Irwin Home Equity Closes

					Reverse Mortgage
                                                                                                                                                                        VOLUME 10.1, WINTER 2007




                                                                                             A D V I S O R
                                                                                                             Industry Leaders Offer Insights
                                                                                                             On Direction Of Reverse
                                                                                                             Mortgage Market By Atare E. Agbamu, CRMS
              http://www.nrmlaonline.org




                                                                                                             N
                                                                                                                     RMLA invited some of the reverse mortgage industry’s most promi-
                                                                                                                     nent leaders to discuss emerging business trends, including product
                                                                                                                     design and innovation, and the impact of a growing secondary market.
                                                                                                                Addressing NRMLA’s 2006 Annual Meeting & Expo were Sarah Hulbert of
                                                                                                             BNY Mortgage Company, Bart Johnson of Financial Freedom, John Nixon of
                                                                                                             Seattle Mortgage Company, and David Peskin of Lender Lead Solutions.
                                                                                                             Moderating the panel was NRMLA President Peter Bell.

                                                                                                                                                                        INDUSTRY UPDATE, continued on page 5
              A quarterly publication of the National Reverse Mortgage Lenders Association




                                                                                                             Managing Yourself to be
                                                                                                             Successful: What to Look for in
                                                                                                             a New Reverse Mortgage Hire
                                                                                                             By Atare E. Agbamu, CRMS




                                                                                                             Y
                                                                                                                    ou need help building your reverse mortgage business. Your suc-
                                                                                                                    cess is tied to those you bring onto your sales team. What are the
                                                                                                                    traits and skills of successful
                                                                                                             reverse mortgage loan officers? What             INSIDE THIS ISSUE
                                                                                                             kinds of backgrounds do successful
                                                                                                             loan originators have? What can man-        Establishing Name Brand
                                                                                                                                                         In Your Community....................2
                                                                                                             agers do to help new hires succeed?
                                                                                                                A panel of industry leaders              Introducing Yourself to
                                                                                                                                                         Financial Planners .....................2
                                                                                                             looked at these questions during
                                                                                                             NRMLA’s Annual Conference in San            Marketing Executives Share
                                                                                                                                                         Strategies for Success.................3
                                                                                                             Francisco. Hosted by NRMLA Board
                                                                                                             member and Education Committee              How an Emerging Secondary
                                                                                                                                                         Market Could Increase
                                                                                                             Co-chairman Dean Jones of SCME              Your Profits.................................3
                                                                                                             Mortgage Bankers (San Diego, CA),
                                                                                                                                                         Taking Complexities Out of
                                                                                                             the discussion involved Guy
                                                                                                                                                         Reverse Mortgages .....................4
                                                                                                             Benjamin of Advent Mortgage
                                                                                                                                                         What Originators Should
                                                                                                             (Benicia, CA) and Dan Osterhout of
                                                                                                                                                                 Know About Reverse
                                                                                                                                                                 Mortgage Servicing ....................4
                                                                                                                   MANAGING YOURSELF   continued on page 10
Establishing Name Brand                                               Introducing Yourself to
in Your Community                                                     Financial Planners and
By Stephen Kinney
                                                                      Senior Network Providers
                                                                      By Atare E. Agbamu, CRMS


O
         ne of the most important assets you can
         develop for your business is a strong brand.


                                                                      Y
                                                                             ou need leads. You want good sources.
         Brands are not just logos or slogans. Brands
                                                                             Financial planners could be a good source. So
are the culmination of who you are, how you’re dif-
                                                                             could other senior-related professionals, such
ferent from your competition, and why a buyer
                                                                      as insurance agents, elder-law attorneys and
should do business with you.
                                                                      accountants.
    Whether you’re a large company or small, estab-
                                                                          Where do you find these professionals? How do
lished or a start-up, establishing a brand can have a
                                                                      you go about introducing yourself and your reverse
tremendous impact. A strong brand establishes con-
                                                                      mortgage business to them? What standards do you
fidence and familiarity, creates loyalty, and may help
                                                                      use to select the right partners? What kinds of ques-
you to command a premium price. Most of all a good
                                                                      tions should you ask? How do you nurture these
brand reduces the perception of risk and makes a
                                                                      relationships? What are the issues to keep in mind
purchase choice easier.
                                                                      as you develop these business relationships?
    Developing a brand is more than just deciding
                                                                          These are some of the questions that a panel of
on a name, slogan or picking some colors. It is the
                                                                      industry leaders with financial-planning backgrounds
summation of all you do and how you wish to be
                                                                      addressed at NRMLA’s Annual Conference in San
perceived. It’s derived from all your touch points with
                                                                      Francisco.
your customers and prospects. Developing a brand
                                                                          Hosted by Rob Wyatt of Fifth Third Bank (Cape
requires having a plan that consistently communi-
                                                                      Coral, FL), the panel featured Scott Hanson of Liberty
cates what your company is and does, along with
your distinct image, attributes, and personality.                                                  FINANCIAL PLANNERS, continued on page 11

WHAT IS A BRAND?                                                       The National Reverse Mortgage Lenders
   A brand is an idea, feeling, and mental imprint                     Association is a national trade association that
you impart to the public based on everything you do.                   provides education, advocacy, and services to
Your logo and/or slogan are small pieces of your                       firms that are involved in the reverse mortgage
                                                                       industry.
brand. A brand should also suggest your story or
                                                                                                  Co-Chairs
how you are distinctive in the product or experience
                                                                                               Jim Mahoney
you deliver. Anyone who competes needs to brand.                              FINANCIAL FREEDOM SENIOR FUNDING CORP., IRVINE, CA

A brand enhances the selling process. It can help you                                         Sarah Hulbert
                                                                                         BNY MORTGAGE, RENTON, WA
command a higher price and create customer loyalty.
                                                                                                  President
Branding consultant and author Karen Post                                                        Peter Bell
(www.brandingdiva.com) compares this notion to a
                                                                                                Vice Presidents
“brain tattoo” put there by choice, but which can be                                          Darryl Hicks
                                                                                             Barbara Zamora
removed at any time.
                                                                                           Reverse Mortgage Advisor
   Brands are built on the 4 P’s: Purpose; Perception
                                                                                            Editor: Darryl Hicks
of Difference; Personality; Promise.
                                                                                                    Office
                       ESTABLISHING NAME BRAND, continued on page 8
                                                                                  1400 16th Street, NW, Suite 420
                                                                                    Washington, DC 20036-2244
  A reverse mortgage is a unique loan that enables senior                      Tel: 202-939-1760, Fax: 202-265-4435
                                                                                 Trade site: www.nrmlaonline.org
  homeowners (62+) to convert part of the equity in their
                                                                             Consumer site: www.reversemortgage.org
  homes into tax-free income without having to sell the home,
  give up title, or take on a new monthly mortgage payment.                Reverse Mortgage Advisor is published quarterly as an
                                                                                information service for NRMLA members.
                                                                          The subscription price is included in membership dues.


