The Reverse Review November 2008

November 2008

THE

REVERSE review

Flip Flopping: Targeting Seniors to buy REO Properties George B. Lopez PAGE

22

REO investors are acquiring properties on the cheap and exploiting senior borrowers using existing loopholes in HECM regulations. Read the feature story which describes how REO flipping could pose significant risks to the reverse mortgage industry.

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© 2008 The Reverse Review, LLC. All rights reserved. The Reverse Review, LLC is a California limited liability company and is the publisher of The Reverse Review magazine. Reproductions or distribution of any materials obtained in the publication without written permission is expressly prohibited. The views, claims and opinions expressed in article and advertisement herein are not necessarily those of The Reverse Review, its employees, agents or directors. This publication and any references to products or services are provided “as is” without any expressed or implied warranty or term of any kind. While effort is made to ensure accuracy in the content of the information presented herein, The Reverse Review, LLC is not responsible for any errors, misprints, or misinformation. Any legal information contained herein is not to be construed as legal advice and is provided for entertainment or educational purposes only. Postmaster : Please send address changes to The Reverse Review, 10801 Thornmint, Ste 250, San Diego, CA 92127

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editors’ note

M

ost people in our industry will tell you the reverse mortgage space is small when compared to the mortgage industry as a whole. In fact, according to the HECM MIC Endorsement Report provided by Reverse Market Insight, the top 10 HECM lenders in the nation retain 37.86% market share thus far in 2008. While market share for the top 10 may decrease as more and more originators jump on the HECM bandwagon, we find this to be a much more intimate market place than the traditional forward mortgage market. Though the industry may be small, as we read the articles submitted every month, we are reminded of how much there is to learn as our industry continues to grow and change. In the past few months, we’ve learned about the loss of Medicaid eligibility, trusts and estates, and a variety of other topics.

investors to target seniors. Coincidentally, Ralph Rosynek, our resident underwriter, was confronted with a similar situation as well. However, what’s interesting is just a few years ago investors were not targeting seniors, given the liquidity in the subprime market. These same investors were flipping properties to anyone who could get a subprime loan. Since the subprime market no longer exists, investors have unfortunately adapted to the new environment and found a loophole in the HECM product. We focus on this to stress the importance of being vigilant of those who are simply out to make a profit from the senior population, and do not have their best interest at heart. Everyone who is a part of our industry understands the tender love and care it requires to work with our clients. We hope you enjoy our November issue and as always, thanks for reading!

Erica English Co-Editor

Aman Makkar Co-Editor

This month in our feature article, George B. Lopez spotlights REO flipping schemes setup by

November 2008

5

CONTENTS

14 What is the Method to the Marketing Madness

22 Flip Flopping:

Targeting Seniors to Buy REO Properties

Sam Collins

18 The Foundations of Effective Execution

George B. Lopez

30 Refi City-Maybe, Maybe Not

Gerald C. Wagner

35 The Art of Developing

Trust and Credibility Through Online Educational Marketing

28 Tax & Insurance

Defaults, a Serious Dilemma Industry

Monte Rose

Valerie VanBooven

Ryan LaRose

38 The Band of Five Alissa Scott

ESSENTIALS 5 Note From the Editor

7 Ask the Underwriter

42 Public Relations

45 Directory

12 Industry Snapshot

46 The Last Word: Fear Factor - What do Seniors Fear the Most? 6

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ask the underwriter Ralph Rosynek

| Seasoning – A Recipe for Success and Failure |

No, Ask The Underwriter has not been taken over by the writers of the Food Network Channel! However, it is interesting that our knowledge and attitudes regarding food may also apply to one of the latest issues impacting our industry. Along those lines, read on and please use your sense of smell on this one. (And oh, by the way, this is a discussion and not a legal or regulatory interpretation or opinion – your final use of the information contained herein should be in consultation with your Lender/Underwriter and legal counsel.)

Q.

I am relatively new to the reverse mortgage origination market and recently I have come upon an opportunity presented by several referral sources in my marketplace whose activities involve the purchase of REO properties for the purpose of assisting seniors with housing needs. I am aware of the market values of these homes as an appraisal with comps is done, the seniors’s eligibility for reverse mortgage proceeds is determined and in many cases the senior has already taken title by Quit Claim Deed, and the proceeds are enough to cover all aspects of the transaction. Is there a limit to how many of these loans I can originate from one referral source?

A.

My initial “quick response” is probably NONE! In my opinion, what you have identified is a transactional methodology which completely distorts the interpretation of the expressed “seasoning guidelines” of HUD and most Lenders in the reverse mortgage market. In addition, I am raising issues of developer/rehabber intent and activities, possible appraisal guideline misinterpretation, improper title and chain transfer, and an uninsurable transaction if for no other reason this activity in most cases is a crafted purchase transaction not a refinance.

While individual Investor guidelines may vary slightly, I am confident that if one of these transactions were to be submitted, most if not all of the following would need to be satisfactorily addressed. Therefore, your consideration of whether to proceed and the appropriateness of the transaction should initially be centered around the following: • Consider if this is a non-arms length transaction – a sampling of prevailing lender guidelines indicate that seasoning requirements – (layman’s term) the time duration of allowing the title to settle/quiet between ownership changes and corrections – has generally been increased to at least 90 days minimum when looking at transfers. • Additional components of determining a non-arms length transaction will probably include extensive verification of owner occupancy – at least 60 days prior to application with actual documentation reflecting same. • Review of the Borrower(s) profile will more than likely be increased wherein the ability to meet required responsibilities of home maintenance, taxes and insurance will be reviewed • Questions will definitely arise as to the intent of the parties involved, possibly their background, capacity and degree of participation in the overall transaction as well as choice of addressing their housing need in the form and manner presented. • Little or no tolerance for extraordinary transaction components like issues of competency, Trusts, POA’s, liens, side contracts, or future performance will be applied. Your desire to assist seniors is noted. You should explore more broad based options to provide a level of product familiarity and education to senior’s who will benefit long term from your efforts. Much like the “recipe” to build a bomb is not readily available to the general public on the web, I am not sure that we as Underwriters are responsible for providing the basic “recipe” to cook up a transaction which in my experience fails to serve a senior’s best interest at the same level of the developer/ rehabber/speculator and places the Investor and others in an increased risk position. Remember, sniff, sniff.

November 2008

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Helping Elderly Homeowners Understand Reverse Mortgages Doug Erickson Vice President, Partner Relations Is it possible that many Americans filing bankruptcy should be seeking a reverse mortgage instead? In a growing number of cases, the answer is ”yes.” While the bankruptcy filing rate in recent years has fallen for people 55 and under, it has soared for older Americans. This is according to a new analysis from the Consumer Bankruptcy Project, which examined a sampling of noncommercial bankruptcies filed between 1991 and 2007. The older the age group, the worse it has become -- people 65 and up became more than twice as likely to file during that period, and the filing rate for those 75 and older more than quadrupled. A number of factors are contributing to the increase. Higher prices for ordinary consumer goods have hit seniors on fixed budgets. For older Americans living below the poverty level, or not far above, a safety net likely doesn’t exist for economic setbacks such as medical problems. And some fall prey to scams that cripple their finances. Mortgage originators, as well as nonprofit counseling agencies that provide elderly homeowners with information about reverse mortgages, are speaking with more and more people each month as the industry begins to take shape. My agency is in a unique position to see the benefits and disadvantages of filing for bankruptcy and when a reverse mortgage is a viable alternative.

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Consumer Credit Counseling Service (CCCS) of Greater Atlanta is among a select group of agencies approved to provide credit counseling and debtor education for bankruptcy filers nationwide by the U.S. Justice Department’s Executive Office for United States Trustees. The nonprofit agency provides counseling to approximately 20% of all Americans that file for bankruptcy. However, we also provide reverse mortgage counseling, and our work in this area is growing. Twenty housing counselors certified by the AARP in reverse mortgage counseling conduct approximately 500 reverse mortgage counseling sessions each month. We plan to add five more reverse mortgage counselors soon as our workload continues to grow. As an unbiased third party, the role of the nonprofit credit counseling agency is simple: to educate homeowners about the benefits and costs of a reverse mortgage loan. We also believe it’s critical for homeowners to be able to manage their new infusion of funds in the most effective way possible. We also believe the industry may be missing an opportunity to reach many homeowners who may be better served with a reverse mortgage than filing for bankruptcy. We work closely with bankruptcy attorneys across the United States, and many of them tell us that an increasing number of elderly homeowners considering bankruptcy are really candidates for reverse mortgages. These homeowners are usually anywhere from 1-2 months to several months delinquent on their mortgage payment, but their other debts are under control. And, of course, these homeowners often have plenty of equity in their homes and could easily be better off with a reverse mortgage. The problem has become so critical that my agency recently established a hotline for bankruptcy attorneys if a homeowner fitting this profile comes to them to file for bankruptcy. And the bankruptcy attorneys, seeing this

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Advertorial by Consumer Credit Counseling Service

growing problem, helped us understand the need and have begun referring people to the hotline. As our economy continues to worsen, it is important for the mortgage industry to realize that they can provide enormous help to these homeowners. While bankruptcy may be the only choice for many consumers, for others there are viable alternatives. The decision to file for bankruptcy is definitely an opportunity to get a new start, but it also has long-term implications and consumers need to clearly understand them. Many people filing for bankruptcy have experienced a major health crisis or have suffered a life-changing event, such as job loss or divorce. But properly utilizing the equity in a home can give people age 62 or older the funds needed to pay their bills during one of these difficult periods and avoid bankruptcy. As a nationwide reverse mortgage counseling agency, we speak with homeowners from around the country. We know that most of the people we counsel are not wealthy, and their house is their primary asset. During 2007 our average reverse mortgage client was 73 years old and had an income of $24,598. More important, their monthly expenses exceed their monthly income by $357. But they also had approximately $126,000 in equity in the home. Of course, any homeowner seeking a reverse mortgage needs to feel that it’s the right product for their needs. As a nonprofit counseling agency, we provide objective advice that will help a homeowner decide whether to seek a reverse mortgage. The vast majority of the people we counsel eventually receive a reverse mortgage, approximately 10% of homeowners who speak with our counselors decide shortly after their session not to pursue a reverse mortgage. Industry sources say up to 30% of homeowners eventually decide not to sign up for a reverse mortgage loan following counseling. As we know, most people applying for a reverse mortgage have immediate financial needs. But many are also concerned about the long-term impact of a reverse mortgage. We find there are two questions that almost everyone asks: 1. Will I lose my home after getting a reverse mortgage? 2. What is the impact of a reverse mortgage on leaving my house to my heirs?

begin with a conversation about helping them define what they want to accomplish. If they want to remain in the home for the rest of their lives, a reverse mortgage may be the answer. We also make sure they understand that, as long as they live in the home, pay the property taxes, insurance, and keep it in good condition, they won’t lose the home. We also make certain they know that, as the homeowner, they will continue to hold the title to the home after they receive a reverse mortgage loan. During a reverse mortgage counseling session, we answer the following questions: • • • • • • • •

What is a reverse mortgage? What are the eligibility requirements? How does a reverse mortgage impact their equity in the home? What are the fees they are required to pay? What are the options in how the funds from a reverse mortgage will be paid to them? This includes a line of credit, lump sum and other options. How the loan will be repaid? What is the impact on their social security? And, finally, what is the impact on their heirs?

