Forward on Reverse: Why mortgage brokers and lenders need to be reverse readyAtare E. Agbamu, CRMSreverse mortgage, HECM, home equity, seniors
What are you doing to be reverse-ready? What does
reverse-readiness mean? To suggest some answers to both questions,
we'll check my inbox. The e-mail is from a reader and mortgage
broker in the state of Pennsylvania. With the authors permission, I
am sharing it with you, for it illustrates a message Ive been
harping on in this column for almost five years: As residential
mortgage brokers and lenders, we need to be ready for the
opportunities and challenges in mortgage lending, as aging boomers
transform our culture, our economy and our business.
Besides showing an enlightened, ethical, caring and thoughtful
mortgage broker, the e-mail from the Keystone State underscores my
proposition [see Forward on reverse: Reverse mortgages as risk
management tools for forward lenders, May 2006] that reverse
mortgages have become essential risk management tools for
traditional forward residential mortgage lenders and brokers, as
aging homeowners increasingly turn to their home equity "bank" to
supplement their fixed retirement income, monthly payment-free and
tax-free. Gone are the days when we casually say reverse mortgages
are "niche" products for specialty mortgage lenders and brokers.
The question today is whether your company can afford to ignore a
growing, non-cyclical segment of the 21st century residential
mortgage lending market.
For anonymity, I have changed some details. Enjoy your
reading:
Atare:
I appreciate the time you spent with me on the telephone yesterday
afternoon. As I promised, I am following up today with a telephone
call to both recommended lenders. I am also sending you profile of
the retired couple in Mortgageville, Pa. with a summary of their
needs.
Both the husband and wife are in their 60s, and both have credit
scores in the 700s. He is a retired constable and district judge,
well known in the area. She was diagnosed with MS in the late 1970s
and has been permanently disabled since 1978. They have no children
and plan on leaving their estate to their nephews and nieces.
They believe their home is worth $235,000. This is probably a
conservative estimate. Their current mortgage is with Zeus Home
Loans [ZHL] with a balance of $135,000.00. They obtained the
mortgage in September of 2003 and chose a 15-year term at that
time. Zeus, of course, placed its standard three-year prepayment
penalty on the mortgage.
I've been talking with them since June. My initial reaction was
to tell them to do nothing until their prepayment penalty expires
in September; then, select a standard FNMA [Fannie Mae] loan with a
10-year term to avoid losing the benefit of their last three years
of payments. As I touched base with the wife earlier this week, she
told me that her husband was more interested in a 30-year term,
reasoning that they would not live long enough to pay off any
mortgage, and he wanted their new payments to be as low as
possible. Frankly, I knew they appeared to be struggling to keep up
with their housing expenses and consumer debt on their current
fixed incomes.
At that point in the conversation, I knew that I had an ethical
obligation to discuss a reverse mortgage, even though I'm not
really set up to do them. When I mentioned reverse mortgages to the
wife, she admitted that they had briefly considered one in the
past, but they understood that when they died, the ownership of the
property would "pass to the government." I assured her that was not
the case and promised to create a proposal for them on a reverse
mortgage.
I also want to quickly profile the company I work for, 1st
Cosmic Mortgage. The company is headquartered in Ft. Lauderdale,
Fla., and it's been in existence for more than 20 years and is
licensed to do business in 17 states. I believe the company also
has offices in all of those states. Furthermore, it is licensed to
do all types of VA and FHA loans. I am the only person in
Pennsylvania associated with the company. The Pennsylvania Banking
Commission considers this to be the "brick and mortar" office that
secures the Pennsylvania license for the company. I should mention
that I have the code and passwords needed to pull FHA case numbers
in this office. I don't go through Ft. Lauderdale for that process.
My immediate boss is in Largo, Florida, near Tampa. She has a
partner, approximately half a dozen originators, and a full-time
processor. Ninety percent of their business last year was purchase
money. During a phone call last week, however, she mentioned in
passing that the office had recently received a flurry of requests
for information on reverse mortgages, and she asked me if I could
recommend anyone. I told her that I would have to take a file to
Caligula Financial LLC if I was forced into a corner and had to do
a reverse mortgage. We both understood however, that Caligula has a
special operation in Reversetown, Colo. that handles the reverse
mortgage business nationally.
As a result, all of the local work that goes into developing a
file has to be done by someone like myself but the only
compensation allowed by Caligula is a $500 referral fee to the
referring brokerage company after the loan closes. My boss agreed
that we need to really get into this business, but must find the
right lending bank. Although we do a lot of business with Caligula,
the company is not the solution for reverse mortgage fundings. That
completes the summary on both my clients and myself. Again, I
appreciate your help and I'll keep you informed via e-mail of my
progress with those two recommended reverse mortgage lenders.
--Steve Sutton, Mortgageville, Pa.
Think reverse. Move forward.
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 Webcast on MortgageMag Live! He can be reached by phone at
(651) 389-1105 or e-mail
[email protected].