 2                                                                                    Reverse Mortgage Advisor             I   Winter 2007
NRMLA BOARD OF DIRECTORS                                   Marketing Executives Share
           EXECUTIVE COMMITTEE                             Strategies for Success
             Jim Mahoney, Co-Chair                         By Atare E. Agbamu, CRMS
Financial Freedom Senior Funding Corp., Irvine, CA

           Sarah Hulbert, Co-Chair




                                                           W
           BNY Mortgage, Renton, WA                                   hether you are an industry veteran or a newcomer to the
         Joe DeMarkey, Vice Chairman                                  reverse mortgage business, one option to stay ahead of the
           BNY Mortgage, Milford, MA
                                                                      competition is to seek advice from a marketing specialist
     Patrick J. McEnerney, Vice Chairman
           Mortgage IT, New York, NY                       who can help you grow your business more wisely.
           Mary Ressetar, Secretary                            Three marketing executives, David Peskin (CEO) and Jean Noble
   Wells Fargo Home Mortgage, Park Ridge, IL
                                                           (Vice President) of Lender Lead Solutions, based in Melville, N.Y., and
            Dan Ryan, Treasurer
  Farwest Mortgage Bankers, Inc., Placentia, CA            Patrick Seroka, (President) of Seroka & Associates, of Waukesha, WI
                  DIRECTORS
                                                           shared their marketing savvy at NRMLA’s 2006 Annual Conference in
               William Agner
                                                           San Francisco.
  The Mortgage Network, Inc., Indianapolis, IN

             Mark Browning
   Community Home Equity Conversion Corp.
                                                           ON ADVERTISING
               Rochester, NY                                  Noble advised lenders to view advertising as an investment. Like
            Nicholas Buscaglia                             any investment, you need to consider a Return on Investment (ROI),
    M & T Mortgage Corporation, Buffalo, NY

                 David Carey
                                                           you need a game plan, and you need to define goals.
          Fannie Mae, Washington, DC                          If you operate a small company with a limited marketing budget,
           Cheryl Chapin MacNally                          then your best option is lead generation and direct-response advertis-
    Wells Fargo Home Mortgage, Bourne, MA
                                                           ing. Your ad should have a “compelling message, a compelling offer,
                  Steve Irwin
    Financial Freedom Senior Funding Corp.
               San Francisco, CA                                                                         MARKETING 101, continued on page 12
                 Bart Johnson
Financial Freedom Senior Funding Corp., Irvine, CA

               Robert Sivori
        BNY Mortgage, West Paterson, NJ
                                                           How an Emerging Secondary
              Vanessa White
       BNY Mortgage, West Paterson, NY

                  John Nixon
                                                           Market Could Increase
    Seattle Mortgage Company, Bellevue, WA

               Shawna James
                                                           Your Profits By Atare E. Agbamu, CRMS
           Mortgage IT, New York, NY




                                                           T
                  Tony Garcia                                     he secondary market is the source of financial oxygen for the
  LibertyStreet Reverse Mortgage, Carlsbad, CA
                                                                  mortgage lending business, forward or reverse. Smart origina-
               Dean Jones
  SCME Mortgage Bankers, Inc., San Diego, CA                      tors pay attention to what’s happening there.
                David Levitt                                   Fannie Mae is still a major investor of HECM loans, but that is
  Circle Mortgage Corporation, Hollywood, FL
                                                           changing. Major investors are beginning to smell the coffee in reverse-
                  John Myers
        Financial Heritage, San Diego, CA                  land. They are getting ready to pour serious money into reverse mort-
                Scott Norman                               gages, which could increase the value of the loans you originate.
 Financial Freedom Senior Funding Corporation
                  Austin, TX
                                                               To help originators understand how a growing secondary market
                 David Peskin
                                                           for reverse mortgages can enhance a loan’s value, NRMLA asked
           Vertical Lend, Melville, NY
                                                           Patrick McEnerney of MortgageIT and Craig Corn of BNY Mortgage,
                 Robert Wyatt
        Fifth Third Bank, Cape Coral, FL
                                                           industry leaders with strong secondary marketing know-how, to speak
                                                           on the subject at the NRMLA Annual Meeting & Expo in San Francisco.
              FOUNDING CHAIRMAN
              Jeffrey S. Taylor
Wells Fargo Home Mortgage, Inc., Greensboro, NC
                                                           HECM’S RISK PROFILE AND INVESTOR’S CAPACITY
                   EX-OFFICIO                                  An industry pioneer, McEnerney said HECMs present investors with
            Peter H. Bell, President
            NRMLA, Washington, DC
                                                           a low-risk way to enter the business. FHA insurance protects the bor-
     James A. Brodsky, General Counsel                     rower and lender and makes lower rates possible. Credit risk is low. If
Weiner Brodsky Sidman Kider, PC, Washington, DC
                                                                                                     SECONDARY MARKET, continued on page 14

Reverse Mortgage Advisor                 I   Winter 2007                                                                                 3
Taking the                                                          What Originators
Complexities Out of                                                 Should Know about
Reverse Mortgages                                                   Reverse Mortgage
By Atare E. Agbamu, CRMS
                                                                    Servicing By Atare E. Agbamu, CRMS

T
      he art of explaining challenging reverse mort-


                                                                    E
                                                                           very loan originator should be able to discuss
      gage concepts to seniors starts with patience,
                                                                           in detail how a reverse mortgage works,
      a good ear, and good questions. That is the
                                                                           explain the role of processing and underwrit-
advice three reverse mortgage industry veterans—
                                                                    ing, but most importantly what happens after a
Sarah Hulbert of BNY Mortgage, John Lucas of
                                                                    loan closes.
GMAC Mortgage, and Barry Scoles of 1st Reverse
                                                                       Borrowers need to fully understand their
Mortgage USA—presented at NRMLA’s 2006 Annual
                                                                    contractual obligations and the role played by the
Meeting & Expo in San Francisco.
                                                                    loan servicer, so that they understand how the
                                                                    administration of a reverse mortgage works (includ-
COMFORT, TRUST, AND CONFIDENCE                                      ing payment plan changes), tax and insurance
BEFORE UNDERSTANDING                                                defaults and loan maturity issues.
    Your average reverse mortgage customer is a                        To discuss these topics, NRMLA invited Steve
74-to-75-year-old widow. For most of her life she                   Irwin, Vice President at Financial Freedom, San
may not have had to deal with financial matters                     Francisco, Calif., and Linda Bridges, Assistant
because, as is common with her generation, her late                 Vice President at Wells Fargo Home Mortgage,
husband handled those issues. She’s worried about                   Greensboro, N.C. to speak at NRMLA’s Annual
reverse mortgage unknowns. She has questions,                       Meeting & Expo.
concerns, troubles, and struggles. She’s afraid of
being scammed.                                                      FUNCTION OF A REVERSE MORTGAGE SERVICER
    As a reverse mortgage loan originator, your first                   Following is a list of key services handled on a
job, advised all three speakers, is to calm the bor-                daily basis by a reverse mortgage loan servicer,
rower’s fears and make her comfortable with the                     according to Irwin and Bridges:
idea of a reverse mortgage. How do you calm her
fears, gain her trust, and build her confidence in                  I   Making Payments to a Borrower. A loan
you? Consider the following measures:                                   servicer fulfills scheduled monthly payments for
                                                                        life (tenure) or for a specific period of time
I   Be extremely patient                                                (term), unscheduled credit line payments at the
I   Listen closely to what her concerns may be                          borrower’s discretion, or a combination of these.
                                                                        Requests must be submitted in writing to access
I   Ask good questions                                                  funds from a line of credit. A fax is considered a
I   Don’t do all the talking. Have a conversation                       written request. The servicer has five business
    with your borrower                                                  days from the date the written request is received
                                                                        to mail or electronically transfer the funds. The
I   Involve her children or other trusted advisors                      five business days begins on the day the request
    (with her consent)                                                  is received.
I   Offer solutions and reassurance
                                                                    I   Processing Payment Plan Changes. A loan
I   Emphasize the government’s relationship with                        servicer processes borrower requests to change
    the HECM                                                            payment plan options for a nominal fee of $20
                                                                        for someone who received a HECM or $50 for a
    Only after you have calmed her fears and earned                     HomeKeeper.
                           EXPLAINING TERMS, continued on page 15                                  SERVICING, continued on page 6

