Sept/Oct 2021 Reverse Mortgage Magazine

While things are starting to change for the better, loan officers need to be careful, Milano says, stressing the presentation was for informational purposes and was not legal advice. “There is no quick, easy fix,” he says, agreeing with Giordano that education through conversations is the best path. It is OK to network with financial planners, educate and inform them about reverse mortgages. But the rules in both industries can make formal arrangements, such as marketing services agreements or lead-generation deals, difficult, if not forbidden. “When you move from educating to compensating, that triggers all sorts of mortgage regulatory requirements,” he adds. The Real Estate Settlement Procedures Act regulates marketing services and lead sales agreements, he says as an example. Other rules also make it difficult, such as the 2008 “McCaskill Provisions” that regulate loan originators when participating in any other financial or insurance product, Milano says. For example, he explains, anti- tying rules prohibit a reverse mortgage from being sold on the condition that it is tied to the purchase of another product, such as an annuity. The provisions also regulate mortgage professionals associating with other financial professionals where there are incentives or compensation, unless firewalls and safeguards are in place. The problem is that those details have yet to be defined 13 years after the provisions were put in place, which creates a chilling effect on the ability of reverse mortgage companies to partner with insurance agents or financial planners when it comes to federally insured Home Equity Conversion Mortgages (HECMs), Milano says. “There is a lack of clear guidance in the HECM world as to how to deal with the McCaskill Provisions,” he adds. And financial services companies that try to promote mortgages can get into trouble if marketing materials aren’t carefully constructed. “For mortgage professionals, what you want to avoid is being deemed to be in the financial advisory space,” Milano says. “But, certainly for financial planners, they need to be careful that they are not soliciting mortgages or seen as taking applications or engaged in any licensing trigger unless they want to be in that business and they structure it properly.” Hiring Financial Planners Some mortgage companies have considered hiring financial planners as reverse mortgage employees, Milano also points out. “That is not flatly prohibited, but you have to be careful,” he says. “You have to look at the financial planners’ regulatory regimen to even get comfortable to have this conversation in the mortgage setting.” He says he understands the appeal because planners have long lists of people who could benefit from a reverse mortgage. “But this permanent part-time employee approach makes me nervous,” he says. Regulators have gone after companies where it appeared the planners were not true employees. “It has to be real. It can’t be a sham.” That means the workers must follow the rules of the company and for the mortgage industry, which would include working in an actual office location, if required, and being subject to mortgage company supervision. Do’s and Don’ts In summary, Giordano says, there are some basic steps to ensure that loan officers get the most out of networking without crossing any lines. • Do not give financial advice. “Please be careful that you are not giving advice. You are an expert in reverse mortgages and how the HECM works. You are not a financial adviser,” she cautions. “There are all kinds of rules out there against people giving financial and investment advice—don’t get caught in that.” • Do not give tax advice, including “recommending” a Roth IRA Conversion. “The other thing is don’t get caught in giving tax advice—ever,” she also says. “That is the worst thing you can do. There are so many landmines in tax laws.” • Never tie any other product to a reverse mortgage origination. “I think if you follow these general rules you will stay out of trouble,” Giordano says. “But I don’t want to scare you. Get out there and talk to these folks and see what is on their minds with the housing asset in retirement.” Opportunities continued from page 28 30 REVERSE MORTGAGE / SEPTEMBER-OCTOBER 2021