Forward on reverse: Reversing the credit crisis at World Alliance Financial: A conversation with CEO David Peskin (Part II)Atare E. Agbamu, CRMSreverse mortgage, David Peskin, World Alliance Financial, jumbo reverse loans , Simple60
Author's note: Many Forward on Reverse readers have been
inquiring about my book, "Think Reverse," for months. I am pleased
to announce that The Mortgage Press has been taking orders for the
first printing since June. Please reserve your copy and download
the first chapter at reverse.mortgagepress.com.
A blog for readers' feedback on the book is in the making. Thank
you.
David Peskin knows how to seize a great business opportunity. He
has maneuvered himself and his company from innovative reverse
mortgage lead-seller to a nimble, top-five wholesale reverse
mortgage lender in America within 18 months!
In a grim credit market, where seasoned reverse mortgage leaders
such as Financial Freedom, Bank of America and others are
suspending jumbo reverse mortgage lending*, Peskin's World Alliance
Financial (WAF) is forging ahead, making jumbo reverse loans and
growing market share. In a sense, WAF is running where other
reverse mortgage giants fear to tread. What is the source of this
unusual strength in an abnormal credit environment for all lenders?
Who is KBC? What is it up to in U.S. reverse mortgages? What is
going on at WAF? To find out, I spoke to David Peskin. Below is the
second part of our conversation.
*Note: Major reverse mortgage lenders such as MetLife Bank,
Generation Mortgage Company and others have not suspended their
jumbo programs.
Atare E. Agbamu: How many brokers do you have
nationally?
David Peskin: I believe it is around 500.
AEA: How many of them are HECM advisors?
DP: That does not include HECM advisors. Those
are brokers and lenders.
AEA: Tell us about some of your products. You have a
very interesting product called Simple60.
DP: There are two advantages to Simple60: It
starts at [the] age of 60 and its closing costs are tremendously
reduced. It is for consumers who want less cash. If you want as
much money as you can get out of your house, then you are better
off doing an FHA HECM loan. But if you only want, say $50,000 or
$75,000, then our Simple60 is for you, because the closing costs
are about half of an FHA reverse mortgage.
AEA: What is the amount?
DP: I think it is around $5,000 or $5,500.
AEA: What do you say to those who say that a Simple60
customer can easily run out of equity when they truly need it in
their late 60s, 70s, or 80s, or that age 60 is too young to start
tapping into home equity through reverse mortgages?
DP: When you start at age 60, you are actually
going to get less access to the equity. In essence, it is almost
the same thing as if you were 65. You are getting more access to
the equity. All that happens is that we limit you to a little bit
less equity in the home so by the time you are 65 or 66, it would
match up to other products in the market. We are not giving you the
same advance rate as you would if you were older. It makes it a
little harder for that [customer running out of equity] to
happen.
AEA: I can see where it can be very useful. There are
people, 60 or younger, who may have medical necessities. The
doctors say: You have just six months to live, but you may live
longer if you have so-and-so medication. They are out of cash, and
the home equity is the only asset that is left. It has a place.
From your research, what is the size of the Simple60
sub-market?
DP: The market is as big, if not bigger than the
FHA product. As the baby boomer generation comes in, they will be
more interested in this product because it is much like a
traditional home equity loan, which is, "Hey, I don't need a whole
lot of money, and I don't want to spend a lot to get the loan."
AEA: The index on this product is LIBOR of course. What
is the margin?
DP: The margin is four percent.
AEA: And it is the one-month LIBOR, right? Now, tell us
about your EquityPlus Advantage, your jumbo product.
DP: Our product is very similar to all the other
products. The difference is, we believe in the product, and we are
going to continue to offer it.
AEA: Even in this tight market?
DP: Even in this tight market.
AEA: Now, tell us about the flexible-margin HECM?
DP: The flexible-margin HECM basically allows the broker
to adjust the margin if they need to adjust closing costs for the
customer. We've introduced a scale no different than what they do
in the forward market. You can have a lower or higher rate based on
loan costs.
AEA: Please give us a scenario.
DP: Let's assume someone wants to pay [a lower]
origination fee. The broker can give them a higher rate and charge
less of an origination fee if they choose to.
AEA: That is, they can increase the margin, right?
DP: Yes.
AEA: Is the broker's discretion in setting the margin
complete or is it subject to your review?
DP: It depends on what the brokers submit to us. It is
also what is comparable for their market. With CMT, LIBOR, multiple
margins and market condition, what a broker makes on a CMT 100,
they can no longer make. They've got to adjust accordingly to a
higher margin so that they can make their profits. It is no
different than three companies selling a TV. At one point, they
will price each other out of the market. Then, sooner or later,
they realize they've priced too low, and they begin to raise prices
again. We have to make rate adjustments based on the market.
AEA: Industry-wide, what are the trends you are seeing
in this tough market?
DP: On the wholesale side, people are competing on price.
They are trying to get market share by pricing. That is not the
right business model. All you are going to do is put yourself out
of business. People need to understand that there are other ways to
competeservice levels, technology, diversifying the business model
a little bit [and] partnering with customers. It is not just all
about price.
I think that the industry is going to start to grow, and grow
very quickly. Consumers are making decisions a lot faster than they
were a year ago. Which means that it is not going to be long before
this market takes off.
AEA: You started in this business selling qualified
leads about four years ago. Do you still sell leads?
DP: We do, on a selected basis.
AEA: Do you sell them to your brokers or to non-WAF
brokers?
DP: We sell them to our approved brokers.
AEA: Exclusively?
DP: Yes.
AEA: Do you have any other thought you want to share
with readers?
DP: It is only a matter of time before the market has to
open up again. Wall Street makes their money from securitizations.
It is just a matter of when investors' appetite for buying assets
is going to come back. And when they do, I think reverse mortgages
are going to be on the very, very top of the list.
AEA: Thank you, David.
Atare E. Agbamu, CRMS formed ThinkReverse LLC to help
originators address demographic change via reverse mortgages. A
specialist with Credo Mortgage and a member of BusinessWeek Market
Advisory Board, Atare is the first to propose reverse mortgages as
risk-management tools for forward originators. Besides marketing,
originating and researching reverse mortgages since 2001, Atare has
authored more than 100 articles and a book on reverse mortgages. He
may be reached by phone at (612) 203-9434 or e-mail
[email protected].
