Scott Tucker's Reverse Mortgage Marketing Blog

"Using a reverse mortage until your investments rebound..."

HeraldNet contributor Tom Kelly writes that many older folks don’t know how or where to look for funds which allow them to maintain the lifestyle they’re used to, but some are turning to reverse mortgages.   

In an article over the weekend, Kelly describes how a couple who owns 35 weeks of timeshares each year who took out a reverse mortgage on their home in New Mexico to ensure they wouldn’t have to skimp on or cut back on activities once they arrived.

“I know a lot of people are skeptical about reverse mortgages, but it worked for us,” Frank Williams said.

“Our friends want to leave everything they have to their kids, and that’s OK. Our kids are doing fine, they own their own homes, and would rather see us enjoy the rest of our lives.”

According to the article, Williams decided a reverse mortgage was the right choice, despite having other assets the couple could sell.

“I had some assets that I didn’t really want to sell because I thought they would rebound and do quite well,” Frank Williams said.

“So, I look at the reverse mortgage as a way of buying us some time for those assets to come back. The bonds that I did sell were not yielding anything close to the interest rate we were paying on the home equity loan, so I sold them and paid it down.”

"Older workers: 40% are delaying retirement by at least another 4 years..." [reverse mortgage]

A new survey from the Center for Retirement Research at Boston College found that 40% of individuals 45-59 expect to retire later than they had before the downturn, with most of the respondents intending to work an additional 4 or more years before retirement.

The report Workers’ Response to the Market Crash: Save More, Work More surveyed 1,317 individuals age 45-59 on how the stock market crash of 2008 has affected their retirement planning.

These workers are heavily dependent on 401(k) plans, as opposed to traditional defined-benefit pensions, as a source of retirement income.

During the economic downturn, these plans lost about 1/3 of their value. Even before the crash, many older workers lacked the assets needed to enjoy a comfortable retirement.

Other findings from the survey:

• 2/3 of workers age 45 to 59 report less retirement savings than they had before the crash.
• More than 1/4 reporting a level of distress in response to the downturn equal to or greater than that caused by the 9/11 terrorist attacks.
• About 40% expect to retire later than they had before the downturn, most of those who intend to work longer are delaying retirement by 4 or more years.
• 2/3 of respondents reported no change in how much they save for retirement in 401(k)s, IRAs, or other accounts.
• Nearly 60% reported that they are spending less (which is equivalent to saving more if income is unchanged).

"How to lower up-front appraisal costs on reverse mortgages..."

Appraisal management company (AMC) Landmark Reverse released a new way to help lower the upfront cost of ordering appraisals for reverse mortgage borrowers.

The appraisal assurance program allows borrowers to pay $200 upfront and the remaining $350 at closing in escrow.

Borrowers can still pay the normal $450 fee for an appraisal but the assurance program is meant to help ease the burden for seniors who are hesitant to pay the full fee upfront for a reverse mortgage appraisal.

“Not all seniors have that kind of money, this gives them an an opportunity explore a reverse mortgage without the large upfront costs,” said Erik Richard, COO of Landmark Reverse.

Appraisers are still paid their normal fee by Landmark to ensure there is no incentive for to do anything different when conducting the appraisal said Richard.

For brokers to be eligible for the assurance program, the fallout rate for appraisals can be no more than 35%.

Landmark is an approved AMC with Generation Mortgage, Urban Financial, Sun West, Security One, and Genworth.

According to Richard, 90% of the companies business comes from the reverse mortgage industry.

"Now you can find HUD-approved, face-to-face reverse mortgage counselors by ZIP code!"

The Reverse Mortgage Counseling Association (RMCA) released a new tool to help lenders and borrowers find HUD-approved counseling agencies.

Consumers can use the tool to choose a HUD-approved RMCA member housing counseling agency and register online or call the unique toll free number of the agency located right under the agency’s name for reverse mortgage counseling.

The tool can also provide lenders a HUD compliant list of 5 HUD-approved counseling agencies that provide services in the state of the borrower and 4 national intermediaries.

According to RMCA the list is updated daily based on the information provided by HUD’s roster of reverse mortgage counseling agencies.

RMCA is a coalition of reverse mortgage HUD approved counseling agencies and elder care experts.

The RMCA agency network is comprised of over 230 counseling locations that employ over 300 reverse mortgage counselors across the country.

