The Reverse Review - March, 2011

THE

REVERSEreview

M A R C H 2 0 1 1

TALKINTERVIEW

Craig Corn Challenges the Industry to Seize Opportunities

Brett G. Varner

THe ThreaT of THefT

QC basicsdanger in 2011?

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11,000 People in the U.S. are reaching retirement age

every day for the next 20 years.What are youdoing now to capture your shareof this prime Reverse MortgageMarket?

Get Reverse Mortgage mailers effectively proven to fill yourrooms with qualified prospects for as low as 28.9¢* each! Our mailers include:

● FREE Coaching with every order ($2,000.00 value)● Top Rated Targeted Mail Lists of Qualifying Seniors● Custom Mailers Available.● Live RSVP service 24/7 in Your Firm’s Name.● U.S. Postage Included!*Based on payment by check or EFT, and on volume and

type of invitation.

“Just did the seminar that your company hadarranged the marketing. This was the first

time I ever had a marketing campaign behindthe seminar. It went very well. People werelaughing and having fun. Lots of questions. Lotsof concerns. 26 people showed up. Three ofthem wanted to fill out applications on the spot.Seven appointments total with 4 other couplesasking me to call them in a couple of days. Totalof eleven sales. Thanks!”

— Jerry Lopez, Oxford Lending Group

Call Edward Waldman, National Sales Manager for Reverse Mortgage Crowds.

800-604-6535 email: [email protected] can Save Thousands $$$ Every Time You Mail!

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The report 7, 9

ask the Underwriter 10

The Perspective 12

The advisor 14

The Conversation 16

The Industry roundup 18

The resources 36

The Last Word 38

Trr 03.11

Do Changes Made in 2010 Pose a Danger for 2011? 20While positive changes were made in 2010, certain regulations enacted could create problems for our industry’s future.John Smaldone

Craig Corn Challenges the Industry to Seize Opportunities 24With the HECM Saver as a game-changer, MetLife’s commitment to reverse mortgages has never been stronger.Brett G. Varner

The Underlying Threat of Identity Theft 30By requiring businesses to implement identity theft programs, the Red Flags Rule protects those on both sides of the equation. mark SiSco

Life estates: The Changes and Challenges 32Recent changes made by Ginnie Mae bring new guidelines when processing a title for life estates. kriSten SchnoeBelen

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the essentials

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the Core

© 2011 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 article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, The Reverse Review, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only.Postmaster : Please send address changes to The Reverse Review, 16745 W. Bernardo Drive Suite 450 San Diego, CA 92127

Letter from the editorl

Printer The Ovid Bell Press

Advertising Informationphone : 858.832.8320e-mail : [email protected]

Subscriptions and Editorial Contentphone : 858.217.5332e-mail : [email protected] : reversereview.com

Meet the Team

Publisher AmAn mAkkAr

Your greatest strength is knowing your greatest weakness.

Editor-in-ChiefEmily VAnnucci

“You’re trying too hard... try less.”

Copy EditorkErstEn WEhdE

I can’t read a menu, text or wedding invitation without proofreading it.

Creative Directort-rAciE knight

I don’t even know how to spell my own name. Sorry, Kersten.

National Accounts ManagerdAVid PEck

Changing the industry... one ad at a time.

News EditorBrEtt g. VArnEr

“He who spends too much time looking over their shoulder, walks into walls.”

e

I started my editor’s letter last month by mentioning that all was quiet on the front while we wait for the changes to come in April. Well, I take that back. Overnight, it seems as if things blew up and now the industry is talking. I feel as if every conversation I have ends on an uncertain but positive note. While the majority of us don’t know what the next turn in the road will be, we are going to keep on fighting and working our hardest to pull through what may seem like a tough time for the industry.

Craig Corn says it best in this month’s feature, “Craig Corn Challenges the Industry to Seize Opportunities”: “Ensure that you are positioned to take advantage of any opportunities that occur in this marketplace, because change is a constant.” There really is no other way to put it. We have to be prepared for change; it’s going to happen one way or another and the only thing we can do is seize

the challenges and opportunities that come out of it. Be sure to turn to page 24 to read the full interview with Craig Corn. It is an uplifting piece offering a great outlook on the future of the industry.

Between our regular columnists and our contributing authors this month, I’m proud to bring you another great issue! I look forward to watching the changes and the road ahead of us unfold and welcome any comments, ideas and opportunities for The Reverse Review!

Please sit back and enjoy all of our hard work that went into our March issue!

Until next time,

editor-in-Chief{ e m i l y v a n n u c c i }

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the Contributors

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Craig CornCraig Corn Challenges the Industry to Seize Opportunities, pg 24

Craig Corn is a Vice President at MetLife

Bank, N.A., responsible for the bank’s reverse mortgage business. He joined MetLife

Bank when it acquired EverBank Reverse

Mortgage LLC, where he was Co-president. He

previously served as EVP of Financial Freedom

Senior Funding Corp., and SVP in Lehman Brothers’ Fixed Income Division,

responsible for its reverse mortgage efforts, including spearheading

the first reverse mortgage securitizations ever

completed in the U.S.

Featurearticle

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daVe Bancroft The Conversation, pg 16

David Bancroft, former Executive Vice President and Board of Director member at Security One Lending, is an industry expert in the origination of reverse mortgages. Bancroft was the Founder and President of Omni Reverse Financing Inc, specializing in Government lending. Omni Reverse was one of the largest originators of HECM Mortgages in the country and was acquired by Security One Lending in [email protected] | 949.355.4653

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Sue haViland, crmPThe Advisor, pg 15

Sue Haviland is Co-founder of ReverseMortgageSuccces.com. She has been in the mortgage industry more than 25 years. Unlike many others, Sue originates reverse mortgages each and every day and has earned her Certified Reverse Mortgage Professional designation. If you would like to profit from the largest niche to ever hit the mortgage industry, grab the free course and profit-producing tips at reversemortgagesuccess.com.

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John k. lunde The Report, pg 7, 9

John K. Lunde is President and Founder of Reverse Market Insight, Inc., a performance data analysis and consulting firm specializing in the reverse mortgage industry. RMI clients include eight of the top 10 reverse mortgage lenders plus investors, servicers and vendors to the industry. 949.429.0452 | rminsight.net

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ralPh roSynek Ask the Underwriter, pg 10

Ralph Rosynek has been The Reverse Review’s “Ask the Underwriter” columnist for more than two years. He is an industry HECM consultant and trainer, leveraging many years of executive and owner skills and knowledge in the reverse mortgage space including HECM Direct Endorsement credentials. Ralph is currently a seated Director for NRMLA and co-chairs the Professional Development Committee. 708.774.1092 | [email protected]

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Brian SackS The Advisor, pg 15

Brian Sacks is Co-founder of reversemortgagesuccces.com. He has been in the mortgage industry for over 25 years. Unlike many others, Brian orginates reverse mortgages each and every day! If you would like to profit from the largest niche to ever hit the mortgage industry, grab the free course and profit-producing tips at reversemortgagesuccess.com.

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TRR | 7

1ST AAA REVERSE MORTGAGE 102

GENWORTH FINANCIAL HM EQUITY 86

SECURITY ONE LENDING 80

GUARDIAN FIRST FUNDING GROUP 69

URBAN FINANCIAL GROUP 65

AMERICAN ADVISORS GROUP 63

M AND T BANK 59

PNC REVERSE MORTGAGE LLC 57

MONEY HOUSE INC 56

FINANCIAL FREEDOM ACQUISITION 55

IREVERSE HOME LOANS LLC 43

NET EQUITY FINANCIAL INC 42

SENIOR MORTGAGE BANKERS INC 37

SUNTRUST MORTGAGE INC 34

NEW DAY FINANCIAL LLC 34

MIDCONTINENT FINANCIAL CENTER 33

MORTGAGESHOP LLC 29

UNITED SOUTHWEST MORTGAGE CORP 29

SENIOR AMERICAN FUNDING INC 28

EQUIPOINT FINANCIAL NETWORK 26

SENIORS REVERSE MORTGAGE 25

STAY IN HOME MORTGAGE INC 24

CHERRY CREEK MORTGAGE CO INC 20

ASPIRE FINANCIAL INC 18

FIRST MARINER BANK 18

FIRST NATIONAL BANK 18

OPEN MORTGAGE LLC 18

UPSTATE CAPITAL INC 18

TRADITIONAL HOME MORTGAGE INC 16

ALLIED HOME MORTGAGE CAPITAL 16

AMTEC FUNDING GROUP LLC 16

GATEWAY FUNDING DIVERSIFIED 15

M AND I MARSHALL AND ILSLEY 15

MAS ASSOCIATES 15

PRIMELENDING A PLAINSCAPITAL 15

TRINITY REVERSE MORTGAGE INC 15

TRIPOINT MORTGAGE GROUP INC 14

ROYAL UNITED MORTGAGE LLC 14

SUN AMERICAN MORTGAGE 14

HARVARD HOME MORTGAGE INC 14

CHRISTENSEN FINANCIAL INC 14

SENIOR EQUITY FINANCIAL INC 13

the reVerSe reView March 2011

the report

January 2011 Top Lenders report

1 2 3 4 5Wells FargoBank, N.a. Endorsement

1687

Bank of america, N.a.

