New Products and Correspondent Investor; Can Conventional Lenders do Reverse Mortgages Correctly?
What did one boat say to the other? “Are you up for a little row-mance?” Oh boy. Don’t forget the chocolates for your sweetie. If the love thing doesn’t pan out, you can eat them yourself. What does the Census Bureau say about Valentine’s Day? $16 billion is the estimated value of chocolate and confectionary product shipments for manufacturing. $131 million the value of imports of bouquet cut flowers and buds in February of last year. Of that, the value of imports of fresh cut roses was $72 million—the highest category of flowers. 22,655 jewelry stores sold an estimated $2.6 billion in merchandise.
New businesses in lending!
Ventana Home Mortgage will be holding a Town Hall Meeting to introduce its soon-to-be launched "Residential Loan Programs Correspondent Lending Platform." Ventana will offer "delegated & non-delegated options across the nation, several loan programs, superior technology, and experienced personnel." Speakers will include Ketan Parekh (President), Joseph S. Kohout, JR. (SVP, Head of Residential Credit & Lending Operations), & Patrick Cardon (Managing Director) Please R.S.V.P to the link below to be included. It is anticipated that the length of the call will not exceed one hour. We can accept RSVP's via email here. Call‐in details, a formal agenda & instructions on how to submit questions will be emailed later this week. Other questions can be addressed to Joseph S. Kohout."
And Finance of America broadcast that it has launched Finance of America Commercial, "a new business unit designed to serve real estate investors. The business unit was established following Finance of America Holdings' investment in B2R Finance and B2R's simultaneous acquisition of certain assets from private money lender Jordan Capital Finance. B2R Finance will operate under a new name, Finance of America Commercial LLC, and joins Finance of America's leading portfolio of brands. Jordan Capital Finance CEO Mark Filler will serve as president of the new business unit. Jordan Capital SVP Ben Fertig and B2R SVPs Joe Hullinger and Matt Soto will continue to lead sales efforts and oversee operations for the organization. In addition to maintaining direct relationships with real estate investors, Finance of America Commercial will expand its focus on independent mortgage brokers and will also leverage opportunities to work with mortgage advisors within the Finance of America family of companies."
Reverse mortgages: the last chance to lend to Boomers?
The fact that 10,000 people a day are turning 62 is not lost on forward lenders. At that point in their life the birthday kids are eligible for a reverse mortgage, and as forward mortgage volumes drag a little, lenders are naturally open to offering other products. Reverse mortgages are increasing in popularity with seniors who have equity in their homes and want to supplement their income. The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through an FHA approved lender.
But reverse mortgages aren't something that an LO takes a two-hour class for and is ready to originate. Nor is it some kind of 30 or 45-day rate lock. The sales cycles are many months, in some cases years. And they'd better be done right, and with a huge amount of customer service - the last thing a lender wants is the Gray Panthers picketing outside their office.
With an eye on forward lenders interested in seeing what the reverse world might offer, I received this note from David Peskin, the President of Reverse Mortgage Funding LLC. "Rob, we are exploring ways to bring the forward lenders into our world. We have our own proprietary technology which makes it easier for lenders to originate reverse loans as well as a full training and development team. If any forward lenders would like to learn more, they can contact me."
Reverse mortgages can certainly be part of the overall financial plan. Jeff Brown in the Wall Street Journal offered up, "New Thinking About Reverse Mortgages." "'Now is an exceptionally good time to be considering adding a [reverse-mortgage] credit line to the retirement blueprint,' says Shelley Giordano, chair of the Funding Longevity Task Force at the American College of Financial Services. Interest rates are low, which increases the credit limit on reverse mortgages, she notes, and if rates rise over the life of the loan, that will add to the growth of the credit line. Since interest rates tend to rise alongside inflation, the growing line of credit would provide an inflation hedge, she says.
"'Research has shown that setting up a line of credit as soon as possible, age 62, in order to let it grow and only tapping into the line of credit when needed can substantially improve the long-term sustainability of a retirement-income portfolio, meaning you can make your money last longer...The strategy-called a standby reverse mortgage, or SRM, by some-has been pushed in financial journals by several academics...They recommend drawing from the credit line when investments like stocks and bonds are down, so the homeowner enjoys a steady income and gives other investments time to recover, allowing them to last longer."
The National Reverse Mortgage Lenders Association introduced three new resources for potential borrowers each geared toward different stages of the lending process, from consideration to the closing to the time the mortgage comes due.
The first guide takes the form of a questionnaire, asking potential borrowers a battery of questions in order for them to consider how they'd use the proceeds of a reverse mortgage, whether they understand the responsibilities inherent in taking out a HECM loan, and if they have explored other potential options for retirement planning and funding.
The second provides a range of information for current HECM borrowers, including a description of the handoff process between originator and servicer, an expansive list of responsibilities - such as the payment of property taxes, homeowners' association fees, and insurance - and advice for special circumstances, such as medical problems that prevent the borrower from living in the home over an extended period of time.
The third and final tool walks borrowers through the maturity of the loan, explaining how the payback process works - along with dedicated sections for both spouses and children. All three pamphlets were developed with extensive input from both originators and servicers, along with outside legal counsel.
