7. Florida Funds to Help

Reverse Mortgage Borrowers Cure Defaults

Florida is gearing up to announce a new program designed to help reverse mortgage borrowers in the state who have defaulted on their loans after struggling to pay taxes and insurance. The Florida Housing Finance Corporation is reportedly introducing the Elderly Mortgage Assistance Program as part of its $1 billion Hardest Hit Fund. It’s designed to assist senior homeowners in the state facing foreclosure due to inability to pay taxes, insurance or association dues following the complete draw-down of home equity through a reverse mortgage. // November 11, 2013 reversereview.com

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The Reverse Review Nov./Dec. 2013

Report October 2013

Top Lenders Report

12345 American Advisors Group

S1L / RMS

Endorsement

442

Endorsement

801

Lender

One Reverse Mortgage

Urban Financial Group

Liberty Home Equity

Endorsement

Endorsement

Endorsement

407

Endorsements

308

257

Lender

Endorsements

PROFICIO MORTGAGE VENTURES LLC

210

SUN AMERICAN MORTGAGE CO

27

GENERATION MORTGAGE COMPANY

184

UNITED NORTHERN MORTGAGE BANKE

27

REVERSE MORTGAGE USA INC

100

FIRSTAR BANK

27

OPEN MORTGAGE LLC

69

MCM HOLDINGS INC

26

NATIONSTAR MORTGAGE LLC

62

TOWNEBANK

26

SUN WEST MORTGAGE CO INC

57

SENIOR MORTGAGE BANKERS INC

26

MONEY HOUSE INC

52

NEW DAY FINANCIAL LLC

23

HIGH TECH LENDING INC

52

NATIONWIDE EQUITIES CORPORATION

19

GMFS LLC

51

ASPIRE FINANCIAL INC

18

PLAZA HOME MORTGAGE INC

47

CHERRY CREEK MORTGAGE CO INC

17

ASSOCIATED MORTGAGE BANKERS INC

45

UNIVERSAL LENDING CORPORATION

17

M & T BANK

38

MORTGAGESHOP LLC

16

MAVERICK FUNDING CORP

36

VAN DYK MORTGAGE CORPORATION

15

FIRSTBANK

31

AMERICAN NATIONWIDE MORTGAGE CO

14

PEOPLES BANK

29

ADVISORS MORTGAGE GROUP LLC

13

UNITED SOUTHWEST MORTGAGE CORP

28

SOUTHERN TRUST MORTGAGE LLC

12

HECM Endorsement Stats Through July 2013 Trailing Twelve Month Endorsements

Retail Endorsement Growth

6,000

7.66%

Wholesale Endorsement Growth

4,000

7.54%

2,000

0

12

Total Endorsement Growth

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

| TRR

INDUSTRY SUMMARY

Wholesale *Numbers represent months

7.61%

*Figures above reflect change from prior month

RETAIL

WHOLESALE

UNITS CHG%

Aug 2,415 12.69%

UNITS CHG%

1,705

0.06%

TOTAL UNITS CHG%

5,804

7.1%

Sep 2,147

-11.1%

1,536 -9.91%

5,584 -10.61%

2,246

4.61%

1,498 -2.47%

4,644

1.66%

Nov 2,705 20.44%

1,724 15.09%

4,653

18.3%

Dec

2,250 -16.82%

1,656 -3.94%

4,567 -11.81%

Jan

3,033

34.8%

2,151 29.89%

5,161 32.72%

Feb

2,818

-7.09%

2,017 -6.23%

5,417

Mar

3,318 17.74%

2,494 23.65%

4,374 20.21%

Apr

3,145

May

2,823 -10.24%

Jun

3,002

6.34%

Jul

3,232

7.66%

Oct

TOT

-5.21%

33,134

-6.73%

2.97%

4,593

-1.7%

2,498 -2.73%

4,427

-6.86%

2,335

-6.53%

5,182

0.3%

2,511

7.54%

3,847

7.61%

2,568

24,693

57,827


Saver market share

hecm endorsement trends

2%

% % % % %

0%

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

5/1/13

3/1/13

1/1/13

11/1/12

20%

16%

14%

12% $1,000.0

$800.0

$600.0

$400.0

$200.0

$0.0 8/1/12

7/1/12

6/1/12

5/1/12

4/1/12

3/1/12

2/1/12

1/1/12

12/1/11

11/1/11

10/1/11

9/1/11

8/1/11

7/1/13

Reverse Market Insight - Logo

6/1/13

October 9, 2009

5/1/13

4/1/13

3/1/13

2/1/13

1/1/13

12/1/12

reversereview.com

6/1/13

5/1/13

4/1/13

3/1/13

2/1/13

1/1/13

12/1/12

11/1/12

$1,200.0

11/1/12

$1,400.0 10/1/12

$1,600.0

10/1/12

$1,800.0 9/1/12

Fixed

9/1/12

8/1/12

7/1/12

6/1/12

5/1/12

4/1/12

3/1/12

2/1/12

1/1/12

12/1/11

11/1/11

10/1/11

9/1/11

8/1/11 ARM

9/1/12

7/1/12

5/1/12

3/1/12

1/1/12

11/1/11

7/1/11

{ FIGURE }

02

9/1/11

7/1/11

Fixed Rate Percentage

hecm endorsement trends

01

7/1/11

{ FIGURE }

03 in the millions

initial principal limits

hecm endorsement

Report { FIGURE }

80%

75%

70%

65%

60%

55%

50%

PANTONE COLORS 3005C

8 TRR

Process Blk C

Brought to you by:

18%

REVERSE MARKET

INSIGHT

10%

8%

6%

4%

| 13


The Reverse Review Nov./Dec. 2013

NRMLA News

You Got Milk One of the recurring questions we hear in our industry is: Why don’t we do a “Got Milk?” campaign?

Earlier this month, attendees at NRMLA’s Annual Meeting & Expo heard a presentation from Otto Kumbar, CEO of Liberty Home Equity Solutions, who has devoted a good part of the past year rallying our industry and outlining an effort he has named the Extreme Summit. The plan has one basic goal: increase overall volume from 50,000 to 300,000 loans per year by 2018. In February of this year, in conjunction with a NRMLA Board of Directors meeting in Washington, Kumbar gathered leaders of the six currently highest-volume lending companies (“I felt we needed sizable checkbooks to begin to provide momentum for everyone,” he says) and presented a PowerPoint outlining nine initiatives to alter the conversation, including calling for a 3:1 ratio of positive to negative press coverage, engaging a force of identifiable thought leaders, funding market research, and exploring a national marketing and rebranding campaign. A comprehensive request for proposals was prepared and submitted to a dozen advertising and public relations agencies of varying sizes from different parts of the country. Eight responded by Memorial Day with their assessment of the industry’s predicament and their strategic approach to altering it. Four were chosen as finalists and invited to prepare creative materials and present their campaigns to the group.

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Reversemortgage.org

In June, representatives from AAG, Generation, Liberty, RMS, Urban and the new RMF, as well as NRMLA senior staff, gathered in a conference room at NRMLA’s Washington headquarters as an audience for the four presentations. It was a head-spinning day of smart, creative ideas. The approaches and themes that seemed to run through the perceptions of all the ad creators were closing the misconception gap, shifting the focus from a “needs-based” audience to a “wantbased” audience, and positioning the product as a financial planning tool with a laser focus on the promise of the future rather than on aging persons’ limitations and fears. The next steps are selecting an agency and preparing a pilot program in two to three cities to test the effort. Members can contribute to the effort by: . Generating additional ideas on how to increase volume .. Helping enhance the plan ... Participating in the use of the materials provided to help execute the plan .... Providing what they can to finance the Extreme Summit activities

Learn more about the Extreme Summit on page 36.

hits a new high… again! In the last issue of The Reverse Review, we were excited to report that our industry’s consumer information website, reversemortgage.org, which averaged more than 17,000 unique visitors per month over the past year, had achieved a new record of more than 23,000 hits in August. Little did we know that was just chump change. In September, more than 28,000 unique visitors spent time on the site, which contains listings of all lender/ members.

Save the Date—St. Paddy’s Day in NYC For the third straight year, NRMLA will be returning to New York for its 2014 Eastern Regional Conference. Holding the conference in Gotham provides an annual opportunity to bring together the mutually dependent lending and investing communities. We will return to the beautiful Intercontinental New York Times Square Hotel on March 17 and 18.


made it to the desk of President Obama for signature and one of them belongs to Congressman Mike Fitzpatrick.”