To help each homeowner understand the costs of a reverse mortgage, we provide them calculators to help them determine the cost of their loan. We discuss the cost of the reverse mortgage during our counseling session and provide them a printout with an analysis of the cost of the loan. The final step – and probably the most important step – is providing the homeowner with a complete review of their budget and reviewing their credit report. While many lenders do not require homeowners to establish a budget or review their credit report, we believe it’s critical for the homeowner to understand how the funds from the reverse mortgage will be spent. Since nearly every person seeking reverse mortgage counseling needs the funds to pay for essential items, they need to understand if the money they receive from the loan will, indeed, cover their monthly expenses. Once they can see the budget and begin calculating various financial scenarios, the homeowner can make an informed decision.

In educating a homeowner about a reverse mortgage, we November 2008

To Contact: www.cccsinc.org 800 . 251 . 2227 NRMLA Both # 57

9

contributors Valerie VanBooven

Ralph Rosynek

- Ask the Underwriter, page 7 Ralph Rosynek is President and CEO of 1st Reverse as well as a HECM DE Underwriter. Mr. Rosynek has been involved in mortgage lending for over 30 years with the last 5+ years exclusively providing reverse mortgage lending solutions. To contact Mr. Rosynek or to learn more about 1st Reverse Financial Services, Please visit www.1streverse.com or call 877-574-1000.

Monte Rose

- The Foundations of Effective Execution, page 18 Monte Rose has helped hundreds of seniors obtain a reverse mortgage during the past 17 years. He is an accomplished speaker and widely quoted industry expert, appearing in financial publications and nationally syndicated media. He was head of national retail sales for Financial Freedom Senior Funding Corporation. Monte is a Certified Senior Advisor and a Certified strengths Coach with Gallup University. For more information, call 800-516-0545 or email [email protected].

10

John Lunde

- Reverse Market Snapshot, page 12 John Lunde is President and founder of Reverse Market Insight, the premier source for market intelligence and analytics services in the reverse mortgage industry. RMI clients include five of the top ten reverse mortgage originators, both lender and independent servicers, as well as some of the largest financial services firms in the world. Find out more at www.rminsight.net or call 949-281-6470.

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- The Art of Developing Trust and Credibility Through Online Educational Marketing, page 35 Valerie VanBooven RN BSN is a Senior Service Marketing Expert and the National Marketing Director for Next Generation Financial Services, a Division of 1st Mariner Bank. She is a professional speaker and the author of the books “Aging Answers” (2003) and “The Senior Solution” (2007). She can be reached at [email protected]. Please visit her website at www. myseniorservice.com

Sam Collins

- What is the Method to the Marketing Madness, page 14 Sam Collins is the President of Sam Collins Reverse Marketing, LLC and Founder of REMALO, the Reverse Mortgage Association for Loan Officers. REMALO is a web based National sales, marketing, training, and full service center, created exclusively for Reverse Mortgage Loan Officers, Correspondents, Branch Managers, and key executives, and brokers. www.remalo.org

George B. Lopez

- Flip Flopping: Targeting Seniors to Buy REO Properties, page 22 George Lopez is Vice President of James B. Nutter & Company, one of the largest wholesale reverse mortgage lenders in the nation. Now celebrating his 20th year with the firm, George was the only industry representative to testify before the Senate Special Committee on Aging in December 2007.

Alissa Scott

- The Band of Five, page 38 Alissa Scott has been an employee of Premier Reverse Closings since August of 2004. Ms. Scott started her career at PRC in Southern California and now resides in Long Island City, NY developing and managing the entire East Coast.

Ryan LaRose

- Tax and Insurance Defaults, a Serious Dilemma Industry, page 28 Ryan LaRose is the Executive Vice President of Celink, an independent reverse mortgage subservicer. Ryan has over 12 years of servicing experience; exclusively in reverse mortgage servicing since 2005. In addition, Ryan is an active member of the NRMLA servicing and technology committees.

Gerald C. Wagner

- Refi City - Maybe Maybe Not, page 30 Jerry Wagner is President and Ashok Shinde is CTO of Ibis software based in San Francisco. Ibis has been the Standard of the reverse mortgage industry since 1995. Wagner graduated from Harvard Business School and has a Ph.D. in Economics from Harvard. But he’s still a fun guy and can be reached at 800-566-5077 or [email protected]. To learn about Ibis software, see www. reversemortgagehomepage.com.

Gary Onks

- Fear Factor - What do Seniors Fear the Most, page 46 Gary Onks has been selling to seniors since 1990. His book “Sold On Seniors” is acclaimed as “The ‘Art’ of pleasing senior customers” and he is nationally recognized as a senior marketing expert. In 2007 he broke national sales records for reverse mortgage selling. He now offers consulting and training in this business. www.soldonseniors.com

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reverse mortgage industry snapshot Statistics Provided by Reverse Market Insight - September 2008

Top 10 Rankings by Region Rank 1 2 3 4 5 6 7 8 9 10

Chg 1 -1 1 -1 1 -1 -

Region Southeast/Caribbean Pacific/Hawaii Mid-Atlantic Midwest Southwest New York/New Jersey Northwest/Alaska New England Rocky Mountain Great Plains Industry Totals

2008YTD 22,036 17,273 10,683 8,790 7,427 6,310 5,149 4,737 2,989 2,129 87,523

Endorsements YTDChg% 19.85% -14.38% 15.58% 2.11% 23.76% -4.21% 15.53% -14.74% 21.85% 0.09% 4.7%

2007TOT 24,014 25,612 11,956 11,434 8,073 8,322 5,790 6,963 3,296 2,827 108,287

Active Lenders 2008 Chg% 774 116.2% 708 58.04% 361 113.61% 464 66.91% 268 84.83% 280 94.44% 266 92.75% 282 57.54% 166 50.91% 151 84.15% 2,625 86.83%

Region Share 2008YTD Chg% 25.177% 14.46% 19.735% -18.22% 12.206% 10.39% 10.043% -2.47% 8.486% 18.21% 7.21% -8.51% 5.883% 10.34% 5.412% -18.57% 3.415% 16.38% 2.433% -4.4%

10 Regions, ranked by HECM unit volume YTD. Including rank change from prior YTD, as well as growth rates. Also includes active lenders and growth

Lender Distribution by YTD Growth Rate Growth Rate

Lenders

YTD MIC

Last YTD

-100%

242

-99% to -1%

526

41,203

63,785

2,229

0 to 100%

357

19,019

14,098

101% to 200%

96

3,823

1,630

201% to 300%

45

1,582

463

301% to 400%

34

3,886

799

105

7,902

589

1,462

10,108

over 400% New Lenders

Lender distribution graph and table, showing number of lenders growing at various growth rates YTD vs. prior YTD, including volume attributable to each group of lenders. Client Notices 1) 2) 3)

Help improve data quality in the Reverse Mortgage industry. If you believe your company’s numbers on this report are inaccurate, please email us (support@ rminsight.net) and we will review your feedback promptly. Please include your name, company and contact information along with a thorough description of the suspected inaccuracy. Thanks! If you received this report as a trial or sample and would like to purchase this report or future reports for your company, please visit: www.rminsight.net/MICreports. php If you’ve been looking for a source for Reverse Mortgage intelligence beyond MIC endorsement numbers, we’ve got just what you need. Find out more at www. rminsight.net/rmarket.php

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24 Month Penetration and Unit Volume 0.018

12000

0.016 0.014

Units

0.01 0.008

Penetration

0.012

10000

0.006

8000

0.004 0.002 0

6000 2006-10

2007-2

2007-6

2007-10

MIC Units

2008-2

2008-6

Penetration %

2 year trend graph of monthly HECM unit volume and industry penetration against 62+ homeowner households nationally. Appendix 1) All statistics based on retail originations from HUD’s Monthly HECM MIC reports 2) Loans are in unit volume, based on HUD reported mortgage insurance certificate issuance 3) Lenders are aggregated using HUD’s lender identification numbers and unique lender names, along with feedback from reporting lenders HUD Regions and Corresponding States/Territories Region 1 - New England Connecticut Maine Massachusetts New Hampshire Rhode Island Vermont

Region 3 - Mid-Atlantic Delaware District of Columbia Maryland Pennsylvania Virginia West Virginia

Region 5 - Midwest Illinois Indiana Michigan Minnesota Ohio Wisconsin

Region 7 - Great Plains Iowa Kansas Missouri Nebraska

Region 8 - Rocky Mountain Colorado Region 2 - New York/New Jersey Region 4 - Southeast/Caribbean Region 6 - Southwest Montana Arkansas North Dakota New York Alabama South Dakota Louisiana New Jersey Florida New Mexico Utah Georgia Wyoming Kentucky Oklahoma Texas Mississippi North Carolina Puerto Rico South Carolina Tennessee U.S. Virgin Islands November 2008

Region 9 - Pacific/Hawaii Arizona California Federated States of Micronesia Hawaii Nevada Region 10 - Northwest/Alaska Alaska Idaho Oregon Washington

13

What is the Method to Your Marketing Madness? Sam Collins 14

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I admire people who plan their day down to the minute and stick to it. Unfortunately, my creative brain does not allow me to be that precise. However, I do understand the importance of a plan and I try not to allow my marketing madness to interfere. Staying on task for me is a real challenge and if I did not have a plan, I am not sure where I might be today. Therefore, I wanted to provide you with some of the lessons I have learned and hope they help you in your marketing efforts.

Lesson #1:

My first lesson in marketing was to understand there is no one definitive answer or solution to marketing (which can pose somewhat of a problem without a clear direction). I’ve also learned that if what you are doing is working, you should keep doing it. That said, you should always keep your mind open to new ideas, formulas, changes in the world, and anything that might change or affect your business to further increase your success ratio. Most of you reading this article are like me. You are a creative person and because of that you are in need of a mindset full of new ideas and even a review of the old ones. Marketing is an ongoing process and the ideas and systems for you must be constantly reinforced.

Why? Because life gets in the way and we all get sidetracked doing something else and of course fail to come back to the real core of our existence, marketing. Being creative can be a curse. Often an idea you have is shot down, because many see the process as too abstract or too risky. In those instances, some may not think of you as being creative, but don’t let that stop you!

