Best of The Reverse Review

THE

REVERSEreview

J U L Y / A U G U S T 2 0 1 0

SURVIVINGIn The ReverseMortgage IndustryTodd Walters

| TRR June 20104

“ T h i n k i n g F o r w a r d I n R e v e r s e .”TRR06.10

Reverse Mortgagesand Life InsuranceSome seniors may not be able to afford life insurance; Jonathan Neal explains how the solution may lie in reverse mortgages.Jonathan Neal 12

How to ManageDistractionsWe all know that distractions canplague the workplace. Try the “Five S” system to help overcome some common issues and enhance productivity. Sam Collins 20

Product Suitabilitythe Choice is Not YoursPaul Fiore highlights the plenitudeof options in the reverse mortgage industry, and encourages lenders to give clients optimum knowledge regardingthe HECM product.Paul Fiore 24

FEATURELocal PR Can Extend National Efforts, ButDo Your Homework!To regain forward momentum with the press, all industry participants can play a role, from the largest lenders and servicers to individual originators.Justin Meise 14

Note from the Editor Ask the Underwriter Industry Stats

Directory The Last Word

The Art of Byline Articles & PR 5

(3Cs)+(2Cs) = 5Cs 6 March 2010 8

Fixed Rate is Popular, but is it the Best Choice? 30

29

“Positive press offers value beyond the brand

awareness you getfrom advertising.”

page 14

| TRR June 20105

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© 2010 The Reverse Review, LLC. All rights reserved. The Reverse Review, LLC is a California limited liability company and is the publisher

of The Reverse Review magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in

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When you pick up The Reverse Review each month or download a copy from our website, you might think to yourself, “I could write an article like this,” but soon come to the realization that you’re not a reporter and probably never will be. If you have thoughts like this, you’re not alone. But, you don’t have to be a reporter in the reverse mortgage industry to get an article published. The trick to writing for us is knowing what your audience wants to read and then understanding the subject matter. Once you’ve decided a byline article is a good PR strategy for your company, the next step is identifying what your readers want to be educated in. This month, Justin Meise writes our feature on local PR. He discusses how it offers value on many levels of awareness, from branding to working with the press in a unique communication process. Positive exposure is a critical component of improving the overall image of our industry. Do you think you’re up for the challenge? Though byline articles take time and effort, the rewards of becoming a thought leader in our industry can be immense.

Have a great month...summer is finally here!

Erica EnglishEditor-In-Chief

THE

reviewREVERSE

The Art of Byline Articles & PR

| TRR June 201010

Ralph RosynekRalph Rosynek is President and CEO of 1st Reverse as well as a HECM DE Underwriter. Mr. Rosynek has been involved in mortgage lending for over 30 years with the last 5+ years exclusively providing reverse mortgage lending solutions. To contact Mr. Rosynek or to learn more about 1st Reverse Financial Services, Please visit www.1streverse.com or call 877.574.1000.

Jonathan NealJonathan Neal is the senior partner at CCG-Capital Consulting Group, LLC, a sales and training consulting firm located in Atlanta Georgia. Through his 30 years of experience, John’s primary focus has been on post-retirement and estate planning. Jonathan is recognized nationally as an author and coach, managing and training financial/insurance professions who work principally in the senior market place. Jonathan can be reach by phone at 678.906.2850 oremail at [email protected]

John LundeJohn 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 8 of the top 10 reverse mortgage lenders plus investors, servicers and vendors to the industry. Find out more at www.rminsight.net or call 949.429.0452.

Justin MeiseJustin Meise is a principal with River Communications, a White Plains, NY PR firm specializing in financial services for over 20 years. Justin worked with NRMLA to launch the consumer education program starting in 2000 and has provided PR services to Financial Freedom for over nine years. Justin welcomes comments or questions at [email protected] or through LinkedIn.

contributors

June 2010 TRR | 11

Sam CollinsSam Collins is the President of Sam Collins Reverse Marketing, LLC and Founder of REMALO, the Reverse Mortgage Association for Loan Officers. REMALO is a web based National sales, marketing, training, and full service center, created exclusively for Reverse Mortgage Loan Officers, Correspondents, Branch Managers, key executives, and brokers. www.remalo.org or 877.262.7656

Paul FiorePaul Fiore joined AAG to head the retail platform in California. Mr. Fiore was most recently the Chief Learning Officer at Senior Lending Network, where he developed SLN University. Paul has been a speaker at NRMLA and MBA meetings. He joined SLN as VP of Internal Production, helping to build their reverse mortgage sales center to the 4th largest reverse mortgage retail provider.

Shannon HicksShannon is a reverse mortgage originator and VP of Product Development at Reverse Fortunes, Inc. His past experience includes serving as a planned giving and fundraising manager for a non-profit, and as a financial services professional. He currently teaches reverse mortgage classes for both financial professionals and borrowers across Northern California. Shannon is also host of Reverse Fortunes Weekly, the nation’s first podcast for reverse mortgage originators. For more information call 1.866.592.2096.

The ‘Counselor’s

Role

reversereview.com3434

35October 09 35

Minding Your Ps and Qs –Legal Considerations in the Marketing of Reverse Mortgages

The marketing of reverse mortgages has become a hot

topic of late as the Federal Trade Commission (“FTC”), the Department

of Housing and Urban Development (“HUD”), the Office of the Comptroller

of the Currency (“OCC”) and the Senate Special Committee on Aging have each either recently commented upon or

taken action to stem perceived ills in the marketplace.

3434 reversereview.com

35April 2009 35

A Country In

CRISESMichael Banner


world classCreating a

Reverse MortgageTraining Program

Jacqueline Del Priore

39April 2009 39

Welcome back to our discussion of creating a comprehensive and effective training program to maximize performance within your organization. You may access parts one and two of this series at www.reversereview.com in our February and March issues.

In this part, the loan officer will be vividly describing each element of the loan in a meaningful way to the borrower as well as explaining how each aspect should be important or exciting to them. Here is a wonderful exercise to teach the loan officers to maximize success with each sale.

“”

37July/Aug 09 37

The Next Wave

Weiner Brodsky Sidman K ider, PC

Washington and vermont leada surge of state legislation

With all the activity we’ve seen at the federal level this year as an outgrowth of the Housing and Economic Recovery Act of

2008, it is easy to neglect the changes state legislatures around the country are currently sowing that may significantly impact

the reverse mortgage industry.

Rightly or wrongly, in the aftermath of the subprime mortgage meltdown, many state regulatory agencies view reverse

mortgages as posing material risks to consumers and are taking steps to get “in front” of a potential problem, rather than being criticized, as was the case in the subprime arena, for not

acting quickly enough. »

| TRR December 09 / January 201024

December 09 / January 10 TRR | 25

Designed to reverse cash shortage among seniors, reverse mortgages have proven their effectiveness in reversing a common financial ailment among elders today: foreclosure.


nown to professionals for some time, the ongoing foreclosure crisis has brought this reverse-mortgage value to the public. For seniors facing foreclosures and for banks looking at balance-sheet-busting losses from bad home loans, this unintended use of reverse

mortgages is a win-win; but there is a problem.

In some cases where reverse-mortgage cash could be used to pay off a forward mortgage in default and save the borrower’s home, the homeowner’s equity may be insufficient to satisfy the loan balance. Wisely, some lenders are accepting reverse-mortgage proceeds as sufficient payment for satisfaction, reasoning that the headline risk of putting seniors on the streets is not worth the extra dollar they may gain from foreclosure and a fire sale. Sadly, not all lenders take this approach, which brings us to a lawyer and senior advocate in Northern California.

David L. Mandel of California Senior Legal Hotline has proposed one solution: Put a subordinate lien (sub-lien) behind a HECM reverse mortgage, the dominant program in the U.S. market, controlled by the Federal Housing Administration (FHA). However, in Mortgagee Letter 2009-49 (November 18, 2009), FHA reiterated its ban on new sub-liens as part of HECM transactions and added a ban to subordination of existing liens.

Mandel was a writer and editor for 20 years (including 9 years at the Sacramento Bee) before, during, and after law school in Israel, where he lived for 11 years. He has written and spoken widely on delivery of legal services to seniors, housing counseling, ethics, and technology at legal aid hotlines.

When he is not presiding over crushing caseloads of seniors in foreclosures and other financial crises, Mandel finds respite in his family, in playing his viola, and in training for marathons.

Although FHA has banned sub-liens behind HECM, discussing them is healthy as we look for ideas to solve a raging foreclosure crisis among our elders. David Mandel and I caught up recently to discuss his ideas for helping seniors avoid foreclosures.

What do you do at California Senior Legal Hotline/Sacramento Senior Legal Services? At the hotline, we field calls from seniors statewide on any legal issue and provide at least some information and advice, at times more extensive intervention when we can and it’s likely to be effective. For Sacramento seniors our responsibilities include also representation in selected cases and various types of community education and outreach. Beyond that, our practice tends to focus on certain areas as developments occur or as funding opportunities arise that are consistent with our mission, which is to empower seniors with the help they need to maintain health, safety and independence to the extent possible.

These days, we spend much of our time working with seniors facing possible loss of their home due to the foreclosure crisis. We advise, negotiate for modifications or other workouts and, in some cases, litigate. Other current special projects include pension counseling and advocacy, SNAP (food stamps) outreach and enrollment, and an in-house mediation department. For more information please visit us on the web at www.seniorlegalhotline.org. What kinds of challenges are seniors facing in your areas of operation, what are the causes of these challenges, and how can they be resolved? There are huge economic challenges among seniors such as foreclosures and evictions. Seniors with home equity were high on the target list of financial predators. Layoffs and furloughs are hurting many of those who have remained employed. The $62-a-month reduction in SSI (Supplemental Security Income) payment hurt many seniors. Add to that suspension of property tax help, cuts in many programs like meals, transportation, case management, in-home help,

adult day care, total elimination of state funding for our program, where so many try to turn for help in dealing with everything else. We have nowhere near the capacity to answer all calls. You have proposed a loss mitigation idea to help seniors and forward lenders in potential foreclosure situations. What is it, and why do you think it is a good idea for seniors and lenders? Do you have any success story?

In several cases, servicers (and investors) have been willing to accept the net proceeds of a reverse mortgage as a short payoff of a loan balance far higher than market value. Typically this occurs when there is a smoking gun of predatory lending and frankly, when we keep up the pressure. We’d like to see it become much more common, and think that servicers would have an interest in getting the quick payoff that only a reverse mortgage (as opposed to a standard modification) can provide when appropriate; even though it comes to just a percentage of current value. In more run-of-the-mill cases without any serious legal violations in the original loan, we’d like to see the use of subordinate loans (amortized over a short term or silent) to make up the difference between HECM proceeds and net present value (NPV – what a lender would net from a foreclosure), where appropriate after counseling.


We’re growing again!Urban Financial Group, the premier reverse mortgage lender in the Midwest is looking for qualified individuals to fill the following positions:

FHA Direct Endorsement Underwriter

Extensive knowledge of FHA guidelines required. We are an aggressive company with a common sense approach and are looking for like minded underwriters to join our team.

Experienced Reverse Mortgage Underwriters don’t pass up the opportunity to join one of the industry leaders in customer service

Work from home or in one of our local offices. Excellent Pay and Benefits.

If you believe you have what it takes to succeed in a fast pace environment

within a rapidly growing company, please fax your resume to:

1-866-250-7081 or email [email protected]

Visit our website at www.reverseit.com

With Mortgagee Letter 2009-49, FHA has closed the door on your idea. What is the reception from conventional lenders? In conversations with FHA we had heard that it remains opposed to the idea. And now it has apparently even disallowed the one previously permitted means -- modification of the existing underwater loan into the subordinate one (as opposed to creating a new loan).

In this economic crisis, we think that is unfortunate. In normal times, preserving equity is paramount and a reverse mortgage may or may not be the best solution for a given client. Now, when a client is determined and able to keep their home of decades, and foreclosure is the clear alternative, we think it should at least be made an option in the government’s Making Home Affordable program. A number of lenders we’ve spoken to understand this very well and some say that they have made such arrangements, however, in general, they seem hesitant to help push the idea with HUD. You deal with seniors in crisis. You hear their stories. What is your favorite story? An 84-year-old client was illegally locked out last year after foreclosure of a predatory loan by a local real estate agency representing Fannie Mae that somehow thought eviction law didn’t apply to it. We helped arrange for a locksmith, who donated his services, to break the locks as TV cameras rolled. The foreclosure sale was voided, and she is still there more than a year later, having been offered a series of unaffordable modifications while we try to get someone to listen to our proposals involving a HECM.

In another case we handled, a borrower and his terminally-ill wife were on the verge of eviction. So we helped them persuade a court to set aside the judgment. Then, we negotiated with the lender for months, and it agreed to reverse the foreclosure and accept the HECM proceeds, writing off nearly $400,000 in principal.

A second lender agreed to accept a small payoff from the first lender and subordinate a small remaining amount, with very affordable payments by the homeowner. A story about the case appeared in the October 21st issue of the Wall Street Journal.


