One branch manager asked if we now need to have a minimum of two appointments before submitting a file for getting a FHA Case Number -- one to cover the documents, explain the program, and sign docs, and a second one to review the booklet and prep the seniors on all twenty questions for the counseling exam so that they can get a counseling certificate.

How many fewer seniors will voluntarily not get a HECM as a result of what they might learn to pass this exam? I doubt that many; most really need a HECM. What happens if they need the money and they are simply poor oral test takers? What happens if their home is in foreclosure and there are just days left before the lender exercises the right to take the home and the senior fails the exam?

While the idea of having seniors pass an exam is ethereally appealing, where is the exam for originators (and where is their background check)? Having seniors take worthless exams seems ridiculous but if counselors are failing to do their job and this is the way to force them to do it, what does that say about the counseling process?

Testing originators is important since they will be impacting the way many seniors will learn about RMs but what good is an exam for a person who is going to get a reverse mortgage just once. If the questions and answers are simple, the pass/fail rate is only 50%, and counselors are working with the seniors to help them understand HECMs that is completely all right. But if that protocol turns out to be something that keeps seniors from getting the help they need, well, then the new protocol needs to be scrapped or greatly overhauled.

Critic makes some excellent points.

I would also add that communication, dialects and/or accents of the HUD counselors may be an issue. Some of my clients have complained that the HUD counselors spoke too quickly or had an accent that was difficult to comprehend.

All the more reason to make local counseling available to the borrower. This would allow for much clearer communication. Also, will originators have the ability to know what the 20 questions are so as to educate their clients, or will that be viewed as "coaching them" to pass the test? In reality an experienced originator should not have any client learn something new from HUD counseling.

I can see some potential pitfalls if originators hand the list to the borrower prior to counseling which would in effect amount to an open-book exam. As far as extending the time between application and the HUD counseling this is fine, but with changing margins and interest rate increases this can adversely effect the senior.

Most people take little to no time to read mutual fund brochures/prospectuses, mortgage documents or disclosures. It looks like seniors wanting a reverse mortgage will be the first to do so.

This seems discriminatory in nature Considering all of the predatory conventional loans that many Americans continue to make payments on,and the poor financial decisions that people made in choosing a 30 yr fixed, there is no requirement nor discussion of requiring younger applicants of conventional loans to pass a loan exam.

An affordability piece makes sense to ensure that the consumer can afford taxes and HOI, but quite frankly there are many counties that are facing considerable unforseen tax increases and even some places such as florida where we don't know what insurance rates will look like in two years.

This is an example of over regulation.

I agree

Not only are our Clients under pressure and don't always completely understand why the counseling is necessary, to begin with, but many seniors do not conduct business on a telephone (which is the primary method of counseling today). I agree that the quality of counseling needs to be improved, but better educated counselors would be a simple solution.

And no, the counselors should not have descretion as to who can apply for a loan. I don't disagree with requiring counseling but I do dissagree with giving unnecessary "power" over someones financial well being. There are too many problems to list with that type of proposal.

**The speling in this messig was spel chekt by ME!!**

Instead of making the process easier for seniors, there seems to be a few people in HUD that are bored wit htheir jobs and need recognition of some sort to make their directors feel their worth! I have had counselors that calculate the reverse and came up with my seniors coming to closing wiht $5000. I closed them with 1200. in a credit line nad paying off a mortgage over 100,000. Also, I had another counselor telling my senior the Origination Fee is negotiable!! Hello! Where are these people coming from? Wallstreet?

This is total nonsense. The only person qualified to determine if a reverse mortgage is "needed" is the borrower. Why do we insist upon making this process as complicated as possible? The idea of taking a test is just ridiculous. Undergoing financial cross examination over the phone is insulting to seniors. This will destroy the reverse mortgage business. HUD is turning this into a welfare program.

You folks just need to calm down, at least until you see the questions. The purpose of the "exam" is not to make anyone anxious or trip anyone up, it's just to make sure that the senior has a minimal understanding of the basics of a reverse mortgage, after the counseling is done. I am a counselor and have been using a form of this tool since last spring. I find it very helpful as a way to review the session with my clients right before they walk out the door. It's really basic stuff, like "Does the reverse mortgage money ever have to be paid back?" Surely you wouldn't want a client going to closing if they didn't understand that they were getting a loan, would you? The purpose of the tool is help counselors have an objective way to assess those situations where they feel the client is really unable to understand what they are about to do. The only time a certificate would be withheld is if the client is so impaired that they cannot demonstrate understanding of the very most basic facts about the reverse mortgage.

Chris Schafale explains this well. It is not a "test" per se that HUD is implementing. It is simply a set of questions to ascertain whether the client is actually "receiving" and "comprehending" the information being discussed in the counseling session.

One of the reasons we had more federal legislations last year and are now facing a wave of state legislation is that many policymakers have doubts about the efficacy of the counseling process as it works in some situations today. During the McCaskill hearings two Decembers back, clients said they had never received counseling -- even though the lenders' file contained signed counseling certificates. How could this have happened some might ask?

Perhaps the client participated in a quick telephone counseling session when handed the phone by the lender, without understanding that was what was taking place. That's why HUD has changed the process to require a clean break between the lender's dealings with the client and the client's scheduling of counseling.

The Q & A procedure that is being introduced is simply another measure being taken to ascertain that propsective borrowers are truly "hearing" what is being reviewed in their counseling session. If anyone has other sessions for how to achieve this, suggestions are encouraged.

HUD is sincerely taking steps intended to improve the counseling process, insure its integrity, better protect seniors from being rushed through the reverse mortgage decisionmaking process, and address the concerns of consumer protection advocates, state legislators and regulators, attorney generals, etc. who are questioning whether the existing consumer protections are appropriate and effective.

It's in our interest to make the existing protections work well in all cases, so we don't face additional new restrictions, more state regulations and other items that slow down our clients' access to their money.

Once again, if anyone has suggestions for more effective ways of doing this, I always find that HUD is receptive to sound ideas. NRMLA forums provide an opportunity to bring your ideas to HUD officials and we also constantly bring them thoughtful ideas that are submitted to us by our members.

This has elevated to a level of complete and utter disrespect for the decision making ability of our seniors and another demonstration of power by AARP.

More specifically, another attempt to intimidate and deny this program to persons of lesser intelligence or social standing. After all, that demographic is not likely to log into the AARP web site and buy insurance, are they.

It is time for the ACLU to look into this and consider suing on behalf of seniors. This will have the result of de facto discrimination.

Sure, we all know the intent is just fine. Most of us, a majority I believe, want to ensure that seniors are suitable for an RM and understand their responsibilities. And that they are not taken advantage of.

But they are not equal in their ability to express themselves and as we age we respond differently under percieved pressure. Its a fact of aging.

The real reason behind this is a complete belief that none of us can do our jobs and that we need "big brother" checking up on us. Another power move on the part of the AARP.

Where is that originator's counceil that we have sought for so long, so HUD can test proposals onthe opinions of some real foot soldiers instead of the elite at NRMLA or non-practitioners at AARP? Why hasn't HUD seen the need for this? Maybe they enjoy rewriting Mortgagee Letters after they prove to be unworkable.

Again, make no mistake. I am for protecting our clients. But really, a test?

I believe HUD is missing the point.
Counseling = Advising
There is nothing about testing when it comes to advising. The counselors job is to LISTEN and ADVISE and EDUCATE. The counselor should be more concerned with the question of senior financial abuse by making sure that neither the family, the originator nor the lending institution are taking advantage.
Perhaps the counselor would best serve the senior by following up after the loan is closed, during the rescission period to make sure there are no additional questions. Since most seniors are overwhelmed at the closing, that would then be a good time to "test" their knowledge without it being so intimidating.
They can then make sure that no bait and switch tactics were used by an unscrupulous lender or originator. Then, if there is something that is not right, there is time to do something about it.
Let's Help the seniors not intimidate them.

I am a 75 year old senior and I have been originating reverse mortgages for 4 years and I can tell you this from personal experience "testing seniors is the dumbest idea HUD has come up with" Some of my clients were so stressed out about their financial condition they would rather sit in their car in the garage with the motor running than take a stupid test to access THEIR money. THE JOB HUD IS RESPONSIBLE FOR IS TO HELP NOT HINDER SENIORS.

By the way, all originators will soon be subject to licensing and background checks as part of the SAFE Act. Part of the bill takes effect this year, and most states are attempting to be in compliance with the bill at large by the end of next year.

