THE

REVERSE
review
The Blueprint for Making Your Company
“Brand New”
Ethics Must Define the Reverse
Mortgage Industry
“Forward Thinking in Reverse”
Reverse Market Outlook
Wall Street Prefers LIBOR
HECM’s
Volume I, Number 2
PAGE
24
Jerry Wagner
John Lunde
John LaRose
Stephen Kinney
ALSO IN THIS ISSUE
• Are You Sending the Right MarkeƟng
Message?
• Building the Reverse Mortgage Sales
Strategy from the Ground Up
• Understanding Reverse Mortgage
Loan Servicing Concepts
• Looking at the Reverse World from a
“Forward” Thinker
Whether you are seeking to reestablish or
repurpose your existing brand, or start a new one,
learn how to set your company apart from the rest.
Retain a positive consumer perception
by integrating ethics into your company
mission.
Read about the risks and opportunities
of originating in the reverse mortgage
industry.
LIBOR vs. CMT: Find out which HECM
is better for your borrower.
May 2008
NewOpportunitiesInReverseMortgageLending
NewOpportunitiesInReverseMortgageLending

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THE
REVERSE
review
Cover Story
11 Ethics Must Define
the Reverse Mortgage
Industry
29 Reverse Mortgage Outlook
24
14 Building the Reverse
Mortgage Sales Strategy
from the Ground Up
20 Are You Sending the Right Marketing
Message?
The Blueprint for Making
Your Company “Brand New”
22 Wall Street Prefers LIBOR HECM’s
31 Understanding Reverse Mortgage
Loan Servicing Concepts
5
Note From the Editor
6
Ask the Underwriter
33
Directory
34
The Last Word:
Looking at the Reverse World from a “Forward”
Thinker
If you would like to
contribute an arƟcle for a
future issue, please email
your arƟcle for review to
editors@reversereview.com
by John LaRose
by Valerie VanBooven
by David J. Cesario
by John Lunde
by Jerry Wagner
by Monte Rose
by Stephen Kinney
Volume I, Number 2
May 2008
Formalize a code of ethics for your
organizaƟon to set yourself apart as
an industry leader.
Long-term care is a family issue, but it is more
oŌen a woman’s issue. Are you targeƟng the right
audience?
Learn to improve your sales strategy
by adding to your pre-exisƟng
arsenal of skills
There has been a lot of buzz about the LIBOR
HECM. Read the historical analysis of the LIBOR
vs. CMT
Are you familiar with the costs of reverse
mortgage loan servicing? Here are a few things
your need to know.
Taking a look at the growing risks and rewards of
an ever changing reverse mortgage marketplace.
by Lisa Schreiber
the basics
by Ralph Rosynek
8
Industry Snapshot
4
May 2008 reversereview.com
THE
REVERSEreview
Editor Aman Makkar
THE
REVERSE
review
Production Manager Jason Westbrook
Sales Manager Gina Smiar
© 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. ReproducƟons or distribuƟon of
any materials obtained in the publicaƟon without wriƩen permission is expressly prohibited. The views,
claims and opinions expressed in arƟcle and adverƟsement herein are not necessarily those of The Reverse
Review, its employees, agents or directors. This publicaƟon 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 informaƟon presented herein, The Reverse Review, LLC is not
responsible for any errors, misprints, or misinformaƟon. Any legal informaƟon contained herein is not to be
construed as legal advice and is provided for entertainment or educaƟonal purposes only.
Postmaster : Please send address changes to The Reverse Review, 10801 Thornmint, Ste 250, San Diego, CA
92127
10801 Thornmint Rd
Suite 250
San Diego, CA 92127
Subscriptions and Editorial Content
phone : 858-217-5332
email : informaƟon@reversereview.com
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Advertising Information
Rates, specificaƟons, and deadline informaƟon available.
phone : 858-217-5332
email : adverƟsing@reversereview.com
Printer The Ovid Bell Press, Inc.
THE
REVERSEreview
Contributing Authors
Ralph Rosynek
John Lunde
Monte Rose
Valerie VanBooven
Jerry Wagner
Stephen Kinney
David J. Cesario
John LaRose
Lisa Schreiber
Copy & Design Editor Harpreet Makkar
May 2008 reversereview.com
5
“Forward Thinking in Reverse”
Note From the Editor
I would like to start by thanking our authors, adverƟsers, advisers, and my
staff for helping make the premier issue of The Reverse Review a tremendous
success. The feedback we received has been overwhelmingly posiƟve, and
the relaƟonships we have started to build are priceless. I have personally
learned more in the last couple months while creaƟng this magazine than
I would have ever imagined. I must admit, we have been fortunate to
collaborate with wonderful individuals who are very passionate about our
industry.
As some of you know, many of my experiences have come from the online
world. Over the last five years in the Internet space, we have become
accustomed to developments like social networks, blogs, online video sites,
etc.. Many of you have heard of MySpace, Facebook, Wikipedia, YouTube,
and the like. Many of us have even started our own blogs, created websites,
or created personal or business profiles on one of the many social networking websites. These online
portals all have one thing in common: user generated content (UGC).
The key to UGC is that all content created is by the end user. Now, think about the impact user generated
content has had on our society. Without people like you and I geƫ ng online and creaƟng this content,
many of these companies would not exist. The big successes of companies like YouTube and MySpace are
simply due to the fact that normal people like us get online and create profiles or upload videos. The web
has given us the ability to express ourselves in any way we would like.
User generated content has become so powerful and mainstream that this year quesƟons for the
presidenƟal debates were brought in from users on YouTube. In another example, earlier this year,
Apple lowered the price of it’s iPhone shortly aŌer it’s launch. Many buyers who had paid a higher price
were furious. CollecƟvely, the online voice was so powerful that “protests” on chat forums and blogs
lead Apple CEO Steve Jobs to refund $100 to thousands of his customers. (WOW! I know I’ve bought a
computer before and within weeks aŌer my purchase it was a few hundred dollars cheaper. I need to
start protesƟng online!)
Point being, the future of our society is not about a few people running the show, but about everyone
geƫ ng involved, expressing their opinions, and making their voices heard. I believe the iniƟal success
of our magazine was truly the success of our authors and everyone else involved. The Reverse Review is
a magazine and website in which we want everyone’s parƟcipaƟon, comments, and feedback. Anyone
who chooses to can be an author and have their opinions heard. Therefore, every month we invite new
authors to contribute, and if we haven’t invited you, we ask you to invite yourself by sending us an email
at ugc@reversereview.com.
Thank you, and we look forward to hearing from you soon!
Aman Makkar
Editor
6
May 2008 reversereview.com
THE
REVERSEreview
Recently one of my loan files was
suspended by the Underwriter for
addiƟonal comparables. When I
checked the appraisal I was confused as
all comparables indicated by the appraiser
appeared to be within HUD guidelines
making the loan insurable – so why is the
underwriter suspending the file?
The Secondary Market conƟnues to become more
conservaƟve in reviewing and accepƟng collateral.
Unfortunately, many mortgage professionals and
appraisers have not been keeping current with the various
changes in market values.
Remember, the investor manuals, handbooks and
suggested review procedures are just as presented
– guidelines for collateral analysis and not hard and fast rules
in many cases.
Reverse Mortgage Loans carry a dual collateral
performance requirement. The loan must be “insurable” by
FHA/HUD guidelines and it must also be “saleable” in the
Secondary Market.
In the case of your quesƟon, there would appear to be
a disjoint between current secondary market standards and
insurability. More than likely, the Underwriter is requesƟng
addiƟonal comparable informaƟon because the 3 current
comparables may meet HUD guidelines, but one or more
may be unacceptable to the Secondary perhaps because of
its age, locaƟon or the number of days on the market prior
to sale.
AddiƟonally, if the property is located in a declining
market, the appraiser may not have made the appropriate/
necessary adjustments or commented suffi ciently to support
the value indicated.
In general, be aware that the review of comparables
has become much more conservaƟve than in the past – a
quick review list for comparables prior to submission for
underwriƟng should indicate the comparables as compared
to the subject property are:
more current than not – the comparable sale date ages
should be less than 90 days if at all possible. Be aware of
the number of days on the market for a property – that is
a big indicator as to the stability, supply and demand for
properƟes in the neighborhood.
more “closer” than not – the comparables should be less
than ½ mile if at all possible and represent similar types
of neighborhoods – the further the comparable is from
the subject, the greater the likelihood that there are other
factors which could effect its appropriateness as a value
support for the subject property.
more similar than not –the lot and physical structure
type/age/design of the comparable should be as similar
as possible to our subject – look at the pictures of all
comparable as compared to the subject.
more “toward the middle” than not – the final value
suggested by the appraiser – is it more in the “middle”
than at the upper end of reconciled values. Generally high
end values should be avoided in markets where declining
values, over supply, or unstable condiƟons are noted by the
appraiser.
Also, look at the date of your appraisal as opposed to the
date of your submission to underwriƟng and the esƟmated
closing date. For example, a 45 day old appraisal, while
“current” could contain comparables that as of the date of
the report were already 120 days old, which now are 165
days old and will possibly be 6 months or more old by the
Ɵme the analyst in the Secondary Market reviews the file for
purchase and pooling.
Think of the changes that have occurred in many housing
markets in the past six months and ask yourself, what is
the likelihood that properƟes similar to the subject would
conƟnue to hold their values?
Lastly, impress upon your appraiser to provide supporƟve
comments and jusƟficaƟons for choices and values beyond
the “standard” language. While it is the Underwriter who
determines the final value of the subject property, it takes
a team effort. There is plenty of “room” for the appraiser
to provide addiƟonal narraƟve support in the report and in
Ask the Underwriter
by Ralph Rosynek
Q:
A:
May 2008 reversereview.com
7
“Forward Thinking in Reverse”
most cases, that addiƟonal informaƟon would be of benefit
to the underwriter and the borrower(s).
Is it permissible to take a HECM applicaƟon prior to
counseling?
The originaƟon of a HECM loan is a two-step process
involving the actual compleƟng of the forms as well
as compleƟon of required counseling. There is no
prohibiƟon to taking an applicaƟon prior to counseling,
however, no services resulƟng in costs to be paid for by
the Borrower(s) can occur prior to counseling and the
Borrower(s) properly execuƟng the counseling cerƟficate.
My quesƟon would be more common sense in
approach – knowing the added value and protecƟons to the
Borrower(s) which counseling provides, is it in the Senior’s
best interest or the Originator’s best interest to engage the
applicaƟon process prior to counseling?
Please take a moment and provide us your feedback
which we will feature in next month’s column.
A note about our subject maƩer expert: Mr. Rosynek has
been involved in mortgage lending for over 30 years with the
last 5 + years exclusively providing reverse mortgage lending
soluƟons. To contact Mr. Rosynek or to learn more about 1st
Reverse Financial Services, please visit www.1streverse.com
or call 877-574-1000.
