FHA Doing Everything Possible to Sustain HECM, Industry Must be Ready to Adapt

Buffeted by lower lending limits, higher insurance premiums and some unsympathetic lawmaking, the reverse mortgage business could be reasonably described as under significant pressure today. Yet, far from being downcast and defeated, practitioners on the front lines remain resolute in their determination to turn lemons into lemonade, a trait typical of successful entrepreneurs.

“A lot is happening right now and not for the better,” says Michael Banner of Loan Well America in Clearwater, Fla., who adds darkly: “The year will get worse before it gets better.”

So, he believes, “the industry is going to be forced to change; the product is being re-defined.” By the end of this year, as Banner sees it, “more certified financial planners, insurance agents, attorneys, Realtors and other professionals are going to get involved.”


He says this will help change the image of reverse mortgages from a “needs-based, last-ditch product” to one that is used by middle-to-upper income Americans, which, he notes, “is what it was designed to be; namely a financial planning tool.”

Agreeing with this view, Michael Gruley, 1st Financial Reverse Mortgages, says market changes “are giving all of us an opportunity to move in the direction we ultimately need to go to achieve profitability and prosperity.”

While this change may cause some to cringe, Gruley is forthright: “It may feel bad right now, but once we accept it, embrace it and be honest with ourselves, it is all good. We’re just moving along the evolutionary trail,” he says philosophically.

And, the industry can take heart in the support offered by sponsoring agencies in Washington, D.C., among them the FHA. Erica Jessup, housing program policy specialist, HUD, declared recently that: “FHA is doing everything [it can] to sustain the HECM program.” But she noted, “we have to be pro-active and be ready for just about anything,” an allusion to pending budget appropriation requests in the federal FY2011 budget. “Oct. 1 is fast approaching,” said Jessup, referring to the start of the new fiscal year.

Acknowledging that appropriations may not be fully approved, she assured listeners that, “we have begun holding discussions to identify other alternatives.”

Written by Neil Morse

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  • Some prophecies are more expressions of lofty dreams than reasonable determinations. Michael declares that more professionals will be involved in our industry by year end. I conclude just the opposite. With less proceeds and higher ongoing MIP, his statement seems counter intuitive.

    Since so few seniors have utilized the HECM for purchase, it is not hard to believe that the industry will be more involved with real estate licensees. However, that particular group will come into our space at great cost of time and energy.

    What will drive CFPs, insurance agents, attorneys, or “other professionals” into our space by year end? With the strong possibility of the lending limit being reduced by over 33%, the principal limit factors going down still further, and higher ongoing MIP, Congress is making it clear that they are not of the opinion that one of the principal purposes in the design of the HECM was for it to be a “financial planning tool” in the hands of the middle class.

    I personally hope (and encourage him to do so) Michael writes an article in RMD about the HECM as a financial planning tool and also presenting his view on why there will be an increase in the interest of professionals in HECMs before year end. That would be a very helpful article. It would also be very useful in adjusting marketing plans for the remainder of the year.

    • Critic,
      Your continual negativity is simply astounding.
      “That particular group will come into our space at great cost of time and energy.” Who do you think sells all the homes in this Country? Realtors!!!

      I am performing a 3 hour CE class for Realtors on the subject of the HECM purchase here in Florida and it is being attended very heavily all over the state. They are very excited about having a mortgage to offer seniors that allows them to have a mortgage of 50% or greater, depending on their age, with no monthly payments what so ever. I also inform them in my class that this figure is probably going to be decreased in the near future by our very narrow minded congress and they still love the product.

      As far as what will drive other professionals to our space by year end, as a matter of fact there is going to be a national education initiative offered by a major university in this country to the literally millions of financial planners, insurance agents, attorneys, long term care providers & Realtors about the true strength of this great product.

      And Critic, please consider this with an open mind…These people who know little to nothing about reverse mortgages at this point in time will not have the past experience with the product that you & I have.

      When they refer a client to a reverse mortgage professional and that professional gives them a figure on how much they can lend they simply will not reply “Hey! Did you reduce the principal limit??????”

      Think forward my friend…not backwards…

      Now, that being said I do agree with you that further principal reductions and increasing costs will severely hurt the present reverse mortgage industry. But the present reverse mortgage industry doesn’t do business with those millions of advisors…

      Education, education, education…

      Oh, and by the way I would love to right an article in RMD.