CharLOTTe

Endorsement 843

MetLife Bank, N.a.

Endorsement 466

One reverse Mortgage LLC

Endorsement 322

GenerationMortgageCompanyEndorsement 122

Lender endorsements Lender endorsements

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kriSten SchnoeBelen

Life Estates: The Changes and Challenges, pg 32

Kristen Schnoebelen has been an Account Manager with Premier Reverse Closings since 2006. She covers part of Northern California, Oregon, Washington, Minnesota, Missouri and Hawaii. Her favorite part of her job is building relationships with loan officers and lenders, helping the senior community and working with incredible people.

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mark SiSco

The Underlying Threat of Identity Theft, pg 30

Mark Sisco is the RSD with West Star Lending and is the driving force of the retail sales and the training group of the Reverse Mortgage division. He holds a California Broker’s license and several other origination licenses and is an accomplished speaker, with over 18 years in the mortgage industry. 949.922.7859.

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John Smaldone

Do Changes Made in 2010 Pose a Danger for 2011?, pg 20

John Smaldone, founder of Taylor, Bean and Whitaker and former Senior Vice President of TransLand Financial Services Reverse Mortgage Divisions is the Executive Vice President of Hanover Financial Services, a consulting firm primarily in the reverse mortgage industry. With 42 years of mortgage banking experience, 10 years in reverse mortgages, John intends to remain in the reverse mortgage industry taking on long-term consulting assignments. [email protected]

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alain ValleS, crmP The Advisor, pg 14

Alain Valles, CRMP, is President of Direct Finance Corp, Hanover, MA. He has obtained the CSA designation, a master’s in real estate from MIT, an MBA from the Wharton School, and graduated summa cum laude from the University of Massachusetts. Alain’s mission is to improve the quality of life through responsible financing. 781.878.5626 | [email protected]

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Brett G. Varner The Perspective, pg 12

Craig Corn Challenges the Industry to Seize Opportunities, pg 24

Brett G. Varner is the newly appointed News Editor for reversereview.com. He has served the mortgage industry for 10 years in leadership capacities in sales, marketing and operations. His unique and knowledgeable perspective is focused on developing useful content and strategies in a forum of open and lively debate. [email protected]

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the Contributors

There’s one thing many lenders focus on at this time of year, and it’s the final rankings for our just completed year.

• Wells Fargo is still the top overall lender and top retail lender, with a combined market share of 24% including both retail and wholesale channels

• MetLife is the top wholesale lender, with 20.9% of all wholesale volume

• 1st AAA Reverse Mortgage is the top broker, averaging almost 100 loans per month

Congratulations to all three companies that led the way in a tough year for the industry.

This month’s report reminds me of a funny question someone once asked me: If you have one foot in the freezer and one foot in the oven, would your head feel average?

As lame as the joke might be, it highlights the fact that averages can mask a lot of variation under the surface. That is certainly the case in December, as we see that a flat volume month for the industry hid continued growth for retail (+8.5%) and a big decline for brokers/wholesale (-13.3%).

The most commonly cited reason in our conversations with clients is that new regulations are making it harder to compete as a broker without closing your own loans. If that’s what is behind the recent shift toward retail volume from broker/wholesale, it suggests that many brokers are either aligning with larger firms or joining forces with others in the same position to close their own loans.

Either way, we’d expect to see the number of active lenders continue to decline (or at least grow very slowly) even as volume increases, leading to a higher average loans-per-lender metric. And while we’ll be the first to agree that this average doesn’t tell an individual company’s story, it does tell us a lot about the general state of the industry. g

INDUSTRY SUMMARY

Retail Endorsement Growth

8.47%Wholesale Endorsement Growth

-13.35%Total Endorsement Growth

-0.02%

TRAIlINg Twelve - MONTH eNDORSeMeNTS

10,000

8,000

6,000

4,000

2,000

08 10 11 121 2 3 4 5 6 7

*Numbers Represent MonthsRetail Wholesale

* Figures Above Reflect Change from Prior Month

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TOT

UNITS CHG% UNITS CHG% UNITS CHG%

3,171

3,124

2,783

2,692

2,465

2,900

3,358

3,969

3,405

2,976

4,004

4,343

-19.8%

-1.48%

-10.92%

-3.27%

-8.43%

17.65%

15.79%

18.2%

-14.21%

-12.6%

34.54

8.47%

4,450

3,890

3,038

2,813

2,086

2,404

2,521

2,672

2,558

2,307

2,547

2,207

10.89%

2.87%

-12.58%

-21.9%

-7.41%

-25.84%

15.24%

4.87%

5.99%

-4.27%

-9.81%

10.4%

7,621

7,014

5,821

5,505

4,551

5,304

5,879

6,641

5,963

5,283

6,551

6,550

-7.96%

-7.96%

-17.01%

-5.43%

-17.33%

16.55%

10.84%

12.96%

-10.21%

-11.4%

24.0%

-0.02%

ReTAIl wHOleSAle TOTAl

December endorsementsretail and Wholesale Volumes - reVerse Market InsIGht

39,190 33,493 72,683


the report

TRR | 9

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ask the Underwriter

Quality Control: Back to the Basics ralPh roSynek

In last month’s column, information was provided suggesting increased lender scrutiny of quality

control plans for third-party originators. The status change from a HUD loan correspondent to a sponsored originator did not change or diminish the need for loan quality control procedures. For those companies participating in the forward loan market, there has been an increase in the profile and perspective with which lenders are assessing loan quality control activities among their customers.

It is impossible to pick up an industry publication and be unaware that the agencies, investors, consumer groups and regulators are all pointing fingers at each other over borrower default and loan foreclosure issues. A large number of these loans are the result of the economy and borrower inability to pay. However, recent buy-back and repurchase demands that have surfaced include loans with many other issues besides borrower payment default. Though the number of loans involving QC issues from the onset of origination has not been fully assessed, remediation of non-performing loans involves a heavy analysis of all components of loan failure, including quality control.

HUD has provided guidance over the years that maintaining an agency-compliant, effective QC program meets agency guidelines as well.

In a perfect origination world, loan QC guidelines would be required reading. Many originators make the assumption that this process is in place and working. How many times have we seen that the actions of one or a few taint the entire reputation of a company, and in some cases ultimately cause the operations of the company to discontinue?

How your company monitors its quality control responsibility should be a primary concern. Your livelihood and the fate of your family clearly rest upon your ability to provide, yet the undetected actions or failures of one or a few could abruptly cause you to be in jeopardy of not meeting your personal responsibilities.

QUALITY CONTROL IS A FUNCTION OF EVERYONE’S PERFORMANCE IN THE LIFE CYCLE OF A MORTGAGE LOAN. WHILE IT IS SUGGESTED THAT YOU BECOME FAMILIAR WITH YOUR COMPANY QC POLICY AND PROCEDURE AGAIN, ADDITIONAL QC RESOURCES ALSO ExIST IN YOUR INVESTOR MANUALS, AS WELL AS IN AGENCY AND REGULATORY GUIDELINES. IN GOING BACK TO BASICS FOR QC, START YOUR REVIEW BY CONSIDERING THE FOLLOWING:

In a perfect origi-nation world, loan QC guidelines would be requiredreading.

TRR | 11

Does someone routinely review the forms that i use?

Continuous changes mandated by law, guideline, policy, regulation and market changes require constant compliance review. If you are not responsible, who is? A good indication that there may be a problem in this area is if you are using forms and crossing out the year in required date areas, or having to strike out and initial pre-printed language.

why Do i have more or fewer DoCuments than the CheCklist

requires? The ability to update checklists and forms is almost instant. Utilizing yesterday’s checklist is a definite indication of internal process issues.

why Do borrowers leave messages for me that they are

unable to get information on the status of their loan? Knowing who and how many people are handling your file is a very important premise of good customer service. Requests made of the borrowers without your knowledge may be an indication of a faulted origination as well as operations issues. How will you learn to correct your mistakes?

are upDates, program anD regulatory Changes routinely

CommuniCateD to all staff? Information and communication flow within your office is important to avoid mistakes and possible delays in the origination and processing of your loan. Many underwriting conditions are the result of changes that were not addressed prior to submission of the file for final approval.

how is Customer privaCy maintaineD? Look around the

office. Are files left on desks or scattered in several different areas? Are there policies and procedures for document destruction and safeguards preventing access to borrower information without authorization? Who is permitted to alter or change information once you submit an originated file?

