The official magazine of the National Reverse Mortgage Lenders Association www.nrmlaonline.org March/April 2024 Volume 17, No. 2 INSIDE: Evangelizing for AI: Byron Torres: Prepare for an Artificial Intelligence Future HECM Handbook Arrives: Experts Discuss Key Points P.22 P.28 TURNING A CORNER ON PROPRIETARY REVERSE MORTGAGES
From the Top Brett Dunn, Ph.D., Chief Investment Officer/ Chief Operating Officer, Traditional Mortgage Acceptance Corp. By Darryl Hicks 8 Those We Help Friends get reverse mortgages for their homes By Darryl Hicks 32 Features 16 Turning a Corner on Proprietary Reverse Mortgages Products remain solid option for some borrowers By Joel Berg 22 Evangelizing for AI Byron Torres: Prepare for an artificial intelligence future By M. Diane McCormick 28 HECM Handbook Arrives Experts discuss key points By Thomas A. Barstow Columns 2 In Reverse Artificial intelligence is just starting By Thomas A. Barstow 4 Steve Irwin: Moving Forward Meeting today’s challenges is nothing new 5 Board Room Increasing your value in 2024 By Erik Richard Morin Departments 7 Hey, Members A roundup of issues and news for NRMLA members 34 Servicing Corner Why completing required repairs ASAP is important 36 Member News Who’s who in reverse mortgages March/April 2024 Volume 17, No. 2 CRMP: Across the Kitchen Table A chat with Eleadah Kemp, CRMP, Finance of America Reverse By M. Diane McCormick 11 Contents PUBLISHER Peter Bell pbell@dworbell.com SENIOR EDITOR Thomas A. Barstow thomas.barstow@theYGSgroup.com ASSOCIATE EDITOR Darryl Hicks dhicks@dworbell.com MANAGING EDITOR Therese Umerlik therese.umerlik@theYGSgroup.com MANAGING EDITOR, DWORBELL, INC. Jessica Hoefer PRESIDENT Stephen Irwin NRMLA EXECUTIVE COMMITTEE CO-CHAIRS Scott Norman, Finance of America Reverse Michael Kent, PHH Mortgage Corp. dba Liberty Reverse Mortgage DESIGNER Tara Smith ADVERTISING SALES Natalie Matter Bellis natalie.matterbellis@theYGSgroup.com Reverse Mortgage is the official publication of the National Reverse Mortgage Lenders Association. The magazine is published every two months. For inquiries regarding association membership and/or magazine subscriptions, please call Darryl Hicks at 202-939-1784. Advertising and editorial inquiries should be directed to Natalie Matter Bellis (natalie.matterbellis@theYGSgroup.com) and Therese Umerlik (therese.umerlik@theYGSgroup.com), respectively. Association & Subscription Contact: National Reverse Mortgage Lenders Association 1400 16th St., NW, Suite 420 Washington, DC 20036 202-939-1760 lross@dworbell.com Industry: www.nrmlaonline.org Consumers: www.reversemortgage.org Advertising & Editorial Contact: National Reverse Mortgage Lenders Association 1400 16th St., NW, Suite 420 Washington, DC 20036 202-939-1760 ©2024 National Reverse Mortgage Lenders Association
Artificial Intelligence Is Just Starting By Thomas A. Barstow ONLY A FEW short years ago, some discussion about reverse mortgage customers involved how older homeowners don’t understand technologies as commonplace as email. I was skeptical of that assumption when I started writing about reverse mortgages five years ago because I have seen a profound shift toward technology and the Baby Boomer generation’s embrace of it. And if there were any doubts about the future of technology in the reverse mortgage industry, the COVID-19 pandemic removed them, with everyone learning how to use Zoom. And now we are on the cusp of yet another major shift in how we do our work. Artificial intelligence (AI) is still in its infancy. My guess is that five years from now, AI will be as embedded in our daily routines as e-signatures and electronic documents are today. Artificial Intelligence The article Evangelizing for AI (p. 22) offers some sound advice for those who might be skeptical of this emerging technology. Byron Torres, the main source in the article, points out that companies will need to embrace this innovation because of its ability to create efficiency but also because the next generations aren’t afraid of newer technologies. “It’s my mission to ensure that by the time Gen X becomes eligible for reverse mortgages, we will have the best technology available,” says Torres, founder and CEO of Reachality, which focuses on AI solutions for companies. As he and others point out, that generation has now arrived at our marketing crossroads. The Greatest Generation that weathered the Great Depression and World War II might have been the first generation to benefit from reverse mortgages. But their grandchildren are now at the age where reverse mortgages will increasingly be of interest. Depending on the product, a proprietary reverse mortgage might be something that people in their mid-50s today could find appealing. And for those in Generation X who want to wait for the government-backed HECM, 2027 is a mere three years away, according to the article written by M. Diane McCormick. In Reverse 2 REVERSE MORTGAGE / MARCH-APRIL 2024
Precise Control. Expert Execution. ASSET MANAGEMENT SOLUTIONS Five Brothers’ reputation for integrity, accuracy, and reliability has been built upon a relentless drive towards customer satisfaction. For over 55 years our expertise in nationwide field services, advanced technologies, and unrivaled Reverse/HECM/FHA expertise continues to build value for our customers, while improving communities across the country. Experience the Five Brothers difference… stronger results from the ground up.