NRMLA President Testifies for House Subcommittee

NRMLA President Peter Bell testified in front of the House Subcommittee on Housing and Community Development today as part of a panel of witnesses on the future of the FHA. While Commissioner Stevens’ statements were written up in the New York Times, Bell’s comments provided a number of interesting anecdotes on the state of the reverse mortgage industry.

Bell talked about the risks to both borrowers and lenders. Borrowers risks include finding out they do not have enough money to remain in the home due to property taxes and insurance. These issues, which we have covered extensively in the past few weeks, only effect 2% of borrowers, and efforts are underway to help mitigate those risks. Lenders risks include being stuck funding a loan that is unable to get a certified by HUD. HUD is reducing this risk, by decreasing the Principle Limit Factors last week, and eliminating the need for a credit subsidy to the reverse mortgage program.

However, Bell’s main purpose in his testimony appeared to be to convince the House Subcommittee to extend the current reverse mortgage limits and to ultimately return to the prior Principle Limit Factors. HECMs have had a net gain of 7 billion dollars in the course of the program, and Bell argues that reverse mortgages have not played a role in the FHA’s recent capital reserve problems. Reverse mortgages are expected to operate on a break even or better basis in the future.

Furthermore, recent changes to the program will impede the ability of seniors to get a reverse mortgage. Over 20% of reverse mortgage borrowers in the last year would not have qualified if the Principle Limit Factors had been reduced to their current levels when they applied for the loan. New technology has reduced costs for lenders, and Bell maintains that the numbers used by the Office of Management and Budget (OMB) are not realistic, since the average lifetime of a reverse mortgage loan is 7 years regardless of the age of the borrower. Older borrowers average the same length of time with a reverse mortgage as younger borrowers. Bell was passionate that the reverse mortgage program has been self-sustaining and will continue to operate as such.

NRMLA President Testifies for Subcommittee on Housing and Community Opportunity

The President of NRMLA, Peter Bell, is currently testifying about reverse mortgages for the Subcommittee on Housing and Community Opportunity. His testimony (as well as the rest of the hearing) can be viewed at:

http://boss.streamos.com/wmedia-live/financialserv/16489/300_financialserv-qwertyuiop_070131.asx

As the committee chairwoman said earlier, without the FHA, there would be no mortgage market right now. We will have more coverage of the testimony as it occurs later, for those of you who are unable to watch live.

The hearing appears to be more about the health of the FHA and the amount of reserves remaining, but so far contains interesting information for those interested in the business side of reverse mortgages, wholesaling, and the mortgage industry as a whole.

Reverse Mortgage Applications Surge

With the principal limit factor decreasing by 10% tomorrow, the number of reverse mortgage case numbers assigned has surged in the last few days. A letter from Peter Bell, President of NRMLA, announced that 60,784 case numbers had been requested in “the last few days.” That is more than half the number of HECMs endorsed in all of FY 2009.

The good news is that, so far, the system seems to be working. Of the 60,784 case numbers, 58,631 were issued in less than two seconds, and an additional 1,800 were issued in less than 10 seconds. These turnaround times are a good omen for those concerned about the FHA Connection system’s ability to handle the increase in demand. However, with about 12 hours until the deadline, it’s too early to alleviate all concern.

Financial Counseling May Help Homeowners Avoid Foreclosure

A recent New York Times article focuses on Fannie Mae’s HomeSaver Advance Program, a now-deemphasized program that gave borrowers up to 15,000 in unsecured personal loans to cover missed mortgage payments. However, 70% of the borrowers who took out these loans defaulted. This instance helps highlight the importance of financial counseling. The article closes with the example of a New York City program that makes foreclosure avoidance loans available to borrowers who have undergone counseling. This program has given out 15 loans so far, none of which have defaulted.