Pictured are Reps. Denny Heck (DWA) and Mike Fitzpatrick (R-PA) to the right of President Obama, joining HUD Secretary Shaun Donovan, NRMLA President Peter Bell and HUD Deputy Secretary/FHA Commissioner Carol Galante in the Oval Office for the signing of the Reverse Mortgage Stabilization Act of 2013.

In Committees

NRMLA, with input from the Risk and Compliance Committee, submitted a letter to FHA that offers suggestions on improving the agency’s Quality Assurance Process (QAP). FHA published a notice in the Federal Register on July 9 seeking input from the lending community, consumer groups and the general public. Comments were due on September 9. NRMLA requested that any changes adopted through the solicitation first be published as a proposed rule, so that the industry has an opportunity to comment. The association also pointed out that HUD guidance can be difficult to discern or inconsistent with what is published in handbooks and regulations, and is sometimes

“Frankly it was a bit surreal,” Heck says. “On my way out, just to make sure, I turned to one of the White House staff people and asked, ‘Now that was the actual, real Oval Office, right?’” Fitzpatrick’s staff, meanwhile, posted on Facebook: “Only 22 bills have

interpreted or applied differently among the four homeownership centers. “Thus, before FHA makes any changes in the QAP, it should first address what some perceive to be an area for improvement in FHA review of loan endorsements,” the letter says. The U.S. Department of Housing and Urban Development published a notice in the Federal Register on September 12 seeking public input on the benefits and costs associated with the Financial Assessment. Comments were due October 15, 2013. NRMLA has convened a Financial Assessment Working Group that has been meeting regularly and preparing comments to submit.

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

The two congressmen who sponsored the legislation in the House of Representatives attended an October meeting of the NRMLA Board of Directors in Washington and expressed great support for the HECM program, giddy pride in getting the bipartisan bill passed in the current political climate, and great admiration for each other. “It’s still possible to get things done in Washington, D.C., if you’re willing to reach across the aisle and focus on the substance of issues,” Heck says.

Professionals Achieve CRMP Status NRMLA congratulates the following individuals for achieving the status of Certified Reverse Mortgage Professional (CRMP): • Laurie Libby, Liberty Home Equity Solutions Newport Beach, California • Sue Milligan, Alpha Mortgage Metairie, Louisiana • Jay Zayer, Aramco Mortgage Carlsbad, California Sixty-seven individuals have earned the CRMP designation since mid-2010, and every one of them is prominently listed on the NRMLA consumer website, reversemortgage. org. New Members NRMLA welcomes the following companies, which recently joined the association: • A New Mexico Reverse Mortgage Albuquerque, New Mexico • The Stone Hill Group, Inc. Atlanta, Georgia • National Field Representatives Claremont, New Hampshire • 1st California Home Loans Laguna Hills, California • CBC National Bank Alpharetta, Georgia • Integrity Home Loan of Central Florida Lake Mary, Florida reversereview.com

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NEWS FROM NRMLA

NRMLA News


The Reverse Review Nov./Dec. 2013

It All Starts With An Appraisal

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Roundup

Here is a look at the latest

{

this month

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.

H ome E q uity Facts

I n the N ews

Home equity for seniors reaches its highest level since the recession.

Americans 62 and older have more equity in their homes than at any time since 2008, according to data released by NRMLA. The NRMLA/ RiskSpan Reverse Mortgage Market Index (RMMI) showed that in the second quarter of 2013, senior home equity rose for the fifth straight quarter, by 3.1 percent to $3.34 trillion. Calculated quarterly, the RMMI analyzes trends in home equity, home values and mortgage debt for homeowners age 62 and older.

The New York Times says many seniors who want to stay in their homes will need to take a reverse mortgage.

the senior agenda

Middle-income boomers say they would prefer to be cared for in their homes as they age. My Home Independent Living Community Nursing Home Child’s Home* Somewhere Else *Excludes respondents without children.

Bankers Life and Casualty Company Center for a Secure Retirement, April 2013

H E C M T rends

number crunch

The number of adults age 65 and older in the U.S. is expected to rise substantially by 2013, according to 2011 data from the Administration on Aging.

13% 2010

13% of the U.S. population in 2010

19% 2030

19% of the U.S. population in 2030

Citing CFPB data that shows 30 percent of homeowners age 70 and older have mortgages to pay off and the fact that the senior population is expected to increase dramatically, a recent article in The New York Times predicted a spike in the demand for reverse mortgages in the coming decade. The article mentions a reverse mortgage study by Ohio State University’s Stephanie Moulton that analyzes data from 32,000 people who sought reverse mortgage counseling. Initial results indicate that 60 percent of counselees got a reverse mortgage, and half had mortgage debt.

M ar k et U pdate

HECM Securities totals $7.1 billion. In the first three quarters of 2013, issuance of HECM mortgage-backed securities totaled $7.1 billion and included 757 pools from 11 issuers, according to data released by New View Advisors. The number of pools issued in the third quarter was nearly unchanged from the last, but the dollar volume dropped 13 percent; about 43 percent was fixedrate.

Here is a list of the top issuers and their percentage of the market in Q3 2013: No. 1 RMS

32.74%

No. 2 Urban

25.53%

No. 3 Live Well Financial

13.8%

No. 4 Generation Mortgage 9.64% No. 5 Nationstar

Data from Reverse Market Insight reveals that the industry grew on a unit volume basis this year, totaling 15 percent growth as of July. States with the largest endorsement growth:

Ca TX NY Fl PN

5,466 3,255 2,481 2,432 1,791

25.2 % 12.9 % 1.4 % 17.5 % 15.0 %

3.

1.

6.23%

2.

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4.

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5.


The Reverse Review Nov./Dec. 2013

the

THE

REVERSE

hot

review

seat

Nov./Dec. 2013

Robert

From his favorite movie and his favorite book to the craziest thing he’s ever done, we get the personal and professional facts from Robert Sivori, Chief reverse mortgage funding llc

Chief Operating Officer 18

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Operating Officer at Reverse Mortgage Funding LLC, in this month’s edition of The Hot Seat.


“Wild Night” and The Civil Wars’ version of

P E R SO N A L >

“Billie Jean.”

Ten years from now I would like to live in various cities around the world for six

>

>

>

Something nobody knows about me is

>

stated by Randy Pauch in his book The

My favorite vacation was in the Catskill

Last Lecture: “The brick walls are there for a reason. The brick walls are not there to keep us out. The brick walls are there to

house with two other families in the winters

give us a chance to show how badly we

of 2005 and 2006. >

My celebrity crush is Natalie Portman.

>

If I were a professional athlete I would

want something… They’re there to stop other people.” >

be a skier. The craziest thing I’ve ever done was company in 2007, which curiously elicited the same feelings I experienced when free-

>

>

My favorite book is The Alchemist by If I could trade places with someone for a day, I would be Leonardo DiCaprio, or HUD Secretary Shaun Donovan, for

If I had three wishes they would be to as Reza Jahangiri, and to be able to

Ten years from now I would like to live in various cities around the world for six months at a time.

Paulo Coelho.

fall skydiving.

be as wise as Craig Corn, as good-looking

The best purchase I’ve ever made was education for my children.

skydive in 1979, and invest in a mortgage

>

The best lesson I’ve ever learned was

that I was a varsity cheerleader in college.

Mountains, where we rented a small ski

>

I always listen to National Public Radio. And Michele Zachensky. And Jean Noble.

months at a time.

entirely different reasons. >

If I could time travel, I would go back to 1998 so I could talk to my father and

disclose the HECM Origination Fee in Box

grandparents. They were so much wiser

2 on the “Good Faith Estimate” because

than I was aware of at the time.

it sure seems like it’s an interest ratedependent charge. >

If I could meet anyone, past or

Professional

present, it would be Donald Rumsfeld on

>

September 10, 2001. >

>

The biggest challenge in the reverse mortgage industry will be adjusting

My favorite movie is The Godfather Part

origination business models to adapt to the

II, which is actually a management training

HECM program changes that took effect

film.

October 1.

I never miss an episode of Glee… just

>

Ten years from now, the reverse

kidding. I never miss Shameless.

mortgage industry will be balanced

>

I can’t go without chocolate.

with products provided through both

>

When I was a kid, I pictured my life looking pretty close to how it is today.