Do you – or Does anyone – Carry ConfiDential borrower

information on laptops or remote servers? Today’s information portability increases risk. Improperly secured laptops and remote information storage is a significant concern when security measures are not in place to protect from theft or misuse of this information. Blanket access to LOS and other operations systems without user permissions identified represents a potential for resulting quality control breach on a large scale.

are post-Closing borrower “experienCe” questionnaires

or inquiries maDe? Feedback from your borrowers after their transaction is complete is an excellent source for evaluation of process changes, communication and information failures and unknown QC breach. From a marketing perspective, this communication represents another touch point in the development of referrals.

when was your last “how to” session? Is there someone in your

company who is a “graphic designer” – the go-to person who utilizes Liquid Paper, Wite-Out and document-editing software as a routine part of their job? While there are some limited instances where the use of these products may be necessary, in general,

document alteration is a very big issue. As the industry continues to move toward electronic documentation, the risk for fraud increases. Having the reputation as the “fixer” is not really a positive job attribute and begs the question: At what point does the correction or alteration become fraud?

who hanDles ComplianCe? Is there someone who is focused on

reviewing QC reports, customer complaints, audit results and investor feedback? Believe it or not, in addition to protecting your company, the information protects your personal well-being. While the results of these types of activities may identify needed areas of improvement or change, lack of identified issues provides a false sense of security that the potential for QC breach could occur in the future.

are there establisheD pre-unDerwriting qC CheCkpoints?

From origination to file submission for underwriting, are there certain activities or routine verifications that are conducted to assess the quality and accuracy of the information being received and processed? Many companies do little to test the integrity of their files (as well as the integrity of their employees), and wait or react until investor review and QC measures are complete. Quality loan files exist when the QC procedure begins as early as the pre-qualification process. More importantly, investor quality control at the time of underwriting is often assumed to be completion of the process. The reality is that the QC process continues well into the future past underwriting, through execution, into servicing and, as we mentioned above, even in loss mitigation. g

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the Perspective

Why are You here?Brett G. Varner

I read an article last month from the Fox Business Small Business Center that really got me thinking about why we in the reverse mortgage industry do what we do. I’m not talking about posing an existential contemplation of your existence, but more of a direct, revealingquestion as to why you are, and intend to remain, in this industry.

The article was about Jim Olson, the owner and founder of James A. Olson Guitars. Unless you are a true guitar aficionado, you’ve probably never heard of him. He has been making his guitars and exercising his passion for woodworking and music for more than 40 years. He handles every aspect of production, from concept to design to construction. At the height of production, Olson only makes about 30 guitars per year.

What really struck me in reading about Olson’s life was that even though it took many years to turn his craft into a profitable business, it was the way he credited his passion as the driving force behind his persistence.

“I was obsessed with it. It took way too long to make for what I could get out of it [financially], but I kept doing it anyway,” he said. “Much like someone who is playing the guitar, you persist at it because you can’t imagine your world without it. I wanted to pursue it in spite of the fact that it wasn’t smart.”

“Can’t imagine your world without it.” How many of you working every day in the reverse mortgage industry have used that phrase in defining your career? Being able to ascribe that type of passion to one’s work is, to me, what separates the great from the good. This industry is too specialized and too limited, with a distinctive prospective clientele that requires empathetic education and counsel for sustained success to come any other way.

In my years of sales and operation management within the mortgage industry, I have worked with a wide variety of players with a wide variety of motives.

There have been, and will always be, those that ebb and flow around the industry in search of the financial gain, more or less chasing dollars over a greater career satisfaction. Many of these types have floated into the reverse mortgage sector as a wading ground until other aspects of the mortgage industry rebound. They are often frustrated by the time and effort required to develop a successful business, and float out as quickly as they floated in.

There are also those that have somewhat successful production, but lack the necessary commitment to raise their effort to a higher level. Some in this category have short-term intentions, merely seeking to cash out on what they have built. In the reverse mortgage sector, they have been fueled by recent high returns from the secondary market, but realizing that this is fleeting, are already looking to the horizon for the next thing.

These players are commodity players. It is about positioning and profitability and the product is immaterial. The overriding theme is committing the minimum to gain the maximum, and then move on.

The reverse mortgage industry does not support these types very well. Regardless of all the growth potential that supporters tout, including the explosion of the demographic as baby boomers age, the reverse mortgage market continues to be a small, niche segment that is dwarfed (and will continue to be dwarfed) by the forward mortgage market. Each potential

client commands an immensely larger amount of time and effort to guide through the education and decision-making process than many other comparable situations. Unless there is an immediate and desperate

TRR | 13

need, many are content to marinate over the product for substantial periods of time, extending the life cycle of the leads and the return on funds invested to generate them.

So the question remains: Why do you continue to trudge along amidst the limitations and challenges of a product with limited scope that will keep receiving scrutiny among regulators and detractors?

The recent announcement by Bank of America that they decided to exit the reverse mortgage business got me wondering about this point. Many were shocked by the announcement and were concerned about what this would mean to the status of the industry, but the reality is that BofA just didn’t need the reverse mortgage product. Reverse mortgages

made up a relatively small portion of their mortgage business. They are clearly in a mode of restructuring the mortgage units in light of the housing crisis and necessary housecleaning resulting from the Countrywide acquisition. The clichéd statement that they are shifting resources to “core mortgage operations” revealed simple corporate belief: Reverse mortgages were just not a valued portion of their business, and were expendable.

For the “survivors” in the industry, those who have chosen to remain, there are a number of reasons that may drive your desire to remain in the battle. The obvious response is how much you love helping seniors. This can be a very rewarding and emotional driving force for many people. I have been fortunate to speak with many seniors who were able to resolve difficult financial situations with a reverse mortgage. The relief and appreciation expressed by them can sustain you through other rough times.

Others may be driven by the professional challenges presented by the reverse mortgage product. From a sales perspective, going through the process of educating potential clients, helping to change their perspectives to see the opportunities and then guiding them through the process can create a rewarding sense of victory. On the operations side, working through tightened regulatory and underwriting guidelines to make sure loans pass muster, helping to manage your company’s risk profile, and still getting loans closed, can bolster pride in one’s accomplishments.

At the end of the day, critical ingredients of success are passion and persistence. Of course, organization, time management and consistent effort must be added to the mix, but it is truly believing in the product you provide, the team you work with, and an affinity for the people you serve that can lift you above the noise of doing just enough, and become (or continue to be) one of the best.

As for Olson, his story is a long and winding road, but after decades of work with minimal returns, he has maintained his passion and found his road to success. He continues to be the only one involved in the production of his guitars, and since 2000, they have been selling for $12,500 to $35,000 each. The guitars remain in demand and his orders maintain a backorder schedule of about one year. Next time you see James Taylor perform, you’ll likely see one of three Olson guitars that he’s been playing since 1989. You can see more about Olson’s work at olsonguitars.com.

Olson’s advice to others is simple, yet speaks volumes: “Do it because you love it and be willing to do it even when it is not working, and if you love it enough and you are dedicated enough, eventually you can succeed at it.”

Why are you here? Knowing your motivations and purpose can keep you going when the weight of challenge tries to hold you down. I’d love to hear your story. Let me know what keeps the wind in your sails at [email protected]. g

“Can’t imagine your world without it.” How many of you working every day in the reverse mort-gage industry have used that phrase in defining your career?

Have a question for the Appraiser?Email questions to [email protected] and look for your answer in an upcoming issue. a? a

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the advisor

“You Can Buy a home with a reverse Mortgage?”alain ValleS, crmP

“I didn’t know that!” That’s what I heard last week from 12 owners of real estate offices representing more than 110 agents. I had just given a presentation called “HECMs for Purchase,” the use of a reverse mortgage to buy a new home.

Those incredulous real estate agents are not alone! Even experienced reverse loan officers do not understand how the P-HECM can improve the lives of seniors, with the bonus of adding an entirely new referral source to the mortgage broker’s database. Will you take the lead and be the first P-HECM trusted advisor in your marketplace?

How It workSNot all seniors want to stay in their home. With children grown and gone, many find that a large home becomes a liability and maintenance challenge. They are ready to downsize, or perhaps move into a more accommodating community. By utilizing a HECM for Purchase, they won’t have to pay 100 percent cash for the home and can reallocate that cash for other investments or uses. This avoids the need for a new forward mortgage with monthly payments at a time when the senior’s income may be fixed. This is a huge potential new market for real estate sales.

overComIng realtor PerCePtIonSMany real estate agents fall prey to the same myths that reverse mortgage professionals have been trying to overcome for years.