4                                                                                Reverse Mortgage Advisor    I   Winter 2007
INDUSTRY UPDATE,
continued from page 1


GET READY FOR A RIDE                                         As more lenders enter the industry, noted Peskin,
    Reverse mortgages are becoming more widely           they will need to get more sophisticated and take
known and accepted as a result of NRMLA’s ongoing        their businesses to the “next level” through educa-
PR campaign, increased lender marketing, and posi-       tion, better marketing strategies, and back-office
tive media coverage, said Hulbert. These factors, as     efficiencies. Lenders need to know how to increase
well as natural growth in the older adult population,    their market share over time, he said.
contributed to yet another record year for lenders.
    Training new entrants to abide by NRMLA’s Code       NEW TWISTS IN PRODUCT INNOVATION
of Conduct and Best Practices remains essential to           `Commenting on where he sees product innova-
the continued growth of the industry, but will be a      tion headed, Nixon said there is customer demand for
challenge, said Nixon, as more third-party loan          fixed-rate products. He also said proprietary “jumbo”
originators enter the program.                           programs will most likely need a tenure option
    Johnson forecasted loan production to exceed         (monthly payments for as long as customer lives in
100,000 loans in 2007, just for the HECM program.        the home) to augment a line of credit. Addressing the
With more proprietary products under development,        upfront cost-structure of reverse mortgages will
and more potential investors poised to enter the         continue to drive product innovation. He said a zero-
market to compete with Fannie Mae, the reverse           upfront cost loan should be available for borrowers
mortgage industry is starting to look a lot different.   who want to stay in their homes for a short period.
The industry has changed “forever,” said Johnson,            Hulbert said upfront costs have become a major
“so get ready for a ride.”                               issue with AARP, HUD, Congress, and customers.
                                                         Restructuring products to reduce or eliminate
BEYOND HECM: INVESTORS, PRODUCTS,                        upfront costs will help sustain our industry’s remark-
NEW INCOME STREAMS                                       able growth.
    More investors could lead to greater product             While HUD has worked with NRMLA to improve
diversification, added Bell. Because the average         the HECM product, new proprietary products should
reverse mortgage borrower is becoming more savvy,        be more user-friendly and less onerous. Johnson said
said Hulbert, more products are being developed to       the industry should look to the “forward” mortgage
meet consumers’ specific needs beyond HECM,              industry for lessons on how to do things better and
which is still the industry staple.                      easier. “We don’t have to reinvent the wheel,” he said.
    Peskin said more investors could mean reduced            When asked whether private mortgage insurance
costs, for both HECMs and other competing prod-          (PMI) companies should be looking at the reverse
ucts, which makes reverse mortgages even more            mortgage industry, Nixon and Johnson agreed that
attractive for many seniors who now balk at their        now is the perfect time. Greater access to perfor-
high upfront costs.                                      mance data, coupled with a slowdown in the forward
    Nixon predicted that six to eight new products       market, have already led some private insurers to
would be introduced in 2007. While good for con-         explore the opportunity, which in the end, could lead
sumers, he expressed concern over the impact this        to further product innovation.
will have on the existing counseling network.
    Johnson said a larger investor base, and a more      SERVING CLIENTS’ NEEDS
sophisticated secondary market, will demand                 As the financial services industry evolves, Nixon
investor-quality loan files. Nixon said a more active    suggested that the reverse mortgage business work
secondary market could create greater value for          with insurance providers to design better annuities
reverse mortgages, beyond origination fees. The          that can meet the specific needs of certain con-
challenge will be how to push the new income             sumers because “not all annuities are bad.” The
streams down the distribution network to help            Seattle Mortgage executive believes “free enterprise
reduce upfront costs for seniors.
                                                                                   INDUSTRY UPDATE, continued on page 6

 Reverse Mortgage Advisor   I   Winter 2007                                                                         5
INDUSTRY UPDATE, continued from page 5                                                 SERVICING, continued from page 4

will drive the most suitable products to seniors in the most efficient                 I   Issuing Account Statements.
manner.”                                                                                   A loan servicer issues periodic
    Johnson said the reverse mortgage industry is unique because most                      account statements; generally
players put seniors’ interests first and NRMLA has done a stellar job,                     monthly or quarterly.
advocating seniors’ rights. Consumer groups don’t necessarily trust
                                                                                       I   Notifying Customers of Rate
lenders or see the good they do, he added. As the industry grows and
                                                                                           Changes. Because the HECM
product options expand, the question of ethics and best practices
                                                                                           is a variable rate loan, a loan
becomes increasingly important as questionable players “who want to
                                                                                           servicer must give a borrower
make a buck” enter the marketplace.
                                                                                           25 days notice of any interest
    Serving our clients’ best interests could mean “protecting seniors
                                                                                           rate changes.
and their use of funds,” for example, using reverse mortgage funds to
buy annuities. On the other hand, it could be about putting the cus-                   I   Tracking Principal and
tomer in a product that most benefits the borrower, not the product that                   Interest. A loan servicer tracks
makes the lender the most money. He asked, “Are you selling them the                       principal and interest owed on
best product?”                                                                             any account at any time.
    In a broader sense, there are three moving parts to think about,                   I   Monitoring Property Taxes
added Hulbert, including:                                                                  and Insurance. A loan servicer
                                                                                           makes sure that property taxes,
I       Education. As companies grow and expand their staff, they must
                                                                                           hazard insurance, and flood
        ensure that loan officers are properly trained to present available
                                                                                           insurance (if applicable) are
        product options in a concise manner so borrowers can make the
                                                                                           kept current. If an insurance
        best decision;
                                                                                           policy lapses, the servicer will
I       Increased counselor education to make sure counselors are                          instruct the borrower to renew
        knowledgeable about all products; and                                              the existing policy or seek a new
                                                                                           policy. If there are no insurance
I       Systems (technology) that can helps customers decide what best                     carriers willing to insure the
        meets their needs.                                                                 property, then the servicer may
                                                                                           seek a “force-placed” insurance
    There are people waiting to give the industry bad press, Peskin said.
                                                                                           policy. If the borrower has no
Our industry must make sure this doesn’t happen by doing what is right
                                                                                           money to pay for taxes or insur-
by the customer. A loan officer should be able to show a customer how
                                                                                           ance, then the servicer can call
a reverse mortgage benefits him or her instead of just saying, “Here is a
                                                                                           the loan due and payable. A
reverse mortgage.” He said, “if you give a customer a reverse mortgage
                                                                                           loan cannot be assigned to
for the wrong reason, it’s going to come back to haunt you. Give them a
                                                                                           HUD when the taxes or insur-
reverse mortgage to satisfy a need.”
                                                                                           ance are not current.
    Bell concluded that the “ancillary” product issue is an area of concern.
He believes it drove the recent consumer protection law in California as               I   Certifying Borrower
well as similar legislation in Connecticut. (see fall issue of RMA). It is an              Residency. A loan servicer
issue NRMLA must grapple with, he said. RMA                                                confirms through an annual
                                                                                           certification process that the
Atare Agbamu formed ThinkReverse LLC, a Twin Cities-based training/consulting              property securing the reverse
firm, to help originators address demographic change via reverse mortgages.                mortgage loan is still the prima-
Besides marketing, originating, and researching reverse mortgages since 2001, he           ry residence of the borrower(s).
has authored over 60 articles on reverse mortgages and a book (Think Reverse!          I   Administering Repairs. A
[2007]). His monthly column, “Forward on Reverse,” is nationally distributed by            loan servicer makes sure all
The Mortgage Press.                                                                        mandatory repairs required as a
                                                                                                     SERVICING, continued on page 7