™ www.fivebrms.com • 855.552.8020 Inspections • Property Preservation • Violation Resolution Utility Management • Registration Services • Hazard Claim Repairs REO Asset Management and Disposition Safe. Sound. Secure. In Reverse Proprietary Reverse Mortgages Speaking of proprietary reverse mortgages, the cover story—Turning a Corner on Proprietary Reverse Mortgages (p. 16)—looks at the state of these products. The article, written by Joel Berg, explores some of the current thinking about the product, as well as its future. “We’ve hopefully turned a corner with our market, and we’re going to start seeing more originations across the board,” Doug Ziegler, national reverse mortgage sales manager for University Bank, tells Berg, looking ahead through 2024. In addition, he and others already are looking at Gen Xers and how they might benefit. Experts aren’t quite sure how this next generation will react to reverse mortgages. But reverse mortgage professionals are paying close attention to this demographic, with Berg reporting that the oldest members of Generation X are turning 59 this year. HECM Handbook Good news came out in the fall regarding the HECM product. NRMLA members have been busy going through the U.S. Department of Housing and Urban Development’s (HUD) updated Single-Family Housing Policy Handbook 4000.1, which includes sections for reverse mortgages, that HUD released in October. All of the rules and regulations are in one place now. HUD was willing to accept comments that could help clarify wording or to make minor changes before April 29, 2024, when the new guidance goes into effect. The beauty of modern technology is that further tweaks likely will be added to the searchable PDF periodically in the future. “Everyone offering the HECM product or those interested in getting into the reverse mortgage space should download the guide and keep it handy as their reference tool,” Elly Johnson, who helped spearhead the review process for NRMLA, says in the article HECM Handbook Arrives (p. 28). Pretty soon, all generations will be as fluent with these new tools—and hopefully vastly more familiar with what reverse mortgages have to offer—as we once were with a fax machine and telephone landline. Thomas A. Barstow, senior editor of Reverse Mortgage, is a writer and editor based in Pennsylvania. REVERSE MORTGAGE / MARCH-APRIL 2024 3
Meeting Today’s Challenges Is Nothing New This Is a Great Time to Focus on Customers By Steve Irwin, President, National Reverse Mortgage Lenders Association THERE IS NO question our industry has faced a set of disruptions that have seen market participants exit the reverse mortgage space and others consolidate into different and unique entities. While I do believe the macroeconomic conditions will continue through their own cycle, we must remind ourselves that now is the time to renew our commitment to customers and our community. The commitment to customers will require us to close performance gaps where performance as perceived by the customer does not equal the performance expected by the customer. It is incumbent on us to properly set customer expectations and ensure service delivery exceeds those expectations. This focus will mitigate reputational risk and help ensure the longevity of our unique product offerings. These expectations must be set across the entire life cycle of the borrowers’ and trusted advisers’ experience—from counseling to application, processing to closing, onboarding to servicing, to delicate end-of-loan issues. The commitment to our community will require us to keep all channels of communication open, broaden and strengthen our commitment to educational opportunities and continue our advocacy on behalf of our members and the senior homeowners you serve. We will work to strengthen and broaden our committee participation and activities; host webinars on topics our members consider critical to their businesses; and stay in front of the agencies, regulators and legislators who oversee the space we operate in. Yes, these past several months have been challenging and trying. But we will come out of this stronger by working together, strengthening our community and renewing our collective commitment to the customer. Your association is ready to meet these challenges and work with you to effectively strengthen our solidarity and manage our collective success. Steve Irwin Moving Forward “Good products can be sold by honest advertising” —David Ogilvy, founder, Ogilvy & Mather 4 REVERSE MORTGAGE / MARCH-APRIL 2024
Increasing Your Value in 2024 By Erik Richard Morin AT THE START of a new year, we are often reflective both personally and professionally. We may ask ourselves what impacts our lives and our well-being, and that of our families, our teams and our clients. Is our business operating optimally? What lessons did we learn individually and collectively in the previous year? The list goes on, but the pressing question is essentially this: What can we do differently, and ultimately how can we be and do better? Some circumstances are outside our control, and other factors and decisions are within our complete control. Are we being complacent or strategic? Are we being deliberate and consistent in our steps to achieve the desired outcome? The top personal goal at the onset of 2024 was improved health and fitness. A whopping 48 percent of Americans resolve to make this commitment to themselves. The second resolution, at 38 percent, is improved finances, according to Forbes Health. Sadly, the average resolution lasts 3.7 months. The good news is we have choices. We can commit to making healthier food selections and getting more exercise. If we falter, whether it be personally or professionally, we pivot and adapt and try a different approach. What is the alternative? To surrender and fall back to what is familiar, even if it’s not what is best for us? Returning to the same starting place, if not worse? If we haven’t already, now is the time to hit reset. Make the necessary changes and proactively set strategic intentions for individual and collective goals. Erik Richard Morin Board Room Board Room continued on page 6 REVERSE MORTGAGE / MARCH-APRIL 2024 5
Board Room Although we have little control over some things, we have far more flexibility to change with others. Since vendor relationships are not commonly prioritized in our business goal setting, have we taken an internal audit? Are our partners truly partnering? Are those relationships providing real value, or are they on autopilot? Are we prepared with options in our arsenal when challenges arise? The mortgage industry has changed over the past few years, facing some significant challenges. We know reverse mortgages are an even more valuable option in today’s economic landscape. The impacts of inflation and increased cost of living—with significant increases in costs related to food and medication—pose potential challenges to many Americans. That is especially true with individuals on fixed incomes. The freedom and peace of mind that reverse mortgages can offer older Americans make them a sound option that should not be overlooked. Hence, taking inventory and assessing our partnerships is critical. Aligning with partners that are actively working with you is more important now than ever before. We can all agree on the importance of