Like many Americans, Realtors think that reverse mortgages are only for poor people, that the homeowner loses equity or control of the property, that reverse mortgages are expensive, that there will be nothing left for the children, etc. These objections and misperceptions must be overcome using education-based responses.

Real estate agents are also curious as to why a senior would go the reverse mortgage route to buy a home when they may be able to pay cash or take on a new mortgage. It is a case of better cash management. By utilizing a P-HECM, the borrower can conserve cash and, in many cases, improve their retirement security.

Many in the real estate business are aware of the financial pressures older homebuyers face, and the difficulty of obtaining traditional mortgage financing for seniors. Having the P-HECM option gives a real estate agent a powerful new tool to help older buyers.

Like many Americans,

Realtors think that reverse mortgages are only for poor peo-

ple, that the homeowner

loses equity or control of the property, that reverse mort-gages are ex-pensive, that there will be

nothing left for the children,

etc. These ob-jections and mispercep-

tions must be overcome

using educa-tion-based responses.

TRR | 15

a Unique and Unlikely referral PartnerSue haViland, crmP and Brian SackS

last month, my article for The Reverse Review focused on my theory of having a smaller number – but a higher quality – of referral sources. I must say, I received many comments on this stance. Some were positive and agreed that they would implement the same strategy. Others felt I had gone over the cliff. That’s OK; it’s all about having an open discussion.

I have discovered one type of referral source that Brian and I will certainly be cultivating going forward. A few weeks ago we got a call from a title representative who we have both known over the years. He had received a request from another professional seeking an introduction to a reverse mortgage specialist. When we heard the

story we knew immediately this was something we wanted to learn more about. the new referral source was a bankruptcy attorney. this gentleman met with a senior client who came to him seeking his advice on filing a Chapter 7 bankruptcy. After the initial consultation he concluded that it was not in this client’s best interest to file bankruptcy but rather to seek another alternative. To this attorney’s credit, he went the extra mile for this senior and started making some calls looking for a reverse mortgage specialist. He wanted to find out for himself if a reverse mortgage was an appropriate alternative for this client. Indeed it was. We were able to help this senior eliminate the troublesome debt and establish a line of credit with the remaining reverse mortgage funds. This attorney has since introduced us to others in his field and we are educating them as well. Keep in mind, all we are asking is for the bankruptcy attorney to refer those clients he/she cannot help. We are not asking them to turn away any business they would otherwise have, quite the contrary: Now the attorney may be able to assist the borrowers in negotiating a lower payoff on some of the debt they have incurred. the borrower’s credit rating is saved by using a reverse mortgage instead of the bankruptcy and the attorney looks like a hero for recommending a positive resolution to the problem.

Perhaps you already have a bankruptcy attorney or two in your professional circle. If not, there is one more source of quality referrals you can add to your list. g

Need assistance from the Advisor?Send your question to [email protected] and it may be addressed in the next issue.

?

BuIldIng realtor relatIonSHIPSBecoming the go-to expert on P-HECMs for real estate professionals in your market is a great way to expand your referral database and create a new source of leads. But it does require effort on your part. You will need to become a teacher, educating local real estate agents about P-HECMs. Make yourself known by volunteering to make presentations at the weekly staff meetings of local real estate offices, or to speak at monthly meetings of Realtor associations. Add as many Realtors with

the Seniors Real Estate Specialist (SRES) designation as possible to your database.

Don’t oversell the P-HECM, and don’t try to force real estate agents into becoming loan officers! Instead, focus on teaching the Realtor to listen for clues that a potential buyer might be sending, such as, “We’d love to downsize but can’t afford the payments,” or “We want to move but our house is our retirement security.” These are indications that the homeowner does not understand how to use the equity they already possess.

Tutor the real estate agent on how to respond to these signals by presenting the P-HECM option. Make yourself available to explain the process and benefits to the senior buyer. An hour of consulting could pay off in a tidy reverse mortgage.

The market potential is huge. Of the 5 million home purchases made last year less than 2,000 were P-HECMs. Why? Because “I didn’t know that…” g

16 | TRR


the Conversation

The Devil is in the DetailsdaVe Bancroft

did you see mixed martial artist anderson Silva’s left foot cave into Belfort’s chin Saturday night? The strike seemed oddly similar to the blow BofA threw at the reverse mortgage world by announcing its departure. It wasn’t too long ago Seattle

Mortgage’s acquisition by the largest bank in America garnered tremendous attention while validating our industry. It was a double-decker jack that gave every company in the arena a reason to celebrate and pine to be the next Seattle. Whispers had the purchase price near $200 million, legitimizing the true arrival of the HECM line, while stamping the quality of our product as Grade A. Now I feel like Belfort, lying still on the Octagon canvas, wondering what just happened. How could Bofa forfeit a game they practically owned? or throw in the towel from the corner, even though the judges had them up on all scorecards?

Something stinks. This thing has the nagging scent of a four-day-old bologna sandwich found between the seats of a truck in Charlotte, North Carolina. I

am having a terrible time gulping down

what just happened … it doesn’t add up.

Here is what I do know: I don’t

throw away things that aren’t broken. I

don’t sacrifice a whole division of a company that

is profitable, or shed a revenue maker and portfolio builder for my financial services department for the sake of redeploying manpower. I’m no conspiracy theorist, but this move has me scratching my head and

wondering out loud about the underlying motives. We have all read about the Countrywide issues, the foreclosure problems and continued scrutiny of the Merrill Lynch purchase. But to bullet-hole the Reverse Mortgage Division to start up a Legacy Asset Servicing department out of the blue? Come on. From the people I know there, this came as a surprise and secrets in this industry at this level are rarely executed with precision.

My gut feeling is telling me that this has a lot more to do with the future of this product than anybody is caring to discuss. I know many lenders were

elated by this news, smiling widely at the fortuitous opportunity to get at the BofA orphaned loans. But I don’t see it that way. This closure has to be autopsied. We can’t be too quick in writing it off as a casualty of the foreclosure mess while not pinpointing the real cause of death. Did anybody else find interesting Paul Ryan’s response to the State of the Union address? Or the front-page news that Republicans propose to slash $74 billion in funding to a whole slew of government programs? The devil is in the details. g

I’m no conspiracy theorist, but

this move has me scratch-ing my head and wonder-ing out loud about the underlying motives.

TRR | 17


the Industry roundup

industryroundup March edition

moVERs k shAKERsAmERIcAN AdVIsoRs GRoup: Capitalizing on a successful 2010, AAG relocated into a new 22,000-square-foot corporate facility with plans to continue growth in 2011.

1sT AAA REVERsE: Opened the year sustaining their position as the top non-lender producer with 102 endorsed reverse mortgages for January.

NcoA, hud & NRmLA: In response to the T&I delinquency concerns, these three organizations collaborated on a pilot program designed to help borrowers navigate options to assist with maintaining their borrower obligations. The results will guide lenders and services in determining best practices for resolving these issues.

JohN smALdoNE: Joined Hanover Financial Services as Executive Vice President to provide consulting services to companies in, or looking to enter, the reverse mortgage market. John is a 42-year industry veteran with more than 10 years in the reverse mortgage sector.

uRbAN FINANcIAL GRoup: Opened a new 20,000-square-foot corporate office in Tulsa, OK, to accommodate growth of their reverse mortgage operation and goals of reaching a 20 percent market share in the industry. This follows the recent acquisition of Guardian First Funding Group.

suN WEsT moRTGAGE compANy: Reported that it has issued more than $6 billion in reverse mortgage-backed securities since its inception in 1980. This Southern Calfornia based company has successfully built a strong technology platform in ReverseSoft, a product that provides industry partners with a seamless solution to securitize the HECM product.

up-k-comERsJEFF bENJAmIN/INVEsTmENT NEWs: Finally, an industry publication for financial advisors, written by one of their own, presented a forward-looking perspective at integrating a reverse mortgage into a client’s overall financial retirement plan.

coNsumER FINANcIAL pRoTEcTIoN buREAu: Charged with consolidating and simplifying the rules and regulations surrounding financial services and products, including reverse mortgages, the CFPB launched their website, announcing, “We are open for suggestions” (consumerfinance.gov).

1sT REVERsE moRTGAGE usA: In response to increased demand from regional and community banks, credit unions and mortgage bankers, the Lakewood, Colorado-based firm expanded their account executive team by adding Joe Breheny, Jack McGovern, Scot Mountcastle and Randy Storm.

WhAT hAppENEd?bANK oF AmERIcA: As part of the refocusing of their mortgage resources on “core operations,” BofA announced plans to exit the reverse mortgage market, going from the No. 2 producer of wholesale and retail reverse mortgage to out of the game.

