New Audiences

By Peter Bell

As an organizer of conferences for reverse mortgage professionals, we are continually looking to expand the product’s horizon.

At NRMLA’s Annual Meeting last October in Boston, we presented both a session featuring financial planners explaining their point of view to loan originators and a special post-conference session for financial planners who wanted to  learn more about reverse mortgages.

At our Eastern Regional in New York in March, we presented both a session featuring security traders explaining their perspective to loan originators as well as a special post-conference seminar on Ginnie Mae’s HECM Mortgage Backed Securities for investors.

At our Western Regional in Irvine in May, we presented a panel of financial planners discussing the growing interest in using reverse mortgages as a retirement funding tool in the wake of three recent academic research reports that were widely covered by national press.

Over the course of these three conferences, our members had the privilege of meeting and hearing from John Salter of Texas Tech, Anthony Webb of Boston College and San Francisco attorney and researcher Barry Sacks, each of whom co-authored one of the research reports mentioned above.

None of these sessions would have occurred or been appropriate just five years ago, before Ginnie Mae launched its HMBS program in 2007, before the recession hit in 2008, and before HUD created the HECM Saver in 2010.  Each of these developments created a new audience eager to learn about and perhaps become more involved with reverse mortgages.

On another panel in Irvine, one that focused on successful techniques for selling both the HECM Saver and the HECM for Purchase (designed for home buying), Eric Hiatt of Security One Lending pointed out that the latter has created a new audience of realtors and builders, while Jim Cory of Legacy Reverse Mortgage suggested that the former product gets an even better reception from estate planners than financial planners.  These are two additional audiences we will now make it our business to corral (perhaps at our upcoming Annual Meeting in San Antonio, where there are a lot of corrals).

I view all of this interest from new audiences as a tribute to the versatility of reverse mortgages as well as to the foresight of those in government and within our industry who made adjustments to the product  that created additional  usages.

What was once thought of as a tool to help seniors age in their family homes or pay for uninsured medical expenses, has continued to emerge-- into a means of expense support while waiting for diminished investments to regain at least some of their previous value; as a means to delay tapping into Social Security benefits that grow by 8 per cent per year between 62 and 70 ½; as a way to pay for long term care insurance;  as funding to maintain an aging home at livable standards, or to purchase a new, possibly more affordable or more manageable home. 

Reverse mortgages are living organisms, continually evolving. There are bound to continue to be new products, new uses, new audiences.  Sometimes amidst the day-to-day burden of conducting business,  we may forget that we are still in an early chapter of a story that continues to be written.

Welcome Financial Planners

By Peter Bell

For far too long, attempting to interest financial planners in reverse mortgages has felt like swinging at a baseball cemented to a hitting tee—it never went anywhere.  But now, suddenly, there seems to be a burst of interest in us within that community. 

“The days of the reverse mortgage being used as an emergency measure are over,” wrote investment advisors Robert Bloink and William H. Byrnes recently on the Advisor One website. “And it’s likely that the use of reverse mortgage in retirement income planning is here to stay.”

“It looks like this is going to be an immensely valuable tool (to create “standby” liquidity),” wrote Harold Evensky, a financial planner with Evensky & Katz Walth Management, professor at Texas Tech and one of the industry’s most influential voices.

Variations on these opinions seem to be cropping up regularly now in the daily press clips we receive from all around the country.  Some of the current advocacy, such as Benny Kass’s comments in the Washington Post and Rick Kahler’s comments in the Rapid City Journal, comes in the form of answers to questions submitted by consumers.

Why are financial planners and advisors coming on board now?   I believe a number of factors are involved:

(1) The creation and implementation of the HECM Saver with its lower upfront costs, offers a more appealing and useful product in the minds of financial advisors. According to Dr. John Salter, Evensky’s colleague at Texas Tech and research partner, “Before the HECM Saver came out, financial advisors had a negative view of reverse mortgages.  They treated them as a last resort.”

(2) The recession has yielded a greater sense of need for utilizing all available financing options given the decrease in home values and portfolios as well as the lower yields on fixed products.  Planners looking to achieve certain numbers (generally around a 4% cash withdrawal rate per year for the balance of life) often cannot find their way there with current yields and without home equity.