Lesson #2:

The most creative ideas can come to you at the strangest and most unusual times. It has been my experience that this is a normal process and I would encourage you to embrace it. For example, you could conceive the idea on Monday, research on Tuesday, stall on Wednesday, think about it on Thursday, and on Friday decide it’s too cumbersome to achieve. There is no reason for us to apologize after all; given enough time we can build the Brooklyn Bridge. However, in our world we need to set a deadline to get it done. Deadlines are one of the most important ingredients to the successful implementation of marketing plans.

Lesson #3:

Your attitude can sometimes make or break your marketing approach. If you are just starting out

November 2008

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15

you need a starting out attitude. A starting out attitude includes following a plan, being excited, and being focused on the tasks at hand. If you are seasoned, try to recapture that same starting out attitude. Your starting out attitude can lead you to life’s success and business success.

Lesson #4:

Don’t be intimidated by the task at hand. Chances are it might take you longer to reach your goal than originally anticipated. It will not be long before you notice that you wait longer before panicking to reach the deadline because you know how much pacing is really needed. Some of the greatest ideas you’ll ever have will come when you’re new and inexperienced. The secret is avoid being overwhelmed by those ideas and immediately say “no”, but to allow your creative mind to open up to new ideas then implement a plan to make your idea a reality.

Lesson #5:

One of the least expensive ways to learn how to market is to work with an expert, even a minor expert, on their particular marketing project. Pay that expert for the opportunity if you have to, although most will pay you for any help you can give to make life easier for them as well as you. You will quickly discover what works and what was not as important as you might have thought.

Lesson #6:

As marketers in the senior world, our goal should first be to seek to understand then we can go on to solve the need or fill the want of our senior client. Remember that servicing the needs and wants of senior clients is what marketing is all about, whether you use direct mail, television, telemarketing, or another vehicle for finding your senior client.

Lesson #7:

Credibility, in senior marketing is king. How credible you are in your consulting and advisory capacity will dramatically affect all costs, (particularly sales costs) and ultimately your risk in doing business. If you are seasoned in the reverse mortgage business you currently have a track record. Somewhere along the way you have solved somebody’s need or want. Some senior client has paid hard-earned cash for you to solve their problem or concerns.

now trusts you. They paid you once and you delivered what you promised. Stop and think,” What is your Credibility score and how do you rank yourself and what can you do to increase awareness and credibility in your marketing area?”

Lesson #8:

As humans, we are creatures of our comfort zones. Once we find our comfort zone, we love to stay there. We’ll even risk getting a little less as long as we don’t have to change. That’s one way scam artists prey on seniors. As an ethical businessperson you must use, not abuse-this understanding of human nature.

Once a client has trusted you, they will use you again or most likely recommend someone to you. Don’t break that trust, because a higher being may forgive you but your senior clients never forget and will tell their friends if you fail to measure up.

Lesson #9:

Senior marketing requires an art form mentality! We need to derive a strategy that moves our client from being a suspect to a potential prospect. In senior marketing this is no easy task. The senior mindset is opposite of what you might think.

You might think the senior has a limited time to make a decision, according to our common sense logic; let’s face it we’re not here forever. However, just the opposite is true. If you put yourself in the shoes of the senior, every dollar that goes out most likely cannot be replaced, since a regular income is no longer an option, and when expenses continue to rise and income remains the same, then it is no wonder our senior clients’ mindset is opposite of how you might be thinking.

Lesson #10:

Your marketing challenge is to carve out as much business as possible without breaking the bank. Many of us endure what I call panic marketing. Panic marketing occurs when business is really bad and we panic, run ineffective ads, which result in extreme costs and no leads. Our goal is not to panic. If you have a plan, you don’t have to panic.

In your reverse mortgage business we all know that our product is good and in many cases can solve someone’s problem. You are known by someone who has allowed you to do a reverse mortgage for them. This senior client

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reversereview.com

The Foundations of Effective Execution Monte Rose

In a previous article, we discussed the importance of planning as the foundation for a producer’s success. Three key elements are involved: (a) knowing what optimal set of activities needs to be done in the short and long term, (b) ensuring the sustainability of these actions, and (c) ascertaining the effectiveness of the actions on the market. Part of the manager’s task is to expose the producer to these three ideas, and be able to coach around them. These factors govern “executional consistency” affecting both the individual’s motivation and ability to sustain effective action over time. This is separate from the actual techniques of time and energy management which we will cover later. Without a coaching paradigm that increases the awareness and understanding of these three elements, consistent and effective execution can be a hit or miss proposition. Optimization refers to finding a correct balance between Skills Development, Brand Building, and Extending One’s Reach. When this “strategic portfolio” is developed based on a combination of: (a) strengths profile, (b) sales behavior assessment and (c) one’s sales experience, maturity and ability, the producer starts with the odds stacked in his/her favor. This is akin to not only determining what sport an athlete is fit for, but also the position and general strategy one can adopt for successful competition. Absent this systematic profiling of talent, strategy execution will essentially become a random event. This results in high turnover and disappointing performance. Without using valid and reliable tools for establishing correct fit one cannot establish correct strategy. There is no such thing as correct strategy for the wrong person. This is a very common mistake frequently overlooked even in big organizations. When a sales force is struggling, the first question to ask is: Is there a correct linkage between the producer’s “success DNA” and the play being executed?

Sustainability is inextricably linked with optimization. If you have congruence between a person’s talent and behavioral profile, and their market strategy, it can be assumed that consistent and continued effort will follow. It is not as simple as it looks however. Different talent and behavioral profiles dictate different motivational “fuels.” A major shortcoming for sales managers is not understanding this fundamental idea: Different individuals respond to different rewards. Each individual has a unique motivational map. Part of a successful coaching conversation is discovering what this map is, and ultimately using it to successfully navigate towards productivity. Coaching for “sustainability” is helping a producer develop stamina and resilience against the market environment and one’s personal and professional challenges (read: helping someone get out of his way). Toughness flows out of integrity. Integrity comes with establishing an organic fit between a producer’s unique talent set and his/her activities in the marketplace. Ascertaining “effectiveness of actions” has to do with having a working system that monitors activity with results. I call this the Art of Strategic Observation. CRM’s or Lead Management systems are effective in tracking actions and results. Most of these tools, however, fail to capture the critical “tail ends” of the cause and effect spectrum. First, they do not provide information on the producer’s profile, so there is no linkage between “wiring” and “action.” How do we isolate/identify what activities/market segments work for specific producer profiles? This is a critical blind spot. The second issue is not having the appropriate level of detail regarding the customer engagement (CE) dimension. Research in consumer behavior is identifying/quantifying the emotional variables involved in building CE. Customer experience maps are becoming an increasingly important tool in marketing savvy organizations. CRM’s that can capture CE variables, alongside “activities” and “producer type”, will elevate strategy formulation to a science.

To recap: The three foundations for executing effectively are having an organic optimized strategy, a sustainable platform of support, and an intelligent observation method. All these ideas can be linked productively in a coaching approach.

Successful Companies Rely On ReverseVision

The tactical end of execution, the ability to get things done in a consistent and predictable fashion, is in itself a craft. To simplify, there are basically three major approaches to time/ energy management: (a) the top down approach (Covey), (b) the prioritization approach (Lakein), and finally, (c) the bottoms up approach (Allen’s GTD system). I will cover these approaches in some detail in a future article, but for now, I would like to extract the fundamental points common to all systems: 1. There have to be explicitly written goals, as well as actions moving you toward the goals. This is actually an important skill unto itself that is often not given the energy or focus it deserves. 2. There has to be a way of tracking time and activities via a “detailed” calendar. 3. There has to be a way of reviewing your actions on a regular basis (Allen calls this the Weekly Review). Given these three elements, a variety of approaches can be fashioned by the producer and/or manager who fits the organizational temperament of the individual salesperson. The gamut runs from an analog three-ring binder, to sophisticated digital configurations embedding CRM systems. In enterprise-based systems, e.g., Outlook, Lotus Notes, a producer is forced to follow “the system.” However, the system can be customized to fit the individual style of the individual. In time management, which is the behavioral basis of effective execution, form has to follow function. It’s all about simplicity -- essentially the achievement of maximum effect with minimum means. To quote Einstein, “Everything should be made as simple as possible, but not simpler.” Developing the skill set to consistently execute correct strategy is a critical step in “making productivity predictable.” For people with the correct mindset, motivational level, and appropriate market strategy, a well-crafted time management system can make the difference between average performance and breakthrough results.

Complete integration from origination to processing, underwriting, closing, and shipping. Highly scalable - for small entities to enterprises with correspondents and branches. Sales oriented graphical interface that integrates directly with Microsoft Word and Outlook. Direct export to Celink, RMS, Fannie Mae, UBS, Goldman Sachs, ReverseDocuments and others.

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

November 2008

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Loan Consultant Success Stories Gretchen Williams Director of Sales We have spotlighted the successes of 3 different loan consultants purchasing leads from Reverse Mortgage Directory, each with varying degrees of experience and coverage throughout the country. The tips highlighted by these successful loan consultants will help you to close more deals, regardless of how you are generating your business. Client Profiles Deborah Fisher of Beacon Reverse has been in the forward mortgage business, as a broker/owner for 24 years and a Certified Financial Planner licensee for 14 years. Her primary market for the last 17 years has been real estate investors. She recently felt that it was time for her to make a major change and has now been originating reverse mortgages for 6 months. “Since making the change I am more happy and fulfilled (in my work) than I’ve been in many, many years. It’s like I’ve finally found my calling – not just providing mortgage information or even some financial planning, but counseling and psychology – I get to do it all! Plus, I get to share stories about my grandkids all the time. I truly love what I’m doing.” EC Forbes of EVOFI has been originating Reverse Mortgages since the mid 90’s and prior to that worked in the insurance industry. “Reverse Mortgage Directory has been an outstanding source for new leads. The potential clients have apparently done some homework, are interested in obtaining more Reverse Mortgage knowledge and best of all are responsive. My contact at the company is equally responsive and this makes what I do so much easier and more enjoyable as well as rewarding.” Wayne Helms moved from a position as a pension administrator of a $45 million plan to the Reverse Mortgage field 3 years ago because he enjoyed working with seniors. His first position in Reverse Mortgage sales was with a small

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company in Green Bay, Wisconsin. Little over a year ago, he was offered a position with Wells Fargo Home Mortgage of Minneapolis and things have been great ever since. “I enjoy going to work every day knowing that I’m helping and improving someone’s life.” Client Question & Answer RMD: What strategies do you use in your follow up process to help ensure that you make contact with as many borrowers as possible? Deborah: I call the number provided and leave an introductory message if I get voicemail. I then immediately send an introductory email asking them to call me at their convenience or let me know when I can best reach them. I call the borrowers daily for the first 7 days and usually send 2 emails over the course of a week. EC: I make the first call attempt as soon as the lead is received! Wayne: One beautiful thing about the RMD leads is that they are all computer literate and email savvy. Email opens up another avenue of communication with your client which is an invaluable (and unusual) asset with the Boomer generation. As soon as I receive a name, I immediately email them introducing myself and the benefits of a Reverse Mortgage and include a picture. Then I follow up with a call the next day, this way there is already some familiarity established and they’ll have questions for me. RMD: What processes/tips do you have in place/suggest for continued follow up? How long is that follow up schedule? Deborah: I keep a ‘current’ folder of all leads that need to be followed up in a short period of time and set my calendar as a reminder of when. I also put all leads, active, inactive and unresponsive into my database to receive a letter or postcard from me every other month. My intention is to keep mailing them until they tell me to stop!

