CNBC Debate: Are Reverse Mortgages the Next Subprime?

June 10th, 2009 | by John Yedinak Published in Generation Mortgage, News, Reverse Mortgage | 28 Comments

Last night CNBC’s Dennis Kneale spoke with Jeffrey Lewis of Generation Mortgage and Babette Bach, an elder law attorney about reverse mortgages. In Reverse Mortgages: Next Subprime? they debate whether the government guaranteed HECM program is fueling another bubble.

Lewis does a great job during the debate but I can’t say the same about his opponent Ms. Bach. Bach clearly doesn’t understand reverse mortgages which is why you can see her reading notes from her lap during the debate. Even after she states that there is, “a tidal wave of need” for reverse mortgages, she doesn’t think it’s a good product. See the video below.

Two other quick notes, I found it funny that they were running a Senior Lending Network commercial while Jeff was talking and Dennis Kneale did refer to him as “Babe” around the 5:00 minute mark.

While CNBC doesn’t pick a winner in these kind of debates, lucky for us RMD does. Jeff Lewis, hands down.

Reverse Mortgages: Next Subprime?

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Robert Wagner

WOW….She got DOMINATED. By the end, it almost sounded as if she was arguing for reverse mortgages. Perhaps it would have been a good idea for her to have a point before going on television to discuss a product she seems to have little knowledge about.
Great Job Jeff!!
http://www.submort.com/RobertLicata Robert Licata

CNBC has done a disservice to the RM industry by letting and elder attorney decimate the value of a reverse mortgage for seniors in need of cash flow assistance. What is she trying to prove? Negative news sells, just look at the media and newspapers for proof. RM’s are about the only saving grace for seniors who have lost half or more of their pension, 401-k and/or CD investment incomes in the current economy! Where else are they to go for relief and how do they maintain a decent lifestyle? She is way off base on this one and is only trying to garner senior clientele through negative bashing of RMs. It is notable that she did not offer solutions for cash strapped seniors either.
John

The attorney was one of the most uninformed people I have heard, other than she is right about the tax/insurance default problem with HECMs.

As I was watching this, I wondered again why NRMLA is not doing any, I repeat any, positive marketing of the reverse mortgage product. They are outstanding at responding to attacks or negative articles, but why are we not investing in our collective future by either public service announcements, or just straightforward ads on the value of reverse mortgages?

I fear for what Congress could do with John Dugan’s comments in comparing reverse mortgages to subprime loans, and interviews like this where the interviewer was clearly biased against reverse mortgages. Please note that he stated that “seeing what happened with subprime loans, I am glad to hear that reverse mortgages are not being securitized.” Yikes!

Now that the comparison has been made to subprime loans, my guess is that uninformed policy makers could easily jump on the” “We must save our vulnerable seniors (read: incapable of making their own decisions)from those rat bastard ‘subprime reverse mortgage lenders’ bandwagon”.

Don’t think it can happen? Absent any counterpoints made by NRMLA or its members, it could very well happen.

Jeff Lewis did an excellent job of presenting a fair and balanced argument in favor of reverse mortgages. Thanks Jeff!
http://www.submort.com/RobertLicata Robert Licata

John – You are right on about Jeff Lewis he did a great job defending the RM position, thanks Jeff!
dduck

Win goes to Lewis.
wealthone

I have sat in front of a number of elder law attorneys and the first meeting clearly shows they don’t fully understand the product. The second meeting shows they think they can either outsmart the product or sit in a position to keep the kids or estate protected from the product. Once a good elder law attorney “gets” it, they still only refer the biz after all of their dances are over and they throw in the towel.

I have just a small handful that call me first when a client or family member needs access to cash flow for care of their parent or spouse. Because we are considered an early option, it reduces the stress of moving funds around or trying to qualify for other services (Medicaid, VA Aid) etc. Too much stress and too much loss of dignity.