According to a 2007 National Survey of Reverse Mortgage Shoppers by the AARP titled, “Reverse Mortgages: Niche Product or Mainstream Solution?” some of the main reasons borrowers were dissatisfied with their lender were a lack of product knowledge, inability to properly explain or provide enough information, inability to answer questions and a lack of respect. These reasons accounted for 53% of the overall total. As if having to overcome the complexities of a very confusing industry and product aren’t challenging enough; the mortgage industry has been fraught with questionable ethics and fraud, complex regulations, poor financial performance and a severely weakened housing market. As if that is not difficult enough, originators have the additional complexity of having to sometimes work with uninformed relatives or caregivers. Although consumer awareness has risen significantly in the last 10 years, many consumers admit they still know very little about reverse mortgages. The reverse mortgage industry is still considered in its formative stage and thus is susceptible to bad press that can negatively affect consumer perceptions and subsequent decision making of an already wary consumer. These are formidable challenges to be sure. It is no wonder that trust is one of the biggest hurdles in gaining the loyalty of the RM borrower.

Fortunately, however, the benefits of a reverse mortgage for the right customer far outweigh most of these challenges. In fact 94% of the respondents of the survey said their reverse mortgage “gave them peace of mind”. The recent growth and popularity of reverse mortgages underscores its importance “as an asset management tool to address financial needs {of borrowers} in retirement”. Lenders that are able to successfully navigate many of the pitfalls named previously and effectively establish rapport with their clients will significantly improve their chances of successfully originating a loan.


Reverse mortgages are not for everyone and each situation is unique, but how one successfully builds trust with a RM client is not always as easy as it sounds and requires a certain amount of expertise and finesse. Speaking from his office in Nashville, TN, Chip Kandrach, a recognized authority in the reverse mortgage industry and a 7-year veteran stated in a recent interview that reverse mortgage clients require more “time and hand holding” in order to properly detail every step of the process. Since he was willing to spend the time answering questions and walking his clients through the steps, he was able to impact his conversion ratios as high as 90%. However, he also acknowledged that because the reverse mortgage origination process was time consuming, an experienced loan originator was limited to how many transactions he could close. So the question remains, what is the best way to build trust with the client and guide them successfully through the decision process?

Here were a few suggestions:1. Take your time and be patient – Nationally, the average age of the

typical RM client is 73.6 years. In many cases they do not have the faculties to review all the complex data. Take your time with each client and explain, explain, explain and then explain again. Make sure the borrower and each person involved in the decision is given all the correct information about his or her loan.

2. Build alliances – with other professionals that share a common goal and will work in unison with you and your client. This is not only critical to establishing your credibility, but also to drive additional business. People like associating with other professionals and when you build alliances that establish you as a professional, they will seek out your expertise. The right advisors in ones network include financial advisors, accountants, estate planners, caregivers and other reverse specialists who are used as trust agents in a carefully orchestrated network of the originator.

3. Meet clients face to face - In most cases, effective interviewing cannot and frankly should not be done over the phone. When it is not possible to meet the client directly due to geographical distance, as mentioned before, another example of a trust agent may include an initial contact with the client when the disclosure package has to be signed. The right professional can help the borrower smoothly navigate and understand the complicated paper work and terminology with assurance.

4. Communicate often - We live in a very fast paced, ever-changing, technological world and while the ideal RM candidate typically lives in an era where these changes are slow to take hold, most borrowers do not even have an email address, much less a computer to read them. Make sure you call the borrower at every point of the process. Spend the time necessary to make sure the client understands what is happening with their loan. The last thing a borrower wants is to be left out of the communication loop regarding their loan. This includes bad news as well as good news.

5. Be accessible - One of the other highest percentage complaints from RM borrowers in the same AARP survey was not being able to contact their loan officer. This almost seems laughable, but when a client has a question, a good originator is always available. Being busy is unavoidable, but being inaccessible should never be. If you are too busy then have people in place to answer questions. Otherwise, return phone calls in a timely manner and call back when you say you will.

6. Educate yourself - the largest percentage of complaints came from 4 separate categories that all addressed the same issue, which was a lack of knowledge about the products that they were selling. Again, this seems laughable, but if we accept the responsibility of advising a certain demographic group about their financial future, then it should be mandatory to know every single detail of the product, its benefits and its shortcomings. Ask yourself the following question, would you let anyone who could not establish their credibility or align themselves with credible advisors give advice to your parents about their financial future?.....of course not. Then why would anyone attempt to do business with someone if they were not properly educated about what they were selling? Educate yourself and develop a system to stay abreast of all the most up to date changes in the Reverse Marketplace.

These steps are proven customer relationship tools that will not only build trust with your clients but will significantly impact your success as a successful lender and originator. They will help you establish and maintain your credibility as an authority in your profession and will also help improve the credibility of the industry with which you work.


Successfulphone sales

Paul Fiore

“Once you have mastered the inner workings of

the product and truly understand Reverse Mortgage 101, the most

important part of selling this product successfully is building the emotional

connection to your client.”

15September 09 15Paul Fiore

25October 09 25

Many of the 80 + million baby boomers have reached the 62-year-old minimum age eligibility for HUD reverse mortgages. This demographic group is expanding exponentially with more than 6,500 seniors turning 62 each day. On top of this, life expectancy continues to rise at a time when government entitlement programs including Social Security and Medicare are already dangerously overextended. It is only going to get worse in the years ahead as more baby boomers retire and tap into these programs.


The aging population currently holds billions of dollars worth of equity in their homes. These individuals are faced with mounting medical bills and have a strong desire to stay in their homes longer. Adding fuel to this momentum, the federal economic stimulus package, which was passed earlier this year, increased eligible home values for a reverse mortgage from $417,000 to $625,500, thus opening up more properties and equity that would qualify for reverse mortgages.

As mentioned above, all of this is happening at a time when lenders are being inundated with new rules and regulations with which they must comply. Reverse mortgage lenders are feeling the pressure to adopt mandatory live pricing introduced by Fannie Mae. There have been regulatory changes for RESPA, the HUD-1 and the GFE, which include form changes and updates, different classifications of fees and the introduction of tolerances depending on the fee type and selection of provider to name just a few.

As a result of these changes, reverse lenders are quickly realizing that success in the reverse mortgage market cannot be achieved on volume alone; efficiency is absolutely critical. It is within these market conditions that technology can be a great enabler. In order to more effectively and proactively adapt, reverse lenders need to embrace automation solutions (robust technology platforms) that enhance their ability to deliver operational efficiency.

Often times, reverse lenders view technology as a cost rather than an investment in their organization. This mindset has resulted in reverse lenders spending money on niche technology products. Historically, these products included reverse mortgage calculators, point-of-sale tools, web portals, investor technology tools and document preparation. These systems have typically been purchased from individual technology providers claiming best of breed, ease of use and low cost of entry. With margins shrinking, reverse lenders should explore the benefits of a robust, fully integrated technology platform that includes the likes of workflow automation, electronic document management and imaging, business rules engine and intelligent forms creation.

Each reverse lender must become more efficient instead of engaging in more rhetoric between niche products and fully integrated technology platforms. A fully integrated technology platform can deliver true efficiency, which is vital to profitability for today’s reverse lenders. This article will define what the elements of a fully integrated technology platform include and provide specific reverse lending examples of this technology in action.

Workflow Automation

Workflow automation consists of business procedures automation or “workflows” during which documents, information and/or tasks are passed from one participant to another in a way that is governed by rules or procedures. In turn, this will eliminate or significantly streamline manual or disparate processes.

The Key Benefits of Integrated Workflow Automation

• Improved efficiency - automation of many business processes results in the elimination of many unnecessary steps, which reduces the overall cost per loan exponentially.

• Better process control - improved management of business processes achieved through the standardization of working methods and the availability of audit trails significantly improves compliance.

• Improved customer service – consistency in the processes leads to greater predictability in levels of response to customers.

• Flexibility – software control over processes enables ease of configuration that is in line with changing business needs and constantly changing rules and regulations.

• Business process improvement - focus on business processes leads to streamlining and simplification thereby reducing errors.

Electronic Document Management and Imaging

The inundation of paper documents resulting in thousands of folders, lost and misplaced documents, cluttered offices, off-site storage, poor data security and compliance issues can break the rhythm of even the most efficient enterprise. A fully integrated electronic document management solution enables lenders to capture, store and manage documents for everyday business operations more efficiently; helping to accelerate the lending process by applying exception based processing.

Electronic document management and imaging systems provide advanced capture and Optical Character Recognition (OCR) technology to enhance data accuracy and loan quality while increasing operational efficiencies and decreasing costs. Lenders have the ability to capture any document from any data source, view and annotate the document, and then print, fax, email or package for delivery. Documents are stored securely and all activities in the imaging system are audited. Lenders can control access to specific documents and specify who can view them and what actions can be performed on them.

“Each reverse lender must become more efficient instead of engaging in more rhetoric between niche products and fully integrated technology platforms.”

27October 09 27

The Key Benefits of Integrated Electronic Document Management and Imaging

• Intelligently recognizes standard lending documents without the use of separator sheets or bar codes in order to drive down costs and improve operational efficiencies.

• By leveraging advanced capture and OCR technology, the system validates pre-existing loan information within the integrated loan origination system and populates/modifies data fields as necessary.

• Takes document capture, storage and retrieval to a new level by learning document types, automatically comparing and analyzing data within integrated loan origination systems and on the related forms, and populating loan origination data fields from the captured forms.

• Additionally, documents can be viewed or exported in configurable stacking orders, focusing the presentation of material on the audience that will be receiving it - expediting review times and streamlining your business.

Business Rules Engine

With the current tempo of business, reverse lenders must be able to institute policy and process changes quickly to gain and maintain a competitive advantage. A Business Rules Engine allows the continual molding of technology to provide dynamic data flow to best leverage internal strategies and real world benefits in the form of time and cost savings along with increased scalability and profitability.

An integrated Business Rules Engine is typically based on a “publish and subscribe” design concept where business functions (actions) are triggered based on events. The solution should include a number of out of box events and actions to fully accomplish your goals; however, you also should have the added ability to take control, extend the system and configure your own policies and processes. The rules engine is normally native to the core technology and manages the rules library to provide an easy, robust and graphical way for rule authoring, management, simplification and use of information. These tools should utilize user-friendly wizards that enable you to design and execute rules from a business user’s perspective without the need for complex programming.

Key Benefits of an Integrated Business Rules Engine

• Thorough understanding of the mortgage process and built from the ground up to automate the lending process by concentrating solely on streamlining mortgage operations.

• An integrated business rules engine will extend to areas such as product and pricing, decisioning, fees, workflow, document management/distribution, messaging, security and more to streamline operational efficiency.

• Allows non-technical mortgage professionals to easily and effectively modify and customize their technology to better solve back office challenges and enhance customer service.

• Auto-resolution capabilities greatly improve efficiency, mitigate the need for additional training and deliver a significant increase in employee efficiency and customer satisfaction.

• Provides for intelligent data edits and validations reducing both data entry and process errors.

Intelligent Forms Creation

Intelligent forms creation enables lenders to dynamically create initial disclosures and closing packages and deliver them securely to the borrower or settlement agent. Accurate and quick document preparation and delivery through a comprehensive platform accelerates the lending process and ultimately increases customer satisfaction while maintaining compliance and reducing costs.

This intelligent forms generation technology should work in concert with your fully integrated technology platform to provide 100% data transfer into the required documents while leveraging import/export functionality to push and pull data to dynamically generate document packages thus nearly eliminating the need to manually complete missing files. By reducing manual entry efforts, you are not only gaining efficiencies, but also decreasing costly data entry errors. In addition, all of the necessary calculations take place natively within your system of record removing the need to maintain an interface to a third-party doc prep provider and preventing disparate data on multiple platforms.

By handling both initial disclosures and closing packages, the solution should include an extensive forms library along with the ability to create custom forms. The library should be continually

updated to accommodate changes in agency guidelines (federal or state) and compliance rules and regulations.

Initial disclosures are automatically generated and placed on a secure website. The borrower is immediately notified via email of the disclosure availability and is provided instructions for downloading and electronically accepting their disclosures via an e-Sign compliant process. Additionally, the three-day window for those disclosures to be delivered to the applicant is upheld via a reminder notice. Finally, the solution will automatically store the completed document package securely in PDF format within the system of record for easy retrieval and future tracking.

Key Benefits of Integrated Intelligent Forms Creation

• Eliminates manual entry of data to streamline document management while improving data quality.

• Provides the ability to accelerate delivery of the latest compliance and regulatory solutions.

• The combination of workflow automation, electronic document management, a business rules engine and intelligent forms creation ensures that the right document packages and content are created each and every time.

The key to efficient and profitable reverse mortgage fulfillment lies in the implementation of a robust technology platform that includes integrated workflow automation, electronic document management and imaging, business rules engine and intelligent forms creation. An integrated technology platform is responsible for managing events that direct strategic, automated actions across your loan origination product solutions. There are an endless number of actions that can be created; however, a few highlights include:

• Auto-distribution and notification• Automated status and task management• Auto resolution• Continuous product validation• Pricing refresh functionality• Risk mitigation actions (including high cost tests)• Service requests and data import to and from external systems

While the reverse lending process consists of a multitude of steps, processes and exceptions, a few specific reverse examples of workflow automation in action include: with a fully integrated technology platform, reverse lenders can apply business rules that set the LTV Factor within the system, set the MCAW Section 10-Mulitply Mortgage Basis field (LTV FACTOR*Mortgage Basis), the solution can then validate that the Base Loan Amount is greater than “multiply mortgage basis” and “multiply the value by FHA calc.” Due to the business intelligence within the solution, the system will provide the end user with an immediate warning that the loan amount exceeds the FHA allowed LTV limits.