>

>

My favorite time of the day is the early

government and non-government programs. >

The most important thing financial advisors can learn about reverse

morning, when my home is quiet and I have

mortgages is that reverse mortgage

the newspaper all to myself.

products can provide a dignified and

My iPod go-to is “Days Like This” by Van

financially secure retirement for their clients.

Morrison, John Mellencamp’s version of

I can’t go without chocolate.

My favorite movie is The Godfather Part II, which is actually a management training film.

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The Reverse Review Nov./Dec. 2013

ASSESS

originating

Less Is More

Ph il i p e . l i p p

I

remember the first time I heard the phrase, “Less is more.” It made me stop and think. I don’t recall where I heard it—if it was a lowtar cigarette commercial, a diet product advertisement or some art critic’s commentary—but I do remember trying to understand what it meant.

Now, with the recent reduction in reverse mortgage loan products and loan amounts, we seem to have a new application for this slogan. In the new reverse mortgage lending environment, is less really more? We’re certainly left with less to work with, and proponents claim we’ll be better off in the long run. So by limiting the scope of the HECM product, did FHA open the door to more opportunity?

Maybe. For one thing, I believe that from a consumer’s point of view, it did just get a whole lot easier to understand reverse mortgages. There are just two programs now: the fixed- and the adjustable-rate. Borrowers just have to decide if they need more money at closing to cover debt and other expenses, or if they prefer to take less money upfront and save on closing costs. And for loan officers, it’s now easier to figure out rather quickly what’s best for your borrower: Saving more versus borrowing more to pay for existing or looming needs. I understand that HUD’s intention was to ensure that the program would

“In the new reverse mortgage lending environment, is less really more? We’re certainly left with less to work with, and proponents claim we’ll be better off in the long run. So by limiting the scope of the HECM product, did FHA open the door to more opportunity? Maybe.” 20

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be solvent and available for years to come. This is especially important because of the tens of millions of baby boomers who are expected to approach the retirement starting line in the next 15 to 18 years. I admit, the changes were not easy to digest at first, but if you assume a long-term point of view, the benefits are a bit clearer. I believe that as a result of these amendments to the program, the FHA’s HECM will likely be utilized less as proprietary programs rush in to fill the void. Want to get a reverse at age 55? It’s been done before. Have a condo that is not FHA-approved? You might still be able to get a loan if a proprietary market were to take shape. How many times have you explained to a borrower that they can’t take advantage of the equity in their homes because it is worth two or three times the current FHA maximum claim amount? Proprietary products would change this tune.


originating

According to philip

Perhaps we became complacent as an industry, originating and closing enough loans to make a living but never managing to advance the product enough to get beyond the market’s abysmally low penetration rate. Maybe these changes were the motivation we needed, and down the road we’ll thank the Feds for pushing us out of our comfort zone. Perhaps these revisions will help catapult the HECM product into the mainstream.

*

appraising

I believe that 2014 will be a pivotal year for this industry. We’ll be working hard to get a handle on the new rules and underwriting

guidelines, and perhaps at the same time we’ll see the emersion of a burgeoning proprietary market. Am I viewing the future through rose-colored glasses or partaking in a little wishful thinking? I don’t think so. Capitalism works best when allowed to expand in a marketplace unhindered by government competition and restrictions. (At least one out of two isn’t bad.) I think investors will see opportunity in a scaledback FHA program and will take steps to fill the void. Personally, I am looking forward to the day when I can offer a full line of programs, just like the forward side of the industry. Perhaps with the return of a proprietary market, that will be a possibility one day. x

marketing

We have lived through what some considered the golden age of FHA’s HECM product, and now the industry will have to redouble its efforts to achieve solid results in this new environment. But we know the demographics are on our side. Baby boomers do not have a problem with borrowing on their homes; they just need a product that works for more of them.

Product differentiation will help fill in the huge gaps that have been created by the one-size-fits-all HECM.

originating

Perhaps we became complacent as an industry, originating and closing enough loans to make a living but never managing to advance the product enough to get beyond the market’s abysmally low penetration rate. Maybe these changes were the motivation we needed, and down the road we’ll thank the Feds for pushing us out of our comfort zone. Perhaps these revisions will help catapult the HECM product into the mainstream.

The question is not if but when will these programs burst forth onto the scene? Generation Mortgage Company was the early bird when it came out with a proprietary program not long ago, and I believe there will be more. No doubt, as more programs enter the market, the resulting competition will make this type of loan product better.

servicing spotlight

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The Reverse Review Nov./Dec. 2013

originating When this happens, it’s easy to say, “Wow, that’s too bad,” move on to the next client and not try to take the challenging loan any further. Or, while you’re looking for the next client, you can meet with the borrower with the troubled loan, tell them what you’ve uncovered and help them put together a plan of action. If they’re willing to work through their issues, it might be possible to keep the loan moving forward. Let them know that certain documents, like those pertaining to the appraisal and counseling, will have to be readdressed, depending on the timeline for solving the problem. But help, don’t run. It will be good for you and good for them too.

The Good, the Bad and the Ugly

My suggestion is to find a few great referral partners to work with who can assist such clients in solving the problems that are preventing them from obtaining a loan. Here are a few ideas about the kinds of referral partners you could connect with:

Mich a e l J . W e lt ma n

T

he story goes something like this: You have a great client meeting, you get them through counseling and you start a file of notes about your conversation and information about their home, including the value, mortgage payoff and other pertinent details to prepare for the application. Then you get that great email or fax from the HUD counseling agency that includes their copy of the unsigned counseling certificate. At this point, I picture the beginning of a NASCAR or Indy race as the green light comes on, the flags start waving and the starting gun fires. And you’re off! To go write another loan… In the days and weeks that follow, the onion is peeled back. The credit report

according to michael 22

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comes in, the title work comes in, and your processor or loan system alerts you that the appraised value has come in. In most cases, all the news is good and you are off to close another loan and help your client obtain a reverse mortgage. But sometimes, as the onion is peeled back, a strong, pungent odor is revealed and your eyes begin to water. You have one of “those” loans. It’s a problem child, and it could be anything: survey encroachments, clouds on the title, probate issues, too much debt attached to the home, liens, repair issues, primary residence concerns, low value, etc. The list goes on and on. If you have been around the block for as many years as I have, you have seen it all.

Building and Repair } Roofers Many times roof inspections are needed to certify that the roof is good for three years or more, and in some cases you can escrow for roof replacement. } Wood rot repair This comes up a lot in Purchase transactions for resale homes in Florida, and probably in other areas near water. A quick wood rot repair that brings the property up to par saves trouble when the WDO report comes back negative. Your Realtor may have a list of these folks. } Structural engineers Doublewide mobile homes need

You have one of “those” loans. It’s a problem child, and it could be anything: survey encroachments, clouds on the title, probate issues, too much debt attached to the home, liens, repair issues, primary residence concerns, low value, etc. The list goes on and on. If you have been around the block for as many years as I have, you have seen it all.


originating structural certifications to pass FHA guidelines, which includes checking the skirting, tie-downs and support devices to make sure the residence meets building codes. } Handymen These professionals can often complete simple or complex work on homes to bring them up to par. I recently hired a handyman to remove burglar bars from the windows of a home and install quickrelease latches per FHA guidelines.

In closing, when connecting with other professionals who may help solve some of the roadblocks your clients are facing, remember to collect two or three names for each referral group to avoid a situation that might be considered steering. You also don’t want to be held responsible if any issues arise with their services; make sure to check out these providers with the state licensing body and other professional boards, and ensure that their licensing and insurance requirements have been met. As one of my colleagues often says, this business is a social mission. Don’t just take the easy, fast and clean loans. You need to learn how to fix and close the good, the bad and the ugly. x

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spotlight

Also, consider connecting with your local legal services firm or legal aid. They can be helpful in certain situations. I had a client whose mom left him her house in her will, and the home had a mortgage on it. He went to legal services to figure out how to give the home up, because he did not have the money to pay off her mortgage or make payments. I met with them at the legal office. He was over 62 and

An insurance agent who handles property and casualty, and flood and hazard insurance can also be helpful. I find quite a few borrowers without insurance.