Win goes to Lewis indeed, the attorney’s need to catch up to the product.
canadian

I just wanted to give Jeffrey Lewis a pat on the back. I think that Jeff held solid grounds. It seemed like they were both coming at you and the reporter was trying to corner you and you put them both in there place, leaving them feeling stupid and speechless. Way to go. I made all my lo’s do homework on that clip and that is going to be one of our topics during tomm sales meeting!
canadian

Babette you got slammed and you have no business being on the news. Get your facts straight and do some homework before you make yourself look like such an uninformed idiot on national TV. You legitimately embarassed yourself and your poor family w/ your lack of knowledge! You have two left feet and ugly shoes lady… go home!!!
warren

It is a shame that a senior ends up paying a lawyer for adivce about a product he/she knows nothing about. A reverse mortgage can change a senior’s life, I have seen it happen many, many times.
http://foxradio.net J. Klebe

The reverse mortgage sadly is doing very little to educate the public. AM radio in particular is targeting elderly and is doing it more costeffectively than any other medium. I have been an advocate of reverse mortgages for some time but it is amazing how uneducated even “educated” people are about the product.The elder law attorney on CNBC is a great example – she should be disbarred for ignorance. However, I can only blame the reverse mortgage industry for not being more proactive in educating the public.
Rob H

Ms.Bach says that she’s a “Certified” Elder attorney–who did she have take her test for her? It’s a shame that there are very unqualified “professionals” advising the senior population about thier financial options! I’ve run into situations where a senior demonstrated a sincere need & desire for a reverse mtge & then ran it by their attorney/accountant, etc only to be told that reverse mtges are expensive and not really good for seniors. They offer no alternatives & these seniors would either lose their homes due to limited cash flow or suffer a very reduced standard of living! Seniors should be very careful when seeking advice from “professionals”–some of whom have no idea of the product they are commenting on!

Most if not all seniors who have taken out a reverse mtge see it as a lifesaver that has allowed them to rid themselves of expensive mtge payments & to enjoy their Golden years!
dduck

I am not an attorney, but have have worked with several, as you all probably have. I do not like painting any group with a broad brush, as has happened to your industry.
I can tell you this, I would go to them, rather than you for wills, trusts and complex strategies you can’t even imagine. Do you guys really think that they don’t know a lot about estate planning that you, or me? Sure, they, may have blind spots, and have only minimal knowledge on some products. However, the better ones, can fill in and learn, and they have a steep learning curve. Knowing the TV interview business, a little, Ms. Bach was probably given a half hour notice and asked if she wanted to participate in the interview. This a publicity opportunity for people and they are often mismatched with an expert in their field (Lewis). This is by no means a defense of Ms. Bach, she probably should have declined, I am defending estate/elder lawyers.
Last point: Do all of you, and your families, have up to date wills, health care proxies, etc; maybe you should visit a lawyer.
kal-el

dduck,

You are 100% correct! I am not an attorney either. I am the Founder of a fairly large reverse mortgage company.

Elder care attorneys/estate attorneys are much better equipped to protect our seniors than mortgage people.

The problem here is the reverse mortgage industriies total lack of educating the financial & legal community on the true benefits of this product.
http://www.revmorserv.com REVMORSERV

I am offended by Dennis Kneale and Babette Bach… 2 of the most uninformed people.
Dennis is just going for publicity! he was rude and inconsider to Mr. Lewis (who actually knew what he was talking about)!!!

Babette Bach like most attorneys tend to be clueless to the market and what seniors truly need. They are only called in on the problem cases… So they assume its all bad…

Where is NRMLA in all this? Peter Bell the self proclaimed EXPERT on RM’s has yet to raise his head… why? what are we paying for if not to represent the reverse mortgage lenders for ignorant commentators and attorneys. Not to mention Mr. Dugan’s half informed comments.

Can you tell this kind of shotty reports ticks me off? My apologies for my ranks!
Yolanda

It’s interviews like this that make our jobs as reverse mortgage originators more difficiult. And it’s uninformed professionals like Babette who continue to negatively influence seniors who are desperate for a solution when there aren’t many. Most of us are in this business because we really believe in this product and really want to help seniors. And we could provide 10 to 1 positive vs. negative stories of seniors for whom reverse mortgage was the absolute best option. The only bubble that exists is the caption bubble above Babette’s head that is filled with question marks. It’s funny how the show ended before Babette could give any alternatives to the seniors who are in (or will be in) the “tidal wave” she describes. I agree that NRMLA needs to advertise the benefits of reverse mortgage so that the education of the general public will increase about our products.
dduck

What are you guys, masochists? You had a great day yesterday. The WSJ article was great publicity and you won the CNBC debate. I wish someone from your industry would comment on the positive day you had for potential sales. It is much harder to sell a product that no one has heard about, than one with all this great publicity.
Oh, and carry the Zickefoose article in your back pocket to remind others (and yourselves)of the great product you have.
HECM Dude

I didn’t see the interview, but there are many crude comments here. We in the reverse mortgage industry must understand that RMs are not the indispensable product all senior homeowners must get.