    6                                                                              Reverse Mortgage Advisor    I   Winter 2007
SERVICING, continued from page 6

     condition for closing a loan are completed within     But the change doesn’t happen overnight. The
     HUD guidelines. HUD requires all mandatory            process can take up to 30 days, according to Bridges
     repairs to be completed by the repair expiration      and Irwin. It takes time to process a payment plan
     date, although a borrower can apply for exten-        change, so originators should stress these facts
     sions (up to one year after closing). If the bor-     upfront and put the borrower in the right payment
     rower refuses to complete the repairs within          plan prior to closing. Here is how a HECM payment
     one year, then the servicer has the authority to      plan change works:
     suspend all payments or access to funds.
                                                           I   Borrower requests a payment plan change in
I    Acting as Escrow Agent. If a customer creates             writing to the loan servicer;
     a set-aside for property taxes, hazard insurance,
                                                           I   A new payment plan agreement is created and
     and flood insurance (where applicable), the loan
                                                               sent to borrower(s) for signature(s);
     servicer makes those payments.
                                                           I   A signed payment plan agreement is received
I    Calling Loan “Due and Payable.” After the last
                                                               and entered into the FHA system;
     remaining borrower permanently vacates the
     property, the loan servicer can call the loan due     I   A new payment plan agreement becomes
     and payable. The heirs or estate have six months          effective on the first business day of the month.
     to pay back the loan, either using private funds or
                                                              Because a servicer cannot effect a payment plan
     selling the home. If payment is not received after
                                                           change without receiving a signed new payment
     six months, the heirs or estate can apply for two
                                                           plan agreement from the borrower, the importance of
     3-month extensions. In cases of default under the
                                                           promptly signing and returning a payment plan change
     terms of the loan agreement, a loan servicer can
                                                           agreement should be emphasized to borrowers.
     call a loan ‘due and payable.’ Examples include
     non-payment of property taxes, allowing property
                                                           FACTORS AFFECTING PAYMENT PLAN CHANGES
     insurance to lapse, and permitting the property to
                                                             Below is a list of reasons why borrowers often
     fall into disrepair.
                                                           want to change their payment plans:
I    Executing Foreclosure. If foreclosure becomes
                                                           I   Customer wants to increase or decrease monthly
     necessary, the loan servicer carries out the
                                                               cash advances;
     process. A foreclosure can occur if the borrower’s
     heirs or estate do not respond to a servicer’s        I   Customer wants to set up a line of credit because
     request to pay back the reverse mortgage when it          one was not created at origination;
     becomes due and payable.                              I   Customer wants to create a set-aside to escrow
I    Processing Prepayments. If a borrower wants               for property taxes or insurance;
     to make partial or full re-payment of the loan, the   I   Customer wants to make a partial pre-payment;
     loan servicer fulfills the request.
                                                               and change their scheduled payment amount
I    Releasing Lien on Property. When a loan               I   Loan servicer forces a change to create a tax and
     payoffs, the loan servicer releases the lien on the
                                                               insurance set-aside because a borrower is chron-
     property.
                                                               ically delinquent.
I    Reporting to Investor. Finally, the loan
     servicer reports on the status of a loan to the       GROWTH IN LINE OF CREDIT
     investor or owner of the loan.                            One issue that servicers would like loan origina-
                                                           tors to better explain upfront pertains to the growth
PAYMENT PLAN CHANGES                                       factor in the HECM line of credit option.
   Reverse mortgage borrowers can change their                 The line of credit is NOT an interest-bearing
payment plans whenever they wish for a small fee.          account. Instead, the growth factor takes into con-
                                                                                           SERVICING, continued on page 8

    Reverse Mortgage Advisor   I   Winter 2007                                                                        7
SERVICING, continued from page 7             ESTABLISHING BRAND NAME, continued from page 2

sideration that a borrower’s home            THE BRAND PURPOSE
has appreciated in value over the past           What are you trying to accomplish with your brand? What is
12 months and that a person is one           the idea, emotion, thought or result that you hope to accom-
year older.                                  plish when someone sees your name, logo or byline? The brand
                                             purpose should be clear, concise, practical and measurable.
TAX AND INSURANCE ISSUES/
TAX DEFERRAL PROGRAMS                        PERCEPTION OF DIFFERENCE
    Irwin and Bridges explained that loan        The best brands establish a difference in a potential cus-
originators should encourage borrowers       tomer’s mind. This difference can be real or perceived. If your
to establish set-asides for taxes and        company has built a better mousetrap or has a better way of
insurance, because it helps avoid future     doing something, then your brand should convince a potential
defaults. T&I defaults have been a recur-    customer of this. Whether your product or service is actually
ring headache for servicers. Some bor-       superior is not the key factor (although maintaining the per-
rowers exhaust all the proceeds from         ception is the key to repeat business).
their reverse mortgage and have no               Perception is reality when establishing a brand. Google
money left over to pay for property taxes,   may not be the best search engine on the Internet, but if it’s
or the borrower allows the insurance         branding convinces you otherwise, then it may not need to be
policy to lapse.                             the best. Conversely, if you do have a superior product and
                                             your branding doesn’t convince the marketplace of this then
HUD AS SERVICER                              your success will be limited. It’s not enough to say you have
   Once a loan reaches 98% of the origi-     the best service (whether it is true or not); your branding has
nal FHA lending limit or maximum claim       to convince the market it is true.
amount, a servicer can assign the loan to
HUD. HUD contracts with First Madison        PERSONALITY
Services to service all assigned loans.          Personality establishes a feeling in the marketplace for
                                             your company. It gets a customer’s attention, and when done
NURSING-HOME STAYS                           right creates an emotional response. Geico’s branding cam-
    When a nursing-home stay extends         paign is a great example of establishing a brand personality.
beyond 12 months, a loan servicer evalu-     It gives us an impression that they are customer friendly and
ates whether the borrower ever intends       easy to deal with. Establishing a brand personality can come
to return home before calling a loan due     through picking the right spokesperson, or the tone and
and payable. The evaluation may include      colors used in your advertising or logo, or where and how
talking with the customer’s medical team.    you market your company.

