Changemakers: Peter Bell, CEO of the National Reverse Mortgage Lenders Association

There are few organizations in the United States that are more committed to spreading the word about home equity incorporation in retirement than the National Reverse Mortgage Lenders Association (NRMLA).

As the foremost trade association operating on behalf of the reverse mortgage industry, NRMLA is uniquely positioned and suited to serve its interests at all levels: from the day-to-day realities that affect the course of loan originators and their work, to the legislative conversations and action that has to take place to ensure the industry is kept in mind when a law that affects it is passed.

Association CEO Peter Bell served a foundational role in the creation of NRMLA, and he has been a tireless advocate on the industry’s behalf for well over 20 years. He is often cited as a pivotal figure in the advancements the industry has made by its most prominent leaders, and RMD is honored to include him in our inaugural class of Changemakers.

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Do you thrive on making change? Why or why not?

To me, change is inevitable. You have to embrace change, accept it and be willing to adapt to it along the way. That’s true in business. I think it’s also true in personal relationships. It’s true in cultural activities. Change is probably the one thing that’s constant in our world and in our lives. So, I don’t shy away from change; I embrace change.

If something doesn’t end up working out, do you believe that it’s beneficial to have a ‘fail fast’ approach so that you can move on quickly? Or, do you have another perspective when it comes to something not quite working out?

It’s hard to generalize. Things always work out one way or another, in my view. They may not work out as initially anticipated. I can’t say that I’ve experienced a lot of things in my life that have changed that have not worked out; change, for me, has generally proven to be positive. Some people face change that has been adverse, but I can’t say that I’ve experienced that along the way.

What are the downsides to making change? Are there ways that you try to avoid those downsides when having to implement some kind of change?

That’s viewing change as negative. But I think that even if you go back to our specific industry, there have been changes in policy that a lot of people view as negative. Whereas with the changes that we’ve had, we’ve been able to adapt and find our way.

If anything, they have sustained the undertaking. Had you not made some of the changes that were made in the reverse mortgage business that people considered to be negative, you might not have a reverse mortgage business at all today.

Sure. So, in other words, you see the changes that have come down in the reverse mortgage industry as aspects that will ensure its future and longevity.

Yes, they contribute to its continued viability.

Change, of course, does contribute to that continued viability. Do you think that the reverse mortgage industry is changing fast enough today?

Actually, no, I think it should get used to changing at a quicker pace. People continue to sell the reverse mortgage pretty much the same way they did 15 years ago. We still see the celebrity advertising and a lot of the messaging is the same as it has been for years. We’re seeing that what we’ve been doing is not moving the needle as much as anyone would like, so we need to figure out something else.

We’ve been doing pretty much the same level of volume for the past several years. It is certainly a lower volume than we did a number of years ago. So, to me, I think we do need to figure out how to change and take a different approach to building our business.

Do you foresee any kind of fundamental aspect that can help things to change more quickly? Or, is it going to be a longer-term discovery process to figure out how that kind of change can take place?

Well, it’s clearly taking a longer time, because it hasn’t happened yet. I think part of our challenge is that because our product is called a ‘mortgage,’ and is insured by FHA, we have fallen into the distribution channels that have developed in the mortgage industry over the past couple of decades. The product we offer, and the point in life that people are considering this product, makes us very different than the forward mortgage business.

So, perhaps our delivery systems are not really the most appropriate for the product we have today.

Why did you start NRMLA? What was the process like to actually get it off the ground?

I was serving on a Fannie Mae advisory board, that was called the HIAC, the Housing Impact Advisory Council, back in 1996. Jeff Taylor was also on that board. Jeff came to me one day and said that our fledgling little industry really needs a way to communicate with policymakers in Washington. We need to adjust the policy to make it more consumer-friendly and better for businesses to be able to operate. I was familiar with reverse mortgages on a general level; I was in the room at the House Banking Committee on the day in 1987 of the mark-up of the bill that created the HECM program. I’ve been working on housing policy matters since 1976.

Jeff said that we need to figure out a strategy for Washington, so I started looking at the business and I came back to him a couple of weeks later with a plan. Jeff, some other participants in the reverse mortgage business and I agreed that we would get together at the Mortgage Bankers Association annual meeting that October in New York City.

