More Outreach and Innovative Approaches to Reverse Mortgages Needed

A growing need for reverse mortgages should be met by a more vigorous outreach by lenders. That’s the thesis coming from those on the front lines.

John Brodey of Sequoia Pacific Mortgage in Santa Rosa, Calif., says he’s counted “4,600 senior homeowners alone [here] who are in default on their mortgages and on course to lose their homes. Many of them will require a more aggressive and innovative solution to closing the gap between principal balances and reverse mortgage proceeds,” asserts Brodey, adding for emphasis: “It is a national crisis in the making.”

And, yet, “we have penetrated less than two percent of the households eligible for a reverse mortgage [nationally],” figures Bart Johnson, Life Stages Financial, Inc., Newport Beach, Calif. “We need to think differently,” he declares, upping the ante. “I want to challenge our industry to think about the 23.2 million senior households that were eligible for the product at the end of [last year] – many of whom need help.” According to Johnson, that market “is only getting bigger, and will increase by something in excess of 13 percent, to 26.3 million eligible households five years from now.”

Advertisement

But, today, there is a serious need, says Sequoia Pacific’s Brodey, who reports generating “a list of 4,600 senior homeowners in California who were at least a month behind on their mortgage payments – and about half already had received NODs.” He reports sending a letter to everyone on the list and receiving “approximately 80 calls. After running the numbers in each case there was nothing I could do for any one of them,” he says. “They were all on track to lose their homes to foreclosure.”

So, the need is there but Bart Johnson says: “We are failing to deliver our product to the mass market – today’s products and practices will not get us there.”

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade. He can be reached at nmorse@reversemortgagedaily.com

Technorati Tags: ,,,,

Join the Conversation (17)

see all

This is a professional community. Please use discretion when posting a comment.

  • What is the point of this article, to state the obvious? Nobody is stopping any of us from implementing innovative outreach ideas. Are we supposed to rely on the “industry” to develop them, or do so on an individual basis? Some lenders have picked up market share and some have lost market share. I wonder why.

  • I personally applaud both Mr. Brodey and Mr. Johnson for their participation in this article. We need to be challenged by the words of Mr. Johnson in particular. In five years will we be doing less than 140,000 loans (a little over 13% of where we are today)? That just meets the anticipated growth rate in the senior population.

    We need new products to meet the standard objections like upfront fees are too high. We also need to find ways to make the fixed rate product more borrower friendly such as splitting it into a fixed rate with a minimum required payout and an (annual rate, preferably) ARM that includes a line of credit.

    We also need to make the product more appealing to the financial and legal community. While it is easy to make the product very appealing to commission based financial and insurance salespeople, it is much harder to do the same with fee based attorneys, CPAs, CFPs, tax advisors, and Registered Investment Advisors. But we need to reach them because they are the actual gatekeepers for some seniors and the guiding influence on financial matter for many more. To do that requires a different mind set and a thorough understanding of the product, its versatility, and its power as a cash management tool.

  • If you combine this article with the earlier one from the NY Times, its easy to connect how a reverse can help keep the homeowner in the home if the right investor allows for principle reductions to meet max cash from the RM- in theory. Unfortunately, every talking head has to give their input without knowing all the facts. I love win-win situations, why isn't this more publicized?

  • I recently helped an 82 year old senior avoid foreclosure with a reverse mortgage. Working with an attorney we got the 2nd lean holder to forgive $150K of a $200K mortgage so the proceeds from the reverse mortgage would cover all leins and costs to achieve his goal. It was alot of work and very stressful but a very rewarding experience. Everyone told me that this deal could not be done…some boundries are just in the mind.

    • Be careful about the Form 1099-C that your borrower will be receiving. There could significant income tax ramifications. Make sure there is a competent tax advisor involved.