WHEN HECM CUSTOMER(S) DIES …                 GET STARTED BUILDING YOUR BRAND
    When the last borrower (or spouse             Getting to your brand identity is a four part collaborative
in the case of couples) dies, the loan       process. Begin by establishing a team made up of creative
servicer sends a ‘due and payable’ notice    people from the areas within your company that will be most
to the heirs or estate. If the heirs or      affected by the branding plan that you create. If you can afford
estate have not responded within six         it, you may want to seek out professional help as well.
months, then the servicer has the option
to foreclose.                                LISTEN
    Depending on how long it takes to sell      Start by listening to your employees, customers and com-
the home to satisfy the loan, a servicer     petitors and begin assessing your premise and the desired
may ask HUD for up to two 90-day exten-      conclusion of the branding process.
sions after the initial six months. RMA
                                                                             ESTABLISHING BRAND NAME, continued on page 9

 8                                                                    Reverse Mortgage Advisor       I   Winter 2007
ESTABLISHING BRAND NAME, continued from page 8

    Investigate your current brand and the assets and      I   Brand Message—Talking points, elevator
image it brings to your organization. Learn from your          speech, and tagline
team and your clients the perceptions (brand image)
that your brand has in the marketplace, the position       RECOMMENDATIONS AND ACTION ITEMS
it has established, and the promises it has made,              The Branding Diva, Karen Post, recommends
kept, and broken.                                          these action items for establishing a super brand: 1)
    Finally, evaluate the desired conclusion and ask       Draft your brand promise or essence 2) Define and
yourself about your strategic goals and what value         relate to your target audience 3) Choose a brand
the new brand should bring to reach those goals.           name 4) Create a logo 5) Make a list of all your other
                                                           touch points 6) Create a demand for your brand.
QUESTION
    Brainstorm and work with your team to move your        THE BRAND PROMISE
brand into the market presence you want to establish.         Your brand promise is the idea or emotion that
Through questioning and research define the percep-        you want the marketplace to take away with them
tions you would like to build, outlining the core con-     when they see or hear your brand. A well executed
cerns of your target audience and how to reposition the    brand promise can have a dramatic impact on
brand to develop new client relationships and differ-      your business. A brand promise should….matter to
entiate yourself from your competitors. Your current       customers; be unique or differentiate you or your
brand’s presence determines the best way to gather the     company; and be believable and attainable.
information you need to define the branding process.          The brand promise helps you position yourself in
                                                           the minds of your prospective customers.
CREATE
    Create concepts for developing a brand identity and    DEFINE AND RELATE TO YOUR TARGET AUDIENCE
brand message, and work collaboratively with your              This means take the time and do the research to
team to capture a brand promise and presence that it       understand your audience’s age, sex, income, educa-
is consistent and clear. Develop the brand message,        tion level, and locale. What motivates them to
which includes collaboration sessions with your team.      action? What turns them off? What gets their atten-
Plan at least two rounds of revisions to the talking       tion? What are their hot buttons? What do they love,
points, tagline, and sales pitch. You may want to          hate, fear? Use a spreadsheet to set up customer
update your existing logo to align with your new vision.   profiles and create a plan to target them.

DELIVER                                                    IN CONCLUSION
    When you deliver the resulting brand, equip your           Creating and building a brand is a collaborative,
staff with a “Brand Articulation Kit” to ensure that       time consuming, and ongoing process. It requires
every communication is consistent, compelling,             research, creativity, dedication and salesmanship.
engaging, and effectively communicates your brand          It requires a branding plan that permeates the
and brand promise. Your resulting Brand Articulation       culture of your company and is reflected at every
Kit can include:                                           touch point you have with your customer. It can
                                                           permanently change the fortune of your company,
I    Brand Identity—Brand name, brand mark, and
                                                           reduce customer acquisition costs, and allow you to
     supporting visual elements
                                                           effectively compete without consistently being the
I    Brand Personality—Definition of the concept or        low cost provider. RMA
     characteristics you intend to portray with your
     brand                                                 (About the author: Steve Kinney is President of Stephen
                                                           Kinney Associates, Inc., which offers sales training and
I    Identity Standards—Usage, fonts, papers, and          mortgage consulting services nationwide. The company is
     other supporting elements                             based in Bloomfield, N.J.)


    Reverse Mortgage Advisor   I   Winter 2007                                                                        9
MANAGING YOURSELF, continued from page 1

Cambridge Senior Capital (Bridgeport, Conn.).              GOOD ‘NETWORK ANIMALS’
                                                               There is another breed of people who have been
HUMAN TRAITS                                               very successful as originators. “The most successful
    Jones prefaced the discussion by asserting that        people at our organization are what I call ‘network
personal integrity—defined as properly representing        animals,’” said Benjamin. “They’ve gone out to
yourself, your company, and the industry—is a key          develop their referral networks; they attend all the
trait he looks for in a new hire. All three presenters     different breakfast functions; they attend all the
agreed that being patient, having good listening           different mixers. Through that, they’ve developed
skills, a caring and compassionate attitude toward         their professional sources and are able to sustain
senior issues, a strong work ethic, being an active        themselves with that business.
conversationalist, having a genuine interest in                “Long-term success in this business requires net-
learning about people (their needs and desires),           working through professional sources,” he said.
and possessing an old-fashioned likeability are key
attributes.                                                EDUCATION, RECORD-KEEPING, AND FOLLOW-UP
                                                               Because of the mountain of misconceptions and
DEEP PRODUCT KNOW-HOW                                      misinformation out there, Jones believes education
    Beyond the ‘soft’ skills, Osterhout believes a solid   of self, customers, their families, and trusted advi-
knowledge of available programs, not just “being able      sors (so that they become comfortable with reverse
to recite the points of them, but understand them          mortgages) is vital.
from the ground up” is essential.                              “Become an educator, not a salesperson. If you
    “Most successful people understand the theory,         are going to be successful, find people that are will-
the rationale, and the whys behind the programs,”          ing, caring, and compassionate; people that have the
Osterhout said.                                            patience to educate borrowers about the programs,”
                                                           Jones said.
FINANCIAL-SALES TYPES                                          Besides education, Jones said success also
    Benjamin and Osterhout agreed that people with         requires good record-keeping and follow-up skills
financial sales backgrounds with good “underpin-           because time-to-application (TTA) for seniors can
ning” in financial theory tend to be more successful.      take months and the successful originator must do
These professionals may include insurance agents           regular follow-ups.
and investment products salespeople with financial             Osterhout said part-time employees, and those
planning and consulting skills. Osterhout added            who are uncomfortable with computers, tend not to
that people who may not have financial sales back-         be successful.
ground, but are good with numbers and have strong              For Benjamin, specialization and focus are pre-
analytic skills, also do well.                             conditions for success because forward and reverse
    However, there are exceptions to the financial-        mortgages are like “night-and-day.” They demand
sales, financial-theory, numbers-loving, and analytic      different “mindsets.” So, keep your forward and
types. For example, two of Guy Benjamin’s most suc-        reverse mortgage businesses separate.
cessful loan officers were former stay-at-home
moms. Could it be that the patient and nurturing           AGE MAKES NO DIFFERENCE
nature of stay-at-home moms (and dads) makes                   It is easy to assume that a senior will be more
them better reverse mortgage originators?                  successful than a younger loan officer. That is not
    Could the ‘soft’ skills of patience and empathy be     the case. Benjamin has a 28-year-old and a 52-year-
more indicative of success? Before you jump out            old that are very productive. What counts, the pan-
and start recruiting all the number-crunchers and          elists agreed, is what the originator brings to the
financial theorists out there, remember there is no        table: patience, empathy, and relational skills,
one simple formula for identifying successful reverse      among others.
mortgage loan officers.                                                           MANAGING YOURSELF, continued on page 11

10                                                                     Reverse Mortgage Advisor      I   Winter 2007
FINANCIAL PLANNERS, continued from page 2