Despite all the hype that has been created, RMs remain primarily a product for those who have particular needs. Homeowners who have made adequate provisions for their retirement are not likely to choose a reverse mortgage.

Remember, a reverse mortgage is a loan, and proceeds from a reverse mortgage are borrowed money! So why should we attempt to convince homeowners that it is a good thing to use borrowed money for frivolous, lifestyle-related expenditures?

Dugan had one thing right when he compared reverse mortgages to subprime loans — many homeowners used their homes as ATM machines to support a lifestyle that could not be sustained in the long run.
dduck

HECM Dude

The worst thing I can say about the interview (it’s short, you should watch it) is that I can’t get it out of my Firefox browser window for RMD. I had to use another browser for this RMD post. Otherwise it was good, since Lewis won.
http://www.acceptancecapital.com Cynthia Cardenas

I’ve been writing reverse mortgages for 5 years and in Texas, am a veteran of the field. We have several loan officers in this office, all caring and kind people in service. You don’t sell reverse mortgages as an independent, wholesale originator unless you are because there is NO MONEY IN IT. In Texas, the average commission earned is $850 and it takes a month to close. Reverse mortgage is only done out of service.

Yes, the “Bubble” is here now and in the rest of the world has already hit. It’s hard to imagine how it can get worse. For example, I heard a Wells Fargo, VP speak, at a recent conference on Mortgage-Backed Securities (the cause of this sub-prime debacle), stated that 65% of all foreclosures over the past two years were people over the age of 62 and there were millions of foreclosures. The truth is that Reverse Mortgage was not an option for these people. They lost their home or are about to lose their home because the bankers would only allow “short-sale” to investors, only reduce the loan amount for investors, not the actual older (senior) homeowner, which would allow them to qualify for a reverse. This was because of the “moral hazard” of benefitting from their “unwise” behaviour. Yes, it was unwise to borrow against your home when you couldn’t make the payment. But, most of these people are still working, or would if they could. Most are simply caught in an economic hazard, rather than the moral hazard. If the Federal Government wanted to help these people it would find a way to allow (read “force”) the banks to do a reduction in the mortgage balance and refinance these people into a reverse. Wells Fargo, Citibank, Bank of America, all have reverse mortgages, yet not one will even discuss it with these people, and not even with their attorneys. Their counselors are “not-allowed to”.
The bubble is coming and it’s purpetrated by our government’s concern for our “just and moral” mindset.
At our office we have helped a very few seniors renegotiate down their mortgage and stay in their home. Every single one of these people blesses us and thanks God for our intervention. We only wish we could help more.
That’s the moral platform we are standing on. It’s the right one in my opinion.
dduck

Ms. Cardenas

Are those people you helped, grateful enough to write their congresspople? If, so, they should, they will be helping help other seniors.
http://www.revmorserv.com REVMORSERV

Dear “The Critic”,

Bravo… nicely put! CNBC really did a disservice to its viewers by airing this. Was the real intention to get ATTENTION? or provide facts…
http://www.revmorserv.com REVMORSERV

Dear “The Critic”,

Bravo! nicely put
http://www.ReverseWithLinda.com Linda Lewis

I echo John’s comment that “NRMLA is not doing any, I repeat any, positive marketing of the reverse mortgage product.” Why is that? Can anyone fill the vaccuum and inform the public before we get more silly laws? (I can already hear “Dream on”!)
Peter Bell

For those who think NRMLA is not doing anything to promote RMs in a positive light, where do you think articles such as the Wall Street Journal’s positive coverage of our topic, as well as most other positive articles emanate from? We spend hours and hours every week educating journalists, finding borrowers for them to interview, reviewing their drafts, responding to editors, etc.