understanding our borrowers’ needs and expectations to best accommodate them. We can stress the importance of consistent communication with the consumer. Holding every partnership to those same expectations is a crucial component in reaching our goals. To be better and do better, partners must be aligned with your needs, values and expectations. That said, I am putting the doughnut down, reassessing the value I am bringing to my partnerships, and making sure my clients know that in 2024, we continue to be in this together. As I like to say at Atlas, we may be neutral on value but not on the value we bring. Erik Richard Morin is president of Atlas VMS. Board Room continued from page 5 Partnership you can trust. Dedicated to never competing with you - your success is our success. Ready to experience the difference? Visit Celink.com Deep Industry Experience 96% Borrower Satisfaction Rating Independence and Alignment with Clients Robust Specialized Technology Reverse Mortgage Is Our Core Competency © Celink. All rights reserved. NMLS #3020 - http://nmlsconsumeraccess.org. Compu-Link Corporation dba Celink (WA license# CL3020 and 603 018 607) 6 REVERSE MORTGAGE / MARCH-APRIL 2024
Hey, Members A Roundup of Issues and News for NRMLA Members By Darryl Hicks IN THIS ISSUE, we highlight important news from the final quarter of 2023 with links to more information. If you have questions about any of these topics, please feel free to contact me at dhicks@dworbell.com. • NRMLA submitted comments to the U.S. Department of Housing and Urban Development (HUD) in November that requested clarification on several new policies contained in the HECM section of Single-Family Housing Policy Handbook 4000.1. Given the large amount of information contained in the handbook, NRMLA will continue to submit comments to HUD through Q1 2024. Read the handbook at https://bit.ly/41uIybt. • Senior housing wealth grew by $178.4 billion in the third quarter to a record $13.08 trillion, according to the latest quarterly release of the NRMLA/RiskSpan Reverse Mortgage Market Index. Read the full news release at https://bit.ly/48ioICe. • The Federal Housing Administration (FHA) adopted servicing policy changes that are designed to improve the HECM program’s financial stability and overall performance, among them the ability for servicers to confirm annual occupancy by phone. Details were provided in Mortgagee Letter 2023-23, which can be found at https://bit.ly/3RMJXGP. • For a third consecutive year, the HECM portfolio had a positive economic value, according to HUD’s 2023 Annual Report to Congress published in mid-November. The stand-alone capital ratio for the HECM portfolio stood at 16.72 percent in FY 2023, which is significantly higher than the congressionally mandated ratio of two percent. A copy of the annual report can be accessed at https://bit.ly/3RrEJ1Z. • Ginnie Mae published its fiscal year 2023 annual report in December to highlight its programs and accomplishments from the past year, including steps taken to alleviate liquidity pressures that impacted issuers of HECM mortgage-backed securities. Read the full report at https://bit.ly/3uXduVl. • NRMLA submitted comments on December 11 that applauded FHA’s expansion of the HECM assignment option to allow servicers to assign loans following the death of the last remaining borrower and/or non-borrowing spouse to address liquidity concerns facing the HECM industry. Read the draft Mortgagee Letter at https://bit.ly/41AtoBl. • NRMLA submitted comments to HUD in December to support a proposed rule—https://www. govinfo.gov/content/pkg/FR-2023-10-25/pdf/202323332.pdf—to amend HUD’s regulations to allow housing counseling agencies to use alternative communication methods, including virtual meeting tools, instead of providing in-person services. • NRMLA submitted comments to HUD on December 8 in support of a Federal Register Notice that announced HUD would update the HECM for Purchase program by permitting “interested party” contributions up to six percent of the sales price and additional funding sources to satisfy a borrower’s monetary investment, including premium pricing, gifts, disaster relief grants and employer assistance. Read the Federal Register Notice at https://bit.ly/3GPwGaa. • A December report from the Harvard Joint Center for Housing Studies concluded that the United States is ill-equipped to provide adequate housing and supportive services to the 17 million households that will be headed by a person age 80 and over by 2040. The report noted that leveraging home equity could provide a potential solution to cover the costs of care. Access the report at https://bit.ly/4844GLZ. Darryl Hicks is NRMLA’s vice president of communications. REVERSE MORTGAGE / MARCH-APRIL 2024 7
Brett Dunn, Ph.D., Chief Investment Officer/Chief Operating Officer, Traditional Mortgage Acceptance Corp. By Darryl Hicks OVER THE PAST eight years, the Dunn family of Bellevue, WA, has built Traditional Mortgage Acceptance Corp. (TMAC) into a top-tier reverse mortgage lender and issuer of Ginnie Mae HECM mortgage-backed securities (HMBS). TMAC CEO Kenneth Dunn, Ph.D. is an emeritus professor of financial economics at the David A. Tepper School of Business at Carnegie Mellon University in Pittsburgh and an early pioneer in the development and valuation of mortgage-backed securities. His son, Brett Dunn, Ph.D., was an early proponent of the HMBS program while at PNC Financial Services Group and today oversees TMAC’s various business channels, including wholesale lending, correspondent lending, capital markets, data analytics and finance. Brett Dunn’s wife, Elisa, is TMAC’s chief financial officer. Previously, she served as executive director of the Anderson Master of Financial Engineering Program at the Brett Dunn From the Top 8 REVERSE MORTGAGE / MARCH-APRIL 2024