Fox & FRIENds: Stirring up a frenzy of anger and frustration, Fox News aired a poorly structured segment on the T&I delinquency issue with reverse mortgages. A subsequent follow-up left much to be desired, but NRMLA continues to work with Fox to ensure future reports have access to accurate information.

sEATTLE moRTGAGE: Less than a year after re-entering the reverse mortgage market, Seattle decided to close down the division. Due to the banking crisis, Seattle went through a $50 million recapitalization effort, which appears to have required a restructuring and the shutting down of non-core business units.

a roundup of this past month’s breaking news: Who moved where; Why a company closed its doors; Who is new to the industry?

Find it here

18 | TRR

TRR | 19

the essentialsThe essentials | i’sen sh l | - your monthly source of in-depth information,

industry updates, highly opinionated views and at-your-fingertips news.

John Smaldone

Brett G. Varner

CraiG Corn

mark SiSCo

kriSten SChnoeBelen

E

It takes a lot to create an attention-grabbing, informative article and The Reverse Review is very fortunate to

have worked hand in hand with industry leaders over the past couple of years. We are always searching for new

writers and industry-related articles. If you are interested in contributing your views and have what it takes to

intrigue our readers, we would love to hear from you! email [email protected] to start the conversation.

20 | TRR

ast year was a year many of us would like to forget. We all saw and experienced many changes, especially in the reverse mortgage sector. With the industry preparing for changes to come, we take a look back at what may have had a hand in creating a shift in the future of our industry.L


the essentials

Do Changes Made in 2010 Pose a Danger for 2011?

While positive changes were made in 2010, certain regulations enacted could create problems for our industry’s future.

John Smaldone

S

TRR | 21

gThe SAFe AcT affected the entire mortgage banking industry. It is now

March and we are still wrestling with the agony of conforming to it.

gThe reverSe morTgAge induSTry experienced

a tremendous amount of bad publicity, much of which was unjustified.

Because of this, many of our

seniors started to mistrust

reverse mortgage specialists and the

program itself.

gour poliTiciAnS became the

proclaimed savior of the senior citizen. they

thought they had all the answers about reverse mortgages. In

reality, we all know that is not the case!

ghome vAlueS declined further.

the reverse mortgage industry came up against major shortfalls

with the principal limit amounts.

Consequently we had to watch many seniors lose their homes through foreclosures.

gThe heAlTh cAre reForm Bill And The

FinAnciAl regulATory reForm Bill were passed in

2010. Both were not favorable to

our industry or for the stability of our

country.

gThere were mAjor chAngeS to the Good Faith estimate (GFe). It

has taken on a new look with changes that are confusing to both the senior

and the loan originator.

gThere wAS A reducTion

in The principAl limiT cAlculATionS,

which in many cases favored

younger seniors over the older

ones. Many seniors were considering a reverse mortgage, thinking they were

going to get a certain amount,

then found themselves in a

shortfall position.

g2010 BroughT The loweST

inTereST rATeS in 50 yeArS.

gThe novemBer elecTion chAnged

The poliTicAl BAlAnce in the

house, which now favors the

republican Party. there was a major shift of faces in the senate. however,

the balance of power still favors the Democrats.

gwe SAw one oF The lArgeST

numBer oF BAnk FAilureS

throughout the country to date. 2011 could be a record-breaking year for failures,

much greater than 2010.

however, 2010 did Bring promiSeS For The FuTure oF The reverSe morTgAge induSTry. It has been predicted that 10,000 baby boomers will be turning 65 every day in 2011, a statistic that is projected to continue for the next 19 years (close to 70 million baby boomers). The number of baby boomers turning 62 this year is smaller, but still close to the staggering number of 70 million. This brings to our industry many opportunities for the right people and financial institutions, providing we approach it the right way. looking ahead

We experienced changes in our product in the latter part of 2010, which have carried

into 2011. We saw the creation of the HECM Saver, which is an alternative to our old-line standards. The major difference is the lower closing costs and lower principal limit factors. The new program is truly a niche product for the industry.

The Saver is not for everyone, but the program is ideal for those who have plenty of equity in their home and do not need the maximum payout bringing lower closing costs, which are not associated with the other reverse mortgage products. The industry knows there is a place for the Saver and as time goes on we will realize more and more where it will fit in.

On January 3, 2011, less than six months after the Financial Regulatory Reform Bill

was signed into law, more than 1,000 pages of regulatory proposals and final rules were issued. Many more pages of regulations, upward of 5,000, are expected to come. We must look at what this bill will do to small community banks, mortgage banking in general, the reverse mortgage industry and our entire financial system. Can small banks survive the overregulation attack? Can we as a country survive our federal government controlling our free, capitalist society?

The Financial Regulatory Reform Bill spawned a tsunami of new rules and restrictions, causing many banks to go underwater.

This will be a significant challenge for a bank of any size, but for the smaller >>

hiGhLiGhTS

22 | TRR

bank, which typically has only 30 to 40 employees, it will be overwhelming. The impact regulations of this regulatory burden will be felt by the millions of individuals, families, and businesses that rely on their local bank to meet their saving, borrowing, and financial services needs.

I wrote an article for The Reverse Review in October 2010 on the Financial Regulatory Reform Bill explaining how it would impact the reverse mortgage industry and our country as a whole. Due to the bill’s immense impact, I would like to delve into the topic a bit more:

Argentina was once a thriving country with wealth and a strong economy. Argentina fell into the trap we are heading into. Today the people of Argentina have an inflation rate beyond comprehension and are controlled by the government – a government that is disorganized, inefficient and has a self-centered agenda.

I have said this many times: The Financial Regulatory Reform Bill is disastrous for the American people and our great nation. Never has a bill been passed that has given the federal government more authority and power over our entire financial system than this bill. The Consumer Financial Protection Bureau (CFPB), a spin-off of the bill, has the authority to target and destroy the reverse mortgage business as we know it. We have started to see the damage it can cause!

It is unfortunate the American people knew so little about the bill. It was passed in the wee hours of the morning with legislators having little idea what they voted for. Now that some of the facts are coming out and parts of the bill are starting to come to fruition, people are realizing how dangerous this bill is and will be for the country’s economy, banking industry and entire financial system.

On January 24, the American Bankers Association (ABA) and the state bankers associations asked the chairman of the Senate Banking Committee and House Financial Services Committee to convene hearings on the current environment affecting banks, particularly community banks. As you read the letter on the following page you will sense the frustration and concern the ABA and community bankers throughout the country have of losing their independency. As our community banks continue to fail and merge with larger banks one starts realizing what the intent of the Financial Regulatory Reform Bill is. This bill will only put us one more step closer to socialism than we already are.

23TRR |

We have many challenges ahead of us in 2011 and in the years to come. There is good news on the horizon for the reverse mortgage industry. As stated earlier in this article, thousands of seniors are turning 62 years of age every day, and that trend is expected to continue for the next 19 years.

The need for reverse mortgages has never been stronger. We have a lot to capitalize on as an industry. We must meet the challenges facing us head on. We need to be united and resist whatever may come upon us.We must act as a single unit and defend our industry. However, more important

than anything, we must protect our seniors from losing the valuable benefits a reverse mortgage gives them! g

January 24, 2011

The Honorable Tim Johnson

Committee on Banking, Housing, and Urban Affairs

United States Senate

Washington, D.C. 20515

Dear Senator Johnson:

The undersigned banking trade associations, representing banks of all sizes in every

state, are writing to request that the Senate Banking Committee convene hearings at the

outset of the 112th Congress to examine the current environment affecting banks and the

future of community banks in particular.

All banks are facing a mounting number of challenges that are severely threatening the

long-term future of these great institutions. Bankers throughout the country have shared

stories of examinations that are overly restrictive in their review of banks’ activities and

often contradictory in their conclusions. In addition, all banks are facing a tremendous

amount of new regulations that will significantly increase their costs. The new regula-

tions come at a time when regulatory agencies are demanding even greater amounts of

capital retention and increased lending activity. The combination of these issues has

made lending extremely challenging and made operating a community bank especially

difficult.

For the first time, community banks are beginning to question their ability to preserve

their independence in the face of examiner pressure, and, especially, regulatory costs.

These are healthy banks, yet they feel the need to explore sale or merger. The number of

these banks may shrink dramatically over the next few years.

As Federal Reserve Chairman Ben Bernanke recently stated before the Senate Budget

Committee, the preservation and survival of these community institutions is directly

linked with the economic recovery efforts that this Congress will undertake in the com-

ing months. To that end, it is very important that Congress hold hearings to understand

the regulatory pressures that are being placed on the banking industry in general, and

on community banks in particular.

We look forward to working with you on hearings on these very

important issues for the banking industry.

