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RMA Spring


									Reverse Mortgage                                                                                              Reverse Mortgage Borrowers
                                                                                                                                                                             VOLUME 2.1, SPRING 1999

                                                                                             A D V I S O R
                                                                                                                    Tell Their Story
                                                                                                                             SEE    PAGES       8-9

                                                                                                             Texas Reverse Mortgage Legislation
                                                                                                             Moving; First Lenders Approved
                                                                                                             in Massachusetts Under New Law
                                                                                                             By Sandy Asirvatham

                                                                                                                   rogress is being made in Texas to remove impediments to making
                                                                                                                   reverse mortgage loans. A legislative measure to remove present bar-
              A quarterly publication of the National Reverse Mortgage Lenders Association

                                                                                                                   riers has cleared the state Senate and is pending in the state House.
                                                                                                                 Texas is the only state in the U.S. where it’s currently impossible to
                                                                                                             originate the two major reverse mortgage products — the FHA Home Equity
                                                                                                             Conversion Mortgage (HECM) and the Fannie Mae Home Keeper loan.
                                                                                                                 Meanwhile, in Massachusetts, three lenders have been approved to
                                                                                                             originate HECMs, the first to get the green light since the passage of a state
                                                                                                             law in 1998 that broke a stall in the reverse mortgage market that began in
                                                                                                             1997. Fannie Mae has just made available the documentation lenders need
                                                                                                             to make Home Keeper loans in Massachusetts. (See sidebar on p.13.)
                                                                                                                 In Texas, the state Senate recently cleared a measure that would

                                                                                                                                                        TEXAS / MASSACHUSETTS LEGISLATION, continued on page 12

                                                                                                             Successful Marketing of Reverse
                                                                                                             Mortgages to Seniors Requires
                                                                                                             Special Skills and Actions

                                                                                                                    uccessful marketing of reverse mortgages involves the creation of
                                                                                                                    long-term, one-on-one relationships between a lender and his or her
                                                                                                                    senior clients. Drawing on his
                                                                                                             years of work with insurance compa-             INSIDE THIS ISSUE
                                                                                                             nies to market long-term care plans
                                                                                                             and annuity programs, speaker              Reverse Mortgage Legislation ...1
                                                                                                             Robert Huntington emphasized this
                                                                                                                                                        Marketing to Seniors ................1
                                                                                                             point recently in a presentation at
                                                                                                             NRMLA’s 1st Annual Meeting in La           Reverse Mortgage Saves Some
                                                                                                                                                        from Significant Debt................2
                                                                                                             Quinta, CA.
                                                                                                                                                        Message from the President......2
                                                                                                                 Seniors “aren’t just looking for a
                                                                                                             quick, transactional type of interac-      NRMLA News............................3
                                                                                                             tion with a person,” said Huntington,      Legislative/Regulatory Update ..4
                                                                                                             a marketing consultant with Hartford       Long-Term Care Cited as
                                                                                                             Life Insurance Company in Simsbury,        Marketing Opportunity .............5
                                                                                                             CT. Instead, they want a strong, posi-     Reverse Mortgage Borrowers
                                                                                                             tive relationship with a specific indi-    Tell Their Story..........................8
                                                                                                                                                                    NRMLA Events Calendar.........16
                                                                                                                  MARKETING TO SENIORS, continued on page 11
Reverse Mortgage                                                                            A Message from the President
Can Save Some
Households from
Significant Debt, but
                                                                                            By Peter Bell
the Issue is Sensitive

                                                                                  s I sit down to draft an editorial for each

        romotional literature for the                                              issue of this newsletter, I’m never quite
        FHA HECM and Fannie Mae                                                      sure of where I want to go with it. Usually
        Home Keeper programs                            Peter Bell          I think about our recent activities on behalf of
indicate that prospective reverse                                           NRMLA to determine if any particular issue
mortgage borrowers must own                     requires my commentary. Then I move on to read all of the other stories
their home “free and clear” or else             for the current edition that have been prepared under the direction of
have a relatively low remaining bal-            Glenn Petherick, our Director of Communications and Editor-in-Chief.
ance on their existing first mortgage.              For this issue’s commentary, I was inspired by the story summarizing
     But some lenders believe that              Hartford Life Insurance Company’s Robert Huntington’s presentation on
this language is misleading and                 “Selling to Seniors” at our recent Annual Meeting. You will find many use-
that, in fact, reverse mortgage                 ful observations shared by Mr. Huntington covered in the article. Those
transactions can work well even for             that had the biggest impact on me are his points about creating strong
seniors with significant amounts of             positive relationships with clients. It is critically important, Bob essentially
debt. This debt can be an existing              said, that we show our clients respect.
first mortgage on their home, tax                   As the reverse mortgage business strives for growth, one of our
liens for unpaid property taxes,                biggest challenges is to earn respect. It is an old adage that, to earn
credit card bills, and the like.                respect, one must give respect. This is an important point to keep in mind
     “I’d say that 75 percent of the            as we all deal with the various parties we interact with in the course of
reverse mortgages I do involve pay-             promoting, originating, and servicing reverse mortgages.
ing off significant debt,” says Rick                First of all, of course, we must respect our clients. Respect requires
Roode, a loan officer in the                    that we try to truly understand their needs and guide them into products
Philadelphia, PA branch of The                  that appropriately serve those needs and are fairly priced. To take advan-
Reverse Mortgage Company, a
wholly-owned subsidiary of Unity
                                                                                                                                      PRESIDENT, continued on page 10
Mortgage Corp.
     Roode is concerned that the
                                                  The National Reverse Mortgage Lenders Association is a national
standard eligibility language in the
                                                  trade association that provides education, advocacy, and referral
popular literature may discourage
                                                  services to firms that are involved in the reverse mortgage industry.
people who might otherwise con-
sider and benefit from a reverse
mortgage. (Fannie Mae’s Money                                   Jeffrey S. Taylor, CMB                                                   Office
                                                        W E N D OV E R F I N A N C I A L S E RV I C E S C O R P.
from Home pamphlet, for instance,                                     G R E E N S B O R O, N C                           1625 Massachusetts Avenue, NW
says ‘You must own your home free                                            President                                               Suite 601
                                                                           Peter Bell                                       Washington, DC 20036-2244
and clear or have a relatively low                        D WO R B E L L , I N C . , WA S H I N G T O N, D C
                                                                                                                                Tel: 202-939-1760
remaining balance on your existing                              Director of Communications                                      Fax: 202-265-4435
                                                                     Glenn Petherick
mortgage.’) Roode noted: “One of                                                                                                     Web site:
                                                      Manager of Legislative and Regulatory Affairs            
the great things about reverse                                         Kay R. Kinney

mortgages is that they can take                        Program Associate/Marketing Coordinator
                                                                      Cynthia Jachles                                    Reverse Mortgage Advisor is published
people out of situations that appear                                                                                     quarterly as an information service for
to have no solution, and allow them                            Reverse Mortgage Advisor                                   NRMLA members. The subscription
                                                             Editor: Glenn Petherick                                     price is included in membership dues.
                                                        Managing Editor: Sandy Asirvatham
       SIGNIFICANT DEBT, continued on page 15

