Forward on reverse: Fixing California's SB 1609: A conversation with James E. Veale of Security One Lending: Part IIAtare E. Agbamu, CRMSreverse mortgage law, annuities, Housing and Economic Recovery Act of 2008
James E. Veale believes California's 2006 reverse mortgage law,
SB 1609, needs improvement to better protect seniors and strengthen
reverse mortgage origination practice in the Golden State.
Among other provisions, SB 1609 barred California reverse
mortgage lenders from selling annuities to borrowers or referring
seniors to annuities sellers before loan closing or the expiration
of borrowers' right of rescission. True to its pace-setting
tradition, newly enacted federal law, the Housing and Economic
Recovery Act of 2008, followed California's SB 1609 lead in this
area. But Veale wants a better law.
A senior vice president for government affairs at Security One Lending,
James came to the reverse mortgage industry in 2005, following a
distinguished career as a certified public accountant (CPA) and
partner in charge of taxes with the CPA firm of Miller, Kaplan, Arase &
Company LLP. He did tax work at Kaiser Steel and Fluor
Corporation. At Arthur Young & Company, Veale handled auditing
and tax issues. Along the way, he gave tax advice to many small
businesses and to some of California's most prominent families.
Below is a transcript of part two of our conversation.
Victory for the insurance lobby
Atare E. Agbamu: Who drafted SB 1609?
James E. Veale: Basically, the law [SB 1609] had a
well-meaning source—someone who thought they understood the
reverse mortgage and the insurance/securities businesses. In its
first draft, reverse mortgage originators and insurance brokers
were barred from selling annuities to seniors during the restricted
period. When the law began going through the legislative process,
the insurance industry took exception and would not support it;
hence, their restriction was removed.
AEA: In other words, what reverse mortgage originators
cannot do (sell annuities or refer seniors to annuity salespeople),
insurance brokers can? This essentially negates the purpose of the
restriction, right?
JEV: You are so right. How much more protected are
seniors (or their heirs) as a result of this portion of SB 1609? It
seems the annuity salesperson is fully protected, despite any
direct or indirect knowledge of the origination of the reverse
mortgage, while the reverse mortgage originator is totally exposed.
All that an annuity salesperson needs is knowledge of the
origination and that person is free to solicit the senior to buy an
annuity without restriction.
Originator incompetence
AEA: You have discussed competency and inadequate training, have
you seen evidence in reverse mortgage origination practices in
California where a senior has been ill-served because of the loan
officer's incompetence?
JEV: Absolutely! I have had borrowers say, "No one pointed
out the one-year-out-of-the-home rule to me. I expect to be out of
my house for more than one year at some point, but hope to be able
to come back to my home later. Now I find out that my reverse
mortgage will become due and payable while I am gone that year. How
can I pay the loan off without selling my home? I never would have
taken this mortgage had I known that rule."
We've also seen [instances] where people were surprised about other
events that cause the loan to become due and payable, such as
failure to pay property taxes, insurance and homeowner association
assessments.
Sometimes, I have even heard people say, after going through a
presentation, "I see. You never have to pay that loan back."
AEA: Is that fairly widespread?
JEV: Even though it isn't widespread, the problem still
exists. For example, we went to see an older woman who did not have
good eyesight. To expect her to read through all the documents is a
terrible business practice. That should not be an expectation! But
here is what occurred: We explained the one-year rule to her. And
she told us an originator for one of the largest lenders had come
to talk to her about the same issues and failed to give her the
same information. She had started the loan process with that other
originator only to find out from her attorney that this is one of
the ways she could be forced to pay back the loan. When she
confronted the originator, she backed down and said, "No, no, I
think maybe you are right." But she really wasn't certain.
Lifeline for a friend's widow
AEA: That's interesting. Now Jim, what drives you? You had a full
and productive career as a CPA before coming to reverse mortgages.
What attracted you to the reverse mortgage industry?
JEV: Well, I had a very dear friend pass away and left his
widow in a situation where she was very house rich, but very cash
short. And she could not physically go back to work. Over time, she
was being helped by friends and relatives. She was running short of
funds.
I visited her one day. As we were talking, I realized I needed to
bring her situation to the attention of others. After several
meetings, someone told me about reverse mortgages. And after seeing
what it did for this woman, I decided that in my retirement, this
[was] one thing I really wanted to do. So, that is the reason I got
involved in the industry.
AEA: What happened with the lady? Did she get what she
needed?
JEV: She not only got what she needed, but she was able to
support her daughter through UCLA (University of California at Los
Angeles) and get her into a career almost debt free. It was a big
relief to this dear widow.
Let there be HECMs!
AEA: What else do you want to accomplish in this business, besides
reforming the way this business is done in California (and possibly
the entire country)?
JEV: One of the things I would like to see is Home Equity
Conversion Mortgage (HECM) availability for seniors on more types
of transactions and properties. The Housing and Economic Recovery
Act of 2008 is a big step forward, by providing HECMs for purchase,
HECMs for coops and HECMs for more manufactured homes. I would like
to see this program spread among as many senior homeowners as
possible, so that the seniors who are cash short can find more
ready sources of cash, without having to go through the stress of
proving income and meeting minimum FICO scores in their retirement
years.
Read books, find mentors, join NRMLA
AEA: From your experience and learning in reverse mortgages, what
would you say to those just coming into the industry on being
prepared?
JEV: When I first started, I worked for a firm that did
not have a great training program. I went out, got books and read.
One thing this employer provided was access to some very
experienced and great processors who saw my interest and really
helped me understand the forms, the process and how to keep seniors
informed on the status of their loans. I cannot overstate the help
of some very dedicated and experienced loan officers. I also
attended meetings of some of the lenders we sent loans to. In
summary, get training, read good books, and find caring and
experienced loan originators and processors who can answer
questions and provide guidance.
AEA: How about getting involved in the industry's trade
group [NRMLA]?
JEV: Oh, there is no question. Being involved in the National Reverse Mortgage Lenders
Association (NRMLA) was one of the best decisions I have made
in this industry. I think their programs are very valuable. Anyone
who is going to be in this industry for any length of time should
definitely be involved in NRMLA as early in their career as they
possibly can.
AEA: I agree. Jim, do you have any closing
thoughts?
JEV: It is both a privilege and very rewarding to be in an
industry where you can make a living helping people in need.
Reverse mortgage origination is a great career for anyone who not
only enjoys being with and working with seniors, but also has the
desire to help them in very substantial and meaningful ways.
AEA: Thank you, Jim.
Atare Agbamu is the author of Think Reverse! (The
Mortgage Press, 2008) and more than 100 articles on reverse
mortgages. He is a reverse mortgage specialist in Minnesota and an
adviser to older adults, their families, professionals and
institutions across the country. He may be reached by phone at
(612) 203-9434 or e-mail
[email protected]. To
offer comments on his book, visit www.thinkreverse.com and
click on the Bookfeedback page. To place an order, log on to reverse.mortgagepress.com.