University of California, Los Angeles (UCLA) and spent 12 years working in finance for market-leading firms in New York, Canada and Brazil. Reverse Mortgage magazine sat down with Brett Dunn to talk about TMAC’s background, the impact of recent Ginnie Mae HMBS reforms and plans for the future. Reverse Mortgage: How did you get your start in reverse mortgages? Brett Dunn: When I was a portfolio manager at PNC Bank, I managed a portfolio indexed against investments of similar parameters as Ginnie Mae HMBS securities. I had a good relationship with Bank of America, and so they brought the idea of investing in HMBS to us. I researched reverse mortgages for about six months and then got the go-ahead to start buying HMBS, which turned out to be a great product for the bank. They are government-guaranteed, have a zero percent risk weight and have very attractive returns. We ended up holding the largest portfolio of HECMs outside of Fannie Mae by the time I left in 2012 to pursue my Ph.D. at UCLA. RM: Your father is CEO of TMAC and your wife is CFO there, as well. What inspired your family to open a mortgage company? BD: It was an interesting challenge. We saw how much the product could help people, yet it had a very low market penetration so it seemed like a great opportunity to make a difference. My father and I started the company while I was in the Ph.D. program, and we leveraged my prior experience with reverse mortgages. After I graduated, I decided to join the company because I wanted to contribute to the space and make a difference. My wife, Elisa, had a background in investment banking, so she was a natural fit to join the company as CFO. It wasn’t planned this way. Everything kind of fell into place. It’s been fun running a family business, but it can be hard to put work aside. When I was in the Ph.D. program, I felt like I was always working. It was hard to separate work and regular life, and TMAC is a more extreme example of it. It penetrates everything we do. RM: How long has TMAC been in the reverse mortgage business? Are you solely focused on operating a reverse mortgage correspondent/wholesale channel, or do you have a dedicated reverse mortgage retail sales force, too? BD: TMAC started operating as a reverse mortgage lender in 2015 after we acquired the assets of Silvergate Funding, including its HMBS portfolio. Today, TMAC operates in all channels, including correspondent, wholesale, principal-agent and retail. On the retail side, we operate a dba (doing business as) called Goodlife Home Loans. We’ve been fairly strategic, especially as a small company, ensuring that all the channels are properly balanced. RM: Do you have any plans to expand into other forms of lending, or will you remain focused on reverse mortgages? How many people does TMAC employ? How many states is TMAC licensed in? BD: Our short-term business plan is to remain focused on reverse mortgages, but we’re very attuned to new opportunities as they come up. Currently, we have 40 employees. We’re licensed in 40 states, including the District of Columbia, and 35 states for direct-to-consumer. RM: Is there a science to securitizing HECMs? For example, are there thresholds—perhaps the number of HECMs funded or a dollar amount—that determine when you initiate a securitization? BD: It’s a fairly complicated optimization problem. At a high level, we try to create liquid pools that have characteristics attractive to investors. Investors generally prefer larger pools, but that requires more working capital so you have to be cognizant of how much capital is required to do that. It’s a balancing act between creating large pools and maintaining the correct liquidity levels for everyday commitments within the company. From the Top From the Top continues on page 10 REVERSE MORTGAGE / MARCH-APRIL 2024 9
From the Top RM: Is there a minimum dollar amount that investors of HMBS require? BD: No, there isn’t. I’ve traded pools right at the minimum amount of $250,000, and they trade surprisingly well. I would say in general, anything over $5 million is ideal, but $10 to $20 million is probably a sweet spot. RM: Ginnie Mae authorized the $250,000 minimum pool size in 2023 as part of its ongoing efforts to minimize liquidity risk. Has that change had a positive impact? BD: Yes, and it’s been a huge help for issuers who don’t have alternative sources of financing for “tails.” RM: For our readers’ sake, explain what a “tail” is. BD: After a HECM is funded, we pool loans together and then securitize them as HMBS pools. After the initial securitization, there are various ways that the balance of the loans grows more than the security, such as borrower draws, interest accruals and monthly mortgage insurance premium (MIP) payments. One of the ways that servicers earn income is through subsequent securitizations of those balances, which we refer to as tails. RM: NRMLA and its Executive Committee spent a great deal of time with Ginnie Mae this past year working on new policies to help reduce the liquidity risk felt by HMBS issuers. While there’s still more to do, how have some of the changes impacted your business? BD: Ginnie Mae’s actions thus far have had a huge impact on our business. First, Ginnie Mae reduced the minimum pool size from $1 million to $250,000, which freed up a lot of liquidity for us. Second, the implementation of multiple participations per month has helped a lot, too. Once you securitize a participation in a loan, if the borrower draws later that month, under the prior rules you couldn’t securitize that draw. So, it involves a lot of analytics to balance the benefits from securitizing versus the risk of draws that month. The new guidelines that allow for multiple participations essentially free up even more liquidity and reduce the amount of risk we need to take when doing securitizations. Lastly, we’ve seen quicker turn times for assignable buyouts. Ginnie Mae requires issuers to purchase HECM loans out of pools when the loan balance, including principal plus any accrued interest and MIP, reaches 98 percent of its “maximum claim amount.” If the loans being bought out are current, they can be assigned to the U.S. Department of Housing and Urban Development, and the issuers are paid a claim. We’re essentially holding buyouts for a shorter period, which frees up additional funds. RM: What distinguishes TMAC from other wholesale lenders? BD: We are the largest family-owned and operated issuer, which comes with certain advantages. We’re lean, and this right-size cost structure allows us to pass the savings on to our customers through better rates and prices. It also allows us to pivot quickly if the environment changes and do the right thing for our customers. Given our size and focus on service, we’ve been able to create superior client opportunities and outcomes and better employee career opportunities. RM: What plans does TMAC have in 2024 to expand its footprint in the reverse mortgage marketplace? BD: We plan to continue closely monitoring the economic landscape and setting our sights where we see the most opportunity. This applies to both volume origination, channel diversification and strategic hires. For now, we’re going to continue to expand into wholesale as we continue to realize the benefits of our recent focus on it and pick up momentum in this segment. Darryl Hicks is NRMLA’s vice president of communications. From the Top continued from page 9 “We plan to continue closely monitoring the economic landscape and setting our sights where we see the most opportunity.” —Brett Dunn, chief investment officer/ chief operating officer, Traditional Mortgage Acceptance Corp. 10 REVERSE MORTGAGE / MARCH-APRIL 2024
