An Interview With a NRMLA

Interview with NRMLA

I am here with Peter Bell, President of NRMLA. NRMLA serves as an educational resource, policy advocate and public affairs center for reverse mortgage lenders and related professionals. Thanks for this opportunity to speak with you about the year to come and the basics of reverse mortgage loans. Tell me a little about NRMLA and what role it plays in the reverse mortgage industry.

<Peter>NRMLA is a trade association for reverse mortgage lenders, companies that provide services to the lenders and the investors who invest in reverse mortgages. We do everything that a trade association typically does. We develop industry standards and best practices. We provide professional education. We serve as a policy advocate. We, work with Congress and various federal regulatory agencies on legislative and policy matters. We work on issues at the state government level. We maintain websites for both the trade and for consumers. We produce a newsletter and several consumer booklets. We’re launching Reverse Mortgage Magazine with our premiere issue due out in early April., We’re developing a professional designation program for the Certified Reverse Mortgage Professional designation and aiming to have that in operation by the 3rd quarter of this year. Although we operate with just a staff of ten people, we do all the typical things that any trade association like Mortgage bankers Association, American Bankers Association or any other industry group, would typically do.

<James>From what I understand that the media and the buzz talk about the reverse mortgage really started to happen mid last year when everybody turned their heads towards it…

<Peter>I would disagree with that completely. NRMLA was formed over ten years ago with a major focus to start generating positive coverage in the press. I have plenty of press clippings from the past 7 – 8 years providing positive coverage -- everything from major news outlets and personal finance magazines, Kiplinger’s, CNN, Bloomberg, network news, Money magazine the NY Times right on down to local daily newspapers from all across the country -- so I think we’ve been getting positive press for quite a while; not just the past year or so.

<James>Let me rephrase that, last year something happened in the forward mortgage market starting looking into reverse and focus their attention...

<Peter>Within the industry, the reverse mortgage has been viewed as a niche product and certain companies have specialized in it. A few larger companies, Wells Fargo, for one example, have had a very deep long term commitment to the reverse mortgage business, but a lot of the activity has come from specialized companies like Financial Freedom, Seattle Mortgage (now part of Bank of America) or BNY Mortgage (now Everbank Reverse Mortgage) that have placed a particular emphasis on this business. In the last year or so, as the forward mortgage market has been slowing down, a lot of more traditional mortgage companies have begun to take a look at the reverse mortgage market.

<James>Have you experienced a lot more members this year compared to last year?

<Peter>We’ve had steady growth and NRMLA has been more or less doubling in size every year for the past 5 years.

<James>What are some of the challenges that NRMLA faces as 2008 begins and where you see the industry perhaps by the beginning of 2009?

<Peter>The major challenge for us right now, of course, is the liquidity challenge faced by anybody looking to the capital markets for funding. Another challenge is that we have a lot of newcomers coming into the reverse mortgage market who do not fully comprehend the importance of having tremendous empathy for the customer. Reverse mortgage borrowers don’t necessarily have the same need to move quickly on a reverse mortgage as do forward mortgage customers. With the forward mortgage, there’s often a clock ticking because people are either closing on a home they are buying or they want to take advantage of an interest rate window before the rates go up. In a reverse mortgage, it is a very major lifestyle decision and may take people several months from when they first meet with the loan officer to when they actually decide to move ahead with the mortgage.

<James>If I was a forward mortgage broker and I didn’t know anything about the reverse mortgage industry, what kind of direction would you steer me to help me understand reverse mortgages more?

<Peter>There are a couple of books that would be very good to read up front. One example is The New Reverse Mortgage Formula by Tom Kelly, a real estate columnist for the Seattle Post Intelligencer who wrote a very good book that I would strongly recommend. I would also suggest attending our NRMLA conferences. The next one is April 7-8 in Philadelphia. Our conference provides an excellent opportunity to network with people who have the background and experience in this business and meet folks that could help you get started.

<James>It sounds like it would be beneficial to become a member of NRMLA.

<Peter>Yes, you really need to be in this organization if you’re involved in this business. In fact, if you’re a member and your company subscribes to our Code of Ethics and Professional Responsibility, you’re then eligible to be listed on our website. Loan officers tell us that it helps immensely to be listed on our site to survive in this business. You might get some business from people that find you on our website but equally importantly, if you have a client and they go to counseling, the counselor will ask if they checked to see if the lender they are working with is listed on the NRMLA website. If they are not, they end up losing the deals, we are often told.

<James>How do we contact you?

<Peter>We have two websites. We have a consumer website, www.reversemortgage.org, that is helpful for learning the basics of reverse mortgages and we have a trade website for people in the industry, www.nrmlaonline.org.