Q:
A:
Your “Go To” Team for Reverse Mortgage Solutions
Marc Helm • 281-404-7824 • mhelm@rmsnav.com
Ken Austin • 281-404-7825 • kaustin@rmsnav.com
Reverse Mortgage Solutions, Inc.
2727 Spring Creek Drive, Spring, TX 77373
www.RMSnav.com
FannieMae
Private Label Reverse
Mortgage Sub-Servicing
Private Label Loan
Origination System
Have a question for the underwriter?
Send your questions to
asktheuw@reversereview.com
HUD Foundation Specialists
Manufactured actured M Hou Housing sing
Troubleshooters rouble T
Foundat F ion
nspections, Upgrades n
& Repairs &
Engine E er
Certificatio ons o C
8
May 2008 reversereview.com
THE
REVERSEreview
Reverse Mortgage Industry Snapshot
As Of March 2008
10 Regions, ranked by HECM unit volume YTD. Including rank change from prior YTD, as well as growth rates.
Also includes acƟve lenders and growth
Lender distribuƟon graph and table, showing number of lenders growing at various growth rates YTD vs. prior
YTD, including volume aƩributable to each group of lenders.
Client NoƟces
1) 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 informaƟon along with a thorough descripƟon
of the suspected inaccuracy. Thanks!
2) 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
3) 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
Rank Chg 2008YTD 2008
1 1 7,404 474
2 -1 5,994 454
3 - 3,692 213
4 - 3,234 279
5 2 2,653 178
6 -1 2,229 171
7 -1 1,769 191
8 - 1,678 170
9 - 1,052 105
10 - 828 94
30,533 1,666
2.712% 3.83%
Industry Totals 5.07% 108,287 75.37%
Great Plains 9.09% 2,827 91.84%
5.496% 7.26%
Rocky Mountain 20.37% 3,296 50.0% 3.445% 14.56%
Northwest/Alaska 12.69% 5,790 84.78%
7.30% -8.67%
New England -16.4% 6,963 59.17% 5.794% -20.43%
New York/New Jersey -4.05% 8,322 85.87%
10.592% -1.5%
Southwest 27.43% 8,073 79.8% 8.689% 21.28%
Midwest 3.49% 11,434 48.4%
19.631% -17.59%
Mid-Atlantic 13.67% 11,956 88.5% 12.092% 8.19%
Pacific/Hawaii -13.42% 25,612 50.83%
2008YTD Chg%
Southeast/Caribbean 20.94% 24,014 132.35% 24.249% 15.11%
Region YTDChg% 2007TOT Chg%
Endorsements Active Lenders Region Share
New Lenders 926 5,154
over 400% 46 2,876 165
301% to 400% 13 192 42
201% to 300% 26 549 161
101% to 200% 71 2,830 1,194
0 to 100% 223 5,851 4,278
-99% to -1% 361 13,081 21,971
-100% 210 1,250
Growth Rate Lenders YTD MIC Last YTD
Lender DistribuƟon by YTD Growth Rate
StaƟsƟcs Provided by Reverse Market Insight
Top 10 Rankings by Region
May 2008 reversereview.com
9
“Forward Thinking in Reverse”
2 year trend graph of monthly HECM unit volume and industry penetraƟon against 62+ homeowner households naƟonally.
Appendix
1) All staƟsƟcs based on retail originaƟons from HUD’s Monthly HECM MIC reports
2) Loans are in unit volume, based on HUD reported mortgage insurance cerƟficate issuance
3) Lenders are aggregated using HUD’s lender idenƟficaƟon numbers and unique lender names, along with feedback from
reporƟng lenders
HUD Regions and Corresponding States/Territories
Region 1 - New England
ConnecƟcut
Maine
MassachuseƩs
New Hampshire
Rhode Island
Vermont
Region 2 - New York/New Jersey
New York
New Jersey
Region 3 - Mid-AtlanƟc
Delaware
District of Columbia
Maryland
Pennsylvania
Virginia
West Virginia
Region 4 - Southeast/Caribbean
Alabama
Florida
Georgia
Kentucky
Mississippi
North Carolina
Puerto Rico
South Carolina
Tennessee
U.S. Virgin Islands
Region 5 - Midwest
Illinois
Indiana
Michigan
Minnesota
Ohio
Wisconsin
Region 6 - Southwest
Arkansas
Louisiana
New Mexico
Oklahoma
Texas
Region 7 - Great Plains
Iowa
Kansas
Missouri
Nebraska
Region 8 - Rocky Mountain
Colorado
Montana
North Dakota
South Dakota
Utah
Wyoming
Region 9 - Pacific/Hawaii
Arizona
California
Federated States of Micronesia
Hawaii
Nevada
Region 10 - Northwest/Alaska
Alaska
Idaho
Oregon
Washington
6,000
8,000
10,000
12,000
2006-4 2006-8 2006-12 2007-4 2007-8 2007-12
U
n
i
t
s
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
P
e
n
e
t
r
a
t
i
o
n
MIC Units Penetration %
24 Month PenetraƟon and Unit Volume
17100 Gillette Ave., Irvine, CA 92614
1-800-516-0545 • info@monterose.biz
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May 2008 reversereview.com
11
“Forward Thinking in Reverse”
Ethics Must Define the Reverse Mortgage Industry
by John LaRose
When headlines out of Capitol
Hill in 2007 touted passage of an ethics
overhaul bill, I have to admit I was
unimpressed. Before it even came up for a
vote, Congress was hailing the work as “a
landmark ruling … historic, momentous.”
UlƟmately, the bill passed the House, 435
to 11; the Senate, 83 to 14. Barely had the
President’s signature been affi xed to the
legislaƟon than there came reports of members of Congress
who had found ways to skirt the bill’s intent regarding travel
expenses.
Well in advance of the iniƟaƟve, Jeff Rundles, former
editor for ColoradoBiz, said, “LegislaƟng ethics is like
capturing air in your fist.” I couldn’t agree more.
Yet, Rundles’ take on codes of ethics runs somewhat
counter to mine: he says, “the ethical don’t need them and
the unethical won’t heed them.” On that, I disagree.
A code of ethics is a window into the soul of a company.
It says: we value partnerships, but not at the cost of our
values. It says: our integrity is not for sale.
So what does Capitol Hill’s ethics bill have to do with us?
Plenty, if we don’t want to risk having our industry’s ethics
legislated.
What has happened in the sub-prime lending sector
is all the warning we need. No one took seriously enough
the flashing “TILT” light that all but blinded us, unƟl it
short-circuited. The cost? More than $300 billion to banks
and other lenders … 1.8 million distressed or displaced
homeowners … 20 percent of the mortgage industry
workforce without jobs … and a permanent stain to the
industry.
Could something similar happen to the reverse mortgage
sector? It not only could happen, but it will happen if we
don’t do what it takes to protect and preserve our industry
now. Each of us needs to ask ourselves—as if children were
listening and our answers were broadcast on the evening
news: Am I taking a stand against unscrupulous business
pracƟces? Am I willing to sacrifice profits for principle? Am I
turning out the predatory and welcoming the principled?
If not, consider our landscape from this view:
• Reverse mortgages soared from 7,800 in 2001 to 107,500
in 2007.
• The 308,000 Americans who have taken out reverse
mortgages since 1990 represent a mere 1 percent of the
senior home market.
• Every day for the next 18-20 years, more than 8,000 of
the esƟmated 76 million Baby Boomers will turn 62 and
become eligible for a reverse mortgage.
• Older adults now hold $4.3 trillion in home equity;
by 2030, when the youngest Baby Boomers reƟre, it’s
esƟmated the total in home equity held by Americans 62
and older will top $37 trillion.
But look carefully for what else is on the horizon:
• 172 U.S. lending operaƟons (and counƟng) have
imploded in the sub-prime bust—filing bankruptcy,
ceasing or limiƟng operaƟons, or being acquired in a fire
sale.
• 100,000-plus mortgage workers are jobless, according to
the U.S. Bureau of Labor StaƟsƟcs.
It follows that at least some out-of-work sub-prime
mortgage brokers—some of the same people who preyed on
at-risk borrowers—are now seeking a home and a paycheck
in the reverse mortgage industry. It also follows that how
and with whom we do business will determine how long we
do business.
An FBI study found that 80 percent of all reported
mortgage fraud losses come at the hands of “industry
insiders”—people with the knowledge and wherewithal to
fool the experts themselves. Not you? Not in your house?
How can you be sure? Industry insiders turned the sub-
prime home mortgage industry on its head. It can happen
anywhere: In 1999 I witnessed the fiŌh-largest bank failure
in FDIC history, brought about by fraudulent mortgage
pracƟces of the bank’s chairman, CEO and CFO.
»
12
May 2008 reversereview.com
THE
REVERSEreview
Simply agreeing in theory that ethics maƩer isn’t
enough. It maƩers what ethics look like in pracƟce. Experts
cite common prevenƟve measures as among the best
weapons against nefarious pracƟƟoners and ill-goƩen gains:
staying abreast of fraudulent pracƟces, educaƟng employees,
implemenƟng technological safeguards, and keeping the
door closed to “un” professionals. No less important, say
those same experts, is having a company code of ethics.
Therein lies the opportunity for you to stand out as an
industry leader—not because a trade associaƟon issues
a call for ethical standards … not because a commiƩee is
charged with naming your ethics for you … not because
you’re compelled by compeƟƟve pressures to accede to
professional upgrades … and not because it’s the “in” thing
to do. Such moƟvaƟons are no different than saying you’re
commiƩed to losing weight because the neighbors think it’s
a good idea.
How can you set yourself apart as an industry leader?
By making ethics as visible throughout and beyond your
insƟtuƟon as is your company logo. By being first in line to
formalize your code of ethics and mandate it as inviolate
corporate policy. By exacƟng high standards of insiders and
outsiders alike. And by sounding the clarion at the first threat
to the values your code represents. Why? Because the more,
the sooner, and the louder we make clear what the “right
thing” is, what we will tolerate and what we will not—as
an industry, as industry leaders, as professionals, and as
individuals—the beƩer and longer we can serve one another,
our investors, and our borrowers.
Formalizing a code of ethics and publicly commiƫ ng to
the values it represents is a criƟcal first step. Because saying
we’re ethical isn’t enough; we must be willing to put our
ethics front and center so everyone knows who we are and
how we do business. Each of us must live our code of ethics
day-in and day-out. And we must leave no doubt about how
much we value … values.
You neither need permission nor an act of Congress …
not a commiƩee or an associate’s (or associaƟon’s) approval.
You only need an ongoing commitment from within to
always do the right thing at the right Ɵme for the right
reason. Individually and collecƟvely, we must make integrity
as much an aƩracƟon for like-minded clients and investors,
as it is a repellent to those who do not share similar values.
Some years ago, I spoke on the topic of ethics at an
industry conference of sub-prime lenders. When I concluded,
I was met with silence.