One good effect is the standardization of the licensing and background check process. Another good effect is the preclusion of convicted felons. An unintended bad effect is the high cost to the originator and lender.

This bill calls for originators and processors to complete extensive education and survive background checks. If the act remains as it is today.

Another thought if the president and congress want to really stimulate the economy they should make it easier and less costly for seniors to access the trillions of dollars in their home equity.

Wow.

My kudos to John for creating RMD and a forum for these important issues to be discussed. Also to many who have posted.

I'm glad to hear there will be a license for reverse mortgage originators in the near future which will include a background check. We must also insist that all HUD counselors be checked against any past felonies or criminal records considering the sensitive nature of the information they are privy to.

Some of the raw nerves I sense with this issue are as follows:

1. From the originator's side of the fence their appears to be an underlying
attitude that seniors must be protected from reverse mortgages as if they're
toxic (Just the impression from draconian legislation, new rules each month)

2. Currently we know of no national standard for HUD counselors to be
background checked to insure none have a criminal history.

3. According to these new counseling rules, HUD counselors must not fall into
the trap of giving financial advice while doing their "analysis". Again I would
stress the originators as a whole could do a much better job fact-finding and
documenting their clients assets/liabilities/income/expenses.

4. The idea that seniors are being "rushed" through the process of getting a
reverse mortgage is puzzling at best. From application, to counseling to
closing docs most seniors have 30-60 days to "think about it" and some do
cancel during this time.

5. It would be good for HUD to publish the list of the 20 questions that may be
used in the session. This would help inexperienced originators make sure
they are covering the basics at a minimum.

6. We must be careful on how we present this new requirement to our borrowers
so as not to: 1- alarm them, 2- insult their intelligence.

I think that is too much power for one individual! Many of those counselors are trained (in a 5-day training session) then put on the telephones. Many of them are younger and not sensitive to the senior needs; just doing their jobs. They are also overwhelmed with counseling for other types of housing issues, so their concentration is not necessarily focused on the reverse. I think it's not going to work efficiently and effectively.

The "BEST" counselors are reverse mortgage specialists, you just need to pull the good ones out of the bunch!

To the Critic:

Many states already require extensive FBI background checks, finger printing accompanied with extensive educational requirements including comprehensive testing before being issued an originator license.

It is my understanding ALL states will have to comply with this type of licensing requirement by the end of this year.

It is also mandatory in the states that require testing to maintain your license you must complete several hours of continued education per calendar year.

Like any other profession (doctors, lawyers, teachers, engineers etc) it is the individual’s responsibility to stay current in their area of specialty. To suggest that federal and state governments require even further testing on originators offering reverse mortgages sounds redundant considering all the laws and regulations already in place and more coming.

Really, at some point to much government oversight becomes suffocating to the industry and ultimately has a negative effect on the borrower.

There have been so many changes in this industry recently there needs to be a cool off period to see how all of these regulations are working together before further changes are recommended.

I personally don't like or agree with the new counseling protocol, but we really can't do anything about it. One suggestion I would bring before HUD is to eliminate the counseling fee, or reduce it to a maximum of $50 or so. Making them go through all of this and then charging them $125 seems criminal.

Lots of good points here. If all of the counselors are great counselors and ask the questions in a sensitive and conversational way. I have no problem with the "test". But we know that will not be the case. Just as all reverse mortgage specialist are not great, neither are the counselors. This is too much power in the hands of the gatekeepers. I have also had counselors tell borrowers that a loan will not work or that they will get less money then I am able to provide. Counselors are not the be all of reverse mortgage information. And with underwriting guidelines, rates and programs varying from lender to lender, they will be even less informed of the details of financing in the future.
I agree that everyone that gets a reverse mortgage should understand the basic facts. The devil will be in the details of implementation of that new rule.
I am most concerned with the timing issue. Why, when it takes about 30 days to process a reverse mortgage is it important for the borrower to have more time to read the documents. And the fact is we do not even have the real figures as far as money available etc... until we at least have an appraisal. So the borrower will spend extra time reviewing information for us to tell them that the information is different once we get the appraisal and lock in the rate.
I agree with the comments above that the counselors time would be better spend looking for fraud and other misconduct issues and following up with the borrowers as a loan is in process and during the rescission period.
Peter Bell mentioned letting NRMLA know of issues, is there a place for comments to NRMLA on their website?

I just looked at a copy of the "Use You Home to Stay at Home" booklet that borrowers will be required to receive and read. It states in the front of the booklet that the information provided was funded by a grant from:
NRMLA (ok), Financial Freedom (?), Wells Fargo (?), BNY (?) and Seattle Mortgage (?)
No wonder some of the big lenders like the idea. Free advertising to all reverse mortgage borrowers.

Telling a senior they will have to pass a test will scare them to death. Once again HUD has proven they do not think about nor really care about seniors. This is just another case of the FED being totally out of touch with reality as usual. If you want to raise the bar for counselors then put the monkey on their backs not the poor seniors who are just trying to survive!!

In response to RM Broker, the way to forward your thoughts is to send an email to anyone of our staff members here at NRMLA. My email address is pbell@dworbell.com. Darryl Hicks' email is dhicks@dworbell.com. Liz Scholz' is lscholz@dworbell.com.

Also, the copy of the "Use Your Home to Stay at Home" book that you have looked at it is from an earlier printing of it when it was initially funded by NRMLA and some of our members a number of years ago. NRMLA contributed $100,000 to an NCOA research project and this book was part of the reseacrh done. A few companies also contributed $25,000-$50,000 each towards that project.

It is my understanding that the book that will be distributed under the new HUD protocol will be an updated version that will not include company names, nor probably even NRMLA.

I sure wish folks would get answers and facts before jumping to conclusions and posting items on this site that are erroneous.

Peter,

I don't think RM Broker was jumping to conclusions, he was just stating what he found and then you responded and addressed his concern.

Unless NRMLA members are informed that the updated version of Use Your Home to Stay at Home won't include the companies listed, how are we supposed to know?

I wouldn't of thought to ask the question in the first place, so I'm glad RM broker brought it to attention.

I appreciate the response from Chris Schafale. I wish all my seniors could be counseled by Chris with such a positive and reassuring attitude. What Chris fails to understand is counselors with that attitude and dedication right now are not the norm.

There is a need for standardization in counseling with well trained counselors. I believe questions at the end of the session to make sure the client understands what they are about to undertake is a great idea. But,I also believe it should NOT be put forth to the senior that they will be taking an "exam" which will put undue pressure on them. As Chris stated it should be expressed as a review of what we just went over. It should NEVER be a pass/fail!

In response to Just The Facts; The last thing we need is to get the ACLU involved in anything involving the Reverse Mortgages business! In the world we live in their are people of all different social,economic and educational backgrounds. It is the responsibility of the counselor to help them understand as much as possible.

As stated by Peter Bell we need to give our input because we are the front line in dealing with seniors.
Hopefully, HUD will listen. We do not need over regulation. I believe we are seeing too much of that in every area of our lives today!

In review I would like to put forth the following to HUD:
1-I believe my input of taking the perception of "test or exam" out of the terminology and phrasing it as a review is good suggestion.
2-Also, having a pass or failing grade is insulting to our seniors. If it is determined at the review that their are areas that the senior does not understand it should be gone over at that time. If it takes extra time that is why they are paying $125.00!

On another matter I think going over a full financial analysis should be "optional". Many seniors I talk with are financially savvy and state they just want Reverse Mortgage counseling and are fully aware of their finances. They resent having to give S.S. numbers and going through all their personal information with a stranger over the phone.

I like the new counseling protocol and am glad it's being adopted. For the past 3 years, if time permits, I've been asking all my clients to read "Home Made Money" and "Reverse Mortgages for Dummies" prior to their counseling session, and everything seems to flow smoother with the homeowners who have read the books (I provide the books). Yes, it takes extra time, but it's well worth it.

