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The Art of Survival

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The Skills Needed for Surviving the Age of Change

reverse mortgage newsBeyond keeping up with product and regulatory changes is remains the difficult task of doing business in the brave new world of reverse mortgage lending. Originators are feeling the impact with fewer borrowers qualifying due to lower principal limits or lending ratios while lenders seek to adjust to lower revenues in the wake of HUD’s eliminator of the  standard fixed rate’s loan.

Much of the pain can be attributed to the protracted process of redirecting our focus to a new demographic. Case in point, the typical needs based borrower. These individuals are most vulnerable to not qualifying due to…

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  1. I have been and remain a strong proponent of the idea that with the originating core which existed in our industry on 10/4/2010, we would never reach the 98% with Savers. Now that all we have is a modified Saver, very little has changed except that we have fewer seniors in our traditional market we can help. Otherwise, the issues are generally the same but with a generally inferior product to the original Saver.

    What is happening right now is the industry is being shrunk due the inability of industry originators to sell the new modified Saver. One problem lenders face with the modified Saver is that they must endorse about 50% more HECMs this year just to stabilize revenues to 2013 levels. That would mean about 92,000 endorsements this year without taking into consideration the increased impact of inflation on costs; there is no way that objective will be reached. Several prognosticators believe that endorsements will not reach even 50,000 this fiscal year.

    What makes the modified Saver so difficult to sell is that its upfront costs are higher than the original Saver and not all of the proceeds can be taken at initial funding unless there are sufficient mandatory obligations. Financial assessment will add to the problems of originating this product. Many times expensive credit card debt cannot be paid off with HECM proceeds as well as other expensive consumer debt with new first year disbursements limitation. We need to see the new product for what it is, a product which will preserve the MMI Fund.

    For the modified Saver to reach 100,000 endorsements, we need originators who understand present value calculations, cash management, some tax strategies for consumers, and other financial basics. There will always be a place for those who can sell to 74 year old widows but with the modified Saver, that market has shrunk and will remain shrunk.

    Too often industry leaders tell us to sell the benefits of the modified Saver to prospects but somehow always lead us back to the same issues, which describe its benefits to government and to a lesser degree the industry. I for one find it hard to look a senior square in the face and tell that senior that the modified Saver is really a better product for him/her.

    I live and work where I was born and grew up, coastal LA and Orange Counties, California. While I am looking forward to seeing the Extreme Summit targeting this area, I am also very concerned that some of the silly notions we are hearing about modified Savers are the very slogans of the Extreme Summit marketing campaign and will damage the garden spot of the HECM market for decades.


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