The Foolish Optimist


Is optimism overrated? Some say yes.

Optimism is good for our mental health and overall outlook but it will do nothing to improve our situation. Optimism without action is empty.

Don’t be mistaken, optimism has several advantages, the chief among them being that it opens our minds to see and seize opportunities a pessimistic mind would overlook. However, the most important quality of optimism is that it can be the fuel to take action. Optimism is seeing the opportunities in the challenges we face, whereas action is the bridge to making the desired outcome a reality.

An optimistic individual who does not take action may find their optimism souring into a pessimistic outlook. Even worse, they will find themselves regretting the actions they didn’t take. Regret is much more painful than pessimism in that it’s disappointment fully realized.

For us to begin taking positive steps to build our business requires some measure of optimism. But where does pessimism come into play?

Psychologists have identified two types of pessimism. Depressive and defensive.

Depressive pessimism saps the will power of the individual who believes they lack the skills, resources, and talent to succeed. In its simplest form, it says ‘why even bother?’. Defensive pessimism is quite different. They worry about specific potential negative outcomes and then harness that anxiety to take action. A defensive mindset anticipates the unexpected and seeks to find ways to adapt and overcome.

Whether you are a self-described pessimist or optimist, know how to harness each to a positive end result. Seek the mindset that best serves you while remaining rooted in the reality of the challenges you face.

Is optimism overrated? Yes, when it results in no action taken. However, it remains a priceless asset in helping us take the first steps toward deliberate and continued activities to grow our business.

5 Reasons to be Excited!


In the early spring, you may have been ‘locked down’ working remotely in response to the COVID-19 pandemic and caught a case of cabin fever in the process. Perhaps you over-indulged in binge-watching Netflix to pass the time you would have typically spent going out to social functions. Regardless of what your current situation may be, reverse mortgage professionals have good reason to be excited, grateful, or just simply relieved. Here are five to consider.

Lending Limits are both national and remain high

Despite repeated recommendations to roll back the national lending limits back to regional or county-by-county maximums, today we enjoy a robust $765,600 maximum claim amount (MCA). This is the cap on the maximum appraised home value that can be considered in calculating a federally-insured HECM’s gross principal limit. Fortunately, it covers the majority of homes in most U.S. markets. Eliminating the national MCA in favor of local caps literally requires an ‘act’ of Congress. Both the upcoming election and ongoing stimulus measures have eclipsed addressing any such consideration presently.

Housing prices are booming

A general shortage of housing inventory and record-low interest rates have home prices reaching record heights, some not seen since the 2008 housing crash. Both HECM and proprietary reverse mortgage borrowers are in an advantaged position to tap their home’s value at what may be the peak of the market. Homeowners struggling to pay their existing mortgage may find themselves now able to qualify based on their latest value and low interest rates. The question many market watchers are asking is if the boom will continue or if values will fall.

Historically-low interest rates

Although HECMs will soon be moving away from the LIBOR, all global indexes are setting record lows as governments take stimulus measures to boost their economies struggling in the wake of the coronavirus and economic shutdowns. In some instances, low rates and high home values have all but erased the impacts of the infamous October 2017 reduction of principal limit factors (lending ratios).

When the interest rate floor of the HECM was lowered from 5 to 3 percent we lamented the drop believing we would never see effective interest rates reach such a low. A few short years later many HECM loans are hovering at or just below a meager three-percent.

Financial Advisors seeking alternatives

The stock market’s volatility remains fresh in the minds of both the financial professional and their clientele. Those who once eschewed reverse mortgages are coming around to the realization that all options should be put on the table to form a plan that accounts for stock market volatility, inflation, and sustainable withdrawals. Now could be the time to rekindle your connections with advisors in your market.

HECM-to-HECM refinances

Late last year HUD proposed that FHA move to eliminate all HECM-to-HECM refinances. Fortunately, FHA made no such change. Today nearly one-third of all HECM applications are refinance transactions as borrowers harvest additional funds from their home. As a result, refis have become a significant driver of ordination volume and profitability.

Certainly, we face much uncertainty, however, we have much to be grateful in the midst of the storm. Count your blessings- at least five of them.