 2                                                                                                                 Reverse Mortgage Advisor          Spring 1999
NRMLA BOARD OF DIRECTORS                            NRMLA News
           Jeffrey S. Taylor
                CHAIRMAN                            May Meeting Set for Washington
   Wendover Financial Services Corp.
          Greensboro, NC
                                                        NRMLA will hold its Regulatory Compliance Meeting on May 13-14,
                                                    1999 at the Doyle Washington Hotel in Washington, DC. NRMLA’s board
           Roger Reynolds
              VICE CHAIRMAN                         will meet on May 12.
         Norwest Mortgage, Inc.
              Hemet, CA
                                                        The conference, the Association’s third, will feature panel sessions
                                                    on topics of immediate use and interest to professionals in the reverse
        Patrick J. McEnerney
             VICE CHAIRMAN
                                                    mortgage industry, as well as to those thinking of getting involved.
      BNY Mortgage Company, Inc.                    Among the sessions offered will be an update on federal regulatory devel-
            Harrison, NY
                                                    opments affecting reverse mortgages, a snapshot of the market and
             Peter H. Bell                          industry today, a discussion of consumer disclosure requirements, and
              Dworbell, Inc.                        “how-to” sessions on underwriting, origination issues, and quality control.
             Washington, DC
                                                        Space is limited, so sign up now!!
           Harris A. Turkel
      GMAC Mortgage Corporation                     Association Creates New Membership Category
            Horsham, PA
                                                       A new membership category for the National Reverse Mortgage
         Jeffrey M. Birdsell                        Lenders Association was recently authorized by NRMLA’s Board of
              ULLICO, Inc.                          Directors. The action is part of a broader strategy to expand the
             Washington, DC
                                                    Association’s membership.
                                                       The new category, Loan Correspondent, is open to loan correspon-
              Steve Baer
        American Senior Income                      dents who originate 25 or fewer reverse mortgages per year. The dues
              Chicago, IL
                                                    level is $750. For those whose production exceeds 25 loans, the dues
         George Q. Conover                          level remains at $2,500.
   International Mortgage Corporation
            Owings Mills, MD                           Other NRMLA membership categories are: Firms with Board Member
                                                    Representatives, Full Members, GSE/Investor Members, Associate
             Lloyd Daniel
         Senior Loan Center, Inc.                   Members, and Public Members.
             Carmichael, CA

           Michael Hyman                            NRMLA Web Site Mentioned
 Wendover Financial Services Corporation
            Greensboro, NC                              NRMLA’s Web site is mentioned in the best-selling new book by per-
                                                    sonal finance advice writer Suze Orman. On page 239 of the book, entitled
             Ken Keranen
       Seattle Mortgage Company                     The Courage to Be Rich, Orman gives the Web address of NRMLA’s site,
               Seattle, WA
                                           as a source of additional information on
            Nelson Locke                            reverse mortgages. NRMLA’s site is the only resource mentioned by Orman
 America’s Senior Financial Services, Inc.
            Miami Lakes, FL                         besides one of her earlier books, entitled You’ve Earned It, Don’t Lose It.

             Jim Mahoney
           Financial Freedom                        Members Meet With Congressman Lazio
       Senior Funding Corporation
                Irvine, CA                              A number of members of NRMLA met March 4 with Rep. Rick Lazio
                                                    (R-NY) to discuss reverse mortgages and related issues. The political
          Joseph A. Morris
          Unity Mortgage Corp.                      event was used to update Lazio on the use and benefits of reverse mort-
               Atlanta, GA
                                                    gages and to point out that for most seniors, owner-occupied housing
           Anthony M. Oh                            rather than rental housing is the norm, and “aging in place” is preferred.
    Hartford Life Insurance Company
              Simsbury, CT                              Lazio promised to be more sensitive to these points in his future
          Elizabeth Scholz                          speeches about elderly housing. The fourth-term Long Island congress-
              Fannie Mae                            man is chairman of the House Banking Committee’s Housing and
             Washinton, DC
                                                    Community Opportunity Subcommittee, which has jurisdiction over HUD
              Terry Turk
    Sun American Mortgage Company
                                                    and writes housing legislation.
               Mesa, AZ                                                                               NRMLA NEWS, continued on page 16

Reverse Mortgage Advisor              Spring 1999                                                                                  3
                                         Legislative/Regulatory Update
     HECM Volume                         New Developments Include
     Up Slightly in                      Planned Guidance to Counselors,
      Early 1999
                                         Push for HECM Streamlined Refi
                                         HUD TO ISSUE GUIDANCE TO COUNSELORS ON NEW RULES
        The volume of FHA Home               HUD plans to issue guidelines very soon to all HUD-approved coun-
                                         selors for implementing the new counseling requirements related to
    Equity Conversion Mortgages
                                         estate-planning fees for FHA Home Equity Conversion Mortgages. The
                                         new requirements, issued by HUD in a final rule that took effect February
    (HECMs) originated during
                                         18, require HECM counselors to inform prospective borrowers that estate
    the first five months of Fiscal      planning fees aren’t necessary to obtain a HECM loan, and can’t be paid
                                         from HECM loan proceeds.
    Year 1999 is 10 percent                  The final rule doesn’t offer detailed guidance to counselors about how
                                         to provide this information to consumers or how to document that they
    higher than last year’s volume,      have done so. HUD staff have told NRMLA that more detailed guidelines
                                         will be provided directly to counseling agencies shortly. In the meantime,
    according to statistics obtained
                                         HUD advises HECM lenders to work with counselors to ensure that each
    from HUD.                            new counseling certificate includes a notation that the information
                                         required in the final rule has been provided to the borrower.
        According to the Depart-

    ment, a total of 2,972 HECMs
                                         NRMLA PROMOTES STREAMLINED HECM REFINANCE PROGRAM
                                              NRMLA met with HUD staff on March 4 to discuss the possibility of
    were insured during the              implementing a “streamlined refinance” program for HECM loans. NRMLA
                                         advocates a streamlined and less costly process for refinancing HECMs,
    period October 1998 through          including reduced mortgage insurance premiums (i.e., crediting the 2 per-
                                         cent up-front MIP paid for the original loan), reuse of the original counseling
    February 1999.                       certificate, and reuse of the original appraisal under certain circumstances.
                                              HUD officials responded favorably to NRMLA’s proposal and promised
        By comparison, during the
                                         to convene a formal working group on HECM refinancing. The group is
    first five months of FY 1998         scheduled to meet April 7. NRMLA has also submitted draft legislative lan-
                                         guage to establish a streamlined HECM refinance program to the House
    (October 1997 through Feb-           Banking Committee’s Housing and Community Opportunity Subcommittee,
                                         for inclusion in a homeownership bill that Chairman Rick Lazio (R-NY) is
    ruary 1998), volume totaled          expected to introduce in April.