      • Thanks for contacting me, your message is very important and we will promptly execute whatever actions are necessary to accommodate you. Regards, Joe

  • I actively seek senior homeowners facing foreclosure. I have closed 15 reverse mortgages this year for seniors that owed more than their homes were worth. As bohemiajoe stated it is lot of work but the rewards out way any of the obstacles you will face in this endeavor. All 15 homeowners I helped this year had tried to get a reverse mortgage but were told they did not have enough equity. I believe it is our fiduciary duty to help senior’s in this situation. Our industry as a whole needs to recognize this and train their staff to negotiated principle reductions with the banks. With the adoption of the HVCC appraisal rules and rising interest rates this is a scenario that will be exasperated. The best advice I can give anyone wanting to pursue this is to study how short sales are done. Our process for negotiating with the banks is similar to the short sale process but we are replacing the buyer of a short sale with a reverse mortgage.

  • You guys are to be commended for going that extra mile for your seniors. You are a credit to a much maligned industry. Good work. Now you need PR to let the world know (NRMLA).

  • I agree with dduck and Greg should be applauded for his efforts.
    Maybe Greg could get together with someone like Sam Collins could put together a seminar with bankers to explain this process of negotiation.
    I believe alot of loan officers would be in a better position to help our senior clients and as dduck stated it wouldn't hurt if we could get some of these success stories in the news.

  • I would love to get the word out about saving seniors from foreclosure. I have sent several press releases to local newspapers to no avail. If anyone can help me get this information in the hands of the national media it would be a big boost for the image of reverse mortgages. I have some very compelling stories of seniors I have helped. I can be reached at
    gciungan@southwestfunding.com

    • Start small, keep plugging, there will be a slow day and some editor will decide to do a story. The weepier the better for reader consumption.
      Very hard to get in the big media, but sometimes they pick up the smaller media's stuff. PR is just like selling (hell it is selling), plug away.

  • I am working on my first RM where I need to contact the current lender to see if they will take less than the current payoff. I am a little worried regarding their incentive to do such a thing because this lady has equity in her home. She has been in her home for 47 years, had it paid for at one point, took out a HEL to help her daughter, got laid off her job, is 75 and cannot find other work and is now 120 late.

    I will do my best to present the facts to this manager who handles short sells but since I have never done it before I hope I am guided from above so that we may save this ladies home.

  • Hi Mark,
    I worked with a company a few years ago that assisted borrowers in foreclosure. What we learned from working with their loss mit departments is that they have a specific course of action they have to take in a specific order to qualify somebody for anything if it is a Fannie or Freddie loan. They will always try to do a workout with somebody first. Be prepared to provide all income docs for the last couple years, bank statement, and a copy of all their bills to show that under no circumstance can the homeowner make the required mortgage payment or make up the payments that are in arrears. They will require a percentage of what they are behind up front and then split the rest in to payments over time. If it is shown they can afford the payments based on their income you will not get a short sale/refi. If they can make the payments but cannot pay back the arrears they will move to a forbearance, which delays repayment until they are working again. Then they will move to putting on the rear of the loan, then modifying the interest rate, then lowering the principal. All done in that order. This may have changed recently with the governments push to modify but these requirements were directly from Freddie and Fannie mortgage servicing guidelines.
    I tried one a few months ago with TBW that was a Fannie Mae loan and they denied it and put him in a workout that he has already failed in. He is now back in foreclosure and we will now try again.

    Good luck and be prepared for a long battle.

  • Josh

    Thanks for the information. Although she doesn't want to work out payment arrangements because she cannot afford to make any payments at all. She wants to make that payment go away but not have to leave her home. We are about 10K away from having a loan large enough to pay off her current balance and that is with me stripping the loan out. If I can just convince them to lower her payoff, that will be the only thing that saves her home.

  • Mark,
    Nobody we worked with actually wanted to work out payment arrangements either. That is just the process they go through to discover that the only reasonable course of action is to lower the balance. If she tells them she is looking for work to replace her lost income they will most likely not lower the balance because there is a chance she could make payments when she is working again.