Perhaps the landscape has changed enough since then,
as to elicit some noise this Ɵme around. I encourage you
to make a lot of noise throughout your companies and the
industry on behalf of ethics, and to make certain integrity
has a voice—the voice of a leader.
About John LaRose: John LaRose has worked Ɵrelessly for
more than 20 years to promote the obligaƟon and need for
ethics in the mortgage industry. Recognized throughout the
reverse mortgage industry as a niche-markeƟng specialist,
he is also frequently called upon for his advice and counsel.
To learn more about how Celink formalized its Code of Ethics,
visit www.celink.com and click on “Code of Ethics,” then
“Read the history of our code of ethics,” A (true) tale of two
ciƟes.
“Individually and collecƟvely, we must make
integrity as much an aƩracƟon for like-minded
clients and investors, as it is a repellent to those
who do not share similar values.”
Over the last 20 years, 345,000 reverse mortgages have been originated. Last year, originations hit a
new high: $20 billion. As the US population ages, the market has responded with new and innovative
products and services geared towards keeping seniors in their homes for longer periods of time.
National lenders in need of market diversification have migrated to reverse mortgages in an attempt to
make up for lost business in other markets.
Recently Michael Fosser, senior vice president of First American eAppraiseIT, offered his perspective on
this market and the opportunities and challenges that it presents to lenders.
Why are so many lenders including reverse mortgages in their product mix?
Today many market segments continue to be depressed and markets like sub prime and Alt-A are almost
nonexistent. Reverse mortgages tend to be more “need driven” and less tied to market conditions. In the
US today, more than 38 million eligible reverse mortgage customers own their homes outright. That’s $4
trillion in untapped equity. This offers a great opportunity for lenders to grow their portfolio of business in
a market that is less sensitive to fluctuations in the real estate market.
Are some appraisers more qualified than others to service this market?
Over 90% of today’s reverse mortgage originations are insured by FHA. Not every appraiser or appraisal
management company is qualified to complete these assignments. At eAppraiseIT we have a nationwide
network of more than 8,000 appraisers who are FHA certified – one of the largest panels of FHA appraisers
available in the industry today. To ensure a successful reverse mortgage offering, lenders need to work with
an appraisal management company that can provide national coverage and still maintain reasonable turn
times. In our case, that is five to seven days.
What challenges does a lender face servicing this market?
AARP recently conducted a survey of reverse mortgage customers and one of its findings was that their
properties frequently need repairs. This of course can complicate the underwriting process and salability
of a loan. To reduce lender concern, eAppraiseIT has created a new product specifically geared for the
reverse mortgage market called “Value View”. It helps lenders assess the condition and value of a property
while the loan is in the lender’s portfolio. This low cost inspection report includes a current photo of the
subject property, an automated valuation using two comprehensive AVM’s, and an inspection report that
answers questions regarding a property’s condition, marketability, and neighborhood. Value View is a great
peace of mind option for any lender interested in originating reverse mortgage loans.
Contact
Michael Fosser
800.281.6200
www.firstam.com
REVERSE
MORTGAGES
A GROWTH OPPORTUNITY WORTH INVESTIGATING
Commentary by First American eAppraiseIT
14
May 2008 reversereview.com
THE
REVERSEreview
Building the Reverse Mortgage Sales Strategy from the Ground Up
What are the criƟcal requirements
of a successful RM sales strategy?
The act of successfully “selling”
reverse mortgages is actually a
minute segment of a comprehensive,
carefully orchestrated process.
Taking the applicaƟon (or more to
the point, funding a loan) represents
the proverbial “Ɵp of the iceberg.”
Beneath this event lies a series of interconnected events, the
results of which essenƟally determine the success (i.e., the
effecƟveness and effi ciency) of the sales effort.
A comprehensive sales strategy depends on the
successful integraƟon of two dimensions: insight and
acƟon. A producer may or may not consciously arƟculate
characterisƟcs of the respecƟve components (much less
the dynamic relaƟonships) of these two dimensions.
Nevertheless, one’s sales “acƟviƟes” are based on key
assumpƟons on how the market operates, and how one
“executes” based on this insight.
How does the idea of “integraƟng insight and acƟon” apply
in managing and growing the sales team?
A comprehensive sales strategy must be able to provide
clear and pracƟcal answers to the following groups of
quesƟons. Success hinges both on the quality of insight and
the applicaƟon of these ideas in real Ɵme:
1. What do I do best? What are my strengths, i.e., beyond
the skills and knowledge (competencies which are
teachable), what are my talents (non-teachable), and
what are my areas of “non-strengths” that have to
be augmented or managed that create obstacles and
resistance points along my sales cycle? How do I leverage
my unique talent blueprint in an opƟmal way that is
profitable, compeƟƟve, and sustainable? Is my “porƞolio”
of sales acƟviƟes opƟmally calibrated to reflect my
“signature strengths?”
2. What is my niche? What are the segments (in the
customer and advisor markets) appropriate to my unique
customer value proposiƟon? How do I locate the decision
maker, and how do I connect and influence them?
3. How do I differenƟate and elevate myself amidst the
cluƩer and noise of the current compeƟƟve landscape?
How do I create a personal brand, establish a strong
presence, and create customer (and/or advisor)
engagement that propels my business with a strong
referral engine component. What skill sets (and learnings)
are necessary to establish this?
4. What systems, tools, and learning strategies do I need
to install in my sales pracƟce that will: (a) integrate the
soluƟons to the above quesƟons, (2) will guarantee my
successful adaptaƟon to marketplace and environmental
changes (e.g., shiŌing demographics and regulatory
condiƟons affecƟng product and distribuƟon strategies),
and (3) leverage my Ɵme and effort? How do I create
sustainable momentum and stamina?
In simple terms, what mind set and strategy do I use to
“Get to the Kitchen Table,” how do I successfully present
and close at the Kitchen Table, and what do I need to do
aŌerwards to engage the client in order to create a strong
referral base?
The answers to these quesƟons necessitate a clear
understanding of four basic areas (strengths, segmentaƟon,
skills, strategy) that affect sales producƟvity. This is shown in
the following illustraƟon:
Some producers aƩain relaƟve success by focusing on
the acƟon dimension alone. Through the process of trial
by Monte Rose
May 2008 reversereview.com
15
“Forward Thinking in Reverse”
and error, they manage to create a workable “strategy”
based on a few key tools and “tacƟcs” used in their previous
sales jobs, or a judicious use of street sales savvy combined
with markeƟng common sense. Some producers are giŌed
with the stamina to “put in the miles” and through sheer
discipline and hard work are able to create a viable business.
Some originators have discovered a logical niche by default,
either through their previous careers (and accompanying
social network) or by effi cient harvesƟng of high quality
leads supplied by their organizaƟon.
Sales skills development and applicaƟon, implemented in
“the same old way,” will yield “same old” results. In order to
improve one’s outcome, one has to personally improve one’s
insight (about one’s self and the market) and skilled acƟon,
preferably both, in a dynamic way. Business will improve only
if we personally improve our game. We can improve the way
we think. We can improve the way we act. Or we can choose
to do both. If these two are carefully and systemaƟcally
coordinated, it stands to reason that our chances of success
will improve exponenƟally.
To get results we have not goƩen before, we need to:
Change the way we think about acƟon, and change the way
we act about thinking.
How important is insight in achieving success in the field?
Isn’t it enough to have the right effort and energy day in,
day out, to get in front of our prospects?
Insight should influence the kind of skills one should
focus on, and how they are to be applied. Conversely, the
effects of sales acƟons and implementaƟon strategies will
necessarily affect our understanding of the market and how
to connect with the customer more effecƟvely (assuming of
course, that we have ways of monitoring and tracking our
efforts).
Sales success depends on correct focus. Correct focus
depends in turn on successfully aligning insight with the
axis of skillful acƟon and strategy implementaƟon. Finally,
this “integraƟon” has to be sustained by a system (i.e., an
infrastructure) that maximizes effi ciency (such as a CRM tool,
Ɵme management methods, and performance dashboards
that give useful feedback and informaƟon about the effi cacy
of sales methods used). It is not enough to say “sales are
down,” but instead ask a series of “whys,” (the famous Five
Why Method pracƟced by Japanese effi ciency experts) with
the end view of hiƫ ng the fundamental cause of less-than-
desired performance.
What is the importance of a “system” that has a built-in
feedback loop?
The objecƟve of a “system” is the ability to see cause-
and-effect relaƟonships between acƟons, insight, and
results. It allows us to effi ciently replicate (and reinforce) the
behaviors that yield the results we want. Sales is one big
“experiment.” One has to idenƟfy and measure the behaviors
that contribute to the producer’s boƩom line, and how they
can be sustained, changed, or amplified. If the manager
knows how to coach at this level, moƟvaƟon, stamina, and
producƟvity improves. The biggest leverage is the front-line
manager’s coaching prowess. It’s one of the most important
variables in the success equaƟon.
The pracƟcal knowledge of the verƟcal dimension, i.e.,
the “strengths lens” interacƟng with the “market lens”
is something that is virtually unknown in our industry. At
our consulƟng organizaƟon we have dissected and applied
cuƫ ng edge research in these two disparate areas. The end
view is to be able to shed light on how to link sales talent
with the appropriate market segmentaƟon knowledge.
The idea of niche strategy is not new. What is new is that
we are at a stage when we can actually apply science to
the quesƟon of “Who will succeed and where?” Most
importantly, we can train the manager to consistently coach
the “how.”
This is where I think the sales profession needs to
direct its creaƟve energies, if it expects to adapt to the
changing compeƟƟve environment. The axis of insight
primarily dictates the quality of effecƟveness, or “doing the
right things.” The axis of acƟon primarily relates to level of
effi ciency, or “doing things right.” The more compeƟƟve the
market becomes, the more one needs to personally have a
method that systemaƟcally manages these two polariƟes in a
synergisƟc fashion.
Maslow once said, “to a hammer, everything looks like
a nail.” Some companies react to tougher condiƟons by
hammering harder, hammering more, or both. Others adapt
by buying more hammers. Unfortunately, the game has
changed. These tacƟcs will no longer work.
Merging insight and acƟon (i.e., “aligning the crosshairs”)
allows effecƟve and effi cient effort in the least amount
of Ɵme. To excel in this game, you must unite theory and
pracƟce.
“Sales success depends on correct focus. Correct
focus depends in turn on successfully aligning
insight with the axis of skillful acƟon and strategy
implementaƟon.”
»
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May 2008 reversereview.com
THE
REVERSEreview
What is strengths-based learning, and how does that help
performance?
The foundaƟon of sales strategy is self-awareness and self-
knowledge. Research from the behavioral sciences and the
neurobiology of performance indicate that peak performance
is Ɵed to the relaƟonship of how an individual’s unique talent
configuraƟon is applied to everyday tasks. The closer (and
more frequently) one applies one’s “signature strengths” to the
acƟviƟes of the sales cycle, the higher producƟvity becomes.