      • Michael,

        You state: “Critic, Your continual negativity is simply astounding.”

        But it seems you forget the assessment of the author about your statements when he says: “'A lot is happening right now and not for the better,' says Michael Banner of Loan Well America in Clearwater, Fla., who adds darkly: 'The year will get worse before it gets better'”?

        Your statements sound a little negative, oh, that is except when it comes to the things you are personally doing. Then everything must be agreed to as rosy.

        Per your own statements you have personally educated thousands of financial planners and many elder law attorneys on reverse mortgages. I am sure someday we will see the results of those efforts in improved endorsement numbers but unless I am mistaken, the number of endorsements in Florida are way down. Where is the impact of all of this education?

        The proof is not in speaking but in the number of endorsements. Yes, I positively believe that based on current experience more real estate licensees (not just realtors) will add to the number of HECMs for purchase but again only at great cost.

        Let's see how the endorsement numbers for HECMs for purchase actually increase between June 1 and next February. I doubt if within that small time period it even reaches 30% of the total HECMs endorsed between June 1, 2010 and February 28, 2011. We will be lucky if it is 10% of that number and that will be after almost 24 months from first introducing the product into the market place. Compare that to the growth in fixed rate HECMs in 24 months.

        To say the senior has “no monthly payments what so ever” assumes many things. One is that an existing second will not be subordinated as part of the HECM transaction. It also assumes that the senior has no other monthly obligations including homeowners' insurance. Last November, that form of “advertising” was condemned at the marketing session at NRMLA.

        If you think some financial professionals will not question your integrity if you do not address the current lowering of PLFs and they find out later, while you may have met many such people, you really know very few.

      • Critic,

        I must say you aptly named your self…

        Things are far from rosy down here in Florida. Property values continue to decrease at an alarming rate, much higher that the majority of the rest of the Country, and this factor more than anything else keeps endorsements down…

        I have in fact educated slightly more than 2,000 advisors in the last 24 months and they include certified financial planners, insurance agents, attorneys and health care professionals. You ask where are the results? With all due respect Critic the results are the following;

        My mortgage company is still in business, unlike many, and back in growth mode. My school is growing a very large rate and getting ready to announce a relationship with a major university that will be expanding my Florida education model into a national platform.

        Educating 2,000 of the above mentioned professionals out of the 4,000,000 in the nation is just a drop in the bucket…Maybe you should reserve your criticism until a greater number of these professionals throw their hat in the reverse mortgage ring…First we educate, then we see results…

        You have referred twice now to the “great cost” of involving Realtors in our industry. What is this mysterious great cost of bringing in 1 million + people touting the purchase HECM?

        2 More important things that you have very wrong…

        # 1 – I never teach “no monthly payments what so ever” I teach “no monthly mortgage payments what so ever” which is a 100% accurate statement.

        2 – I stated in my last transmission clearly that I do tell the attendees of all my classes that further principal reductions in the reverse mortgage are almost a certainty…and they still want to learn more about what this product can do for their senior clients.

        Before you suggest financial professionals might question my integrity over what I teach, you may want to consider using your real name rather than your alias…

        Anonymity allows you to never be wrong in the eyes of your peers and create false courage in your statements.

      • Michael,

        You know your business. Maybe you can provide us with information as to how much of your reverse mortgage business is coming from those 2,000 “students.”

        I find it interesting you refer to your school. It is the school which sounds like it is doing well. There are few educators who can claim to have directly educated one out of every 2,000 members of a significant industry in one specific area. That record is impressive whether the quality of the education provided is great or not.

        As a leader in educating Realtors (by your own words – not the same as real estate licensees) about HECMs for purchase it is astounding you ask about the cost of time and energy. For those of us who have met with such licensees, it is not easy for them to grasp the concept many times simply because of the bias they hold against the product from the lack of having a HECM for purchase before 2009. The growth of this product cannot compete with fixed rate HECMs and the volume is still miniscule. So what is the percentage of HECMs for purchase your business produces compared to all reverse mortgages you originate?