"Center for Retirement Research: Retirees must consider using home equity..." [reverse mortgage]

Reverse Mortgage Daily is reporting on a new study from the Center for Retirement Research (CRR) at Boston College.

In the study, CRR found over 60% of households are "at risk" of being financially unprepared for retirement.

The latest analysis of the National Retirement Risk Index (NRRI) examines how not taking full advantage of housing equity affects the share of U.S. households "at risk" of being unable to maintain their pre-retirement standard-of-living in retirement.

"Even after the bursting of the housing bubble, our research shows that home equity remains a major financial asset and can significantly impact retirement security," said Center Director Alicia H. Munnell.

"The impact of home equity on the percent of households 'at risk' is greater than that of the recent stock market crash. How baby boomers and future generations decide to use their home equity could determine how well many fare in retirement."

According to the brief, not tapping home equity through a reverse mortgage increases the percent of those "at risk" by about 10 percentage points, raising the NRRI in 2009 from 51% to 61% said the CRR.

The study says that "financial services firms need to acknowledge that existing reverse mortgages are often complicated and expensive and that the industry needs to develop innovative approaches to ensure that retirees have easy and efficient access to their equity."

In addition, CCR says that protecting home equity for their kids may be a luxury that future retirees can ill afford as Social Security replaces a smaller share of pre-retirement incomes and people rely increasingly on meager 401(k) balances rather than on traditional pensions.

"Illinois Attorney General cracks-down on reverse mortgage marketing..."

Reverse Mortgage Daily is reporting that Illinois Attorney General Lisa Madigan has filed lawsuits against 2 mortgage brokers for using unfair and deceptive marketing practices to solicit seniors for reverse mortgages.

“These companies used extremely misleading language in their advertising, sometimes even disguising their loans as government benefits that borrowers don’t have to repay,” said Madigan.

 Many consumers have reported that they didn’t even know these offers were for reverse mortgages or a loan of any kind added Madigan.

A lawsuit was filed in the Circuit Court of Cook County against Woodridge, Illinois-based Hartland Mortgage Centers, as well as a suit in the Circuit Court of Sangamon County against Irvine, California-based American Advisors Group, and its company president, Reza Jahangiri.

In both lawsuits, Madigan alleges that the defendants make a series of claims that falsely imply that seniors could be eligible for lifetime monthly "income" or lump-sum payments that are part of government benefit programs offered to all seniors.

According to a statement from Madigan’s office, the defendants solicitation included false claims such as:

“President Obama’s Economic Stimulus Plan Helps Seniors. If you are 62 years of age or older, you may be eligible to take advantage of an important U.S. Government Insured Program.”

“The United States Congress has authorized a Reverse Lending program you do NOT have to pay back as long as you live in your home!”

In addition, the defendants allegedly misled consumers into believing that the reverse mortgages would only be offered for a short time, with many of the defendants’ mailers including “expiration dates” said Madigan.

Further, Madigan’s suits also claim that the defendants’ "deceptive" marketing gave consumers the "false" impression that they would maintain ownership of their property. 

But reverse mortgage borrowers do maintain ownership, so who's shaky on the facts?

Madigan added:

In reality, consumers who take out reverse mortgages can lose their property to foreclosure if they fail to meet the conditions and terms of the loan, including paying property taxes and properly maintaining the home.

Yes, borrowers can be foreclosed on if they fail to meet the conditions of the loan, but stating that reverse mortgage borrowers lose ownership of the property is incorrect. 

RMD contacted Lisa Madigan’s office looking for clarification, but has yet to receive a response.

In each suit, the Illinois Attorney General is asking the court to enter a permanent injunction banning the defendants from engaging in deceptive advertising and marketing in violation of Illinois law.

In addition, Madigan is asking the courts to award restitution to consumers and to order each defendant to pay a civil penalty of $50,000, additional penalties of $50,000 for each act committed with intent to defraud, an additional $10,000 penalty for each act committed against a person 65 years or older, and the costs of the investigation and prosecution of the cases.

RMD contacted American Advisors Group for comment, and  Reza Jahangiri, president of AAG told RMD in an email that, “it is premature for us to comment as we were just made aware of the action and have not had an opportunity to review the complaint or speak with the Attorney General’s Office about its concerns.”