 

Just one more thing


“I’ll take my family on a nice vacation once I make enough money.”  “I’m going to create a killer marketing plan that will grow my help me close more loans.”

These are just a few examples of the rationalizations for why we’re doing the things the way we are and avoiding the work required to reach our goals.

You may not have the money for a family cruise, but you may be able to take your family on a weekend getaway and not break the budget in the process. An imperfect business plan is better than nothing. Why not put pencil to paper and begin with a rough outline?

Truth be told, it’s the little things that often yield the best results. Taking 15 minutes without distractions to sit with your partner, child, or colleague to ‘check-in’ maybe ‘just one more thing’ but it may be the most important thing for them that day. Our lives have an overabundance of ‘just one more thing’ to do. The trick is to confront our tasks as if they were the last thing we will do.

What’s most important at this very moment? Taking a moment to give a sincere compliment? Inviting over your friend who’s overwhelmed to simply sit and relax in your backyard? Calling your widowed borrower to see how they’re faring during the pandemic? Is it shutting down your email and silencing your cell phone to make 15 outbound sales calls?

Each of us knows what that ‘just one more thing’ is. The question is what will we do without for the moment to make it happen?

Up in the Air: Airline employees face furloughs


Up in the Air

There’s much that’s uncertain in these turbulent times. One group that’s facing looming financial uncertainty is the nation’s airline employees. Airlines are poised to shed tens of thousands of workers as federal aid backstopping the industry stops October 1, 2020. American Airlines and United plan to furlough 19,000 and 16,000 workers respectively. A federal prohibition of airline furloughs and a massive $25 billion cash infusion to cover payroll have delayed the inevitable until the first day of October.

While the Federal Reserve continues to print money at a feverish pace, the truth that is the fiction of ’employment recovery’ is reaching its final chapter. Captain Jetson, an online airline/aviation publication, serves up inside industry information and tips for those employed in domestic air travel. Jetson’s August 22nd column warns airline professionals of the impending deadline and what potential strategies may help ease the financial fallout of unemployment.

When it comes to ‘income matters’ Captain Jetson suggests pursuing one or all of the following plans of action:

  1. Pursue state unemployment benefits & programs
  2. Having a working spouse or partner increase their working hours
  3. Applying for military benefits if applicable
  4. Consider applying for a reverse mortgage and/or beginning to take Social Security payments

While the age distribution of airline employees is somewhat murky we can safely surmise that there may be a significant number of older workers who did not take an early retirement package earlier this spring who are facing economic uncertainty. Many are longtime homeowners anxious as to how they will afford monthly mortgage payments or find the cash to meet their daily expenses.

Unions representing airline employees are highly-motivated to present members with potential solutions, especially those facing a forced furlough in two short weeks. Despite most airline pilots not being able to fly after age 65, the vast majority of airline personnel are found in ground crews and support staff. Contacting your nearest airline labor union could be the first step in getting in front of members 62 and older who may want to leverage their home to weather a season of unemployment or simply retire altogether.

What other industries in your area are dependent upon federal aid that may expire? What business plan will you develop to help these older workers facing unemployment?

Regardless, now is the time to make your presence known and the powerful financial tool you offer older homeowners- all while home values remain at historic highs and interest rates reach their lowest benchmarks.

Up in the air? Much may be but as Captain Jetson advises industry workers in its column, ‘develop a plan of action- NOW’.

Anxiety Sells

retirement anxiety


Like it or not, the reality is that fear and anxiety sell. To put a point on it, fear motivates us to take proactive steps to reduce risks with a reasonable solution where we would typically run to comfort instead. As it’s said, ‘action defers anxiety’.

Here are just a few motivating fears and the actions many have taken.

Fear: A young income-earner worries his family would suffer financially should he die prematurely.

Action: They purchase a life insurance policy.

Fear: A conservative investor worries that today’s low interest-earning CDs and money market accounts won’t allow them to keep up with inflation.
Action: They purchase an investment/contract that guarantees a higher interest rate.

Fear: A senior widow is anxious that medical expenses outside of Medicare will break the bank.
Action: She purchases a Medicare Supplement policy to reduce her financial exposure.