        You state: “I never teach ‘no monthly payments what so ever’ I teach ‘no monthly mortgage payments what so ever’ which is a 100% accurate statement.” Please read the second sentence in your first reply above where you state: “I am performing a 3 hour CE class for Realtors on the subject of the HECM purchase here in Florida… They are very excited about … no monthly payments what so ever.” I am just quoting you.

        I apologize as to your educating about lower PLFs. I got lost in your pronoun references when you said: “When they refer a client to a reverse mortgage professional and that professional gives them a figure on how much they can lend they simply will not reply “Hey! Did you reduce the principal limit??????” The only ones referred to in the plural were the professionals but then you begin mixing plural pronouns with a singular reference. It is hard to follow your writing at times.

        It is laughable how you attempt to attack anonymity. You desire the glory of your achievements so you have a real reason to provide your alleged real name. But as I always point out, I can pretend to be Michael Banner as well as anyone else. Besides you might just have a very poor ghostwriter providing your comments and replies. RMD readers either groan or enjoy reading The Critic. Using this name allows me to question what is being said and written without making it so personal. I even critique my own employer.

        By the way, michaelbanner is not exactly your real name, is it?

      • Critic,

        You are a character…but a character I do enjoy conversing with and respect.

        I really would love to converse with you in person and would gladly sign a non disclosure agreement to protect that anonymity you obviously enjoy so much…

        Let me make a few things very clear as you seem to take the word literal to new heights…

        #1 – When I refer to Realtors I am referring to all licensed agents…of which there are over 1.2 million according to NAR. The cost and energy you are referring to is not something I look at as unusual but part of the normal cost of doing business as a career mortgage banker. I would guess you entered the mortgage industry solely as a reverse mortgage professional as your comments strongly suggest you are not very experienced with the conforming mortgage world. But if I am wrong I will apologize is advance. One of the main reasons the purchase HECM is so very rarely used is many reverse mortgage professionals have no experience in dealing with Realtors and therefore shy away from this very large source of business.

        #2 – So you think I crave the glory of my achievements??? Lol, You may be right…but I am also very proud of being involved in the reverse mortgage industry and find it very rewarding. I also truly do feel the more we educate the financial community the more chance we all have of helping a greater # of seniors. So promoting my education model is an everyday thing for me…and I do have fun doing it…

        #3 – Almost 100% of my reverse mortgage business is a direct result of my education classes. And I am not ashamed to admit my volume is more than 60% off from 18 months ago. And you are correct that I am enjoying more success in my school then in my mortgage company at this point in time although I have seen a very strong uptick in volume in LoanWell America the last 45 days.

        #4 – Michael Banner is not my alleged name…I have been Michael Banner since July 4th 1958. Since you now know my birthday is just a couple of weeks away I will be expecting a gift…lol

        As I mentioned in one of my earlier transmissions you can expect to see announcements of a major university becoming involved in a national education initiative on the subject of reverse mortgages very soon and I am hoping RMD is a part of those announcements.

        If you are a father I hope you are having a great father's day with your family and look forward to actually meeting you one day and having many of these conversations in the future.


      • Michael,

        You’re just a kid. By the way a few OTHER very famous events happened on July 4th besides your birthday and the signing of the Declaration of Independence. On that day in 1826, both President John Adams and his political rival President Thomas Jefferson passed away. Exactly five years later our fifth president, James Monroe died. You now have that gift.

        You are correct about my experience in the mortgage industry although I have been a California real estate broker for about 2 decades. Even though I was once a Realtor, I have no need of the cost for retaining the NAR or CAR membership since I am not selling real estate.

        You state: “So you think I crave the glory of my achievements.” But what I said was: “You desire the glory of your achievements….” There is absolutely nothing wrong with desiring to have your achievements associated with your name but craving it is something else again. Was that a Freudian slip?

        While I believe it is Michael Banner of LoanWell who is responding, there is no independent verification. While I could be Thetis O. Homer, that is not the point in blogging. Blogging is for the purpose of expressing ideas. Many times names and personalities just get in the way. That is why I blog under this pseudonym. In attempting to be The Critic, I find anonymity very helpful.

        Congratulations on the acceptance of your program by the university. I am happy for you. As you probably already know NYU has a certificate for reverse mortgage training as well as the University of Denver in its school of continuing education for CPAs. I do not believe there is yet such a program specifically tailored for financial advisors who are not CPAs although there is an attorney in Florida who has had an approved CLE course on reverse mortgages for Florida lawyers for several years now.

