Chris Clow/RMD: Jim, you were a real estate agent, then a forward mortgage professional, and then moved into the reverse world. You’ve been in this industry for just under 20 years. Would it be fair to say that you experienced its highs and lows?
Jim Cullen: Yeah, absolutely. Honestly, I turned to reverse mortgages not because of anything I initiated. Our regional manager is at FuGuo bank In June 2004, he approached me and asked me if I would consider a reverse mortgage.
I haven’t really thought about it because I don’t know much about them. We had someone in the area who was our reverse mortgage person, and she said, “I think this might be something you’d be really good at.”
So I did my homework and did some research and decided to give it a try. In August 2004, I went to Boston for a week of reverse mortgage training. Very good and thorough training at Wells Fargo – it’s a solid week as you need to focus solely on reverse mortgages. There’s no mix and match with forward mortgages, which I like because it keeps us focused on what we’re trying to do.
Clow: How does Wells Fargo’s exit from the business affect you?
Cullen: Wells was bailed out in the summer of 2011. MetLife, thought this was a good move. But eight or nine months later, in April 2012, MetLife also took action. I have to take some action. I never acted on my own; it was always the bank or whoever decided to exit the reverse plan.
It’s frustrating because it’s a good plan, but if they don’t make enough money or some other reason, they decide there’s no point in continuing. Clearly, this is a niche product. Still, I took some action but always kept at it. I always tell myself that once I get into a reverse mortgage I will never go back to a forward mortgage. Forward mortgages are a hornet’s nest and I’m glad I didn’t move back. It would be wise to stay in the contrarian business.
Clow: Much has been said about reverse mortgages that emerged in the aftermath of the financial crisis, but the HECM program itself has undergone considerable changes since then. How would you compare today’s products to those of then?
Karen: Obviously, the safeguards that were put in place may have protected and preserved the product. But to me, despite soaring property values and other factors, the absolute No. 1 issue right now is focusing solely on HECM plans.
We are located in Wisconsin and source nearly all of our products from that state, so we have no proprietary products. The only option at the time was financial freedom Cash balance plans, you have to be an old-timer like me to know about them. However, all new proprietary products are not available in Wisconsin, so we strictly adhere to the HECM program.
Right now, the major constraints are there, especially for younger borrowers (in their 60s to 70s), and you run the data for people and they see principal limits. They’re thinking in their mind, “Well, my house is worth this much, this is what I can afford, and it’s going to cost me this much to do this.” It’s too hard. It’s very, very difficult.
I miss our HUD friends [the U.S. Department of Housing and Urban Development] Need to look at this and find a way to improve the main limiting factor. I’m not saying give up on farming, but I think the capital limit is so low right now that it’s hard to trade.
Clow: What is your fondest memory in the reverse mortgage business?
Karen: Well, I mean, in general, it’s obviously the people – the customers that you serve. With this, it doesn’t close as quickly as a traditional mortgage. With reverse mortgage programs and HECM programs, it takes longer and you build relationships with these people.
Before you do anything, you have to determine why they are considering a reverse mortgage and what they hope to achieve. Can we do this? Can we make it work? You build a relationship and they have to trust you because it’s important to them. You don’t just fly in and say, “Bang, bang, see you later.” That doesn’t work. You really have to develop the relationship.
I’ve done hundreds of loans, and everyone has a story to tell. It’s crucial to understand the story and understand what they were doing. It’s incredibly rewarding when you finally get to the closing table, sign the last piece of paper, and see the look of relief or joy on their face. They often feel like they would be in a much better financial position. It’s an emotional thing. You can be very objective about everything in black and white, but there’s a lot of subjectivity involved in the process.
Generally speaking, that’s the problem – the people you serve and the people you work with. Overall, our industry is quite small. Over the years, you get to know people both inside and outside the organization. It’s almost like joining a club – the reverse mortgage club. This is a neat thing.