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Advertorial by Reverse Mortgage Adviser

EC: I am always sure to vary the time of day that I make my calls, including evening calls in case the borrowers are at work during the day. I call at least once daily for the first 7 days. Wayne: I use a series of 3 email templates that I wrote (for these leads in particular) and 5 information packets that I send via mail. I follow up with a telephone call to each and track them in Outlook. I also have a few voicemail scripts posted on my bulletin board for leaving messages. I can go out 3 to 6 months with a client with those materials. RMD: How do you find that RMD’s Internet leads differ from other leads?

in jump starting my business plan. EC: My ability to establish contact and build rapport early. Wayne: RMD has doubled my sales in a very short time. The leads are quality leads, and in the end save me field time allowing me to focus on clients who are already asking questions. **Please note that the information provided by the loan consultants above were gathered through telephone/email interviews and are the personal views of the loan consultants interviewed and not the beliefs of their individual companies.

Deborah: The RMD leads seem to have done research on reverse mortgages and are much more knowledgeable than leads I get from newspaper advertising. Generally speaking, they need much less education from me.

To Contact: Reverse Mortgage Directory (800) 407-6365 www.ReverseMortgageAdviser.com

EC: The borrowers are interested and motivated since they made the inquiry and I’m just following up on their request. Wayne: I’ve used other lead providers over the past few years. I have been using RMD for 4 months now and I’m impressed. The clients are often ready to go when I call them, because they’re often familiar with Reverse Mortgages from studying various websites. The difference is phenomenal, primarily, because of the manner and methods by which RMD generates their leads. The leads are, by definition, computer savvy, more educated, and eager to ask questions. RMD: What advantages do working with RMD’s Internet leads provide? Deborah: The biggest advantage is their level of education and that the lead flow is dependable. EC: The fact that they requested the information has definitely been to my advantage. Wayne: The RMD staff is very customer friendly and ready to help. But the real test comes with returns for credit. If the client is unreachable because of an erroneous telephone number RMD gives you credit without questions asked. In fact, they provide an easy to use website for returns. RMD: To what do you attribute most of your success? Deborah: Being fairly new to this side of the business, having leads that are qualified and interested has played a huge part November 2008

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Flip Flopping:

Targeting Seniors to Buy REO Properties George B. Lopez

At first glance, the reverse mortgage file looked perfectly normal. A senior client who had recently moved into a house apparently wanted to use a reverse mortgage to retire a small lien on the property. The appraisal indicated a well maintained, modestly valued property with more than sufficient equity to perfect the reverse mortgage transaction. The loan file conformed in all respects with FHA underwriting guidelines. In fact, the loan was indistinguishable from hundreds of reverse mortgages that are processed and closed each day across the country. However, a closer examination of the loan file revealed some peculiarities. For example, the previous owner was a limited liability corporation that purchased the property three months prior through an REO sale. Just one month later, the senior client acquired title to the property via a quitclaim deed (or perhaps a land contract). More troubling, the appraisal photos indicated that the interior rooms were sparsely decorated, containing 3-4 pieces of furniture and no personal effects or accessories whatsoever. Just weeks after the closing, the servicing lender received returned mail from the senior client. Further investigation revealed that the senior homeowner had vacated the property. Or worse, the servicing lender discovered that the senior homeowner was penniless and had been sleeping on the floor in abject poverty. In such cases, the servicing lender may have no choice but to initiate foreclosure proceedings.

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reversereview.com

“The road to hell i intent - John Ray

is paved with good tions.” y, ca. 1670

The scenario I’ve just described illustrates one of the fastest growing forms of reverse mortgage fraud in the country—REO property flipping targeting senior citizens. Once confined to urban subdivisions in Detroit and Atlanta, the problem is spreading like wildfire across the country as investors look to unload newly acquired REO property on senior clients who can then repay the investor by using a reverse mortgage. The Scheme The marketing tactics for this scheme are constantly evolving and quite clever. Seniors are lured into attending homeownership seminars and/or receive direct mail pieces offering seniors the opportunity to purchase a property with little or no money down and no monthly payments. The REO investor, who acquires the property on the cheap, invests a minimal amount of funds to get the property up to code and then transfers title to the senior. In the process, the investor puts 1-2 liens on the property with a tidy profit baked into the lien amounts. The reverse mortgage then becomes the critical piece of the puzzle, especially the appraisal. The appraisal typically contains comps from properties that are located in the vicinity of the subject property. However, given that the subject property is usually in an urbanized, densely populated area, it is fairly easy for higher value comps to be chosen from other nearby subdivisions that do not contain high concentrations of REO properties. Once the fair market value has been established in a subdivision where 1-2 of these REO flips have occurred, the stage is set for widespread fraud. Even reputable FHA appraisers can be duped by a database of artificially inflated appraisals. The potential profits to the REO investor and the mortgage broker can easily run into the millions given the high volume of REO properties on the market today. The Responsible Parties Ironically, the parties responsible for this scheme-investors, mortgage brokers, appraisers and even community leaders, are often hidden in plain sight. The reason should surprise you—arguably, these parties have not violated any laws. What they have done is exploit a small loophole in the FHA HECM guidelines that does not exist in the forward mortgage world. In the forward mortgage world, if a subject property has been sold within the past twelve months, the lesser of the sales price or the appraised value from that transaction is the November 2008

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fair market value figure used in any refinance transaction. HUD guidelines explain this unique “seasoning requirement”: Properties Under Construction or Existing Construction Less than One Year Old Properties not meeting the criteria shown below are… limited to 90 percent financing, i.e., 90 percent of the lesser of the appraiser’s estimate of value or sales price. FHA Single Family/4155.1 REV-5/CHAPTER 1, SECTION 2/1-8 (F)

If the loan proceeds from a forward mortgage are used to pay off a Land Contract, the HUD guidelines are also clear: If all loan proceeds are used to pay the outstanding balance on the land contract and eligible repairs, renovations, etc., the appropriate LTV ratio is applied to the lesser of the appraised value; or the total cost to acquire the property… FHA Single Family/4155.1 REV-5/CHAPTER 1, SECTION 2/1-8 (E) 1,2

Yet no such “seasoning requirement” exists with reverse mortgages. As such, the HECM underwriter can accept a new appraisal and use the fair market value from the new appraisal despite the fact that there is recent sales price data that contravenes the appraisal, sometimes quite significantly. The Human Tragedy The philosophical justification for this scheme can sound compelling at first, but it’s completely misguided. Who doesn’t think it’s a good idea to enable seniors to buy a house with no money down and no monthly payments? And if enough seniors take advantage of this opportunity in a given area, the thinking goes, the reverse mortgage program

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reversereview.com

can singlehandedly restore stability to distressed real estate markets by ridding subdivisions of dreaded REO properties. However, the philosophical justification crumbles when examining the human element involved. Hundreds and perhaps thousands of lower income seniors have been targeted and recruited as straw buyers. Many of these seniors are currently renters, perhaps recent victims of the subprime crisis, and have no tangible assets. Many are poorly equipped to deal with the responsibilities of homeownership. Houses that were once staged for appraisal photos are quickly emptied by the REO investor, leaving the senior with little or no furniture and no means to properly inhabit the house. Even worse, when the first utility bill arrives or the first maintenance issue arises, the senior cannot afford to make payment. Similarly, tax and insurance bills are permanently put to the side. Frustrated and unable to cope, seniors either vacate the property or attempt to fashion some sort of Spartan existence out of their situation. Risk to FHA and the Lender FHA’s exposure is plainly apparent. The concept that an REO property has significantly appreciated in just a few months during the most depressed real estate market in our lifetime is dubious at best. While some REO investors may expend resources to rehab a property, the amount of money invested is certainly less than the profit involved. Many REO properties are the byproducts of the subprime lending crisis and are dragging down the balance sheets of the Wall Street banks that are saddled with them. According to RealtyTrac, by the end of the year more than a million bank-owned properties will have piled up on the market, representing around a third of all properties on the market. To allow that burden to be transferred so easily to FHA’s balance sheet should be a source of concern to FHA policymakers. As this edition went to press, FHA released Mortgagee Letter 2008-33 which contains language designed to deter reverse mortgage lending on a property within 180 days of the “flip” date. Mortgagee Letter 2008-33 appears to be inadequate to deal with property flipping for two reasons. First, the REO investor and the senior homeowner can postpone the reverse mortgage transaction for 180 days, effectively circumventing the new guidelines. Second, ML 2008-33 appears to only apply to purchase transactions, when in November 2008

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fact reverse mortgages in these cases are being used to pay off seller-financed liens. In other words, these property flips are being handled as refinance transactions and not purchase transactions, thus negating the HECM purchase guidelines outlined in ML 2008-33. More clarification from FHA could be necessary in the coming months. Fortunately, the HUD Inspector General is aware of this REO activity and is actively formulating a response. In addition, several wholesale lenders have instituted corrective policies to deal with the problem such as one-year seasoning requirements. The National Reverse Mortgage Lenders Association (NRMLA) is working with industry professionals to create best practices guidelines to combat this gathering threat. Clearly, in the area of property flipping and mortgage fraud it is difficult to keep pace with the sophisticated criminal mind. Ultimately, the greatest exposure to this problem may lie with those reverse mortgage lenders who aggressively pursue partnerships with REO investors. By targeting senior citizens to buy these properties and using such a flawed methodology, these lenders may not only harm their clients, but also cause irreparable harm to their own businesses.

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TAX AND INSURANCE DEFAULTS,

Ryan LaRose

a serious dilemma for our industry

Q

uite often we have had people come up to us and say, “Reverse mortgage servicers have it made. All you have to do is send money to borrowers when they request it and keep track of their accounts.” Oh, if it were only that simple!