ELEADAH KEMP’S FAVORITE moments arrive courtesy of emails from clients astounded that they didn’t have to make their first mortgage payment. Most couldn’t imagine that their home offered a ticket to financial security. “I always tell them that I look forward to the time they don’t have to make that mortgage payment, and one day, they look in their bank account and see their extra money,” she says. Kemp is a service-oriented lifelong learner who obtained her CRMP in October 2023. With seven years in the industry, she is leveraging the power of reverse mortgages to help revitalize an underserved area of Indianapolis and show homeowners how to get more value from their homes. Undoing Imbalances Kemp tells friends to call her EJ. She was born in Brooklyn and grew up in Milford, CT, which to her is “still my favorite place in the country.” She studied business administration in college and switched to economics before stepping away for personal reasons. In the late 1990s, she was unhappy in her work for a global logistics company when a high school friend asked if she was interested in mortgages. She didn’t know anything about that field but saw an opportunity and jumped in on the selling side. During the housing collapse of 2007–08, when “everything went haywire,” she found herself studying reverse mortgages for a client. She became intrigued but then exited the mortgage industry to join a travel business. She was working at Angie’s List when a colleague who left for reverse mortgages suggested Kemp would be a good fit, reigniting her previous interest. She bristled at the way economic forces were treating retired homeowners as their income leveled off while taxes and the cost of living kept rising. The demographic was overlooked in policy circles and steeped in fear caused by misinformation and stigma, she believed. “I wanted to be able to be a voice to help people learn about reverse mortgages and feel comfortable with them, even if they didn’t get one,” she says. “They can just feel comfortable with the fact that it is a safe option.” She found herself in the right place with Finance of America Reverse (FAR), which provided a supportive CRMP Works to Serve Underserved Communities A Chat With Eleadah Kemp, CRMP, Finance of America Reverse By M. Diane McCormick Eleadah Kemp CRMP: Across the Kitchen Table CRMP: Across the Kitchen Table continues on page 12 REVERSE MORTGAGE / MARCH-APRIL 2024 11
CRMP: Across the Kitchen Table atmosphere for her learning and licensure. She had the time and the resources to have productive conversations with retirees about the workings of reverse mortgages. “There are a lot more ‘Ohs!’ and ‘Ahs!’ and ‘Oh, my goodness—I didn’t know that!’” she says. Homeowners feel a sense of trust. And with their newfound knowledge, even those who decide against a reverse mortgage feel comfortable sending referrals Kemp’s way. “That helps keep building business, even in a downturn,” she says. The CRMP: A Window Into the Reverse Mortgage Process Kemp recently bought her first home, intentionally located in an underserved area of Indianapolis. There, many homeowners take pride in their independence while harboring misgivings about reverse mortgages. Kemp sought the CRMP to gain a better understanding of the entire process, including servicing, to build her confidence as an educator. She hopes to do more presentations in the community, reaching the many homeowners whose homes need significant repairs and maintenance but don’t know where to turn. “By building up their homes, they are thereby helping build up the value in the area—never mind giving people their dignity back,” Kemp says. She also sought the CRMP for the brain-sharpening challenge and to familiarize herself with a reverse mortgage’s entire processing journey. “I like learning, and if there’s something new in my field, I want to learn it,” she says. “I want to be the best at what I do. I want to do anything that can help me deliver a smoother process and help my client have a very good, true understanding so they have something they can take to other people if they need to.” The CRMP has helped her navigate situations more fluidly. With the power to forecast underwriting issues, she can manage potential snags upfront “and not just learn it through a mistake.” In one case, she was working with a client seeking a reverse mortgage to help pay for his dying mother’s home healthcare. Because of something Kemp read in her CRMP studies, she spotted a gap in the documentation and shared her observation. The client corrected it, averting possible problems in probate when his mother died a short time later. “He was very happy that I had helped them through that,” she says. Community Perspective Kemp maintains a working list of charitable organizations and state and federal grant opportunities for home repairs and maintenance. When homeowners share what needs to be done—and Kemp is always asking—she finds a resource. The reverse mortgage takes care of long-term needs, while the financial cushion it provides helps whittle down the homeowner’s to-do list. “If you need to hire somebody to clean your gutters, you’ve got the money now,” she tells clients. “If you need somebody to go get the groceries, you’ve got the money now.” Kemp once refinanced a reverse mortgage for two sisters from New Orleans who both lost their husbands around the same time. One sister moved into the other’s home so they could be close while reducing expenses. Still, expenses kept rising. They thought about getting a roommate, but it wasn’t what they wanted. Their nephew introduced them to FAR, and the reverse mortgage provided