Reverse Mortgage (Rancho Cordova, CA), Patrick               beyond the business interest of individual members.
Donohue of 1st Reverse Financial Services                    Her network meets once a month for lunch to find
(Westmont, IL), Wendy Whitaker of Mortgage Mobility          out “who can help whose customers?”
(Richboro, PA), and Art Widmann of Widmann                       For Widmann, the best way to approach a finan-
Financial (Bowie, MD)                                        cial planner is through a mutual customer. Say you
                                                             are doing a reverse mortgage for Sherry Apple. You
BEGIN WITH FAMILY AND FRIENDS                                ask her who her financial planner is, and you call
    Donohue believes it is important to start at home:       him: “Hi Jerry, my name is Ralph Shecm. I am doing a
call your own financial planner; if you don’t have one,      reverse mortgage for your client, Sherry Apple. Ms.
call your parents’; if your parents don’t have a financial   Apple said I can call you to get a better picture of her
planner, call your friends’ or relatives’. You don’t have    financial situation. I would like to meet with you to
to call strangers. These professionals already know          see how we can better serve Ms. Apple.”
you or know someone who knows you. So, you have                  A certified financial planner who owns a reverse
an advantage. From these family-and-friends base,            mortgage company in Maryland, Widmann says
Donohue said, you can expand your contacts by asking         financial planners, unlike most mortgage profession-
them a key question: “Who else should I talk to?”            als, are more interested in building long-term rela-
    Whitaker takes a different approach: she goes to         tionships with their clients, and they are more likely
senior-related events with the goal of meeting other         to be receptive to reverse mortgage professionals
professionals who serve seniors. After meeting and           who share their long-term philosophy.
getting to know these senior service providers, she              Every state and every major city has a financial
forms a networking group. The key advantage of this          planning association. And Scott Hanson, another
a method, Whitaker said, is that “you get to choose          financial planner and part owner of a reverse mort-
the people you network with.” Because the group              gage firm, said you should get a membership list of
cares about senior issues, there is a common bond            your local financial planning association, call them
                                                             up and join them. The best financial planning associ-
                                                             ations, he added, have a large membership and fea-
MANAGING YOURSELF, continued from page 10                    ture great speakers at well-attended events. “You
                                                             don’t have to be a financial planner to join a financial
HOW TO FIND MARKET                                           planning association,” Hanson said.
    A new originator in the audience wanted to know
how to find customers and grow a referral base.              EDUCATION IS YOUR TICKET
Osterhout said he provides leads to new loan officers            The panelists agreed that positioning yourself or
generated by his company through direct mail, adver-         your company as a resource helps build and sustain
tising, lead-generation firms, and other sources, but        relationships with financial planners. Most financial
at the same time the person develops his or her own          planners, they said, do not understand reverse mort-
referral sources through networking.                         gages or know how they can help their clients. So,
    Practices vary from company to company with              you should come in as someone who can educate
some firms providing support and others leaving              and advise them.
new originators to sink or swim. Benjamin added                  “They are beginning to get questions. They need
that there are many lead sources in the industry, but        to understand the basics of this product. If you can be
the loan officer must do some due diligence to find          the one that can educate them, you will get their
the few good ones. He repeated that long-term suc-           attention,” Hanson said.
cess requires networking.                                        Whitaker said you should create a marketing plan
    “To find your market, network with other profes-         to continuously educate your contacts after your initial
sionals; get involved in your community through              presentation. You need to develop different databases
Area Agencies on Aging; and become someone who               and come up with different things to mail out to these
really cares about seniors,” said Benjamin. RMA
                                                                                     FINANCIAL PLANNERS,   continued on page 12


 Reverse Mortgage Advisor    I   Winter 2007                                                                               11
FINANCIAL PLANNERS, continued from page 11

groups, she said. For example, if you find an interest-     RESPA-compliant tasks, and get paid on the books.
ing story on reverse mortgages or on any senior-relat-         “HECM clients are not your annuity clients. It’s
ed issue, copy it and send it out as an FYI. Do what        your jumbo clients that may be. HECM monthly
successful banks, wholesalers, and mutual funds do:         beats annuity,” Hanson added.
stay in touch with your contacts every six weeks.
                                                            DOES YOUR FINANCIAL PLANNER HAVE A
YOU ARE A SPECIALIST AND THEY ARE IN CHARGE                 SECURITIES LICENSE?
    Besides education and information, the panelists            Hanson said you have to be able to separate the
said you need to reassure your financial planners           real financial planners from the pretenders. How do
and senior network partners that you are a reverse          you find real financial planners? Ask them if they
mortgage specialist. You are not interested in “client      have a securities license. If they have a securities
poaching.” You also need to let them know that they         license, go to the National Association of Securities
are in charge of their client, and that your role is to     Dealers (NASD) website to check them out
help them help their clients.                               (www.nasd.org). If they don’t, they are not a finan-
    Donohue said you should tell them you are plan-         cial advisor.
ning to do some marketing in their city or town, and            They are insurance agents, selling fixed insurance
that you would like to send them referrals for finan-       products such as Equity Index. “There is no way a
cial planning work because seniors would rather             client is going to make money by taking the proceeds
work face-to-face with a local financial planner.           of a reverse mortgage and putting it into an equity
                                                            index product. You don’t want to partner with those
WHERE IS THE BEEF?                                          who sell equity index,” Hanson said.
     As with any relationship, panelists said chal-             Another test Hanson recommended: talk with
lenges will come up and you must be prepared to             people. Make sure they have “empathy for older
deal with them in a professional manner.                    folks.” “If you talk with people and the first thing
     Compensation for referrals and selling ancillary       they talk about is how they are going to be paid,
products (such as annuities) to seniors are areas of        move on,” said Hanson. RMA
potential conflict.
     Widmann and Hanson said most good financial
planners are not interested in being compensated.
                                                            MARKETING 101, continued from page 3
Furthermore, referral fees are explicitly prohibited by
the Real Estate Settlement Procedures Act (RESPA).          and some sort of freebie such as a complimentary
“It’s best to have a clean relationship where the           consultation, free information kit, or video.” She
motivation is taking care of the client,” they said.        said direct-response marketing can take anywhere
     On selling supplementary products to seniors,          from three to four months to attain a positive ROI, so
the panelists agreed that taking cash via a reverse         originators should manage their “expectations.”
mortgage and putting it into an annuity is often not            Noble said ROI and response rates depend on the
in the borrower’s best interest because of double           media used. Different media have different response
costs relative to value. If a financial planner wants to    rates. About 10 percent of calls arrive within one to
sell an annuity, ask the planner to show you and the        two weeks from radio, television, or newspaper ads,
customer a form showing the “Net Tangible Benefit”          but the vast majority, roughly 90 percent, come in
(Where’s the beef?). Document the form and have             right after the ad is “dropped” (i.e., first appears).
the customer, financial planner, and you sign it and        Here are some tips she shared:
put in the file.                                            I   Direct Mail. Expect calls three to four weeks after
     Another way to handle the compensation issue,              piece drops;
they said, is to ask the financial planner to get a mort-
                                                            I   Magazines. Great way to advertise because of
gage license, act as a HECM advisor, perform some
                                                                                          MARKETING 101,   continued on page 13