Fear: The U.S. Debt just added $2 trillion to the federal ledger making federal debt exceed our annual gross domestic product (GDP) for the first time since World War II. Higher taxes are likely to follow.
Action: They convert their existing IRAs to Roth IRAs to stop future tax liabilities.

Fear: Inflation is likely to increase substantially in the wake of the COVID-19 pandemic making nearly everything more expensive.
Action: They get a reverse mortgage which eliminates their existing mortgage payments and leaves them an available line of credit should they need to increase their cash flow even more.

Ethically we never want to sell only from a position of fear. However, we should ask the uncomfortable ‘what if’ questions to uncover a homeowner’s hidden fears. Those things they wouldn’t volunteer to discuss yet eat away at their peace of mind. After all is it better to shy away from sensitive topics for our own comfort or check to see if the homeowner could benefit by taking some proactive steps to leverage their home’s value?

Now more than ever before older homeowners would benefit by thinking through the realistic ‘what if scenarios’ that most retirees wrestle are struggling with. So, let’s commit to getting a little uncomfortable ourselves and address the proverbial elephant in the room.

retirement anxiety 

 

The Problem with Drift Net Marketing

reverse mortgage marketing

How today’s top-producers are succeeding


Last fishing season I sat down with my friend Mike and caught up on his recent fly fishing exploits in Shasta Lake, California. As an experienced fisherman, he related to me how he adjusted his typical techniques due to the rapidly-rising waters in the reservoir after several weeks of heavy rain and snowfall. The water was brown in several spots obscuring the fish below the surface, the currents had changed, and small inlets disappeared. Basically, he had to reinvent his approach in a rapidly changing environment. His flexibility paid off with over 20 fish caught and released.

Mike’s technique is specific and targeted. The opposite approach is deep sea drift netting, which hangs several large net curtains under the water’s surface catching nearly everything in its path- often entangling smaller fish that must be thrown back.

While it is easy to lament the decline in homeowners taking a reverse mortgage, the more intriguing question is how do a handful of HECM professionals succeed in today’s marketplace? Here are just a few of the ways today’s top producers tell us they attracting and closing qualified homeowners.

  1. Referrals– Most salespeople in any industry fail to get referrals. One of the best ways to enter a sphere of influence is to ask each borrower if they know any local CPA, attorney, or financial planners in your community you could speak with. Take note of each name and ask them if you can use them as a reference when you make your introduction.
  2. Relationship management– if you have contacted professionals in the past, when is the last time you spoke with them? When was your last coffee or lunch meeting? When was your last phone conversation? Do they see you as a friend or just another salesperson looking for a free lead?
  3. Targeted investment– Your time is an asset you choose to invest each day. Are you spending 80% of your time on activities that produce 20% of the results? Take a hard, cold, pragmatic look at where you are marketing. Are you trying to reach every age-eligible homeowner in your area? If so, chances are you’re getting burned out on unqualified applicants. Instead, seek out the homeowners who are most likely to qualify and utilize a reverse mortgage. This could be those seeking to right-size into a new home in retirement, who want to avoid taking more taxable withdrawals from their retirement accounts or are simply looking for an alternative to a home equity line of credit.

Whichever method you choose, commit to hanging up your driftnet and pick up your fly rod and reel. Explore the smaller niche inlets and coves overlooked by most that are rich with opportunity.

reverse mortgage marketing

The Pension Problem is Now a Crisis

American taxpayers are already footing the tab for somebody else’s retirement and that bill is expected to grow considerably. Welcome to the pension fund crisis.  While some lawmakers have expressed a willingness to bail out underfunded private pensions many oppose the continued subsidization of the Federal Housing Administration’s MMI (Mutual Mortgage Insurance) fund which backs the Home Equity Conversion Mortgage program.

In the last decade, several private pension funds have revealed they are facing financial insolvency. Fast forward to the ‘new abnormal’ in the wake of the economic devastation unleashed by the COVID-19 pandemic and you’ll find the contagion of insolvency is spreading to pension funds that were once on a sound economic footing. Simply put, the pension problem has become a financial crisis.