In early 2004, when we began researching the reverse mortgage market, our CEO attended his first National Reverse Mortgage Lender’s Association (NRMLA) conference in Atlanta. It was there that he met people like Jeff Taylor, Dave Carey, Paul Franklin, Jim Cory, Sarah Hulbert and Shawna James, among many others. Interestingly, at that time he also thought servicing reverse mortgages was quite simple. However, when he was finished listening to all of the industry experts and veterans, he was stunned at the breadth of work that was required. It was then that he ran into the “cold wall of reality”: reverse mortgages are a highly sophisticated (and slightly esoteric) loan product. Further, they require not only a thorough understanding of HUD and Fannie Mae servicing guidelines, but also the ability to build a servicing platform from scratch, and of equal or greater importance, the ability to recruit and retain employees who have an almost “evangelical mission” to help and protect older adults. As we began structuring systems, procedures, and processes, the one huge sticking point in our operational development was, “What in the world do we do with those borrowers who are unable to pay their taxes and/or insurance premiums?” Much to our initial dismay, the HUD servicing guidelines state that the servicer should request the loan be called due and payable on any tax or insurance (T&I) default, which sent us sideways. We simply could not imagine initiating foreclosure and eviction proceedings against an 85 year-old widow just because she was unable to make her $500 homeowner’s insurance premium. However, our fears were quickly abated when we learned that Fannie Mae, the only purchaser or investor of HECMs at the time, had decided not to pursue foreclosure on T&I defaults for the time being. Okay, we thought, not so bad after all.

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In early 2007, we saw the entrance, albeit short-lived, of Wall Street investors to the reverse mortgage industry. This was the first time that a significant number of new reverse mortgages would very likely not be sold to Fannie Mae where the servicing policies and procedures were “timetested”. This did cause us a certain level of concern: would the non-Fannie Mae investors be as willing to adopt the “ride it out” philosophy concerning T&I Defaults as that followed by Fannie Mae? One, I might add, that we fully support. Fortunately, so far they have. Fast forward to the 4th quarter of 2008 and now that we are servicing close to 20,000 reverse mortgages, the T&I issue has become a lot more problematic for us, NRMLA, and in fact, the entire reverse mortgage industry. Before I get into all of the intricacies and nuances of the T&I default dilemma, I would like to offer a little perspective. The vast majority of reverse mortgage borrowers are able to keep their taxes and insurance current. However, an everincreasing number of borrowers require the proceeds from their reverse mortgage for immediate needs and in many cases, all available funds are either taken at closing or used up shortly thereafter. Now factor into this “equation” the fact that a lot of older adult borrowers were (or are) accustomed to having their previous mortgage payments include escrows for taxes and insurance. Then, when they get the much-needed funds from their reverse mortgage, the thought of keeping reserves on hand for the tax or insurance bill, in many cases, doesn’t occur to them or is simply not economically feasible. When a servicer receives information that taxes are delinquent or a homeowner’s policy has lapsed, the borrower is immediately contacted to discuss these potential “defaults” in the hopes that it was a simple oversight and the situation is easily and quickly rectified. Oh, if it were only that easy! All too often, the borrower is completely “tapped out” and is also unable to obtain funds from any other family members to help resolve the default. Somewhat surprisingly, it is not uncommon for a borrower to actually thank us for

reversereview.com

advancing the funds to pay their taxes or insurance premium with a rather revealing comment like, “Thank you so much for paying my tax bill. I honestly don’t know what I would do without you.” Even though servicers work diligently to impress upon the borrower that this is not a “free” advance and they need to pay it back, most efforts at recovery are generally not very productive. Yes, there are some folks on repayment plans, but the successful completion rate on these T&I workouts is dismally low. With that said, the “pot is beginning to boil” once again as we are seeing a recent and rather dramatic increase in T&I defaults, with a significant percentage of those being fairly new loans. Quite frankly, we were completely amazed by the results of a recent data analysis that we conducted on new T&I defaults in our servicing portfolio. When we studied the underlying reasons behind these new defaults, one overwhelming “theme” emerged quickly: over 80% of the borrowers that recently defaulted on their taxes and/or insurance had selected a lump sum payment (full draw of all available funds) at the time of closing. Further exacerbating this problem is the fact that secondary market investors of the HECM product compensate originators based upon the amount drawn at closing. This practice, whether or not it’s intended, is an underlying factor causing the increasing number of fully drawn loans being originated. Fannie Mae, reverse servicers, and HUD have been in communication with one another regarding this topic over the past several years. There have been T&I “brainstorming sessions”, work groups, and a sharing of ideas in an effort to provide the industry with a clear direction on how to move forward. Many great ideas have been generated by all of the various participants as a result of these meetings and conversations, but roadblocks continue to be placed in the way of true progress. Guideline restrictions handcuff HUD from making any dramatic policy changes, without first seeking and obtaining congressional approval. Knowing how long it took to get the most recent housing bill passed, this is not a very encouraging solution. Processes were introduced by HUD in the last 12 months as a tool to help investors mitigate foreclosures on T&I defaults. Essentially, the plan involves analyzing the current loan-to-value on the property, along with other factors, to determine if there could be a potential loss at some point in the future. If the borrower meets HUD’s criteria, meaning there is no foreseeable danger of HUD incurring a loss, then

they will allow the servicer to “defer” calling the loan due & payable until a future date, avoiding the requirement for an immediate foreclosure action. On the flip side, if the borrower’s property value cannot support the potential future T&I advances, it is expected that the servicer/investor will seek approval from HUD to call the reverse mortgage due & payable, thereby moving towards foreclosure. Thankfully, I am not aware of any foreclosures on HECM borrowers due to a default on taxes and insurance as of today. I do not know if this is due to the success of the HUD deferral program or the continued stance of HECM investors to not foreclose on T&I defaulted seniors, because it is not publicly shared information. At a HUD training session for HECM servicers in August 2008, it was reaffirmed that HUD will continue to offer the T&I deferral program as an option for servicers and investors to reduce the requirement for foreclosures. However, there are still more questions than answers that remain on the right way to deal with borrowers who find themselves in this lessthan-desirable predicament. While the deferral process is a good first step, there has not been a HUD Mortgagee Letter issued which details this process and provides clear direction to servicers and investors. In addition, there are industry concerns over the criteria used when analyzing whether a loan passes or fails the HUD deferral guidelines. This lack of clear direction could lead to inconsistencies in servicing practices from one servicer to another, or one investor to another. This difficult and sensitive situation leaves the primary HECM investor, Fannie Mae, with the unenviable role of advancing the necessary T&I advances year after year, after year. And it leaves the servicer with the haunting, potentially daunting, and even more unenviable task of initiating foreclosures if the investor decides that they cannot absorb any more advances. This becomes an even more challenging decision for investors to make as falling home prices and the overall housing crisis impacts the reverse mortgage industry. As a final note, the reverse mortgage industry has seen many positive achievements over the past year: continued growth in the HECM program, more originators entering the marketplace, higher loan limits, and increased levels of consumer acceptance, to name just a few. But for servicers and investors, the “clock is ticking” and those of us at Celink, as well as any other servicer in the reverse mortgage industry, are hoping that a broad-based solution to the T&I default issue can be found – sooner rather than later.

November 2008

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Refi City—Maybe, Maybe Not For several years we’ve thought HECM-to-HECM Refi’s would be beneficial to many borrowers. They’re older now and rates are lower than usual – age and rates determine benefits when applied to a Maximum Claim Amount (the lesser of the home’s appraised value or the HUD lending limit in that area). 30% of existing HECM’s are over-collateralized (original appraisal was higher than the original HUD lending limit). Then HUD announces a $417,000 lending limit – way over past limits. Great! Not so great – home values have plummeted in the last two years and HECM’s have fast payoff rates so there are not that many ‘old’ loans. Many factors go into finding how many and which HECM borrowers would benefit with a REFI. In these notes, we explore this and more. Over the last several years, HECM Refi’s have accounted for 6.4% of HECM originations. We thought this figure would explode with the new $417,000 lending limit. Maybe not! As a side note, HECM Refi’s account for 31.2% of HECM payoffs – there are five times more HECM originations than there are HECM payoffs. Some Background On April 23, 2004, HUD released Mortgagee Letter 2004-18. It provides that borrowers can receive credit for the initial Mortgage Insurance Premium (MIP) they paid when doing a HECM-to-HECM REFI. This is called a “Streamlined Refi”, but, as we shall see, it’s not all that streamlined. Initial MIP is two percent of the Maximum Claim amount. If the original Claim amount was $250,000, the initial MIP on the existing HECM would have been $5,000. If the new Claim amount is $417,000, the initial MIP would normally be $8,340, but with credit for the $5,000 MIP paid on the original HECM, only $3,340 MIP is charged on the new HECM. Home prices have fallen materially in the pat couple of years. The Mortgagee Letter doesn’t specifically say what to do if the new Claim amount is less than the original Claim amount, but the final rule published in the Federal Register (75204, Vol. 69, No. 240) on December 15, 2004 says “the initial MIP paid by the mortgagee shall not exceed two percent of the increase in the maximum claim amount”. This

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Gerald C. Wagner, Ph. D. and Ashok Shinde, Ibis CTO

implies that if there is no increase, there is no incremental MIP, and the HUD software won’t allow the new Claim to be less than the original Claim. So, basically, one cannot get credit for more than the new MIP. Ibis software simply converts negative incremental MIP to a zero. We’ve seen several examples where REFI HECM’s pay no initial MIP owing to declining home values. The Opportunity With a HECM, the benefits increase whenever (1) the Claim amount is higher, (2) the borrower is older, or (3) the Expected Rate is lower. This month the HECM national lending limit is going to Freddie Mac ‘conforming limit’ of $417,000. A temporary increase in the conforming loan limits for high-cost areas is included in the 2008 economic stimulus package; it is the lesser of $729,750 or 125% of the average home value within a metro area. Unfortunately, HECM is stuck with the $417,000 limit. Claim Amounts Last month, county-by-county 203(b) lending limits ranged from a national floor of $200,160 to a national ceiling of $362,790 (excepting Hawaii). There are 3,230 counties in the U.S. – 79% of them were at the national floor – now they are all at $417,000. A breakdown of the old 2008 limits is below. 670 of the Counties were classified as ‘high cost’.

Hawaii $362,790 In between $200,160

Counties 4 120 546 2,560 3,230

Counties

Mix

Mix

670 2,560 3,230

4% 17% 79% 100%

21% 79% 100%

The HECM program began in 1989. For the first three years, lending limits were low. From 1993 thru late 1998, the FHA county maximum and minimum lending limits were set at 75% and 38% of the conforming limit respectively. In late 1998, these were reset to be 87% and 48% of the conforming limit. Chart 1 shows the max and min lending limits over time as well as the average HECM home value and the average Claim amount.

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for a HECM-to-HECM REFI. Of the 30% of HECM’s that are over-collateralized, 54% were over the then current lending limit in the 124 maximum limit counties. Only 13% of these over-collateralized loans were in Minimum limit counties.

Chart 1 shows that HECM borrowers have shared equally in the housing market down. Downturn is perhaps too soft of a word – perhaps a ‘market catastrophe that was waiting to happen.” In the last two years, the average home value of a new HECM has declined 17.0%, but interestingly, Claim amounts are down by only 7.9%. That’s because 30% of HECM’s are over-collateralized – when the home value is greater than the 203(b) lending limit, a fall in home value doesn’t necessarily mean that the Claim amount will fall. Whenever a HECM’s home value is greater than its Claim amount, the loan is over-collateralized and a prime candidate

Chart 2 shows the percentage of new HECM’s that were made with a home value greater than its 203(b) lending limit. This chart indicates that the ‘high-cost’ metro areas have the most over-collateralized homes. Those areas are where your REFI market is.