enough funding to buy a new car, pay property taxes and help them to look forward to living the rest of their retirement years in comfort. Today, Kemp has a standing invitation to visit the sisters in New Orleans. Outside her life in reverse mortgages, Kemp could once be found fronting a rock band. She has been involved in music since childhood and singing offered “a great way to decompress and relive my youth a little bit.” She is deeply involved in improving the quality of life in her surrounding neighborhoods as an appointed member of three city boards devoted to housing, parks and safety. Her civic work circles back to her professional goals. Her part of the city is home to one of the nation’s largest regional parks, the 861-acre Riverside Park, larger than Central Park and with the White River flowing through it. But the park is underutilized. As outside investors are spotting the area’s potential, Kemp wants residents to get CRMP: Across the Kitchen Table continued from page 11 12 REVERSE MORTGAGE / MARCH-APRIL 2024
CRMP: Across the Kitchen Table ahead of trends by increasing the value of their homes on their own. “It makes the area much more attractive, and that means more money can come into these areas to help take care of the parks and cultivate a lot more things like community gardens, sidewalks, trees and play areas,” she says. Future of Reverse Mortgages Aside from the current slumping housing market and high interest rates, one of the biggest challenges Kemp sees in reverse mortgages is helping customers become comfortable with technology. Older clients, especially, resist e-signing and other digital functions, but the experience has opened Kemp’s eyes to the barriers they face. Some clients can’t trust their internet service to stay connected. Others have no service at all. “Sometimes, it makes them frustrated with the entire process,” she says. She has learned to offer to work together and walk them through the process. Younger clients, she hopes, will someday have access to more of their equity as they look ahead to longer retirement spans. For now, these 60-somethings seem to accept the concept of reverse mortgages, and they come to the table having done their research. Working with an aging population has given Kemp a new perspective on her own health and retirement planning. She aspires to become a landlord not just to rent properties but to help her tenants avoid scams and pursue legitimate rent-to-own pathways. For the future, she feels nervous and excited about her potential to impact the lives of customers. “You can’t help but cry with people sometimes because of what they’re going through, even if there are tears of joy when the process is done and they can exhale now because they were so scared,” she says. “They had nowhere else to go. They felt there was no hope. They felt they were completely forgotten about. I can hear them holding their breath throughout the whole process, and when it’s over, I love the impact that a reverse mortgage has, especially for people who were skeptical while knowing that I’m the one who helped them get over their fear.” M. Diane McCormick is a writer and editor based in York, PA. CALL US AT (888) 369-1573 OR EMAIL US AT WHOLESALE@HIGHTECHLENDING.COM TO LEARN MORE! REVERSE MORTGAGE / MARCH-APRIL 2024 13
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BEFORE INTEREST RATES began their upward climb in 2022, proprietary reverse mortgages made up less than five percent of the volume for the reverse lending arm of University Bank. While higher rates have diminished originations overall, proprietary loans now account for about 20 percent of University’s reverse lending business, says Doug Ziegler, national reverse mortgage sales manager for the bank, based in Ann Arbor, MI. With interest rates leveling off and possibly falling later this year, Ziegler expects to see a rebound for the HECM. But he also hopes momentum continues to build for the bank’s proprietary products—the Home Elite and Home Premier loans. Doug Ziegler Proprietary Reverse Mortgages continued on page 18 TURNING A CORNER ON PROPRIETARY REVERSE MORTGAGES Products Remain Solid Option for Some Borrowers By Joel Berg REVERSE MORTGAGE / MARCH-APRIL 2024 17
“We’ve hopefully turned a corner with our market, and we’re going to start seeing more originations across the board,” he says. Proprietary reverse mortgages have long been seen as a reliable option for homeowners who aren’t a good fit for the government-backed HECM. Owners of highvalue homes, for example, can often access more equity through a proprietary reverse than through a HECM. Owners of condos and other non-Federal Housing Administration-approved properties also can benefit from proprietary loans. Ziegler recounts the example of a borrower who opted for a $2 million proprietary reverse for a purchase, allowing the borrower to put down less cash at closing. “After net proceeds from their home sale, they only had to bring about $100,000 out of pocket; whereas, if they would’ve looked at a HECM, they would have had to bring about $800,000,” he says. However, when interest rates were low in the early 2020s, the market for proprietary loans took something of a backseat to the boom in HECM-to-HECM refinancings. Since then, rising rates have chilled interest in refinancing. And because higher rates eat into the principal limit factor governing what HECM borrowers can take out from their loans, lenders see growing potential for proprietary reverses, particularly for higher-value homes. “I’m very optimistic about the year, and we’re already seeing an uptick in our volume,” he says. Learning What Works As long as inflation remains under control and the economy holds up, the Federal Reserve is widely expected to start considering interest rate cuts toward the end of 2024. But lenders aren’t banking on rate cuts alone to drive interest in proprietary reverse mortgages. Innovation and market expansion also have been keys to growth. Early in 2023, for example, Finance of America Reverse (FAR) brought back its HomeSafe Second product with new features. The company also expanded the distribution network for the loan, which allows homeowners to tap into their home equity without disrupting their first mortgage. The company is now distributing the product through its direct-to-consumer division, American Advisors Group, whose advertising