He added, “American Advisors Group is committed to working with the [Illinois] Attorney General’s Office to address their concerns and resolve this in an appropriate manner.”

It should be noted that Lisa Madigan's father, Mike Madigan, is Chairman of the Illinois Democratic Party, Speaker of the Illinois House of Representatives, and takes campaign contributions from bankers, and represents bankers in his legal practice.

Mike Madigan has been a long-time critic and opponent of mortgage brokers.

"Why aren't builders listening to reverse mortgage for purchase message?"

Builders and developers are another group in addition to realtors that has yet to be educated on the realities of the HECM for Purchase program, according to Reverse Mortgage Daily.

“We need to take the time to understand the realities of their business and be able to talk to them in their language,” says Monte Howard, Affinity Relationship Director at Generation Mortgage.

Builders and developers are trying to move large volumes of inventory at this point, and the HECM for Purchase program might be able to help—especially in retirement communities.

But Howard notes that he has yet to reach out to the builders and developers, on account of feeling that pursuing such relationships is premature until the reverse mortgage industry has “their ducks in a row.”  

He notes that when the reverse mortgage industry approaches builders, it is important that they come through the door with more than just a loan product.

HECM for Purchases are still an unknown for most people, but he notes the time for them to be marketed to builders and developers is coming.

So why hasn’t the industry whole-heartedly embraced telling realtors, builders, and developers about the HECM for Purchase program?

It is because, according to Howard and Derry Hampton, a reverse mortgage professional at Security 1 Lending and a licensed realtor, many still don’t fully understand it themselves.

Many lenders have not yet taken the time to understand the product, and most loan companies have yet to build marketing campaigns around it.

Without the industry taking it upon themselves to learn and understand the product, it is hard to expect realtors, builders, and developers to do the same.

Howard notes that, “It’s one thing to show somebody the light, but you also have to show them where the switch is.”

What’s been missing is an explanation of the HECM for Purchase process. While people may be becoming familiar with the HECM for purchase product, Howard believes that the volume of HECM for purchases will increase once there is better understanding of the HECM for purchase process.

He notes that some title companies are still uncomfortable with the transactions.

Until the reverse mortgage industry takes the time to educate itself and others on the HECM for Purchase product, it remains extremely unlikely that HECM for Purchase transactions will meet the FHA’s expectations next year.

"Robert Wagner: still on the air after Senior Lending Network shut-down?" [reverse mortgage]

Reverse Mortgage Daily is reporting that Guardian First Funding Group has announced the addition of 2 former key executives from the Senior Lending Network and the addition of  legendary actor Robert Wagner as the company’s spokesperson.

Mr. Wagner will appear in all of Guardian First Funding Group’s print, television and web site advertising said a company statement. 

In his role as spokesperson, Mr. Wagner will educate Americans about the importance of reverse mortgages.

David Peskin, former CEO of the Senior Lending Network will serve as Chairman of Guardian First Funding Group and will use his secondary market expertise to attract strategic capital partners.

“I am pleased to join Guardian First Funding Group and help implement its vision. I believe that Guardian is well-positioned for future growth and am excited to work with the team.” said David Peskin.

Also joining Guardian First Funding Group is Kenneth Peskin who will serve as chief operating officer.

In his role, he will transition Guardian from broker to banker and will focus his attention on gaining efficiencies through new technologies and expanding the company’s banking licenses.

Both David Peskin and Kenneth Peskin will hold seats on Guardian First Funding Group’s Board of Directors.

“It’s an honor to be working with two individuals with so much experience in building a reverse mortgage business,” says Jason Levy, chief executive officer.  “We have a long-standing working relationship and I am confident and excited about our future.”

“Additionally, we could not be more excited and honored to work with such an expressive and endearing talent. Mr. Wagner’s work with the reverse mortgage industry adds credibility and importance to our product and our industry. His knowledge and compassion for the product has given a huge boost to our industry and our  advertising efforts,” added Levy.

Guardian First Funding Group believes these changes will further fuel growth.

Increasing the sales staff and grooming existing loan officers has been a large focus and that can be seen in their originations.  The company has increased its sales force by 50% in just the last quarter of 2009.

Guardian First Funding Group will continue to advertise aggressively to meet the growing needs of its direct-to-consumer call center.  “Our business model affords a great deal of time to explain, nurture and support seniors as they make critical decisions about their financial well-being.” said Levy.