Most HECM borrowers are aware of the refinance option because they had the same option on their standard mortgage. HECM borrowers have other options, however, which are unique to HECMs and may not be known or fully understood. If they took a monthly payment but find out later that their needs would be better served by a larger or smaller payment for a different period, or by a credit line on which they could draw as needed, they can modify the transaction without charge. If they had originally taken a credit line and decide later that they prefer a steady monthly payment, they can make that switch as well.
Any forward LO looking at entering the reverse field will soon see plenty of challenges. For a consumer, getting a mortgage poses one set of challenges; managing the mortgage after they get it poses a completely different set. The firms that service mortgages work for the lender and their major objective is to make sure borrowers meet their payment and other obligations to the lender. Issues important mainly to the borrower usually are left for the borrower to work out.
HECM reverse mortgages have a major twist: there is no fixed end date. Except for borrowers who have drawn the maximum cash permitted on a fixed-rate HECM, managerial challenges are greater because the reverse mortgage has no terminal date. It can go on as long as the borrower lives in the house and the borrower always has an option to change the deal in several ways.
If you want to learn more, and keep learning, you should sign up for the Reverse Mortgage Daily.
The capital markets!
Last week was characterized by subtle moves in rates up and down. Perhaps this week will be the same, which would be good as no lender likes a volatile market. With no news to focus on Monday, bond traders are yammering about today's appearance by Fed Chair Yellen in front of the Senate Banking Committee (part of her semiannual monetary policy report before Congress).
What is the timing of the next rate hike? The Federal Open Market Committee meets again in March, but the odds, as of this writing, are slim they will have another increase. But hey, our economy is doing well, and stranger things have happened. And stocks and bonds tend to reflect expectations of the future. Regardless, on Monday the 10-year lost about .250 in price and closed yielding 2.43%. Agency MBS prices and the 5-year note worsened about .125.
This morning we've already had the NFIB Small Business Optimism Index for January which rose slightly. (My guess is that they had the number last night - why not just send it out then?) We've also had some readings on inflation in the form of the Producer Price Index (hot at +.6%, core +.4%). Ahead are the Redbook Weekly Same-Store Sales Index and a slew of Fed speakers. Rates are a shade higher versus Monday with the 10-year at 2.44% and MBS prices worse nearly .125.
Jobs and Announcements
Mortgage brokers need love too and REMN Wholesale is giving them something that many other lenders simply won't this Valentine's Day. REMN is now offering mortgage products for manufactured homes accompanied by the industry leading same-day turn times the lender has become synonymous with for both reno loans and traditional products. As a part of its commitment to making the closing of these home loans as turnkey as possible, REMN includes delivery, setup, site development, installation, along with well and septic connections, within the purchase price of each loan. These loans are supported by the same award winning closing department and internal help desk that have solidified REMN's reputation as a lender dedicated to an excellent broker experience. As REMN continues to grow, it is looking to hire experienced, customer-focused account executives in all regions coast to coast. Interested applicants should send their resumes to AErecruiting@REMN.com.
Address Mortgage, a purchase-focused division of American Financial Network (a 2016 "Top Mortgage Employer"), is seeking to fill two open Regional Vice President - Business Development positions for the IL/IN and MI/OH/WI markets. The ideal candidates will have a demonstrated track record in recruiting both loan originators and full production branches. Per Gary Fioretti, Division Executive for Address/AFN, "Address is a leading mortgage solution for Century 21 Affiliated, the single largest C21 franchise in the world with more than 100 office locations and more than 2500 licensed real estate agents in this market." Commenting further, Gary stated that "To support our expanding C21 relationship, we are looking to fill more than 100 open loan originator positions during 2017. And to enhance their efforts, both RVP candidates will enjoy personally recommended loan originator referrals directly from the real estate agents at the C21 offices." Qualified candidates are encouraged to submit their resume in confidence directly to Gary.
"I saw a startling statistic the other day," says John Paasonen, CEO of Maxwell. "Loan officers and their teams are spending over 40% of their time chasing borrowers for documents." With the race to cut cycle times, having borrowers complete tasks faster must be a top priority. Lightweight platforms like Maxwell automate borrower documents by linking to thousands of financial institutions to digitally pull in actual bank statements, W-2s, paystubs and full tax returns. Since these are the original documents, not generated based on raw transaction data, they are universally accepted by investors. Maxwell is the emerging leader in mortgage collaboration software that connects loan officers and their teams with the homebuyers and real estate agents they serve every day. Sign up for a demo of Maxwell to see this automation at work.
Assurance Financial continues to expand after increasing production by 29% in 2016 while opening several offices in new markets throughout the country! The company has a solid reputation for closing loans on time, appealing to anyone wishing to grow their origination business. Our back office supports its mortgage loan originators and branch managers so they can focus on originating more new loans rather than worrying about closing their pipeline. Assurance plans to expand its footprint further this year by selectively hiring producing branch managers and MLOs in good markets. For more information, contact Paul Peters, CMB at 225-239-7948 or visit LendTheWay.com/Careers.