*** This is NOT a RANT****

This is a Joke, right? Why is this all happening? I am really getting tired of us (Originators) getting treated like we are a bunch of crooks! This is Big Brother at its Best! No need to settle down or sugar coat what is going on here as we have a group of people who have never needed help and do not understand what it feels like to even go through a process like getting a reverse mortgage making up these new rules that will only hurt our industry and the senior citizens that need and want a reverse mortgage. The only thing that will happen by putting up all of these road blocks and slowing down the process is hurt all involved. What is the basis for these new protocols? Is it because there have been a few isolated cases of borrowers complaining because they were misinformed or is there a MASS of borrowers complaining? I am betting the former.
I know that most of the counselors do a good job just like most of the originators do a good job, so why is HUD penalizing everyone with these new rules? Giving councilors more authority is flat out wrong. Having them do an in depth financial analysis for my client? Then giving them a test? Then if they do not pass the test they have to take it over? And they can withhold the certificate? And telling customers that my fees are negotiable? Now we have to give them a book to read that has Wells Fargo, B of A etc. on the cover? I will tear that off before any of my clients receive it! Let's see, I spend 10-12 hours a day talking to potential borrowers, analyzing their needs, talking with their financial planners, attorneys, CPA's, children, I spend money on marketing, I drive to as many of the customers homes to meet them personally to go over the program again face to face before they sign the application, I drive back to the customers at the signing to answer any questions they may have and make sure everything goes smooth, I do all of this only to have HUD cut my fees, have councilors advise my clients that my already reduced fees are negotiable, now the councilors are going to be REQUIRED to do a financial analysis and give them a TEST! All of this when margins are going up, rebates are going down, and mandatory locks are in effect with the smallest margin of error! Whets next, is HUD going to require that all applicants get 3 quotes and have their kids sign off as well? I hear that HUD will always listen to good suggestions, from whom they will listen to these from, not us! Once again I ask will someone please tell me who is representing the originators, the people that are REALLY on the front lines trying to the best job they can and help our clients, anyone?

First of all, this is an open forum Peter for interested people to voice their concerns. We don't have all the facts because the facts haven't been released. You appear to have inside information.

The people who subscribe to RMD are probably not the same people who Sen. McCaskill, state legislators, AARP, the misinformed media are attempting to protect the senior community from.

I'm a licensed RE Broker in California, a CSA and have attended many RM training sessions on all aspects of our business online and at NRMLA functions. The problem that I see developing here is that the rules keep changing in an attempt to provide perfect protection against the most egregious predatory scenario.

It is also true that the testimony before McCaskill was given by reverse mortgage "victims". A handful of seniors that had suffered abuse at the hands of irresponsible originators.

The seniors who do not have a voice in the discussions with the legislators and rule makers are the thousands and thousands of senior homeowners who have been treated with dignity, respect, honesty and who are living independent lives free from financial worry, thanks to originators like myself and other subscribers to RMD who are conscientious, competent and caring.

Attempting to legislate to protect everyone from the worst in our industry results in punitive treatment and unnecessary delays for the thousands who want and need our service in a timely manner.

I believe the purpose of giving counselors the authority to withhold counseling certificates is to prevent situations in which seniors who may suffer from cognitive impairment are making decisions to obtain a reverse mortgage that might not be appropriate for them.

25 percent of seniors aged 85 suffer from dementia, and that percentage increases by five for each additional year. While counselors are not qualified to make a diagnosis of dementia, they are on the front line in dealing with this issue. If a counselor suspects a senior's cognitive impairment prevents him or her from understanding a reverse mortgage, it would be inappropriate for a counseling certificate to be issued.

If such a senior could indeed benefit from a reverse mortgage, then a conservator or trustee may make that decision.

Unfortunately, not all seniors are equally capable of making complex financial decisions; some need help; others truly need someone else to make those decisions on their behalf.

I'd like to hear more about the SAFE Act.

Request for clarification on MORTGAGEE LETTER 2009-10, Budget Analysis and HECM Counseling:

Is the HUD counselor determining suitability?
If so, would FINRA have a problem with this financial counseling?

When a Certified Financial Planner has done a thorough financial analysis for a client and suggests a Reverse Mortgage, the client then talks to a HUD counselor to determine suitability or provide financial advise?

I can understand and appreciate safeguards but I can't determine where the line is drawn in the Mortgagee Letter.

By the way, my clients say counseling sessions are about 15 minutes. I can understand why a senior wouldn't remember!

Brad,

I know of no state that has a reverse mortgage specific exam. If there is one, please let me know. Why shouldn't RM originators have to show a minimum level of knowledge in the product they are selling?

Yes, I like the ideas proposed in the SAFE Act but "the devil is in the details." But what licensing experience does the federal government have? Will it work as "designed" and if so, when?

You correctly hit the best example of all. State licensing allows for disciplining individuals who fail to meet minimum professional standards whether it is doctors, nurses, dentists, architects, CPAs, etc. How is it that this new federal regimen will do the same? It has no such mandate or the framework to accomplish such oversight.

MPete,

Who says the counseling fee will be just $125? Did I hear $225?

But you are so right.

Eric,

It is best we lay the problem of our reduced origination fees where it belongs -- AARP and Congress. HUD had absolutely nothing to do with it other than implementing the change as required by law. NRMLA tried to prevent the reduction and did at least get a decent compromise. Wow, if that great author of Home Made Money (also the AARP consultant on RMs) had had his way none of us would be in this industry -- 1% of the principal limit was all he felt we deserved!! Thank goodness, NRMLA was there; neiher the MBA nor the NAMB were there to protect us.

Louise,

The S.A.F.E. Act is Title V of HERA and is contained in Sections 1501 through 1517. As to its current status, someone else will need to provide that information.

Why don't we just cut to the chase and make every borrower produce a letter from his/her attending physician stating that they are indeed competent.

Might as well cut the Doctors in on a piece of the pie. I bet they would be happy to sign off on such a letter for $125 or so.



"HECM Dude says:

April 8th, 2009 at 11:33 am (#)

I believe the purpose of giving counselors the authority to withhold counseling certificates is to prevent situations in which seniors who may suffer from cognitive impairment are making decisions to obtain a reverse mortgage that might not be appropriate for them.

25 percent of seniors aged 85 suffer from dementia, and that percentage increases by five for each additional year. While counselors are not qualified to make a diagnosis of dementia, they are on the front line in dealing with this issue. If a counselor suspects a senior’s cognitive impairment prevents him or her from understanding a reverse mortgage, it would be inappropriate for a counseling certificate to be issued.

If such a senior could indeed benefit from a reverse mortgage, then a conservator or trustee may make that decision.

Unfortunately, not all seniors are equally capable of making complex financial decisions; some need help; others truly need someone else to make those decisions on their behalf."

WOW!

This issue is getting almost as much intention as the FNMA margin increase. First off, it is the counselors that are going to be required to be tested. Nothing wrong in that, counselors need as much education about a Reverse Mortgage as they can get.

However, I feel a very important part of the counselors test and education is that a counselor MUST be impartial when it comes to discussing or recommending companies that a borrower should go to. Steering is still a practice widely being perpetrated on our seniors by counselors.

Secondly, I agree with Sue Hunt. Even though the borrower's are not the ones being tested, they are being quizzed. They may be quizzed to the point that they will be made to feel inferior and ignorant.

Sure, it is important that the senior understands what a reverse mortgage is but lets face it, we have to give our seniors credit for being intelligent human beans.

Why should a counselor be able to withhold a counseling certificate. This is an awful lot of authority and power given to these counselors. As far as requiring the borrower to receive the comparison and amortization schedule along with booklet by the NCOA, prior to counseling, may not be a bad thing.

Now what would concern me is the counselor advising the borrower that what you are quoting is to high or, if they say go see another lender. I see a lot of adversity coming from this.

It all boils down to the agencies don't really know how to stop the problem of bad Apples in a Bushel. In short, the problem is with those lenders or loan officers that are doing a poor job with our seniors. Lenders and LO's that are taking advantage of the seniors by being scam artists. This is the root of the problem, we try and solve the problem in ways that are so complicated that it destroys the tremendous good a program like a Reverse Mortgage has done for our seniors.

We need to make our laws tougher on those who are perpetrating fraud on our seniors. We need tough laws, higher fines and tough incarceration laws on these people.

What I have seen in the past few weeks with what FNMA has done and proposals like this is criminal. Criminal because we are destroying the reverse mortgage program piece by piece. Every day seems to be a day of sadness somewhere in this country, when are we going to wise up, most likely never.

The agencies are destroying a program that has many compassionate and educated people in it dealing with our seniors. Because of the few bad Apples and the incompetence of many of the people in our agencies, states and Federal Government to deal with the problems the way they should be dealt with, what is going to happen? Our seniors, the back bone and pioneers of our country are going to pay for it once again.

