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Breaking the Cycle of Business As Usual

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Are You Ready for the New Way of Doing Business?

Reverse Mortgage Business News

Doing business as usual is a sure recipe for failure in our fast-changing industry. First year distribution limits, borrower financial capacity and lower lending ratios are the new reality of reverse mortgage lending. Beyond industry-wide efforts like “Extreme Summit” to redefine the reverse mortgage’s public image lies a more crucial and practical consideration. Just how should we be doing business in 2014? In our most recent online training “Asking the Right Questions” which over 500 professionals attended we examined several facets of our interaction with borrowers. At the conclusion one attendee commented “prescription before diagnosis is malpractice’. In other words, to make recommendations to any prospective borrowr without first conducting extensive fact finding is both short-sighted and  unprofessional.

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3 Comments

  1. Hi Shannon,

    I am thrilled that you are using my “motto”, “Prescription without diagnosis is malpractice”. I heard that years ago and thought it was absolutely perfect for what we should be doing as reverse mortgage professionals.

    Thanks for a great video and a wonderful reminder that we are not “order takers” and that we must truly understand our client’s situation before we can even begin to suggest a solution.

    I loved your seminar on asking the right questions! Thanks for all you do. I will be sharing this video (like I always do) with my team!

    • Thank you Sylvia. I couldn’t recall exactly who said it but it struck a chord amongst myself and all of our attendees. Thank you! Glad to be part of pushing toward the goal together in 2014!

  2. Shannon,

    I fully agree with the need for originators to diagnose the financial situation of the borrower. The problem is many originators do not understand finance.

    For example the other day an originator wrote an article that expounded the idea that if a young couple have additional cash it would be wiser to put those funds to work in an investment than to pay down their mortgage because math proved compounding of an investment would produce a better result. The writer had no idea what he was advocating. Whether it is best to (1) invest while making minimum mortgage payments or (2) pay off the mortgage first then invest with the mortgage payment and any additional funds, is dependent upon earnings versus interest rate cost arbitrage and income taxes. In that same article the author writes about the three bucket approach but had no idea what each bucket represents except the last one, available funds through a HECM.

    Not long ago one of the industry’s most outspoken advocates in the political arena declared that the interest costs on a 30 year fully amortized fixed rate mortgage is greater than a HECM. She was stunned when it was shown that unless the interest rate on the forward mortgage was twice that of the HECM, what she was saying was totally wrong.

    It has been and continues to be my position that in reaching out to the financial community, we need an origination core who understands finances which to me means a new one. It is clear that many who believe they understand finances, do not. That in part explains your point about seniors being educated about HECMs but never having the originating team review the financial situation of the borrower; that team most likely does not understand how.

    It is great that so many originators are passionate about HECMs but to serve our customer base, we need to understand what it is we advocate. A HECM helps few unless the borrowers appreciate how it is a HECM can most productively help them and thus why borrowers should use its proceeds prudently.

    As the old saying goes, sales are based on emotion but success in use of the product is based on a thorough knowledge of the product, its prudent use, and the needs of the acquirer. My concern is with the second aspect of the basis for product success and yours, the third. Without both of these key ingredients (knowledge of how to use the product prudently based on the needs of a particular customer), the chances of anything other than mediocre success are dismal.

    Put another way, prescribing medicine without knowing its possible side effects on a patient can kill. After all, few of are hardly “doctors” in finance.


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