Reverse Mortgage Originators Decide to Go Big or Stay Independent

As reverse mortgage volumes have decreased since last year’s principal limit changes, moving to a bigger lender is an attractive option for some independent originators.

Mario Martirano, a 25-year industry veteran, recently made the move to American Advisors Group after feeling the current stresses of a small business owner. Although he is still getting settled, he said he is already seeing those headaches disappear because of the dedicated departments, channels, and resources he never had when he owned his own company.

“I don’t have to worry about marketing, auditing, compliance,” he said. “I’m doing what I do best, which is dealing with the people directly. And now I have backing of a big name and employee benefit providers.”

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Martirano, a Certified Reverse Mortgage Professional, had his own company — the Agency for Consumer Equity Mortgages — for 20 years until he grappled with a roughly 40% decline in business following the introduction of financial assessment in 2015.

After briefly working for a local lender, he said he reached out to top mortgage lenders, like AAG, Liberty, FirstBank, and Nationwide. In the end, accepted a position to become AAG’s manager for New York, New Jersey, and Connecticut.

While the perks of a larger company can be enticing, other independent originators plan to stay autonomous. Beth Paterson, executive vice president at Reverse Mortgages SIDAC in St. Paul, Minn. said bigger companies have approached her regularly over the years, but she has chosen to stay independent.

“I know myself and recognize myself as being an entrepreneur,” she said. “I like that independence, even with the volume down. Everybody is struggling, even the large lenders. I’m just trying to come up with other ways to increase business and volume and stick with my niche.”

Paterson, who has specialized in reverse mortgages since 1999, added that she enjoys some of the tasks – like producing marketing materials and her website – that she knows other originators would rather hand off. In addition, a group of independent originators has regular conference calls to discuss concerns, brainstorm, and offer support, Paterson said.

But because some colleagues with small businesses have expressed interest to him in moving to larger firms, Martirano said a trend might be starting.

“As business owners, they have the same concerns,” he said. “Marketing is expensive; the industry is changing; compliance and regulations are getting tougher. I think you’re going to start seeing more industry veterans looking to join the bigger names.”

Written by Maggie Callahan

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  • This trend has been anticipated for a number of years. As revenue opportunities grew with the advent of Ginnie Mae issuance, larger lenders began reaching out on a somewhat irregular basis to smaller operations about joining up.

    The expectation of further consolidation grew particularly with Mortgagee Letter (ML) 2010-20 which ended the Mini Eagle status and grouped all such lenders with lenders who had no direct approval Mortgagee status with HUD into a category known as Third Party Originators. HUD then no longer included those lenders that formerly held the Mini Eagle status in its list of approved lenders. That particularly riled one of the interviewees who wrote on several occasions about this seeming injustice.

    The industry shook after HUD announced it was dropping all Standards and adding rules that discouraged the origination of fixed rate HECMs. Several smaller lenders questioned why they should hold out any longer. Financial Assessment was difficult to swallow. Yet it only seemed things got worse when ML 2017-12 (commonly known as the 10/2 changes) was posted in late August 2017.

    All the while Reverse Market Insight showed an overall downward trend from approved mortgagee wholesale operations as a percentage of endorsements. Back in fiscal years 2011 and 2012, several of us thought that the trend might even reverse with the departure of the Big Three lenders along with the virtual end of Financial Freedom as a leading lender.

    Despite all of the rants, raves, and contrary predictions, the trend moves on all but unabated. With some predicting still further PLF reductions for fiscal 2018, will the current consolidation/merger/abandonment trend turn around?

  • Glad Mario made the decision to stay in the business even while letting go of his own shop– and now he can focus on the client not the 12,000,000 rules that a company has to follow. Congrats!

  • I can understand both angles philosophically. I have owned three mortgage companies, one very large one and two smaller ones. I have also been in the large corporate structure in the reverse mortgage space.

    I admire both. I admire Mario for the decision he made and yet at the same time I admire Beth Patterson for hanging in there.

    What I feel is most imortant is that we all try and hang in there, regardless of the path we take. Sure, in order to stay alive, we have to adapt, change and explore a whole new realm of opportunities.

    We will come back strong one of these days if we do what I mentioned above, we have a great product and we do so much good for our seniors! How can we lose!!!

    John A. Smaldone
    http://www.hanover-financial.com

    • As always John talks out of both sides of his mouth. Above all, unless the reasons for the market decline are addressed we will not come back stronger than ever.

      Reverse mortgages were so good for seniors who needed them, today those seniors who need them can no longer get one. It is now a great product for seniors who don’t really need them.

      As always, this will not be allowed on the comments.

      • There is a whole segment of the mass affluent that our industry is under-targeting. You are exactly right that it is a great product for seniors who don’t really need them … now. The reverse mortgage is one of the best ways to plan and buffer against longevity risk, sequence of returns risk, and market risk.

        Our industry has historically over-targeted seniors on the verge of financial collapse. Take a step back and reflect upon that statement: our industry pinned their hopes on clients who were a high risk for mortgage foreclosure

        Our industry needs to do a better job at making the connection to the mass affluent. Our industry needs to do a better job at communicating our tool as one of the safestways to buffer risk within proper financial planning. Our industry needs to move beyond the clients of the past, and recognize that there’s an even larger pie that we’re not scratching yet.