*

servicing

} A trust attorney Having a go-to trust attorney can be helpful. Recently, I closed a loan involving a revocable trust, which had to be reviewed for title. I worked with a law firm that has a title company on the ground floor, so we did all the title and law work in the same building. With the proper help, you can do reverses with trusts and life estates.

Consider making contact with a survey company, as you’ll need to have surveys completed on Purchase loans. I once helped a client who did not get her land surveyed before she added a swimming pool, barn and a garage. Guess what? She added some of those structures to her neighbor’s yard and encroached on his property line. I had another loan where the barn roof was so close to the property line that it hung over the neighbor’s yard. I brought in a surveyor to meet with both neighbors and we agreed to a land swap, where we cut equal parts from both pieces of land to remedy the situation.

appraising

It’s the Law

} A divorce attorney I had more than one client who wanted a divorce but needed help paying the bills and also needed money to pay the departing spouse some of the equity they had in the marital home. I was able to help them with both and when the departing spouse got her settlement in the divorce, guess what? She needed another home, and the reverse for Purchase program was a great way to help her pay for her next place. Now tell me the ex-husband and ex-wife won’t love you once you help them split up, pay the settlement, pay the lawyer and get settled in separate residences. That’s a project worth undertaking—two loans, two happy single folks and one happy divorce lawyer.

Odds and Ends

marketing

I once worked with a client whose home repairs required a general contractor because the damage was so serious. Remember that escrowed repairs have a ceiling, but repairs on the HUD-1 do not, so you can do some repair work upfront and pay at closing, while the rest of the work can be saved for post-closing. Read the guidelines and check with your company on the specifics if you come across such a situation.

} A probate attorney I worked on a loan for a client who had gotten a divorce just before her husband passed away before he had moved out of the home. He had children and she wanted a reverse mortgage, but we needed to probate the estate before I could do anything. She also had other liens on the home from creditors, and so she needed some help from a bankruptcy attorney and then a probate attorney before we could consider applying for the loan. She came back to see me in a year and we were able to close her loan.

was renting an apartment. We talked to him about the possibility of keeping the home and getting a reverse mortgage, and in the end, he did.

originating

} Plumbers Plumbers can come in handy in situations where a house has its own well or septic tank, which was likely installed before the city’s water supply was able to connect to the house. They can assess the work involved and their estimate can help deduce if connecting to the city’s water line is feasible.

} A bankruptcy attorney You might even consider adding two or three bankruptcy attorneys to your Rolodex. Remember, it is possible to do a reverse just one day out of a BK7. I have even done a reverse inside of a BK13 to pay the trustee.


The Reverse Review Nov./Dec. 2013

originating

What to Expect When You’re Expecting j ef fre y m . b ir ds e ll

xpected rates have gone up and down each week over the last several years, yet the principal limits have remained constant. The reason these rate changes have not affected principal limits is because HUD’s principal limit factors (PLFs) top out at 5.06 percent and stay the same for all expected rates equal to, or lower than, that rate.

E

Each one-eighth of a percent has a list of factors for ages 62 through 99. Most factors top out at 90, so everyone 90 and older receives the same factor or principal limit. As expected rates climb higher than 5.06 percent, the factors for each age will start to drop lower. If expected rates were to climb higher than 10.06 percent, the factors and principal limits drop to zero.

However, in the last six months, fixed and variable products with expected rates higher than 5.06 percent are starting to appear. So how do we know what to expect when expected rates change in a higher rate environment? To know the answer, we must first understand HUD’s factor table.

Now let’s examine how changes in the expected rate index cause a change in the principal limit. First is the obvious: It is rare for expected rates to be exactly equal to an even one-eighth of a percent, like 5.000, 5.125, 5.250 percent and so on, in HUD’s factor table. So which factor column gets used for 5.56 or 5.57 percent? HUD requires rounding the expected rate to the nearest eighth. For example, 5.56 percent would round to 5.50 percent so we use the 5.50 percent factors, and 5.57 percent is closer to 5.625 percent so we would use the 5.625 percent factors. Although this sounds simple, it can still cause much confusion.

Using HUD’s factor table, we match the youngest borrower’s age with the expected rate on the loan. This results in a factor, or percentage, that determines the principal limit available to the borrower when multiplied against the maximum claim amount. This factor table is broken down into expected rates from 3 to 10 percent in increments of one-eighth. 24

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ng goi he

t People have to urce so asked me, “How come Using HUD’s factor the principal table, we match the youngest borrower’s limit went age with the down when expected rate on the the expected loan. This results in a rate barely factor, or percentage, went up?” Or that determines the they’ll say, principal limit available “Sometimes to the borrower when the expected multiplied against rate has gone the maximum claim down a good amount. amount and the principal limit doesn’t get any better.” The explanation lies in the rounded expected rates. That one basis point, or 1/100 of a percentage increase from 5.56 to 5.57 percent, caused the principal limit to go down because it was rounded to different factor columns. However, that same 5.56 percent expected rate would have to go down 13 basis points, or 13/100, in order to round down to the 5.375 percent factor column, which results in a higher principal limit. The opposite


originating “So what should you expect when the expected rate changes? You may see possible alterations to the principal limit, since the rate change caused the expected rate to round to a different eighth, therefore putting it into a different factor column. Every time the expected rate moves, you can also expect to see a change in the monthly tenure payment. could be true as well. A small adjustment down could result in a higher principal limit and a larger adjustment up could still give you the same principal limit.

servicing spotlight

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appraising

I hope this explanation brings a little understanding to the often misunderstood expected rate and assists you when dealing with HECM loans. x

*

marketing

So what should you expect when the expected rate changes? You may see possible alterations to the principal limit, since the rate change caused the expected rate to round to a different eighth, therefore putting it into a different factor column. Every time the expected rate moves, you can also expect to see a change in the monthly tenure payment. Also note that if an expected rate increase causes the principal limit to drop, in most cases (but not all), the tenure payment would drop as well because there are fewer funds available for the tenure payment.

originating

The expected rate is also found in two other formulas in a HECM loan. It is used to calculate tenure and term monthly payments, and is also used in the servicing fee set-aside formula. But in these formulas, the expected rate is NOT rounded like it is to determine the principal limit. So how do changes in the expected rate affect these calculations? A higher expected rate actually produces a lower servicing fee set aside, which is good for the borrower, and when using the same amount of funds available for calculating a monthly payment, a higher expected rate produces a higher monthly payment, which is also better for the

borrower. To reiterate, you could see a change in the expected rate from one week to the next that would result in the same principal limit, but the tenure payment would still go up or down a little because that formula uses the unrounded expected rate.

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The Reverse Review

Are you looking for more leads and more sales? Connect with seniors in need of a reverse loan through our direct mail campaigns.

Nov./Dec. 2013

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originating

Reflecting on the Reverse Industry: Past, Present and Future mar k d ra p e r

A

s I was getting ready for a garage sale recently, I came across a box that contained documents with reverse mortgage news from September 2008. It made for a fascinating read, and here’s why: The headline was the Top 100 HECM lenders. Wow! Can you believe there were once 100?

originating

*

marketing

Top HECM Lenders September 2008 #1 Wells Fargo #2 Financial Freedom

appraising

#3 Countrywide #4 World Alliance Financial #5 Bank of America

Why has industry volume declined in recent years? We all have our own opinions on that. After ’08, the industry rolled out the Saver, the fixed rate and, of course, the Standard, along with new counseling protocol. With all these changes, one might think the endorsements would increase, or at least remain strong, but they did not. Also, with the number of lenders that have left the space, freeing up their portion of the market share, you would think the major players would have achieved higher endorsement rates. But that didn’t happen to any major extent either. With 10,000 seniors turning 65 every day, there has to be

Regardless, I know what I am hoping for, and what I am working toward. As a humble reverse mortgage advisor who hits the streets daily, I think the demographics indicate that there has to be an uptick in volume at some point, and I wholeheartedly believe that those originators who remain focused will reap the rewards. I believe the program will get stronger, and that it will eventually be embraced by consumers and their advisors. (And lucky for us reverse professionals, there are only two programs to explain now.) Let’s hope this recent set of changes is final so that we can get on with the business that we love. Hopefully, in five years, I’ll review top lender endorsement numbers December 2013 and reflect on how far the industry has come. x

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In September 2008 the monthly endorsement total that made Wells Fargo No. 1 was 1,858. The total number of endorsements industry-wide that month was 9,494. These high endorsement numbers in ’08 occurred in the height of the market’s meltdown, and the decline that has happened since then is obvious.

a tipping point for demand. But this tipping point has not happened yet and the decline has continued. We have not yet seen the effects of the changes implemented October 1, and we’ll also have to wait and see what the second wave of changes, those pertaining to Financial Assessment, will bring in 2014. Will the decline in endorsements continue? Will they even out? Will the endorsements slowly increase as the product’s headline risk diminishes? Will the HECM finally become more mainstream? The answers to these questions remain to be seen.