<James>Is there anything that you want to say to my audience that is of importance?

<Peter>People who are getting into this market have to understand that the reverse mortgage market is a very separate market from the forward mortgage market. It takes a different mentality, a different attitude, a different empathy for the customer and a motivation that has to be pure. You really have to be concerned with doing what’s best for the senior -- not closing the loan that’s most profitable for the company.

<James>That’s why I created Reversenewsletter.com so that we can educate and warn others who may not have the same mentality to make sure no one is wasting their time getting into a market that is not a fit for them necessarily.

<Peter>A professional in the reverse mortgage business has a much greater responsibility to help prospective clients evaluate and determine whether a product is right for them. In the forward mortgage market, if a client is buying a house, they need a mortgage to get the funds to buy. In a reverse mortgage, there are a lot of other factors involved in determining whether it actually the appropriate product including what other assets and resources the client might have and what their health condition is. Even if they have the money coming in from the reverse mortgage, will they be able to continue to live in the house? Will they be able to maintain the house and do the things they need to? Do they fully understand the reverse mortgage? Do they have the funds available to pay the taxes and insurance? There are a lot of issues involved in determining the appropriateness of the loan for the individual borrower.

<James>True, there are hundreds of things involved. One phrase I hear frequently from seniors is, “I don’t want to lose my house”. Why would they say such a thing?

<Peter>There is a common misperception that in a reverse mortgage, you get some money from the bank, and then when you pass away, the bank gets the house. I think it goes back to older concepts that pre-dated reverse mortgages, such as life-estate scenarios, where someone sold their home, but was given the opportunity to live in their home until they died. When they passed away, the home basically passed to the owner that purchased it from them. Those kinds of arrangements were common for many years, particularly in Europe, and I think that’s driven a lot of the confusion. People don’t necessarily understand that a reverse mortgage today is like any other mortgage where the lender has a lien on the home but title is retained by the borrower and it’s the borrower’s decision when they leave the home.

<Peter>Also people are under the misconception that the lender gets the full value of the house at the end. They don’t understand that the only thing that is due at the end is the sum of the funds that have been advanced plus the accrued interest. If there is any value remaining, that equity would accrue to the homeowner that moved out or to the heirs in an estate situation.

<James>It sounds like a good deal to me even for seniors with a fixed income who cannot afford for their healthcare or situations like that.

<Peter>People take the loans for a wide variety of purposes. Every loan has a story behind it. Sometimes it’s for healthcare. Sometimes it’s just to pay off an existing mortgage because people find that their income is being squeezed and they can’t afford to make mortgage payments. Sometimes it’s to remodel the house or for some discretionary spending.

<James>I am concerned about the forward mortgage market coming into this market thinking that they can make a lot of money as they did in the subprime. We saw a lot of errors and have suffered the consequences dearly.

<Peter> There are some of the poor ethical practices from the subprime mortgage business creeping into the reverse mortgage business. We had a tough Congressional hearing in mid-December and a very damaging NBC news piece a few weeks later. I have concerns about various vendors offering direct mail and lead generation services that are inappropriate and have had to turn down a few vendors who wanted to exhibit at recent NRMLA meetings. The NBC news piece was about a borrower who had been sold a reverse mortgage and an annuity. The story was misreported and misguided and indicated that the annuity was part of the reverse mortgage transaction, which it was not. Nevertheless, the “tag team” selling of reverse mortgages with other financial products or investments is problematic for our industry. This type of dual sale should only be done if handled by a qualified professional who has a fiduciary relationship with the client.

<James>I have heard rumors that within a few years people may not be able to participate or it’s going to be tougher to get into this market unless they are strictly FHA approved or a CA, Certified Senior Advisor. What kind of regulatory changes do you see down the road in this industry?

<Peter>I am not sure what you are referring to here, unless you are referring to HUD’s thinking about limiting participation to FHA-approved correspondents and lenders, and curtailing so-called “HECM advisor” programs. The Certified Senior Advisor is a useful program, but not necessarily a credential to participate in the reverse business. CSA is a good educational program to learn about marketing to seniors and a lot of people in the reverse mortgage business have pursued that designation, but I don’t know what you are possibly referring to when you say in a few years people may not participate if they do not have that. Around the country, states have been adopting licensing laws for individuals involved in offering mortgages, so maybe that is what you are alluding to, but that’s not unique to the reverse mortgage, that’s to the mortgage market overall.

For more information about NRMLA and Peter Bell, go to http://www.nrmlaonline.org/

 

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