"Is HUD's new reverse mortgage counselor test 'too hard'?"

The Post and Courier, Charleston, South Carolina, is reporting that HUD's new reverse mortgage test for counselors is a "puzzler".

The Post and Courier says that HUD's new mandatory nationwide licensing test for reverse-mortgage counselors is "stumping" veteran housing specialists, some of whom have been advising elderly homeowners in the Charleston, South Carolina area about reverse mortgages for years.

Several months after HUD revised the exam, making it more difficult, no Charleston, South Carolina housing counselor has been able to pass the exam.

As a result, Charleston-area seniors seeking the counseling required to get a reverse mortgage are being referred to agencies in Columbia and Greenville, South Carolina.

Debbie Kidd, head of the Homeowner Resource Center at Family Services Inc., North Charleston, South Carolina told The Post and Courier that she has failed the online test 4 times.

"It's humiliating for me," Kidd told the paper. "I've done this for 20 years... Why can't we pass this test?"

Robert Mitchell of the Trident United Way has taught classes about reverse mortgages to other counselors, yet he, too, did not make a passing score on this first attempt.

Asked if he plans to retake the exam, Mitchell said: "If I don't retire before that."

Once an obscure financial product, reverse mortgages are being increasingly promoted to older homeowners as a way to help them pay their bills.

When structured properly, they enable seniors who are at least 62 to tap into the equity they've built up in their residences without having to move out.

In recent years, housing advocates have raised concerns about abuses, so federal housing guidelines now require counseling for home owners before they commit to a reverse mortgage.

Last year, HUD made the licensing exam for counselors tougher.

A spokesman said HUD "acknowledges the test is intentionally difficult, but we believe it needs to be so because of the vulnerable population" who seek out reverse mortgages.

After receiving complaints from test takers, HUD posted more study material online. But HUD also pointed out that 995 counselors nationwide have passed the test so far, leading it to believe "the level of difficulty is not so stringent as to limit the number of counselors available," according to a statement.

In South Carolina, only 2 counselors -- one each in Columbia & Greenville -- have passed the test so far, according to HUD's database. The number of people statewide in South Carolina who have taken the test is not available.

Kidd said Family Services has spent thousands of dollars sending some of its staff to training conferences and paying fees to retake the exam.

Kidd described what she sees as some of the more challenging aspects: the test doesn't reveal the correct answers; some questions are written with double negative phrases; and she contends the test unfairly concentrates on less important details about trusts.

Next time, she's thinking of taking the exam in Columbia. "Maybe it's the test center," Kidd said. "There's no way I can continue to fail this test with the knowledge I have."

"HECM Program Not Subsidizing the Rest of FHA Say Analysts..."

New View Advisors published an interesting analysis on the risk profile of the Federal Housing Administration’s reverse mortgage program (HECM).

Using an actuarial analysis published by IBM in October 2009 and FHA’s Annual Management Report (AMR) for FY 2009, New View anticipates that we can expect a tightening of ending standards across FHA’s entire program, both forward and reverse.

For years there has been a group of people who believe that due to the frontloaded MIP structure of the HECM program, the cash generated has been used to subsidize other parts of FHA’s business. 

However, New View writes that the dramatic increase in the HECM Loan Liability Guarantee (LLG) which is used to estimate the present value of projected income and costs make it clear that the HECM program is not subsidizing the rest of FHA.

According to the AMR, the LLG rose alarmingly from $19.3 billion in FY 2008 to $33.9 billion in FY 2009, up 75%.

HECM accounted for $4.4 billion of this increase, not an insignificant amount. Overall, HECM LLG nearly quadrupled, from $1.5 to $5.9 billion.

This amount represents, in effect, the negative net present value of the HECM program, and exceeds the total amount of MIP ever collected. Most of this is concentrated in the GI fund, not the MMI fund.

The AMR attributes says this “increase in liability is primarily due to the drop in house price appreciation projections … [which] results in lower recoveries from future HECM assigned assets which increase the liability.”

True, but the reversal of fortune for the LLG surely also reflects the house price depreciation that began in 2007 and continued through FY 2009.

Therefore, given the uncertain state of the housing market, and its diminished capital position, FHA was justified in reducing the HECM principal limits says New View.