My best,

John A. Smaldone

Peter,

It all boils down to two issues:
1: SUITABILITY
2: ACCOUNTABILITY

My suggestion is very simple. One, yes one, question should be asked: WHY ARE YOU GETTING A REVERSE MORTGAGE?

The response should be documented and it should be made part of the Lender's and HUD's permanent file.

Counselors should be REQUIRED to issue a certificate that reflects the consumers "suitability answer" and if a lender dare provide an unsuitable loan, it would be easily documenatble thus facilitating accountability.

The current proposal only convolutes the accountability issue by giving unscrupulous Lenders/Brokers the opportunity to point fingers at the Counselor who determined the suitability (evidenced by their decision to issue a certificate). If I were a Counselor I would be reluctant to issue ANY certificates and take on that degree of liability for $125. Us Lenders/Brokers need to be accountable, not the counselors, their pay does not warrant it.

If the consumer did not answer the suitability in a manner that indicates clear understanding, the Lenders/Brokers would be wise to re-educate and then send them back through counseling to obtain an ADDITIONAL certificate to document their new understanding of "WHY AM I GETTING A REVERSE MORTGAGE".

Each and every counseling session should result in a certificate and it should be required that Lenders/Brokers maintain all certificates (for sessions within the last 6 months) in their permanent files.

Educate the Counselors and hold the Lenders/Brokers accountable. If this isn't the right track, then I am very fearful for the future of our industry.

Further on the ACCOUNTABILITY issue, our industry needs to form a task force to "go after our own". Why should we wait to see if the regulators clean up our industry befor the "press bombs" destroy it? Count me in, I volunteer to torture the accused and make them TALK!


Travis De Renzo
www.HECM.net

Ms. Lewis,

One of our customers got through HECM counseling in 5 minutes. Of course, anyone who discussed reverse mortgages with this couple would know immediately they had sought the advice of a CPA, their attorney, and a CFP. They not only knew the basics; they knew the contents of the docs. In this case, the counselor got out of the way and did the right thing.

FINRA is not a government agency. Unless I am terribly mistaken, FINRA will have to live with any decision HUD makes. Now FINRA members may find difficulties because of FINRA reactions, but this would not be the first time FINRA misplaced its focus.

For example, in the May 2008 issue of the Kiplinger Retirement Report, Kathryn A. Walson quotes the Senior Vice President of the Office of Investor Education as saying: “A reverse mortgage shouldn’t be seen as a cost-free way to enhance your lifestyle in retirement,” says John Gannon, senior vice-president at FINRA. “It’s an expensive option, and people need to realize they’re reducing the value of their home.”

I am not an officer in the FINRA Office of Investor Education but as a lowly, lowly reverse mortgage originator, I do not understand how a reverse mortgage has ever once reduced “the value of” any senior’s home; these weighty FINRA financial concepts escape me. During 2008 while FINRA was busy issuing investor warnings on reverse mortgages and Ms. Mary Schapiro was out speaking critically of reverse mortgages, Bernie Madoff’s exposing financial statements lay unopened in FINRA offices. Didn’t Mr. Madoff once head up FINRA’s predecessor? Weren’t some FINRA members out selling inappropriate variable and deferred annuities to seniors while all of these warnings and speeches were going on?

Let the HECM counselors review the financial information of the seniors. I believe the majority of counselors know that a reverse mortgage will not reduce the value of any senior’s home. Let FINRA learn to police their own and stop trying to meddle into things they apparently don’t understand.

Mr. De Renzo,

I hope I don't get on your bad side.

I believe what is being proposed is highly discriminatory and borderline illegal. Where is the counseling and testing for people applying for regular FHA mortgages? Do people have to take tests when they make major purchases like a house or a boat or play the Lottery to make sure they understand what they are doing? Teenagers who have no understanding of finances are given credit cards at the most vulnerable times in their lives. But seniors, who have a lifetime of experience and knowledge and have been making decisions for themselves and their families for decades, are now being told not only do they have to have mandatory counseling before they can apply for a loan, something which has been in effect and accepted albeit woefully at times, now are told they must pay for it themselves AND their financial competence is going to be evaluated AND they will be tested to make sure they UNDERSTAND and then, and only then, will they be ALLOWED to apply for a reverse mortgage on their own homes. I am 57, not yet the proper age for a reverse mortgage. But I imagine when I am 62 I would be highly insulted to have to jump through these hoops for the privilege of obtaining a loan when there is no other loan in the world that has this requirement. My mom is 78 and believe me, she would be, too. We are less able today than we were just a year ago to tell people how much they can expect to benefit from a reverse mortgage with any kind of accuracy because of crazy appraisals, home values, margins changing daily and live pricing. Now we are going to delay it even more. The appraisers are telling us we're still in a declining market, so let's let values decline even more while we delay counseling and then test our clients. This has all just made me and my colleagues wonder if this is a program that HUD really wants to keep or that FHA really wants to insure. And just an additional point. Back in the day when I did help seniors make the phone call to a counselor I usually was placed on hold with a recording waiting and waiting until a live person came on the phone. Seniors love that. Or you'd have to leave a message and they call back. Many seniors don't even answer their phones when they don't know who's calling because they get so many marketing phone calls -- usually from reverse mortgage salespeople! Well, I guess there's the bright point. That will probably end when this program is killed by unreasonable, discriminatory and insulting regulation.

To The Cynic: First, thank you for your responses and all the information you provide here! Yes, many organizations who were supposed to be financial watchdogs failed (or succeeded in helping the rich get richer).

Why FINRA and Mary Schapiro (now at the SEC) are so mis-informed about RMs is beyond me. I'd certainly like to know how to change that.

I prefer working with financial advisors who help clients make crucial financial decisions. I hope a HUD counselor with minimal information never contradicts the advice of a certified financial planner who examined the clients' overall financial situation and long-term goals.

Ms. Lewis,

When Ms. Schapiro was nominated to head up the SEC, many of the financial advisors on CNBC declared Ms. Schapiro to be a very nice person but few went beyond that. Many questioned how strong she will be with so many ties to the securities industry. We'll see....

I wish the story was just the rich getting richer but the most notorious stories are about thieves like Madoff and Stanford. Sad to say, by the estimates of some very learned individuals, this may be just the tip of the proverbial iceberg. So much so greed and so many good gatekeepers asleep at the wheel, how sad.

It is hard to believe that someone who interviews a person for about an hour can not only fill in the gaps that we might have missed in explaining RMs, get seniors through “the exam”, gather the financial information needed to evaluate the financial situation of the senior and then reach better decisions than CFPs; the training that counselors are now receiving must be turning them into “super counselors”. Then if you compare education, it strains one’s imagination that a counselor can reach better decisions than a CFP especially if the CFP has known the senior for any time at all and the plan is the product of many hours of careful planning. Yet it appears that counselors can overrule the judgment of CFPs about the advisability of obtaining RMs -- kind of scary.

Of course in some instances having this failsafe could prove useful. The question is whether or not the risk of a counselor occasionally reaching a wrong determination and incorrectly overruling a well developed financial plan of a CFP outweighs the rare instance that the CFP has actually reached a wrong decision because of derelict of duty or avarice. Unfortunately this is the potential situation that the new protocol has created.

It sounds like you have a great niche. You will have to let all of us know how you did it and how you maintain your relationships. Keep up the good work.

Howdy!

Where are we supposed to get an updated version of "Use your home to stay at home"? and when must we start sending this and the Amort and comparison?

thanks!

RSafer:

I don't think our situation and the situation of the seniors we are suppose to be serving could have been stated any better.
I also wonder about the reasoning behind recent decisions. It seems like a blatant attempt to slow down the fundings of reverse mortgages and as you stated possibly the end of them altogether. It's not too hard to read between the lines
We are being OBAMARIZED with regulations. What's next?
Will we have a government regulator review every file?
All this and where is NRMLA? Peter Bell seems to be defending the over regulation. Where was he last week when we were looking for answers regarding the margin increases?
I think Travis is right. We need to form our own task force and deal with the real issues!

A comment from an old timer...

I am not sure when it happened, but I remember when I first started offering reverse mortgages that the counselor and the originator worked together to assist the senior client with the entire reverse mortgage transaction. I would send a senior information including a list of local counselors, an appointment would be made for counseling and, horror of horrors, I might just drive my borrower to counseling and sit in and hear what the counselor had to say. It worked. there was a transparency in the entire transaction. Heck, we might even call the counselor back if the client had some questions mid processing to help with. Often, our counselors would go to closing just to make the client feel better.

