It is with great melancholy that I look back upon a near decade- old decision that gave birth to that indelible “aha moment”; that moment in life that reverberates in every pore of ones being; which loudly and unabashedly reaffirms that yes, you are on the right path; until it is discovered in a cruel twist of faith, that you are not. This antithetical discovery can only reside in the pantheon of human cruelty. It is, I confess, gut-wrenching to figure out that after years of uncontested faith, the reason you believed you were put on this earth was wrong.
I believed with every molecule of my being, especially after emerging from life-saving brain surgery that my Raison d’être would become abundantly clear. I made that ubiquitous pre-surgery promise that survival would lead me down a “do something special with my life”path.
Many years later I could have sworn that I found that precious meaning. Clearly it was to help seniors lead the life of their dreams, while remaining in their homes. Working in the reverse mortgage industry became a labor of love because of the profound difference the program made.
When one discovers that labor of love, life becomes magically reciprocal. Each life changed proved Newton’s third law of motion: For every action there is an equal but opposite reaction. The joy, satisfaction and friendship my clients gave to me often made me think that it was I who was the lucky one.
When conceived about 22 years ago, the reverse mortgage program was born out of the clarion call for finding a better way to keep our elders in their homes. In its nascent years, the industry attitude evinced a singular desire to helping those in need at a time of reduced income capabilities. However, as the years flew by, and as the industry matured, the reverse mortgage loan took on the look, feel and flavor of its more mature sibling in the forward mortgage market. Compliance issues now reign supreme as the aforementioned singular forgotten glory has now morphed into a minor detail.
Many of my colleagues seem to think and maybe they are right-that this program is doing fine. Of course they will point to the fact that the Boomers are now in the third year of eligibility and are a growing cohort at the rate of 10,000 per day. This, along with the often cited statistic that the Social Security program will not have a cost of living adjustment for the second year in a row and that the retirement income deficit in this country is 6.6 trillion dollars. The above tallies are usually the focus of their optimism. While there will always be a need for the program, the program must reach a wider group of people. It seems that the new buzzwords are “long term viability”. This is nothing more than spinning something negative into something less negative- “Let’s sacrifice a little today to make the program stronger tomorrow”. The program is sick. All the hoping and wishing will not change this concrete fact.
Research has shown that in order for a product to tip it must gain a market share between 15-18%. After entering its third decade, the reverse mortgage industry has never had market penetration greater than 2 per cent. It is worthwhile to note that the last significant increase in closed loans occurred in 2007 when the program grew by 40%. The next two years showed a meager growth of 2 and 4 per cent respectively. The summer of 2008 saw the FHA Modernization Act passed and signed into law. Yet we saw only a 2,538 production increase from the previous year. The act provided a laundry list of initiatives and protections that the industry sought. In spite of this, last year was an unmitigated disaster. The industry did 31% fewer loans than the year before.
Clearly FHA wants to reduce market share and bring private capital back into the marketplace. FHA insures 99% of all reverse mortgage loans. This is not sustainable, especially if it is at taxpayer expense. The specter of lower limits, although around for years, may become a reality sooner rather than later. As many point out, lower limits by themselves will not spur the creation of proprietary programs, when home values have not hit bottom. The latest Case-Shiller Index report bears this out. The current administration, under their risk management avatar, have instituted policies which have resulted in making it harder for many to obtain the loan. Adding a credit score requirement is yet the latest example of another impediment- Wait. I hear it coming. “Let’s sacrifice a little today to make the program stronger tomorrow.
The announcements by Bank of America, Seattle Mortgage and Now Wells Fargo-wholesale leave little room for doubt that the industry has seen better days. The industry has now virtually ignored the co-op market, hurt the condo market, does not like the use of a power of attorney, made counseling adversarial, and will institute the use of credit scores.
This program is no longer recognizable. While I will always be there for all my clients, the time has come to remember a cherished chapter of professional life and begin another. Unfortunately many of our prospective clients must succumb to the feckless policies that sealed their fate.
I haven't visited you for awhile Dennis, due to all of the changes that you mention in this post. I discovered the RM business in 2000. I was intrigued with the potential to help seniors, saw that much of the insanity of the "forward" business was missing and decided to give this business a shot. After a couple of deals I was hooked. I loved the results we were able to produce with this product and the positive impact on peoples lives. Unfortunately, the political machinations, bureaucratic bumbling and the economic climate have takent their toll on this life changing product and on me. I've had one foot out the door for over a year now. But I keep the other foot in the business in hopes that something positive will develop. Unfortunately, it just seems to get worse, and then worser. Thank you for your honest appraisal of the state of our business in your posts Dennis. I have been engaged in an effort to locate the next passion to pour myself into, but it's challenging to find a replacement for what used to be the perfect business for me...and obviously, for you.
Posted by: Carl Shadle | April 04, 2011 at 08:34 PM