  • Thanks so much for the wonderful updates from Joe etc. and all those who have really tackled this problem. Too often we feel we are operating in a vacuum and that no one has encountered the kinds of issues each of us obvously have.
    Personally, I have had difficulty getting any kind of reduction in the principal balance from a variety of lenders. It would be great to share strategies that have proven successful in negotiating settlements with loss mitigation departments. Even settlements requiring a mere 10% write off have proven difficult. Sharing information about what lenders are more receptive and responsive would be a great help. I'm sure others may have angles that are worth noting.

  • You have no idea how grateful I am to have read all these postings. Some days I don't get to this site and don't always take the time to catch up but this issue is very dear to me. Have been in the mortgage business for over 30 years, RMs since 1994 so have long been aware of its value in saving people's homes and keeping people in their homes.

    The comments about existing lenders have been spot on! It is not the borrower's choice they consider, just how then can collect the most of what is owed them. I understand they are in business to make money (and we need to make a living) but some borrowers have no control over the circumstances that put them in dire straights and this current economy has shown many more people in like circumstances than ever.

    Although I have had some success – some better than others – it is the luck of the draw as much as the hard work we do. A lot of difficulty comes in that the borrowers don’t want others to know their business so you can’t threaten bad publicity as a way to make them listen to your borrowers’ needs. My personal best is $539,000+/- down to $173,000+/- and that took over 8 months of very hard work. Meanwhile, I am still required to keep production up so I make a living and my employer is happy with me.

    The time you put into this type of transaction may result in a solution that will not pay you a dime. If you are not happy with that, don’t do this but refer them to someone who can help such as the Consumer Credit Counseling of Greater Atlanta who does not charge the customer. You may get them back if a short pay is finally accepted. Get to know the people there so you can stay involved in a peripheral role and stay in touch with the borrower.

    What advice can I give? I can provide a “process” to follow that gives you some guidelines but each situation is different enough that you may wonder how good any guidelines are before you are finished. For starters, go to the lenders website. If they have a topic such as Home Retention or anything that says Foreclosure Assistance, you should be able to download their forms for your customer to fill out. If that lender does not provide forms, try Chase or Washington Mutual as they have a relatively easy set of forms. Just white out the company name.

    Like you have been told by others, they will want the people to pay in full from the start and will go through various solutions before actually considering a short pay. In fact, some of the people will not understand what you mean by the term short pay and may keep saying short sale. Be patient and polite, preferably you will have the senior with you on the phone (speaker phone, extension, whatever works) so they can confirm this is what the borrower is agreeing to – but don’t let the borrower agree to anything other than the fact they can talk to you. And you should fax or email a Third Party Authorization form about 3 days in advance of calling so they have it in front of them. Be prepared to speak to a different person every time and resist asking for a supervisor early on so you don’t offend the lender’s employee and make things worse for your borrower.

    The biggest issue on the downside is that the lender may require that the borrower put the home up for sale. If offers will net the lender more than your short pay, that may be forced on them, thus they will lose the home. Otherwise, should they choose to go back to just making the payments, they will be flagged in case they are late so the foreclosure process can be started sooner.

    If a lender has signed up for the Making Homes Affordable program, they are required to do a certain amount of work outs so our thrust is to make as many as possible be for Seniors. And don’t neglect to remind the lender’s rep that every home kept off the market will assist them in keeping higher values on those that eventually need to be sold anyway.

    If I haven’t discouraged you by this, I am very pleased and you will be well rewarded in feeling you have done the right thing. Although I acknowledge the economy is not the fault of just any one thing that was done, reluctance to work out some of these loans when people want to pay but can’t will only make things worse for all of us. Bankers who persist in foreclosing on properties that can’t possibly be sold for close to the amount owed are only making the situation worse and it could result in their no longer having a job because the lender is bought out or closed down. Lets all share in the responsibility and do what makes the cash start flowing positively again as soon as possible. That usually means a modification, short sale or short pay as opposed to foreclosure. The sooner everyone realizes this and makes a real effort to find a solution, the better off we will all be.

    Good luck and God bless you with patience and perseverance.

string(112) "https://reversemortgagedaily.com/2009/12/16/more-outreach-and-innovative-approaches-to-reverse-mortgages-needed/"

Share your opinion