Reverse mortgage counseling has come under fire recently, and several states have been debating whether to pass legislation requiring counseling before all reverse mortgage transactions. It is often argued that counseling is necessary in order to ensure that the senior borrower understands the reverse mortgage transaction, but if one looks closely, it appears that counseling has the potential to do a lot more than that. As counselors at the NRMLA Orlando Road Show explained, the purpose of counseling is partly to make sure that the borrower will still have enough money to live on after the reverse mortgage. The financial counseling portion of the reverse mortgage counseling process is perhaps underestimated, but it articles such as the one referenced above help show that financial counseling may be another way to help homeowners avoid foreclosure–and ensure that the steps they take in the short term will not penalize them in the long run.

NRMLA Orlando: Basking in the Afterglow

The Hyatt Regency Grand Cypress, where the conference was held.

I got back last night from the NRMLA Reverse Mortgage conference in Orlando, and I am already in withdrawal. The conference was wonderful and far more exciting than Chicago. In addition, the weather was about 20-30 degrees warmer, and the hotel had a pool, a fake “beach,” and a talking macaw. While the setting was hard to beat, the information at the conference once again proved to be quite informative.

Some highlights:

- The session on “Making Counseling More Effective,” which pulled from a large variety of people. While the Q&A portion got pretty heated, the clarification of the new protocol (whenever it is finally released) was quite useful. More to come next week.

- The addition of Peter Fatizzi, of Realty XPerts, to the panel on HECM For Purchase led to wonderful insights on how realtors, builders, and lenders can work together. Peter’s relationship with Jourdan Hoover (of Wells Fargo Home Mortgage) I think put forth a good model for the way lenders can potentially build a client base through interacting with others in the real estate industry–and just how much the product can help their clients. However, the panel also inadvertantly pointed out the importance of clearly explaining the product, leading to questions about the ethical obligations of the industry to make sure a senior is financially stable after a reverse mortgage. This theme was echoed throughout the conference and especially in the counseling session.

- Amanda Norvell, of TRUE Marketing, and Tara Hornsby, of the Orlando Magic, shared some very creative ways their companies are using technology. While many of the comments did not directly relate to the reverse mortgage industry, it was a good catalyst to begin thinking creatively about the opportunities presented by facebook and twitter.

- It was quite enjoyable to tweet the conference (see @hecmgirl for tweets), leading NRMLA to start a twitter account at the end (@NRMLA). Look for twitter to play an increasingly large role in the industry.

- And finally, in the free stuff category, hats off to The Reverse Review for the fantastic cupcakes, as well as Customized Lenders Services, INC. for paddleball.

Looking forward to seeing everyone at the next event!

Helping Seniors Avoid Foreclosure

Lisa Madigan, Illinois Attorney General

At the NRMLA conference in Chicago, one of the speakers was Brenda Grauer, who works for the Office of the Illinois Attorney General. During her presentation, I learned that the government is available as a resource for seniors trying to avoid foreclosure.

As previously discussed, generally in order for a reverse mortgage to be used to help a senior avoid foreclosure, the borrower needs to get a short pay from the bank. The short pay reduces the amout the senior owes the bank, which can then be paid off through the reverse mortgage. But banks are often reluctant to grant short pays.

Ms. Grauer explained how the Attorney General’s office is working with many lenders to try and help seniors (and others) receive short pays so that they can stay in their homes. The office is getting stays on orders of foreclosure, and, as of when she spoke, none of the people they were working with had lost their homes. It seems that the Attorney General’s office is therefore a good place to go for seniors in search of resources or aid in avoiding foreclosures. While all states have different resources available, it is a worthwhile call to make with nothing to lose and much to gain.

The number for the Homeowner’s Helpline of the Office of the Attorney General in Illinois is 1-866-544-7151.

NRMLA Chicago 2009

I spent yesterday at the 2009 NRMLA Chicago conference. I have to say, I was pleasantly surprised. Not only was it 70 degrees in Chicago (a rarity recently), but the conference was informative, I met some great people, and I got some cool stuff (thanks LiveWell Financial and Genworth!).