We could call the counselors for help with difficult situations, and problems with repairs, payoffs, etc...they were happy to help. I am not sure when it changed, but at some point, the lenders became the enemy. Like we were the subprime lenders lurking about seniors looking to take advantage. I know that there are bad apples, but for the most part, the originators that stay in this business are making a living, but do this loan because they love it. If we worked out how much we make on every loan by the man hours it took to get the loan closed, many of us are making barely above minimum wage. We do it, because we love the seniors.

Once again, we will all suffer because of the acts of a few. We need to find a way to take control of these regulations, and inform the regulators about the specifics of reverse mortgage lending.

Thank you

For the Critic,

There are actually several questions that touch on reverse mortgages in the state tests that I have taken. Additionally there are a lot of questions regarding FHA programs, fraud and state /federal regulatory as well.

I am not suggesting this totally prepares you to offer a reverse mortgage and know every aspect about the program, however it is certainly a step in the right direction and shows that you understand the fundamentals of lending business.

You are suggesting there should be a specific test for loan officers to take on reverse mortgages before they are allowed to offer to the general public.

A reverse mortgage is simply another loan product that a loan officer might have at their disposal. It is the loan officer’s responsibility to learn and understand the products he or she decides to offer their clients and the state and federal regulations that go along with it. This is what separates a successful professional from one that does not take the time to understand what they are offering and generally won’t last in the industry very long.

I personally would have no problem with taking some kind of an exam to prove I understand the reverse program inside and out however where do you draw the line? Should I be required to take a test on every loan program out there? Are we going to require every plumber, landscaper, auto mechanic to take mandated tests?

At some point to much government intervention strangles and suffocates the people trying to provide a service.

The state has licensed me to offer loan products based on the education I have received the tests I have passed and a thorough background check.

They have the right to revoke my license at any time if they find I am not following all state and federal mandated regulations or am fraudulent in any way. Federal regulators have the same authority when they audit lender.


I believe the fundamental idea behind CLA as well as the SAFE program is to get every state to participate in a standard across the country. I will be up to the states to still enforce not the federal government.

@ ReverseQueen

You could not have said it better. I find myself wanting to leave sarcastic comments to some of these postings because of the seemingly unending march over the cliff this program is taking.

When I first got started I "horrors of horrors" went to the office of my local counselor and took her and the agency's Director to lunch. It was all about working together to help the senior. It does not feel that way anymore. You nailed it, a few bad seeds and the solution is impose draconian new rules, more restrictions more & more government. The government will solve all the problems and tell us how much we can make, and we will all say thank you sir may I have another. How about we just punish the wrongdoers?

It is nice to see Peter Bell posting here and I find his comments instructive. I am intrigued that Peter does not understand how little information about the decisions and decision making processes that affect all of us as loan officers is disseminated.

I also feel the "well it could have been worse" attitude needs to stop. If you are a loan officer in this business you need to start contacting your congressperson directly.

http://www.usa.gov/Contact/Elected.shtml

NRMLA will not save us from everything.

Reverse Queen,

A great job in explaining what it was and what it should still be. It is sad we can't get the powers to be to listen to plain old common sense, isn't it?

We can't continue to go back wards as we are going. It is making it very difficult for us to do a good job for our seniors. Simplicity is needed the most in our industry, especially with all the confusion within our country and abroad. Wake up HUD, wake up FHA and wake up committee members. You are all becoming the problem, not the solver of problems.

Best,

John A. Smaldone

Peter, I understand that NRMLA might have helped in what is now our fees structure, but where is it with everything else? Everything that we are all discussing here seems to be getting handed down to us from lawmakers and powerful organizations like AARP and nobody INCLUDING NRMLA is taking the time to really listen to the people that are doing these loans, US! And I might be missing something but when did Reverse Mortgages become about being financially qualified? There are no income, asset or credit score qualifications needed to get a RM so why are the counselors getting into this area? Sure most of our clients use this as a way to supplement their SS or small pensions and with the economy like it is, actually save their homes but when did it become necessary to have to be in financial dire straits to be eligible for one? I was always under the impression (and apparently I am wrong) that counselors were there to make sure the seniors UNDERSTOOD the program and how it worked, using the equity to make the payments, options for receiving proceeds, fixed vs. adjustable, immortalization tables, making sure I did my job in explaining this all to them, when did this all change?

All of the topics that are discussed in this thread and others on RMD are being actively worked on by NRMLA. For those who are wondering what NRMLA is doing in each of these areas, our conferences, publications and member bulletins are the place to find out about them.

Our upcoming conference in Chicago the week after next will include discussions on counseling issues and policies, HUD's financial analysis of the HECM program and the impact that might have on future mortgage insurance premiums or principal limit factors, federal legislation, state regulatory and legislative activity, cross sell restrictions, and more. So, if anyone is interested in hearing all that is going on your attendance is encouraged in Chicago or Orlando the following month. Just under 200 people attended last month's conference in Boston and the event recent rave reviews from just about everyone in attendance.

If you are not able to attend an event, audiofiles of sessions are available for download from our website, so the information is generally available to both attendees and non-attendees alike.

Traverse,

If the few unscrupulous originators and lenders in our industry had half the care for seniors that most of us in the industry actually possess, the McCaskill hearings on RMs would have been little more than some really great napping time. Counseling would not have been under such attack, HECM cross-selling rules would be less onerous, the attacks by other professionals would have been less strident, senior suspicions would be much easier to address, state legislators would be trying to catch up on lost sleep from long-term budgetary sessions (rather than trying to find more ways to restrict our little industry), and reporters might be singing our praises (OK, so I am getting a little carried away).

NRMLA did not create the current situation. A lot of this comes right back to avariciousness origination and in some cases substandard underwriting by some who believe that not only does every senior need a RM but also a high commission deferred (or some other questionable investment) annuity that they or their company sell. Here I am not addressing MetLife or other responsible insurance companies but companies like Mr. Shannon Hicks addresses in his comments.

Substantially all of the negative aspects of HERA are the fault of some “bogus reverse mortgage peddlers” whom we should be drumming out of this industry. They are the snake oil salespeople among us.

I would have loved to have walked into an industry where originators had their own organization that dealt strictly with originator issues. We don’t have that. The “L” in NRMLA does not stand for originators. If our interests conflict with the lenders well NRMLA should forthrightly represent their positions, not ours. Except in one area, there are few if any industry conflicts between lenders and originators.

Now as to time and costs, how big is our little originator core? If you exclude those who do less than 5 loans a year, the high school down the street from me is large enough to hold all of the originators in our industry. Among that number, who will be interested in committing large amounts of money and the time necessary to get this group up off of the ground?

Be happy there is a NRMLA. Without NRMLA our situation would be far worse. Work within NRMLA. Utilize their resources to get the things accomplished you seek. There is nothing wrong with accomplishing things outside of it but realize the uphill battle you face. Yes, I do not always agree with NRMLA but it is the best we have and, yes, we are heard even though what we say is not always what results.

I think you have the right heart but you seek action at the wrong time. Now is not the time to be looking for a separate organization to represent the interests of originators alone but that day may come. Now is the time to help ensure that NRMLA is as strong and as effective as possible.

Thank you, The Critic, for your comments about working together through NRMLA.

As far as we are concerned, NRMLA is a reverse mortgage industry association. We don't see any difference between "lenders" and "originators." You are all part of the same industry. In fact, the large majority of NRMLA members, and most of those who participate in our meetings and programs, are actually correspondents, so I'm not sure why some feel that there is this schism between "lenders" and "originators?"

Brad,

Don't project what is true in your place to all other places. In my state, there is no law against certain lenders hiring all felons to originate reverse mortgages. Does that sound like potential headline risk to you? Yes, lenders can be penalized for certain violations but originators are generally exempt. Thank goodness most lenders in the state are reasonable even though some take unnecessary risks.

No one is suggesting that an exam be made for each type of product but having an exam on HECMs does not seem improper or unreasonable. Having originators pass a criminal background check also seems reasonable.

I live in the state where more HECMs have been endorsed than any other. We also have had the most notorious cross-selling violations. Do I think that the attacks on RMs would be less if California had some sort of licensing with an agency to discipline those who violate public trust? You bet I do.

Forgive my strong opinions if you feel otherwise. Let's see how SAFE works before we begin singing its praises; I am not so confident SAFE will work all that smoothly at a reasonable cost.