reaches more than 20 million consumers each year. In addition, the product is available to FAR’s wholesale partners. HomeSafe Second is expected to appeal to homeowners who have low-rate first mortgages but want to draw on their equity. Such borrowers have been reluctant to refinance and let go of their low rates. HomeSafe Second allows them to keep the first loan and avoid payments on a second loan, says Scott Norman, vice president of field retail and government operations at FAR, which is based in Tulsa, OK. Even if mortgage rates start to fall this year, rates aren’t likely to return to previous lows, Norman says. “So, I think that gives us plenty of room to grow and develop and evolve the HomeSafe Second product.” After they learn about HomeSafe Second, some borrowers take out FAR’s HomeSafe Standard reverse loan, which replaces their first mortgage. “When they start thinking about making those monthly payments and they realize how much more cash flow they would have if they were able to extinguish their first mortgage, I think that begins to open their eyes a little bit and has them starting to ask additional questions,” says Jonathan Scarpati, vice president of wholesale for FAR. Proprietary Reverse Mortgages continued from page 17 “I’m very optimistic about the year, and we’re already seeing an uptick in our volume.” —Doug Ziegler, national reverse mortgage sales manager for University Bank Scott Norman Jonathan Scarpati 18 REVERSE MORTGAGE / MARCH-APRIL 2024
The company is continuing to work on new reverse products, Scarpati says. One source of ideas is FAR’s new retail division. As it reaches more borrowers directly, FAR is learning what works and what does not. The company also gathers insights from its wholesale partners, Scarpati says. “What we try to do is build a suite of products to give them a solution to some of the things that they’re facing when selling on the street.” Innovation also is a priority for Longbridge Financial, says Tim Wilkinson, senior vice president and head of capital markets for the company, based in Mahwah, NJ. The company’s proprietary product, Longbridge Platinum, is tailored for jumbo loans. “There will definitely be some changes, some product offerings that are, on the margin, beneficial,” Wilkinson says. But for the most part, reverse borrowers remain interested in either a lump-sum payout or a line of credit. The two options will remain the “bread and butter” of the industry, Wilkinson says. Sitting on a ‘Gold Mine’ Industry executives see education as a key tool in building the largely untapped market for proprietary reverse mortgages. Lenders are continuing to focus on financial planners, real estate agents and other professionals who can play a role in recommending reverse loans to clients. Those efforts are starting to make an impact, says Ziegler. “It’s where we’re seeing a big change in our Proprietary Reverse Mortgages continued on page 20 “The younger generation is more familiar and more willing to treat that as an investment and get the cash that they need to thrive in retirement.” —Jonathan Scarpati, vice president of wholesale for FAR REVERSE MORTGAGE / MARCH-APRIL 2024 19
industry right now. We’re seeing a lot of other professionals being educated on reverses and realizing that reverses can be used as part of an overall financial strategy.” Building on its previous efforts, University Bank is developing a continuing education program for planners and real estate agents, Ziegler says. “We’re excited about that and, I think, with that comes more opportunity.” At FAR, meanwhile, attention is falling on forward brokers coming into the reverse market. The brokers see reverse loans as a way to offset the decline in forward loans and refinancing. New entrants often think that by adding reverse mortgages to their portfolio, they will be able to reach new customers, Scarpati says. But, he says, they are more likely to find business among previous customers who, for example, may have refinanced several times over the years. FAR is encouraging brokers to reach out. “I think they’re sitting on a gold mine, and they don’t even realize it,” he says. Talking About the Next Generation One intriguing feature of the market for proprietary reverse loans is that it includes members of Generation X, the relatively smaller cohort that follows the Baby Boomers. The Pew Research Center defines Gen X as those born between 1965 and 1980, meaning its oldest members are turning 59 this year. The cutoff for many proprietary reverse mortgages is 55. As Boomers entered the market, lenders often noted the generation’s greater comfort with debt and its willingness to embrace new technologies, opening new avenues for marketing and education. Younger retirees also are more interested in using home equity to support their retirement rather than saving it for their heirs. However, it is too early to say with any certainty how Gen X will approach reverse mortgages, executives say. “With reverse mortgages, no two loans, no two borrowers, are alike, and those in the reverse space understand that,” Ziegler says. “We come across some very unique circumstances.” Still, younger homeowners seem more comfortable with leveraging the equity in their homes to pay for what they need or want. “The younger generation is more familiar and more willing to treat that as an investment and get the cash that they need to thrive in retirement,” Scarpati says. Younger people also are seeing how their parents and grandparents benefit from reverse loans, says Norman. “Educating not only seniors but also the public on what a reverse mortgage is—versus what a reverse mortgage is not—has been something that we’ve been spending a lot of time on over the last few years,” he says. “And now we’re starting to see that light go on, that this is something everybody needs to be looking into when they start to plan their retirement.” Smoother Roads Ahead After a roller-coaster ride over the past two years, lenders are looking forward to a less volatile market, particularly where interest rates are concerned. When rates were rising, reverse borrowers often saw their potential proceeds shrink before their eyes, says Wilkinson. That often dissuaded them from closing on loans. “Lower rates and more stable rates, I think, are more conducive to the origination environment in general,” he says. Wilkinson doesn’t expect a quick rebound for reverse lending or a meaningful recovery in refinancing activity. However, he expects reverse mortgages will continue to appeal to borrowers as part of their retirement planning, particularly as the cost of living remains elevated. “More borrowers are considering reverse mortgages as a way to address that,” he says. And while the HECM limit jumped to nearly $1.15 million this year, some borrowers will need or want more. “There’s still plenty of a potential, addressable market for the proprietary products,” Wilkinson says. Joel Berg is a writer and editor based in York, PA. “There’s still plenty of a potential, addressable market for the proprietary products.” —Tim Wilkinson, senior vice president and head of capital markets at Longbridge Financial Proprietary Reverse Mortgages continued from page 19 20 REVERSE MORTGAGE / MARCH-APRIL 2024