Another example of automation in action is the lender’s ability to set the anticipated advance date three days from the closing date and have it include Saturday. The system can also set the commitment expiration date to 180 days once the commitment date has been issued, or it can set the completion of escrow amount by totaling all repairs that need to be made, significantly streamlining the lending process while eliminating the potential for manual errors.

Other examples of how a fully integrated technology platform can streamline the reverse lending process and eliminate manual processes include:

• The ability to store and assign originator, broker and underwriter licenses for new regulation changes.

• A robust technology platform can automate email to the broker regarding incomplete file submission. These systems can default repetitive items on loan input (account type, lien position etc.).

• Lenders have the ability to lock down certain loan fields post-conditional approval to make sure that it is closed in the same way as it was disclosed. They can also implement validation for birth date, SSN, etc. If information is missing, the user is warned prior to the file being received in investor delivery.

• Reverse lenders can automate pooling for delivery based on pool and commitment rules and flows. They can capture the following data points for each of the trailing docs: received date, shipped date, shipped to whom and tracking information for the doc. In addition, they can set reminders, auto emails and verifications.

The list of actions that can be automated with a robust technology platform to improve efficiency in the reverse lending process is endless. It takes the manual steps and guess work out of the employee’s hands and puts full control over the process back to the organization in order to ensure that compliance, new rules and regulations, investor guidelines and specific timing requirements are met every time. This can include index values, interest rates and how long an offer stays in front of a potential borrower. The timing of these activities has a direct impact on your bottom line.

A robust technology platform improves the speed at which reverse lenders can change and adapt to constantly changing market conditions while improving data integrity. Since the reverse lending world is driven by government programs that include very specific timing and process requirements, it is critical for reverse lenders to embrace fully integrated technology platforms that can control the process. These systems are ones that can ensure that the right information is delivered at the right time to the right person.

Success in reverse lending can no longer be achieved based on volume alone, so more reverse lenders will invest in integrated technology platforms that can deliver on the promise of greater efficiency. This can be accomplished through integrated platforms that provide workflow automation, electronic document management and imaging, business rule engines and intelligent forms creation to streamline operational efficiencies. These efficiencies will drive profitability and ensure long-term success.

| TRR March 201018

March 2010 TRR | 19

nspector General Kenneth Donohue of the HECM Fraud Unit has taken the time to answer questions regarding the cold hard truth surrounding the sensitive issue of fraud and how it can affect our industry.

I asked direct questions and I got back direct answers. This is exactly what our industry needs right now.

It’s well worth reading, its well worth heeding…

I would like to start with a brief statement about our organization and our work. The Department of Housing and Urban Development Office of Inspector General (HUD OIG) is established to provide independent and objective reporting to the Secretary, Congress, and the American people through its audit and investigative activities. We are charged specifically with identifying and combating waste, fraud, mismanagement and abuse in the administration of HUD’s programs and operations including, among others, the Federal Housing Administration.

The HUD OIG’s goal is to ensure that the billions of taxpayers’ dollars appropriated by Congress for HUD programs along with the FHA’s insurance premiums are used efficiently and effectively.

The housing and mortgage crises over the last few years resulted in HUD and its programs being placed front and center in dealing with the complex issues created from this critical economic situation. The HUD OIG’s Office of Investigation has increased the number of open single-family mortgage fraud criminal investigations by 82%. Together with the FBI, we now have more than 1,500 criminal investigations involving mortgage fraud. The HUD OIG is actively investigating HECM fraud cases involving literally dozens of targets, hundreds of loans and some big names in the industry.

| TRR March 201020

We continue to be leaders in investigating mortgage fraud. In December 2008, HUD-OIG and the FBI partnered to form the National Mortgage Fraud Team (NMFT). Working closely with the National Mortgage Fraud Team, the Financial Crimes Enforcement Network (FinCEN), the United States Secret Service, and numerous other federal and state law enforcement partners, the NMFT has established more than 70 regional working groups and task forces around the country. The NMFT allows our agencies to bring together their resources, including HUD’s FHA databases, FBI Intelligence and FinCEN data, in order to identify mortgage fraud trends and fraud schemes, create investigation target packages, and provide field agent support.

HUD-OIG has also taken a leading role in the interagency Financial Fraud Enforcement Task Force established by President Obama’s November 17, 2009 executive order, and in the Task Force’s Mortgage Fraud Working Group.

1. What are the most common types of fraud taking place right now in the Reverse Mortgage market place? Current HECM fraud schemes range from false statements regarding occupancy of the subject premises, to straw senior borrowers, to grossly over-inflated appraisals. These frauds run the gamut -- from crimes involving single loans to organized criminal enterprises churning dozens of HECM loans.

The most common schemes that our agents are encountering involve straw buyer senior schemes. Typically, fraudsters purchase low cost, often uninhabitable homes, and flip those properties to unsuspecting seniors. They then often convince seniors that the homes are free, through special (and non-existent) HUD or American Association of Retired Persons (AARP) programs as part of the federal government’s rescue programs. Once the senior is signed up, the property is quitclaimed to the senior and paperwork is drawn up for the senior to take a HECM against the newly-owned property. Of course, this fraud also involves an inflated appraisal, sometimes as much as 1,000% of the true fair market value. To justify the increased appraised value, fraudsters may do some cosmetic repairs to the home, and then file a lien against the property for an amount equal to the expected HECM net proceeds. When the HECM loan is closed, the fraudsters pocket their ill-gotten gains and leave the senior in a home, sometimes with no heat or air conditioning or working plumbing.

A new variation of this scheme involves the HECM for purchase program. Rather than quitclaiming the deed to a senior, fraudsters will “sell” the home to the senior, again at a grossly over-inflated price based on a fraudulent appraisal. The fraudster will typically create bogus down payment documents for the senior as part of the purchase scheme. As in the traditional HECM straw senior scheme, the fraudsters can walk away with tremendous profits and the senior and HUD are left to suffer the losses.

Our agents and auditors are actively pursuing these schemers as it is critical to the vulnerable segment of our population and the American taxpayer for us to protect the integrity of the HECM program and the FHA insurance fund.

2. Other than the above, what should we be looking for in the future?

You can expect that HUD OIG will continue to work with federal, state and local law enforcement partners throughout the country to combat HECM program frauds. Our fiscal year 2010 overall investigative priorities include specifically focusing on the HECM program and frauds committed against senior citizens.

Agents are working closely with the Conference of State Bank Supervisors to coordinate multi-state and multi-jurisdiction reviews, audits and investigations of HECM lenders. We will also take a close look this year at HECM appraisals to determine if HECM appraisals, even appraisals on otherwise legitimate HECM loans, have been overstated.

In addition, we are working closely with HUD and the Senate Committee on Aging to improve legislative program requirements in order to close any loopholes that may allow such frauds to occur.

We would very much like to enlist and encourage your assistance in providing leads on fraudulent activities identified by your members and readers. You can report these to our HUD OIG Hotline at 1-800-347-3735.

3. The issue of cross selling is certainly the most sensitive subject in the reverse mortgage industry. How do we monitor this while still sending the message to financial professionals that cross selling of financial products is in fact illegal?

March 2010 TRR | 21

| TRR March 201022

The Housing and Economic Recovery Act of 2008 (HERA) added new protections for seniors to prevent lenders and other parties from pressuring or requiring them to purchase certain inappropriate financial products with the proceeds of the reverse mortgage or as a condition of eligibility for the reverse mortgage. Financial professionals have an obligation to put the senior’s best interests first. However, we continue to receive complaints that lenders are requiring seniors to purchase some of these products, and we actively investigate each complaint. In addition to pursuing possible criminal charges, we will refer the lenders, if appropriate, to the HUD-run Mortgagee Review Board for administrative sanctions.

And again, we are working with HUD staff and the Senate Committee on Aging to strengthen the rules on the cross selling of products and to increase criminal sanctions for the parties involved.

4. Do you think it would be proper for our industry to develop “suitability standards” and if so would your unit want to be involved in creating them?

We worked closely with HUD in drafting new departmental guidance for the counseling of seniors on reverse mortgages. We would encourage the industry to develop its own ethics and product standards to assist in the education and protection of seniors.

To this end, the industry needs to develop, administer and enforce ethical standards for the organizations and individuals who market reverse mortgages to such a highly vulnerable population.

HUD OIG has proactively spoken to industry groups about the abuses we are finding in this program. We would welcome the opportunity to review and comment on proposed industry standards from our fraud prevention vantage point.

5. What can we expect from the HECM Fraud Unit? Are you here to observe and react? Or be proactive in the development of policies and procedures?

Both. HUD-OIG has assigned Assistant Special Agent in Charge Michael H. Stolworthy to the FBI/HUD-OIG National Mortgage Fraud Team. ASAC Stolworthy and a HUD-OIG analyst work closely with agents and analysts from the FBI and FinCEN and other law enforcement partners to identify mortgage fraud schemes and create investigation-targeting packages. We also have agents and auditors working in more than 70 mortgage fraud task forces and working groups throughout the country.

As I stated earlier, we have worked proactively with HUD staff and Congress to ensure that proposed regulations, policies and procedures work in the best interest of the reverse mortgage program and to

| TRR March 201024

urrently in the reverse mortgage industry, negativity is rampant. The news is typically piled with negative report after negative report. Consumer Reports say our

industry is the next “financial fiasco”. The National Consumer Law Center calls reverse mortgages, “Subprime Revisited”. It appears we have all had huge targets painted on our backs.

However, misery loves company and many traditionally talented reverse mortgage specialists are using the current environment to find like-minded pessimists. While it’s not wise to ignore market conditions, it’s even worse to let negativity control your activity. Temper negativity with realistic evaluation and maintain a mindset of goal-orientated activity.

Too much negativity has a way of bringing on a defeatist mentality. Unfortunately, as arrows keep flying and the threat of more restrictive legislation is discussed, some folks have succumbed to hopelessness. This was recently demonstrated to me through a conversation I had with a former reverse mortgage specialist. He told me that the market seemed to be decimating and he was actively looking to leave the industry. He explained that he simply couldn’t fight for business anymore and wanted something “guaranteed”.

He admitted that few of the naysayers had an educated argument; they were just repeating news reports, vague market data and what “might be coming”. Unfortunately, all the negativity overcame him. He did leave the reverse mortgage

C

| TRR November 0920

• Why am I in this industry?• Is doing the right thing for my client really more important

than getting paid on the deal?• Am I more committed to strengthening my sales skills than

increasing my technical knowledge of the product?• How long do I foresee myself staying in this industry?

Voice of reason: The reverse mortgage sector is not the “get rich quick” answer for “forward” dropouts. In order to succeed today, you not only need to sell your qualities, you need to be these qualities. Being a good salesperson will only take you so far. Those of us who will succeed have a deeper understanding of our clients and the products we offer as well as an unyielding sense of ethics.

2. A reverse mortgage is a beneficial financial product for the right borrower.

Suitability. (noun). 1. The quality of having the properties that are right for a specific purpose.

My first memory of the recent wave of bad press was hearing about an 80-year old lady who took out a reverse mortgage and was then sold a 30-year annuity with huge withdraw fees. It was obvious that nobody should have sold a 30-year annuity to an 80-year old individual, however, was it wrong for her to take out the reverse mortgage? I don’t know…maybe or maybe not. It very well may have been the right decision to take out a reverse mortgage based on her individual circumstances…however, the reverse mortgage became guilty by association with the annuity. Voice of reason: If you’re interested in selling anyone and everyone a reverse mortgage, you won’t last long in this industry. Looking at your prospects’ individual scenarios. Identifying and reviewing their available options are critical in determining whether or not a reverse mortgage is a suitable product for your client. Are you able to strike the ethical balance between suitability and sales?

3. There are currently 8,000 people in the United States turning 62 every day.

4. There were approximately 115,000 HECM’s endorsed by HUD so far this year.

Voice of reason: Both of these statistics demonstrate the future and potential growth of our industry. If you’re only in this business for today, these figures really don’t matter. However, those who want to cultivate their business over time, waves of prospects are coming. If you don’t see the opportunity, you may need to seek medical assistance.

5. All I need to close is (fill in your number) loans each month to earn a good living.

I believe it was June of this year; I overheard some negative people complaining that endorsed HECMs fell from 11,660 in April to 8,396 in May. Someone else was talking about leaving the industry because, “…Wells and the other big banks are taking all the volume.”

Voice of reason: How many loans do you need to close each month to earn a good living? So what if there were only 8,396 HECMs endorsed in May? Unless you’re living like a king…homes, yachts, jets, etc., you don’t need to close hundreds of loans each month. What’s your number, 3,.. 4.. 8 each month? In our business, you’re an excellent producer if you’re individually closing 8 loans every month. Think about it…that’s 8 loans out of 8,396 total. Even if Wells and the other big banks take over the world, there will always be plenty of “scraps” left over for you to close 8 loans every month.

6. I’m going to set specific goals and objectives to achieve my target of closing (fill in your number) loans each month next year.

November 09 TRR | 21

SLOERA

kls/jb/jb

3.625 x 9.8125” (4c process)

SF009181B 11/1/2009

WF120301933

TMP PRODUCTION

Whether you’re at the beginning of your career or looking to makeyour next move, you want to work for a company that values yourindividual talents, skills and experience. Wells Fargo was namedAmong the World’s 25 Most Respected Companies by Barron’smagazine in 2009. Learn about the many exciting career pathsand opportunities we offer.