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Interestingly, MetLife was No. 98 at that time; it hadn’t climbed the ranks to No. 1 just yet before leaving the space in 2012. As for the status of today’s top lenders in 2008, AAG was No. 29, Security One Lending was No. 66, Urban Financial was No. 8 and Generation Mortgage Company came in at No. 11. Considering AAG recently ranked No. 1 on the most recent list of top lenders, much has changed in just five years. Many of the players from back then are still in the game, but now the total number of lenders has dropped to 61.


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connect

marketing Upping Your Response Rate jef f b u s h

S

LTV. As you can see, the numbers are close: 3.5 million seniors own their homes free and clear, and 2.9 million seniors are still paying a mortgage under 55 percent LTV.

In my experience, when it comes to direct mail marketing, response and

conversion is three times better when you focus your efforts on seniors with an existing mortgage loan. With this in mind, next time you launch a direct mail campaign, don’t target those with an LTV of 0 to 55 percent. Work with a direct mail specialist to target potential consumers with an LTV of 10 to 55 percent. This will cut your no-response rate in half. x

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$0-$15k

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Many seniors work most of their lives with the goal of paying off the mortgage on their homes, and once they do, the chances of them taking out a reverse mortgage loan decline

greatly. Of course, we have all done reverse mortgage loans for seniors who don’t have a mortgage, but they are few and far between. It does not make sense to spend your time and money marketing to this group because response and conversion rates are low.

originating

eniors who have to make a mortgage payment each month are three times more likely to fund a reverse mortgage loan than seniors who don’t have an existing mortgage. The chart below shows senior homeowners age 62 and older who meet one of two sets of criteria: They have either paid off their homes in full or they have a mortgage balance between 10 and 55 percent

servicing spotlight

$15k+ Seniors With Mortgages - total 2,934,850 State

Seniors Without Mortgages - total 3,524,806

Record

AK 1,665 AL 23,617 AR 12,792 AZ 81,946 CA 491,201 CO 73,903 CT 56,487 DC 2,966 DE 15,030 FL 234,607 GA 68,902 HI 10,080 IA 17,888 ID 12,696 IL 124,141 IN 35,589 KY 14,485

LA 10,236 MA 117,853 MD 92,785 ME 5,987 MI 85,927 MN 34,378 MO 43,934 MS 5,577 MT 7,425 NC 89,021 ND 2,609 NE 13,112 NH 16,932 NJ 142,020 NM 16,535 NV 28,626 NY 119,163

State OH 133,782 OK 22,446 OR 43,271 PA 132,969 RI 14,852 SC 35,492 SD 14 TN 58,460 TX 168,949 UT 22,012 VA 77,804 VT 7 WA 73,119 WI 38,308 WV 944 WY 2,306

Record

AK 4,842 AL 33,333 AR 19,544 AZ 115,373 CA 435,367 CO 71,765 CT 52,348 DC 9,701 DE 13,113 FL 352,856 GA 131,768 HI 11,451 IA 24,628 ID 22,155 IL 171,871 IN 59,907 KY 23,025

LA 21,053 MA 75,550 MD 91,715 ME 5,318 MI 138,633 MN 38,604 MO 74,035 MS 6,780 MT 9,727 NC 134,323 ND 4,555 NE 17,297 NH 11,692 NJ 104,729 NM 25,096 NV 48,531 NY 89,399

OH 197,734 OK 25,853 OR 60,268 PA 130,865 RI 19,014 SC 63,153 SD 25 TN 89,901 TX 230,357 UT 27,898 VA 87,717 VT 10 WA 98,279 WI 39,438 WV 1,744 WY 2,466

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The Reverse Review Nov./Dec. 2013

Reverse Mortgages have changed. Shouldn’t your business? AAG knows the ins and outs of the new reverse mortgage business landscape. Superior customer service. Customized reverse mortgage training. Expert marketing support. Competitive pricing. Processing and underwriting. Access to the industry’s best leads.

For more information and to learn more about how we can help drive your business in 2014, contact Kimberly Smith, Senior Vice President of Wholesale Lending.

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866-964-1109 KSmith@aag.com AAGwholesale.com


appraising Reverse Mortgage Customer Service Teams Jon i P il grim

value

So far, few AMCs have invested the resources required to train and develop a dedicated reverse mortgage customer service team. Among those that have, most train customer service team members in one of three specialties:

For instance, a reverse mortgage division team member will explain to the borrower that the inspection will take about 30 minutes, depending on the size of the home. The borrower wants to be assured that the appraiser is licensed and insured and also might want to go over the process of what happens after the inspection. Once the borrower feels comfortable, the team member will schedule the appraisal.

Client relations managers E They work with lenders and relay to the team any concerns or special requests, such as completing the appraisal and returning it to the lender a day earlier than normal. In many cases, the notes the representatives make from their conversations are entered into the AMC’s technology platform and alerts are automatically sent to team members. Although each team member has a specialty, everyone is cross-trained in each area. The work a skilled, experienced, humanistic customer service representative performs to educate the borrower ensures that client timelines are met, and this builds a foundation for winning additional business in the future. The discussions between the representative and the borrower are an opportunity to bond, letting the client know that the AMC cares and, above all, representing the lender in a positive light. x reversereview.com

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spotlight

To make matters worse, many

Training is expensive but necessary, and ensures that customer service representatives understand reverse mortgages and can explain how the appraisal process works.

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Providing high-quality customer service is critical to increasing this market. Reverse borrowers are senior citizens who have heard about the real estate bubble, have read about financial fraud or have seen the stories on the evening news. It’s no wonder they feel nervous, agitated or even fearful about the product.

Understandably, they tend to be a bit gun-shy and need to be treated like first-time borrowers, with patience, kindness and communication. That approach is already the norm in some forward-looking firms, because they provide formal training to employees on humanistic customer service.

Account managers E They communicate with appraisers and schedule the appraisal. They understand that it is more important than ever to hire a local appraiser, one who has experience in reverse mortgages, because it makes the borrower feel confident and relaxed.

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According to statistics from the CFPB, 32 million baby boomers, defined as people ranging in age from 48 to 66, own homes on which reverse mortgages could be originated. But just 2 to 3 percent of eligible homeowners have a reverse mortgage, and only 70,000 reverse mortgages are originated each year.

reverse mortgage borrowers have not participated in a mortgage transaction in years, and some not for decades. In the intervening years, the mortgage process has changed and it may not resemble the one they remember.

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T

o ensure that the senior citizens who purchase reverse mortgages understand the appraisal process, AMCs have begun to train and develop customer service teams that specialize in the product. If an appraisal management company can get that piece in place, the opportunity to capture this new channel of business may last for a couple of decades.

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Processors E They are the initial and single point of contact between the AMC and the borrower. Their job is to reach out to homeowners, answer questions, provide any requested information and collect the appraisal fee payment.


The Reverse Review Nov./Dec. 2013

learn

servicing

Where the Servicing Ends Rya n L a R o s e

according to ryan “In the event that a

loan is called D&P, servicers attempt to work with the borrower or their heirs and assist them in satisfying the outstanding balance due on the mortgage. If the servicer is receiving regular communication and cooperation, and receives documentation that supports the efforts to sell the home and/or pay off the loan, then the servicer can request additional time extensions from HUD.”