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www. ArmLeads.com November 2008

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Fiscal Year Ending Sept. 30 1989-99 2000 2001 2002 2003 2004 2005 2006 2007 2008

Average Expected Rate 7.15% 7.30% 6.70% 6.40% 5.40% 5.80% 5.70% 6.00% 6.00% 5.60%

Average Property Value 124,382 141,700 167,100 178,000 197,600 219,400 254,900 289,700 261,900 240,400

Average Maximum Claim 110,806 124,600 140,600 151,300 165,900 182,200 206,000 235,600 229,300 217,100

The Potential Refi Market So the good news is that 30% of existing HECM’s are overcollateralized -- a great pool of potential Refi’s exist. The bad news is that HECM home values are falling along with the market. 77% of active HECM’s were originated in the last three years, and it’s safe to say that few are great refi candidates unless their original home value was higher than their original Claim amount. One thing is for sure – the borrowers are older than when they got their original HECM. That means higher Principal Limits (Benefits). The Principal Limit on a HECM is found by multiplying the Claim amount by a factor which depends on the younger borrower’s age and the Expected Rate. The Expected Rate is the lender’s margin plus the 10-year Treasury or LIBOR rate depending upon which HECM product is offered.

Fiscal Year Ending Sept. 30 1989-99 2000 2001 2002 2003 2004 2005 2006 2007 2008

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Original Expected Rate 7.15% 7.30% 6.70% 6.40% 5.40% 5.80% 5.70% 6.00% 6.00% 5.60%

65 37,502 40,147 29,088 19,953 -3,606 3,606 3,606 10,337 10,337 -3,606

Average Unpaid Balance 91,754 86,000 95,900 101,500 118,600 119,600 130,500 134,800 120,200 108,300

Mix of Active Cases 1.1% 0.5% 0.7% 1.6% 2.8% 6.7% 9.6% 19.9% 30.1% 26.8%

Accum. Active Cases 100.0% 98.9% 98.4% 97.7% 96.1% 93.2% 86.5% 76.9% 57.0% 26.8%

Older borrowers mean Principal Limit higher factors. And lower rates mean higher factors – today rates are pretty low, but they were lower in 2003. To justify a HECM REFI, one must demonstrate benefits that are materially higher than the costs of doing the REFI. The next table shows the incremental benefits across borrower ages that just using current rates would give compared to the loan’s original Expected Rate. The high Expected Rates for loans made from 1989 thru 2002 make them good REFI candidates – they will enjoy considerably higher Principal Limit factors. Loans made in 2006-2007 also show a positive ‘rate’ benefit, but their homes have undoubtedly fallen in value and current rates are jumping around weekly. So there we are. The HECM Refi market may be less than we hoped. The prime Refi loans are those originated in 2002 and earlier. This pool contains only 13,500 active HECM’s out of more than 450,000 total HECM’s (360,000 of which are active).

Change in Principal Limit using current rates With a $240,400 home value and 5.67% Expected Rate. 70 75 80 33,656 29,329 24,280 36,060 31,492 26,204 25,723 22,357 18,270 17,549 15,145 12,260 -3,125 -2,644 -2,164 2,885 2,644 1,923 2,885 2,644 1,923 8,895 7,693 6,250 8,895 7,693 6,250 -3,125 -2,644 -2,164 reversereview.com

85 19,472 20,915 14,664 9,616 -1,683 1,442 1,442 4,808 4,808 -1,683

Of these 13,500 active loans originated from 1990 thru 2002, 30% were originally over-collateralized. In these 4,000 loans, the average appraised home value was 32% higher than the original lending limit. These are prime Refi candidates because although home values have fallen materially in the last two years, they haven’t fallen back to the original home values of these old HECM’s. One caveat on old HECM’s: For loans originated before May 1, 1997, the Principal Limit grows at the loan’s Expected Rate (plus 0.5% MIP). After that date, growth is what the practice is now – the actual note rate (plus 0.5% MIP). The average Principal Limit growth rate on these pre May 1, 1997, HECM’s is 8.7%. In a Refi comparison of old and new Principal Limits, finding a benefit for the borrower may be tough. The borrowers are older, rates are lower, home values are likely higher – all pluses so the Refi’s Principal Limit will undoubtedly be much higher than the loans original Principal Limit. But the original Limit has grown by 8.7% per year for many years. HECM Servicers and Refi’s When doing a Refi proposal, the originator will have to contact the original HECM’s servicer to get three pieces of information. For the original HECM being refinanced, servicers are required by HUD to provide:

1. The Maximum Claim Amount (this allows you to calculate the original MIP). 2. The current Principal Limit (the original PL plus growth over the years). 3. The current Payoff Amount. Items (2) and (3) can generally be found on the latest monthly servicing statement. If you know the loan’s FHA case number, you can go HUD’s case number assignment screen to find the name of the servicer. Contact information for the various servicers is found at HUD’s website (http://www.hud. gov/offices/hsg/sfh/hecm/hecmservlist.pdf). HECM’s are either “full service” or “sub-service”. Full service means an originator sold the servicing rights to a servicer and received a Service Release Premium (SRP). The servicer collects the full monthly service fee, and I believe legally the borrower is now ‘owned’ by the servicer, not the originator. So originators culling their lists of old clients should be careful to not get in a flap with the servicer they ‘sold’ the loan to. In a sub-servicing situation, the originator ‘retains’ the client, gets no SRP, and splits the servicing fee with the servicer. So there should be no problem with the originator getting the information needed and making Refi proposals for their old clients.

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Anti-Churning Disclosure

Counseling

Along with the usual Good Faith Estimate, a HECM REFI requires a separate disclosure comparing the incremental costs and benefits of the new HECM vs. the existing HECM. This is done by estimating the Principal Limit (PL) of the new HECM and subtracting the PL of the existing HECM. The PL of a HECM grows each month, and you use the current (grown) PL of the existing HECM, not its original PL, in this calculation.

It may be a good policy to always request your REFI client to go through HECM counseling again. But, if three conditions are met, new counseling is not required. The conditions are: (1) you give your client an Anti-Churning Disclosure, (2) the magic number from above (the benefit/cost ratio) is five or higher, and (3) that it hasn’t been more than five years between the closing date of the existing HECM and the application date for the new HECM.

Then you find the cost of the refinancing by adding up the loan fee, the incremental MIP, third-party costs such as appraisal, title insurance, etc., and a zinger thrown in by HUD – the Service Fee Set-Aside (SFSA). Most of us know that the SFSA is a set-aside, not a cost – at least they could have given credit for the SFSA on the existing loan – that SFSA is going away.

There’s a catch to the five-year rule. The period begins with the original HECM if there has been a prior REFI in between the original HECM and the new HECM. If your client qualifies, and opts out of new counseling, the case binder must include a document showing that the three conditions were met.

One then divides the increase in PL by the new ‘costs’ to find a ratio of benefits to costs. Five is the magic number. The disclosure also shows the borrower the net amount that will be available. This is the new loan’s PL, less the costs above, and less the payoff on the existing HECM.

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Refi Recap The housing crash has made a mess of what we thought was the opportunity of a lifetime – to refi 50,000 HECM’s. Still, the new $417,000 national lending limit opens up many HECM’s as potential candidates for immediate refinancing. We estimate the current number at 5,000 – a far cry from 50,000. When, and if, home values come back, the Refi market may bloom.

reversereview.com

the art of developing trust and credibility through online educational marketing Valerie VanBooven

Knocking the ball out of the park on Reverse Mortgage production consistently means knowing your community and knowing how to educate effectively. Developing trust and credibility in your local community means not only having a respected physical presence, but also a respected and informational online presence. Where are your prospects and referral sources today? Most of them are online!

November 2008

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Where are seniors getting their information on Reverse Mortgages? They are receiving their information in the mail, on the radio, TV, online, and from well meaning adult children who get their information online. Here are two things to consider as you ramp up your marketing plans for 2009. 1. Create and upload excellent videos- 1-3 minutes each on Reverse Mortgages. 2. Make sure your website is effective in turning leads into clients. Video Marketing for Increased Credibility and Trust You don’t have to be an internet guru to figure out that video is one of the most pervasive entertainment and educational facets of the online world. If you are not leveraging video yet, the good news is you can start at any time. • Popularity & Accessibility - Video is now so popular and accessible, it accounts for half of all Internet traffic. That’s right -- in less than two years video has gone from practically non-existent online to comprising half of all the content consumed each day. • Power - This is fantastic news for anyone selling products or services online. Why? Because it’s been widely known for decades that video is the most powerful selling medium there is. If you could learn how to sell with Internet video, just imagine the results you could drive piggybacking on to the most popular online content there is. • Simplicity - Another factor is that the technology and processes for creating video has gotten so simple, children are now doing it! • Affordability - The amount of money it takes to produce online videos that sell and blast them all over the Web is now so miniscule, practically any business owner can now afford it and not even blink. • FACT: YouTube is now the fourth most popular site on the Internet, commanding almost 12% of global Web traffic. • FACT: More than 70% of Internet users now stream video each month. • FACT: Worldwide, nearly 12 billion videos are consumed online each month. • FACT: Before our eyes in less than two years, the number of free video hosting services has gone from a handful to nearly 300. (Sources: comScore Media Metrix and the New York Times)

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Google.com LOVES videos. When you upload a short video to some of the most popular online FREE services, you will be indexed on the front page of Google.com and other search engines almost overnight. Be sure you understand how to make keywords work for you! Equipment and the “How To” For the beginner, I recommend using a program called Camtasia, and a simple Power Point presentation. Camtastia ($324 US) can be found online at www.camtasia.com. This is a screen capture program that will record everything you do and say as you move through a short Power Point presentation. No camera required! In fact, you can record and upload a video in a matter of minutes with a little practice. The videos you record should be uploaded to many sites across the internet including YouTube, Google Videos, Yahoo Videos, MySpace Videos, Veoh, LiveVideo, GUBA, and dozens of others. (This takes an investment of TIME.)

Use these videos on your website as well. Consumers want as much information as they can get before making a decision. Keep your videos short and to the point. By all means, take a look at what your competition is doing BEFORE you record. Take note of what looks terrible and what really shines. Model your videos after those who have done a great job. Finally, today video and the internet go hand-in-hand. It’s cheap, easy to do, and really sets you apart from the boring crowd. Establish yourself as the ultimate expert on any topic by using video to your advantage! Can you pay someone to do this for you? Absolutely! But don’t spend an arm and a leg on a process that shouldn’t cost you more than $100 per month. As an example of how well this works, the next time you are surfing the web, type in “Marketing Senior Services” and see if you can find one of my videos on the front page of Google. Use my template as a model for your own. If you can’t find me, email me at [email protected], and I’ll point you in the right direction.