Reverse Mortgage ConsultantIn this role, you will be expected to develop your local market bycreating awareness and demand for reverse mortgages with WellsFargo customers, prospects, and internal and external referral sources.These sources include realtors, builders, financial professionals,attorneys, and other professionals serving the needs of the seniorcommunity. Reverse Mortgage Consultants work directly withborrowers to ensure they obtain the mortgage loan product thatbest meets their needs while producing high-quality loans that meetstrict Wells Fargo Home Mortgage guidelines. Compensation isreceived through a draw and commission on funded loans.

Wells Fargo Home Mortgage is the Nation’s leading retail reversemortgage lender with a strong nationwide network of over 6,000Banking Stores and more than 2,000 Mortgage locations. The seniorsegment is experiencing exponential growth which provides ReverseMortgage Consultants a great deal of opportunity to create awarenessaround these unique solutions for seniors. This role demands anunderstanding around the needs of senior homeowners and a passionto help them achieve their financial goals.

Join our team. Visit our career site at wellsfargo.com/careersand search keyword “Reverse Mortgage”.

Matching your talents with a company that values youcould be just a click away

Wells Fargo is an Affirmative Action and Equal Opportunity Employer M/F/D/V. © 2009 Wells Fargo Bank, N.A. All rights reserved.

As sales professionals looks for ways to maintain or grow business in a struggling market, I’m always shocked to see a fundamental building block for success missing properly setting goals.

In a difficult industry environment, goals are critical- not only to clearly understand what we, as reverse mortgage specialists, want to achieve, but also so we understand how to get there. Precision goal setting is formulating goals, which leads to a clear plan for success.

Voice of reason: Salespeople are typically big offenders of believing they have set goals when in reality they have not. Do you have goals? Are they written down? Have you shared your goals with anyone who will hold you accountable?

7. Everything’s going to be ok.

We all have pressures. Some pressures are stronger then others…and everyone handles pressure differently. On a broader level, we constantly hear about the state of the economy, the wars, disease and the price of food and housing. On a more tangible level, we have bills to pay, family needs to meet, etc. Are you in panic mode?

Voice of reason: Discovering what’s really important in life is not easy, but well worth the effort in terms of fulfillment and satisfaction. There’s no right or wrong or good or bad answer to what is important to each of us. These are our values. What creates stress and/or panic is when you are not in sync with your values.

| TRR April 201022

The odds were against them. The two women n their 50s, one from France and the other from California, had no experience owning or running a restaurant. Yet they forged ahead with nothing more than a vision to create “a country French restaurant,” their passion for French cooking, and their capacity for hard work.

Startup cash was so tight they had to max out their credit cards to buy stove, dishwasher, freezer, chairs, tables, utensils, and other capital equipment for their restaurant. The run-down Victorian-styled house they bought in downtown Marshall (Texas) needed so much work they had to knock heads with city officials over permits, inspections, re-inspections, approvals, and re-approvals.

Parking was another headache because it took two months for the city council to approve their parking lot. Since parking was required for them to open for business, their neighbor allowed them to use eleven parking spaces that had to be documented for city officials. And there was the city engineer’s grand-opening-day surprise. The city’s fire department had signed off on their building for fire, but minutes before they were to open, the city engineer stopped by and said “no way.” He decreed on the spot that they needed another door, so they had to get a carpenter in a hurry, knocked out a window in one parlor, and installed a door.

Through brute determination, some business smarts, lots of work and luck, Durfee Bedsole and Odile Besseau, her French-born partner and roommate, pulled it off and opened The Taylor House, “a country French restaurant with a southern accent” during Thanksgiving in 1991.

Traffic in the southeast coast through Marshall was so good for their restaurant, especially after rave reveiws in Southern Living Magazine and Dallas Morning News, that by 1993, “you couldn’t get in the door,” said Durfee Bedsole.

Six years after they started in 1997, they sold the restaurant, built a log home with their profits, and retired.

Now at the ages of 69 and 75 respectively, and living in Oregon, Odile Besseau and Durfee Bedsole and others like them mirror what experts in business creation have always known: entrepreneurship among the 50-plus is growing. People like Franny Martin of Saugatuck, Michigan who, at 56 in 2002, started a successful cookie business (Cookies on Call) and couples in their 60s such as Brian and Shirley Loflin of Austin, Texas, who turned their love of nature into a publishing business and used a reverse mortgage to finance their capital equipment. Older-preneurship is gathering steam.

In 2005, 5.6 million workers 50 and older were self-employed, a 23 percent jump from 1990. The Small Business Administration (SBA) says Americans


SLOERA

kls/jb/jb

3.625 x 9.8125” (4c process)

SF009181B 11/1/2009

WF120301933

TMP PRODUCTION

Whether you’re at the beginning of your career or looking to makeyour next move, you want to work for a company that values yourindividual talents, skills and experience. Wells Fargo was namedAmong the World’s 25 Most Respected Companies by Barron’smagazine in 2009. Learn about the many exciting career pathsand opportunities we offer.

Reverse Mortgage ConsultantIn this role, you will be expected to develop your local market bycreating awareness and demand for reverse mortgages with WellsFargo customers, prospects, and internal and external referral sources.These sources include realtors, builders, financial professionals,attorneys, and other professionals serving the needs of the seniorcommunity. Reverse Mortgage Consultants work directly withborrowers to ensure they obtain the mortgage loan product thatbest meets their needs while producing high-quality loans that meetstrict Wells Fargo Home Mortgage guidelines. Compensation isreceived through a draw and commission on funded loans.

Wells Fargo Home Mortgage is the Nation’s leading retail reversemortgage lender with a strong nationwide network of over 6,000Banking Stores and more than 2,000 Mortgage locations. The seniorsegment is experiencing exponential growth which provides ReverseMortgage Consultants a great deal of opportunity to create awarenessaround these unique solutions for seniors. This role demands anunderstanding around the needs of senior homeowners and a passionto help them achieve their financial goals.

Join our team. Visit our career site at wellsfargo.com/careersand search keyword “Reverse Mortgage”.

Matching your talents with a company that values youcould be just a click away

Wells Fargo is an Affirmative Action and Equal Opportunity Employer M/F/D/V. © 2009 Wells Fargo Bank, N.A. All rights reserved.

| TRR July / August 201016

July / August 2010 TRR | 17

You have heard all the dire predictions at NRMLA conventions concerning the

sustainability of reverse mortgage providers. But, don’t throw in the towel just

yet! There are new companies and concepts that have arisen to help the new,

small or struggling entities that offer reverse mortgages.

For roughly 18 years, the number of reverse mortgages and the companies

writing or servicing them remained small. The pioneering brokers who chose to

write only reverse mortgages found themselves in a pretty select niche in the

mortgage industry. For the most part, everyone in the industry was doing pretty

well until 2006, when reverse mortgages became more profitable. When this

happened, the secondary market collapsed, and trade groups (like NRMLA) began

promoting RMs as an additional source of income to existing forward brokers.

| TRR February 201024

February 2010 TRR | 25

I received an email the other day from a reverse mortgage broker in which he asked an interesting question. Since I have had a number of conversations with this broker in the past I knew that he was in fact looking for answers based on my financial planning experience rather than just trying to get me to justify a sale.

The question at first glance appears to be simple enough, “Should a reverse mortgage be pursued in this situation?” In reality to answer this question with some semblance of correctness we have to look at it from a number of different yet related perspectives. In other words, rather than a simple yes or no we had to make an objective assessment of a situation, taking into consideration all the different aspects and their comparative importance.


The reason I wanted to share this is because it is a real life situation that comes up on a regular basis. What makes it interesting to me is that I have had this same question posed to me a number of times by a number of different people in the reverse mortgage, investment planning and insurance fields; and more often than not they were look for the validation of a sales presentation.

So here is the question as it was written via email:

Jonathan, have you thought about the potential advantage of utilizing a reverse mortgage to pay taxes on a Roth IRA conversion?

Of course at first glance the simple answer is yes, but when giving advice, about someone else’s money at least, a little time should be given to thought. So I have thought about it, as a matter of fact I have thought about it, written about it and had numerous conversations with a lot of different people about the potential advantages. On the other hand I spent a lot more time thinking, talking and writing about all the disadvantageous.

Here is my actual replay:

The Roth question comes up a lot, and I almost never give the person asking the question the answer they are looking for.

A Roth conversion usually implies one if not both of the following.

(1) A significant tax liability will be generated. If this isn’t the case why bother.

(2) The person considering the conversion is not going to need the funds for a minimum of five years. If this is the case why not just wait until they do need the money. Even if a person does have to start complying with RMDs there are numerous other options that would prove more beneficial than paying all the taxes up front. I am sure that there are cases where this would make since, but I have yet to see the situation or model where it does.

Thanks,Jonathan

What you need to take into consideration is that the answer I gave is nothing more than my opinion. As such there is no doubt you can find any number of other people who will have opinions that will differ from mine.

The point I want to make here has nothing to do with my opinion of this particular question, what it has to do with is the reality, you as a reverse mortgage professional are faced with, when it comes to what people plan on doing with the money they generate from a reverse mortgage. In other words the real question is what, if anything, is your responsibility when it comes to how people use their own money?

The truth is that I have heard many different reasons for why people decide to do a reverse mortgage ranging from what I considered to be really well thought-out and smart reasons to some downright dumb ones. However,


what I have to keep reminding myself is that whether a person’s reasoning makes sense to me or not is irrelevant, after all it is their money and my opinion is nothing more than that, my opinion.

On the other hand, if a reverse mortgage professional is involved in the decision process of a senior when it comes to whether or not they do a reverse mortgage that includes the opinion(s) and presentation(s) of one or more people in the insurance, investment or accounting fields we have ventured into a whole new arena filled with pitfalls and land-mines AKA liability and conflicts of interest.

Think about it from this point of view, the sale of one product or service depends on the sale of some other product or service either immediately, prior to, or just after the completion of one or the other. Could it be reasonable for some third party to construe that sales people involved in the two transactions benefited mutually from the success of the other?

Granted that this case could be made on almost every reverse mortgage, but when the funds from the reverse mortgage end up being used to purchase an investment or insurance product it is almost a certainty that bells and whistles are going to be set off in at least one regulatory office.

When it comes to Roth IRAs you are dealing with federal laws written expressly to address a specific type of qualified account and the tax status of deferred taxes related to those accounts. This is one of those areas where it pays to abide by the old saying, “Fools rush in where angels fear to tread” or keep in mind what a securities attorney once told me, “my business depends on the acts of the rash and the inexperienced attempting things that wiser people avoid.” The conversation of IRAs and other qualified accounts into Roth IRAs has been popular among some investment and insurance advisors since

they came into existence as part of The Taxpayer Relief Act enacted in 1997. Unlike other qualified accounts where the tax deferral of the investment is fairly simple to follow, the Roth conversions require that the deferred taxes of the old account be addressed at the time of the implementation of the Roth. Satisfying the tax liability generated by converting an existing qualified account to a Roth is a serious issue that should not be taken lightly.

Food for thought: If you are not a Lawyer, don’t give legal advice; if you are not an accountant, don’t give tax advice; if you are not a registered equities broker, don’t give securities advice; and if you’re not a licensed insurance agent, don’t give insurance advice.

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Taiwan has seen the future of retirement cash flow: There is a reverse mortgage in it, and it plans to help its first-time homebuyers think reverse early, a notion I have been advocating here for years.

Chang Chin-oh, a professor of Land Economics at National Chengchi University in Taipei City, Taiwan, recently gave this hint about Taiwan’s evolving reverse-mortgage model:

“The program will also encourage young people to start planning a home purchase early for retirement.” Let me repeat: Plan a home purchase early for retirement!

In Think Reverse! (2008) and in several articles before the book, I argued that in an era of uncertain retirement cash-flow sources, our home equity, thanks to reverse mortgages and other equity take-out products, has become the new pillar of retirement security. The retirement-planning industry and policy leaders have been urging Americans to save for retirement for decades. To this sound traditional advice, I add a complementary new call: Build Reverse-capacity!

To build reverse-capacity, young families should plan their home purchase early and not use their home as a “piggy bank” to pay for non-emergency pre-retirement consumption. Using the tax code, Congress should create incentives to support reverse-capacity building.

As a nation, the earlier we embrace this idea (that is, reverse mortgages for first-time homebuyers and reverse-capacity building) the more secured retirement cash flow will be for most homeowners who may not have enough disposable cash for traditional savings. It may also encourage non-homeowners to view homeownership differently and more favorably.

The circumstances of two couples I served in August 2003 convinced me of the power of this idea. In an October 2003 article (“The Fate of the Glenns: Your Equity or Your Freedom” [The Mortgage Press]), I told their stories. Here is the gist:

Paul and Paula Glenn* were at a very low point physically and financially. To save their home, their loan officer sent them to me for a reverse-mortgage solution. Because of their large forward lien and the lower county-by-county FHA loan limits at that time, I couldn’t help them. They probably lost their home.

| TRR May 201026

May 2010 TRR | 27

ave you ever looked at one of those pictures that at first glance appear to be nothing more than a bunch of dots and then suddenly see an image after you stare at it long enough? Personally, I have looked intently at a number of those and have

never been able to see anything other than the dots. Although my inability to convert dots into pictures may indicate that I am artistically challenged, I have been able to do something similar with reverse mortgages and long-term care insurance.