(3) Over the past two years, there has been a sharp reduction in criticism of reverse mortgages by politicians, consumer groups and the press.  A close audit of press stories now and then would show this is at least partially a result of NRMLA’s aggressive call out to those who publicly express misperceptions—to provide them corrections and offer them education.

(4)    In an ongoing avalanche of anecdotal justification, good modeling is difficult to refute.  And since businesses are usually bandwagons, once a few high profile players jump on, the crowd generally follows.  In this case, the maestros have been Evensky and Salter.  The latter presented NRMLA membership at our Annual Meeting last October with a graphic model demonstrating that use of a reverse mortgage to maintain cash flow reserves while allowing a portfolio to continue to grow vastly increases the likelihood of not outliving your money.     

Now comes an article by Barry H. Sacks and Stephen Sacks in the Journal of Financial Planning entitled Reversing Conventional Wisdom: Using Home Equity to Supplement Retirement Planning which encourages an active rather than a passive use of home equity in retirement planning and shows that “a reverse mortgage credit line can lead to substantially greater cash flow survival possibilities.”  (Barry Sacks will present this research at NRMLA’s Western Regional Meeting on May 16 in Irvine, California.)

These two studies combined with the recent report from the MetLife Mature Market Institute that shows a vast increase in the number of people 62-64 taking reverse mortgages and thus a corresponding decrease in the average age of reverse mortgage borrowers presents a lure the financial advisory community will find hard to resist.  

We are eager to welcome more and more of them into our conversation.

A Pledge to Reverse Mortgage Borrowers

By Peter Bell

At our meeting in Washington, DC the first week of March, NRMLA’s Board of Directors voted unanimously to implement signing and abiding by the Pledge to Reverse Mortgage Borrowers as a requirement for association membership.  This was a reaffirmation of the viewpoint of the committee of members that worked on writing the Pledge.

The Pledge is the anchor of the Borrow with Confidence campaign, a national effort that we are about to launch created to provide another and even higher level of assurance to America’s seniors that their best interest is our priority.  Its 19 points promise integrity and clarity throughout the reverse mortgage experience.

Why do we need to provide this additional assurance at this time?  Well, all you have to do is read last week’s jolt from within the financial services industry: Greg Smith’s Op Ed in the March 14 New York Times about quitting Goldman Sachs because, as he writes, “it makes me ill how callously people talk about ripping their clients off.”  Suspicion about financial service providers is rampant in the press and the public, and with inappropriate home mortgages pinpointed as the cause of our nation’s recession, it can be hard to argue.  But that doesn’t mean we don’t try to distinguish our business from the other sectors of financial services.  And if this effort is going to be taken seriously, we need to prove that we’re different to back up our claim.

The best evidence we can provide is the most transparency and the fewest surprises for consumers—which are the precisely the goals of Borrow with Confidence.

In addition to the Pledge, our initial Borrow with Confidence effort includes a  Road Map to Reverse Mortgages, which is a step-by-step guide through the loan process.  As an addendum to the Road Map, we have created a tool of advice for children of reverse mortgage borrowers called Should My Mom and Dad Get a Reverse Mortgage? And all of these tools are available and easily findable to consumers on the newly designed reversemortgage.org website.

These tools have been created with input from lenders, originators, servicers, closing agents and counselors all across the country and reviewed before release by our Executive Committee and our Board.  And we are grateful to all of you who contributed.  But despite all the thought and experience that went into them, they will only be trusted if adhered to with unanimity.  One bad egg can ruin the taste of the whole soufflé. We cannot settle for anything less than a 100% buy in to these principles from those who choose to affiliate with NRMLA--which is why a written commitment to the Pledge is from here on in a requirement for membership of the organization.   