I took away some interesting industry insights from the conference. Some noteworthy pieces of news:

- In Illinois at least, the Attorney General’s office will step in to help get short pays and keep seniors in their homes (or connect them with social services when they cannot). Brenda Grauer represented the Office of the Illinois Attorney General, and it made me hopeful to hear so many positive stories where short pays were negotiated or foreclosures were stayed. It also reminded me to beware of Countrywide, which seems to be the least likely to provide a shortpay to those in need.

- An interesting discussion about the future of the press took place at the session on “Spreading the Good News About Reverse Mortgages.” Peter Bell, Marty Bell, and Lew Sichelman began a debate on the future of the press. We wondered aloud whether newspapers will survive, and discussed how newspapers were more casualties of the niche marketing revolution than of the Internet.

- The session on “How Can You Help Serve a Client’s Need for a Comprehensive Financial Plan? The Challenges of Working under New Restrictions on “Cross Selling” definitely made one think. More to come about this session on Monday.

ReverseMortgageGuides featured in April issue of "Reverse Mortgage"

The ReverseMortgageGuides.org Calculator was featured in this month’s issue of “Reverse Mortgage,” the official magazine of the National Reverse Mortgage Lenders Association. The article talks about the proliferation of online web applications for reverse mortgage lenders. The Reverse Mortgage Toolkit features a free calculator that can be embedded in a lenders’ site in only a few minutes. A more enhanced, paid version is in development.

Links to the calculator for both lenders and borrowers can be found below:

Reverse Mortgage Calculator (Borrowers): http://www.reversemortgageguides.org/reverse_mortgage_calculator.php

Reverse Mortgage Toolkit (Lenders): http://www.reversemortgageguides.org/toolkit/

NRMLA Proposes Counseling Test for Seniors

NRMLA (National Reverse Mortgage Lenders Association) is expected to announce that in order to receive their HECM counseling certificate, seniors must pass a test given by the HECM counselor. The counselor will have a list of 20 questions to choose from and must ask 10. The borrower must not get more than 5 wrong in order to get the certificate.

Requiring borrowers to pass a test is not a good way to assess their understanding of reverse mortgages. Many seniors have not taken tests in years. Taking a test, especially if the test is given orally, requires a level of concentration that is difficult for most individuals and is a stressful experience.

While mandating counseling for borrowers has more upsides than downsides, requiring those borrowers to then pass a test is an undue burden on borrowers. Although counseling can be a helpful safeguard to ensure that the borrower understands what a reverse mortgage is, some elderly borrowers, such as those with Alzheimers or dementia, likely do not have the ability to pass a test, regardless of whether they have an understanding of the situation. Even those who do fully comprehend the situation may get flustered and fail. Often, understanding of a topic is not well summed up on paper or in an oral question and response. The better gauge of understanding should be the counselor’s conversation with the borrower. As long as the borrower undergoes counseling, a test is not needed.

Reverse mortgages are often applied for in times of hardship. Requiring a borrower to pass a test, especially an oral one, is an unnecessary requirement that will cause more harm than good within the reverse mortgage process.

NRMLA To Offer New Reverse Mortgage Credential

Last week, NRMLA (National Reverse Mortgage Lenders Association) announced that it is planning on offering a new designation for Certified Reverse Mortgage Professional/Loan Originators. To receive the credential, candidates will need to have at least 2 years of experience, closed over 50 loans, take 12 hours of classes, and pass a background check before they can even take the exam.

NRMLA cites the certification as an important step towards protecting consumers in reverse mortgage transactions. However given the size of the reverse mortgage market, it seems likely that the designation will be more easily available to those from larger firms and to those who specialize in reverse mortgages.

While there is clearly an advantage to specializing in reverse mortgages, there are many small lenders and independent loan officers. Although the designation is a useful step to help enfranchise consumers and ensure quality, the certificate should be available to dilligent and experienced officers at all firms– not just those that conduct the largest volume of reverse mortgages and have the largest amount of resources.