SaBa LeTTer

sincerely,american Bankers association alabama Bankers association alaska Bankers association arizona Bankers association arkansas Bankers association California Bankers association Colorado Bankers association Connecticut Bankers association Delaware Bankers association Florida Bankers association Georgia Bankers association hawaii Bankers association heartland Community Bankers association Illinois Bankers association Illinois League of Financial Institutions Indiana Bankers association Iowa Bankers association kansas Bankers association kentucky Bankers asso-ciation Louisiana Bankers association Maine association of Community Banks Maryland Bankers association Massachusetts Bankers associa-tion Michigan Bankers association Minnesota Bankers association Mis-sissippi Bankers association Missouri Bankers association Montana Bankers association nebraska Bankers as-sociation nevada Bankers association new hampshire Bankers association new Jersey Bankers association new Mexico Bankers association new york Bankers association north Carolina Bankers association north Dakota Bankers association ohio Bankers League oklahoma Bankers association or-egon Bankers association Pennsylva-nia Bankers association Puerto rico Bankers association rhode Island Bankers association south Carolina Bankers association south Dakota Bankers association tennessee Bankers association texas Bankers association Utah Bankers association Vermont Bankers association Virginia Bankers association Washington Bankers association Washington Financial League West Virginia Bank-ers association Wisconsin Bankers association Wyoming Bankers association Members of the senate Banking Committee

| TRR 24

TALK INTERVIEW

Craig CornCraig Corn Challenges the Industry to Seize Opportunities

With the HeCM Saver as a game-changer, MetLife’s commitment to reverse mortgages has never been stronger.

Brett G. Varner

=

26 | TRR

he recent announcement by Bank of America of their plans to exit the reverse mortgage

business came as a shock to many in the industry, and has caused concern about the strength of the industry and the HECM products. Their exit also shines a spotlight on MetLife Bank as an industry leader in both the wholesale and retail channels. MetLife Bank will inevitably need to step up, visibly increasing their leadership role, and fill the void created.

In light of this announcement and the ongoing period of rapid regulatory change within the reverse mortgage industry, I had the opportunity to talk with MetLife Bank Vice President Craig Corn, who is in charge of the company’s reverse mortgage division. I had sought to discuss the impact of Bank of America’s announcement on the industry, but what I found was that BofA’s move had virtually no impact on MetLife’s plan nor their positive outlook on where the industry is moving.

Craig has been an integral player since 1998, when he helped Lehman Brothers shape the secondary market for reverse mortgages. He has been an executive leader for Financial Freedom, BNY Mortgage and EverBank Reverse Mortgage. Recognizing the challenging road the industry has been through, Craig spoke of the status of the industry and opportunities that lie ahead, with a specific focus on the HECM Saver product. Speaking to those who have persevered through these challenging times, he looks ahead with an encouraging and refreshing sense of enthusiasm for the reverse mortgage market.

We think HECM Saver is a game-changer. We think that the product is

going to open up the eyes of many consumers who

had dismissed the reverse mortgage product of the past, and I also think it is

going to open up the eyes of many financial advisors and other trusted advisors

who had dismissed the HECM Standard

product. We believe the applicability of the HECM

Saver is significant.

However, I would say MetLife Bank is a major

player in the reverse mortgage space and one of our guiding principles is education. Let’s face

it, the best consumer is a well-educated consumer

and the same holds true for the financial and

trusted advisors.

However, if you stack up the HECM Saver – and I’m talking specifically

about the HECM Saver ARM versus a HELOC – we believe it compares exceptionally well when

you think about things like overall interest rate, costs,

and the line of credit growth on the HECM.

Understanding where and how home equity

can play a role in this can help people make better, or at least more informed

decisions.

I think that’s probably the message that I would put out there

for others: Ensure that you are positioned to take advantage of any

opportunities that occur in this marketplace, because

change is a constant.

E! $ 6

cRAIG coRN sAys...

( BRETT You have such a long history in the reverse mortgage industry. given that perspective and the fact that we are in such a period of rapid change, what is your viewpoint on the overall status of the industry and the next 12 months, or at least the near term?

( CRAIG The next 12 months, that’s tough, but I’ll start with the following: At MetLife Bank, we’re very bullish on the reverse mortgage space. We think all the work that the industry did in order to get the HECM Saver out last October is going to make a very significant difference in the direction of the reverse mortgage industry. The way the product was structured and designed in the past really catered to a very specific type of older American customer. Some would characterize it as the individual who didn’t have many other options, and that’s unfortunate. Although I think that the product has served that segment of the market very well, it’s a very small segment of the overall older American population as evidenced by the 2 percent penetration rate with homeowners over the age of 62.

We think the HECM Saver is a game-changer. We think that the product is going to open up the eyes of many consumers who had dismissed the reverse mortgage product of the past, and I also think it is going to open up the eyes of many financial advisors and other trusted advisors who had dismissed the HECM Standard product. We believe the applicability of the HECM Saver is significant.

So, I know you wanted to talk a little bit about Bank of America, but frankly, whether Bank of America was in the space or not, those are our prospects. We think this creates an incredible opportunity, not just for MetLife Bank, but the entire industry. Those institutions that understand how to reposition their

education, marketing, training and loan originators will be the institutions that are going to take advantage of the changes that were made last October with the introduction of the HECM Saver.

( BRETT let’s explore that a little bit. obviously the industry, especially Hud, looked at the introduction of the HeCm Saver with great anticipation. at nrmla in november, they were really pushing for it to have a significant impact. are you already seeing that impact or are you really looking at its applicability as it becomes more visible?

( CRAIG Well, it’s become a significant part of our retail production right out of the gate, approaching 20 percent of our retail business.

That’s obviously from a zero percent starting point on October 4, and that’s exciting because there are people at MetLife Bank who were part of the re-engineering efforts with FHA. We obviously had a sense before the launch date in October that this product might be coming. So we had the ability to position ourselves prior to the launch date and it’s had an immediate impact on our retail production. I think our brokers and correspondents might be a little slower to the take, but we see the percentage increase of business on their side also happening. It just takes them a little longer to absorb this new product.

In my opinion, we’ve only scratched the surface. Let me explain why. It’s not just that the product is significantly different than what we have originated in the past; it is the entire mindset of the industry, ranging from counselors who now have a new product they need to understand to loan officers who have historically been approaching a very specific segment of the older American population. Now they have to start working with a completely different segment of the population as it relates to the HECM Saver product. It is not just that the product has changed; it’s the entire mindset of the education efforts at the consumer and trusted advisor levels. So, MetLife going from zero to20 percent in a very short period of time without a tremendous amount of change in the way we do business, speaks to the merit of the product appealing to people who might not have been previously attracted to the old HECM product.

( BRETT You talk about applicability. a lot of the media reports tend to talk about how the new HeCm

At MetLife Bank, we’re very bullish on the reverse mortgage space. We think all the work that the industry did in order to get the HeCM Sav-er out last october is going to make a very significant difference in the direction of the reverse mortgage industry.

cRAIGsAys

TRR | 27

| TRR 28

is so great because of the reduced costs, but in the application that you are seeing, is it really more of the flexibility and the fact that it goes more head-to-head against traditional loans, like the Home equity line of Credit (HeloC)?

( CRAIG Well, I think you’re going down a very important path. There is some research that we’ve gathered from our colleagues at the Mature Market Institute, in conjunction with the National Council on Aging, that suggests that the number of people who have taken out HELOCs, and specifically first lien HELOCS, versus reverse mortgages is a significant multiple. What that tells me is that there are people who have looked at the traditional reverse mortgage, with the higher upfront costs, and decided that the HELOC with the lower upfront costs would be a more attractive proposition for them. However, if you stack up the HECM Saver – and I’m talking specifically about the HECM Saver ARM versus a HELOC – we believe it compares exceptionally well when you think about things like overall interest rate, costs, and the line of credit growth on the HECM. Additionally, the fact that it is government-insured is important, as there was a time from 2007 to 2009 that lenders were shutting down available lines of credit on HELOCS, which, of course, can’t happen on a HECM due to a component of the government insurance. Of course, the fact that the HECM doesn’t have a payment has always been one of the big selling points of a reverse mortgage against HELOCs and traditional mortgage products that do. When you stack it up like that, it is a very favorable comparison for the HECM Saver. Accordingly, we think that as institutions like ours can reposition those points of distribution that have traditionally offered HELOCS, and I specifically mean the banks, and demonstrate to them the benefits and

features and how well they stack up against the HELOC. The result, we believe, is an opportunity to penetrate that segment of the older American population very significantly.

( BRETT one of the big points I have made previously has been the training of loan officers and not just the technical aspects of the product, but how it applies to a meaningful financial plan for seniors as well.