Like most people, at first glance it didn’t appear to me that Reverse Mortgages (RMs) and Long-Term Care Insurance (LTCi) had much, if anything, in common. However, even though I have never been able to convert dots into pictures, after years of experience in the financial/insurance industry and untold hours researching RMs, I have come to realize that there are some uncanny similarities between the two.

For the most part, these similarities follow two paths; the most obvious is that they share a primary market in which they have experienced analogous growth pains, including the limited success both suffered through in their early years. The second is the hard, drawn-out fight both have waged in an effort to be accepted, regardless as to why. The fact is that both should be enjoying a much greater and more significant position then they presently do.

The bright side is that the more informed your target market becomes, the greater the level of acceptance your product will enjoy. Of course, educating prospects is one thing, finding them is something else altogether. The often overlooked similarity here is that the majority of LTCi owners and prospects fit the RM prospect profile. Logic dictates that anyone who has been in the LTCi arena for any length of time has a list of seniors who would buy LTCi if they could find the money to pay for one. So the more LTCi salespeople you can bring up to speed on RMs, the greater the likelihood they will share that information with clients and prospects, which in turn greatly increases your imprint in that market place.

Here is the rub: the majority of LTCi salespeople fail to see any connection between these two products, in fact many hold negative opinions about RMs. The problem here is simply a matter of education; in other words, those RM salespeople who are capable of converting dots into clear pictures for LTCi salespeople will find pots of gold.

| TRR November 0924

| TRR November 0926

he lifeblood of any healthy industry is the availability of credit. In the mortgage industry, that lifeblood is the availability of warehouse lending—short-term

funding that enables mortgage bankers and mortgage brokers to sell their loans into the secondary market and thus compete with depository institutions many times their size.

Unfortunately, in the wake of the credit crisis and the ensuing recession, the warehouse lending market has virtually collapsed, contracting over 90% according to some industry experts. The reverse mortgage industry has been hit especially hard as a number of retail and wholesale lenders have experienced funding curtailments or ceased doing business altogether.

Thankfully, the warehouse lending environment is beginning to show signs of improvement. However, the reverse mortgage industry faces a new challenge in the post-credit crunch era—the inability of many warehouse lenders to fund reverse mortgages. Despite clear evidence that the reverse mortgage industry is in far better shape than the forward mortgage industry, some warehouse lenders are struggling to accept this reality and their refusal threatens to stunt the future growth of the industry.

Background

For almost two decades, from 1989-2007, the reverse mortgage industry led a relatively sheltered existence. Lenders who specialized in reverse mortgages toiled in near anonymity, impervious to the ebb and flow of interest rates and turmoil in the forward mortgage market. Capital was relatively cheap and plentiful as Wall Street investors and foreign investors gradually joined Fannie Mae in the reverse mortgage arena. The resulting burst of competition generated record profits for the industry, and the sky, it seemed, was the limit. Not surprisingly, during that same period, warehouse lending was also quite accessible, enabling mortgage firms of all sizes to gain entry into the reverse mortgage market and grow as much as their profits dictated. At one time, according to the Warehouse Lending Project, mortgage firms that relied on warehouse lending were responsible for 41% of all loan originations in the country,

and 55% of all FHA originations. More importantly, warehouse lending helped spur healthy competition and ensure that a few large lenders didn’t dominate the mortgage lending industry.

All of that changed in August of 2007 as the credit crisis spread through the economy like a plague, ravaging the balance sheets of corporate America; Wall Street investment banks that had invested aggressively in the U.S. real estate market were decimated and the resulting pullback drained liquidity for scores of mortgage products in just a matter of weeks. One by one, lenders and Wall Street firms who had engaged heavily in subprime or Alt-A lending fell victim to the onslaught.

As a result, many large and regional banks exited the warehouse lending space entirely. By January 2009, with interest rates at unprecedented low levels, the precious few warehouse lenders who remained were forced to handle an enormous volume of refinances, further straining their reserves. At the same time, hundreds of new warehouse line applicants were clamoring for new financing. Needless to say, when warehouse lenders inevitably exhausted their cash reserves, an already overloaded system officially achieved gridlock.

Meanwhile, many institutions that had received a transfusion of emergency TARP funds opted not to rush back into warehouse lending. Instead, the crisis gave pause for many of these lenders to reevaluate their entire lending strategies, with mostly inconsistent results. Some institutions prohibited the funding of third-party originations altogether, while some

T


prohibited the funding of proprietary loan products. Some lenders merely trimmed the size of their warehouse lines or tightened the qualifying requirements for new applicants. Still others increased their transaction fees as well as their haircuts. Many warehouse lenders were forced to increase their margins as the LIBOR index continued to drop.

However, along the way, something more disturbing and insidious occurred. Somewhere in the midst of this mess, the FHA HECM reverse mortgage product was unfairly branded as a risky, unsafe loan product in a way that no other federally insured loan program has been before. It is this negative stereotype that the reverse mortgage industry must overcome in order for the industry to grow.

The Knowledge Gap

Most warehouse lending divisions are staffed with experienced professionals who possess a great depth of knowledge about the forward mortgage world. On the subject of reverse mortgages, however, there can be wide disparities in their working knowledge. A

number of common misperceptions abound:

First, there is a widespread perception that Fannie Mae is the only investor that purchases HECMs.

Few warehouse lenders are aware that there is a vibrant and rapidly growing market for GNMA

HMBS securities. Even fewer lenders are aware that investment banks and private

equity firms are in the process of re-entering the HECM market to buy

whole loans. What makes this misperception especially

frustrating is that in the forward mortgage

world there are many

mortgage products that are purchased by just one investor. Yet, by comparison, the FHA HECM product is somehow seen as “unsafe” despite 20 years of consistently reliable performance.

Second, reverse mortgages are perceived as a growing liability on a warehouse line. Specifically, the negative amortization feature of a reverse mortgage means that any unfunded reverse mortgages on a warehouse line will burn through the available credit at an accelerated pace. On its face, this argument makes some sense but it’s still a rubber chicken. FHA HECM reverse mortgages are much easier to insure than forward mortgages and therefore, are much easier to fund. There’s virtually no credit, income or employment underwriting required. If a reverse mortgage lender produces a marketable, insurable FHA HECM, Fannie Mae will purchase that loan as part of a small commitment, or on a flow basis, with very few exceptions.

Third, some warehouse lenders are worried about the “headline risk” associated with reverse mortgages. Whether it’s the high fees, the litigation involving deferred annuities or just the bad press coming from Washington, some warehouse lenders are unnerved by the barrage of bad publicity surrounding reverse mortgages.

Fourth, some banking professionals who are considering warehouse lending feel that the relatively low interest rates of reverse mortgages could skew their cost of funds. In other words, in the world of short-term lending, there really isn’t much profit to be made on a loan that yields such a low rate of interest. However, many times these lenders don’t realize that the margins on reverse mortgages have increased substantially and that transaction fees in the warehouse lending market have increased as well.

Fifth, and perhaps most widespread, is the lack of knowledge about reverse mortgages in general. The complaints of “we just don’t know enough about the product” or “that’s not a core product for us” or “we’ve never funded those before” are commonplace.

In today’s environment, it’s incredibly difficult to persuade an institution to fund reverse

mortgages or any other new loan program when there is such a palpable fear of

the unknown.

| TRR November 0928

The Industry Response

Beginning in 2009, the mortgage banking industry actively tried to bring the warehouse lending issue to the forefront of the public’s attention. As liquidity in the warehouse lending sector rapidly evaporated, major trade publications and trade organizations promptly sounded the warning bells to Congress and the media. MBA President John Courson frequently commented on the dearth of warehouse lending in his appearances on Capitol Hill, as did other industry leaders. Mortgage trade publications, especially the National Mortgage News, regularly featured articles on the warehouse lending crisis. The Warehouse Lending Project, a coalition of mortgage lenders dedicated to providing expert commentary and statistical data on the issue, worked to engage policymakers and industry experts on all levels and continues to do so.

The intense lobbying effort has generated some interesting policy ideas, including a proposal to have Ginnie Mae provide short-term guarantees for loans that are packaged into Ginnie Mae securities. In a more recent development, policymakers are debating whether to have Fannie Mae and Freddie Mac provide similar short-term guarantees, or participations, directly linked to warehouse lenders funding GSE-backed loans. Unfortunately, no major policy initiatives have yet been implemented. More importantly, while the recent lobbying effort has certainly helped raise awareness about warehouse lending in the forward mortgage world, virtually none of the lobbying has addressed the lack of liquidity in the reverse mortgage sector.

Next Steps

At some point, the U.S. economy will rebound and many of the problems in the credit markets will heal themselves. However, unlike any recession since 1973-1975, the recession of 2008-2009 has brought about major structural changes to our economy, especially in the area of residential real estate lending. It’s a brave new world and the warehouse lending environment is but a microcosm of our new reality.

Without adequate warehouse capital to fund reverse mortgages, new lenders will find it much more difficult to enter the market. Existing reverse mortgage lenders who are not depository institutions or not well-capitalized will have difficulty sustaining real growth. The worst-case scenario is that the industry collapses down to a small group of lenders, sapping itself of political and financial strength and dramatically reducing competition in the marketplace.

Ensuring a healthy future for our product requires that our industry adopt a new paradigm, one in which comparisons to the forward mortgage world are made at every step, such as:


First, the banking industry

must be made to understand that reverse

mortgages are much safer than forward mortgages. For starters, reverse

mortgages have a much lower foreclosure rate than forward mortgages. Reverse mortgages also

require borrower counseling, and thus have much lower suitability and steering risks. Owing to the additional credit, employment and income requirements, forward mortgages have a much higher incidence of fraud. In the area of proprietary lending, most reverse products have closely mimicked the sound lending principles of the FHA HECM, whereas scores of flawed proprietary products in the forward mortgage world were responsible for the collapse of the mortgage industry. Finally, forward mortgages have a far less regulated fee regime—junk fees and mark-ups are practically routine. That reverse mortgages are much safer than forward mortgages should be plainly self-evident.

Second, we must reach out to the banking community in general, and the warehouse lending sector specifically, and engage them about the realities of today’s reverse mortgage market. After all, the FHA HECM program is a 20-year old, federally insured program. It’s anchored by a government sponsored enterprise and supported by a number of investment banking and private equity firms, as well as a rapidly growing GNMA market. HECMs are heavily

regulated and safe, and they contain a number of

innovative, borrower-friendly features that are unique to the mortgage

world. Congress has added its endorsement, significantly expanding the HECM program by

enacting a higher national loan limit and adding the HECM for Purchase feature.

Third, the “headline risk problem” facing our industry must be addressed. Here again, from a pure social justice perspective, a reverse mortgage is far more compelling than a forward mortgage. The FHA HECM Reverse Mortgage Program has significantly enhanced the retirement security of thousands of senior citizens, many of whom would otherwise have been forced out of their homes. That critical message cannot be drowned out by media coverage of isolated incidents that occur on the fringes of our industry. Forward mortgages may allow families to purchase their first home or refinance to a lower rate, but reverse mortgages allow our seniors to remain independent and keep their homes. We owe them this program.

Final Thoughts

Even the most cynical observer would agree that healthy competition is a prerequisite for good business. The reverse mortgage industry is certainly no exception to this rule. However, healthy competition can only exist when small to medium-sized companies with strong balance sheets are able to compete alongside much larger institutions.

The accessibility to warehouse lending continues to be a major challenge for our industry. To maintain and expand warehouse credit facilities in the post-recession era is going to require a concerted effort. The rewards for this effort are right in front of us--in the final analysis, seniors are better served by a vibrant and robust reverse mortgage industry.

SO WHY IS EVERYONE WAITING TO CORRECTLY

MARKET THEMSELVES TO SENIORS?

Jorge Villar

Not doing things right is hurting the industry

19October 09 19

ReverseVision Inc.3310 Pollock Place • Raleigh, NC 27607www.reversevision.com(919) 834 0070 • [email protected]

Increased ProductivityReverseVision is a powerful collaborative software that increases productivity. Role-based business rules ensure quality and improve efficiency.

ROI (Return on Investment)ReverseVision fair pricing model guarantees a quick return on investment, increasing profitability.

Operationally thinking companies

rely on ReverseVision

Operationallythinking...

For years I have been shocked to see how POORLY many Reverse Mortgage agents and their companies were at promoting their services to the senior market - a market that is continuously bombarded with junk mail, offers and solicitations from so many organizations wanting to reach this very sensitive and guarded audience (and rightfully so, by the way).

How about using the most proven old-fashioned way to personally send those folks an important message, in the most “American-type” format and one of the most powerful promotional and emotional vehicles in the world-YES, DIRECT MAIL LETTERS (done the correct way that is).

Other than a referral, direct mail is still the most personal, emotional and accepted medium to make a connection with people. Not the direct mail that you see out there in the industry; not those flimsy flyers, cheap postcards, and not those tiny newspaper ads. Think of this, you are marketing a very special product (backed by the government) that needs to be immediately associated with TRUST, CREDIBILITY, and REPUTATION. So you use cheap methods to promote it? Why? Do you understand how important your image is when you are asking seniors to listen to your advice and then to meet with you, a total stranger?

The way you look in the mailbox will tell a lot about you and your services. Does that make sense to you? That is the very first impression that you make with your targeted audience. What do you want them to think or perceive? I see agents with nice business clothes, nice cars, nice homes, nice offices, and nice presentation materials, yet their marketing looks CHEAP!