12                                                                        Reverse Mortgage Advisor         I   Winter 2007
MARKETING 101, continued from page 3

     long shelf life and reach. A magazine ad invest-         direct mail, for example. Track your marketing all the
     ment takes as long as four to six months to              way to closing. Tracking and knowing costs helps you
     recoup one’s investment;                                 budget in the future and to know your ROI. Otherwise,
                                                              you may be throwing away money,” said Peskin.
I    Newspapers. Offers your quickest response rate;
                                                                  Noble said there are six factors to track when
     about 90 percent of calls hit the day the publica-
                                                              making an ad investment: document campaign
     tion runs;
                                                              sources, costs, number of calls/leads from ad,
I    Have a strong message. It’s the key ingredient; it       appointments set, applications taken, and loans
     can make or break your ad campaign. Keep your            closed. “All these factors are important in deciding
     message consistent;                                      whether your ad campaign was successful,” she said.
I    Use 800 number (not 866 or 877, seniors think
     they are toll numbers) and repeat 800 number at          BRANDING, FREE MEDIA, AND DIRECT MAIL
     least 4 times;                                               Unless you have unlimited access to marketing
                                                              funds, meaningful advertising may be too expensive
I    Avoid vanity numbers [i.e. 1-800-ABC-CASH];
                                                              for the average reverse mortgage shop. Patrick Seroka
I    Have someone manning your response desk 24/7.            advised lenders to look for opportunities to brand them-
     Auto-attendants are not recommended – they               selves in their local markets and explore free media.
     simply confuse consumers;                                    “Consider free media. Talk to local publications,
I    Information should be clear and concise. Describe        TV, and radio. They are looking for information about
     reverse mortgages, talk about myths, and be              reverse mortgages because it is new to them. You are
     upfront about the costs;                                 making their job easier by giving them information,”
                                                              Seroka said.
I    Use large fonts;
                                                                  Seroka also advised reverse mortgage lenders to
I    Consider the time of year and geography.                 hit the road. “Get on the speaking circuit. Find out
     Television and print ads do well in the summer in        where seniors congregate. Use collateral,” he said.
     the Northeast when our target market is trying to        Collateral is a marketing term that refers to
     escape the heat and is indoors, while California         brochures, product profiles, and testimonials that
     television ads are usually not as effective in early     inform the consumer and reinforces your message.
     spring as many people are out of the house enjoy-        NRMLA has collateral—in the form of our consumer
     ing the weather. Holiday advertising is a waste –        booklets—that members can purchase and customize
     hiatus all advertising until after the holiday is over   with their company information. This can save you
     as people are not thinking about their finances;         the expense of developing your own materials, at
I    Diversify your media channels by marketing a             least in the short term.
     little bit on television, radio, and print to see            Seroka believes direct mail can be very focused and
     which one works best in your market.                     effective if the list is good. A good list is everything
                                                              with direct mail, so make sure you get a good list.
THE INTERNET AND SIX FACTORS TO TRACK                         Send a letter in an envelope, not a post-card. Direct
FOR YOUR AD INVESTMENT                                        mail should be run three to four times a year and he
   The Internet offers marketing opportunities                counseled “testing, testing, and testing to see what
because seniors are using the medium increasingly.            gets you a better response.”
About 60 percent of a senior focus group said they use            Seroka, Noble, and Peskin agreed that training
the Internet everyday. Both Peskin and Noble stressed         your staff to be competent in reverse mortgage pro-
the importance of tracking your ad investment.                grams so that they can be informative and consulta-
   “Set up a tracking system for all your different           tive is critical. “You are the educator, the consultant.
campaigns, so that staff who handle incoming calls            No high-pressure sales tactics, be honest, talk about
know whether the person responded to a print or               benefits, not features,” Seroka said. RMA



    Reverse Mortgage Advisor   I   Winter 2007                                                                     13
SECONDARY MARKET, continued from page 3

the loan balance reaches 98 percent of the FHA                McEnerney advised originators to move closer to
lending limit or maximum claim amount, the                the “ultimate investor” to “maximize revenue and
investor can turn it over to HUD, as long as the loan     control.” Originators can take the following steps to
is not in default.                                        be nearer to a final investor: create a business
    Unlike “forward” loans, which are declining-          model that does not rest on one investor, control
balance mortgage loans, reverse mortgages are             origination technology, become an FHA lender and
growing-balance assets. That means an investor’s          step up to mini-eagle or full-eagle with DE authority,
portfolio grows without extra work or investment in       establish warehouse lines to fund HECMs to increase
marketing and origination.                                price, and choose business partners prudently. (For
    Although minimal, HECMs do present some risks.        more information on becoming a DE lender, see the
A natural disaster, such as Katrina, could create liq-    Summer issue of RMA located on NRMLAonline.org)
uidity risks from a failure to advance cash to bor-           “Get a strong advisor and investment banker,
rowers, or a servicing-failure risk from inadequate       somebody who can help you negotiate and make the
servicing (HUD could deny an insurance claim for          most out of your company,” said McEnerney
improper servicing).
    Proprietary reverse mortgages pose some risks to      RISKS VERSUS REWARDS
potential borrowers. For example, does an investor            Craig Corn focused his remarks on the risk/
have the financial strength to advance cash to bor-       reward nature of secondary marketing, depending
rowers over several decades? As originators, you          on where an originator is in the mortgage lending
should carefully assess this risk for your loan is only   “food chain.” For Corn, who worked on Wall Street
as good as the investor behind it, said McEnerney.        for 15 years, secondary marketing is all about “risks
                                                          versus rewards,” with the most rewards going to the
ABOVE PAR AND GETTING BETTER                              biggest risk-takers. The “food chain” is as follows:
    Lenders have seen “above par” pricing for HECM
                                                          I   Licensed Mortgage Brokers (advisors, correspon-
loans recently, and McEnerney believes it will get
                                                              dents, mini-eagles). Their risk is minimal because
better as investors increase their understanding of
                                                              they don’t underwrite loans; their reward is small.
the product’s value. Ginnie Mae is getting ready to
guarantee HECM mortgage-backed securities.                I   Licensed Mortgage Lenders (mini-eagles). Closed
New data suggests that a HECM’s value rests on its            loans in their names; but loans are underwritten
duration. Innovation and new programs are coming              and funded by others. Again, little rewards mirror
in jumbo reverse mortgages.                                   little risks.
    For the future, McEnerney sees the following          I   Licensed Mortgage Lenders (full-eagles with DE
trends:                                                       authority). They underwrite and fund loans.
I    Flexibility in product margins (margins of 125,          Previously, they sell to Fannie Mae; now, they are
     150, 170, 175, and 200 will be common)                   selling to Wall Street in whole loan form. By cut-
                                                              ting out Fannie Mae, they are taking added risks;
I    Multiple index options (possibly allowing for            their rewards are bigger.
     LIBOR in HECMs)
                                                          I   Fannie Mae-approved seller/servicers. They must
I    Fixed-rate HECMs could be better suited for              meet tough capital, net-worth, and experience-
     lump-sum situations                                      in-reverse-lending/servicing requirements;
                                                              underwrite and sell loans to Fannie in whole loan
I    Shrinking origination fees from competition
                                                              form. They take more risk and get better rewards.
I    More efficient securitizations similar to Ginnie
                                                          I   At the top of the “food chain” are institutions that
     Mae’s “pay as you go” model
                                                              can securitize loans. They use Wall Street as an
I    Investors will put HECMs on their balance sheets.
                                                                                   SECONDARY MARKET, continued on page 15


