Written by John Smaldone, as originally published in The Reverse Review.

2010 was a year many of us would like to forget. We all saw and experienced many changes, especially in the reverse mortgage industry. With the industry preparing for changes to come down the pipeline, we take a look back at what may have had a hand in creating a shift in our industry.

•The SAFE Act affected the entire mortgage banking industry. It is now March and we are still wrestling with the agony of conforming to it.

•The reverse mortgage industry experienced a tremendous amount of bad publicity, much of which was unjustified. Because of this, many of our seniors started to mistrust reverse mortgage specialists and the program itself.

•Our politicians became the proclaimed savior of the senior citizen. They thought they had all the answers about reverse mortgages. In reality, we all know that is not the case!

•Home values declined further. The reverse mortgage industry came up against major shortfalls with the principal limit amounts. Consequently we had to watch many seniors lose their homes through foreclosures.

•The Health Care Reform Bill and the Financial Regulatory Reform Bill were passed in 2010. Both were not favorable to our industry or for the stability of our country.

•There was a reduction in the principal limit calculations, which in many cases favored younger seniors over the older ones. Many seniors were considering a reverse mortgage, thinking they were going to get a certain amount, then found themselves in a shortfall position.

•The November election changed the political balance in the House, which now favors the Republican Party. There was a major shift of faces in the Senate. However, the balance of power still favors the Democrats.

•We saw one of the largest number of bank failures throughout the country to date. 2011 could be a record-breaking year for failures, much greater than 2010.

•There were major changes to the Good Faith Estimate (GFE). It has taken on a new look with changes that are confusing to both the senior and the loan originator.

•2010 brought the lowest interest rates in 50 years.

However, 2010 did bring promises for the future of the reverse mortgage industry. It has been predicted that 10,000 baby boomers will be turning 65 every day in 2011, a statistic that is projected to continue for the next 19 years (close to 70 million baby boomers). The number of baby boomers turning 62 this year is smaller, but still close to the staggering number of 70 million. This brings to our industry many opportunities for the right people and financial institutions, providing we approach it the right way.

LOOKING AHEAD  We experienced changes in our product in the latter part of 2010, which have carried into 2011. We saw the creation of the HECM Saver, which is an alternative to our old-line standards. The major difference is the lower closing costs and lower principal limit factors. The new program is truly a niche product for the industry.

The Saver is not for everyone, but the program is ideal for those who have plenty of equity in their home and do not need the maximum payout bringing lower closing costs, which are not associated with the other reverse mortgage products. The industry knows there is a place for the Saver and as time goes on we will realize more and more where it will fit in.

On January 3, 2011, less than six months after the Financial Regulatory Reform Bill was signed into law, more than 1,000 pages of regulatory proposals and final rules were issued. Many more pages of regulations, upward of 5,000, are expected to come. We must look at what this bill will do to small community banks, mortgage banking in general, the reverse mortgage industry and our entire financial system. Can small banks survive the overregulation attack? Can we as a country survive our federal government controlling our free, capitalist society?

The Financial Regulatory Reform Bill spawned a tsunami of new rules and restrictions, causing many banks to go underwater.

This will be a significant challenge for a bank of any size, but for the smaller bank, which typically has only 30 to 40 employees, it will be overwhelming. The impact regulations of this regulatory burden will be felt by the millions of individuals, families, and businesses that rely on their local bank to meet their saving, borrowing, and financial services needs.

I wrote an article for The Reverse Review in October 2010 on the Financial Regulatory Reform Bill, explaining how it would impact the reverse mortgage industry and our country as a whole. Due to the bill’s immense impact, I would like to delve into the topic a bit more:

Argentina was once a thriving country with wealth and a strong economy. Argentina fell into the trap we are heading into. Today the people of Argentina have an inflation rate beyond comprehension and are controlled by the government – a government that is disorganized, inefficient and has a self-centered agenda.

I have said this many times: The Financial Regulatory Reform Bill is disastrous for the American people and our great nation. Never has a bill been passed that has given the federal government more authority and power over our entire financial system than this bill. The Consumer Financial Protection Bureau (CFPB), a spin-off of the bill, has the authority to target and destroy the reverse mortgage business as we know it. We have started to see the damage it can cause!