Have you ever seen a wedding invitation in a postcard format? How about Hallmark? Do you see cheap looking postcards in the greeting card aisles? The answer is NO. You see personalized and emotion-eliciting messages on nice stationery that is delivered in an envelope. Personalized is the critical word here. Generic does not cut it in today’s world. “You will never save your way into

Other than a referral, direct mail is still the most personal, emotional and accepted medium to make a connection with people.

“”

31October 09 31

What makes communication work? Why do some messages have an impact while others never reach their target? Being aware of the challenges our senior clients face will help you prepare effective communication strategies.

Communication and information are critically important to our senior clients. Growing older is a process of adjustment, and having the proper information helps in the aging transition. Your seniors want information not only about housing, but transportation, employment, legal matters, retirement planning, health issues, and nutrition. Your seniors also want to know about special programs, events, services designed for seniors, products that make their lifestyles leisurely, volunteer programs and cultural events.

Today’s’ seniors are more active and involved than ever. The way you communicate with your senior clients can have profound implications on all parts of your seniors’ lives and well being. Unless you can effectively communicate yourself, your programs, and services your seniors will not have access or a true understanding of the message you convey.


REMEMBERING OUR CUSTOMERS’

A TREATISE ON REVERSEMORTGAGE MARKETING SEGMENTATION

BY JESSE PUJJI

NEEDS


raditional performance marketing and lead generation is all about the numbers. No surprise there. Ask any direct marketer about how to close sales, especially in

the reverse mortgage space, and they’ll tell you just that: it’s a numbers game. Direct mail, telemarketing, TV marketing and internet leads all boil down to source cost, conversion rates and eventually, cost per acquisition. Want profits to go up? Lower cost per acquisition, which means increase conversion rates or decrease lead source costs. Want volumes to go up? Buy more leads or try a new type of direct marketing, but keep conversion rates the same or lose profit! This is nothing new—it’s how virtually all performance marketing works.

It makes sense too! Performance marketing and lead generation are very elegant ways of allocating and spending a budget. They are clean, simple, straightforward and go back to the dollars and cents. You can track performance, compare vendors easily, test results, drive better performance, measure it and then rinse and repeat. It’s easy to understand what’s happening to your investment. Let’s face it: branding campaigns are a challenge. Spending on advertising which isn’t measurable is difficult at best and can be wasteful at worst. Our industry wasn’t built that way and while we desperately need some large branding campaigns, it’s tough for any one to pioneer those efforts. But somewhere, between the CTRs -Click through rates, and the ROAS -Return on Ad Spend, and the CPA -Cost per acquisition, we’ve forgotten something.

We’ve forgotten the human; the human who could be our grandmother or father, the human who may be dealing with a challenging medical situation or living with a sub-optimal retirement. Every human has become a row in an excel spreadsheet, a lead we need to buy from Vendor X or a “non-converter”. And while our industry was built around direct marketing, ask any Reverse Mortgage loan officer and they’ll tell you: this is the most human of all businesses. This business is all about the person: who they are, what their situation is, their family, their fears, doubts, needs and on and on. Most direct marketing and lead generation almost completely misses the question of “who?” The numbers game requires that you buy 100 leads of different types, call them and some portion will convert. It never goes under the surface to ask,“why did they (or didn’t they) convert?”

o how do we solve this problem? How do we maintain the elegance of quantifiable marketing spend while not forgetting that our buyers are actual people. We can’t

know everything about everyone we talk to in the performance marketing business. We can’t quantify every issue and think through all the reasons. It’s nowhere near as efficient as the current system. So where do the numbers of performance marketing tie back to the who, the what and the why?

The answer is in building a marketing segmentation. Specifically, a needs-based marketing segmentation. Most people are already somewhat familiar with marketing segmentation: take a bunch of people, split them up into groups where there are similarities and

market to them in the same way, or sell them similar products. Reverse mortgages, after all, are the children of a marketing segmentation activity. Someone a long time ago asked, “What financial product would people over the age of 62, with greater than 50% equity in their homes want?” The answer was reverse mortgages and the rest, as they say, is history. Grouping similar people together sounds straightforward, but in fact there are a host of different ways you can go about doing it and some are better than others. So what are the major types of marketing segmentations? What do the ”experts” use? How can they be used to improve current performance marketing efforts?

That’s what this article is all about. Marketing segmentation is the process of taking a group of consumers and dividing them up into similar groups in order to improve marketing, positioning, product design or other factors related to selling. By splitting consumers into groups, you gain a lot of insights into the customers and improve your overall strategy. Basic segmentation requires creating a number of separate groups which when added together are all encompassing. Once you segment the market, you can better understand which areas are underserved and which are overly competitive. The science of marketing is first segmentation, then targeting - choosing which segments to go after and then positioning - deciding what marketing mix and messaging to reach the segment with.

hile there are many types of segmentations, the three most common are demographic, behavioral and needs-based. Using all of them is important.

Understanding each and its relevant shortcomings are also important. So let’s take a look at each type of segmentation, highlight its importance and point out some shortcomings to remember. To keep this simple, fun and entertaining, let’s use the example of beer drinkers.

The first type of segmentation is the most common: demographic. This is also the easiest to perform and quickest to implement. Demographics are any of those factors that you’d hear a police officer use to describe a suspect: age, gender, race, or religion. Additionally, demographic can include income, occupation, education and a host of other factors. It’s anything objective used to describe a person. It will tell you critical factors about the person you are marketing to and give you a number of clues about this person and generally paint a real picture; and for a direct marketer, it can be very powerful. For example, simple data will show us that someone 70+ years of age is far more likely to convert than someone below 70 years of age. Where we focus our lead generation activity and which leads we focus on converting can and should be a part of bringing both science and the human into marketing efforts. Using the same example, wouldn’t we want to call a 70+-year-old prospect more times than a prospect below the age of 70? So what does a simple demographic segmentation look like for beer drinkers? Let’s keep it simple: age, gender and income level. Let’s make five segments: Young Males; Young Females (income not important for younger people); Older, Rich Males; Older, Poor Males and Older Females (again, income not as important. As you can imagine, a campaign which just touts

T

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W


beer will not resonate with all of these groups. Young males like the excitement of football and cheerleaders and a simple, cheap product like Bud Light. Older Females, on the other hand, might like the sophistication of Stella Artois. Using a few simple demographics and creating simple categories has already improved our marketing efforts.

o what’s the challenge with demographic segmentation? First off, it’s implicit. It requires us to use averages and assumptions to determine what a consumer actually

wants. Using our beer example, there are probably a number of older females who enjoy Bud Light but we’ve assumed this to be untrue. Like lead generation, demographic targeting ends up being a numbers game. Let’s look to a more poignant example: using demographic analysis, I find my perfect customer. He was born in 1948, is a male and of British nationality. He’s affluent, on his second marriage and comes from a well known family. Clearly, there can only be one of this customer, right? Wrong! These factors perfectly describe TWO people: Prince Charles and Ozzy Osbourne! Clearly, demographically speaking, these two are twins, but it’s also obvious that they are worlds apart. Their consumption, needs, desires and behaviors are vastly different.

So what about behavioral segmentation? This, too, is a tool with significant value to a marketer. Behavioral segmentation aims to split consumers up by observed decisions they have made or their attitudes and usage towards specific products. By understanding a consumer’s behavior, we can better understand how to reach

them and we can add another layer of intelligence to our direct marketing efforts. For reverse mortgages, a straightforward behavioral segmentation would be the payment type a senior would be most likely to select. Those looking for an annuity stream versus those looking for a credit line are very different. The lead is different, the script used to call and the pivot point of the call would all be very different depending on how they answer the question around payment type. Perhaps a better behavioral indicator would be “readiness to buy”. Is the consumer just getting information, are they comparing price quotes or are they looking to close a deal? Behavioral segmentation and understanding the potential segments and their issues, presumably, would bring back human elements to our consumer base and thus allow us to better reach these people. What’s a behavioral example for beer? The most obvious might be usage. At its simplest, there are heavy drinkers (>10 cans per week), medium drinkers (2-10 cans per week) and light drinkers (<2 cans per week.) Without a doubt, we’d want to market and reach to people differently depending on what we believe their usage patterns to be.

o what’s the challenge with behavioral segmentation? Again, it’s implicit. It tells us what the customer is doing but it is the “what” and not the “why”. We can attempt to segment

by these factors and it will allow us a better understanding of our client, but it doesn’t “hit the nail on the head”. Similarly, it can lead to confusion. We understand what a customer has done (e.g., filled out a lead form) and perhaps that sends us a signal. But we don’t know they have filled out that form (e.g., their child made

“PERFORMANCE MARKETING AND

A BUDGET. THEY ARE CLEAN,

AND GO BACK TO THE

ARE VERY ELEGANT WAYS OFLEAD GENERATION

DOLLARS AND CENTS.”

ALLOCATING AND SPENDING

SIMPLE, STRAIGHTFORWARD

S

S

25April 2009 25

During these tumultuous times, when news articles referring to “mortgages” are

frequently preceded by adjectives such as “toxic” or “troubled,” reverse mortgage participants have fared somewhat better than their forward brethren. Not

surprisingly, recent statistics published by FHAsuggest that new forward players are entering into

the reverse arena at an unprecedented pace. Forexample, during the first six months of 2008, over 1,000 new originators entered into the business,representing an 86% growth rate, while overall

volume grew just 5%.1

1ReverseIQ Newsletter, September 12.2008, Reverse Mortgage Insight, Inc.


As new reverse mortgage market participants embark upon their reverse mortgage journey, the first hurdle they must overcome is obtaining all necessary regulatory approvals. Consequently, as a use-ful refresher for those already in the business and a primer for those entering, we focus in this article on many of the regulatory approval requirements and related issues that impact new reverse mortgage participants as they step into the reverse mortgage space.

Since most reverse mortgages originated on the market today are Federal Housing Administration (FHA) insured Home Equity Conversion Mortgages (HECMs), we cover several topics related to FHA-approval. In addition, we also address certain non-FHA specific issues that apply to all reverse mortgage lenders and originators, whether they originate FHA-insured HECMs or non-FHA insured proprietary reverse mortgages.

FHA Mortgagee Approval

In order to participate in the origination and funding of, and investing in, FHA-insured loans, including the FHA-insured HECM, one must be FHA-approved. Under FHA parlance, an approved entity is a “mort-gagee” and there are four different classifications of mortgagees: non-supervised mortgagees, supervised mortgagees, loan correspon-dents (which can be either supervised non-supervised) and investing mortgagees.

Non-supervised mortgagees (i.e., mortgage lenders) are non-deposi-tory financial entities that have as their principal activity the lending or investment of funds in real estate mortgages. A non-supervised mortgagee may originate, underwrite, purchase, hold, service, and sell FHA-insured mortgages and submit applications for mortgage insur-ance.

Non-supervised loan correspondents are non-depository financial enti-ties that have as their principal activity the origination of FHA-insured mortgages for sale or transfer to one or more “sponsors” that under-write the mortgages. Sponsors must have Direct Endorsement (DE) authority (as discussed below).

Supervised mortgagees are financial institutions that are members of the Federal Reserve System, and financial institutions whose accounts are insured by the Federal Deposit Insurance Corporation (FDIC), or the National Credit Union Administration (NCUA), such as banks, savings associations, and credit unions. Supervised mortgagees may originate, underwrite, purchase, hold, service and sell FHA-insured mortgages as well as submit applications for mortgage insurance.

As is the case with supervised mortgagees, supervised loan corre-spondents are also either members of the Federal Reserve System or financial institutions whose accounts are insured by FDIC or NCUA. The difference, of course, is that supervised loan correspondents may only originate FHA-insured mortgages for sale or transfer to one or more sponsors that underwrite such loans.

As its name implies, an investing mortgagee is an organization, includ-ing a charitable or not-for-profit institution or pension fund, which invests in FHA-insured mortgages with funds under its own control. An investing mortgagee may purchase, hold, and sell FHA-insured mortgages, however, an investing mortgagee may not submit applica-tions for mortgage insurance.

Finally, it is important to note that an FHA “mortgagee” approval only applies to the legal entity that is the actual applicant and does not cover any of its subsidiaries or affiliates. A subsidiary or an affiliate of an approved mortgagee must apply for FHA approval separately.

General Requirements for FHA-Approved Mortgagees

Now that we understand the different types of approved mortgagees, let’s review the general requirements for each type as well as the spe-cific requirements for different forms of business organization.

A non-supervised mortgagee must maintain a warehouse line of credit adequate to fund the mortgagee’s average 60-day production pipeline, but no less than $1 million. The line of credit must be issued directly to the mortgagee. In lieu of a warehouse line of credit, FHA permits non-supervised mortgagees to provide evidence that it has entered into a mortgage funding program with a financial institution that provides for table funding or concurrent funding of all mortgages originated by such mortgagee.

A non-supervised mortgagee is also required to spend a majority of its time and assets in the production of real estate mortgages and in the lending or investment of funds in real estate mortgages, or a directly related field. Unless organized as a not-for-profit entity or otherwise approved by FHA, these principal activities must contribute at least one-half of the entity’s gross revenues.