I agree with Travis DeRenzo on accountability. Let's clean up our own industry rather then wait for issues to hit the fan. It may save the industry in the long run. A clearing house to report abusers would help. Then they could be referred to the proper agency with follow up. Could NRMLA help?

R M Broker,

Wow!! Now there are two of you guys who want to torture the accused until they TALK.

I think Mr. Bell will let us know NRMLA is doing all it can; however, as to non-member firms there is little NRMLA can do. (That is what makes me think Mr. De Renzo and now you "might be on to something").

All kidding aside, somehow in someway the industry needs to address the issue. As times get busier, these issues will be driven into the background. The time to consider and implement is now.

Great comments on this subject. I am concerned that the entire point of these possible counseling changes can have a profound impact on our seniors.

For example, you are working with a client who has been notified they are going to foreclosure. The client is scared to death to consider being homeless. You are compassionate and are trying your best to reasure them all will be well. You explain they must take HUD counseling (which is fine). Your client contacts a HUD counselor only to be faced with even more pressure and stress, even as the process is currently done.

Our seniors do not deserve the repercussions of any additional burdens placed on them for yet another, unintended consequence.

Critic

You had some very good comments but nowhere did I state that that NRMLA created the current situation. I was just asking what they are doing to address the issues and I didn't seem to be getting any answers until now!

Sometimes when you ask questions you do get answers. I was happy to see Peter Bell correct you on your assumption that NRMLA just represented the lenders.
Everyone is now aware that NRMLA is representing originators on the important issues or at least we hope so.

The NRMLA website keeps us updated on current roadshows, mortgagee letters, HECM endorsements etc. but nothing was ever mentioned about the margin increases . It seems to avoid anything that might be controversial. Things could quite possibly be going on behind the scenes but as members don't we have a right to be kept informed? I beleive we should also call it as we see it. I don't know about a schism between lenders and originators but lets face it lenders do have interests at stake that is not always in the best interest of the originators. I didn't see any lenders chiming in about the margin increases! So my question to Peter Bell is how can one organization equally represent lenders and originators when what is in the interest of one party might not be in the best interest of the other.

My other question is who makes up the board at NRMLA. Are originators equally represented?

Good day,

Sam, I could not agree with you more. Take the example of the borrower you mentioned going into foreclosure. If for some reason that borrower did not answer 5 questions right, another delay and more stress added.

If the Post is accurate on what they are reporting, this proposed rule will be very damaging to the seniors and the industry.

It seems like our Governmental bodies like HUD/FHA and individual states think they are imposing all these new restrictions and rules to protect the senior. The only thing that is happening is the creation of confusion and fear in the Hearts and minds of seniors and those of us that are their to serve and help the senior.

Over the past few weeks I have seen some very foolish decisions and proposals perpetrated on the Reverse Mortgage industry. I have to wonder what or who is behind the thinking and actions of the likes of FNMA, HUD, FHA and the individual states. Lets hope common sense starts returning again soon.

Best regards,


John A. Smaldone

John Smaldone:

If you think the restrictions are bad now here is something else to be concerned about.

If you read Peter Bell's comment you will notice that part of the agenda for the upcoming Chicago conference is " HUD’s financial analysis of the HECM program and the impact that might have on future mortgage insurance premiums or principal limit factors "

Could this analysis mean raising the MIP and lowering LTV's? Don't be suprised?

Treverse (and all RMD readers),

You can find a list of the NRMLA BOD members on the web at the following URL: http://nrmlaonline.org/nrmla/board/board.aspx

What you will find is a BOD with a geographically diverse representation of correspondent/broker company owners, originators, senior exec's at larger firms, and operations/servicing experts.

I can't stress enough that NRMLA is a membership organization, and that I and all others that serve on the BOD serve voluntarily and at the will of the members. I thoroughly enjoy the work, am passionate about our industry, and would welcome any comments (positive or negative) about the work that NRMLA does on behalf of the industry.

Joe

Treverse and all that is reading my comment,

I am aware of Peter Bell's comments and the part of the agenda you are referring to. I can only hope you are wrong in what you think may happen.

HUD, if anything, needs to look into the past and analyze what the Reverse Mortgage industry was five or six years ago. I feel very strongly about the statement I am about to make.

We need to re-wind the Clock and take the industry back five years. We need to keep all the great components of the programs and benefits to the senior we had. The only items in my opinion, we need today, over what we had five years ago is the following:


1. The higher lending limits of today for the HECM.

2. The 120 day lock protection of the expected rate.

3. The changes in the appraisal approach.

4. The additional HECM programs added.

5. The abolishment of the Homekeeper.

6. The curtailment of the proprietary products.


If anything more is needed today, it is NOT what has been dished out to the industry thus far. I have my opinions on what we do need, that will be for another day?

Five years ago the senior was not as educated about a reverse mortgage as they are today, that we know. However, we as Reverse Mortgage Specialists new our product and we counseled the seniors well. When the senior entered into an application they were comfortable about it because of the good job we did for them.

Today, we have mass confusion on our Hands. We have more people than ever in the industry, people that should not be in the industry, Reverse Mortgage Specialists know less today than they ever have, FNMA, HUD and you name it has made more stupid decisions than one would have ever imagined, I could go on and on.

I know this is question is not very original, but, are we really better off today than we were five or six years ago?

Thank you,

John A. Smaldone

Mr. Smaldone,

Nostalgia is understandable; however, unless there is a practical way to make your dream come true, there are many battles to fight and much to be done. I have seen several very good originators lose their way because of not successfully navigating their way through the present economic and reverse mortgage environment. One with his partner had well over 300 HECMs in 2006. That’s right over 0.4% of all HECMs endorsed for that year had this originator’s signature on Fannie Mae Form 1009 (their marketing budget was 20% of their gross income). Over the recently completed 12 months, their production did not reach 50.

Let's keep moving forward in reverse.

Brad,

There is a real need for a disciplining body that is normally associated with state licensing. Here I submit two examples. The first is one brought to light by someone using the RMD blog name “Elder Advocate” and the other is one that recently came to my attention.

The Senior Advocate tells of an originator that advised a senior that the margin on the annual HECM that the originator was processing had just gone up 1% which means the interest rate would go up by 1% and nothing else would change. As the Elder Advocate was reviewing the redisclosures, the $30,000 decrease in the principal limit jumped out at him. Then looking further down the sheet, it was clear that the tenure monthly disbursement was now significantly lower.

If the originator had stated that the margin had gone up 1% and thus all of the interest rates would go up 1% and left it at that, even though the communication would have been incomplete, it would not be misleading. However, because the originator claimed nothing would change except the interest rate, his statement showed 1) the lender failed to properly review the originator’s activity (if he was green), 2) the originator is incompetent, or 3) the originator was trying to get the borrower to sign the redisclosures without looking at the change to the principal limit, the service fee set aside, or the tenure monthly disbursements.

The second case is an originator that talked with his client at 4:30PM Pacific Coast time on a Friday night claiming he had just got off a telephone conference call with HUD where he claimed that all were notified there was no longer any annual HECM. It seems his firm did not offer annual HECMs. The client smelled something odd and switched lenders. The new originator checked with NRMLA and found out that the supposed call which would have ended at 7:30PM East Coast time never took place and that HUD is still endorsing annual HECMs. The client is cheerfully getting an annual HECM.

Both of the originators (and perhaps at least the first lender) should be disciplined. Seniors should not have to endure those who intentionally (or perhaps in the first case unintentionally) misinform. This is why I strongly support state licensing and passing a state sponsored exam exclusively on reverse mortgages as part of that process.

Critic,

I appreciate your comment on my quote. However, I brought up a lot more than a nostalgic overview.

The point I was trying to make was, the industry, the agencies and even the states are trying to do an overhaul on many sections of the Reverse Mortgage way of doing business. However, it is not benefiting the senior or the industry at all. It is making it more difficult to do business and more difficult to understand how to do business. Also much of what is being proposed or have been put into affect is contradictory to what many mortgagee letters that are active and not repealed say.

The Reverse Mortgage industry is very different from the traditional lending industry. However, movement seems to be going closer and closer to the forward side of the mortgage world.

I am saying we CANNOT take the Reverse Mortgage industry and turn it into the same way of doing business as the forward world, it will not work.

I was reflecting the past because we need to turn back the Clock and return to many of the rules and regulations that governed the industry before.