    2,692 loans.
                                         LENDERS MEET WITH SENATORS
        During all of FY 1998,               On March 4, several reverse mortgage lenders met with key senators
                                         and staff to discuss the importance of reverse mortgages and the FHA
    HECM volume totaled 7,877            HECM program. The senators who met with lenders included: new Sen.
                                         John Edwards (D-NC), a member of the Senate Banking Committee; Sen.
    loans, which was up substan-
                                         Rick Santorum (R-PA), Vice Chairman of the Senate Banking Committee’s
    tially from the year before.   RMA   Housing and Transportation Subcommittee; and Sen. John Kyl (R-AZ), a
                                         member of the Senate Appropriations Committee’s VA-HUD and
                                         Independent Agencies Subcommittee.

4                                                                            Reverse Mortgage Advisor     Spring 1999
    NRMLA urges all reverse mortgage lenders to meet as soon as pos-             Long-Term Care
sible with their representatives and senators. If you have questions
                                                                                 Cited As Marketing
about how to go about this, call Kay Kinney, NRMLA Manager of
Legislative & Regulatory Affairs, at 202-939-1788.
                                                                                 Opportunity for
                                                                                 Reverse Mortgages

                                                                                      ong-term care is a sizable
    On March 1, HUD issued its long-awaited statement of policy on the               and growing need among
application of the Real Estate Settlement Procedures Act (RESPA) to the                  Americans that also repre-
payment of fees by lenders to mortgage brokers.                                  sents a marketing opportunity for
    The statement makes it clear that HUD doesn’t consider the payment           reverse mortgage lenders, insur-
of fees by lenders to brokers, including so-called “yield spread premi-          ance executive Cynthia Lawson
ums,” to be illegal per se under RESPA. However, the statement says              told NRMLA’s 1st Annual Meeting
HUD considers such payments legal only if they are reasonable (defined           in La Quinta, CA.
loosely as whatever the market rate is for the type of loan originated),             A reverse mortgage, she
and are for goods, services and/or facilities actually provided to the           explained, can help seniors pay for
lender. Reverse mortgage lenders that use and pay mortgage brokers to            long-term care of the type they
originate loans must ensure that the broker is actually performing ser-          want and where they want it deliv-
vices, or providing facilities or goods, even if the fee is based on the yield   ered, such as at home, especially if
of the loan. HUD acknowledges that it is legitimate for brokers to earn          they plan ahead. Lawson, who
higher fees for loans that are more difficult to originate; a lender doesn’t     spoke at the conference, is with GE
have to pay the same amount to each broker for each loan. Lenders must           Capital Assurance, one of the major
ensure that any fees charged by the broker to the borrower are for ser-          insurance companies that sell long-
vices to the borrower that aren’t the same as those paid for by the lender.      term care insurance policies.
The statement strongly suggests that brokers inform borrowers earlier in             In meeting with prospective
the mortgage process about the fees that they will receive, and that dis-        clients,” she noted, “one of the cri-
closures describe the fees and how they are earned in more detail.               teria for appropriateness of cover-
                                                                                 age is: Can they afford to pay the
MORTGAGE REFORM TALKS CONTINUE                                                   premiums?” Because many seniors
    Efforts continue to develop a consensus among mortgage industry and          Americans are “house rich” but
consumer groups for proposed legislation to streamline and reform RESPA          have limited cash flow, “you offer
and the Truth In Lending Act (TILA). HUD and the Federal Reserve Board           a viable means to fund the cost of
held a meeting on March 4 that was attended by all of the groups that have       long-term care insurance,” Lawson
been engaged in reform talks for the past 18 months. HUD continues to            told the audience.
meet with smaller groups of industry and consumer representatives. RMA
                                                                                 DEFINITION OF LONG-TERM CARE
                                                                                     Long-term care is the set of
                                                                                 services needed by an individual
                                                                                 — generally a senior, but not
                                                                                 always — to help them carry on
                                                                                 their normal daily activities. The
                                                                                 needs these services address vary
                                                                                 by individual but the cause is the
                                                                                 same: reduced independence due
                                                                                 to the loss or impairment of physi-
                                                                                 cal and/or mental capacities.
                                                                                     According to Lawson, the need

                                                                                         LONG TERM CARE, continued on page 6

 Reverse Mortgage Advisor     Spring 1999                                                                                5
LONG TERM CARE, continued from page 5

for long-term care is determined by an individual’s         rations — including General Electric, Ford Motor
inability to perform one or more of the “activities of      Company, and Lucent Technology — have established
daily living,” or ADLs, or incidental activities of daily   programs or “fairs” to inform their employees about
living,” or IADLs. ADLs include bathing, dressing, toi-     options for long-term care for their parents and
leting, moving, and eating. Examples of IADLs are           grandparents. Lawson advised reverse mortgage
taking and keeping track of medication, shopping for        lenders to approach these companies to participate in
basics, cooking, doing laundry, traveling, moving           these initiatives and let firms know that reverse mort-
about outside, and doing light housekeeping.                gages are another option in this area.
     In addition to physical difficulty, long-term care         Separately, she said lenders may want to go
may be needed because of “cognitive impairment,” or         through their first mortgage portfolios, identify bor-
short-term memory loss. Lawson said some behav-             rowers 40 to 60 years old, and mail them a marketing
iors due to cognitive impairment can be dangerous,          piece that talks about reverse mortgages as a possible
such as repeatedly forgetting to turn off the stove         way to address the long-term care needs of their par-
after cooking.                                              ents and grandparents.
     According to Lawson, long-term care can be deliv-
ered in different settings (e.g., at home, in a nursing     COST OF LONG-TERM CARE
home, assisted living facility, adult day-care) and take        Lawson said most people want to receive long-
different forms. It may consist of minor or “standby”       term care at home. But she noted that this may not be
care, such as a daily morning visitor to the home to be     feasible for everyone because of their condition. In
present while a senior bathes and dresses — high-risk       addition, she said home care can be much more
activities because of the potential for falls. Or, at the   expensive than people think, citing such costs as $50
other extreme, it may be extensive “hands-on” care,         per day for a four-hour home care visit, $150 per day
such as 24-hour supervision, medical attention, and all     for round-the-clock custodial care service, or $120
meals provided in a nursing home.                           per home visit by a nurse.
     Lawson said 95 percent of seniors who require              In planning ahead on how to meet their future
long-term care need “custodial care” — assistance in        long-term care needs, Lawson said that consumers
performing the activities of daily living. She noted        need to determine “how far their money will go and
that one in two women will need long-term care in           how long their needs might go.”
their lifetime. For men, the figure is about one in             For instance, she said that by the time a 55-
three, since two in three men die suddenly. She said        year-old today reaches 80 — generally the point
only one in four individuals receiving long-term care       where individuals need long-term care — the cost of
are in nursing homes; the rest are generally at home        a typical package of long-term care services provided
or in assisted living.                                      in the home will cost about $216,000 a year.
     Lawson said long-term care should be thought of
as a continuum of different levels of care in different     PAYING FOR LONG-TERM CARE
settings, because most individuals’ needs change                Lawson indicated that different approaches to
over time.                                                  paying for long-term care include waiting until the
     Lawson said that while family members histori-         care is needed or planning ahead.
cally have provided 80 percent of long-term care, this          If an individual waits until they need care, they
trend is unlikely to continue “because of changes in        will either have to spend out of pocket, try to utilize
our family structures. There are few children avail-        Medicare, or — once they spend down their assets
able to care for seniors” and families are more dis-        and income to qualify — try to depend on Medicaid to
persed today, she said. “With baby boomers having to        pay the bills.
care for their parents, elder care will become the              Lawson noted most people lack the assets, sav-
biggest issue,” Lawson said.                                ings, and investments to be able to pay for extensive
     In fact, she noted that a number of major corpo-       long-term care out-of-pocket for long. And she noted