As far as OCC Chairman’s Duggan’s remarks are concerned, we have met with his team since the speech was made and they are arranging a meeting with him in a few weeks once he returns from overseas travel. His staff will also be participating in next week’s NRMLA Policy Conference, which has attracted over a hundred key industry executives, as well as representatives of HUD, FRB, OCC, OTS, FDIC, GAO, OMB, FTC and Congress.

Some folks choose to sit on the sidelines and take pot shots at those who are out there doing things to promote our industry and help policymakers understand what we do. Others choose to get involved in the action by participating in events such as the Policy Conference and arranging meetings with their elected representatives while they are here.

I would ask the posters in the chain above what have each of you done to communicate with or educate your elected officials on this topic? We’re working on that day in and day out, but it’s essential that our efforts are bolstered by hearing from the folks back in any Congressman’s district or senator’s state.

Could everyone here name your Congressman or Congresswoman is? Or what committees he or she sits on?

Finally, I would ask if “Linda Lewis” or “john” or any of the others that post comments on NRMLA have any idea what NRMLA does? Evidently not. Have they ever bothered to inquire? No. They’d rather just comment without any information or knowledge. Come to think of it, isn’t that essentially doing the same as what the reporters everyone is upset about are doing?
http://www.celink.com John

I am not sure who the “other John” is, but I want to make sure no one thinks it is me, John LaRose, CEO of Celink.

I agree wholeheartedly with Peter Bell and I do think NRMLA does a superb job of trying to get positive articles published on reverse mortgages. I do believe like the “other John” that NRMLA staff does an outstanding job of responding to negative or misinformed articles, or comments like those from John Dugan, head of the OCC.

That said, I do think NRMLA could help our cause if there was some proactive informational pieces being distributed to policy makers, on a regular basis. Now that John Dugan has put the words “subprime” and “reverse mortgage” in the same sentence, there are those in DC that may feel compelled to jump on that and the results could be very detrimental to the industry. Remember what happened when Senator Schumer made his concerns about Indy Mac Bank public?

Much like the McCaskill hearing that was the result of one bad incident related to a single reverse mortgage, the “bad news cycle” lasted for months.

My Congressman is Mike Rogers and he serves on the Intelligence Committee as well as the Energy and Commerce Committee. I have not met him, but I have sent him information on reverse mortgages on an occasional basis.

What I think would be a terrific service of NRMLA to its members would be to provide us with periodic updates that we could forward to our Representatives, and Senators as well. It would not take much effort on NRMLA staff, and as I believe strongly that this grass roots approach could do a whole lot more for educating those who wield all the power, than any media campaign.
dduck

Sorry, this is redundant, I posted originally on the wrong thread (hey, Critic, I’m old so I goof up sometimes0>

Mr. Bell

I don’t know you and I am not part of your organization. But having been a member of a couple of insurance industry organizations, I can appreciate your problems. When I first started at an insurance agency, the first thing they told me was I had to join the insurance trade org. and start studying for my Chartered Life Underwriter (CLU) designation. Why? Because they wanted everyone on board. That is why the insurance business has one of the best lobbies and power to deal with legislatures. When there was an attack on us, we were sent sample letters to send to our representatives. In other words we were in the fight, not just depending on the org. to do the battling for us. One thought, which may be helpful, is they let us know what positive things they were doing. I think this heads off a lot of grousing (which can never be eliminated, just minimized). Communication from org. to outsiders is important, but keeping the troops in the loop, as much as is possible is also a good idea. In any event, from what you said above, it sounds like you are doing what you can, and I agree the WSJ was overall a positive article.
http://www.facebook.com/people/Joann-Love/1060702564 Joann Love

IT IS A QUESTION,I FILE A DEED N LIEU FORECLOSER, I SOON CAN ILEAVE THE HOUSE?
http://www.facebook.com/people/Joann-Love/1060702564 Joann Love

IT IS A QUESTION,I FILE A DEED N LIEU FORECLOSER, I SOON CAN ILEAVE THE HOUSE?

CNBC Debate: Are Reverse Mortgages the Next Subprime?

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