The corollary is that the greatest areas of liŌ in sales producƟvity
is not to be found in constantly “improving” one’s weak areas,
but in leveraging one’s unique talents. The 80/20 rule of thumb
applies: the greatest liŌ comes from capitalizing on one’s
strengths 80% of the Ɵme, while spending 20% of one’s Ɵme and
energy creaƟng workarounds and compensaƟon strategies on
“weaknesses.” Unfortunately, many in the field sƟll believe that
“fixing weaknesses” is the most producƟve use of one’s Ɵme,
despite overwhelming research evidence to the contrary.
Two pragmaƟc soluƟons are required for a strong foundaƟon
in this area: (a) proper assessment, and (b) skillful, strengths-
based producƟvity coaching. The field of talent assessment
has a long history, though in the last 10 years, researchers in
the field of PosiƟve Psychology have created instruments with
robust psychometrics and pracƟcal applicaƟon (i.e., idenƟfying
work-related “themes” strongly correlated with high successful
performance and achievement). Strengths-based coaching
uƟlizes a salesperson’s “talent map” as the starƟng point for
producƟvity enhancement. The key objecƟve is one of pracƟcal
skill building based on what could be termed “meta-learning on
steroids” – i.e., learning about “learning to excel,” based on a
deep fluency of the strengths language and systemaƟc efforts
to focus one’s talents on those acƟviƟes that yield the greatest
return. (One of the sales manager’s most important tasks as a
“strength-based” partner is to concurrently facilitate strategic
partnerships/structures to bolster the sales staff’s areas of
challenge - i.e., the “boƩom drawer strengths”).
In my experience, skillful and in-depth strength-based
training and coaching is a key foundaƟon to a successful sales
strategy for two reasons:
(a) It creates a highly engaged sales staff, which translates
not only to personal sales producƟvity, but also yields a high
level of customer engagement in the long run. Human Sigma,
which is a concept/tool rapidly being adapted by cuƫ ng
edge performance-oriented organizaƟons, in fact measures
the potency of the salesperson-engagement-to-customer-
engagement linkage as a key driver of business profitability.
The latest findings from neuroscience research is telling us that
employee engagement is achieved primarily through “managing
May 2008 reversereview.com
17
“Forward Thinking in Reverse”
from strengths,” i.e., structuring a logisƟcal, psychological,
and social environment where both manager and sales
staff converge on strategies that incorporate the concepts
of strengths fluency and moƟvaƟon. Successful sales teams
flourishing within posiƟve organizaƟonal cultures have
always accomplished this. However it is only in the last 5-10
years that methodologies for tagging and replicaƟng these
successful approaches have been published and taught as
part of the coaching lexicon.

(b) Behavioral change efforts are more effecƟve and
sustainable when they take into account the “wired-in”
talent profile of the salesperson. Strengths-based coaching,
mentoring and training energizes the individual, builds
performance stamina in a non-coercive way, enhances
effi ciency, decreases turnover rates, and increases staff
retenƟon. In today’s highly compeƟƟve talent marketplace,
this is a key strategic advantage. Not only does this result
in high performance, it also creates an employment brand
that aƩracts highly talented people into the organizaƟon.
Thus one creates a fully self-propelled posiƟve dynamic that
starts from effecƟve selecƟon, and comes full circle with
conƟnued sales excellence and customer engagement as
effects.
EffecƟve strengths management is the underpinning of
effecƟve sales strategy. It is the key to focusing moƟvaƟon.
It is the framework for developing the agility, sensiƟvity, and
stamina required for succeeding in the mature market.
How important is it to understand market segmentaƟon in
the mature market?
There are two major subdivisions in this area: (a) direct
to consumer (“D2C”), and the business-to-business (“B2B”,
or referral) market. The old “62 and a pulse” understanding
of the mature market is not only obsolete, it’s also
completely useless as far as formulaƟng markeƟng strategy.
Unfortunately, most players are sƟll quite in the dark about
the psychographics of aging.
D2C. TradiƟonal market segmentaƟon typically covers
geographic, demographic (e.g., income, ethnicity, etc.),
psychographic (e.g., aƫ tudinal, values, and lifestyles)
dimensions of understanding consumer preferences and
buying behaviors. These kinds of segmentaƟon applicaƟons
are very prevalent in tangible consumer products, and
certain types of financial products such as credit cards. In our
industry, however, market intelligence has not yet reached
a level where there has been a systemaƟc invesƟgaƟon
of buying preferences within the senior populaƟon. Most
large organizaƟons segment based on geo-demographic
variables such as age and income, and fail systemaƟcally
(quanƟtaƟvely/qualitaƟvely) to assess the heterogeneous
distribuƟon of seniors as a funcƟon of: (a) where they are
in the aging process, and (b) the various biophysical and
psychosocial determinants of needs and wants.
Suffi ce it to say that there are certain consumer
segments we have discovered that: (1) respond to specific
promoƟonal and posiƟoning strategies, (2) have disƟnct
media and channel preferences, and (3) have specific
recepƟveness/resistance to the reverse mortgage offering.
The effecƟveness of one’s path to the kitchen table, how
one manages the conversaƟon at the kitchen table, all
depends on one’s understanding of the various “mind-set”
classificaƟons of the respecƟve mature market segments.
There are several gerontologically based market
segmentaƟon approaches we uƟlize in training sales staff
in order to help them understand the senior client psyche
(the emoƟonal and cogniƟve components of the “buying
decision”). The advantage of gerontological segmentaƟon is
that it incorporates the biological, social, and psychological
dimensions of aging. It creates useful “mind maps” of
how we can serve the senior populaƟon based on what
they need and want. Perhaps most importantly, it yields
insight on how they are likely to process informaƟon
»
18
May 2008 reversereview.com
THE
REVERSEreview
in terms of form and content. It takes into account the
natural processes/dimensions of aging, alongside criƟcal
life events that necessitate adjustments and dislocaƟons in
lifestyles and financial posiƟon. Knowledge of mature market
segmentaƟon equips the salesperson with beƩer insight so
that he/she can anƟcipate where and how to connect with
the client. Understanding the client and quality of customer
service goes hand in hand.
In training our clients, we teach a gerontological
segmentaƟon lens to focus on customer variaƟon. Age is
not a final differenƟator of need and/or want. More oŌen
it is where one falls on the declining biological/psychosocial
“energy” scale that determines recepƟvity to financial
products and soluƟons. EffecƟve promoƟon and educaƟon
also requires the formulaƟon of specific
buyer personas (i.e., based on these
previously idenƟfied market segments) to
understand the direct-to-consumer market
dynamics.
B2B. Many successful originators successfully
build their business through the financial/
legal professional advisor market. However, there are also
other advisor influences besides these two. They include
community influencers, family members, and social work/
health providers. An enƟre strategy can be built on effecƟve
networking and relaƟonship building with these populaƟons.
Just as in the D2C segmentaƟons, B2B approaches need
to systemaƟcally idenƟfy the “moƟvaƟonal maps” of the
various segments within this sector.
However, not everyone has the temperament or
capabiliƟes to fully uƟlize this market portal. They require
a different talent set, a different level of competencies and
product knowledge, and, in many cases, a different level of
business approach to be successful. B2B markeƟng needs
to be tailored based on the unique talents and competency
profiles of the sales staff, in much the same way that D2C
campaigns are orchestrated.
Understanding the key segments of this market in terms
of: (a) their primary senior targets, (b) their own posiƟoning
and promoƟonal strategies, and (c) their understanding of
equity conversion as soluƟons to their mature market clients,
whether they are in the non-profit or financial advisory
role, and their understanding of the various gerontological
market segments themselves, will affect how they are to be
approached.
What is the link between strengths-based performance
coaching and market segmentaƟon knowledge?
EffecƟve strengths assessment and profiling gives a good
indicaƟon of the segments one can be reasonably successful
at. In addiƟon, the talent profile will give good insight on
what parƟcular skills are easy to learn and apply. The talent
profile will give a clue as to the appropriate markets (D2C vs.
B2B) that are a natural fit. There are certain ways to reach
specific segments (e.g., channel/media vs. seminars, vs.
networking for example) that are inherently easy for some,
and painstakingly diffi cult for others.
The key is to coach individuals to their strengths in
terms of Geƫ ng to the Kitchen Table skills. Certain strength
profiles naturally predispose individuals to
parƟcular markeƟng methods, which means
that they will consistently be resistant
and/or blocked in some paths. Certain cases
-- moƟvaƟonal issues, call reluctance, and
demoralizaƟon (all contributory to poor
performance) -- are caused by managers
demanding producers to consistently use
their “boƩom drawer strengths” to grow the business.
For example, forcing individuals with very low “Woo”
theme to constantly “fish” in cocktail networking events can
be a painful exercise. If this person had a high analyƟcal and
deliberaƟve talent, he/she could have been more effecƟvely
coached to explore the B2B terrain, because the expression
of analyƟcal and deliberaƟve sensibility is more valued in
this market. In general, people who have more themes in
the cogniƟve and impacƟng categories are generally more
natural B2B players, compared to those with high relaƟonal
talents (e.g., Empathy, Connectedness), which tend to be
more effecƟve in the D2C arena.
Some producers are more flexible, and can dial down
or dial up their energy levels quite easily because of certain
clusters of strengths that allow such mobility. Others need
to sƟck to a certain kind of customer to be effecƟve. For
these kinds of producers, oscillaƟng between different sales
personas can be very draining.
About Monte Rose: 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 publicaƟons and naƟonally
syndicated media. He was head of naƟonal retail sales for
Financial Freedom Senior Funding CorporaƟon. Monte is a
CerƟfied Senior Advisor and a CerƟfied Strengths Coach with
Gallup University. For more informaƟon, call 800-516-0545
or email info@monterose.biz.
“EffecƟve strengths
assessment and profiling
gives a good indicaƟon of
the segments one can be
reasonably successful at.”
To contact Lender Lead Solutions
call 888.775.3631 or visit our website at
www.lenderleadsolutions.com
At Lender Lead Solutions we know
that one size doesn’t fit all.
Products for every client;
Wholesale for every lender
A traditional, government-insured Reverse Mortgage.
For clients who want the comfort of a fixed rate.
Lower closing costs and eligibility starting at age 60.
Clients can make the most of their higher-valued homes.
This is for mortgage professional use only, not for distribution to the general public.
20
May 2008 reversereview.com
THE
REVERSEreview
Are You Sending the Right Marketing Message?
As Elder Care Needs Increase, Families Search for SoluƟons
by Valerie VanBooven
As our populaƟon ages, elder care
needs increase, and therefore cash
flow needs increase. The three simply
go hand-in-hand-in-hand. According
to a recent joint Cornell and Purdue
University study, supported by the
NaƟonal InsƟtute on Aging; aging
mothers are nearly four Ɵmes more
likely to expect a daughter to assume
the role of their caregiver rather than a
son if they become ill or disabled.