 6                                                                        Reverse Mortgage Advisor    Spring 1999
Medicare isn’t really a viable option — it generally       sive coverage, which allows long-term care services
pays for only 1.9 percent of all total long-term care      to be provided in all kinds of settings — at home, in a
expenditures.                                              nursing home, assisted living facility, etc. — and
    Similarly, Lawson said Medicaid — the state-           “facility” coverage, where home care is excluded.
administered health insurance program for low-indi-             The premium size also depends on the specific
vidual individuals — won’t pay for many kinds of           kinds of services and care that will be provided under
long-term care services, especially for delivery in the    the policy (e.g., hands-on care only vs. hands-on care
home. She noted the states where the senior share          plus supervision) and on the maximum benefit level
of the population is expected to grow the most             chosen by the consumer (i.e., up to $100 in daily cov-
between 1990 and 2025 (Arizona, California, Florida,       ered costs, $150 per day, unlimited). Another option
Georgia, Nevada, Utah) are states that in 1996 had         is inflation protection, under which the benefit level
the lowest per capita home- and community-based            increases as the policyholder grows older.
Medicaid expenditures. As a consequence, Lawson
said, consumers who live in these states won’t be
                                                                       F O R M O R E I N F O R M AT I O N :
able to turn to the state for help if they want home
care “because the money isn’t there. If they want to
                                                                    Cynthia Lawson, tel. 949-477-6100
stay in their homes they’re going to have to look at
other alternatives like reverse mortgages or long-
term care insurance.”                                                Questions and Answers About
                                                                      Long-Term Care Insurance
    Lawson noted, though, that consumers can also
pay for long-term care using the proceeds from a              Web:
reverse mortgage. Going a step further, though, she                 longtermcareinsurancetips.html
suggested that a wiser step is for consumers to pur-
chase a long-term care insurance policy, which they           Projections of Expenditures for Long-Term
can pay the premiums on if they wish from a reverse                  Care Services for the Elderly,
mortgage.                                                      Report by Congressional Budget Office,
                                                                             March 1999.
LONG-TERM CARE INSURANCE                                                 Web:
     Lawson conceded that long-term care insurance
isn’t cheap, noting a comprehensive policy from a
top insurer for a 75-year-old healthy woman proba-              Lawson said a key element of a long-term care
bly costs $3,000 to $4,000 a year.                         policy is the “benefit trigger” — the specified physical
     But she noted that long-term care insurance can       or mental conditions that, once certified as met, will
make the cost of potential long-term care affordable       qualify an individual to receive benefits under the pol-
by transferring the risk of lengthy, expensive care in     icy. She advised that consumers pick a policy that lets
the future for “pennies on the dollar.” Lawson             their doctor — rather than an HMO — examine them
stressed, though, that consumers must be healthy           to decide whether the benefits should be triggered,
when they apply to qualify for long-term care insur-       and that allows for an appeal of the doctor’s opinion.
ance. Those in need of long-term care benefits when             Lawson explained that some of the home-care
they apply aren’t eligible, she noted.                     services that can be paid for by long-term care insur-
     Lawson said the cost of a long-term care insur-       ance include custodial care in the home, visits by
ance policy will vary, but be determined primarily by      nurses and therapists (physical, speech), physical
the type of benefit coverage selected and the age of       modifications to the home to aid mobility (e.g., ramps,
the individual at the time of application (the older the   grab bars), and “care coordination.” The latter is an
person, the higher the premium).
     The two types of coverage include comprehen-                                       LONG TERM CARE, continued on page 10

 Reverse Mortgage Advisor    Spring 1999                                                                                 7
    Reverse Mortgag
    Tell Their Story
    Ira and Barbara David

                                                ra and Barbara David were certainly not experiencing a financial crisis.
                                                help of a HECM reverse mortgage, this retired teacher and his wife woul
                                                move from their mobile home — where they’d built up about $70,000 in
                                           new place in Del Webb’s Sun City retirement community in Roseville, a hou
                                                 But their lender, Senior Loan Center, Inc., worked out a HECM strategy
                                           Davids to move into their new home without the burden of a forward mort
                                                 Ira David said he first read about reverse mortgages in Consumer’s Dig
                                           1997. He then had to hunt around to get more information. “Nobody seeme
                                           them,” he says. Eventually, someone in the Washington office of HUD put h
                                           Sacramento-based Senior Loan Center, now a division of Freedom Financia
                                                 HECMs can’t be used for new home purchases in the same seamless m
                                           Mae Home Keeper for Home Purchase program — which combines the sale
                                           purchase of a new home, and closing of a reverse mortgage into a single tr
                                           David said, he got the impression that Fannie Mae’s terms were better suite
              Ira and Barbara David        ers than to couples, so he and his wife opted for the HECM program.
                                                 This meant that the Davids had to take title to the new property before
    approval on their HECM application. First, in June 1998 the Davids closed on their new Sun City property with the b
    $70,000 equity from the sale of the mobile home, plus a $75,000 bridge loan received from a local bank. “My credit
    said, “so the bank gave me a personal note.”
        Senior Loan Center immediately put the wheels in motion and, in about nine days, the HECM lump-sum payme
    through. David used this amount to pay off the personal note (the principal plus about $450 in interest).
        Instead of sweating a mortgage payment of $1,500 or so each month, the youthful 77-year-old Davids are now
    When the Reverse Mortgage Advisor spoke with them in March 1999, they were about to take a two week trip “trave
    motor-home to visit some of our great-grandchildren,” Ira David said. RMA

8                                                                      Reverse Mortgage Advisor   Spring 1999
                              Martha Clements
                              M A R T I N C O U N T Y, F L O R I D A