With few exceptions, both supervised and non-supervised mortgagees must originate, close, fund, and submit mortgages for FHA insurance endorsement in their own names. A mortgagee may not perform only a part of the loan origination process, such as taking the loan ap-plication, and routinely transfer the underwriting package (appraisal report and/or mortgage credit package) to another mortgagee, except between a loan correspondent and its sponsor, and a principal and its authorized agent (discussed below).

A loan correspondent may process an application and submit it to one of its sponsors for underwriting. Again, its sponsor must have DE authority (discussed below). The loan correspondent may close the loan in its own name, or in the name of the sponsor that underwrites the loan. [However, be mindful that in certain states applicable law may require that an originator that closes loans in its own name, hold a mortgage lender license. Further some states prohibit an originator from closing loans in its own name unless the entity also funds the loan with its own funds.] Most importantly, an FHA-approved loan correspondent may not underwrite the loan. That is the job of a

As new reverse mortgage mar-ket participants embark upon

their reverse mortgage journey, the first hurdle they must overcome is obtaining all necessary regula-tory approvals.

“”


HappyAnniversaryto You!!!

Ask The Underwriter

Ralph RosynekWith April marking the 1st Anniversary of

The Reverse Review and paper being the traditional 1st Anniversary gift, how fitting

that we start off the month of April withkilling more trees for paper to add to

our HECM files! Time to lay in a supplyof more toner!

Mortgagee Letters 2009 -09, 10 and 11did a last minute rush to the finish

line in March 2009.

ML-2009-09

Adoption of Market Conditions Addendum (Fannie Mae Form 1004MC/Freddie Mac Form 71) and Appraisal Reporting Require-ments for Properties located in Declining Markets

Currently, all Federal Housing Administration (FHA) Roster Appraisers are required to report on housing trends in the Neighborhood section of the applicable property specific appraisal reporting form. The Uni-form Standards of Professional Appraisal Practice (USPAP) mandate that an appraiser maintain documentation necessary to support all analyses, opinions and conclusions for each appraisal assignment in a work file. In order to ensure greater transparency and accuracy of appraisals performed for FHA-insured financing, FHA will adopt the Market Conditions Addendum

(Fannie Mae Form 1004MC/ Freddie Mac Form 71, released Novem-ber 2008). For all appraisals of properties that are to be security for FHA-insured mortgages and that are performed on or after April 1, 2009, the appraisal must include the Market Conditions Addendum.

To read this mortgagee letter, the others listed below and any attach-ments in their entirety, please visit: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/ view the 2009 letters and click on the letter of your choice. Mortgagee Letters from previous years can be found on the same page.

| TRR May 201022

May 2010 TRR | 23

or some seniors who take reverse mortgages, potential financial problems are often rooted in “non-financial” matters.

Slowly, financial problems ooze out of everyday issues. “Soft” issues that financial people may not always appreciate, such as losing a spouse, having difficulty getting out of bed or dressing, taking a lump sum reverse mortgage advance, relying on reverse-mortgage funds for too many needs, having frequent falls and being in poor health, and lacking information about private and public benefits programs for which they may qualify eventually mushroom into an inability to meet borrower obligations. Yes, they become “financial problems.”

Built around traditional budget analysis, information about reverse mortgage alternatives, and disclosures of obvious borrowers’ risks, the best conventional HECM counseling often misses these existential issues and their financial implications, let alone attempts to address them. That is about to change, thanks to two evolving forensic reverse mortgage counseling tools developed by the National Council on Aging (NCOA): Financial Interview Tool (FIT) and BenefitsCheckUp (BCU).

Any day now, FHA Commissioner David Stevens could issue a mortgagee letter mandating their use in HECM counseling. To understand these vital and emerging front-end HECM-borrower risk-management tools and to share that understanding with you, I spoke with Dr. Barbara Stucki, Vice President of Home Equity Initiative at NCOA. NCOA is one of four HUD HECM Counseling Intermediary organizations, and Dr. Stucki runs the national reverse mortgage counseling network for NCOA.

A former researcher for the American Council of Life Insurers and AARP, Dr. Stucki directed NCOA’s highly-regarded 2005 study on aging-in-place via reverse mortgages, “Using Your Home to Stay at Home.” She has testified before Congress and the Federal Reserve Board, and her research has been quoted in the New York Times, Wall Street Journal, USA Today, BusinessWeek, Fortune Magazine, Bloomberg News, Washington Post, Money Magazine, Kiplinger’s Personal Finance Magazine, and National Public Radio, among other media.

AA: What are FIT and BCU, and what are their purposes?

BS: FIT is an acronym for Financial Interview Tool. It is a series of additional questions that reverse mortgage counselors will ask their clients in discussion about immediate financial shortfalls as well as their ability to stay at home over time. These questions help to inform the decision older homeowners make about the appropriateness of a reverse mortgage for their situation and the loan features that might meet their needs.

BCU stands for BenefitsCheckUp. It is the nation’s most comprehensive Web-based service to screen for benefits programs for seniors with limited income and resources. Using a simplified version specifically designed for reverse mortgage counseling, counselors can quickly screen more than 1,800 public and private benefits programs from all 50 states and the District of Columbia. For seniors with limited incomes, benefits from existing federal, state, and local programs could be an important alternative or supplement to a reverse mortgage.

AA: Are FIT and BCU creations of the National Council on Aging?

BS: That’s right. We developed and started using the original questions for FIT when we began as an HECM Counseling Intermediary in 2007. Our national reverse mortgage counseling network is distinctive because it consists of agencies that primarily serve seniors. From the beginning, we felt that reverse mortgage counselors should discuss this loan using a holistic perspective that looks at factors that could affect a senior’s stay in the home, and their level of dependence on the loan funds.

BenefitsCheckUp was developed and is maintained by NCOA. Since 2001, over 2.4 million people have used this online tool to find benefits programs that help them pay for prescription drugs, health care, rent, utilities, and other needs.

We streamlined both FIT and BCU so they do not overwhelm our clients and help them look at the big picture. Seniors who have received counseling through NCOA have all gone through this process. Many have told us how much they appreciate the additional discussion. We have never received any complaint on this approach from lenders.

F

| TRR May 201024

AA: Why is FIT an improvement on the existing HECM counseling model?

BS: For people in dire financial straits, a traditional budget analysis can be important to solve their immediate problems. HUD also recognizes the long-term consequences of taking a reverse mortgage, and FIT will help counselors engage their clients in this deeper conversation. It is a tool to promote discussion, not just a checklist. It is a way of getting people, whose judgment may be clouded by immediate needs, to think long-term about how they plan on staying at home so they can get the full value of this loan.

FIT has counselors ask seniors a series of questions relating to risk factors that may not be considered a normal part of the discussion in taking out a loan. For example, is the person living alone? Have they had a recent fall? Do they live in a house with stairs or other barriers? By themselves, each of these issues may not be a risk, but they can add up. For example, seniors who live alone may have few other resources so they may be overly dependent on a reverse mortgage. If they are also in poor health and their financial needs exceed their expectations, they may soon find themselves unable to fulfill their borrower obligations, such as paying property taxes, homeowners’ insurance, and home maintenance. These types of risks, which we call “yellow flags,” are important and should be added to the overall assessment of a person’s needs and goals.

BenefitsCheckUp produces a customized report, which describes federal, state, and some local programs for which a client may be eligible; it also provides contact information to help them apply for these benefits. For many middle-income families, the types of public programs they can get may be modest. But getting help with programs such as weatherization, home repairs, or with Meals-on-Wheels can make the difference between being able to stay at home, and not.

AA: Is HUD going to make FIT and BCU mandatory tools for counselors?

BS: That is our understanding. HUD is partnering with NCOA and the Administration on Aging (AoA) to provide the FIT and BCU as budget tools for reverse mortgage counseling. Counselors will be required to complete a budget with every client during the counseling session, based on information obtained from the client using these tools. As part of FIT, counselors will review their clients’ monthly budget shortfalls, including extra cash needed for everyday expenses, health needs, family support, and property taxes. They will also review their need for a lump sum amount to pay off existing debt, make home modifications, and to meet other financial goals.

AA: What are the benefits of these tools for reverse mortgage lenders?

BS: FIT can be a valuable risk-management tool for lenders. Seniors who go through counseling will receive a customized FIT summary printout, showing the types “yellow flag” issues raised and the implications these issues may have on their ability to fully benefit from a reverse mortgage.

Lenders can use this report as a tool to further conversation, understand the risks their clients may face, and for gaining insight into the suitability of the loan for different senior homeowners. Having this discussion upfront could help lenders manage reputation, litigation, and financial risks.

Through FIT, NCOA also collects data on counseling clients to better understand the potential needs and risks of this group of seniors. These data could help to inform product design, develop seniors-sensitivity training for lenders, and provide a better handle on the nature and magnitude of the potential vulnerabilities of reverse mortgage borrowers beyond anecdotes.

AA: Now, I can see some lenders saying, “Hey, seniors go through trained counselors; that’s enough for me. Why do I have to duplicate the process by putting them through these touchy-feely questions again?” How would you respond to people who might say that?

BS: Taking out a reverse mortgage is a decision that has long-term consequences and carries significant costs, so people who make these decisions about these loans should be as informed as possible. That is just good business. It is due diligence and making sure the loan is suitable for the borrower. For example, borrowers in poor health and on marginal income may find themselves at some point needing public assistance to stay at home. If they select a loan that requires a lump sum advance, they will probably not qualify for that kind of assistance. This could make it hard for them to meet their borrower obligations.

For certain borrowers, the combination of public benefits with a reverse mortgage can make this whole package work. So, there are a lot of ways that lenders can benefit from this approach that looks at the bigger picture. That is part of what we are trying to do here: to think more holistically about seniors and reverse mortgages.

AA: How should lenders use FIT?

BS: Along with the counseling certificate, counselors will send each client a FIT review report, which includes two things — a FIT number and a list of advice that is based on the client’s responses. The FIT number summarizes the total number of “yellow flag” issues raised during the counseling session. For example, if a person is in poor health and recently had a fall, FIT will count two yellow flags. FIT numbers range from a high of 5 (no “yellow flag” issues) to a low of 1 (10 or more “yellow flag” issues).

The more yellow flags, the more issues a senior is facing, and the more pressure may be put on the reverse mortgage as a solution. Lenders should encourage clients to share the FIT summary, to ensure that the choices borrowers make in taking out a loan meet their needs. It will also be important to take yellow-flag issues into consideration to ensure that clients select appropriate loan types and loan features.

AA: How would a FIT number of 3 affect the selection of specific loan features?

| TRR May 201034

Timing is critical for any business and what better time than now to be in the reverse mortgage business. Opportunities abound for those who go after the business. Lenders are positioning themselves to maintain and grow their market share of the senior reverse mortgage business. With the elimination of the Service Fee Set Aside and Monthly Service Fee on fixed rate HECMs, this change has opened up the market place in many ways. Now many more senior homeowners will qualify for a reverse mortgage, which opens up a shift in profit opportunities for originators.

In October, when the new principal loan limit formula was reduced, coupled with continued reductions in home values and consumer confidence, there was a major impact on reverse mortgage originations. This was witnessed by most of us seeing our originations falling at or near 2007 levels. The move by lenders to eliminate the Service Fee Set Aside and Monthly Service Fee has and will impact origination growth positively and return growth to the industry.

Other significant changes, such as reductions in upfront origination fees are also having a significant impact on senior clients and originators. Most recently, one lender has now eliminated upfront origination fees for the HECM monthly adjustable and there are surely others that will follow in order to maintain their market share.

Regardless of whether you are an originator, correspondent/broker or lender, you are being challenged. How long will these changes last? How should you do your pricing? As we are often reminded, our business is under a constant microscope from many venues. I made a prediction two years ago, that at some point we will move closer to mirroring the forward business and it appears that that time may have arrived. So be it, competition is good and the winners are, no doubt, our senior clients, which is the way it is supposed to work.

Exciting times is an understatement! What will be next? Stick around and we will surely see more changes. Welcome to the Wild, Wild West!

| TRR May 20108

On a recent vacation, I visited a Florida theme park and was confronted with a very interesting decision – “red or blue”?

I was advised “red” was the pathway to my destiny, so, acknowledging the health warnings, I joined a procession of thrill seekers inching their way into a cavern of excitement to board the ride of my life.

Heart throbbing, thoughts of common sense and caution being overruled by the lure of the experience of a lifetime, I stepped forward in confidence, girded myself into the dragon’s transport device, feet dangling, and held on for dear life. In four or five minutes, I was delivered back to the cavern after what seemed to be a mental eternity of ups and downs, bends and turns, thrills and chills, and an occasional obscenity.

Upon exiting, the red decision was questioned by my accompanying support crowd, leading me to confirm that I had, in fact, experienced the ride of my life. Foolishly, I gave way to public opinion by mindlessly following the pack back into an alternate inching line headed for the “blue”. Was I a glutton for punishment or returning to face yet another fear with a renewed sense of strength?

Actually, in the end I realized I would survive “blue”. I needed to survive “blue”, as, after all, “red” had educated me to a confidence and I felt “blue” would ultimately prepare me to undertake the “green” one, which I am sure is out there being built somewhere! What a thought process!

So, are you feeling like you have been on the “red and blue” roller coaster of late? Could it be that more revised HUD Guidelines, new pricing, revitalized products, enhanced forms, increasing state legislation and greater disclosure are begging to question if you are a “glutton for punishment?”