        Yesterday my family came together to celebrate a birthday and father’s day. Thank for your well wishes. I hope your family had a good time as well.

        While your offer of providing a nondisclosure agreement is flattering, that plus a few million U.S. dollars will do just the trick (LOL). The stated gesture is genuinely appreciated but warmly declined.

      • Admin,

        It would be beneficial to understand Michael's view on HECMs as a true “financial planning tool” even before the senior applies for one. It would be good to see his education platform and what it includes. He is in fact a successful leader in educating “financial planners” in reverse mortgages.

        I, for one, would like to read that article. I hope that is not too much to ask for. Thanks.

  • The industry must adapt. I hope we do a much better job of it this year over last. It got pretty tiring to read all of the complaints last year and early this year about being taken by surprise over the September 2009 announcement of reduced principal limit factors for the coming 2010 fiscal year.

    This article was a great wake up call to be planning for announced changes taking effect on October 1, 2010. Of course we may not know what the exact changes will be for two or three more months; so prepare your leads and prospects for any number of scenarios.

    • It is with the greatest of respect for our two beloved “TCs” (The Critic & The Cynic) that I add my voice to the Principal Limit discussion. I envy their eloquence and depth of understanding and have learned much from them over the years.
      It is evident to me, the time is drawing near to effectively impart to our representatives in Congress what is at stake in the upcoming HECM Subsidy request.
      Every Reverse Mortgage Professional, Processor, Underwriter, Closer, Funder and Reverse Closing Attorney from every corner of the country, that can steady a pen or compose their views really must write to their representatives in Congress.
      But…the timing must be right, (too soon and they forget the message before a vote – too late and we miss the opportunity) The Appropriations Committe members must be reached. (If I write to them from outside their state, the e-mail will not register in their websites and I have no idea what happens to regular mail received from out-of-state. (I can guess though.)
      We were guided by a reader last year who revealed those in the budget appropriations committees and generally how to write Congress. I wrote about 25 letters in early September '09 and was discouraged by the seeming futility of the effort.
      We now have roughly 90 days before October. I am reaching out to the RMD readership who know what to do to guide us. Who do we write to? When do we write? When do we follow up? Do our home state Congress men and women matter if they are not on committee. Do we go see them personally? What states are key (i.e. whose representatives sit on committee)? Will RM Pro's from the key states volunteer to visit personally their representatives? Can NRMLA, Dennis Haber, Reverse Fortunes or other Reverse Mortgage venues create a platform to effectively channel our voices so that we are heard? Should our letters be masssed and hand delivered via 20 Mule-Team Wagon Train to more sensational effect?

      I admit, I do not know what exactly to do. I do know however, if we do what we did last year we most assuredly will harvest last year's result.
      Let's harness a beleagured but determined and knowledgeable industry to make some Real NOISE!
      My thanks and appreciation to all.


      • John,

        While appreciating your kind comments, I fully agree with your assessment. I would love to see Peter Bell or Joe DeMarkey step in at this point and provide the information you request. Excellent reply to me and The_Cynic. Keep up the good work.

  • Change is here, no doubt about that. However, will the changes be positive and keep the HECM program going or are we going to see changes that could be the beginning of the end of the HECM program.

    I am not trying to paint a gloomy picture, just the opposite. I have no choice but to put my faith and confidence in those that are forcing change. I have to believe that they will not adjust and recalculate the principle limit so we will face another reduction. If this takes place, I believe the HECM loan will have reached its life's end.

    I can't believe that those who have the power to implement these changes would be so foolish as to do this again with the principle limit. Don't they have any confidence that our great nation will recover and home values will increase, maybe not? This is what this is all about, home values. The same government, the agencies and Wall Street that created this housing crash and economic nightmare we are in, are same one's who now are scurrying around trying to make decisions to correct their errors and failures they have made over the past 15 years. They are making it appear that the HECM, reverse mortgage industry is the blame for everything.

    The plain fact is, our industry is small, we don't have the strength in numbers to fight back the way we should. We are the scapegoat, the foot ball to be kicked. The senior citizen, they are not important, the HECM won't make a difference. I am plain old infuriated. How did we become to have so little common sense?