These mothers also are much more likely to choose
a child to whom they feel emoƟonally close and who has
values similar to their own, report Karl Pillemer, Professor
of Human Development at Cornell, and Purdue sociologist
Jill Suitor, in the journal, “The Gerontologist”. (The
Gerontologist 46:439-448 (2006) © 2006 The Gerontological
Society of America Making Choices: A Within-Family Study
of Caregiver SelecƟon Karl Pillemer, PhD, and J. Jill Suitor,
PhD )
The MarkeƟng Message
The point with regard to Reverse Mortgages (and the
markeƟng of your Reverse Mortgage services) is that in
order to send the right message, you have to understand
your audience. We, as an industry, are not just speaking to
the 62+ homeowner. We are markeƟng to- and educaƟng-
thousands and thousands of adult children. Although it’s
much more diffi cult (ok impossible) to purchase as list of
“adult children of aging parents”, our aƫ tudes, our sales
pitch, and our overall message needs to convey credibility
and trust.
Your Audience
Long-term care is a family issue, but it is more oŌen a
woman’s issue. Throughout history women have been the
caregivers in our lives. As we have seen, women also live
longer than men on average. From beginning to end, women
oŌen care for family members young and old. Now as our
populaƟon begins to age, it is even more important that we
understand what lies before us.
Although we see increases in male caregivers all the
Ɵme, the fact remains, that when it comes to long-term care
for our family members and our spouses, today women carry
the weight.
Daughters, daughters-in-law, wives, sisters and nieces
oŌen accept the role of caregiver for aging adults in the
family. Across the U.S. there are women commonly referred
to as “the sandwich generaƟon” who are playing dual roles
in their families. They are oŌen mothers themselves, while
caring for their own aging parents at the same Ɵme. The
level of stress and frustraƟon can be overwhelming. Careers
are being put on hold, and promoƟons passed up, in order
to accommodate the busy schedules of their children, and
their parents. Even so, there is sƟll not enough Ɵme for these
women to meet everyone’s needs. A financial burden results
as well.
Women in America also tend to marry men who are
older than they are. Therefore, they oŌen end up caring for
a chronically ill spouse in later years. When this happens, it
is someƟmes the case that all of the reƟrement funding and
assets are used to pay for the long-term care needs of the
“ill” spouse, leaving nothing in savings to care for the “well”
spouse later in life.
It is esƟmated that one out of two women will need
long-term care at some point in their lives. One out of three
men will also require long-term care. So why do more
women need services? A woman’s life expectancy is sƟll
longer than the average male.
So there is your audience- seniors, adult children of
aging parents, and women.
“It is esƟmated that one out of two women will
need long-term care at some point in their lives.
One out of three men will also require long-term
care...As we have seen, women also live longer
than men on average.”
May 2008 reversereview.com
21
“Forward Thinking in Reverse”
GeneraƟng Success
Do you have the right markeƟng message? Is your
message conveyed using the right media? Do you even have
a markeƟng plan?
The most successful Reverse Mortgage originators
understand full well that family involvement is a big deal,
an important consideraƟon, and not something they try to
avoid. As elder care needs increase, families are looking for
soluƟons. You may have that soluƟon. If your community
trusts you and believes that you are a credible professional,
the business will fall into your lap with very liƩle effort.
Establishing that level of credibility and trust takes Ɵme. Start
a new markeƟng plan KNOWING who your true audience is,
and move forward from there.
About Valerie VanBooven: Valerie VanBooven RN BSN is the
NaƟonal MarkeƟng Director for Next GeneraƟon 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 SoluƟon” (2007). Her websites are www.
ngfs.net and www.seniorserviceselling.com . Valerie can be
reached at valerie@nextgenfinser.com
6722 Vista del Mar, Suite A, San Diego, CA 92037
toll |ree 1-888-811-0208 · e|a× 619-330-4872 · emall. traam@aol.com
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22
May 2008 reversereview.com
THE
REVERSEreview
Wall Street Prefers LIBOR HECM’s
Will they be kind to your clients?
Since the incepƟon of the Home
Equity Conversion Mortgage (HECM)
program in 1989, the tradiƟonal loan
was based on Constant Maturity
Treasury (CMT) rates as published every
Monday by the FED. The Note Rate was
based on the one-year CMT rate plus
an investor margin. The Expected Rate
is used for finding how much money is
available and in calculaƟng Service Fee Set-Asides (SFSA) and
payment plans. The Expected Rate was based on the ten-
year CMT rate plus the same investor margin.
In October of 2007, HUD authorized HECM’s based on
the London Interbank Offered Rate (LIBOR). The Note Rate
is based on one-month LIBOR as published every Monday
in the Wall Street Journal, plus an investor margin. The
Expected Rate is based on the ten-year LIBOR Swap Rate, as
published every Monday by the FED, plus the same investor
margin. For background, see our first arƟcle in this series at
The Reverse Review Website.
What’s the Difference?
Table 1 compares the LIBOR and CMT HECM as shown on a
seller/servicers website for the week of April 22. Note that
this company is playing the LTV lookup game – Expected
Rates are rounded to the nearest eighth for LTV lookups
subject to a 5.50% lookup floor. The LIBOR margin here is the
highest that will sƟll allow the Expected Rate to round down
to 5.50% (nice folks!).
The LIBOR HECM gives an extra $80 in available benefits
because its higher Expected Rate gives a lower SFSA. But its
iniƟal Note Rate is 0.676% higher. If this spread holds, this
73-year old borrower will owe an extra $26,454 in ten years
– all for an extra $80 up front!
Table 1
LIBOR HECM CMT HECM
Short-term Index 2.874% 1.67%
Investor Margin 1.222% 1.75%
IniƟal Note Rate 4.096% 3.42%
10-Year Index 4.340% 3.67%
Investor Margin 1.222% 1.75%
Expected Rate 5.562% 5.42%
LTV Lookup 5.500% 5.500%
LTV Factor 0.715 0.715
Max Claim Amount 362,790 362,790
Principal Limit 259,395 259,395
Loan Fee -7,256 -7,256
Upfront MIP -7,256 -7,256
3rd-Party Costs -2,211 -2,211
Available AŌer Costs 242,672 242,672
SFSA -5,603 -5,682
Available Benefits 237,070 236,990
What might we expect?
We are in strange Ɵmes – rates are low and the spread
between short-term LIBOR and CMT rates is high. Historically
the one-month LIBOR has been only 0.13% higher than the
one-year CMT rate. If this spread comes back in the future,
the borrower will be much beƩer off in the LIBOR HECM. The
chart below shows the history of the two Note Rate indexes.
by Jerry Wagner
“Wall Street has temporarily backed off from
invesƟng in reverse mortgages. Luckily for the
reverse mortgage industry, Fannie Mae, the
tradiƟonal investor, is sƟll buying in a big way.”
May 2008 reversereview.com
23
“Forward Thinking in Reverse”
But the historical average spread in the Expected Rate
indexes has been 0.58% (LIBOR higher than CMT). This
means that in the future, when rates go up a bit and the
annoying 5.50% HUD lookup floor has no effect, LIBOR
HECM’s must have a margin that averages 0.58% less than
the margin on CMT HECM’s in order to give similar benefits.
The chart below shows the history of the two Expected Rate
ten-year indexes. You can see how consistent the spread is
between the LIBOR Swap Rate and the ten-year CMT.
What products should you offer?
Wall Street has temporarily backed off from invesƟng in
reverse mortgages. Luckily for the reverse mortgage industry,
Fannie Mae, the tradiƟonal investor, is sƟll buying in a big
way. But we believe that Fannie prefers CMT HECM’s. When
Wall Street rehires their trading desks, LIBOR HECM could
well move to the forefront.
It all depends on the spreads between the ten-year
indexes and your percepƟon of the future spread between
the two Note Rate indexes (“Short Spread”). We can
preƩy well predict that the ten-year spread will average
0.58% -- the wild card is the spread on the two Note Rate
indexes. In the chart below you can see the material effect
the sub-prime and rate spread melt-down has had on the
Short Spread. The Long Spread has stayed fairly consistent
averaging 0.58%. The Short Spread has gone haywire!
If you believe that historical yield spreads will reassert
themselves in the next few years, your client will be beƩer
off in a LIBOR HECM if their iniƟal benefits are equivalent to
those from a CMT HECM. The LIBOR HECM will need a 0.50%
or so lower margin to match the benefits of a CMT HECM,
and if the future Short Spread is less than 0.50% (history is
0.13%), the LIBOR HECM will have materially lower future
loan balances.
Hopefully the “American CondiƟon” will be a short-lived
phenomenon.
About Jerry Wagner: Jerry Wagner is President and Ashok
Shinde is CTO of Ibis soŌware 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 sƟll a fun guy and can be reached at 800-566-5077 or
wagner@ourtoolbox.com. To learn about Ibis soŌware, see
www.reversemortgagehomepage.com)
Like what you have read?
Share your thoughts with the editor!
email us at editors@reversereview.com
“We are in strange Ɵmes - rates are low and
the spread between short-term LIBOR and CMT
rates is high.”
According to a recent survey by Reverse Market
Insight, there are 1667 acƟve reverse mortgage
lenders in the USA today. FiŌy-five percent, or 926
of those lenders, are new to the business. Currently,
these new lenders account for about 16% of first-
quarter 2008 producƟon. With so many new lenders
entering the business, differenƟaƟng yourself and
your company from others in the industry is going to
become more challenging and more important.
The Blueprint for Making Your
Company “Brand New”
by Stephen Kinney
May 2008 reversereview.com
25
“Forward Thinking in Reverse”
One of the best ways to do this is to establish a strong
brand, one that sets you apart from the compeƟƟon and
creates a percepƟon in the marketplace that you are
different, beƩer, and someone a consumer should consider
doing business with.
Branding is important and can have tremendous value
to an individual or company. Look at Donald Trump; his
branding has become a business unto itself. Lending his
name to mortgage companies, board games, even neckƟes,
creates revenues for “The Donald”. With each new venture,
he further establishes the value of his brand.
For reverse mortgage sellers a strong brand name
and promise can create confidence, familiarity and, most
importantly, reduce the percepƟon of risk in the public’s eye.
Done well, a strong brand may even allow you to command
a premium price while making it diffi cult for compeƟtors to
gain a foothold in your marketplace.
CreaƟng a brand idenƟty is a collaboraƟve, Ɵme-
consuming process. You want to start with a creaƟve team,
one that represents everyone in your organizaƟon who will
be affected by the branding plan you create. If you can afford
it, you may want to seek out some professional help as well.
The branding process can be broken down into a
four part process Listening, QuesƟoning, CreaƟng, and
Delivering. Let’s take a look at each of these.
Listening
Begin by assessing your premise and the desired
conclusion of the branding process. InvesƟgate your
current brand and the assets and image it brings to
your organizaƟon. Start by listening to your employees,
customers, and compeƟtors. Assemble focus groups of
employees and customers. Learn from your team and your
clients the percepƟons (brand image) that your brand has
in the marketplace, the posiƟon it has established, and the
promises it has made, kept, and broken. Brainstorm and
strategize with your team on how to move your brand to the
market presence you want to establish.