I had the opportunity to speak with a good friend, who, like many of us, has been part of our industry for many years. His company, a mortgage brokerage firm, consistently places statistically in the top HECM 100 lender listings. I noted nervousness during our conversation, wherein he came out and asked me, “Will I be here tomorrow - should I be underwriting my own loans?”

I couldn’t resist to answer his question with one of my own – “red or blue?”

The choice to underwrite your own loans is a very complex strategy to overcome fears, resulting preparedness and recognizing challenges yet to come. I commented that many more of us are underwriters than we give ourselves credit for, but that in itself is only the beginning and should not be the sole criteria to get into the next line.

The foundation of “handbook and regulation” knowledge and skills is probably the first bend and turn on the underwriting ride which we all will agree is a key component to answering the question.

However, reconfiguring your company to compete in the current and future HECM market requires consideration of the supporting checklist of questions. The final decision to underwrite is part of a body of skills and knowledge, which must be attended to on a continual basis:

• Do you have the necessary capital and cash to support the process change?

• Do you have the ability to undertake the increased HUD authority requirements?

• Do you have an adequate source of warehouse funding? • Do you have a backup source of funding for impaired or

uninsured loans – or the reserves to effect indemnification?• Do you have the requisite insurance coverages and bonding?• Do you understand the state mortgage banking requirements

for this change?• Do you have the appropriate compliance and documentation

resources to effect this process change as well as resources to monitor the process for changes going forward?

• Do you have a secondary marketing plan and the ability to meet the representations and warrants your “investors” may additionally require?

• Do you have enhanced internal controls – i.e. augmented policies and procedures?

• Do you have a quality control program designed to evaluate the underwriting and approval process as well as determine the quality of your production?

May 2010 TRR | 9

• Do you understand the increased scope of audit and exam requirements?

• Do you understand the additional reporting requirements and to whom you report?

• Do you have a servicing or subservicing plan?• Do you have accounting and settlement procedures which

recognize the process?• Do you understand the additional training and monitoring requirements?• Do you understand the need to employ experienced personnel to

effect the change?

Given the material evidence that is necessary to move to a “banking” strategy, and newly promulgated tightening of some of the requirements, business as usual does not appear to be a debate that will gather much steam going forward or perhaps provide for your long term survival.

In fact, one might conclude the HECM product will probably become a specialty product represented by a select few lenders in the market. There are also those who believe the current market will soon be replaced by a new wave of eager investors who will provide the additional products and competitive capital to enhance the HECM value to seniors. Obviously, we will rule out those few who believe that this latest ride we are on is a diabolical governmental plot, atonement for decades of subprime, or safer than healthcare as a reform platform for politicians to gain re-election! I believe that for those who have made the decision, the choice to take on underwriting does not in itself guarantee a measure of success. As we have seen with the number of lenders that have exited or consolidated

recently, the business plan must be flexible, scalable, and measurable…and the market, to some degree, must work hand in hand.

Regardless, there needs to be a long and serious effort made to evaluate where you are today and perhaps the all important question - are you and your company ready to take the ride of your life? The risks and the rewards are both large.

Red or blue?...been there, done that, bring on the green one!

| TRR May 201030

This is both a great and timely question. When most people think about the life of a mortgage, they tend to think in forward mortgage terms and, depending on the market conditions affecting prepayment speed, it could be as little as 2-3 years. Reverse mortgage professionals know things are a bit different in our corner of the world. The answer, or at least what we have experienced, is that the typical life of a reverse mortgage is approximately seven years.

This is a great question because it calls to mind the tremendous responsibility and duties a servicer assumes after the loan is closed and funded. A forward mortgage generally concludes when new opportunity arises, a good investment has been made, or the borrower is ready to upgrade to a new home. (I am purposely not taking into consideration the current foreclosure crisis.) Before our culture became so mobile and transient, it was not uncommon for borrowers to purchase a home with the intent of remaining there for life. In the past, once the mortgage was paid in full, a party may have been held to celebrate liberation from monthly payments.

Reverse mortgages, on the other hand, generally do not close out in celebratory circumstances. They may close out as the result of the death of the borrower, a permanent vacancy of the home, or a default (taxes or insurance unpaid or other conditions not met). When the borrower has no money for taxes or insurance, a servicer is faced with a very complex and delicate situation. Some borrowers have family members who can help them, while others may have access to financial reserves outside of their reverse mortgage. However, other borrowers may have only social security income to live on and their reverse mortgage proceeds have been fully drawn and spent. When the decision is made to foreclose by the investor or insurer, a servicer must work diligently, yet compassionately with borrowers to explore all options available to satisfy the debt or cure the default.

The death of the last surviving borrower is, without a doubt, the most difficult situation a servicer has to deal with on a daily basis. Servicers work closely with grieving family members, and may provide assistance through handholding and counseling

of the repayment options available under the terms of the mortgage. In this particular situation, it is not uncommon for serving staff to spend countless hours with family members for up to a year after the death. But, we all accept it as the one thing we can do to help the family get through the loss. Most servicers have staff that truly enjoy this delicate work and have the innate skill set necessary for what I consider the toughest task we do.

The question posed is also very timely because the average number of years a servicer will hold a reverse mortgage may very well be increasing. A number of factors make that so. First, life expectancy in the United States has doubled in the past century. According to the US Census Bureau, the average life expectancy today is 78.8 years and is expected to increase each year. Second, on January 1, 2011 and every day thereafter for the next 18 years, somewhere between 7,000 and 10,000 baby boomers will turn 62. Since their eligibility for a HECM begins at 62, a possible additional 16 years or more stretches before them.

Interestingly, much has been written about this generation’s lack of financial preparedness for retirement, so it is anticipated that many will look to the equity in their homes for sustenance. Taking this into consideration, a reverse mortgage servicer could be expected to be working with HECM borrowers for many years beyond the current “life-of-loan” calculations of seven years. In fact, it could easily double rather quickly.

Do you have much direct borrower contact during the life of the loan?

Take a look at the typical life cycle of the reverse mortgage as it is passed to the servicer. The marketing, sales, and closing process of a reverse mortgage generally runs around six months, though from time-to-time it may run significantly longer. When a servicer receives a loan after closing, it is being entrusted with a valuable asset that will be in its possession for an average of seven years (at the present time). There are multiple “touch-points” that originators have with borrowers in the origination process, but they number far less and pale

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in comparison to the touch-points a servicer will make with the borrower over the life of the loan. These touch points begin with the servicer’s initial contact with the new borrower. On forward loans, the first call to a new borrower may be as brief as 45-60 seconds. Not on the reverse side! In the reverse world, that first borrower call averages 7-8 minutes and it is not uncommon for them to go on for 20+ minutes. The average senior borrower requires more explanation and more patience, and those of us who service this product understand and accept this responsibility willingly.

Every month, shortly after statements are mailed, incoming calls are simply off the charts. The senior borrower is much more attentive to detail and they will ask about anything they do not understand at length. One particular item that drives us servicers crazy is that we have to explain the servicing fee set-aside every month, month-after-month, often to the same borrowers.

From our experience, the percentage of incoming calls each month is approximately 25% of the size of the portfolio and it has remained at that level for more than 4 years. In 2005, when my department was servicing

5000 loans, it received approximately 1500 incoming calls per month. My department now services 45,000+ loans and can expect at least 10,000 incoming calls (each a separate touch point with a borrower) per month. It is tempting to commoditize the servicing process without understanding the very “high touch” aspects of the reverse mortgage product. The truest value of servicing extends above and beyond the cost of processing paperwork.

When a servicer takes on each loan, and for the life of that loan thereafter, it becomes the calm, reassuring voice of reason on behalf of the lender or investor, the monthly point of contact for all things financial, the helpful hand to hold during inevitable grief and transition, and, more often than not, just a listening ear to a lonely senior.

Servicing reverse mortgages can be incredibly challenging, but it is truly the most rewarding job I have experienced.

I look forward to receiving any questions you may have regarding servicing at: [email protected]. There is no such thing as a stupid question. The question you ask may be in the minds of other readers as well.

| TRR April 201014

In an article by Mark Huffman for the magazine Consumer Affairs Online entitled: Is a Reverse Mortgage a Good Idea? He ended the article by writing, “Even if the reverse mortgage is not a scam, it may come with so many charges and hidden fees to make it a bad deal. And of course, the person trying to sell it to you probably won’t mention that.” (You can read the whole article at the link provided at the end of the article.)

What?!! Okay, don’t blow a gasket! As infuriating as these types of comments are, it underscores the need for diligence in the continued battle to reverse (no pun intended) many of the public misconceptions of the product that we so strongly support. The bigger issue, however, is the types of experiences our valued customers are having that would force this type of commentary.

In a recent article in the Dec/Jan issue of the TRR titled, Building Trust with Reverse Mortgage Clients, I referred to a 2007 National Survey of Reverse Mortgage Shoppers by the AARP that over 50% of the reasons many borrowers were dissatisfied with their lender was due to a lack of product knowledge, an inability to properly explain or provide enough information, answer questions and a lack of respect.

Be InformedThe last thing our industry needs is an overzealous originator to go unchecked and loose their focus of the true objectives of providing a meaningful financial alternative to a senior’s retirement planning. To that, I would say there are solid legislative systems in place to keep that from happening, but is that enough? Because of this, are the reverse mortgage companies in the industry implementing additional accountability standards to their best practices? Do you rely on your mortgage company to provide you with the materials and resources necessary to be the best reverse mortgage professional that you can be? Stay informed of legislative changes.

Use the InternetApply to popular website RSS feeds and email lists that focus on industry changes and share opinions, like The Reverse Review. Other sites like LinkedIn have group forums and discussions in just about every industry and topic. Plus they are good sites to network with other professionals.

Talk with OthersAs mentioned above, become part of a network of informed reverse mortgage professionals that share the same quest for knowledge. Create

| TRR March 201030

Examining your own reverse mortgage marketing techniques and follow-up strategies is a constant and ongoing challenge. Here are 6 foolproof secrets to improving your origination efforts, enabling you to become the master of originations and growing your reverse mortgage business.

Secret #1: The Real Definition of “Successful Marketing”“The Right Message…to the Right Market…at the Right Time!”Most miss at least one of the latter in their marketing efforts. Many spend a lot on their own image rather than concentrating on direct response. It’s important to test your offers. Create several marketing offers using direct mail, phone, email, post cards, and seminars. Following up on your leads must be persistent and resilient for you to earn the trust of senior prospects. We know the market areas we want are senior homeowners, but in today’s market you must go a step further and break it down even further. Knowing the right time is a challenge in our business, but patient persistence combined with follow up will make you the winner.

Secret #2: “Cherry Picking” and the three types of Reverse leads.Every time you do any Reverse Mortgage lead marketing, the senior leads you get can be broken down and divided into three categories:

1. Leads that are ready NOW (I call them Hot leads) we all want the cherry deals. Give me those cherry picked leads all day and I’ll show you how good I can really be!

2. Leads that are not ready NOW, but will be ready soon (Warm –these leads are critical to your Success).

3. Leads that may never be ready (Cold or bad leads that lead nowhere).

7May 2009 7MaMaMaMaay yy y 20202000090000

MaeFlowers

ask the underwriter

Ralph RosynekIt’s mailbag time, and the internet has come

alive with inquiries seeking reverse mortgage

assistance for seniors experiencing diffi culties

due to economic impact. Many times the

information received requires some thought and

investigation prior to engaging the customer or

their trusted advisor.

While the interview component is key to

the origination process, a few minutes of

preparation time to develop a checklist of key

areas to focus on prior to assembling the pages

and pages of disclosures, fi gures and forms

necessary to create the application package will

be of particular benefi t in most situations.

Sometimes we do not hear what our borrower(s)

is telling us or miss the opportunity to request

additional clarifi cation or documentation at the

application session.

Prepare yourself to meet Mae Flowers and her

daughter for the fi rst time.

Dear Mr. Rosynek:

I am writi ng to you as I live in California and am seeking your help to provide a reverse mortgage loan for my mother and her sister. My mother is getti ng more forgetf ul as the years pass by and she now requires more medical care than her funds will provide.

My mother is 83 years old and was born in a small house on a farm in Alabama – I have never seen her birth certi fi cate and the litt le town no longer exists.

She has lived in her apartment for 43 years – my father Robert purchased the building right aft er they moved to Chicago and he died shortly aft er I was born. Her second husband William left her several years ago and my Aunt Mary was forced to move in with her to help out.

Mary sees to her daily needs. She takes care of all on my mother’s banking and fi nancial matt ers as mother can no longer do this on her own and she doesn’t leave her apartment. While the trust papers say that Mary can help her, my father wanted to make sure there was a litt le something for each of us three children as well as aunt Mary.

There is a $65,000.00 mortgage on the property which I am not sure if they have been paying – mother keeps saying the taxman keeps sending lett ers. Part of the money was used to fi x the roof and the heaters about 15 years ago. I do not know what the property is worth, however, I remember my mother telling me that one similar to it sold for about $235,000.00 two years ago.

I will be in Chicago on the 15th of this month and would like to meet with you if possible – please let me know what I need to do to begin the process.

Thank you.

So, here’s your chance. I am asking for your assistance to compose an e-mail response to Mae Flowers’ daughter giving her further directi on and informati on – you may accept the appointment or defer based upon your assessment of the informati on provided. Next month, The Reverse Review will publish 3 responses for review by our readers.

Address your e-mail response to informati [email protected]. We look forward to your comments.

| TRR March 201014

Best of The Reverse Review

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