14                                                                     Reverse Mortgage Advisor      I   Winter 2007
EXPLAINING TERMS, continued from page 4

her trust and confidence should you even begin             borrower’s questions could include losing the deal,
explaining program concepts and terminology.               dissuading a prospect from ever considering a
Otherwise, you can forget it. “If the borrower is          reverse mortgage, and impairing the program’s repu-
confused, if she doesn’t have trust and confidence in      tation, Lucas and Scoles advised originators to be
you, she won’t do it,” Scoles said.                        thoroughly prepared before meeting with seniors and
                                                           their advisors.
KNOW YOUR STUFF                                                “Anything that discourages seniors from taking a
   To explain reverse mortgage terminology and             look at reverse mortgages to change the difficulties of
concepts, you must know your subject. As Lucas and         their lives is very bad,” said Lucas, a senior himself,
Scoles said over and over, “You can’t explain what         a reverse mortgage industry pioneer, and a 40-year
you don’t understand.”                                     veteran of the mortgage banking industry.
   Since the consequences of failing to answer a               Seniors will ask questions that require a deeper
                                                           understanding of reverse mortgages. Lucas and
                                                           Hulbert said originators should study HECM credit
SECONDARY MARKET, continued from page 14                   and security instruments to gain a better understand-
                                                           ing of the program. For example, a senior may want
                                                           to know why there are two HECM notes, two mort-
   agent to distribute their securities. These are the
                                                           gages (or deeds of trust), and one loan agreement.
   biggest players, for example IndyMac Bank (par-
                                                           They may ask about the servicing fee set-aside
   ent of Financial Freedom), Wells Fargo, and
                                                           (SFSA), the creditline growth feature, how the princi-
   Seattle Mortgage Company.
                                                           pal limit is calculated, and other unique aspects. You
                                                           just have to know your stuff. Your program knowl-
    Overall, Wall Street is where you get the best
                                                           edge, coupled with your emotional skills, will work
price, but its stringent due diligence (DD) process
                                                           together to build trust and inspire confidence in you.
can cause “business dislocation” for companies.
    Corn said Ginnie Mae’s HECM MBS (expected in
2007) and “portfolio retention” (or putting loans on
                                                           PACE YOUR DELIVERY, USE METAPHORS
                                                               You have gained your customer’s confidence and
your books) could be attractive options for origina-
                                                           trust. You have done your homework on the technical
tors. Portfolio retention suits big banks with deposi-
                                                           side. Now you are ready to present program informa-
tors’ money to invest. The Ginnie Mae HMBS will
                                                           tion and answer questions. Hulbert, Lucas, and
require lenders to meet its guidelines to get a
                                                           Scoles say stop. Take a deep breath. Presenting too
“Ginnie Mae wrap.”
                                                           much information too soon can backfire. As Scoles
    Corn cautioned originators to carefully consider
                                                           put it, “Don’t dump all your information in 15 min-
the risk/reward trade-offs of the secondary market
                                                           utes; you will lose them.”
path they choose. For example, if you want the best
                                                               You should plan on sharing information over
price for your loans, securitize them and use Wall
                                                           several meetings, in person or by telephone. And
Street as a distribution agent. But only the biggest
                                                           your method should be informal and conversational.
institutions can take this road. If you sell to Wall
                                                           “Conversation makes them comfortable and able to
Street, it will put your company through its DD “fire.”
                                                           relax,” said Scoles.
Know the risks/rewards of the secondary-market
                                                               Besides a conversational approach, don’t be afraid
direction you want to take.
                                                           to use metaphors to explain certain key terms and
    It is “unrealistic” for most reverse mortgage origi-
                                                           concepts. Below are some examples offered by Lucas:
nators to think they can get “best execution” (best
price/service), especially when they are producing
                                                           I   FHA lending limit. A number set by HUD each
25 to 50 loans a month. By originating “200 to 500
                                                               year—that varies by county—which limits the
loans a month, they will get best pricing as they
                                                               amount of home value that can be used to calcu-
climb up the food chain,” said Corn. RMA
                                                                                    EXPLAINING TERMS,   continued on page 16


 Reverse Mortgage Advisor    I   Winter 2007                                                                            15
EXPLAINING TERMS, continued from page 15
                                                                                               Briefs
     late loan advances from a reverse mortgage. The present limits (for
     2007) range from $200,160 to $362,790. If a home’s value exceeds                Congress Suspends HECM
     the county lending limit, then the computer calculates “as if” your             Cap; News on FHA
     home’s value is the county limit rather than its true market value.             Modernization Bill

                                                                                       President Bush signed into law
I    Net principal limit. Number calculated by the computer that is
                                                                                     a continuing resolution (H.J. Res.
     equal to the amount of available loan proceeds after closing costs
                                                                                     20) on February 15 that funds
     have been deducted.
                                                                                     most of the federal government
I    Total Annual Loan Cost (or TALC). This is the government’s way                  thru 9/30/07, and “suspends” the
     of telling a borrower that if you plan on staying in your home for a            HECM cap until then, as well.
     short period of time (2-3 years or less), then a reverse mortgage                 For a short period of time, the
     can be expensive, because the closing costs are being spread over               Federal Housing Administration
     a shorter period of time. In essence, the longer you live in your               (a division of the U.S. Department
     home, the cheaper a reverse mortgage becomes because the costs                  of Housing and Urban Develop-
     are being spread over a longer period.                                          ment) ran out of authority to
I    Service Fee Set Aside. Under most reverse mortgage programs,                    insure new reverse mortgages
     you will be charged a monthly servicing fee that ranges from $30-               (aka Home Equity Conversion
     $35 to manage your account once the loan closes. The SFSA is an                 Mortgages) because the statutory
     estimate of what the total servicing fees will be over the life of the          cap of 275,000 loans had been
     loan, by multiplying your life expectancy (converted from years into            reached. H.J. Res. 20 suspends the
     months) multiplied by either $30 or $35. Although it’s not consid-              cap until the end of the current
     ered a closing cost, the SFSA can equal several thousand dollars,               fiscal year when a more perma-
     which is deducted from your available loan proceeds.                            nent solution can be reached.
                                                                                       Addressing the NRMLA
I    Expected rate. An interest rate based on the 10-year Treasury
                                                                                     Western Regional Meeting in
     Bond that helps calculate the amount of available loan proceeds
                                                                                     Newport Beach, Calif. on
     from a reverse mortgage.
                                                                                     February 22, Joe Bates, Director
I    Creditline Growth – The unused balance in the line of credit                    of HUD’s Santa Ana Homeowner-
     grows. However, you are not earning interest. The growth factor is              ship Center, reaffirmed the
     taking into consideration that your home has appreciated in value               Department’s commitment to
     over the past 12 months and that you are one year older.                        seek Congressional approval of
                                                                                     an FHA modernization bill that
    In essence, you need to explain to your clients that the government              would eliminate the cap entirely,
makes rules and controls events. Home values increase. Computers do                  implement a single national loan
magical calculations people don’t “understand.” Use what your clients                limit, and create a HECM for
already know as a reference point.                                                   Home Purchase feature.
                                                                                       Last year, the House of
THREE KEY QUESTIONS                                                                  Representatives passed an FHA
    The art of explaining complex reverse mortgage concepts to seniors
                                                                                     modernization bill, but the legis-
is actually the art of solving their problems. Lucas proposed three
                                                                                     lation failed in the Senate. At a
questions originators should begin a meeting with: What would you
                                                                                     recent budget briefing, HUD offi-
like the program to do for you? What’s your problem? How can I help
                                                                                     cials were hopeful that Congress
you?
                                                                                     would re-introduce a moderniza-
    “We are in the business of solving people’s problems and changing
                                                                                     tion bill later this spring.   RMA
lives,” Lucas said. RMA



16                                                                            Reverse Mortgage Advisor     I   Winter 2007

				
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