I

’ve written about various maturity events that occur with a reverse mortgage and place a loan in due and payable (D&P) status. Primary among those events are the death of the last surviving borrower, which, in my experience, accounts for approximately 60 percent of all D&P volume. The remaining 40 percent comprise the permanent vacancy of the property as the borrower’s principal residence and tax and insurance defaults. As a result of HUD guidelines regarding the deadline for the initiation of foreclosure proceedings, once a loan goes into D&P status, borrowers have approximately 60 days to satisfy the loan, cure the default or provide documentation that they are taking steps to satisfy the loan

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before foreclosure must be initiated. Borrowers can cure the default by moving back into the property or repaying the delinquent tax or insurance advances, but in order to satisfy the loan, they would have to pay the loan in full (typically through the sale of the property), complete a short sale (per HUD guidelines), sign a deed in lieu of foreclosure (deeding the property back to the investor), or simply let the loan go into foreclosure. In the event that a loan is called D&P, servicers attempt to work with the borrower or their heirs and assist them in satisfying the outstanding balance

due on the mortgage. If the servicer is receiving regular communication and cooperation, and receives documentation that supports the efforts to sell the home and/or pay off the loan, then the servicer can request additional time extensions from HUD. These extensions can provide borrowers with up to one year from the date of death or the date the loan was approved to be called D&P by HUD. This does not mean, however, that every loan automatically receives these time extensions—they have to be individually reviewed and approved by HUD.

fact: The number of loans moving into foreclosure has already dropped by more than 10 percentage points in 2013.


servicing Every action a servicer takes after a loan has gone into D&P status has to meet the strict and precise servicing requirements set forth by HUD. It’s important to understand that HECM servicers have very little flexibility within these HUD regulations outside of what is detailed above. HUD sets forth a prescribed process and holds the servicers’ figurative feet to the fire if they violate those regulations.

Where does the servicing end? It ends with the calm, sensitive and compliance-driven resolution of the loan and the protection of our product, our industry and our HUD partners— and not a moment before. x

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Author’s note: This article’s title is my homage to Where the Sidewalk Ends by Shel Silverstein and my two grade-school readers. It is also an attempt to bring a bit of levity to the topic of defaults and foreclosures—no one’s favorite subject!

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When all available time extensions granted by HUD have expired, or the estate is uncooperative or unwilling to make an effort to satisfy the loan balance, then the servicer is required to

The national housing market appears to be on the upswing and that certainly bodes well for the reverse market. To get a feeling for the impact of how the housing crisis impacted servicing, in 2006, once a loan went

into D&P status, 25 percent of these loans resulted in a foreclosure sale, while 75 percent of them were paid in full. Compare those numbers with the “high of the low” in 2011, when we saw 70 percent of loans facing foreclosure sale, and only 30 percent of them paid in full. From what we have seen, the number of loans moving into foreclosure has already dropped by more than 10 percentage points in 2013, and that positive trend shows every sign of continuing. originating

To protect the product and our industry, loans cannot be originated that violate HUD regulations, and as servicers, we can’t service a loan that is in violation of HUD regulations. Most importantly, if a servicer were to disregard HUD servicing regulations, its insurance fund could be compromised.

initiate foreclosure action by referring the loan to an attorney. It’s important to note that the loan can still be satisfied anytime up to the foreclosure sale date. The reverse mortgage foreclosure process follows a similar path to that of forward mortgage foreclosures. There are required notices, timelines and actions, and they vary from state to state. For example, in Michigan, it may take 90 to 120 days from the time the borrower’s file is referred to the attorney for the property to go to foreclosure sale. In sharp contrast, in New York or Florida, depending on the complexity of the estate and number of heirs, a foreclosure may take anywhere from 24 to 36 months (or more) to complete.

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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

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The Reverse Review Nov./Dec. 2013

spotlight article

How to create opportunity from change

Embracing the New HECM Sco t t G o r don

borrower better and faster. If you can master this, you help your vendor partners understand the changes and you can be first to help seniors receive a loan under the revised program.

w

Change is a marketing blessing. It gives you a reason to touch base with everyone in your network and meet with referral partners and renew those relationships. It gives you a way to add value. It inspires new topics for presentations to groups of all sizes, because people need to learn what you know about the changes. If you miss out on these marketing opportunities, you are missing a valuable opportunity to advance your career.

ontrary to what some might believe, if we embrace the new HECM as a marketing and career opportunity, it may be possible to achieve success under the revised program. I told a loan officer that the other day, and he looked at me like I was crazy. But I believe programs will always evolve, and you need to be prepared to turn lemons into lemonade. We have lived through enough changes this year, and now it’s time to embrace the new HECM, which will require more study, education, thought and evaluation. We have to know this loan inside out if we are to succeed at selling it. The changes that come with this new loan are restrictive, but at least they are understandable. The new rules may not be comfortable for originators, but we can live with them. It’s also important to remember that for the HECM program to survive, changes were necessary. A friend of mine, Bob Wommack, who originated his first reverse mortgage in 1999, said, “The 34

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changes are good for seniors who need to stretch out their equity over a number of years, and they will help HUD protect the future of the HECM program. It’s a win-win.” I couldn’t agree more. These changes to the HECM were inevitable, and they may even continue to evolve. To survive and prosper, we need to be open to learning and adapting. When things remain constant the routine might make life easier, but it’s also easier for our competition to catch up. By switching things up, HUD has created a new playing field for those in the reverse space. Originators who can master the new rules and develop an innovative business approach will succeed. Remember, the first to market always wins market share. New loan programs and changing economies provide opportunities for loan originators who are able to best adapt. The ones who succeed are the ones who can understand the changes better and faster and who can understand the impact for the

The biggest challenge in social media is coming up with something worthwhile to talk about. A change like the new HECM provides originators with lots of valued material to share. It presents a great opportunity to build your social media presence and your online authority at the same time. Study and learn, then share what you know! So, will this newfound opportunity be easy? Of course not; it’s loan origination, not order-taking. Great opportunities usually boil down to an opportunity to work more, not less. But remember the famous saying, once erroneously attributed to Thomas Jefferson but actually written by F.L. Emerson and published in Reader’s Digest in 1947: “I’m a great believer in luck. The harder I work, the more of it I seem to have.” The good news is some of your competition will not understand that this is an opportunity. Some will not put in the time to actually understand the changes and therefore they won’t understand what the changes really mean to the consumer or how to sell the new program. It also means they will miss marketing opportunities and


spotlight article have fewer leads. Eventually, they may decide to retire, and the survivors will get their market share. You can be that survivor; you can take their slice of the pie.

Understand the new program for borrowers.

3 What channels or lead source will you use? 3 What referral partners and vendors will you use?

Lather, rinse and repeat.

3 What is your messaging to borrowers?

3 Analyze your results and make changes.

3 Create the materials you need.

3 Improve your targeting, messages and presentations.

Roll out your plan. 3 Contact referral and vendor partners.

3 Create a schedule and start filling it with presentations and meetings.

Understand the program for you.

3 Start making presentations.

3 How will you be paid, and what borrowers should you target?

Track your results. 3 Track the vendors, partners and borrowers you contact. Know your results.

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TITLE COMPANY

Have loans that need rescuing?

toll-free: 800.542.4113 www.PRClosings.com

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BEST

#1

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If you work a plan like this, you should rake in new business. It won’t be the business you had; that business is gone. But it will be the business of today and tomorrow. You will be helping people, maybe more than ever before, and the HECM program will be on better footing, more likely to be a solution for aging consumers down the road. x

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3 How does it work for borrowers, and what are the benefits?

3 Expand your reach and hit it again.

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3 Who will the program work for?

VOTED THE

3 At large presentations, ask where else you can present.

3 What is your messaging to the partners and vendors?

3 Reaffirm that you are “the HECM expert” in your sphere of influence.

3 What is your messaging, and how do you sell the loan?

3 Ask for referrals from everyone you meet.

originating

So are you ready to survive and thrive? The first thing you need to do is create a plan. I still value the adage, “Plan your work and work your plan,” because I believe that’s what successful people do. Start with the simple plan below, and fill in your own details. The more you think through the details, the better results you will have.

3 Write down the results of each presentation, large or small.

Create a marketing plan.

PRC WILL SAVE THEM! reversereview.com

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The Reverse Review Nov./Dec. 2013

By Otto Kumbar

N 36

inety-nine percent of the opportunity is in front of us. By most estimates, there are 20 million to 25 million senior households that are age-, property- and equity-qualified. This year will likely see around 50,000 reverse mortgages written, giving the industry 0.2 percent penetration into its target market. While this can seem depressing at times, it really means we have an incredible opportunity to help more seniors.

surveys I’ve seen, seniors who have gotten a reverse mortgage score a 90 percent-plus satisfaction rate. That’s in stark contrast to non-customers, more than 80 percent of whom say they have an unfavorable impression of the product, partly because they don’t fully understand it. We need to fix these education and perception issues.