For decades, and even recently, the idea of the government backstopping private pension funds has been avoided for fears of a voter backlash. In fact, this April five Republican senators wrote President Trump expressing their resistance to the federal government giving aid to supplement state budgets citing concerns of it being used to backstop pensions. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations”, the letter said in part. 

With sales local and state tax revenues collapsing elected officials will be forced to prioritize funding vulnerable pension plans. That leaves public services such as education, public safety, and other programs in the crosshairs of severe cutbacks. 

So where can those without a pension or pension holders who may face a reduction in monthly payouts turn for help? Most likely it’s their home. Despite housing wealth typically being the largest asset for senior homeowners, its influence pales in comparison due to the political clout that private and public employee unions hold with state and federal lawmakers. Much of that influence differential can be attributed to the way that defined benefit plans or pensions are viewed compared to reverse mortgages. It’s much easier for elected officials to ignore the risks present in regional pension funds hoping for strong investment returns while protecting them at all costs.

Both homeowners and pension participants have made consistent monthly payments over many years; one in the hope of eliminating the expense of a monthly mortgage payment, the other for the promise of more stable cash flow in retirement.

Soon even those with a pension may consider tapping into their home’s value to help fill their cashflow needs. Perhaps some of our international counterparts were wise after all to call their reverse mortgages the ‘home pension plan’.

It’s time to ask this question

reverse mortgage news blog

Current events are forcing many to ask this question

[PDF version]
Current events are forcing many to reevaluate many things. Where we live, how we work, and what’s no longer necessary. Much of what we’ve taken for granted has either fundamentally changed or ceases to exist. On the surface, such questions lead one to conclude these are terrifying times. Yes while unsettling they in fact present an opportunity.

Many, like myself, have family members living in expensive metropolitan areas who now find working from home is their ‘new normal’. Naturally, they are asking if the high cost of living and traffic is worthwhile since they can essentially work from anywhere. Perhaps a more picturesque location and a better quality of life may motivate them to relocate.

Unlike any other time we have the opportunity to face the most primary of questions- “is this necessary?”. While pruning away the excesses of daily life may be unpleasant at the moment it allows us to redirect our limited energies to more fruitful endeavors. Personally, this is not a process I naturally gravitate toward. Yet when faced with such decisions I often reflect on the words of the philosopher-king and Roman Emperor Marcus Aurelius.

“Because most of what we say and do is not essential. If you can eliminate it, you’ll have more time and more tranquility. Ask yourself at every moment, is this necessary.”
– Marcus Aurelius, Meditations.

Our days often run on autopilot, and sometimes our business does as well. Running on pure instinct is the surest way to stagnation and burn-out.

With that in mind here are some general questions that can be applied to your personal or professional life, and of course more business-specific questions for reverse mortgage professionals.

General & Personal

Professional

Why am I doing this now?

How much time do I invest in prospecting?

Is this the best use of my time?

Am I too dependent on refinance transactions?

What’s the immediate benefit?

When’s the last time I sat down with another professional financial advisor or CPA?

What’s the long-term benefit?

Do those in my community know what I do?

Does this move me toward my goals?

Should I work from home indefinitely?

What can’t I do if I do this instead?

Have I ever spoke on my local radio or television news stations?

What does life require of me?

Am I connected to other reverse professionals?

What gets the lion’s share of my energy?

How do I spend most of my workday?

Is this necessary or essential?

Will this help me grow my business & income?

These questions will force you to face three things: (1) your perception of what’s happening, (2) the actions you are committed to taking, and (3) your will to consistently make a positive change over time.

So ask away. Turn off the daily autopilot and begin to scrutinize just what it is you’re doing and why.

 

Lean Times

As dividends fall the cost of living continues to climb 

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.” – Charles Dickens ~ A Tale of Two Cities

While Dickens’s opening lines are not prescient they certainly could describe the current state of affairs in which we find ourselves. Lenders are seeing a significant rebound in consumer interest as evidenced in new application activity, as several retirees and seniors face lean times seeing the coronavirus continue to spread across the globe.

Today long-term inflation remains moderate, however, food prices jumped significantly this quarter as supply chains were temporarily interrupted due to the COVID-19 pandemic. NBC reported that beef prices jumped 20.4% from April to July. Everyone is feeling the squeeze- the mass affluent, middle class, and low-income older homeowner.