                                      bout four years ago, Martha Clements got herself into a bit of a jam. She had
                                      sold her home after her husband died, and was now living in a condominium in
                                      south Martin County, FL. She’d paid $72,000 for it, and had made another
                              $7,000 worth of improvements. But unbeknownst to her, the developer of the condos
                              still had a large share of unsold units in the development. Moreover, shortly after
                              Clements closed on her place, the developer drastically slashed the sales price for the
                              remaining units. So, five years later, when Clements tried to sell, she was forced to
                              reduce her price to $48,000 and live with the loss of equity.
                                  She subsequently fell in love with an $80,000 attached home in a small planned
                              community in Port St. Lucie, and moved there in July 1997. “It has a garage, and a won-
                              derful location…,” Clements said. “I’ve never lived anywhere that I love so much.” To
                              buy it, she used her equity from the condo sale and cashed in some other investments
                              to buy her new home outright. But then she found herself frighteningly short on
                              income. “I get $540 a month from an annuity, and $611 from Social Security, and that’s
                              what I live on,” Clements said. It was enough to get by on, but not enough to pay for
                              some needed home improvements, and certainly not enough to cover any emergencies
 Even without the             or contingencies.
 ld have been able to             “Years ago, I had heard of these reverse mortgages, but I live in a small town and
n equity — to their           nobody around here knew anything about them,” she noted. After some assiduous
 use costing about            research, Clements was able to track down a few reverse mortgage lenders, but they
                              offered only bad news. Because her small subdivision was not on FHA’s list of approved
  that allowed the            planned communities, she was ineligible for an FHA Home Equity Conversion
 gage.                        Mortgage. And, according to the first few lenders she’d spoken with, her attached house
gest in September             made her ineligible for Fannie Mae’s Home Keeper reverse mortgage.
ed to know about                  Just as she was about to give up, Clements talked to Alexia Landis, a lender with
him touch with                Unity Mortgage Corp. in Miami, who encouraged her to stick with the process. Through
 al Senior Funding
                              Unity, Clements was able to get approval for a Fannie Mae Home Keeper loan. “It’s true
                              that Fannie Mae doesn’t allow duplexes, but this is a bit different, this is simply an
manner as the Fannie
                              attached house,” Clements explained. Unity made the loan to Clements.
 e of an old home,
                                  Clements, who is now 77 years old, took an up-front sum of $5,000, which she used,
 ransaction. However,
                              in part, to install hurricane shutters. She is also receiving a monthly $300 payment that’s
 ed to single borrow-
                              guaranteed for as long as she lives in the home. When the Reverse Mortgage Advisor spoke
                              with her in late March, she had just learned that her air conditioning compressor had
 receiving FHA
                              failed and needs to be replaced. “This was quite a hit in the head,” she said, but with the
builder, using the
 is very good,” David         additional income stream from the reverse mortgage, she’ll be able to absorb the cost.
                                  Clements said her heirs, who all live around Chicago, have expressed no interest in
ent of $75,000 came           getting her house after she passes on. “Some people have this weird idea that they have
                              to save everything. I have a friend who’s loaded, but she goes without and wears hand-
 free to enjoy life.          me-downs, so that she can leave everything to her kids. But they don’t need it!” she said.
eling south in our                “I have this allowance coming through every month, and I intend to live long
                              enough so that I use it all up!”   RMA

           Reverse Mortgage Advisor   Spring 1999                                                                           9
PRESIDENT, continued from page 2

tage of them, by “selling” a loan product that is mis-             atmosphere, we could more successfully work togeth-
matched to their needs or that is priced higher than               er to strengthen the positive impacts of counseling.
necessary, is disrespectful. Such disrespect will certain-             We need to be respectful of HUD’s employees,
ly hinder our growth as an industry.                                                     both at HUD and in the regional
    Secondly, we must patiently pro-                                                     Homeownership Centers, which
vide explanations and disclosures                                                        are responsible for developing and
                                                   AS THE REVERSE
that are straightforward and under-                                                      implementing policy on the FHA
standable. Taking the time to make                     MORTGAGE                          HECM program. They, too, like the
sure that our senior clients fully                                                       counselors, work with severely
                                                 BUSINESS STRIVES
understand the transaction they are                                                      limited resources, lack adequate
entering into is one important                       FOR GROWTH,                         information on the market reali-
aspect of giving respect.                                                                ties of the reverse mortgage busi-
                                                      ONE OF OUR
    We need to extend respect to the                                                     ness, and have ever-expanding
housing counselors who our clients                       BIGGEST                         portfolios of responsibilities to
are required to visit prior to taking                                                    fulfill in a rapidly shrinking
                                                    CHALLENGES IS
out a reverse mortgage. Granted                                                          Department. Through respectful
there are several problems out there             T O E A R N R E S P E C T.              relationships, we can take HUD’s
with the manner in which counseling                                                      career staffers “under our wing,”
                                                      IT IS AN OLD
is delivered and great variation in the                                                  teach them about the dynamics of
quality of counseling offered. But it                A D A G E T H AT,                   our market, and turn them into
will only be through offering respect,                                                   our own internal advocates within
                                                 T O E A R N R E S P E C T,
support, and education to the coun-                                                      the Department.
seling community that we will be                    ONE MUST GIVE                             It is easy to take a cynical atti-
able to overcome the obstacles                                                           tude toward HUD bureaucrats,
                                                        R E S P E C T.
sometimes presented by the current                                                       housing counselors, and, yes, even
counseling mechanisms. Counseling                                                        our clients. We can dwell on their
agencies, after all, are often strug-                                                    biases, insufficient knowledge, or
gling nonprofits working hard to fulfill a civic respon-           wariness of lenders… but that would be unproductive.
sibility, often with severely limited financial, informa-          Instead, if we reach out, and give respect for the impor-
tional, and training resources. Their intent is well-              tant role that all play as we try to build the reverse
meant — even if their performance or practices occa-               mortgage business, we will earn that respect back. That
sionally fail to meet the needs and expectations of                is an essential ingredient if we are to be successful in
borrowers and lenders. In a mutually respectful                    gaining broader acceptance of reverse mortgages. RMA

LONG TERM CARE, continued from page 7

individual who finds the caregivers needed by the                  time. The reason for picking such a carrier is to avoid
client, such as a therapist. Lawson said other possible            the possibility of a future rate hike; she noted some
areas of coverage with a long-term care policy include             lower-rated insurers have raised premiums for exist-
Meals-on-Wheels and home monitoring systems.                       ing policyholders and some more than once.
    Lawson advised consumers to purchase a long-                        Finally, Lawson noted that a federal law enacted
term care insurance policy from a major carrier that               in 1996 allows individuals to be eligible for tax bene-
has at least an A+ rating from A.M. Best Co. and that              fits on their federal income tax return for the costs of
has been selling long-term care insurance for a long               qualified long-term care insurance coverage. RMA