( CRAIG You’re 100 percent right and that’s a great segue to what is, in a lot of ways, maybe even a bigger applicability of the HECM Saver, and that’s in the context of retirement planning. We know that a significant

amount of older Americans, those approaching or already in retirement, have a significant amount of their assets in what I would call home equity. And we all know that when people are trying to assess retirement income planning, typically they and their advisors tend to look at the investable assets, or the liquid assets. Things like stocks, bonds, cash, 401k and Social Security income are the traditional sources of income that people focus on as it relates to this planning. We feel that home equity is an important part of the retirement income planning process and that it needs to be considered when you’re looking at a holistic retirement income plan.

( BRETT that concept requires a fundamental shift in the mindset of those financial and trusted advisors. Do you see the education effort occurring more at the grassroots level, with originators networking with those advisors, or on a larger scale, such as nrmla working in concert with financial advisor industry groups?

( CRAIG I can’t really speak to what NRMLA might do. However, I would say MetLife Bank is a major player in the reverse mortgage space and one of our guiding principles is education. Let’s face it, the best consumer is a well-educated consumer and the same holds true for the financial and trusted advisors. Taking the retirement income planning a little bit further, here are some things that are very important. There are a tremendous number of decisions that people have to make as they are approaching, or are in, retirement. For example, there’s the question of whether to take out Social Security at age 62 or defer it to a later age. That’s an important decision that thousands and thousands of older American homeowners have to make every day. That’s such an important decision and without really

cRAIGsAys

TRR | 29

Karen Keating recently became the first Title

Professional to become a Certified Reverse

Mortgage Professional

TRUST is EARNED.EXPERIENCE is CREDIBILITY. KNOWLEDGE is POWER.

“I have been in the mortgage business for about 12 years...(and) used a number of title companies. My experience with Tradition had been the best in my mortgage life.

They are responsive... professional and careful with my clients.

Thank you, Karen Keating, for my introduction to your great and professional company.”

–Carol Ryan, Wells Fargo Home Mortgage

(631)328-4410WWW.TRADITIONTA.COM

Tradition Title Agency

Providing our clients with Knowledge, Experience and Trust.

understanding your entire financial picture, you may not be best positioned to make a decision that is the appropriate decision. Understanding where and how home equity can play a role in this can help people make better, or at least more informed decisions. We talk a lot about the idea of how people can use a reverse mortgage to bridge the income gap that is created when an individual decides to defer Social Security in order to maximize their benefits. Just to illustrate, let’s say that someone is able to take $1,000 a month of Social Security at age 62, but if they defer until age 70, they might be able to get $2,000 per month. That’s an important decision. If the decision is to defer, they would likely need other sources of income to bridge the gap created by not taking Social Security at an earlier age. Why not consider a reverse mortgage to fill that income gap?

In the past, the traditional reverse mortgage with the significant upfront costs, utilized for a relatively shorter time period that the deferral period may be, could be seen by some consumers (and perhaps more importantly, financial advisors) as an expensive proposition. But a HECM Saver, with significantly reduced upfront costs … that’s a completely different conversation. And I think that’s just one of many applications that trusted advisors and financial advisors are going to start looking at once they understand what a HECM Saver is all about, and the applicability it may have in retirement income planning.

( BRETT that being true, doesn’t that put a lot of pressure on the originators themselves to be better versed, not just in the reverse mortgage

products, but also how they fit in a larger plan and what those retirement decisions people face are?

( CRAIG You bring up a good point. There are regulations out there that were established back in 2008 as it relates to the Housing and Economic Recovery Act, HERA, and the requirement of firewalls and safeguards as it relates to mortgage originators, and specifically reverse mortgage originators. I think it makes sense that if a

loan officer wants to be the best LO they can possible be, they have to understand not only their consumer, but also the intermediaries they may be working with. Whether they are financial advisors, CPAs, banks or such, that’s just common sense. It’s obviously important the LOs understand their customer and understand their referral network.

At the end of the day – and this is really important – financial advisors should know their customer better than any reverse mortgage loan officer. In the context of providing

sound, thoughtful retirement income planning advice, it probably should come from the financial advisor, not necessarily the loan officer.

( BRETT Before I let you go, are there any encouraging words of wisdom you might have for the industry and to the many dedicated people who have persevered through challenging times?

( CRAIG Well, as I said before, we’re very, very bullish on the reverse mortgage space and our commitment to this space has never been stronger. I am personally pleased that at MetLife Bank, we are uniquely positioned to take advantage of the market environment and I think that’s probably the message that I would put out there for others: Ensure that you are positioned to take advantage of any opportunities that occur in this marketplace, because change is a constant. g

TALK

INTERVIEW

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he Red Flags Rule is enforced by the Federal Trade Commission (FTC), the federal bank regulatory agencies, and the National Credit Union Administration. The Red Flags Rule, in effect since January 1, 2008, requires many businesses and organizations to implement a written Identity Theft Prevention Program designed to detect the warning signs – or “red flags” – of identity theft in their day-to-day operations, take steps to prevent crime, and

mitigate the damage it inflicts. By identifying red flags in advance, businesses

T


the essentials

The Underlying Threat of Identity Theft

By requiring businesses to implement identity theft programs, the red Flags rule protects those on both sides of the equation.

mark SiSco

will be better equipped to spot suspicious patterns when they arise and take the necessary steps to prevent a red flag from escalating into a costly and hurtful episode of identity theft.

The Red Flags Rule protects those on all sides of the equation and describes how certain businesses and organizations must develop, implement, and administer their Identity Theft Prevention Program. now more than ever, we as an industry need to embrace these regulations to weed out the undesirables that prey upon seniors. Remember, fraud comes from all areas, including those that it is set up to protect. Just because they are seniors does not mean they are all honest. The same goes for lenders and brokers/TPOs, and here is where negative situations can arise. The larger the company, the better chance of fraud within its organization, whereas the smaller company can go undetected. Fraud can come from within an institution as well as outside an institution and is all around us – more than 9 million Americans’ identities are stolen each year.

determining who must Comply with the red Flags rule

The Red Flags Rule applies to financial institutions and creditors. The rule requires you to conduct a periodic risk assessment to determine if you have covered accounts. If you have covered accounts you will need to implement a written agreement. The program must be designed to prevent, detect and mitigate identity theft in connection with the opening of new accounts and the operation of existing ones. Your program must be appropriate to the size and complexity of your business or organization and the nature and the scope of its activities. A company with a higher risk of identity theft or a variety of covered accounts may need a more comprehensive program.

HOW TO COmply:

h F i r s t gyour program must include

reasonable policies and procedures to identify the red flags of identity theft you may come across in

the day-to-day operations of your business. Red flags

are suspicious patterns or practices, or specific

activities that indicate the possibility of identity theft. For example, if a customer has to provide some form

of identification to open an account with your company

and presents an ID that looks like it might be a fake, that would be a red flag for

your business.

h s e c o n dgyour program must be

designed to detect the red flags you’ve identified. For example, if you identified fake IDs as a red flag, you must have procedures in place to detect possible fake, forged or altered

identification.

h t h i r d g

your program must spell out appropriate actions you’ll take when you detect red

flags.

h F o u r t h g

your program must address how you will re-evaluate

your program periodically to reflect new risk from this

crime.

Just getting something down on paper won’t reduce the risk of identity theft. That’s why the Red Flags Rule sets out requirements on how to incorporate your program into daily operations of your business. Your board of directors (or a committee of the board) has to approve your first written program, or in the case of a TPO your acting lender and FHA will be the one to approve. If you do not have a board, approval is up to the senior-level employee. Your program must state who’s responsible for implementing and administering it effectively. Because your employees have a role to play in preventing and detecting identity theft, your program must also include appropriate staff training. If you outsource or subcontract parts of your operations that would be covered by the rule, your program must address how you’ll monitor your contractors’ compliance.

The Red Flags Rule allows you the flexibility to design a program appropriate for your company in regards to its size and potential risk of identity theft. While some businesses and organizations may need a comprehensive program that addresses a high risk of identity theft in a complex organization, others with low risk of identity theft could have a more streamlined program.

In my opinion, you must be aware that your program addresses all areas of concern. As more approved FHA lenders entertain the TPOs in the wholesale arena, make sure you abide and do your part in the elimination of fraud within and outside your organization.

