Why Six Months Can Feel Like a Lifetime

My introduction to the reverse mortgage industry began on February 7, 2011. For those who remember (and virtually all do), that was the Monday after Bank of America announced it would no longer originate reverse mortgages. I arrived to that first day on the job with virtually no background on reverse mortgages, and no way to assess how big of an impact the Bank of America exit could have.

And little did I know, that was just the beginning of the change I’d see. BofA’s exit was only the first in a series of events that have ruffled, but not injured, the industry in the past six months.

From my first phone calls with people in the industry, everyone seemed to indicate that the reverse mortgage business has always been filled with change, and that the cream rises to the top. “Get used to it,” they told me. But in following the news of this industry, I have to admit, I’m not sure that’s possible. It’s a little bit like saying “get used to whiplash.”

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And, while it has still been just a matter of months for me, the scope and speed of the changes seems to be increasing:

Within weeks of that initial BofA announcement, AARP filed suit against the Department of Housing and Urban development over three HECM borrowers facing foreclosure for several different reasons. (The case has since been dismissed, but it may not be the last the industry sees from AARP’s actions.)

The suit cast reverse mortgage products in a bad light as the largest senior association out there spoke against it in such a public way. Friends of mine, who knew about my new reverse mortgage beat, emailed me daily with links to articles covering the lawsuit, wondering whether the lawsuit was representative of all reverse mortgages. (I assured them it was not.)

At that same time, lenders and brokers geared up for major changes in loan officer compensation. Many told me they wondered: “Will I still be able to run my business once the laws are in place?” I wondered the same thing. Was this normal? Was this kind of regulatory change strong enough to truly damage the industry? (We are still here.)

Next, former industry spearhead and mainstay Financial Freedom shut its doors. Even if that had been the end of the major lender exits, most would call this a bumpy ride.

But then, Wells Fargo sent the industry reeling—albeit temporarily—when it announced last month it would exit the business. In spite of numerous discussions in the Department of Housing and Urban development regarding a potential assessment to determine whether borrowers will be able to meet their HECM loan obligations, the lack of such an ability to assess a borrower’s situation was precisely the reason the reverse mortgage giant cited for its departure.

Once again, alarm bells sounded. And yet, we are still here. This week, the Consumer Financial Protection Bureau bids adieu to its training wheels and its oversight of the industry will become a reality. While we don’t yet know the scope of its authority, we do know that it will be responsible for conducting a report on the industry. What will that report uncover and what will it mean for the industry? I can only guess.

And on top of it all, the state of our economy is sort of the icing on this cake of uncertainty. Will new job numbers increase? Will home values rebound? Will Social Security benefits fall?

At the end of the day, the economic times are also attributable to the particular need for reverse mortgage products at this moment in history. Even in spite of uncertainty and change, often lenders tell me there is no business they’d rather be in. Right now is a time when people who are 62 and older simply cannot count on the retirement savings they built over past decades. For many, home equity is a viable—and increasingly necessary—option.

Here’s where change may not be such a bad thing. In six short months, it seems that the public is actually starting to catch on to the concept of a reverse mortgage. The tune is slightly different today from what I heard in my first couple of months covering the industry. While financial advisers and mainstream news shows still note that a reverse mortgage is not for everyone, they seem to be acknowledging that it is a good option for some.

While I have not seen very much coverage of the HECM for Purchase, the introduction of the HECM Saver sparked several news stories that covered the product in a positive light. The exit of Wells Fargo on the heels of Bank of America also prompted a flurry of news coverage that seemed to say: we wish the economy was better, but people are going to need this option.

I have confidence after talking with executives at the many companies that remain in the industry, specialized or not, that they are flexible enough to recalibrate to the changes we have seen. Many companies have made acquisitions that allow them to operate reverse mortgage divisions. Others, including non-FHA-approved lenders, have just started originating reverse mortgages or have formed relationships with bigger lenders to get them up to speed. The number of players may be in flux, but with potential for growth and introducing new participants to the industry (something I’m told was not a regular practice in the past).

For what it’s worth, my 6-month take is that the entrepreneurial companies remaining in the industry are in a particular position to gain—from all of the above. While they may not have the huge national presence of Bank of America, the branch network of Wells Fargo or the history that Financial Freedom built over the last two decades, the vast majority have their own history of working with borrowers, assessing their needs, and they are flexible; more adaptable to the changes that are yet to come.

While six months is no lifetime, in some ways it certainly can feel like one.

Written by Elizabeth Ecker

This edition of RMD Report is brought to you by Landmark, a leading national appraisal management and compliance company serving the reverse mortgage lending industry.

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  • It was interesting to read the email when it first came out.  Ms. Ecker noted that several individuals talked to her about how change was now a way of life in our industry.  For some of us, this industry is a nice switch to minimal change.
     
    Coming from an industry where change was constant and where the Big Eight firms are now the Big Four and where the Middle Eight seemed to be gobbled up, litigated into oblivion, or still trying to find a place among the biggest international CPA firms, the contrast of coming into this industry back in 2005 was like the difference of watching a Tasmanian devil versus Rip Van Winkle in the midst of his sleep.
     
    Tax law change is a way of life.  IRS, Court, and state rulings are constant.  Income tax forms are changed at least annually.  Major accounting and auditing rules were almost as frequent.
     
    Then there was keeping up with changes in your client base and quickly learning what those changes mean to the services we provided.  Then there were internal as well as client changes one had to stay up on.
     
    Yes, things are moving more quickly now than before.  But the pace is more that of the lions on the plains of Tsavo at the heat of the day than a hungry Tasmanian devil at night fall.

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