Make sure you freshen up your content once a month to stay on top of the search engine rankings.

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The Band

Alissa Scott

OF FIVE

Getting a loan closed is not as easy as it appears. In order to close loans quickly and efficiently it is important for loan officers to surround themselves with elite business partners. It is imperative that loan officers have a team which fits their mold and provides the same level of service. This team should consist of a DILIGENT PROCESSOR, an EDUCATED SETTLEMENT AND TITLE PROVIDER, a TRAINED REVERSE MORTGAGE NOTARY/ATTORNEY, a WELL-VERSED TRUST ATTORNEY, and a CREATIVE FINANCIAL PLANNER. Loan officers often refer to these individuals as the “band of five.”

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By having a “band of five” in their network, loan officers will be able to get their loans closed without stress. No two loans or borrowers are alike and it is the loan officer’s responsibility to assist the senior homeowners in making the loan work. For example, a loan officer was not able to get the loan to closing because their senor borrowers had not fully executed their trust and it was a lender requirement that the trust be signed prior to the loan documents. The senior borrower’s attorney had drawn up the trust but the attorney forgot to have them sign and notarize it. An easy solution would have been to have the senior borrowers contact the attorney or a notary to get the trust signed and notarized. Unfortunately, the senior borrowers had been in and out of the hospital and were unable to find time to get the trust signed. The loan officer solved the problem by contacting a member of the “band of five,” their title company. One of the title company’s account managers had a notary license and offered to drive to the senior borrower’s home to obtain their signature at no additional charge. This is just one of the

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many instances where a valued business partner can assist a loan officer in finding solutions to their client’s needs. When choosing a processor to handle reverse mortgage closings, the loan officer should be selective. Many senior homeowners haven’t obtained a mortgage in 30 years, so the processor must have the patience to communicate with the older, wiser homeowner who doesn’t understand the reverse mortgage process or industry jargon. A reverse mortgage processor will have to be kind, caring, and understanding of the senior borrower who cannot locate a copy of their bank statements, trust, or death certificate. Many times, the reverse mortgage processor will have to guide the senior borrowers on what the documents look like so they can assist in locating what is needed to close the loan. A reverse mortgage processor will get to know the family members of the elder homeowner and will have to learn to remain calm when they receive a call from a disgruntled heir asking why they are taking their inheritance. They will have to adjust to clearing all conditions prior to receiving the loan documents and assist in the coordination of scheduling the closing. Typically, the reverse mortgage processor is the main point of contact throughout the transaction due to the fact that the senior homeowners get confused when they receive calls from vendors who have their private information. To prevent from upsetting a senior borrower, the reverse mortgage processor will work closely with title to help cure old liens, obtain the proper documentation to clear conditions, and scheduling the reverse mortgage closing. An efficient reverse mortgage processor will help loan officers close their loans quickly and allow them to do what they do best, bring in more reverse mortgage applications. Choosing a reverse mortgage processor to be a part of the “band of five” is equally as important as electing a settlement and title company. First, loan officers would want to check to make sure they chose a settlement and title company that is on their reverse mortgage lender’s preferred vendor list. Next, loan officers should find out how many reverse mortgage transactions the settlement and title company has closed and they would also want to verify that the settlement and title has the ability to review trusts based on HUD, lender, and state guidelines. Also, a settlement and title company should be able to offer resources and suggestions to assist loan officers in getting their loan closed such as: counseling agencies, reverse mortgage experienced notaries/attorneys, and industry referrals.

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In comparison to the conventional mortgage industry, the title and settlement company takes on a different role in the reverse mortgage industry. Their interaction is done behind the scenes and they have very little interaction with the senior borrowers due to the confusion it provides to the senior homeowners. However, that doesn’t mean they don’t have their work cut out for them. The settlement and title officer acts as a liaison between the loan officer, processor, lender, and notary/attorney.

them in getting a reverse mortgage and they trust them with their biggest asset. Other things to consider are the mishaps that happen on loans such as: the signer misses a signature or the senior homeowners are late for the signing, or the documents don’t arrive on time and the notary/attorney has to reschedule after they drove an hour for an appointment or the loan documents were incorrect and we have to redraw. The notary/attorney may want to charge additional fees for the extra work, mileage, or time. If the loan officer had a relationship with a notary/attorney who understood that people make mistakes and that it is not the senior borrower’s fault, the notary/attorney might be more willing to work with the loan officer on adjusting their fees.

The biggest obstacle the title company faces is old liens where a reconveyance hasn’t been recorded or the lending institution has gone out of business. Trying to locate a zero demand letter, paid in full statement, or copy of the recon can be difficult and can delay the closing. This is why it is so important “A lot of senior homeowners don’t that the reverse mortgage It is important to stress the processor and settlement and fact that if a loan officer can have a trust but they are interested title company have a strong attend their closings, they in creating one for the purpose of relationship and can work have a 99.9 percent chance together in a timely manner that the borrower won’t avoiding probate for their heirs to get the loan closed. If the rescind. Realistically, a loan should they pass away.” reverse mortgage processor officer can’t always attend can provide a complete the signing because they copy of the trust and all are either writing another of the amendments, bank application or spending statements, death certificates, homeowner’s insurance time with their family. Business is based on referrals so a information, statement of information, borrower’s loan officer better make certain that if they can’t attend authorization, power of attorney, and final vesting (if it needs the reverse mortgage closing, the notary/attorney who to be altered) then the settlement and title company can is representing them knows and understands reverse mortgages. efficiently do their job and the loan officer can continue to do their job of bringing in more loans. Now it’s time to focus on the professional partners; trust After all the conditions have been met and the clear to close attorneys and financial planners. A trust attorney who is has been issued, it is time to call upon another member of well-versed in reverse mortgages is essential to the success the “band of five,” the notary/attorney. A notary/attorney is of a loan officer. The trust attorney will be able to offer an extension of the loan officer. They are the last person to assistance by drawing up a trust for senior borrowers, contact the client before the loan disburses. A title company providing an attorney opinion letter when required by the will do their best to elect a notary/attorney who has been lender, amending the trust to reflect only one beneficiary, trained on reverse mortgages but sometimes at the end of providing a letter to state that the property lies in the revocable portion of the trust, an instruction and a deed to the month, it’s harder to schedule the most experienced notaries/attorneys. remove the borrower from the irrevocable trust, and assist in addressing senior borrower’s concerns about how a reverse However, if a loan officer has an established relationship with mortgage will affect their trust. A lot of senior homeowners don’t have a trust but they are interested in creating one for a notary/attorney and that person is a part of their “band of five,” the loan officer wouldn’t have to worry about whether the purpose of avoiding probate for their heirs should they pass away. or not their senior borrower had a question on their loan documents. The notary/attorney would be able to answer the senior borrower’s questions, or they would get the loan By including a trust attorney in the “band of five,” loan officers can refer their clients to a trusted attorney who they officer on the phone to address their client’s concerns. After know will treat them with care. Also, since the trust attorney all, the senior borrowers chose that loan officer to assist

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is well-versed in HECM/HUD guidelines, the loan officer won’t have to worry about the attorney including verbiage in the trust that would prevent the senior borrowers from obtaining a reverse mortgage loan. Another scenario that might occur would be if the senior borrower can’t locate a copy of the trust and the vesting clearly reflects that they hold title in an irrevocable trust. At the trust attorney’s discretion, they can provide an attorney opinion letter to have the senior borrower removed from the irrevocable trust. A trust attorney can be a saving grace when a loan officer is faced with a deceased borrower and the property is in an “A and B” trust. A trust attorney can come to the rescue by providing the senior borrowers with an attorney opinion letter stating that the property lies in the revocable portion. A trust attorney is a great ally because not only are they helping the senior borrowers, they are a great referral source for the loan officer.

borrowers Medicaid benefits and the senior borrower was not happy. There are many different scenarios and each borrower is different but choosing a financial planner that has the proper accreditation to work with seniors and making them a part of the “band of five” can only help loan officers achieve their goals of being the best. It is well known that the most successful loan officers have strong relationships within the reverse mortgage industry. Loan officers can’t close these loans on their own; they need help. It’s a necessity for loan officers to work with business professionals that can assist in growing their business. The “band of five” must share the same morals as the loan officer and want to achieve the same goals; closing loans quickly, efficiently and professionally.

An additional referral source and trusted advisor is a financial planner. We have all heard about the nightmare loans where a broker was sued because they sold a senior borrower an annuity along with a reverse mortgage. They may have thought they were doing the senior borrower a favor or they may have just been greedy. If the loan officer had only suggested that their senior borrowers seek the advice of a financial planner, they wouldn’t have been put in that predicament. A financial planner can offer solutions to a senior homeowner that a loan officer cannot. For instance, if a senior borrower has a spouse who is not 62 years of age, that spouse cannot be on title to the loan. This may prevent the senior homeowner from going through with the reverse mortgage because they are concerned about what will happen to their spouse once they pass away. One situation that may occur is the non-borrowing spouse could lose the home if they are not able to refinance the reverse mortgage with either another reverse mortgage or a conventional loan. Also, depending upon the state and how the senior homeowners are holding title, the non-borrowing spouse may have to go to court to claim their inheritance due to probate.