10                                                                                Reverse Mortgage Advisor       Spring 1999
MARKETING TO SENIORS, continued from page 1

vidual lender, rather than a whole department or                    AUTONOMY. “When you lose the ability to do
institution. “Seniors like to know who they’re speak-               what you want and when you want to do it,
ing with over the phone…and when they come in and                   you have a feeling of helplessness,”
talk, they appreciate it when you take the time to                  Huntington said. “Reverse mortgages can
chat with them…and remember their name.”                            further the feeling of autonomy, control,
    Even in the case of direct marketing and telemar-               empowerment.”
keting efforts, Huntington continued, where there’s
no ability for face-to-face contact, it’s still crucial to          ALTRUISM. Seniors have come to the point
create a personal tie between individual representa-                where they feel they want to give something
tives and their prospects, by ensuring that the same                back to society. This manifests itself through
person makes all the phone calls and uses his or her                teaching, volunteerism, charitable giving,
name on all correspondence.                                         and so on. Personal growth is also impor-
                                                                    tant, Huntington said, and in the past decade
POTENTIAL FOR REFERRALS                                             there’s been an increasing number of seniors
     If a lender puts time, effort, and genuine affection           going back to college. Thus, the equity in
into his or her relationship with clients, this creates             their home might be helping them to take a
real potential for referrals of other business. “Seniors            course or participate in an organization.
are a group that has some time to socialize with
                                                                    COMFORT. The idea of a comfort zone is
friends and acquaintances, and word of mouth is a
                                                                    “a very powerful concept for seniors,”
very powerful thing, either in a good direction or a bad
                                                                    Huntington said, as evidenced by the practical
direction.” Furthermore, Huntington said, a strong rela-
                                                                    clothing they buy, for example. A reverse
tionship with your reverse mortgage client can lead to
                                                                    mortgage can “let them maintain the comfort
other forms of business with their children, who are
                                                                    of living in their own home.”
usually involved in the decision-making process.
     Huntington also noted that seniors do best with
                                                                    SECURITY. Physical security is important, but
loan officers who are also seniors or at least mature
                                                                    the emotional security derived from a reverse
adults. (Perhaps the ideal situation is for loan officers
                                                                    mortgage is also a cherished value. There’s
to be 10 to 15 years younger than their clients, since
                                                                    peace of mind in the fact that, if big unfore-
that’s how most people think of themselves, he added.)
                                                                    seen expenses come up, a reverse mortgage
     “Seniors relate to people who’ve been through
                                                                    holder can tap into their line of credit and
many of the experiences they’ve been through.”
                                                                    maintain control, Huntington emphasized.
Although it’s probably impossible to have a sales force
composed entirely of seniors, it’s probably worthwhile
                                                                    CONVENIENCE. The ease of accessing your
to hire an outside consultant or get sensitivity training
                                                                    product and working with your organization
to help a younger staff understand how seniors per-
                                                                    may be as important as the product itself,
ceive themselves and their needs. “Or, you can have
                                                                    Huntington said.
your younger members work with older members, see
how they operate, pick up nuances,” he said.
                                                                  In addition, Huntington listed some key emotional
                                                             concerns that should be touched upon in all lead-gen-
KEY VALUES CITED                                             eration materials and in initial discussions with
    Although reverse mortgage sales involves plenty
                                                             prospective clients. “If the focus is on the product
of generic “Marketing 101” concepts, Huntington
                                                             itself and the financial end of things, you may never
said, “there are several key values that all of us have
                                                             click with them,” he said. “You’re telling them what
to one degree or another as adults, but that are more
                                                             you’ve got, but you haven’t made that emotional con-
pronounced with the senior marketplace.” He said
                                                             nection on how this is going to make their life better.”
these values are:
                                                                                   MARKETING TO SENIORS, continued on page 12

 Reverse Mortgage Advisor      Spring 1999                                                                               11
MARKETING TO SENIORS, continued from page 11               TEXAS / MASSACHUSETTS LEGISLATION, continued from page 1

    Lenders need to demonstrate the way reverse            remove current
mortgages enhance freedom, by allowing seniors to          impediments to
do what they want when they want it, but also keep-        the origination         IN MASSACHUSETTS,
ing them from being a burden on loved ones. With a         of HECM and                THREE LENDERS
reverse mortgage line of credit, for example, seniors      Home Keeper
know that they’ll be able to deal with whatever con-       loans in the                   H AV E B E E N
tingency life may throw at them, Huntington                state, following             APPROVED TO
explained. Lenders must also address this potentially      a hearing at
major sales obstacle: For some people, debt is per-        which Fannie             O R I G I N AT E H E C M S
ceived as a sin. This is especially true with older        Mae testified in
seniors who lived through the Depression, and less so      support of the
with older members of the baby-boom generation,            legislation. The measure has been referred to the
who are comfortable with credit card and other forms       House Committee on Financial Institutions where it is
of personal debt. The solution is to show seniors that     awaiting action. The Texas legislature, in session in
the debt can’t exceed the value of the home, and that      1999, meets every two years.
no payment burden will be passed on to their heirs.             Elizabeth Scholz, Fannie Mae director of senior
                                                           products, told the Reverse Mortgage Advisor that if the
ADDITIONAL RECOMMENDATIONS                                 bill receives House approval and a ballot measure is
      Other small practical issues must be taken into      approved by voters it could be effective as early as
consideration, Huntington said. Many seniors have          the beginning of 2000. The measure, SJR 12, intro-
some degree of hearing loss, he said, so lenders may       duced by state Sen. John Carone, proposes an
have to learn to talk more slowly and keep visual con-     amendment to the state constitution and calls for it to
tact. Seniors may have also lost some visual acuity, so    be submitted to state voters at the election on
it’s important to create all presentation and advertis-    November 2, 1999.
ing materials in a clear-cut, easy-to-read manner.              Scholz said: “We’re pleased with the progress so
“Many seniors are losing the deeper colors, the dark       far and we’re aggressively working with the many
greens and blues and purples,” Huntington said, so         parties involved, including HUD, to do whatever we
materials should be printed in brighter colors with a      can to support this.” She noted that Fannie Mae has
lot of white space. Any typeface less than 11 points in    been active in support for the bill, along with a num-
size should be minimized, if not eliminated, and           ber of groups including the National Association of
glossy paper should be avoided.                            Realtors, AARP, and the Retired Teachers Association.
      Reducing paperwork, or helping seniors with it, is
important. Little things mean a lot in face-to-face and    TEXAS RESTRICTIONS
phone contacts, particularly among older seniors who           At present, current impediments to reverse mort-
may not get out as much anymore. Do some unex-             gages in Texas include a prohibition on reverse mort-
pected things such as reminder calls for meetings and      gages with a line of credit, and the inability of a
birthday or holiday cards.                                 lender to call a loan after a borrower leaves their
      Sales staff must understand that the decision-       home for more than 180 days if the lender knows the
making process for a reverse mortgage is a long,           whereabouts of the borrower.
complicated one. “Even in presentations, you should            SJR 12 would amend the Texas constitution to:
slow down, because seniors may need more time to
process and react. Try not to dump too much informa-               Permit lines of credit as a feature of reverse
tion on them at once,” Huntington advised.                         mortgages.
      In sum, Huntington said, “show them care and
concern and attention, and they’ll reward you with                 Allow reverse mortgages to be used for home
their loyalty and attention.” RMA                                  purchases, as is provided for by Fannie Mae’s
                                                                   Home Keeper for Home Purchase program.

