Reverse Mortgage Call Centers Could See Big Gains From “Dramatic” FHA Changes

What some in the industry have called “dramatic” changes to FHA lender approval requirements through Mortgagee Letter 2011-34, announced last week, could open up serious opportunity for mid-sized lenders who operate in many states across the country.

Under the new rules, lenders are no longer limited by their office locations in terms of the states where they can operate. Prior to the change, they were limited to the states sharing a border with the state where the office was located.

“It hopefully allows us to expand into more states much more easily,” says Josh Shein, CEO of Great Oak Lending. “We still have to get state licensing in those states, but having the FHA process be not restrictive as it was in the past is really going to help us expand into different areas.”

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The lack of restriction on lenders, which was rumored for some time, was called a “dramatic” change by Weiner Brodsky Sidman Kider PC, counsel for the National Reverse Mortgage Lenders Association, in a special alert email sent this week. “This is a dramatic expansion of the ability of FHA lenders to make loans nationally,” the email stated.

The changes stand to spark some competition in areas where the licensing process is easiest. Additionally, it could serve to benefit lenders which operate under certain models.

“This would more easily open the lenders to a call center/direct model in my opinion, and encourage them to get licensed in additional states if they’re not already,” John Lunde, Reverse Market Insight president and co-founder told RMD in an email.

Lenders say the expansion could happy fairly quickly, now that their branch operations are not limited within the states that they border.

“This definitley opens up the door for other states without having to open an actual office to be able to do FHA loans in other states,” says Amanda Clinton, operations manager for Net Equity Financial. Currently, Net Equity Financial operates mainly in the states surrounding Maryland, where the company is based. “Hopefully, we will start getting licensed in some other states and this will allow us to be able to do FHA loans in those states immediately,” Clinton says.

“It allows everyone to be able to reach more consumers, and helps everyone’s business,” Shein says.

But for those that operate call centers, the opportunity may be even greater.

“This is really good news,” says Reza Jahangiri, CEO of American Advisors Group, which operates a reverse mortgage call center based in Irvine, Calif. “[It] should open up the field for bigger players.”

Bigger, and potentially more phone-centric.

“I think we’ll see more lenders open call center/direct operations for reverse and put more emphasis on that channel for those that have existing,” Lunde says.

Written by Elizabeth Ecker

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      • When I started in the reverse field several years ago, the AVERAGE LO, on the street produced around 3 loans per month. Then the big players installed call centers and bought glitzie TV adds with senators and movie stars. Now the average, “on the street” LO produces somewhere around 1 loan per month. Where did all the prospects go? TV is powerful. Remember when Century 21 Real Estate opend up in the 70s with TV adds every 15 minutes? “We are national but neighborly” Nobody ever heard of them, but their share of the R.E. business skyrockted over night. More listings for them, fewer for the no name, mom and pop shop. 
        I was there. More call centers and more TV adds equal a HUGE footprint for the big guys and much less for the little, face to face originator on the street asking / begging for referrals. Horray for them, —  to bad for us.
        I got in the real estate business in 1968 and switched to mortgages in 1984. “Been there”.  Thats why Eric.

      • Eric. There are only a certain, by comparison, small number of customers for reverse mortgages. When a call center loan officer covers four states and reaps the benefit of TV adds featuring movie stars and politicians, the result is fewer prospects for the “on the street” originator, who has only his or her “nice smile” to compete with the razzel dazzel TV add. The smile is not enough. Thats one reason the turn over rate in the reverse business for “on the street” loan officers is so high. My question is still this. Do you or others think it is time for the outside, on the street, reverse loan officer to look for another opportunity outside this field? Thats all. Thanks   

  • Common sense? When FHA caved to Countrywide pressure, allowed a non face to face application/counseling and opened up the call center concept, the beginning of the end was in place. When you have cross country loan officers doing business over the phone and by mail, reputation becomes unimportant. Most seniors have no idea who they’re even dealing with and will fall prey to the ethics of a personality they’ll never even meet, working for a comany they’ll probably never even hear of again. Yesterday I spoke with a gentleman who was contacted and told he should do a streamline refinance because he could get a lower interest rate and a refund of his service fee set aside (offseting the refund against the cost of the refinance!). He was being pressured to sign by a “professional” phone loan officer. You people may see the dramatic changes as a good thing because you can swoop down on a bigger pot of money…the senior is not served!  Shame on the FHA and you sharks at the end of the phone!   Jerry Gilmour  Directors Mortgage

  • >>When you have cross country loan officers doing business over the phone and by mail, reputation becomes unimportant.

    That’s the most ridiculous thing I’ve ever heard.  I’ve been originating Reverse Mortgages like that for over 7 years, and reputation is extremely important.

    >> He was being pressured to sign by a “professional” phone loan officer.

    That happens when they’re visiting the Senior at their home too – it’s not specific to face-to-face or phone.  It’s specific to that individual, and unacceptable behavior.  Those RMLO’s are disappointing and tarnish our industry.

    • Much more likely to happen if you don’t have to look someone in the eye and they don’t know where your office is…I’m not saying that everyone who originates on the phone is a crook…just that the odds are greatly increased in favor of abuse in that format. The senior is best served with a face to face application. Period 

  • The endorsement pie will be redistributed in two ways.  First, lenders will be trying to grab their share of the pie abandoned by Wells Fargo and Bank of America.  Second, the largest lenders will be adding or attempting to expand their call room operations while boots on the ground will be sent scrambling as never before.  In such times, ethical standards fall by the wayside and greed rules.
     
    HUD is over its head yet issuing more rules; that is what ineffective government overseers do.  In many corners HUD has never been shorter of staff.  It is STILL overburdened by the mortgage meltdown.  As clear evidence, the OIG tested counseling once and has not followed up again; no doubt that is on its back burner.  Also the default information has not been released.  Will that come in another three months, six months, or how long into the future?  Its importance was once immediate.  Where is it now?
     
    Fiscal year 2012 will test the ability of HUD to monitor and regulate the ongoing operations of reverse mortgage lenders.  Not surprisingly the expansion of lenders (not the industry as a whole) and change in origination modus operandi will be staggering to those in HUD who have the responsibility to oversee the reverse mortgage industry and since they are less experienced in their new positions, they will retreat to oversight by more meetings and new rules. 
     
    What 2012 will expose is the ineptitude of HUD to monitor and actually regulate the ongoing operations in the industry but there will be exceptions.  NRMLA will show a flurry of action but will be in most regards rudderless; its ability to provide self-regulation will be more exposed than ever as toothless and ineffectual.
     
    2012 will be the year when real ethical standards at the lender level will take a back seat for the sake of gaining market share.  2012 will not only be the year of lower accepted ethical standards across the board but also of industry wide endorsements trending toward 2005 rather than 2009.  Most lenders will be happier and hungier on September 30, 2012 than they are today; however, greed will be crying for even more in 2013 with little means to be as readily satisfied.  The losers will be those who have succumbed to their greed and those we supposedly serve, seniors. 

    The lessons of history scream loud but as history makes clear, greed drowns its cries and rules the day.

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