Because your employees have a role to play in

preventing and detecting identity theft, your

program must include appropriate staff training.

g

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esting, vesting! 1, 2, 3! When it comes to vesting, there are so many options. Trusts, joint tenancy, community property, tenants in common, life estates. What to choose? Only your borrower and their attorney can make that decision. If they do have their property vested in a life estate, a reverse mortgage is not always a lost cause. There could, however, be potential issues that may ultimately delay or prevent closing.V


the essentials

Life estates: The Changes and Challengesrecent changes made by Ginnie Mae bring new guidelines

when processing a title for life estates. kriSten SchnoeBelen

33TRR |

Ginnie Mae recently made some changes in regards to the certification requirements for the Home Equity Conversion Mortgage (HECM) and the Mortgage Backed Securities Program (HMBS).

tHeSe CHangeS InClude:

1 to verify the promissory note is

executed by the holder of the life estate;

2 the security instrument is

executed by the holder of the life estate and any future interests (sometimes referred to as the remainderman);

3 the intervening assignments

reflect such mortgagors; and

4 the title insurance lists such

mortgagors as holding title.

LIFE ESTATE CONSISTS OF TWO PARTIES: the life tenant (the person who owns the property until a specified event occurs) and the remainderman (the person who acquires ownership of the property upon the demise of the person upon whose life the duration of the life estate is measured). The remainderman is also the holder of either a “future estate” or an “estate in reversion.” The borrower’s children are typically named as remaindermen, some of whom could be difficult with regards to signing off, thus

creating roadblocks along the way. Another potential roadblock is a remainderman’s liens against the property. Any liens against a remainderman will attach to the subject property, and must be addressed during the transaction. Examples include a son or daughter’s child support liens or past-due student loans.

A life estate

can be created in two ways:

It may be granted outright OR it may be reserved via deed.

A typical deed creating a life estate by grant might say:

• “John Jones, a single man, grants to Susie Smith a life estate for the term of her natural life.”

In tHIS CaSe, Susie is the life tenant and John is presumed to be the remainderman who owns the estate in reversion and will reacquire title upon the death of Susie.

• “John Jones, a single man, grants to Susie Smith a life estate for the natural life of Bill Woods.”

In tHIS CaSe, Susie is the life tenant and owns the property until Bill Woods passes away. John is presumed to be the remainderman and title will revert to him upon the death of Bill. Bill has no present

or future interest in the property; his life is merely the yardstick by which the length of the life estate is determined.

• “John Jones, a single man, grants to Susie Smith a life estate for the natural life of Bill Woods, with the remainder to Ralph Baker.”

In tHIS CaSe, Susie, the life tenant, owns the property as long as Bill, the yardstick, is alive. When Bill dies, the property goes to Ralph, the remainderman. Neither John, the grantor, nor Bill, the yardstick, has present or future interest.

Obviously, there are numerous variations of the standard theme. A life estate is essentially stating one person owns the property until a designated person dies, whereupon title is vested into a (usually) predetermined person.

A life estate, an estate in reversion, and a future estate are all interests in real property. Those interests can be bought, sold, gifted, leased, or encumbered. They’re similar to full ownership interest, unless the creating document contains restrictions to the contrary. In most cases the life tenant is responsible for taxes and general upkeep on the property, but this can vary also.

A life estate can be terminated by merger of the “estate for life” and the “estate in reversion.” A deed from the life tenant to the remainderman would merge the interests, and vice versa. >>

&

Life Estate (lif-i’stat):

a form of ownership of real property. It can be created by any of the methods of voluntary transfer allowed by law, i.e., by deed, or by testamentary disposition (leaving property at one’s death, most often through a will). also known as an estate for life, it vests title into one or more persons for the life of “someone.” that someone can be one or more of the grantors, one or more of the grantees, or one or more of some entirely unrelated third party (or parties).

| TRR 34

Both the life tenant and the remainderman will need to execute loan documents. The remainderman may execute in counterpart (outside of closing) but your lender may require otherwise. For specific lender requirements, check with the underwriting department or your relationship manager.

Another deed you might see that is similar to a life estate is a “Lady Bird” Deed. This is another term or a nickname for an enhanced life estate, which is only available in a select few states. The name came from Lady Bird Johnson, because President Johnson supposedly used this type of deed to leave property or land to his wife. An enhanced life estate deed is a variation of a life estate, however this type allows the creator to buy, sell, gift, lease, or

encumber, etc., without the consent of the remianderman. This allows the owner to deed the property to their children (or whomever they choose), and still gives the ability to sell or take out a loan on the property, including a reverse mortgage. The enhanced life estate also allows the property to be free of liens against the reminderman’s creditors, which can be another roadblock.

Although most lenders will loan to a property currently held in a life estate, check with your underwriter prior to accepting applications. If you need help closing a reverse mortgage in a life estate, or simply have questions, please contact us at 800.542.4113 or find us on Facebook at facebook.com/premierreverseclosings. g

Enhanced Life Estate (en’hans-lif-i’stat)also known as “Lady Bird” Deeda variation of a life estate that allows the creator to buy, sell, gift, lease, or encumber, etc., without the consent of the remianderman. allows the owner to deed the property to their children (or whomever they choose), and still gives the ability to sell or take out a loan on the property, including a reverse mortgage. also allows the property to be free of liens against the reminderman’s creditors.

| TRR 36

l

appraiserLoftappraiserloft.com

877.229.7799

Celinkcelink.com

517.321.9002

Direct Finance Corp.dfcmortgage.com

781.878.5626

hanover Financial [email protected]

865.980.3583

ireverse home Loansireverse.com/employment

800.486.8786

l

MetLife Bank, N.a.metlife.com800.607.0366

Mortgage Cadencemortgagecadence.com

888.462.2336

Premier reverse Closingsprclosings.com

800.542.4113

reverse Market Insightreversemarketinsight.com

949.429.0452

reverse Mortgage Crowdsreversemortgagecrowds.com

800.604.6535

reverse Mortgage Successreversemortgagesuccess.com

410.557.0294

l

reverse rate Leadsreverserateleads.com

888.399.1859

reverse Visionreversevision.com

919.834.0070

rMSrmsnav.com888.918.1110

Tradition Titletraditionta.com

631.328.4410

West Star Lending weststarlending.com

949.922.7859

l

the resourcesInformation at your fingertips. a listing of advertisers and contributors featured in this issue.

1 in 5 Number of people expected to be 65 years old by the year 2035. - The New York Times, “The aging of america”

Number

www.nytimes.com/interactive/2011/02/04/business/aging-population.html?ref=business

TRR | 37

HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Mar-keting Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RE-SPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compli-ance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Dis-cuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILAHECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Mar-keting Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RE-SPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compli-ance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Dis-cuss RESPA TILA HECM Saver Fixed LIBOR Mortgagee Letter FHA HUD Compliance Marketing Lead Improve Grow Debate Discuss RESPA TILA

HMBS

as “Holy Grail”of

fixed-income securities

A CONVERSATION WITH

NEW VIEW ADVISORS’ JOE KELLY.

ATARE E. AGBAMU

THE

REVERSEreviewF E B R U A R Y 2 0 1 1

REFORMS:consequences for

ORIGINATORS

3SECRETSfor REFERRALS

customersCHANGING:WHAT LENDERS

MUSTdo

Things are always better looking

IN reVerSe.Advertise with The Reverse Review | [email protected] | 858.832.8320

| TRR 38


the Last Word

The Last LaughanonymouS

while we normally leave you with the Last Word, we recently received this cartoon and thought we could part ways on a comical note, leaving you with the last laugh.

| TRR39 TRR | 39

Loan Origination Technology• Web Based - Accessible anyplace• Cost Efficient - 100% Scalable• Advanced Product and Pricing Engine• Reverse Specific Underwriting Manager• Configurable Advanced Workflow• Digital Document Storage and Retrieval• Access Multiple Lenders & Vendors

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Asset Management• Comprehensive REO Services • Reverse & Forward Mortgages • Claims Management• National Eviction Services• Complete Valuation Solutions

When guidance is extremely important....

rely on experience.

Bob Yeary 281.404.7818 I Marc Helm 281.404.7824 I Kevin Gherardi [email protected]

RMSNAV.com

Join RMS - The Market Leader Offering End-to-End Support

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Enterprise Lending Solutions, Document Services and Compliance SolutionsIn every enterprise, there is an underlying rhythm – a cadence – in the execution of mortgage loans. Those companies that have seamless system integration and dynamic data flow across the enterprise are in rhythm and optimize their efficiency at every step. Their business flows in absolute harmony to increase productivity, retain customers, maintain compliance and reduce costs. Now your company can catch the rhythm and reach a whole new level of performance. Mortgage Cadence is orchestrating the ultimate mortgage origination performance by providing a true Enterprise Lending Solution (ELS) that handles both forward and reverse lending, as well as multiple business channels. With the Mortgage Cadence suite of solutions you have access to full end-to-end loan origination functionality, automated underwriting, business rule management, product and pricing, workflow automation, document services, and Web portals within one integrated platform. No other system in the market today can deliver this level of fully integrated performance tools and compliance support to accelerate the tempo of your enterprise.

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TRR | 41

| TRR42

Documents

The Reverse Review - March, 2011