I realize we must go forward but not in a way that we will revolutionaries the Reverse Mortgage industry.

We now have FNMA, who brought live pricing to the table, they now are raising margins and they are turning commitments into mandatory delivery pools rather than a best effort delivery. To make matters worst, we now have HUD trying to revolutionaries the counseling procedures.

No, My statement was not just about the past or having my dream come true as you put it. If that is what many who read my statement walked away thinking, than I did a poor job in trying to convey a message to our readers. I hope this response clarifies my position and clears up any misconception one may have had in reading my previous comments.

I agree with you Critic, we have a lot of tough work ahead of us. We need to bring some simplicity back to the senior, the HECM programs and the Reverse Mortgage industry before it is to late for us to do any thing about it!

My best regards,

John A. Smaldone

I understood clearly what you were saying and you are so right. lets turn the clocks back to where a reverse mortgage was black and white..

Mr. Smaldone,

You may find this disagreeable but we are a little industry. We had less than 120,000 sales of our prime product, HECMs, for all of last year. Our industry trade association has great turnouts to its national convention despite the number of those who actively spend more than a few hundred hours working in it annually.

With relatively low income and a small staff, NRMLA does well. But with so many fights, it cannot fight and win every one. That was made clear in the HERA hearings but that does not mean they did not do well. When you are up against AARP, it is hard to win as our new origination fee structure reflects but again the compromise is far better than what AARP wanted.

I agree with your statement: “HUD, if anything, needs to look into the past and analyze what the Reverse Mortgage industry was five or six years ago.” But I do not know what they can do to “re-wind the Clock and take the industry back five years.” Then you ended with “are we really better off today than we were five or six years ago?” FHA likes to call itself an insurance company. There is little it or HUD can do to “rewind” the direction where those who oversee our industry are taking it.

I agree with your statement in your last comment: “Also much of what is being proposed or have been put into affect is contradictory to what many mortgagee letters that are active and not repealed say.” The trouble is the mortgagee letters only state how a reverse mortgage can be endorsed. They generally have no application beyond HECMs. But no regulation or ruling (such as mortgagee letters) can restrict states from making conflicting laws or other federal agencies from making conflicting regulations or rulings. Only federal law can do that but only if such law is constitutionally permitted. Recent State of Washington law and existing Texas laws should be a constant reminder of how little HUD can do if states want to or already have laws that prohibit HECMs or aspects of HECMs.

I wish there were some way to accomplish what so many in our industry want in the way of stopping state laws that add restrictions to HECMs but is that even possible? I am no attorney.

I would like to hear why you dislike proprietary products so much, including HomeKeepers. There are many seniors here in California who need them and now cannot get them. During 2007, many were predicting that by now a significant number of all originations would be proprietary products. NRMLA dedicated at least one session at each 2007 Regional Conference to that subject.

As usual I enjoy reading your views although we do not always see eye to eye. You definitely have the right heart in these matters.

Question_Mark,

I appreciate your reply and I would not expect everyone to see eye to eye with me all the time, I respect you for saying that.
It is imposable to roll the Clock back but their is nothing wrong in using some of the good that was used in the past coupled with the changes time creates.
Three or four years ago our industry was not looked at or considered predatory or the next sub-prime industry because we were not. In fact we are not now but certain factions and legislators are making us out to be.
the proposed bills and some of the new legislation passed has has not only made us less effective than we were but it has also turned us into looking like a greed monger industry like the forward industry has become. Believe you me, we are not that type industry!

You make a lot of sense in what you say, I enjoyed reading your views on my opinions, many made sense. Please do not think what you might say would be disagreeable to me, on the contrary, I appreciate you for saying what you feel and
combating my views if you see them differently.

We are in very troubled times, our industry and most definitely our country. We have no choice other than whether the storm but we can do all we can to fight it when it is wrong for our clients, the seniors. Thank you Question_mark, you have a good weekend.

My best,

John A. Smaldone

Critic,

I enjoy exchanging views with you as well. I am sure we have both learned a lot from one another, I know I have from you. Let me try and answer some of your questions, which are good one's by the way.

First off I did not call out NRMLA, it sounded like you felt I did? I understand what you are saying about as far as not being able to fight all fights and win all battles. AARP is a tough one, I understand. You are right, the compromise is much better than what AARP wanted.

As far as HUD and FHA re-winding the clock back in time, sure, HUD, FHA and FNMA can do it. They can eliminate some of the damage already done by what they have implemented. They could also not go through with some of the future items on the agenda that will hurt the industry even more. Critic, you hit the Nail on the Head! It is those who are overseeing our industry today that is blocking any movement to look back and see what worked in the past. They can and will only focus on the direction they want the industry to go in. I do not feel it is for the good of the senior or the industry but for their own good only!

We as an industry need to unite and designated a panel of educated people who understand the Reverse Mortgage industry from Soup to Nuts. This panel needs to outline what the Reverse Mortgage product and industry needs to function smoothly. The panel needs to outline what will work for and benefit the senior with our products. The panel will have to outline in detail what needs to be eliminated, what needs to remain and what needs to be added.

We are starting to become disorganized because the people who do oversee our industry are implementing changes that are doing more harm than good. It is coming at us from all directions. FNMA has been a major cause of confusion and unrest in our industry. Over the past six months they have implemented changes that have disrupted the RM industry something terribly. This panel will have to get our senators and congressmen involved. The panel will need the strength and support of a NRMLA so we can bring our problem to the attention of legislators and the people of the United States of America. This is one way of bringing the people who are the overseers and the one's damaging our industry to their knees. I may sound a bit radical but many people and governmental officials out side our industry do not know what is going on. We need to inform them and get them involved.

The one who makes the loudest noise sometime are the one's that are heard! I would go as far as getting the Associated Press involved, especially if we can bring into play our senators and congressman?

Let me answer your questions about the Proprietary programs and the Homekeeper. As far as the Homekeeper, the only way it would and could work, in my opinion, is if the lending limit were higher than that of The HECM. Also, the LTV would have to at least be equal to or exceed the HECM's LTV actuary calculations. The only way that will happen, is if the PMI companies would come out with a program to insure the loans with the same or higher LTV than the HECM has.

Critic, it is not that I don't like the Homekeeper or proprietary programs, they just have not done the job. The Homekeeper and proprietary program had some very good features to them. Take the proprietary programs, they did fill a big gap before the national HECM lending limit went into affect. Who knows how long after 2009 that will remain?

In my opinion only, I feel the proprietary program, to work today, needs to have a much higher LTV and we need to have a demand for the product in the secondary markets. With out those two components, I can't see the product being useful. I know there are programs on the drawing board and their are investors in the secondary trying to figure out what structure will work to securitize the product, maybe in the near future we will see a good proprietary product surface.

I hope I answered your questions? You are right, we may not agree on everything, but that is a good thing. What is important is that I feel you and I share the same philosophy. At the end of your comment you gave me a compliment and said "I had the right Heart in these matters". You do as well Critic, that is why I enjoy your comments and sending back to you a nice long reply like this one. You and I as well as all the other caring and knowledgeable people I have seen comments from, need to stick together and figure out a way to win. We have a candle to carry for our seniors and the Reverse Mortgage industry as a whole. We cannot allow the type people you mentioned destroy our industry, the seniors industry.

All my best to you,

John A. Smaldone

Mr. Smaldone,

Thank you for answering my questions on proprietary products. As to Homekeeper it is sad that coop owners have no reverse mortgage products right now. As to other proprietary products the HECM upper limits have done nothing for some who really need it. In early 2008, we were able to help homeowners we cannot help today. Despite much lower LTVs (because of no FHA insurance) and interest rates much higher than HECMs (i.e., HECMs being originated then but not being originated now), we have several happy and satisfied customers who obtained proprietary products in 2007 and (especially) 2008. Before late 2006, the only proprietary product available other than a Homekeeper had a 5% margin. Just as a competitor was announcing the details on the proprietary product they were launching with a 3.6% margin, the first lender dropped the margin on the existing product to 3.5%.

So while I fully disagree with your earlier comment, I agree with your revised comment at least as to proprietary products other the HomeKeeper.

Mr. Smaldone,

Unless NRMLA is picking it up, few if any of us have the time or the resources to dedicate to creating the type of effective task force you propose. I wish there were such a thing.