12                                                                          Reverse Mortgage Advisor        Spring 1999
        Authorize a lender to call a loan — provide for
        it to become due and payable — once a bor-                             Home Keeper
        rower ceases to occupy their home for more
        than 12 months. The current requirement
                                                                            Documents Available
        relating to lender knowledge of the borrower’s                       for Massachusetts
        whereabouts would be eliminated.

        Clarifiy that a reverse mortgage becomes due                           annie Mae has just made available the
        after all borrowers have died.                                         applicable documents that seller-ser-
                                                                               vicers need to originate Fannie Mae
        Clarifiy additional conditions that will trigger
                                                                       Home Keeper loans in the state of
        a default, including fraud by the borrower and
                                                                       Massachusetts. These documents include such
        failure by the borrower to maintain the priority
        status of the lien or to repair and maintain,                  items as copies of the loan application and the
        pay taxes on, and insure the property.                         actual mortgage instruments.
                                                                           In late March, Fannie Mae’s legal depart-
[Note: The text of SJR 12 can be found at the Web site of              ment approved the final form and content of the
the Texas state legislature, at]
                                                                       Home Keeper program’s generic documents,
                                                                       allowing individual lenders to include these
    In Massachusetts, three lenders have been                          model documents in their application to
approved to originate HECMs so far, in the wake of                     Massachusetts for a license to originate reverse
last year’s law that liberalized and clarified the rules               mortgages. Prior to this approval, lenders were
for reverse mortgage lending.                                          unable to receive permission to originate Home
    BNY Mortgage Company (BNY) was the first to
                                                                       Keepers in Massachusetts.
receive approval from the Massachusetts’ state bank-
                                                                           According to industry sources,
ing commissioner early this year. Unity Mortgage
Corp. and Norwest Mortgage, Inc. received approval                     Massachusetts hasn’t given any kind of “blan-
shortly thereafter.                                                    ket” approval to the HECM and Home Keeper
    According to executives at all three banks, the                    programs. Rather, individual lenders must apply
application process was both costly and time-con-                      to the state’s banking commissioner and pro-
suming. As of late March, BNY had just closed its first
                                                                       vide details of their particular business plan in
HECM in Massachusetts, Unity was in the process of
                                                                       the state. Elizabeth Scholz, director of senior
closing two loans, and Norwest had just begun dis-
cussions about the HECM program with several                           products at Fannie Mae, told the Reverse
prospective clients.                                                   Mortgage Advisor that Fannie Mae is willing and
    According to a Fannie Mae spokesperson, until                      able to provide support to individual lenders as
1997, Massachusetts state law required that a reverse                  they embark on the application process with
mortgage have (1) a term not greater than 10 years,
                                                                       Massachusetts.       RMA
(2) a loan-to-value ratio of 80 percent or less, and (3)
an outstanding balance no greater than $250,000.
    Language in the original statute provided an
                                                                         T O O B TA I N T H E H O M E K E E P E R D O C U M E N T S :
exception that allowed HECM loans. Norwest was
among the lenders that had begun to originate                                Call Elizabeth Scholz, 202-752-3389.
HECMs under these limitations.

             TEXAS / MASSACHUSETTS LEGISLATION, continued on page 14

 Reverse Mortgage Advisor         Spring 1999                                                                                           13

    In 1997, however, an opinion letter by the state’s         the process had been grueling, but said, “It’s going to
banking commissioner, expressing a different inter-            be a great state for us. The demographics and pent-up
pretation of the law, had the effect of putting a stop to      demand are great.” Unity’s office in Albany, NY will
further HECMs and has prevented origination of any             handle originations in Massachusetts.
Fannie Mae Home Keeper mortgages.                                  Joseph DeMarkey, of BNY Mortgage Company,
    Aggressive efforts to change the statute resulted          noted that the industry must now set about educating
in the enactment in late summer 1998 of a new law              the state’s population about reverse mortgages. “As
that eliminated the 10-year term restriction for               an industry, we’re challenged [around the country]
reverse mortgages as well as a requirement that                with raising public awareness,” he said. “In
reverse mortgages have a fixed                                                       Massachusetts, it’s just a bigger
interest rate. The law also provid-                                                  challenge…because it’s almost a
ed for a seven-day “cooling off”                                                     virgin market.” BNY will originate
period, under which a senior is not               TEXAS IS THE                       HECMs in Massachusetts out of its
bound to take a loan until seven             O N LY S T AT E I N T H E               Boston office.
days after receiving and approving                                                       During the past few years, one
a written loan commitment from                      U.S. WHERE                       nonprofit organization has contin-
the lender.                                     I T ’ S C U R R E N T LY             ued to offer reverse mortgages
    Borrowers must receive coun-                                                     under prior law (and even under
seling from a program approved                   IMPOSSIBLE TO                       the 1997 adverse interpretation) in
by the Massachusetts Office of                   O R I G I N AT E T H E              its efforts to help low-income
Elder Affairs. (For HECM loans,                                                      senior homeowners. The group,
this means that the counselor                       TWO MAJOR                        Homeowner Options for
must be both HUD-approved and                REVERSE MORTGAGE                        Massachusetts Elders (HOME
state-approved.)                                                                     Program), is a state-sponsored,
    Rather than approving the                  PRODUCTS — THE                        nonprofit charity that works
HECM or Home Keeper loan out-                 FHA HOME EQUITY                        through a consortium of 64 mem-
right, the banking commissioner                                                      ber lenders — primarily communi-
must approve each individual                       CONVERSION                        ty banks, thrifts, and co-ops — to
lender for mortgage origination in            MORTGAGE (HECM)                        offer refinancings, individually tai-
the state. Roger Reynolds, of                                                        lored home equity lines, and equi-
Norwest Mortgage, expressed                            AND THE                       ty conversion loans. HOME
extreme frustration at the long and           FANNIE MAE HOME                        Executive Director Leonard
costly process of receiving a                                                        Raymond said the program’s pri-
Massachusetts license. “We had to                  KEEPER LOAN                       mary mission is charitable, and its
hire a local attorney, which cost us                                                 priority is to find grant or loan
about $3,500, to create the individ-                                                 resources for needy seniors, with
ual [reverse mortgage business] plan — and all we’re           equity conversion loans playing the role of a last-
doing is an FHA loan,” he said.                                resort strategy.
    Reynolds decried the state’s micromanagement of                Raymond said the HOME program, and the state
the industry, saying: “Here we’ve got an individual            in general, “certainly welcomes more players” into
program [HECM] that’s already been perfected by the            the reverse mortgage arena. However, he said, the
federal government, and they’re trying to change it,           state’s commitment to protecting and helping seniors
because they want to make it their own program.” In            — particularly the high proportion of low-income
doing so, Reynolds said, “they’ve left their seniors out       elderly in the state — means that Massachusetts will
in the cold.”                                                  continue to “preserve the tradition of bank oversight”
    Joe Morris, of Unity Mortgage Corp., agreed that           of this industry. RMA

