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   James E. Veale, CPA, MBT

   May 22, 2015 at 12:21 pm

   The speaking skill of Mr. Sless is very good. His ability to work with the show’s host was also very good. In a separate blog in Linked In I discuss some of the content which did not reach the same level.

   However, what the experience of Mr. Sless shows is that we all need to be out there meeting with all kinds of people involved in residential real estate. We need to take the message that HECMs help seniors improve their financial situation, specifically cash flow, throughout retirement without fear of termination of the source or it being reduced or frozen for any reason other than termination, non-borrowing spouse deferral of the balance due, and temporary freezing if a bankruptcy petition is filed during the life of the loan.

   We also need to promote those ideas that help the borrower not lure the asset manager, the securities salesperson, the Realtor, or the builder with ideas on how to get more out of the HECM which will improve their revenues. It is disgusting to hear some originators promote the idea that seniors can buy up with a HECM for Purchase which would give the Realtor more compensation or that seniors can take out the cash not used for needs and put it into the asset pool being managed and thus the asset manager can realize more fees even if the senior is in the asset consumption stage of retirement.

   If there is something we all need to work on it is content. There is a saying that goes: “Amateurs practice until they get it right but professionals practice until they cannot get it wrong.” If we are asked about the balance due we should not state it has two components (principal and accrued interest) when we are talking about HECMs which have at least three (HECMs accrue ongoing MIP).

   With the accrued ongoing MIP today at its 150% increased annual rate (0.5% for HECMs receiving a case number before10/4/2010 versus 1.25% thereafter), a fixed rate HECM which closed last month with a starting balance due of $300,000 at a 4.75% interest rate will have over $200,000 in accrued ongoing MIP in 25 years(if the balance due is not paid down until maturity.)

   (The fourth component for most HECMs receiving case numbers before 2010 is accrued servicing fees, normally accruing at between $20 and $30 per month inclusively.)

   Some of our national leaders are great at reciting program details but that ability generally comes through hard work. Improvement in our presentations is something we all need to strive for. Missing key points should be avoided at all costs (even if that means we believe that the audience will turn away from HECMs.) When the HECM is rightfully explained, few borrowers say that this nonrecourse mortgage appears just too good to be true and yet they clearly see its benefits and how they can improve their cash flow position with “THE” HECM.

   (The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)

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