      • You think we have a shot at capturing a larger piece of the mass affluent pie with 2% upfront MIP? That’s a big hurdle for folks that have no need for the funds now and might never need them. It was a challenge to get them on board at 0.5% upfront MIP. Now it’s pretty much a nonstarter.

      • Hi Matt, that’s an unfortunate pain point of the HECM and a major hurdle when looking at us versus other mortgage products like a HELOC. With that said, I think originators need to be prepped for that query when dealing with financial advisors. We’re offering a safer product and the only one truly designed for seniors – guaranteed to always be there, no required mortgage payments, no prepayment penalty, and of course non-recourse protection. Is it worth it to pay a little more for that safety? Sure. We need to frame the HECM as a safer tool with more intrinsic value due to the mortgage insurance.

      • Allen,

        Music to the choir.

        “The reverse mortgage is one of the best ways to plan and buffer against longevity risk, sequence of returns risk, and market risk.”

        Everything between the quotation marks is opinion. I share your point of view but that means little.

        Where is the evidence? I remember the Big Short. The safety of the MBSs was clearly seen in Monte Carlo simulation after Monte Carlo simulation. Guess where the real proof was, what I call evidence? It was buried in tranche after tranche after tranche. Those who did the homework saw something different than what was hailed in those Monte Carlo simulations.

        Now if you produce verifiable plans with verified results that clearly demonstrate what you claim to be true as true, then you have evidence. We can take it to the world, write books, and have movies made.

        But guess what, no one has even started that work yet. Why? Because of right now it is conjecture seen clearly in Monte Carlo simulations but not in any practical results. To get the results we claim, we need seniors who are diligent to follow the plans and not deviate from them to any substantial extent. We cannot excuse plans and results that do not match up just because the senior now has dementia and cannot and will not do what is expected of them. It is like mortgagors holding up their end and not running into payment defaults the way they did; otherwise, the MBSs would be worth far less than the issuers claimed.

        The evidence needed to prove what we believe is harder to obtain, decipher, and prove than the tranche data buried in the MBSs discussed in the Big Short. So even though I believe, forgive me where I doubt.

        We are at least decades from showing consistent results based on each plan. After all you did not qualify if the plan was achievable or even competently prepared. We need hard evidence. The evidence on those rotten MBSs was not available for several years after their rot was first exposed.

        Right now we are in the Monte Carlo simulation part of our story. Will our claims prove out? I am not 100% as confident as it seems you are.

      • This product needs to get back to being consumer focused. I have a client I spoke with Monday, who’s home is free and clear. Living off $743.00 a month social security. Home value 25k, it would cost him more in closing cost than he would receive.

        Time to get this product back to helping consumers from all walks of life, with all home values.

      • Mr. Shurden,

        Then why don’t you, the originator, or the lender cover those costs? This program was designed to provide liquidity to seniors, not create crazy loans.

  • I don’t know who Bill Wisherly is but I can say this to you Bill, your comment was posted, even though you said it would not have!

    I guess you owe Maggie Callahan, and The Reverse Mortgage Daily Post an apology, don’t you!

    Also Bill, I don’t talk out of both sides of my mouth, you don’t know me at all, just like I don’t know you or anything about you!

    However, by your comment, if you really knew what you were talking about Bill, you would know that our product is still for those who need it, only in a different way!

    Many of those seniors in the past probably should not have been talked into a reverse mortgage by the loan originator, maybe you were one that did such a great job talking those kind of seniors into a HECM?

    You want to know something Bill, if I consulted a senior back then and saw that the HECM was only creating a Band Aid for the inevitable, foreclosure! I would point out to them that getting a HECM at this point of time is only going to make their problems worse in the end!!

    Naturally when it was all said and done, it was up to the senior borrower if they wanted to proceed or not but I at least I felt I did right about trying to protect their future!

    I agree with you Bill, the need product of the past is gone but the need product of today is still good. What about using the HECM as a retirement tool, what about paying off existing liens and other debts to improve cash flow. Would this alone not allow our seniors to have a better quality of life? What about a line of credit for the future piece of mind for our seniors in the event of emergencies ETC? Have you ever thought of any of these needs that still be filled today???

    Don’t tell me these are not needs Bill, you need to go back and learn the meaning of passion and what our industry is all about. I have not been in the reverse mortgage space for 21 years for the money, the money automatically came because I had and do have the passion for the business and our seniors! I always tried to do what was right and my seniors knew it and know it today!

    I said my piece Bill to you and everyone reading my comment! People like you make me very upset, it also shows me how so many things and people in our industry have changed and not for the better in many, many ways!

    As I said in the beginning, I feel you owe Maggie Callahan, and The Reverse Mortgage Daily Post an apology and I am sure many others feel that way as well!!! They did post your comment because they are honorable, whether they agree with you or not!!!

    John A. Smaldone
    http://www.hanover-financial.com

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