If You're Not Part of the Solution...

by Peter Bell


A few weeks ago, Illinois Attorney General Lisa Madigan told a group of seniors she is "getting more and more complaints about reverse mortgages all the time."  A month earlier, Attorneys General Kamala Harris (CA) and Catherine Cortez Masco (NV) announced they were combining forces to crack down on mortgage fraud.   In January, a Florida loan officer along with three co-conspirators were sentenced to 24 to 70 months in prison each and forced to pay over $2 million in restitution for a reverse mortgage fraud scheme. And February ended with the sentencing of six reverse mortgage conspirators in Georgia to a combined 30 years in prison for, among other charges, forged deeds, false appraisals, inflated property values and false down payments.

All of this disappointing news comes at a time when we are noticing an overall improvement in the press's attitude towards reverse mortgages.  An informal audit of printed press, visual media and digital media across the country over the past month shows there were 25 positive stories about different aspects of reverse mortgages.  The only negative stories for the month were reports on the Illinois Attorney General remarks and of the sentencing of the Georgia conspirators.

At a NRMLA meeting in Chicago a few years back, a representative of the city's Office on Aging told us that she had 100 cases of elder financial abuse on her desk and more than 50 of them were complaints within families.  Though anecdotal evidence is not the most dependable, it seems to tell us that there are fraudsters who target our product to steal grandma's funds.  It's easy to say, these are not reverse mortgage problems, they are societal problems.  The money stolen could just as easily have been (and often is) from a CD or a Social Security check.  No lender oversees how the funds are controlled once a loan is made. 

Some say we can't cure every ill in society. But I believe that if the product we advocate is an element of financial abuse and fraud, we cannot simply turn our backs on the problem.

As an industry--and as the industry's trade association--we need to confront these problems.  We need to collaborate with personal finance experts, gerontologists and the new multidisciplinary elder abuse centers to figure out how we might devise safeguards.  We need to work with the experts to find  ways to build widespread awareness of the methods of abuse and insulate our clients from those who prey upon them.

Selling a financial product comes with responsibility that extends way beyond closing the deal.

A New Political Year

by Peter Bell

The annual release of the President's budget is political new year's day in Washington. It triggers the beginning of a whole new cycle of negotiation, advocacy, relief to some and disappointment to others.

A budget is not just a set of numbers; it's a philosophy.  It's the government's approach to the coming fiscal year, a set of priorities as well as of lesser concerns.

For those of us in the reverse mortgage business, the news in this week's release of President Obama's FY2013 budget (which covers expenditures from October 1, 2012 through September 30, 2013) was good. There are two primary numbers in the current HUD budget structure that are most significant to us: one is the projection for the Mutual Mortgage Insurance fund and the other is the money for counseling.

Since the HECM program is by statute required to be net neutral annually, each year we need an evaluation from the Office of Management and Budget (the President's budgeting office) that projects the HECM portion of the MMI fund will not lose money and need an appropriation.  If an appropriation were required from Congress in this deficit-obsessed environment, the future of the HECM program would be extremely vulnerable.  But the new budget scores the HECM program at -0.921, and though that looks negative, in Washington-speak it means the fund's revenue is expected to be positive and support is unnecessary.

As for counseling, the FY 2013 budget asks for $55 million, about ten per cent of which usually goes towards the HECM program.  That's a $10 million or 22% hike over the proposed FY 2012 counseling budget.

The release of the President's budget is just a table setter.  It kicks off a long, complicated and politically-charged process. Were the House of Representatives controlled by the President's party, it would take the President's budget and work from it.  But with the opposition in control, it appears as if the Republicans plan to pass a budget of their own.   With two different budgets (or philosophies) on the table in an election year, what is the Democratic controlled Senate to do?  Republican voices claim Senate Majority Leader Harry Reid has already told them he won't even try to pass a budget until after the 2012 election.

When a budget is in limbo, the vehicle for assuring continuing operation of the government is generally a Continuing Resolution (CR).  Since no FY 2012 budget has been passed, we are now operating via a CR that runs through the end of this fiscal (September 30). Under a CR, programs continue at budget levels from the last passed budget.

So what does this mean for our industry for the rest of the year?  That business can continue as is without us having to fight for an appropiation or to preserve the loan limits or maintain the current MIP premium.  And so we can devote our time to expanding consumer knowledge of and demand for reverse mortgages.

For information about the National Reverse Mortgage Lenders Association, click here.