A NAME YOUR BORROWERS KNOW AND TRUST MutualMortgageWholesale.com Learn More at Exceptional Service Industry Experts Marketing and Training Support 1267673104 Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to Credit Approval. For licensing information, go to: www.nmlsconsumeraccess.org Minnesota Residential Mortgage Originator Exemption MN-OX-1025894
BYRON TORRES REMEMBERS riding his bicycle and pretending to communicate with friends by talking into his Casio watch. Yesterday’s futuristic game is today’s reality. And as the digital age advances exponentially, Torres believes it’s time for the reverse mortgage industry to embrace artificial intelligence (AI). “AI is not replacing humans,” says Torres, founder and CEO of Reachality, which focuses on AI solutions in the reverse mortgage space. “People who use AI are going to outperform and eventually replace people who do not. It’s imperative for [our] industry to start utilizing AI and, even at this entry point, become aware of how it is helping us.” The benefits can be huge: connecting with Gen X customers who expect sophisticated technology, streamlining internal communications and condensing drawnout processes, and educating consumers so they feel fully Evangelizing for AI Byron Torres: Prepare for an Artificial Intelligence Future By M. Diane McCormick Byron Torres 22 REVERSE MORTGAGE / MARCH-APRIL 2024
knowledgeable about reverse mortgages and comfortable with their decisions. AI is the tool for propelling reverse mortgages into 21st century commerce, says Torres. Gen X on the Way Technology is “not the friend of reverse mortgages,” says Torres. “Not because companies didn’t have resources or even the dream, but because the demographic didn’t ask for it. People who qualified for a reverse mortgage in years past haven’t demanded advanced technology.” Previous generations had different mentalities—meet in person, sit across the table and shake hands. But in 2027, the Gen Xers born from 1965 to 1980 will begin to qualify for HECMs. Already, their late-Boomer predecessors are comfortable with technology. The Gen X wave will expect digital immersion because today’s technology has its roots in their childhoods. “We grew up with Atari, with cable,” Torres says. “We saw the cellphone being born, 24-hour news, the internet, you name it.” The forward mortgage side is already steeped in technology “because who’s buying homes? Twentysomethings. Thirty-somethings. They’re living with technology every day in every way, and their homebuying experience is no different.” Torres wants to see reverse mortgages catch up to the forward side, and he has become an evangelist. He speaks at NRMLA conferences. He meets and educates lenders, loan officers and U.S. Department of Housing and Urban Development officials. He participates in industry-specific technology webinars. It’s a perspective honed as a sales and marketing entrepreneur and by early experience in mortgage companies, including roles as a top-producing loan officer and a wholesale account executive. Since 2018, Torres has been deeply involved in reverse mortgages as a fractional chief marketing officer for multiple lenders on the forward and reverse sides of the business. While working in reverse mortgages, Torres recognized the field’s limited use of technology. The arrival of ChatGPT in November 2022 gave urgency to correcting that oversight, and he founded Reachality in January 2023. “It’s my mission to ensure that by the time Gen X becomes eligible for reverse mortgages, we will have the best technology available,” he says. The Reachality platform operates on the principles of simplicity, education and “making a complex product or something that someone has never seen before easy to digest by communicating and asking questions.” The education push begins when Reachality’s conversational AI mines every bit of information available on a reverse mortgage firm’s website. Customers popping in with questions get automatic, humanlike answers. There’s no waiting for someone to track down the information. No one is forced to wade through generalized knowledge bases that might or might not address their concerns. Instead, responses are instantaneous and conversational. The voice of the AI assistant—and he says that, ethically, the customer should know they are dealing with an AI assistant—is designed to resonate with the customer base. The tone can be formal and professional or 20-something and laid back, depending on the target audience. Through this process, better-educated clients make better decisions. “Conversational AI isn’t about making a sale,” says Torres. “The CEOs I work with and my clients might think otherwise, but if you’re educating customers and they get to trust you and get to know you, they’re more likely to do business with you.” New Way of Interacting Almost everyone deals with AI every day, whenever they ask Siri for a weather report or ask Alexa to play their favorite songs. Infusing AI into the reverse mortgage industry is a lateral step with enormous payoffs. AI brings the following multiple advantages to reverse mortgage settings: • It can schedule appointments and ask the same questions that schedulers would ask: What year were you born? When are you available? What is your email address? And it won’t call off sick. The result: capturing and scheduling customers when the opportunity presents itself. Evangelizing for AI continued on page 24 REVERSE MORTGAGE / MARCH-APRIL 2024 23
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