14                                                                            Reverse Mortgage Advisor     Spring 1999
SIGNIFICANT DEBT, continued from page 2

to enjoy life again.”                                          financially challenged seniors to stay in their homes.
     Roode notes that much of the promotional lan-             The popular literature for reverse mortgage programs,
guage for reverse mortgages can cause people with              however, suggests that applicants need to be better
significant debts “to give up….It doesn’t make sense to        off, he indicated. On the other hand, it’s equally impor-
discourage potential customers.”                               tant not to fuel another misperception that reverse
     According to Roode, senior homeowners with sig-           mortgages are just for “desperate” seniors.
nificant debt may not have much left from a reverse                 “These [reverse mortgage] programs don’t apply
mortgage after using the proceeds to pay off their             only to the most needy,” says Harris Turkel, Senior
debts, but it can relieve them of ongoing monthly pay-         Vice President and Managing Director of GMAC
ments and provide peace of mind. “One of the best              Mortgage Corporation in Horsham, PA. “We have cus-
things about a reverse mortgage is that it takes finan-        tomers that run the gamut” in income, home value,
cial pressure off senior citizens,” Roode said. “When          and use of the reverse mortgage proceeds, he said.
we pay off a mortgage, it automatically increases their        Turkel rejects the notion that reverse mortgage cus-
disposable income substantially [by                                                tomers are only for the “house-
eliminating the monthly mortgage                                                   rich, cash-poor.” He notes:
payment].”                                                                         “Reverse mortgages are for the
                                                   C E R TA I N LY,
     For example, Roode cited a                                                    house-rich, period.”
senior couple in Bucks County, PA                THE OFFERING                           Turkel added that while older
who lived in a $150,000 home but                                                   seniors frequently have little or no
were struggling with a predatory                  OF REVERSE                       debt outstanding when they apply
$42,000, five-year balloon loan                                                    for reverse mortgages, more and
with a monthly payment of $447.                  MORTGAGES TO                      more younger seniors — those in
The couple also owed $7,200 in                                                     their early to late sixties — are
back taxes, and the home’s roof                   HOUSEHOLDS                       using reverse mortgages to pay off
needed major repairs. “These peo-                                                  existing mortgages.
ple were feeling suicidal because             WITH SIGNIFICANT                          Certainly, the offering of reverse
their house was going to be taken                                              mortgages to households with sig-
away from them,” Roode said. The                     DEBT IS A                 nificant debt is a sensitive issue.
couple, he added, obtained a HECM                                              Fannie Mae, for instance, has dis-
with a lump-sum payment that                    SENSITIVE ISSUE.               couraged participation in reverse
gave them enough to pay off the                                                mortgages by lenders who view the
balloon loan, the back taxes, and                                              product as a “loss mitigation” prod-
finance the roof repairs.                                  uct to generate fees.
     Roode offered another example of an 83-year-old            For some households with significant debts, a
widow whose Social Security payment was slashed            reverse mortgage can help put them back on a solid
after her husband died to the point she couldn’t meet      financial footing and keep them in their home to let
the $550 monthly mortgage payment on the $75,000           them regroup and move on. However, there are other
first mortgage on her $150,000 home. She qualified for     households who have so much debt that a reverse
a HECM mortgage of $105,000 and, using the pro-            mortgage probably won’t help them keep their home
ceeds, paid off her first mortgage, spent $3,600 on        in the long term, but rather just stave off bankruptcy
home repairs, and had $26,400 left over in a line of       or financial collapse for a period of weeks or months.
credit. “She’s got a line of credit that’s growing at 6.25 At what point does a reverse mortgage no longer
percent annually, or about $1,650 a year, and that’s       make sense for a particular household with significant
exactly what her property taxes are,” Roode noted.         debt? In the months and years ahead, the answer
     Roode asserted that in certain critical cases, a      may become clearer as the experience of the
reverse mortgage can play a crucial role in enabling       industry grows. RMA

 Reverse Mortgage Advisor         Spring 1999                                                                         15
                       1999 NRMLA Activities                                              Briefs

                                                                                 Ann Landers Calling
                               M AY 1 2                                              Personal advice columnist
                                                                                 Ann Landers talked up reverse
                  Board of Directors Meeting
                                                                                 mortgages in a column that
                           Washington, DC                                        ran March 15 in newspapers
                                                                                     The column included a from
                                                                                 a California reader responding
                            M AY 1 3 - 1 4                                       to Lander’s previous advice to

               Regulatory Compliance Meeting                                     another reader with 80-year-old
                                                                                 relatives. The California reader
                           Washington, DC                                        suggested a reverse mortgage
                                                                                 and asked Landers to recom-
                                                                                 mend the same. In response,
                                                                                 Landers said she’d heard from
                       SEPTEMBER 8-9                                             “hundreds” of readers who

                  Board of Directors Meeting                                     made the same suggestion,
                                                                                 adding it “sounds like a splen-
                           Washington, DC
                                                                                 did solution.”

                                                                                 Fannie Mae Issues Letter
                                                                                     On February 16, Fannie
                      NOVEMBER 11-14
                                                                                 Mae issued a reverse mortgage
                      1999 Annual Meeting                                        letter (#1999-1) in which it
                                                                                 expressed concerns about
                               Naples, FL
                                                                                 reported cases where some
                                                                                 home repair contractors have
                                                                                 allegedly taken advantage of
                                                                                 reverse mortgage borrowers
                                                                                 and committed abusive prac-
                                                                                 tices. The letter reminds seller-
                                                                                 servicers of their obligations
NRMLA NEWS continued from page 3
                                                                                 and to report to Fannie Mae

    Lazio was instrumental in securing 1998 passage of a package of leg-         any instances in which their
islative changes to the FHA Home Equity Conversion Mortgage program.             borrowers have experienced
NRMLA is seeking to work with the congressman in 1999 to enact addi-             “significant” problems with
tional amendments. In addition, Lazio has called for the creation of a           home repair contractors.   RMA

bipartisan national commission to examine issues that will affect the
seniors population in the future. RMA

16                                                                         Reverse Mortgage Advisor   Spring 1999

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