We sat down and I told them my assessment of the challenges they faced. It was an industry that’s offering a product that is counterintuitive. It’s different from what people think of when they think of mortgages. It deals with a population that’s perceived to be vulnerable, seniors. And, [it was comprised of] companies that nobody had ever heard of. So, when you take that combination – a product that people don’t understand, a clientele that’s perceived to be vulnerable, and companies that have not established a reputation that people are comfortable with, it creates a challenging situation.

In that type of situation, when policymakers saw reverse mortgage representatives come in the front door, they exited out the back door, to avoid sitting down and engaging. The group assembled in NYC asked me what they should do about it, and I told them, “you have to show that you’re willing to step up to the plate and accept accountability.” I explained that the mortgage industry had been notorious for aggressively implementing marketing procedures and then when something would go awry, everybody pointed to somebody else for the blame. The secondary market investors pointed to the issuers, the issuers to the originators, the originators to the underwriters or the confusing guidelines. No one accepted accountability.

I told them that they couldn’t operate that way in this business. They had to be willing to accept the accountability. That [requires you to] have a code of ethics and professional responsibility and a set of best practices. There has to be an ethics committee that could accept complaints, review them and take action. And that was really the beginning of NRMLA, to establish an organization to do those things.

Next, we invited about 16 industry leaders to an organizational meeting in DC, a few weeks later. I facilitated a day where we had a discussion about the state of the industry, what people saw as the challenges, what we might be able to do if we work together, and what it would take to be able to form an organization. We concluded that day by telling the participants that if they were interested in forming an organization, confirm their interest by sending a check for initial dues. We needed a budget of $200,000 to get started and we agreed on $10,000 initial dues.

We asked them to send their checks in by the end of the month, and if we received 20 of them, we would go ahead. If we didn’t get 20, we would just send the checks back. That was how we launched NRMLA. Twenty checks came in and we were off to incorporate the association, develop a code of ethics and professional responsibility, and establish a set of best practices.

I suppose in terms of self-regulating, through something like a code of professional ethics and responsibility, it’s easier to regulate yourself as opposed to waiting for the government to do it for you.

Well, in this case, we were trying to get the government to regulate, but the main thing we were looking for was to change the regulations to create a fee structure that would provide the appropriate compensation for the origination of a loan, to cover the costs of creating the loan, and to compensate the originator. There was a much more severe restriction back then.

The thought was that policymakers needed to see some degree of self-responsibility within a new industry before it could ask them to consent to changing the rules in the industry’s favor.

What was the response to the founding of NRMLA from ‘boots-on-the-ground’ loan officers that you would communicate with?

We convened our first conference actually right near your office there in Chicago. It was about 60 people. That meeting included a bunch of active originators and I think that they were excited to have a networking opportunity. It was kind of a friendly business, very supportive of each other and not cut-throat competitive back then. Having an association helped define it as an industry.

Would you say that it also took steps in the anticipated approach of legitimizing it further?

Yes, that was a major part of our effort, to start dealing with all the misperceptions that are out there.

What’re some changemaking efforts in the reverse mortgage industry that you would say you’re most proud of in your role at NRMLA over the years?

I take particular pride in the single national loan limit, which took us a few years to get through. But we did get it through on an amendment that Congresswoman [Maxine] Waters actually introduced on our behalf back then. The thinking behind it was that HUD took a lot of policies that were created for forward mortgages and just tried to apply them to reverse mortgages. It really wasn’t the right fit.

The loan limits are a good example of that. The concept of area-by-area loan limits on forward mortgages is to empower a consumer to buy more or less an equivocal home whether they’re in Los Angeles or Topeka. A comparable home has vastly different costs in different markets. In a reverse mortgage, people are using the proceeds to buy durable medical equipment, to pay for health care costs, etc. The cost of these things doesn’t really vary by geography. A set of bedrails costs the same whether you’re buying them in Topeka or buying them in Los Angeles.

So, if we’re really looking to empower homeowners to be able to use their own wealth to age in place, then why should we restrict them based on geography? That was the concept behind having the single national limit, versus the area-by-area limits.

I didn’t realize how involved NRMLA was in the establishment of that. Do you have another example?

Another one is counseling. We’ve always had counseling as part of HECM from the get-go. A lot of people think counseling was added later on, but it was not. It was in there from the original statute, but it wasn’t a legal or a regulatory requirement for proprietary products back then, as it is now in some states. But, NRMLA decided that counseling was an important safeguard particularly for a product that had such a poor consumer understanding of it.