Outline the core concerns of your target audience and
how to posiƟon or reposiƟon the brand to develop new
clients. Ask how you can differenƟate yourself from your
compeƟtors. Start from scratch or use your current brand
presence as a starƟng point. Determine the best way to
gather the informaƟon you need and assign tasks to the
members of the team or seek out other resources.
Take the Ɵme and do the research to understand your
target audience’s age, gender, income, educaƟon level,
locaƟon and emoƟonal state. What moƟvates them to
acƟon? What turns them off? What gets their aƩenƟon?
What are their hot buƩons? What do they love, hate, fear?
Use a spreadsheet to set up customer profiles and create a
plan to target them.
Finally, evaluate the results and ask how your conclusions
fit your goals and what value your new brand can bring to
helping you reach those goals.
QuesƟoning
CreaƟng a brand is more than just designing a logo,
creaƟng a slogan, or deciding on some colors. You want your
brand to create a posiƟve mental imprint in the public’s
mind, an imprint that is reflected in everything you do.
Like most successful markeƟng efforts, building a brand
starts with asking a lot of quesƟons.
The first of these quesƟons revolve around the 4 P’s,
purpose, personality, promise and percepƟon of difference.
Let’s look at these and liƩle more detail.
What Is the Purpose of My Brand?
What do you want your brand to do for you? What idea,
emoƟon, thought, and result do you hope to accomplish
when someone sees your name, logo or byline? Your brand
purpose should be clear, concise, pracƟcal and measurable.
What Personality Do I Want My Brand to Convey?
You want your brand to be reflecƟve of your company’s
personality, or at least the personality you want to convey.
What is the emoƟonal response you want customers to
have when they come in contact with you or your company?
When you think of Donald Trump, chances are you think
of money and boldness. Geico uses humor to portray
a personality of a company easy to deal with. Financial
Freedom and Lender Lead SoluƟons use James Garner and
Robert Wagner and create a customer friendly personality
for their companies. What personality do you want your
brand to convey?
What Is My Brand Promise?
Your brand promise is the idea that you want the
marketplace to take away with them when they see or
hear your brand. A well executed brand promise can have a
dramaƟc impact on your business.
»
“Take the Ɵme and do the research to understand
your target audience’s age, gender, income,
educaƟon level, locaƟon and emoƟonal state.”
26
May 2008 reversereview.com
THE
REVERSEreview
A brand promise should….
• maƩer to customers
• be unique or differenƟate you or your company
• be believable
• be aƩainable
The brand promise helps you posiƟon yourself in the
minds of your prospecƟve customers and helps you create a
posiƟve reputaƟon in the marketplace.
What Is the PercepƟon I Want My Brand to Convey to the
Public?
PercepƟon of difference is one of the most important
things a brand can do for you. This difference can be real
or perceived. Early in my career I had to be dragged kicking
and screaming to the understanding that “percepƟon is
reality.” Your PercepƟon is oŌen related to how the public
perceives how you deliver on your brand promise. You may
want to create the percepƟon you are the most experienced,
or the fastest. While all or none of this may be true, if your
branding creates that percepƟon in the public’s mind it will
have succeeded. Of course delivering on the brand promise
(at least most of the Ɵme) is the best way to insure that you
will maintain the proper percepƟon of difference over Ɵme.
CreaƟng
Create concepts for developing a brand idenƟty and
brand message. Review what you learned in the quesƟoning
process and work collaboraƟvely with your team to capture
a brand promise and presence that it is consistent, clear, and
can be promoted by the whole company.
Develop the brand message, which should include
collaboraƟon sessions with your team and customers if
possible. Plan at least two rounds of revisions to the talking
points, tagline, and sales pitch. You may want to update your
exisƟng logo and slogan to align with your new image.
Choose a Brand Name
While your name is certainly not everything, it is an
important piece to building a lasƟng brand.
Great brand names:
• Are emoƟonal
• Are memorable
• Have personality
• Tell a story and communicate
Should a name be literal and descripƟve, or obscure and
emoƟonal? Both can have impact. Obscure and emoƟonal
Tradition Title Agency
Serving New York State with
Knowledge, Experience and Trust
We Help You Grow Your Business
Providing Reverse Mortgage Services for Over 12 Years
CALL OUR TEAM FOR MORE INFORMATION AT (631)328-4410
WWW.TRADITIONTA.COM
AN APPROVED VENDOR WITH THE LEADING REVERSE MORTGAGE LENDERS
May 2008 reversereview.com
27
“Forward Thinking in Reverse”
can lead to very disƟncƟve brands, but literal and descripƟve
can speed up the process of communicaƟng your message
to your audience. When you have come up with a name or
slogan, research it. Can you secure a domain name that is
consistent with your brand name? Also, check the internet
and the trademark offi ce to see if anyone else is using it.
Try to be original. Generic names like Senior Mortgage,
Reverse Mortgage Lending, or Senior Lending may just make
you spend more and work harder at building a brand. They
will likely be the same or to similar to other companies in the
marketplace, and will make it harder to differenƟate your
company from these compeƟtors. As names get harder to
come by, many modern companies create names that are
a combinaƟon of words (i.e. Verizon, Costco etc.) to insure
they are unique.
Being descripƟve - as opposed to being generic – can be a
good thing for names. Given a limited budget, it can actually
be a great way to go. Try to be original so that your name
stands out, so that it means something, so you can own it,
and so it will be much harder to copy.
Avoid names that are hard to spell or pronounce. Ask
yourself, how will the market receive the name? Will the
market get it? Will it jive with your strategic posiƟoning of
the brand? Are there negaƟve connotaƟons or associaƟons
with the name?
Perfect brand names are hard to come by and there’s
no fool-proof method for tesƟng names, so don’t get too
bogged down. Under pressure to come up with a descripƟve
name for my company, one that I could get a reasonable
domain name for, I gave up and decided to use my own
name. It’s easy enough to pronounce, but the spelling is
unusual. However, if you Google Stephen Kinney you will see
that I am first or second on the list. Come up with a few ideas
and then test a liƩle, talk to your colleagues, customers,
friends and family, listen to people you respect, trust your
gut feelings, and make a choice.
While the brand name is important, few brand names
can stand on their own. Great brands become part of the
public consciousness as a symbol of your story, differenƟate
your company in your marketplace, and trigger a memory,
emoƟon, or posiƟve percepƟon. The brand name and how
your branding campaign is executed are essenƟal to building
brand awareness.
Create a Logo
The right logo makes a great first impression. A logo
is the visual image of your company that will be used in a
variety of applicaƟons. When you are considering a design,
start with simple. Many of the most effecƟve logos are
one or two colors. For a start-up, this can save you a lot on
prinƟng and markeƟng expenses.
It is important to test how your logo photo copies and
works in a digital environment, fax, website, leƩerhead, etc.
Sample other venues that you may grow into, like posters,
print adverƟsing, or promoƟonal items. Can it work as well
on a small or large scale?
Whether your logo is full-color or one color, make sure
you leave customers with the best possible impression
through the use of high quality business cards, leƩerhead
and envelopes. The good news is that in this age of computer
graphics and low cost printers, it shouldn’t cost a fortune.
Delivering
Brand markeƟng is communicaƟon that differenƟates you
from compeƟtors and increases awareness of your brand
promise.
Brand markeƟng sets the stage for adverƟsing, direct
markeƟng and other communicaƟon by posiƟoning
your product in the minds of potenƟal customers. Direct
markeƟng or product markeƟng then hones in on customers
and gives them an opportunity to buy with confidence,
as they are aware of the brand promise your branding
campaign has imparted to them.
Integrated MarkeƟng CommunicaƟons (IMC) is the
process that aligns communicaƟons to build posiƟve and
lasƟng relaƟonships with customers and others. It is a
customer-centric approach to markeƟng and branding that
stresses communicaƟng to consumers in order to speak
with one voice through mulƟple forms of media. In other
words, it’s how you present your company or adverƟsing
and prevent it from having mulƟple, conflicƟng messages. A
good IMC plan balances a company’s responsibility to create
awareness with its need to generate results.

Make a List of all Your Touch Points
Every Ɵme you touch a customer or prospect, you should
see your brand coming through. This should include your
workplace, promoƟonal acƟviƟes, correspondence, and
even how your phone is answered. Remember a brand is the
summaƟon of your company’s promise; infuse your brand
“PercepƟon of difference is one of the most
important things a brand can do for you.”
»
28
May 2008 reversereview.com
THE
REVERSEreview
in as many contact areas as you can. Be sure to include each
of these touch points in your IMC plan so that your branding
speaks with one voice.
Create a Demand for your Brand
Your product’s performance, your customer service,
follow-through, and the quality of your adverƟsing,
markeƟng, and communicaƟon add up to the brand
experience. PosiƟve experiences create new and repeat
business. Your branding can make the consumer’s choice
easier and more comfortable. Customers will know you, seek
you out, refer you to friends, and remain loyal. The power
of a well executed brand can make your fortune! A poorly
executed plan will yield no benefits and may actually hurt
business (remember “New Coke”).
Monitor your Results
Evaluate how your new brand is working. Convene
anonymous surveys and focus groups to evaluate your
percepƟon in the market place. Are you geƫ ng more
calls? Are your markeƟng efforts becoming more effecƟve?
Is your business increasing? Are you delivering on your
brand promise at all levels of your organizaƟon? How has
the public’s recogniƟon and percepƟon of your company
changed.
Conclusion
Whether you are seeking to reestablish or repurpose
your exisƟng brand, or start a new one, creaƟng and building
a brand is a collaboraƟve, Ɵme-consuming, and ongoing
process. It requires research, creaƟvity, dedicaƟon and
salesmanship. It requires a branding plan that permeates
the culture of your company and is reflected at every touch
point you have with your customer. The right branding can
permanently change the fortunes of your company, reduce
customer acquisiƟon costs, and allow you to successfully
compete without consistently being the low cost provider.
About Stephen Kinney: Stephen Kinney is a
26 year veteran of the mortgage industry
and CEO of Stephen Kinney Associates,
Inc., a company that specializes in the
providing training and consulƟng services
to company’s seeking to excel in the Reverse
Mortgage Industry. Stephen can be reached
on the web at www.stephenkinney.com or
by calling 973-842-0081.
Finally, a robust, interactive
online resource exclusively
for Reverse Mortgage Loan
Officers!
Join NARMLO and dramatically impact
your reverse mortgage business.
Ɣ Get resources and information geared
towards reverse mortgage Loan Officers
NARMLO Reverse Mortgage Today
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Ɣ NARMLO.org is the place to find answers to
all of your questions
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ideas and express constructive opinions with
reverse mortgage Loan Officers throughout
the world
www.narmlo.org
May 2008 reversereview.com
29
“Forward Thinking in Reverse”
Reverse Market Outlook
In a world full of investors, you have undoubtedly heard
the disclaimer, “past performance is no guarantee of future
results”. Of course, you probably also noƟced this typically
follows a large chart and table trumpeƟng past performance
staƟsƟcs. You may wonder why the seeming contradicƟon,
but I’ll venture a guess that in looking at an uncertain and
unknowable future, the past is oŌen our best foundaƟon for
guiding future expectaƟons.