    As far as the HECM purchase program, it does not have a chance the way it is structured. It was doomed to fail from day one. Well my friends, that is all I have to say for one night.


    John A. Smaldone

    • John,

      You & I have had many good talks but with all due respect you are way off on the HECM Purchase Program.

      I am performing a 3 hour CE class for Realtors on the subject of the HECM purchase here in Florida and it is being attended very heavily all over the state. They are very excited about having a mortgage to offer seniors that allows them to have a mortgage of 50% or greater, depending on their age, with no monthly payments what so ever. I also inform them in my class that this figure is probably going to be decreased in the near future by our very narrow minded congress and they still love the product.

      And I'm getting strong business from these classes…

      • Michael,

        Good to hear from you, hope things are going well. Michael, my experience with the HECM purchase program has not been good. Also, the number of endorsements on the program have been dismal. However, if you are having success with the program as well as with the classes you are giving, far be it from me not to look at what your doing. I hoped when the program came out it would be successful. It is all in the delivery.

        Michael, anything you can share with us on what we should be doing or please let me know, I am open to anything that could lead to success in this market.

        I appreciate,

        John A. Smaldone

  • I think all poters need to identify themselves. Why are people allowed to post anonymously? Who are the critic and the cynic? Are they the same man or woman?

    • Many famous writers (and many more less so) have written under pseudonyms. There is more than one name for it. Some use the term “pen name” in describing it.

      Your fight is with history not those who avail themselves of pseudonyms. Historically you are not the first to complain. Secrecy drives many straight up the wall.

      But I have absolutely no apologies for availing myself of a perfectly accepted means of identifying my authorship. It is perfectly all right to rail against the practice just don't expect people like me to be sympathetic.

      Be at peace. Reverse mortgages will still be originated and RMD will still go on without knowing who uses what pseudonym.

  • Michael,

    What are “poters?”

    You have got to be kidding.

    So that everyone is clear that one of your aliases really is Michael Pinter you should be required to post your dirver's license, your Social Security Number, your confidential NMLS information, and your passport. If your passport is not up-to-date, you should not be allowed to post until it is. I also like the idea of posting your thumb print so that we all of us have a way of comparing it each time you post.

    How about a DNA sample? How about someone sitting at the keyboard verifying that you really wrote the post? Well two are better than one. Let's do the ultimate, all comments must be done in the RMD office and before posting, your ID must be verified through a retina scan.

    This is getting almost as silly as forcing people not to post anonymously. Maybe your name serves you well but mine matches my identity about as well as the Johnny Cash song — “A boy named Sue.”

    • I wonder who has less guts, you or the “The Critic” It's very easy to write the absurd drivel that the two of you do, when there is no accountability for any of it.

      • Michael,

        I have all of my body parts, whether The Critic does or not. If you need a name just call me “Mickey” Shire. I bet you like the secret ballot. I like anonymity when blogging. What is wrong with that? I can tell it bugs you to pieces. Be at peace.

        I hope you had a great father’s day.

        “Mickey” The Cynic

  • Good morning my friends,

    Why is everyone bickering and going after one another? Between Michael Banner, Michael Pinter, Cynic and the Critic, all of whom I have the upmost respect for, your going at one another personally, which you have never done that in the past.

    I have never seen any of you react this way. This goes to show you the stress that is building up within everyone over the happenings in our industry. The four of you ad so much knowledge and constructive conversation on the Reverse Mortgage Daily Post and to this industry. Please put your energy where it is needed. We have so much Fish to fry, we need to, some how, unite and figure out how to fight our enemies, and we have them, especially in Washington.

    I am only saying this because for such a long time we all have been communicating on a very professional level with respect for each other, regardless of what name any one used or uses. We have gotten along well and learned from one another. In fact, most of us like James Veale and others have always contributed so much to the effort. We need it to continue. I call you my friends because I feel like we all are friends, sure don't want to see that go away.

    Take care all, have a good Monday.

    Your friend,

    John A. Smaldone

  • Cynic,rnrnI want to thank you for the compliment. I had to look up the word “Admonition” first!rnrnTake care,rnrnJohn A. Smaldone

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