In order to make sure people really understand the transaction they consider, counseling should be part of proprietary reverse mortgages, too. When we made it part of our NRMLA values, we essentially said that any NRMLA member that’s going to bring a proprietary product to market should have a counseling component to it.

How does the continued innovations and introductions of proprietary products change NRMLA’s role, if at all?

I think it broadens the number of things that need to be explained and discussed. It also shifts a lot of the activity from the federal government to the state governments. Because, as we have more and more proprietary activity, we’re going to have more and more state-by-state regulations and legislation.

In terms of the educational conversations that you have with lawmakers about HECMs and proprietary products, does the approach change at all between the two product classes?

You know, it’s hard to generalize, because policymakers come from different perspectives, have different motivations and different things they’re trying to accomplish. For instance, one lawmaker in Missouri has introduced the same bill on several occasions over the years which would require that when the reverse mortgage borrower passes away, the family should be given up to 20 years to repay the mortgage.

Obviously, if they were to pass that kind of legislation, there would be no reverse mortgages made in that state. We have to deal with that differently than we deal with matters in other states.

In the time that you’ve been involved with NRMLA, what was the most pivotal change that you’ve observed? Either in terms of perception or policy in regards to reverse mortgages?

I have not seen a lot of what I would describe as pivotal change. I have seen a number of incremental changes. Some have been made in response to news reports of consumer abuses. Others have been made to improve the performance of the FHA fund. Some have been to enhance counseling; others to improve the value proposition to consumers.

Obviously, one of the bigger changes more recently were the changes handed down in October of 2017, as well.

I think the most significant change in 2017 was the lowering of the floor on the expected interest rate. When the highest level of proceeds available was obtained with a 5% expected rate, that was what was sold most frequently. Over time, that became a high interest rate relative to other products in the marketplace and, therefore, investors were willing to pay a premium for those loans.

The industry was making a lot of additional revenue per unit then. When FHA lowered the floor, allowing expected interest rates to go below 5%, that basically took some of the profitability out of the transaction and reduced the interest rates to consumers. People say it was the PLF cuts that were the problem, but I think it was really more the changing of the floor and the interest rate cuts that ensued.

In terms of the ways in which NRMLA does communicate with its membership, has that had to change in an inordinate way since you’ve been in a leadership position with the association?

I don’t think it really has to date. Now, we’ll see if the current coronavirus situation changes it going forward. The face-to-face meetings, the conferences and events have been an important part of communicating about issues and trends with the membership. The value of being in an organization is greatly enhanced when one comes and participates in its events. We’ll see now whether we’re going to have a change in behavior here.

9/11 changed conference-going behavior quite a bit, and it never really changed back, although it has recovered somewhat over the years. Spouse participation has dropped, and that means that you don’t do meetings on the weekends. Because if a spouse is not there, the participant wants to get home for the weekend. So, that was a major change then. Now, we’ll see how we are forced to change. Building our online presence thru webinars and Zoom calls is one change underway.

What do you think the reverse mortgage industry would look like today if NRMLA had not been established?

I don’t know that there would be a reverse mortgage industry today. There would certainly not have been an FHA product had NRMLA not been here.

NRMLA has been able to garner the support of members of Congress from both sides of the aisle, and also in the top tier of HUD management to sustain the program over the years. But, there have been a number of threats along the way that would have probably led to FHA discontinuing insuring HECMs had it not been for this organization.

Was there ever a time in which you took an action in your role as a leader at NRMLA that you thought was best for the industry, but which proved unpopular among its members?

There are some people who say that extending counseling to proprietary was not a good idea. I disagree with that. There are always people who disagree. They often tend to be the louder ones within the industry, but I don’t know that they are representative of the majority.

You recently shifted from the dual role of NRMLA president and CEO to now CEO, having promoted Steve Irwin to president. What convinced you that the time for that was right?

It’s just my own schedule. I turned 67 recently, so I’m entering a wind-down mode over the next few years. I am focusing my time on the future of our company, rather than the activities of our individual clients. NRMLA is one of several organizations managed by our company. Steve [Irwin]’s been around waiting in the wings and has the technical subject matter knowledge to be an effective leader.

Since NRMLA’s inception, I have had the titles of president and CEO. It’s been the same with the other organizations under our management. In all of them, I have relinquished my role as president, yet retain the CEO role. The difference is that the president is the COO, responsible for operational activities on a day-to-day basis. The CEO is responsible for the overall financial health and direction of the organization.

These changes allow me to focus on internal matters within our association management company, Dworbell, Inc., to prepare for the future, the next generation.