In that vein, I’d like to ask a simple quesƟon about our
industry. What can past performance tell us about the
future of our industry? In parƟcular, I’d like to focus your
aƩenƟon on two important topics that will play a major
role in shaping the near term success of originators and by
extension, the growing group of supporƟng vendors.
We’ve all heard about how the number of companies
selling reverse mortgages has expanded rapidly in recent
years. Even if you haven’t seen the figures, you’ve
undoubtedly felt it first hand in increased compeƟƟon for
customers. So let me put some numbers around this for you:
The graph above tells the tale of our market, illustraƟng
how unit volume growth has outpaced acƟve lender
growth in some years and vice-versa in others. Last year
the growth in the number of lenders was 40% higher than
volume growth, the highest gap in recent years, triggering a
perceived shrinking of the opportunity among lenders and
leading to declines in markeƟng and sales conversion rates.
The challenges have clearly grown for originators, so what
opportuniƟes and risks exist today?
Risks
1) Home Value Declines
In many ways, the proprietary products which have been
introduced in our industry to date have filled the ‘jumbo’
product niche above the federal lending limits. With a
substanƟally lower LTV curve in place in most proprietary
products than HECM, borrowers typically don’t see
addiƟonal cash unƟl home values are 150-200% or more of
the lending limits.
ExisƟng Loan Limits
Percent of HECM Unit Volume
NaƟonal 2005 2006 2007 2008 YTD
Value <= Lending Limit 58% 61% 71% 75%
Value <= 120% Lending Limit 75% 78% 86% 88%
Value <= 150% Lending Limit 88% 90% 95% 96%
California
Value <= Lending Limit 28% 31% 39% 43%
Value <= 120% Lending Limit 51% 54% 62% 68%
Value <= 150% Lending Limit 73% 76% 84% 87%
There is evidence from the table that declining home
values against mostly stable lending limits has incrementally
contributed to a shiŌ in volume toward HECM, although
the much clearer factor behind this has been an illiquid
secondary market. Even in the higher value market of
California, the trend has been significant and sustained as
home values fall from the peaks seen in 2005/06.
The larger implicaƟon of this shiŌ is more striking – that
HECM is taking up a larger share of the potenƟal transacƟon
volume of exisƟng ‘jumbo’ focused proprietary products,
even if the secondary market were operaƟng at full capacity.
For the foreseeable future, HECM will conƟnue to dominate
the industry unless and unƟl a convenƟonal conforming
product is created to compete against HECM at the lower
home value segments.
by John Lunde
»
30
May 2008 reversereview.com
THE
REVERSEreview
2) AnƟcipated Higher Loan Limits
Everyone is hoping for higher loan limits on the HECM,
but what would the actual impact of such a change be? The
tables below show the impact on the previous table for both
$417,000 and $550,000 naƟonal loan limits.
Single NaƟonal $417K Loan Limit
Percent of HECM Unit Volume
NaƟonal 2005 2006 2007 2008 YTD
Value <= Lending Limit 85% 81% 87% 90%
Value <= 120% Lending Limit 92% 89% 94% 95%
Value <= 150% Lending Limit 97% 95% 98% 98%
California
Value <= Lending Limit 63% 54% 59% 64%
Value <= 120% Lending Limit 79% 72% 78% 81%
Value <= 150% Lending Limit 91% 72% 92% 94%
Single NaƟonal $550K Loan Limit
Percent of HECM Unit Volume
NaƟonal 2005 2006 2007 2008 YTD
Value <= Lending Limit 94% 92% 96% 97%
Value <= 120% Lending Limit 97% 96% 98% 99%
Value <= 150% Lending Limit 99% 99% 99% 100%
California
Value <= Lending Limit 85% 80% 86% 88%
Value <= 120% Lending Limit 93% 90% 94% 95%
Value <= 150% Lending Limit 98% 97% 98% 99%
These tables make it crystal clear that increased loan
limits will have a larger impact on HECM market share
than any home price decline and potenƟally more than the
current secondary market issues. While it is not clear when
legislaƟon may pass or what the final form of loan limits
and originaƟon fee changes might be, originators should
expect and prepare for conƟnued HECM dominance in this
landscape.
Where in the past we’ve seen proprietary products
make up the lion’s share of profits at many companies,
the combinaƟon of factors limiƟng the proprietary jumbo
opportunity is a major factor affecƟng business planning
around the industry. In a capped HECM originaƟon
fee world, the industry runs a significant risk in losing
profitability on a macro level without a realisƟc proprietary
product outlet.
OpportuniƟes
Where there is risk, there is also opportunity, and two of
the most immediate opportuniƟes you’re likely to find today
revolve around the two risks highlighted above. Increased
lending limits will almost certainly lead to a mini boom
of refinance business for those ready to take advantage.
Whether you focus on retaining your previous customers or
farming other lenders’ porƞolios, this opportunity isn’t likely
to knock twice. The HECM expected rate floor, limited home
price appreciaƟon and other factors are combining to ensure
that future refinance opportuniƟes are significantly more
modest than the present wave.
Second, as borrowers with home values previously above
the lending limits are able to access more cash, a significant
number of transacƟons will have the numbers work where
they previously were too liƩle to payoff exisƟng obligaƟons
and/or meet the liquidity needs of the borrower. Reviewing
old leads and re-running the numbers for each using the new
loan limits and current interest rates is a prime way to garner
new business while keeping costs associated with lead
generaƟon down.
Lastly, product innovaƟon remains a large opportunity
although likely not an immediate opportunity for most
market parƟcipants. Whether through a HECM compeƟtor,
bundling, or re-invigorated jumbo pricing, the conƟnued
lack of penetraƟon in the vast senior marketplace remains a
crucial indicator of product gaps in our industry. The outsize
profitability of the early jumbo products points the way
toward large rewards for successful innovators, although the
risks and costs of failure can be daunƟng.
In closing, as each of us confront these risks and
opportuniƟes every day, it’s crucial that we also keep in
mind the overall perspecƟve of the industry beyond the
immediate landscape. Each day our growing industry is
helping more and more customers fulfill their financial and
lifestyle objecƟves. This history of performance should be
intensely saƟsfying to all of us, no maƩer what our future
holds. If there’s one thing that’s certain, it’s that everything
changes and today’s compeƟƟve challenges will give way to
tomorrow’s rewards for successful innovators.
About John Lunde: John Lunde is President and founder
of Reverse Market Insight, the premier source for market
intelligence and analyƟcs services in the reverse mortgage
industry. RMI clients include mulƟple top ten reverse
mortgage lenders and servicers, as well as some of the
largest financial services firms in the world. Find out more at
www.rminsight.net or call 949-429-0452.
May 2008 reversereview.com
31
“Forward Thinking in Reverse”
Understanding Reverse Mortgage Loan Servicing Concepts
by David J. Cesario
One of the longest relaƟonships
that exists between a borrower and
lender is the relaƟonship established
through the servicing acƟviƟes of their
mortgage loan. Since the reverse
mortgage loan has a variety of unique
features, the servicing aspects are
somewhat different with respect to
how the loan is managed aŌer closing.
But something else that makes servicing of reverse mortgage
loans different is the effect servicing has on the qualificaƟon
ability of the borrower. Therefore, it is very important to
understand, and differenƟate servicing aspects of reverse
mortgage loans compared to servicing of forward mortgage
loans.
Since most new reverse mortgage borrowers will have
had experienced servicing of forward mortgages, it is
important to be able to explain the different funcƟons and
expense components to your reverse mortgage borrowers.
Servicing expense is not necessarily a concept discussed
with most forward mortgage borrowers, but it is absolutely a
concept dealt with for reverse mortgage borrowers.
As with any mortgage loan, there is an expense incurred
by the lender for the servicing of that mortgage loan; and
a reverse mortgage is no excepƟon to this rule. Reverse
mortgage servicing has many similar funcƟons as forward
mortgage servicing including monthly statements mailed
to borrowers, the maintenance of a customer service call
center, and handling payoff requests. But unlike forward
mortgage servicing, reverse mortgage servicers may be
making outgoing monthly disbursements (payouts) to
borrowers instead of collecƟng incoming payments. They
may also be dealing with borrower requested changes to
the payout methodology selected, which can be changed as
many Ɵmes as the borrower desires, aŌer the loan is funded.
The biggest difference in the servicing of a reverse
mortgage loan versus that of a forward mortgage is how
the cost or expense for servicing acƟviƟes is paid for. In
a forward mortgage, servicing expense is collected (or
paid) from the incoming monthly payment of principal and
interest. The lender will typically pay a fixed fee to the
servicer for their services. This monthly revenue stream
does not exist for reverse mortgage loans as no incoming
monthly payment is required. The quesƟon then arises how
to collect for (or pay) the servicing expenses incurred?
The soluƟon was to charge the borrowers a monthly
servicing fee as part of the ongoing expense of a reverse
mortgage loan. This monthly servicing fee is typically added
to the outstanding loan balance each month that the loan
conƟnues in force.
According to HUD guidelines, lenders are not required to
charge servicing fees on a reverse mortgage loan. Instead,
HUD recognizes that a lender may charge a higher interest
rate, or build the cost of servicing into the rate, instead of
charging a monthly servicing fee. This typically would be
disadvantageous to borrowers who then would be incurring
higher interest rates over the life of the loan. Therefore,
most FHA reverse mortgage lenders have chosen to charge
a monthly servicing fee. This has the effect of lowering the
overall borrower expense while sƟll providing servicers with
a source of revenue to pay for their services.
According to HUD Handbook 4235.1, Rev. 1, SecƟon 1-12,
reverse mortgage servicing has the following features:
SERVICING. The lender is permiƩed to charge the
borrower a servicing fee if this cost has not already been
priced into the borrower’s mortgage interest rate.

A. If the lender chooses to assess a servicing fee, the
fee is established at closing as a monthly figure and the
amount necessary to pay this fee throughout the life of
the loan is calculated and set aside from the principal
limit at closing (see Paragraph 5-7B. for calculaƟons).

B. The servicing fee that may be charged on fixed rate or
annually adjustable loans may not exceed thirty dollars
($30.00) per month. The servicing fee that may be
charged on monthly adjustable loans is uncapped.
C. The lender adds this fee to the borrower’s outstanding
balance monthly, and cannot assess any other fees to
cover the costs of servicing.
»
32
May 2008 reversereview.com
THE
REVERSEreview
So there appear to be straighƞorward guidelines on how
servicing expense can be recaptured by the lender, with
certain program limitaƟons to protect the borrowers.
