New Fiscal Year Brings New Reverse Mortgage Top 10

With the 2009 fiscal year ending on September 30, this month’s HECM volume report revealed a new list of the top 10 reverse mortgage lenders, very much changed from that of last fiscal year. The list is below, compared to that of 2009 FY. However, given how close many of the lenders are to each other in terms of the number of HECMs they endorsed, it is by no means clear how the list will shake out over the next few months.

October 2009:

1. Wells Fargo

2. Bank of America

3. MetLife Bank

4. Financial Freedom Acquisition

5. One Reverse Mortgage

6. 1st AAA Reverse Mortgage

7. First Mariner Bank

8. Security One Lending

9. Harvard Home Mortgage

10. Stay in Home Mortgage

Fiscal Year 2009:

1. Wells Fargo

2. Bank of America

3. World Alliance Financial Corp

4. Financial Freedom

5. One Reverse Mortgage

6. MetLife Bank

7. Countrywide Financial

8. Generation Mortgage

9. Urban Financial Group

10. 1st AAA Reverse Mortgage

Thus, from last year’s top 10, only 6 remain in the top 10 for October. The complete list for October can be found on the HUD website. The changes will also be reflected on the Reverse Mortgage Guides website in the Lender Directory in the near future.

Reverse Mortgage Guides Introduces Advertising For Lenders

As Reverse Mortgage Guides prepares to launch its new section for reverse mortgage lenders, it has decided to open up the Lenders section to advertising. Advertising, which will only be available on the Lenders pages, should therefore be targeted to those within the reverse mortgage industry. Rates are expected to start at $60/month, with discounts available for those advertisers that link to Reverse Mortgage Guides. For more information or to advertise on Reverse Mortgage Guides, please contact Reva Minkoff at reva.minkoff (at) reversemortgageguides.org.

Senior Lending Network Stops Accepting New Loan Applications

On Tuesday the Senior Lending Network, also known as World Alliance Financial Corp., announced that it would no longer be accepting new reverse mortgage loan applications. The decision comes down from World Alliance Financial Corp.’s parent company, KBC Group, based in Belgium. KBC Group has been hard hit in the recent economic downturn, and, with the recent repurchase of Equity Key by its founders, appears to be seeking to shed its US holdings. Both World Alliance Financial Corp. and KBC Group have announced their diligence in finding a buyer or capital partner, but if they don’t, KBC Group has said it will begin to wind down World Alliance Financial Corp’s operations.

This move is destined to have ramifications throughout the industry considering that World Alliance Financial Corp. has endorsed 2,892 HECMs thus far this year, making it the fourth largest lender and holding a significant market share, around 3.4% of the market. As a result, it will be very interesting to see which lenders pick up both Senior Lending Network’s former customers and their former leads. Next month’s HECM volume report is likely to paint a different picture from what many in the industry have grown accustomed to over the past few months.

New Cross Selling Restrictions Hurt Lenders and Borrowers?

Senator McCaskill in DC

At first, I was inclined to be in favor of the new “cross selling” restrictions. However, after learning more about them, I have changed my view.

One of the most popular and well-publicized examples of reverse mortgage fraud comes from lenders selling a senior a reverse mortgage, then convincing them to use the proceeds to buy an annuity or long term care insurance. This practice is known as “cross selling.” The annuity could perform poorly, the money could be invested for the gain of the broker, or the terms of the insurance could be highly unfavorable. And in many of these cases, seniors could be taken advantage of.

Hence the new series of “cross selling” restrictions that are passing through state legislatures and the federal government. The federal government’s restriction, in the McCaskill amendment to the Housing & Economic Recovery Act of 2008, is arguably the most stringent one. The amendment states that the mortgagee “shall not participate in, be associated with, or employ any party that participates in or is associated with any other financial or insurance activity;” This language can be extended to include tellers and savings accounts, let alone all insurance products and 401(k)s. There is an “or,” however, which states that the mortgagee can do the above if they prove to the Secretary that the mortgagee maintains firewalls and safeguards to ensure that the originator has no incentives to provide the mortgagor with any other financial product and that the mortgagor does not need to purchase any other product as a condition of the reverse mortgage. This means that, provided that it can be proven adequately that safeguards are present, other financial products may be able to be sold by mortgagee.

The principle of the law is correct. Clearly it is important to protect seniors from fraud. Cross selling can prove disadvantageous for seniors, especially when the mortgagee is being compensated for the other products–something the senior may or may not be aware of.

However, there are other instances where cross selling may be advantageous. A senior may wish to place the money in a savings account or open up a credit card with the bank behind their reverse mortgage. They may decide to purchase a long term care insurance plan. These products can be favorable, and seniors should be able to purchase them.

The current law means that reverse mortgage lenders can only discuss a reverse mortgage with their client. If the client asks them about other options, they are not permitted to answer. Many seniors have long-term relationships with their banks or financial advisors. These seniors should not be forced to go to a variety of sources, leaving the person whom they trust and have a long-standing relationship with, just because they are considering a reverse mortgage. Such a policy has a potential to cause more harm than good.

Seniors have the right to evaluate all their options. Hopefully HUD’s interpretation of the McCaskill ammendment will still enable seniors to discuss alternatives to a reverse mortgage with their financial advisors and/or discuss options for what to do with the money, if they wish to do so. Cross selling could be prevented by a more narrow law. But the McCaskill ammendment takes it too far.

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.