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. According to most

Some of the industry’s leading firms made almost $2 million in voluntary contributions to fund pilots of the highest payoff ideas. If these ideas work through the pilot, the fully scaled initiative will be an investment of $30 million or more in industry growth.

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NRMLA members brainstormed the challenges and solutions in San Antonio at the end of last year. Through surveys of industry participants, the list was boiled down to the nine most impactful ideas. Teams then developed each idea into a plan and presented it to some forwardthinking firms for funding.

The three initiatives are all focused on increasing volume. Everyone in the industry now has the opportunity to benefit from and help drive the pilot programs. Brokers, lenders, suppliers, influencers, counselors, senior advocates and regulators can help make sure that seniors thoroughly understand the product, which I believe will lead to many more seniors accessing their equity over time.

90% of the opportunity is in front of us.


Three Simple Initiatives Geo-targeting is literally identifying the geographic areas where sales and marketing dollars are likely to have the most success. John Lunde from Reverse Mortgage Insight has developed a model that identifies the industry’s best opportunities. As volume drops due to FHA program changes, becoming more efficient will be critical. Geo-targeting has a second benefit, because the data shows that as you increase the penetration of reverse mortgages in an area, volume increases and costs go down. It makes sense that if more people know about a terrific product, they’re more likely to tell their friends and neighbors. The next sale is a little easier and less expensive than the last. We believe we can increase volume and penetration by concentrating resources market by market. Early next year, we’ll be sharing this data with all firms participating in this initiative. The firms can make their own decision on resource allocation, but I suspect we’ll see many choose to deploy in the target areas, driving up understanding and accelerating the education process. Next we need to drive “3:1 positive” impressions. This is all about resources: people and content, putting an offense into the game. NRMLA has always tracked stories published about reverses, and has recently started to track impressions: how people actually see the stories. Proactive weekly brainstorming sessions will generate ideas that will be slotted into a marketing calendar for everyone’s benefit. NRMLA is asking industry firms to step up their testimonial gathering, not only from people who needed the product, but especially from those who used a HECM as a smart financial planning tool. The best stories and press releases, however, are built on new

and compelling research. The Extreme Summit will be funding a significantly expanded research effort. Columbia University’s Chris Mayer is helping the industry identify the most pressing and interesting research topics and partner with universities interested in doing the research. This initiative should produce a stream of new insights landing about every other month throughout 2014. Finally, we need to rebrand. While it would be prohibitively expensive to rename the product, many industry leaders feel a rebrand is necessary. Thanks in part to the recent FHA changes, there’s an opportunity to reintroduce the reverse mortgage product to consumers as new.

on, we discovered that no single firm could tackle this challenge. We need to leverage all the resources we have available in the industry. This starts with the fabulous and caring people who work locally in their market. This is a “ground game.” First, strongly consider stepping up your outreach in the identified geo-target markets during the pilot periods. Your efforts will be magnified by others doing the same: increased seminars, more local advertising, increased local press and increased influencer discussions should all result in increased interest. Remember, these local markets were chosen because they already have the best return on investment (ROI) for your efforts.

Second, for the rebrand pilot markets, distribute and take advantage of the new marketing materials. Many of the negative views about These markets will see an increase in reverse mortgages refer to a product attention accompanied by significant that no longer exists. There used to TV advertising that will further raise be high loan origination the visibility of the product. fees (LOF), but today The new brand (with the many consumers get the same name) should start to zero LOF product. The make it easier for seniors to upfront mortgage insurance understand the product and Financial and premium paid to FHA used for you to help them decide retirement to be 2 percent, and now it’s if a reverse fits into their research now shows that 0.5 percent for draws below retirement plans. seniors should 60 percent of the principal consider how Finally, take advantage of limit for the first year. a reverse NRMLA’s increased PR mortgage Most importantly, financial efforts in all markets. You’ll could improve and retirement research have access to reprints of their retirement now shows that seniors some significant and positive plans. Taken should consider how a articles. You’ve already seen together, reverse mortgage could the start of this effort with these product improve their retirement positive pieces in the Wall improvements plans. Taken together, these Street Journal and The New lower costs and new product improvements York Times. You’ll have access research is lower costs and new to NRMLA’s marketing leaving the research is leaving the calendar along with more “product of “product of last resort” testimonials and educational last resort” myth in the past. Many materials on NRMLA’s site. myth in the seniors use the product past. Many Winning the Battle today as originally seniors use the intended: a tool to release product today Every great product in equity over time. as originally history had to battle and intended: a overcome obstacles to Call to Action tool to release become widely adopted. equity over Even utilities that we take for Your participation is time. granted, such as electricity, 8 necessary for the success of this initiative. Early

(Fact)

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REFOCUS From the needs-based consumer

To the planning consumer

were at one time maligned and discouraged. Marketing, advertising and gritty determination for folks who wanted a better life ultimately overcame these challenges. 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. The reverse mortgage is not right in every situation, but it can help many more people than we’re helping today. Many seniors I speak with simply want to retire in their homes and not worry about losing their homes. Reverse mortgages are tailor-made for this situation, and when originated properly to the right consumers who maintain their tax, insurance and repair obligations, there is no better alternative. We will need to overcome many obstacles, including perception and education issues. Many of the HECMs that have been sold have been to “needs-based consumers.” The industry’s sales and marketing efforts are largely targeted toward people whose other options have run out. We should be proud of these loans. Many homes were saved from foreclosure and hundreds of thousands of seniors are living a more secure retirement. Refocusing some of our efforts on the “planning consumer” will target the larger market opportunity. These individuals may not need the money today, but including a reverse mortgage may strengthen their financial plans. Unfortunately, some are turned off by the product’s “government guarantee,” seeing it as a handout, and by the industry’s strong direct-sales approach. We need

to introduce them to the new reverse mortgage. We need to recruit local allies (Realtors, financial planners, etc.) for this effort. Many of these individuals will be perceived as more credible, but this is early in the process; we just need the arms and legs to get the message out. Some of the Extreme Summit was modeled on the “Got Milk” campaign. In that effort, they attempted to include everyone with an interest in the product, including cookie companies and health advocates. There are detractors of the old product, and we have an opportunity to win them over with the new product. Many of the issues identified by the product’s critics have been solved by FHA and industry efforts over the past year. Regulations and industry efforts over the past two years have made significant improvements to disclosures, steering and product cost. I’m confident the industry will keep working with FHA to continue these improvements. Even while that’s occurring, we need to be more vocal about how dramatically the product has changed and how much better it is for the consumer.

What It Is The Extreme Summit is all about increasing volume. There are many paths and activities to get there, but it’s our litmus test for every effort and every investment. We get ideas from anywhere, encourage our critics to help us make the ideas into robust plans, investing in the highest payoff ideas in the shortest amount of time. Admitting “we don’t know what we don’t know,” the entire program is built on experimentation. While only the best ideas get funded, they’re all turned into pilot programs with

specific goals and measurements. We will either succeed (deliver volume) or learn significantly from the pilot, or both. We let the best idea win and have a brutal process for selection—it’s the “will you spend your own money on this?” test. Outstanding ideas have been set aside because better ones proved to be more promising. Even when a plan is fully fleshed out, we ask people to find something better. Only once we fail do we declare an idea “the best for now” and proceed. The Extreme Summit is incredibly bold in declaring a goal to grow industry volume to 300,000 by 2018. While this is only 1 percent of the available market, we don’t know if we’ll achieve it. Declaring a bold goal forces us to think above and beyond what individual companies are able to accomplish today on their own. We anticipate this to be a multiyear, multimillion-dollar effort. If the pilots succeed, we’ll need an increased and sustained effort to win over the country. Even our success will uncover new challenges and obstacles. By design, however, the initiative was constructed so that success will create the resources to reach the next step. Every journey, including a mountain climb, starts by putting one foot in front of the other and repeating.

