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The world of credit: Debt ratio--Income and credit

National Mortgage Professional
Jun 27, 2006

Forward on reverse: Insights for marketing to maturity: Part V: A different kind of customerAtare E. Agbamu, CRMSReverse mortgages,HECMs Fourth anniversary note This is the 48th consecutive installment of "Forward on Reverse." My aim remains the same as it was four years ago—to help originators prepare for the huge demographic changes ahead in residential mortgage lending via reverse mortgage know-how. Reverse mortgages are the only residential mortgage programs that address the cash needs of older customers without tying them down to regular monthly repayments, without putting their ownership rights in danger because of defaults and without risking other assets or leaving debts to their heirs because of reverse mortgages' no recourse feature. Whether or not you plan to get into reverse mortgages, you should know about these home loans and train your home lending teams to be literate in them. It is essential. In response to inquiries from readers and industry leaders, I formed ThinkReverse LLC to continue the work we began here four years ago. Our focus on helping mortgage originators manage demographic change via reverse mortgage training and consulting services was featured in Source Media's National Mortgage News, Origination News and Home Equity Wire. A 68-year-old lady and retired Wells Fargo personal banker, who used a reverse mortgage I did for her to achieve financial security, was featured on NBC's Today Show. We have coached and advised home lending teams at Leader One Financial Corporation in Lenexa, Kan. and Nevada Federal Credit Union in Las Vegas. We intend to be very busy with training and consulting assignments in 2006. From ample field experience and from responses to "Forward on Reverse" readers across the country, I am convinced that every residential mortgage originator in America needs to be reverse ready. Why? Because there is a reverse mortgage in every mortgage borrower's future! Every residential mortgage originator needs reverse mortgage know-how to provide well-rounded professional guidance in this new lending era. Even our leaders in Congress are becoming increasingly aware of the uncommon strengths of these innovative home loans. During a December 2005 debate on the floor of the U.S. House of Representatives, Rep. Michael G. Fitzpatrick of Pennsylvania described the impact of reverse mortgages on the life of one of his constituents: "Listening to his stories, I realized that the house was more than four walls and a roof. It was his life, it was his past and it was his future. The reverse mortgage allowed Arthur [Gerald] to stay in his home. He harnessed the power of this loan to achieve financial security and independence and to preserve his memories."1 If you are in the 21st century residential mortgage lending business, you ought to gain a deeper understanding of the power of this loan. You ought to find out how you can use it to move your business forward. And, you ought to find out how you can use it to gain competitive advantage in a market and culture dominated by aging customers. Thank you very much for reading "Forward on Reverse," for your e-mails, for your phone calls and for your always instructive questions, scenarios and inquiries. I have received many inquiries about my upcoming book for originators and senior advisors. My publisher and his staff are working very hard to get it out. It should be out soon. Excitement, activity and raw athletic energy filled the air at the Metrodome in Minneapolis. Some were lacing their running shoes, some were pinning bib numbers to their shirts or shorts, some were stretching their muscles and others were just talking, pacing, jogging, hugging and waiting. Many of the runners who gathered at the home of the Minnesota Vikings on that chilly October morning more than two years ago were gray or graying, like me. "Why do we have a lot of middle-aged and older people here?" I asked my neighbor and marathon mentor, Greg Doyle. "I guess it is the whiff of mortality," said Greg in his amiable and understated way. "The whiff of mortality? What's that? What does it have to do with being middle-aged and marathons?" Let's save these questions. In Part IV of this series ("A different kind of customer," The Mortgage Press, January 2006), we concluded that basic human development for entering adulthood with good prospects for a successful life is the goal of the first 20 years of life (spring). Play is the primal force during these years, influencing the maturation of the young person. The aim of the next 20 years (summer) is social and vocational growth; the desire to become somebody in our vocation and in society is a strong influence on behavior. Although we continue to grow socially and vocationally during our summer years, by middle-age (fall), we begin to experience what can be called "mid-course convulsion"—the adult equivalent of the turbulent teenage years. The changes are both physical and psychological. The physical changes are often obvious: expanding midsections, receding hairlines and graying hair are some physical evidence of middle-age. Psychological changes may not be so obvious. They may include feelings of restlessness and dissatisfaction with one's life, despite much professional and social achievement. Thoughts along the following lines may run through the mind: "What is the purpose of my life? Is this all there is to life? If I die today, what will my obituary say about my life?" This season of disquiet may lead to drastic events, such as divorce, career change, relocation, spiritual quests, renewed academic pursuits and other adventures, like running marathons, climbing mountains and jumping out of airplanes (with parachutes, of course!). Also, during this mid-life evaluation, individuals generally begin to break free of peer influence in search of their real selves. It is a time when the "pursuit of ambitions is being moderated by the pursuit of balance," says author and marketing guru David Wolfe. "The 45-year-old's outlook on the world and himself has changed dramatically from what it was at 25. He no longer views life from a romantic perspective. Gone is the heroic notion that he can conquer any challenge to which he puts his mind. From time to time, his spirits are dampened by feelings that there must be more to life than what he's getting out of it, even though he suffers no unmet material needs, is financially secure, has many friends and is ostensibly the master of his own destiny," wrote Wolfe in "Ageless Marketing." Where social orientation is the general developmental thrust of the first half of a customer's life, the emphasis is on inner growth in the second half. Wolfe wrote, "In the yearning for life balance and meaning, the focus changes from becoming someone to being someone. The inner self, long submerged by an outer world-directed agenda, aches for a simpler life. The quest for life satisfaction in fall shifts progressively away from a focus on things to a focus on experiences." There are always exceptions, but the general direction is toward inner growth. Others have observed that attendance at churches, temples, mosques and other houses of worship tends to be largely middle-aged and older. The "whiff of mortality" (a.k.a. "the search for meaning"), the realization that "life is short" is a truism and that we had better make the most of every minute may be responsible for bringing me, my neighbor and other graying runners to the starting line of the Twin Cities Marathon at the Metrodome that October. The journey toward a more human person continues into the winter years, with reconciliation and a yearning for peace as the leading life themes. Wolfe says that achieving reconciliation with ourselves as well as others is essential for successful aging. From Wolfe's four seasons of a consumer's life, we know that the reverse mortgage market is in the winter years. We also know the general mind of that market. In Part VI, we will look at eight traits of the aging consumer and their implications for marketing reverse mortgages. Because we are in a market and in a culture dominated by aging customers, the lessons we draw from these eight traits will apply to non-reverse mortgage marketing as well. Think reverse. Move forward! Footnote: 1. Congressional Record—U.S. House of Representatives, Dec. 14, 2005, H11586 Atare E. Agbamu, CRMS is president of ThinkReverse LLC, a reverse mortgage training and consulting firm based in the Twin Cities and is a consultant with Credo Mortgage. Atare is regarded as an emerging authority on reverse mortgages and is frequently consulted by financial professionals and families across America. His reverse mortgage interviews have been Web cast on MortgageMag Live! He can be reached by phone at (651) 389-1105 or e-mail [email protected]
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