HUD Foundation Specialists

M Manufactured actured Hou Housing sing Troubleshooters T rouble FFoundation Inspections, Upgrades & Repairs EEngineer Certificatio C ons

In order to put the senior homeowner’s mind at ease, the financial planner may offer some suggestions to protect the interest of the non-borrowing spouse, such as a life insurance policy. A financial planner can also be a resource when senior homeowners have concerns about how a reverse mortgage can affect their taxes or Medicare benefits. For instance, a loan officer advised a senior borrower to remove the property from the trust. Changing the vesting on the property affected the look back period on the senior November 2008

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Press Release NEWS RELEASE Contact: Tyler Sebresos 801.316.6999

NEW REVERSE DOCUMENT PREPARATION INTERFACE International Document Services Inc. and Ibis software announce a data interface opening the way for unprecedented reverse mortgage document flexibility. DRAPER, UTAH November 6, 2008: IDS a document preparation company has teamed up with Ibis, makers of Ibis RMO, the leading reverse mortgage origination software. This integration allows lenders to transfer all of the data from Ibis RMO into idsDoc; IDS’s document preparation solution, enables the generation of necessary documents for reverse mortgage loans smoothly and without data entry. With its experience doing forward mortgage documents for over 20 years together with this new interface, IDS surges into the reverse mortgage market touting a broad range of competitive advantages. By working with a widely used and well respected company like Ibis, IDS is making the right moves to show their commitment to the reverse industry. Moreover, as a historically forward mortgage doc prep company, IDS is a pioneer by expanding into reverse documents, a commendable move that reflects the company’s aim to be flexible to client needs. The partnership combines the usefulness of Ibis with the customization abilities of IDS. This gives lenders a streamline workflow through the closing process, plus a range of tools and options to avoid compliance issues or costly data entry mistakes. “I am excited to give RMO users the flexibility that IDS provides. They will be getting the type of options and efficiency that is expected of document preparation on the forward side.” said Jerry Wagner, President of Ibis. “I think lenders will be impressed with the new tools and features we’re bringing to the reverse mortgage space,” commented Curt Doman President of IDS. “I’m excited about our partnership with IBIS. The seamless integration of our systems provides a new standard of service.” A noticeable difference that IDS brings to the reverse market is the progressive manner in which the data is merged dynamically into the proper forms. Once all the information is entered or interfaced from Ibis, the document package is created in a matter of seconds. Other tools include data entry shortcuts and auto-fills that speed up doc generation, audit checks to help catch clerical mistakes or enforce company compliance settings and form manipulation to refine the package to meet the specific requirements and requests of the client. About IDS Inc. For over 20 years, IDS Inc. has been a nationwide provider of mortgage closing documents. In this time, IDS has become quickly recognizable in the industry due to system flexibility and industry recognized customer support. The idsDoc system is fully customizable to applicable legal, compliance and automation requirements of each individual lender. In addition, IDS backs the system with unsurpassed customer service and progressive technological advances. For lenders looking for a flexible and accelerated document ordering process with 24hr support; visit the IDS website at www.idsdoc.com or call 800554-1872.

About Ibis Capital, LLC Ibis software has been the industry standard since 1995. The sister company of Ibis, NETirement.com, Inc., licenses online reverse mortgage software products that are second to none, including The Reverse Mortgage Analyst (RMA), The Reverse Mortgage Calculator (RMC) and The Reverse Mortgage Originator (RMO), the first non-HUD software to propose and disclose HECM’s. To learn more, please visit Ibis on the Web at www.ReverseMortgageHomePage.com or call 800-566-5077.

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MBA’s ANNUAL 08SF CONVENTION & EXPO

Gallery of Guests Carl Rove Norman Edwards Kim Newell Jay Leno with Club MBA John Courson Senator George Mitchell

November 2008

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Press Release NEWS RELEASE Contact: Trevor J. Gauthier AVP of Marketing 303.991.8337 SENIOR LENDING NETWORK® GOES LIVE ON MORTGAGE CADENCE ORCHESTRATOR™ AND FINALE™ PLATFORMS Transforms Reverse Automation with Data Driven Workflow and Fully Integrated Document Solution DENVER, October 21, 2008 – Mortgage Cadence, Inc., a leading provider of Enterprise Lending Solutions (ELS) for the financial services industry, announces the successful implementation of Mortgage Cadence Orchestrator and Finale to Senior Lending Network®, a program of World Alliance Financial Corp, and a leader in reverse mortgages. The Mortgage Cadence solution delivers extraordinary back office automation while driving efficiency throughout the reverse lending and document preparation process. “This is a marketplace that is expanding exponentially, with more than 6,500 seniors turning 62 each day. There is a tremendous need for the reverse mortgage product and a proven technology solution to support our business as it rapidly grows,” said David Peskin, Chief Executive Officer of Senior Lending Network. “We were looking for someone with the ability to scale our operations in an efficient manner and implement a fully integrated document solution to move our loans swiftly from point of sale to the closing table. “ Mortgage Cadence supports multiple top 10 reverse lenders and lenders that are new to the reverse market segment. The reverse mortgage functionality included in the Mortgage Cadence Orchestrator ELS supports reverse process flows and requirements. Additionally, it provides lenders with the ability to enter 1009s and HUD supplements, complete calculations for FHA HECMs and Fannie Mae Home Keeper products, reverse mortgage specific forms with a 100% pull through, the power to add additional customized calculations for custom products, as well as full support for multiple underwriting processes such as mortgage credit analysis and property analysis. Mortgage Cadence Orchestrator also offers sophisticated data driven workflow automation (powered by the ACE™ Rules Engine) including auto-resolution capabilities that greatly improve efficiencies, mitigate the need for additional training and deliver a significant increase in employee productivity and customer service. “By using the ACE™ Rules Engine to validate ratio’s and other reverse specific lending guidelines, we have been able automate our processes to significantly drive down costs,” added Peskin. Mortgage Cadence Finale, a premier document solution that supports both forward and reverse lending, is leveraged to dynamically create initial disclosures & closing packages and deliver them securely to the borrower or settlement agent. The Mortgage Cadence Finale team works in conjunction with Weiner Brodsky Sidman Kider PC to provide a full range of superior legal services and guidance in areas including due diligence, FHA/VA/GNMA and federal and state regulatory compliance. This relationship strengthens Mortgage Cadence Finale’s position within the entire mortgage document services space and facilitates continued dominance in the field of document services and technology for both forward and reverse mortgage lending. “We saw the potential in the reverse mortgage lending market early on and so we have been pro-actively working on this functionality for years,” stated Michael Detwiler, Chief Executive Officer of Mortgage Cadence. “We are pleased to partner with one of the true reverse lending innovators, Senior Lending Network, a program of World Alliance Financial Corp., to provide them with the industry’s leading Enterprise Lending Solution and premier document preparation and delivery technology.” About Senior Lending Network® Since 2004, the Senior Lending Network has been championing the rights of the nation’s senior citizens through its educational efforts, mortgage products, and philanthropic endeavors. By providing seniors with information and guidance on issues most pertinent to their lives as well as access to a network of qualified reverse mortgage experts, the Senior Lending Network has already touched the lives of more than one million seniors. For more information call (800) 454-1546 or visit the company’s Web site at www.seniorlendingnetwork. com. About Mortgage Cadence, Inc. Mortgage Cadence, Inc. is the leading provider of Enterprise Lending Solutions (ELS). Mortgage Cadence Orchestrator™ provides data driven workflow automation and seamless integration across the enterprise to help lenders achieve harmonious operational rhythm from origination, processing, underwriting, and closing through secondary marketing. The solution provides both forward and reverse lending automation – as well as support for multiple lending channels. This superior technology features business rules management, product and pricing, electronic document management, and a suite of Web portal options within one comprehensive platform. To learn more, please visit us on the Web at http://www.mortgagecadence.com.

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directory 1st Reverse Financial Services, LLC A Subsidiary of Wilmington Savings Fund Society, FSB 877.574.1000 1streverse.com

America’s Recommended Mailers, Inc. 800.992.2722 armleads.com

AppraiserLoft 877.229.7799 appraiserloft.com

James B Nutter and Company 800.798.3946 jbnutter.com

Monte Rose 800.516.0545 monterose.biz

Reverse Market Insight, Inc. 949.429.0452 rminsight.net

Mortgage Bankers Association 202.557.2700 mortgagebankers.org

Next Generation Financial Services 888.973.8377 www.ngfs.net Consumer Credit Counseling Service 800.251.2227 cccsinc.org

International Document Services 800.554.1872 idsdoc.com

Reverse Mortgage Adviser 800.407.6365 reversemortgageadviser.com

Reverse Mortgage Association for Loan Officers 877.262.7656 remalo.org

Celink 517.321.9002 www.celink.com

Ibis 800.566.5070 reversemortgagehomepage.com

Reverse Fortunes.com 866.592.2096 reversefortunes.com

OnTheLevel 800.909.1110 onthelevelcontractors.com

Premier Reverse Closings 800.542.4113 prclosings.com

November 2008

Reverse Mortgage Daily reversemortgagedaily.com

Reverse Vision 919.834.0070 reversevision.com

SoldonSeniors 540.785.9050 soldonseniors.com

45

the last word Gary Onks - Fear Factor - What do seniors fear the most?

If

you ask most people what a senior citizen fears the most, they will probably say illness or death of either themselves or loved ones. This would seem to be the logical answer about people whose age has brought them to the final stages of life. However, this answer is incorrect. Seniors are fully aware that due to their age they are facing potential physical and health problems, but those fears are way down their list of concerns about their lives. During my 18 years of marketing to seniors I’ve learned directly from “the horses’ mouths” what really worries seniors the most, and it’s not getting sick or dying. They literally worry that they will live too long. The top 3 things seniors fear the most are:

1. 2. 3.

Will I outlive my money? If I run out of money, what will happen to me and where will I live? Will I become a burden to my children or my family?

These concerns are very practical and make sense because seniors know that once they are gone, they will never be a burden to anyone. Seniors come from an era of extremely strong work ethics and have always prided themselves on being independent, paying their own way and taking care of themselves and their family. The thought of becoming dependent on others and being a burden to anyone, especially their family members, is almost unbearable and they will do anything in their power to avoid having that situation occur. I began learning this about seniors in the early 1990s while selling retirement community and assisted living units. As necessary as these were to my clients and as nice as the facilities were, I learned that my clients did not want to move there and they told me so. Their desire was to stay in their homes, but aging issues were forcing them to make life changes they did not have the money to address. Their only option was to sell their home in order to get the money they needed. Then they could move to a facility that offered the necessary services. This was an extremely negative emotional experience since they had to give up their home in order to get services they needed. It was like having an estate sale while they were still alive. They would have given anything to stay in their home and be able to pay to bring the services to their home, but alas there was no money available since they were house rich but cash poor. Knowing these financial fears of seniors gives those of us in the reverse mortgage business a major marketing advantage. Our product does not require melting down their existing home or lifestyle. In fact, we can make these fears disappear and replace them with peace of mind and happiness. No one else offers a remedy to fix these concerns that is even remotely close to what we can give them. The current economic crisis that fills the front page of every newspaper each day and is the lead story on every radio and TV program is adding greatly to seniors’ monetary fears. They are watching their investments or 401k plans shrink more every day. Their worst financial nightmares are occurring right before their eyes and they are sick with worry about what the future holds for them. But, as Paul Harvey would say, here is the rest of the story. Reverse mortgage originators offer seniors the best financial news they could possibly ever hope for. Not only do we offer them a financial breath of fresh air, we actually bring them something that is as sweet as a summer breeze. We give them a way to stay in their home for as long as they want without any fear of losing it; and in addition, we give them access to money every month that can help them avoid becoming a burden to their loved ones. It’s no wonder that so many seniors say this is truly a dream come true. In these dreadfully bad news financial times we are the Good News Missionaries who can truly change seniors’ lives for the better and save them from misery and despair. We are like doctors with a miracle cure that the patients did not realize even existed. It’s been said that there are three words, which are stronger than “I love you” and those words are “I understand you”. This is what seniors long to hear from us. They seek someone who understands what they are facing, who understands how worried they are and who can offer them a way to be free from their financial fears. Knowledge is Power. You now have some crucial and very personal knowledge from inside the hearts and minds of seniors. If you use it wisely, seniors will thank you and your sales will soar.

46

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