What It Isn’t Defining the Extreme Summit is also about what it isn’t. Anytime there’s a new initiative with momentum, companies (or politicians) try to attach additional items or divert some of the funds. Getting ground rules about what something isn’t can help minimize this distraction. 8

(Our Goal) The Extreme Summit is incredibly bold in declaring a goal to grow industry volume to 300,000 by 2018. While this is only 1 percent of the available market, we don’t know if we’ll achieve it. Declaring a bold goal forces us to think above and beyond what individual companies are able to accomplish today on their own. reversereview.com

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The Extreme Summit won’t duplicate any existing NRMLA initiatives or other industry efforts. There are many wonderful things being done by NRMLA and industry firms. These should all continue as appropriate with the current budget and spending. We will coordinate wherever appropriate, but never divert or get in the way. We won’t reprioritize existing resources or efforts underway at PR and other committees. This is an incremental effort. The Extreme Summit won’t fund other industry initiatives; it is strictly about generating incremental volume through education. There are many pressing needs at NRMLA and within the industry. If the last couple of years have taught us anything, it is that we can expect significant change. We’ll need to muster other resources if required to manage these situations. The Extreme Summit won’t exclude anyone. While the initial program was kicked off by a handful of large firms, we want all NRMLA members to participate and benefit from the effort. We also hope non-NRMLA members join the organization to take advantage of this and other resources. The Extreme Summit isn’t a leadgeneration campaign. Companies (and whole industries) often think about marketing in terms of “brand” and “direct response.” Industry firms are doing a great job with direct response, and some even spend resources on improving the brand. To use a farming analogy, this isn’t about harvesting the corn; it’s about preparing the soil and

nurturing the environment.

How We Got Here This all started with an 8 a.m. brainstorming session at NRMLA’s annual conference in San Antonio in the fall of 2012. Much to my surprise, we had a packed house with 60 people not only attending, but vocalizing their views on our problems and presenting creative solutions. We brainstormed for more than 90 minutes on two simple questions: “Why is volume decreasing?” and “How can we fix it?” The perception/reputation issue quickly bubbled up as a main issue. There were many other issues indentified, including lack of distribution, no remaining household names and product complexity. But as the participants debated, it appeared that many of those issues also had a root in the perception issue. We were later able to quantify this perception issue with the surveys of customers and non-customers. We then moved on to solutions and ended up with literally dozens of great ideas. It became clear that there were multiple solutions to the problem, so we reached out to industry participants with surveys to get a sense of which ones had the greatest support. Some of the top industry CEOs got together to see if there was an appetite to fund an industry initiative focused on growth. We laid out the data, the proposed initiative and ground rules for the Extreme Summit. One of the

ground rules was “vote with your dollars.” In other words, we would only go forward if the CEOs thought the investment was worth it. Near the end, we conducted a secret ballot of how much the CEOs would invest and ended up with a five-year initiative with funding between $30 million and $150 million. From the surveys, we plucked nine topics and recruited project teams to develop each idea in detail. A plan was developed for each, including cost and expected payback. In many cases, they needed to tap outside experts and develop new materials. Specifically for the “rewrap” effort, the team issued a request for proposal to 10 ad agencies, PR firms and image turnaround experts. We then ranked every idea on a classic “four-block” matrix. On the x-axis was the return on investment, and on the y-axis was the cost. The investment took into account not only the dollar spend required, but also whether or not the initiative could leverage the assets we have in the industry (local brokers/lenders, fabulous consumer reviews, etc.). We let the best ideas float to the top. In June 2013, the CEOs did a pulse check on the ideas and asked the teams to develop detailed plans. They also reviewed presentations from four ad agencies on how to turn around the product’s reputation. And as always, we pulsed to make sure we were still willing to make the size investment. The teams were asked to keep going for a September “go/no-go” decision.

These four

i ndu s t r y ma r k e t i ng gu r u s have been instrumental in shaping the Extreme Summit.

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2

3

4

Jean Noble

Marty Bell

Mary Smith

Teague McGrath

Urban Financial Group

NRMLA

Liberty Home Equity Solutions

AAG

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These reverse mortgage lenders have generously provided the initial funding for:

The team ultimately chose RadarWorks to develop the rebranding campaign. RadarWorks is famous in the tech space for working with Microsoft, Acer Computer, Star Trek Into Darkness and others. They brought “product turnaround” technical expertise and a deep passion to help more seniors. The moment of truth came just before NRMLA when AAG, Generation, Liberty, OneReverse, RMS, and Urban decided to fund the initiative. They each made a $200,000 commitment to the rewrap pilot and an $8,000 monthly commitment to the intensified PR effort. Since NRMLA’s annual meeting in New Orleans, other firms have expressed interest in joining, and Nationstar has already made a commitment.

Next Steps RadarWorks will be developing the TV ads, marketing campaigns and sample materials for all industry participants. We’ll finalize our pilot markets over the next couple of months and plan to have a rollout of the rebranding

campaign at the end of the first quarter of 2014. NRMLA and the industry firms that funded the initial effort will be communicating the geo-targeting and other pilot information to their industry partners. While we want everyone to be involved, a brand must have a consistent message and feel. Anyone using the campaign will need to follow rules necessary to maintain campaign integrity. The Extreme Summit will monitor progress and adjust the program in real time as needed. We anticipate some things won’t work as expected and will adjust accordingly. This is all data-based; our efforts must show up in applications and loans. Please let us know if you’d like to be involved in the effort, we’ll have mailing lists to get you information in real time. We will also have public updates in various industry news outlets, and will continue to solicit broad input. Thanks in advance for your help on this important effort. x

Senior Settlement Services Where the senior always comes first! Senior Settlement Services was formed exclusively to service the unique requirements of the reverse mortgage industry and the senior borrower. Senior Settlement Services is a full-service title and settlement company. Our parent company, Equity Settlement Services, has been servicing the needs of lenders in 38 states for more than 25 years.

CONTACT US TODAY!

Phone: 631.715.3444 seniorsettlementservices.com

info@seniorsettlementservices.com

a division of

Equity Settlement Services, Inc.

reversereview.com

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The Reverse Review Nov./Dec. 2013

last word

2013: The Year of Change

reflect

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

r ic ha rd m a n d e ll

C

hange. That is the overwhelming theme for 2013, and did we ever have change in our industry this year.

Change isn’t always bad, even when it is somewhat drastic, as it has been with our industry. This year, HUD made significant adjustments to the HECM program with the hopes of ensuring the future viability of reverse mortgages. These changes have made us all more nimble and ready to help meet the needs of seniors across the country. One of the first hurdles we had to overcome this year is the removal of the Standard fixed loan option. This change removed the ability for seniors to take a very large equity draw, which HUD believed resulted in complications with insurance and tax payments later into the life of the loans. The belief is that this modification will strengthen the program, so we must forge a new path without this loan option. As the year progressed, there were more changes and new requirements. The signing of the Reverse Mortgage Stabilization Act brought many updates to the program, including smaller loans, first-year limits, Financial

according to richard

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While much has happened to the reverse mortgage program this year, one thing is clear: Our industry must remain flexible and adaptable. Remember that our goal is simple: doing everything in our power to ensure the financial well-being of our clients. Anything short of that is failure.

Assessment and fee changes. While many may see these changes as restrictive, there are still many seniors who will benefit from a reverse mortgage long after their initial draw. While much has happened to the reverse mortgage program this year, one thing is clear: Our industry must remain flexible and adaptable. Remember that our goal is simple: doing everything in our power to ensure the financial wellbeing of our clients. Anything short of that is failure. Financial Assessment will start January 13, 2014, and while we know this will restrict some clients from obtaining a reverse mortgage, we have to adapt. Our clients deserve to know that when they get a HECM, it is the best option for them. Assessing a client’s ability to pay their obligations after taking a reverse mortgage gives them a better chance for success in the future. With all of the changes in 2013 and those yet to come in the new year, we will be able to bring a stronger product to our clients. The changes will help bring stability to the program and protect not only the borrower, but also the lender. It is important for us in the industry to embrace change. For those of you who may not think the changes are positive, or if you are not able to adapt quickly, remember these words from Theodore Roosevelt: “Nothing in the world is worth having or worth doing unless it means effort, pain and difficulty.” x


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reversereview.com 8 TRR | 43 For further information, contact: Ralph Rosynek 281-404-7970 Email: rrosynek@rmsnav.com


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The Reverse Review Nov./Dec. 2013

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Innovatively delivering industry-leading mortgage systems that enhance the financing experience for borrowers while compliantly improving efficiencies for lenders since 1999.

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The Reverse Review November/December 2013  

A magazine for professionals in the reverse mortgage industry

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