Something that is unique to reverse mortgage loans is
the concept referenced in subsecƟon A of SecƟon 1-12; the
concept of a servicing set aside. The reference to secƟon 5-7B
of the Handbook describes where the descripƟon, calculaƟon
and methodology for the set aside can be found.
It is important to note that there are specific limits in
place on fixed rate HECM’s and annually adjusƟng HECM’s,
while there is no limitaƟon on the monthly adjusƟng HECM’s.
Market forces currently have the monthly adjusƟng HECM’s
servicing fees is ranging up to $35.00 per month. Since the
level of the fee established at the lenders discreƟon, you
may want to make sure that your wholesale lenders offer you
mulƟple levels of servicing fees to offer your borrowers.
Fannie Mae HomeKeeper loans and most Proprietary and
Jumbo reverse mortgage loans also have monthly servicing
expense. The monthly servicing fee limit on the HomeKeeper
is a maximum of $30.00 per month and Proprietary and
Jumbo products individually determine what monthly
servicing expense is to be charged.
The monthly servicing fee, and ulƟmately the servicing
set aside calculaƟon, influences the amount of available
funds a borrower will be able to access along with amount of
revenues available to the lender. Having the flexibility to find
the right combinaƟon should be one of your primary concerns
for both the borrower and your company.
During the next part of this two part series, we will discuss
how the servicing set aside is calculated, we will debunk
erroneous explanaƟons of what the set aside truly is and we
will cover how to explain the set aside to reverse mortgage
borrowers.
About David J. Cesario: David J. Cesario is a naƟonal speaker
and educator on Reverse Mortgage Lending. He serves as the
ExecuƟve Vice President of 1st Reverse Financial Services, LLC,
a naƟonal wholesale reverse mortgage lender, located at 410
Quail Ridge Drive in Westmont, Illinois, 60559. The company’s
website is www.1stReverse.com where informaƟon can be
found about 1st Reverse’s wholesale lending programs and
opƟons for lenders interested in offering reverse mortgage
loans.
lä| |\||\l|ï \l\\|\|| \|\|| |ll¡
Ѯe Industrv Standard is not just a slogan.
Six of the top 10 reverse mortgage originators
use Ibis Soѫware for their websites, retail
and wholesale businesses.
Ѯose lenders are using:
IěĢĬ RMO:
Loan origination modules include CRM,
Ouick Ouote, Proposal, Application,
Underwriting, Documents, Closing, Pipeline
Reports, and Cost Templates. Plus Broker
and Correspondent Management. Full state
specifc application and closing packages can
be stored, printed, and emailed.
IěĢĬ QĮĢĜĤ QĮĨĭĞ:
Bilingual consumer calculators,
alreadv in use at:
- www.rmaarp.com -
- www.wellsrm.com -
and manv other websites
Ibis also provides:
IěĢĬ RMA:
A complete counseling package for
HUD-Approved reverse counselors.
For more information, visit
www.ReverseMortgageHomePage.com
Or call (800) 566-5077
May 2008 reversereview.com
33
“Forward Thinking in Reverse”
David Cesario
1st Reverse Financial Services, LLC
410 Quail Ridge Drive
Westmont, Illinois 60559
(877) 574 - 1000
info@1streverse.com
America’s Recommended Mailers, Inc.
1680 S. Hwy 121, Bldg. B
Lewisville, TX 75067
(800) 992 - 2722
armleads.com
10801 Thornmint Rd
Suite 250
San Diego, CA 92127
(877) 229 - 7799
appraiserloŌ.com
informaƟon@appraiserloŌ.com
John LaRose
Celink
Reverse Mortgage Servicer
3900 Capital City Blvd
Lansing, MI 48906
www.celink.com
john@celink.com
FirstAmerican/eAppraiseIT
5 Cherry Hill Dr
Suite 200
Danvers, MA 01923
eappraiseit.com
(800) 281-6200
Jerry Wagner
Ibis Capital, LLC
2101 Pacific Avenue
PH 701
San Francisco, CA 94115
(800) 566 - 5077
reversemortgagehomepage.com
info@ibisrmo.com
Lender Lead SoluƟons
3 HunƟngton Quadrangle
Suite 303N
Melville, NY 11747
(800) 562 - 6755
lenderleadsoluƟons.com
Lisa Schreiber
LSK Consultants, LLC
39821 Foxglove Court
LoveƩsville, VA 20180
(540) 822-9710
lskconsultants.com
lisa@lskconsultants.com
Monte Rose
17100 GilleƩe Ave
Irvine, CA 92614
(800) 516 - 0545
monterose.biz
info@monterose.biz
NaƟonal AssociaƟon of Reverse Mortgage
Loan Offi cers
22 Polly Drummond Hill Rd.
Newark, DE 19711
(877) 2NARMLO (877) 262 - 7656
narmlo.org
Valerie VanBooven
Next GeneraƟon Financial Services
Reverse Mortgage NaƟon
3301 Boston Street
BalƟmore, MD 21224
(888) 973 - 8377
ngfs.net
OnTheLevel
2982 Ora Avo Terrace
Vista, CA 92084
(800) 909 - 1110
onthelevel@mac.com
Reverse Market Insight, Inc.
Aliso Viejo, CA
(949) 429 - 0452
rminsight.net
info@rminsight.net
Reverse Mortgage SoluƟons, Inc.
2727 Spring Creek Drive
Spring, TX 77373
(888) 918-1110
rmsnav.com
Smart MarkeƟng
6722 Vista del Mar
Suite A
San Diego, CA 92037
(888) 811 0208
smart--markeƟng.com
traam@aol.com
TradiƟon Title Agency
1991 Union Boulevard
Suite C
Bay Shore, NY 11706
(631) 328-4410
tradiƟonta.com
info@tradiƟonta.com
Directory
34
May 2008 reversereview.com
THE
REVERSEreview
Looking at the Reverse World from a “Forward” Thinker
by Lisa Schreiber
I’ve been in the “forward” mortgage
industry for over 22 years. From my start in
post-closing all the way through retail and
wholesale sales to sales management and
EVP of American Brokers Conduit, I thought
of myself as one of many knowledgeable
people in our industry.
Since starƟng my new venture as a
consultant, I have relied on my experience and past industry
partnerships and colleagues to build my business. Truth be told, I
knew of reverse mortgages and like many didn’t think posiƟvely of
the product as my percepƟon was that they negaƟvely impacted
the consumer. Of course what I have found out through educaƟon
is, there is a great place for this type of lending for many in our
communiƟes.
EducaƟon is a primary goal for me in any thing I undertake. I
learn from asking lots of quesƟons and listening to the answers. As
a consultant I found I had opportunity to be valuable to clients that
had either reverse aspiraƟons or reverse plaƞorms. So how did I
get started?
First I went to one of my old colleagues that I admire for her
sense of integrity and knowledge. I asked her to give me a Reverse
Mortgage 101 crash course. She gave me all the industry data and
taught me about the different way you had to think about a reverse
mortgage. She also opened my eyes to the risks and benefits from
the borrower and lender aspects. It was a terrific presentaƟon and
I learned a lot!
Next, I started to get industry publicaƟons so I could keep up
with the changes and issues that confronted the reverse world.
Finally, I bought a Ɵcket to the MBA Reverse Mortgage Conference
in San Diego last month. I found out later that there was a NRMLA
conference in Philadelphia that same week, which would have
been handy informaƟon as I live in Northern Virginia, but all part of
the learning curve!
The MBA Reverse conference was a good one as it looked at
reverse mortgages as a newer enƟty for most, which it was for me
and was geared to educate from that perspecƟve. Through the
conference I learned the industry staƟsƟcs, although each speaker
had a different number associated with the current available
equity, from 2.5-4 trillion, understandable as home valuaƟons are
an issue for any type of mortgage these days!
So what were the main things I learned about the reverse
world? Besides all the things you already hear; reverse is really
a new business and not a product as its sales cycle is protracted
due to the fact that you are selling to not only the senior but their
family (many cooks in the kitchen) and like our forward world, is
highly regulated and becoming more so each day. If you are gun
shy about things like suitability and further scruƟny regarding your
originaƟon pracƟces, I am thinking this world is not for you.
What I do see is opportunity for those that are willing to be
educated. Per my conference speakers, only 2% of the eligible
populaƟon has been penetrated. I am not sure what the number
should be, as many will never need a reverse mortgage, but when
I think of my own family members or those of my friends, I can see
a real value to many. If we just think of the higher taxed areas of
the US where the elderly are living longer than ever before, I can
clearly see how the ability to tap the equity in your home to help
you through your later years can be a huge benefit. In the forward
world without income to qualify for the payments, these same
clients have been underserved. Another example of the major
differences between forward and reverse worlds is the issue for
servicers in the non-payment of taxes and insurance. Think about
it, typically we have an escrow payment included in our mortgage
payment that goes towards taxes and insurance, even if we waive
the escrow (or impound) we understand it is our responsibility. A
reverse scenario is more like when we pay off our mortgage and
we are now on our own, so many forget that this is now their
responsibility. I was happy to hear that servicers are now offering a
hold back opƟon to pay taxes and insurance for their borrowers.
In the forward world I also advocate partnerships to develop
referrals and talk about expanding your reach by using the internet.
In the reverse world the internet is not the primary tool to market
to, unless of course you are talking to the children of the seniors
you are looking to educate. My favorite thing I learned is the places
that make the most sense to hold markeƟng and educaƟonal
seminars, Bob Evans and Sizzler restaurants as an example and
make sure it is in Ɵme for the early bird special!
This is not meant in any way to make fun of or denigrate the
importance of this product or its clients! I am just really fascinated
by the way my brain started thinking when I learned more about
the reverse world. As a “forward thinker” I am glad I took the
opportunity to understand the possibiliƟes of helping those that
need it the most.
About Lisa Schreiber: Lisa Schreiber is currently a mortgage
consultant and speaker with LSK Consultants, LLC. Lisa is a 22 year
mortgage industry veteran, formerly execuƟve vice president with
American Brokers Conduit and regional vice president with Bank
of America. Her experƟse resides in building the bridge between
corporate goals and successful field implementaƟon. She can be
reached by email lisa@lskconsultants.com or by phone 540-822-
9710.
The Last Word
Lender Lead Solutions provides the
stability of a financial giant.
Our parent company, the KBC Group, is a Belgian-based bank with a highly-regarded reputation as a financial
leader. With $41 billion in market capitalization* and a AA-rating, KBC’s strength gives LLS the ability to fund our
own loans, which allows us to offer unique products that are perfect for today’s market conditions.
To contact Lender Lead Solutions call 888.775.3631 or
visit our website at www.lenderleadsolutions.com
*As of March 17, 2008. Lender Lead Solutions is a division of World Alliance Financial Corp., a member of the KBC Group. ©2008 World Alliance Financial Corp.
Partner with the leading Reverse Mortgage wholesale lender and watch your business grow.
But don’t just take our word for it. Come and see for yourself.

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