However, beyond daily expenditures seniors who dutifully saved are feeling the brunt as well. Millions of older Americans count on dividends to make ends meet. These shareholders are seeing dividend payouts slashed as over 700 publicly traded companies seeking to preserve cash in an uncertain economy announced a reduction or suspension of dividends. For example, last month MarketWatch noted the highly-touted Halliburton (HAL) slashed their quarterly dividend payouts  75% in May to 18 cents a share. The Janus Henderson asset management group sees this trend continuing. In its recent Global Dividend Index report, Janus projects dividend payouts will decrease between 15-34% by the end of 2020.

Consequently, older homeowners with substantial investments who rely on dividend payouts and those whose home is their most significant asset are facing lean times; both will need a source of funds to bridge the gap. Investors may be forced to tap into their cash savings or worse, sell stocks at a significant loss. Moderate and lower-income senior homeowners have limited options and are likely to begin viewing their home’s equity in a new light.

Americans are an optimistic lot not naturally inclined to anticipate unnerving ‘what-if’ scenarios. However many ancient philosophers did anticipate potential outcomes practicing ‘premeditatio malorum’- which loosely translated means to ‘anticipate the worst and plan accordingly’. Reverse mortgage professionals can encourage this mindset by asking some simple questions. “How long would your cash reserves last if you continue to use them to cover monthly expenses?” “Do you have a plan if you no don’t receive any dividends this year or next?”. Those working with a financial professional may be hearing similar probing inquires from their advisor.

Your mission should you choose to accept it is to continually build momentum in presenting the reverse mortgage not as a cure-all for one’s financial woes, but simply as a valid and established potential solution which could help older homeowners weather the economic storm in which we find ourselves. Now is the time to schedule those financial advisor introductions you’ve been putting off or plan your first public seminar.

Fortune favors the bold, especially when opportunity presents itself in the midst of adversity.

8 Productivity Hacks

8 Ways to Get More Productive Starting Now

I know, you’re busy, very busy, and perhaps even stressed. As a HECM professional you have quite a bit to juggle: inbound calls, outbound sales calls, applications to review, proposals to send, Zoom meetings, etc. As the demands increase in our time we have two choices; prepare with efficiency or accept that you’ll miss potential opportunities.

Here are just a few ways each of us can become more highly organized and position ourselves for success in the coming months.

1- Get your email in order. We’ve covered some great ways to fully manage and get control of your email. One is Inbox Zero which was developed by productivity guru Merlin Mann. Basically you decide immediately whether to delete, delegate (forward), do it, or defer it to a later date. Some simple folders in your email program will make a world of difference.

2- Paperwork Zen Master. Nothing stresses out professionals like stacks of unfinished business on their desks. Here’s how to use the 43 folders system. (older video)

3- Media Blackout. Social media that is. Schedule times during the day at which you will check your social media accounts such as Linkedin, Facebook, Twitter, and more. Also, turn off social media notifications on your phone and desktop computer. Each distraction will add up to minutes and hours lost during the day.

4- Use the phone. The appearance of email ‘conversations’ is a mere illusion. The longer the email chain the more irritated I become. If you notice a notable long email chain suggest a short group conference call. If you have a detailed message perhaps just picking up the phone would save you and the recipient considerable time. Phone calls allow both parties to pick up on the tone of the conversation which is often lost in written communications.

5- Check and process your mail. Each day check your snail mail (remember the post office?) and immediately trash, save or file for action at a later date.

6- Plan a day ahead. Productive professionals have a habit of planning out the next day before they leave the office. Take a moment and look at your inbox, your 43 folder files, and emails, and then time block what needs to be accomplished in addition to any meetings already scheduled. You will be less distracted when you get home.  Your family will thank you.

7- Be judgmental. Not in a negative sense but learn to judge quickly what is important, what can wait, and what does not deserve your time or attention. The quicker you learn to filter what is relevant the more time you will have to focus on building your business. 

8- Keep a time diary. It’s simple really. If you have a calendar with a lot of blank spots for today, no worries. Just note as a calendar event how you actually end up spending your time. I’ve done this for years and it helps me see where I am investing time and what I can discard.