For a while, I hoped that perhaps Mr. Sam Collins was forming such a group. Quickly my hopes were dashed. This is not Mr. Collins’ fault. What he is doing is good for the industry even though it is promoting his marketing arm. Sam is a great guy with some very good fundamental marketing principles that originators, seniors, and the industry as a whole would all be better if we, the originators, followed. To be clear I am not recommending one marketing system like Sam’s over another say Monty Rose’s or Reverse Fortune’s. It is the way that Sam was forming his telephone conference calls, etc. from which I incorrectly inferred (not Sam implied) along with another somewhat regular commentator that the group would be some type of originator task force.

It seems you would like to form that task force. I agree such a task force is needed but not if all it will be is a discussion group or a group that acts independently of NRMLA. Unlike others, I do not agree that at this time, it is a good idea to be supporting more than one organization to any degree at all. We are such a small number of originators that have any substantial involvement in this industry that being fragmented makes little, if any, sense.

Here is an example of what I am against and why. I am not trying to call anyone out or attack anyone, this is simply an example with a simple request for an update. Mid-month last month several commentators debated and discussed the HECM credit line issue. The issue seemed simple and clear. Significant information was presented to the initiator and then the initiator blindsided us with the fact that the position the initiator was espousing was that of some alleged HUD official. The initiator assured some of us that the situation was being handled. You and the initiator were going to follow up on the issue including reaching out to NRMLA to help resolve the situation. After three weeks, has anything been resolved or is the HUD official still disseminating his incorrect understanding of the maximum that the unused credit line can grow to, with the initiator still “studying the issue”?

The reason why I am asking you and you alone is so that you can see why I oppose this type of task force. I know people are questioning when NRMLA will actually launch its designation program especially in light of its early indications this would be completed before 2008. They at least are accountable and moving towards final development. The task force you are proposing must have some real limited projects with reasonable deadlines that the task force is held to or it will appear to be little more than “Don Quixote, Sancho Panza, et al, the men of La Mancha.”

The time for effectively taking on the Fannie Mae issue is quickly slipping if not gone. The problem with NRMLA is that too many times it is merely reactive not proactive. That is a common problem with and for organizations like NRMLA.

But before we go down that road, someone needs to propose what it is the task force will look like, how it will be funded, what will the size of the task force be, how projects will be selected, how will it structured, etc. This is not a simple undertaking and will require a lot of consideration even as to its formation.

Critic,

Thank you. As to the Homekeeper product, you are right, the Homekeeper did fill that void. You are also right on the new HECM limits not helping those in the upper category who is really needing them.

I agree that we need a proprietary product that is functional. What we have seen during the fade out of the proprietary product was, LTV's going down so far, they became useless. They became useless because the LTV drop also was followed by a ceiling on the amount one could get as the principal limit.

This is where we can turn the Clock back. If we could get investors to come back into the market, securitize a product with at least a workable LTV and with balances that will be able to be used for the $2M to $50M home value, we would have something again.

Before I go, what did you think of my idea on forming a panel for the purposes I outlined in the last comment to you? I would be interested in your thoughts on it. Have a great day.

My best,

John A. Smaldone

Critic,

I sent you a comment reply to the first message you sent to me. This was before reading your 2:03 PM comment. By the way, I think you have me mixed up with someone else.

You said the initiator and myself were going to follow up with NRMLA on the credit line issue. That was not me that said that, please check your records.

As far as the task force, you are right, it would be a large undertaking. If you read my comment on that again you will see the panel I spoke of was not going to be a decision making board but one that would be a panel that would draw up a proposal for the RM industry and the path it should take. I stated we would have to have the backing of senators, congressman and NRMLA in order for us to be heard.

I know this could not be a panel to make decisions, I am sorry if it appeared that I was eluding to that. I wish I had a Crystal Ball and knew exactly what to do but I don't. Mine was a suggestion. I do know this, something has to be done.

You said a lot in your last comment. I thought you put it in prospective very well, for the most part. I know a panel like I spoke of has to be structured and a well thought out plan would be needed. It does not necessarily have to be a costly project. An idea first starts with a thought, then it has to be put together like a puzzle. If the thought makes sense, then it will be worth putting the puzzle together.

I was only fishing and thinking out loud to you with a thought. You enjoy your evening and I look forward to future conversations.

Best regards,

John A. Smaldone

Mr. Smaldone,

Yes, you are right. My memory failed me. There was no mention that you two would actually approach NRMLA. My apologies. Is there an update?

It seems I also misunderstood your idea regarding a panel. Certainly such a panel would be helpful but getting the sort of backing you suggest will be difficult. It sounds more like a “think tank” than the task force I described. There is nothing wrong with that. In the long run, much good can come from that.

As you can tell, my style is much different. For example, with the Fannie Mae issue, I appreciate the fact Sam Collins has a telephone conference call about it but if that is all that is done, it will do little to help blunt the loss of proceeds we are all now experiencing when dealing with seniors who are in financial trouble. I want to find a solution or know that the present situation is about as good that can be done. Who knows maybe Sam’s call will do that.

Critic,

On the first issue. I can't give you an up date. I never communicated with the initiator but I know of his comments. I think someone else along with the initiator said they were going to contact NRMLA. By the way, don't feel bad, if it were not for posties my memory would always fail me.

You are right about what my intentions were with the panel, a "Think Tank" is a great word for it. My hopes were if the think tank worked, we could try and get enough senators and congressmen to listen. I can't argue the point that it would not be easy or would it do any good at all, as you stated.

There is nothing wrong in different styles, we need it. Believe me, I am different in my style as well.

As far as the call Sam is going to have. You are right, it will not help the present situation or the loss of proceeds you are and will be experiencing with your senior borrowers. It is a sad thing we are facing, especially for those seniors that have critical financial issues. A $5,000 loss of proceeds could make all the difference in the world to a senior who may be facing foreclosure, as you so well pointed out.

What is very frustrating to me and I know it is to you as well is that we are handy caped. We can't do anything about it. We can only console those the best we can. Will they ever trust us again, most likely not. Our pain will be to watch the suffering the senior will go through. Sam's conference call could do a lot of good for the future. I know I have at least one senator and one congressmen that will be on the call. I intend to try and have more. I believe it is Sam's intentions to invite other senators and congressman. We need the right people to listen and understand the real issues here. Until we get the right Ears listening, we are not going to get any where. That is my opinion for the night.

You really put me to work today, but, I enjoyed it. You understand the business well and you have the compassion for the senior and our industry. I am always honored to go back and forth with you on the issues, we are definitely on the same team. You have a good evening and thank you.

Best regards,

John A. Smaldone

http://thereversemortgageschool.blogspot.com/
Holy Cow - commentary on this subject and more from Florida's reverse mortgage expert

There certainly is a fine line between being protective of the seniors with whom we work and treating them disrespectfully or like financial babies.

I have had conversations with many prospects who don't necessarily need the proceeds to survive but WANT the money available to them for whatever purpose. It is, after all, their money.

Having a counselor, who is probably not a licensed financial adviser, making decisions about who is appropriate for a reverse mortgage sounds insulting to me.

As a loan originator I see it as my job to make sure that I have explained every single detail about the program, the products, their choices and the ramification as well as the process before we ever get to the point of the "official" counseling which it seems to me should be just a rewrap of all of the information that has already been discussed in detail.

It is easy enough from the get-go to determine if a customer is impaired simply by paying attention to whether or not they are understanding, remembering and tracking what is being said. I always ask a customer if there is POA and if there is any doubt about cognitive functioning I suggest that we include a family member who can be there for them through the process.

My last 2 customers endured 1 1/2 hour counseling sessions where they were asked personal questions about health and hygiene, family and social arrangements and an abundance of personal questions that have nothing to do with a reverse mortgage. And to top it off, one of the counselors told my customer that the MIP was negotiable. (Banging head on table).

Could we please stop scaring our customers and not request that they walk the plank before completing a transaction that THEY have requested?

the test seems to more about testing the housing counselor as to how well they were able to educate the client than anything else and I think it is very needed

Seems to me they are saying our Senior are uneducated and unable to know whats best for them. I don't see the same happening to forward borrowers. We are talking about people that have paid off there homes & obligations, responsible people. They thought they would live out there lives on penions,investments,SS and as we all have found out thats not happening today and age has nothing to do with it. These people are proud and the last thing we need to do is make them feel they have to beg for help.. I think it might be time for this honest, caring Reverse Mortgage Originator to change careers this saddens me... I'm glad my mother got her reverse mortgage years ago..