If you could go back in time and talk to yourself coming right out of that first meeting with all of the initial stakeholders in the association, what would you tell yourself?

In hindsight, I would say that to get people to accept the concept of deploying home equity this way, to fund aging in place, is a behavioral change that…well, whoever thought it would take this long?

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  • Chris, this interview was very interesting and helpful. Peter has been a major influence in the industry over the last 20 years. It is hard to imagine the industry without him.

    Since HUD endorsed the first HECM back in fiscal 1990 and NRMLA was created about nine years later, what did Peter mean when he said the following? “There would certainly not have been an FHA product had NRMLA not been here.” Perhaps he meant to say that there would be no FHA insured reverse mortgage today if it were not for the efforts of NRMLA which is exactly right.

    It was very, very surprising to read that Peter did not state that the most pivotal change to the HECM program was the the requirement of all HECM endorsements after September 30, 2008 to be accounted for in the Mutual Mortgage Insurance Fund (MMIF) rather than the General & Special Risk Insurance Fund (G&SRIF). Yet most of what is considered negative changes to the HECM program since September 30, 2008 have been as a direct result of trying to mitigate losses in the MMIF — from the first lowering of PLFs that took effect on October 1, 2009 to the contingent second appraisal requirement that went into effect on October 1, 2018, few changes, since the spring of 2009, have been implemented without consideration of its impact on the MMIF. Many of the changes were initiated as a result of needing to further mitigate losses in the MMIF. The MMIF change was enacted in the same legislation (HERA of 2008) that gave us the single national lending limit.

    Even though it is most likely true for lenders, the most controversial statement Peter made was the following: “When FHA lowered the floor, allowing expected interest rates to go below 5%, that basically took some of the profitability out of the transaction and reduced the interest rates to consumers. People say it was the PLF cuts that were the problem, but I think it was really more the changing of the floor and the interest rate cuts that ensued.” If the PLFs were not reduced, consumer demand would most likely be much higher than it is and that increased demand would have resulted in more HECM closings. The additional revenues from increased volume would have offset losses in lender revenues to some extent. No doubt, the combination of a lower interest rate floor with lower consumer demand due to lower PLFs has done far more damage to lender revenues than either one would have done on their own.

    [ Three more points about the 10/2/2017 changes:

    1) Some in the industry believe that the biggest problem in the October 2, 2017 changes was neither lower PLFs nor a lower interest floor of 3.06%. They believe that it was the change in upfront MIP. There is no question that the upfront cost of a HECM has become a greater obstacle to prospects today than it was between September 30, 2013 and October 1, 2017 (inclusive) when those who needed no more than 60% of the principal limit in the first 12 months following closing paid three quarters less in upfront MIP than what they do now (0.5% back then versus 2% now).

    2) Those who needed over 60% of the principal limit in the first year following closing paid 2.5% in upfront MIP in the period after September 29, 2013 but before October 2, 2017, the impact of a lower upfront MIP of just 2% has had little impact on consumer HECM demand since October 2017.

    3) Despite lowering the ongoing MIP from 1.25% to 0.5% which most believe lower total HECM costs, few argue that this change in the 10/2/2017 changes has substantially or even significantly had any real impact on HECM demand.) ]

    To this day, the October 2, 2017 changes are considered far more detrimental to the growth of HECMs than even financial assessment. Yet among the most compelling reasons to implement both changes were their potential ability to mitigate MMIF losses.

    Like HUD’s Deputy Secretary, Brian Montgomery, I believe that the simple change most of us in the industry missed back in the summer of 2008 has been the most pivotal and impactful change made to the HECM program, which is that all endorsements after fiscal 2008 must be accounted for in the MMIF rather than the G&SRIF. To this day, I am grateful that shortly after the passage of HERA, Peter asked me what I thought of the change to the MMIF. That was the first time I heard of that change but certainly NOT the last. To this day I am grateful Peter took the time to ask my opinion on this change.

  • I think Mr. Bell makes some excellent points about the perception of the industry among consumers. In my very limited experience, when I speak to Americans about reverse mortgages there is often a negative perception about the product. Conversely, when I speak to my friends in England, Ireland and Canada, they react by saying; “oh..you mean equity release” which is how they refer to the same type of product. In fact, there seems to be a rather positive perception in those countries for what is essentially the same idea. I believe our industry would be well advised to transition to the terminology “equity release” products instead of “reverse mortgage” products.

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