It is unfortunate the American people knew so little about the bill. It was passed in the wee hours of the morning with legislators having little idea what they voted for. Now that some of the facts are coming out and parts of the bill are starting to come to fruition, people are realizing how dangerous this bill is and will be for the country’s economy, banking industry and entire financial system.

On January 24, the American Bankers Association (ABA) and the state bankers associations asked the chairman of the Senate Banking Committee and House Financial Services Committee to convene hearings on the current environment affecting banks, particularly community banks. As you read the letter you will sense the frustration and concern the ABA and community bankers throughout the country have of losing their independency. As our community banks continue to fail and merge with larger banks one starts realizing what the intent of the Financial Regulatory Reform Bill is. This bill will only put us one more step closer to socialism than we are.

The letter from the ABA requesting the hearing is below:


January 24, 2011 The Honorable Tim Johnson Committee on Banking, Housing, and Urban Affairs United States Senate Washington, D.C. 20515


Dear Senator Johnson:

The undersigned banking trade associations, representing banks of all sizes in every state, are writing to request that the Senate Banking Committee convene hearings at the outset of the 112th Congress to examine the current environment affecting banks and the future of community banks in particular.

All banks are facing a mounting number of challenges that are severely threatening the long-term future of these great institutions. Bankers throughout the country have shared stories of examinations that are overly restrictive in their review of banks’ activities and often contradictory in their conclusions. In addition, all banks are facing a tremendous amount of new regulations that will significantly increase their costs. The new regulations come at a time when regulatory agencies are demanding even greater amounts of capital retention and increased lending activity. The combination of these issues has made lending extremely challenging and made operating a community bank especially difficult.

For the first time, community banks are beginning to question their ability to preserve their independence in the face of examiner pressure, and, especially, regulatory costs. These are healthy banks, yet they feel the need to explore sale or merger. The number of these banks may shrink dramatically over the next few years.

As Federal Reserve Chairman Ben Bernanke recently stated before the Senate Budget Committee, the preservation and survival of these community institutions is directly linked with the economic recovery efforts that this Congress will undertake in the coming months. To that end, it is very important that Congress hold hearings to understand the regulatory pressures that are being placed on the banking industry in general, and on community banks in particular.

We look forward to working with you on hearings on these very important issues for the banking industry.


American Bankers Association Alabama Bankers Association Alaska Bankers Association Arizona Bankers Association Arkansas Bankers Association California Bankers Association Colorado Bankers Association Connecticut Bankers Association Delaware Bankers Association Florida Bankers Association Georgia Bankers Association Hawaii Bankers Association Heartland Community Bankers Association Illinois Bankers Association Illinois League of Financial Institutions Indiana Bankers Association Iowa Bankers Association Kansas Bankers Association Kentucky Bankers Association Louisiana Bankers Association Maine Association of Community Banks Maryland Bankers Association Massachusetts Bankers Association Michigan Bankers Association Minnesota Bankers Association Mississippi Bankers Association Missouri Bankers Association Montana Bankers Association Nebraska Bankers Association Nevada Bankers Association New Hampshire Bankers Association New Jersey Bankers Association New Mexico Bankers Association, New York Bankers Association, North Carolina Bankers Association North Dakota Bankers, Association Ohio Bankers League Oklahoma Bankers Association Oregon Bankers Association Pennsylvania Bankers Association Puerto Rico Bankers Association Rhode Island Bankers Association South Carolina Bankers Association South Dakota Bankers Association Tennessee Bankers Association Texas Bankers Association Utah Bankers Association Vermont Bankers Association Virginia Bankers Association Washington Bankers Association Washington Financial League West Virginia Bankers Association Wisconsin Bankers Association Wyoming Bankers Association.


We have many challenges ahead of us in 2011 and in the years to come. There is good news on the horizon for the reverse mortgage industry. As stated earlier in this article, thousands of seniors are turning 62 years of age every day, and that trend is expected to continue for the next 19 years. The need for reverse mortgages has never been greater.

We have a lot to capitalize on as an industry. We must meet the challenges facing us head on. We need to be united and resist whatever may come upon us.

We must act as a single unit and defend our industry. However, more important than anything, we must protect our seniors from losing the valuable benefits a reverse mortgage gives them!