Credit Union Magazine - January 2009 - (Page 27)

credit union decided to work with a third-party firm, BCI Financial Corp., in Cheshire, Conn. Los Angeles Firemen’s also researched options and decided to offer reverse mortgages two years ago. “We could serve our retirement-age members better,” says Seltzer. “Our retired members weren’t a large percentage of the membership, but it was growing—especially considering the number of baby boomers nearing retirement age. We realized we needed to make reverse mortgages available. “We looked at existing programs. The startup and monthly fees were costly, and the documentation was incredible,” he continues. The credit union created its own program, the Senior Equity Access Program, in spring 2007. Similar to other reverse mortgage programs, applicants must be age 62 or older, and the loans must be secured by TopLine Federal has built a relationship with Wells Fargo to expand its mortgage services. “We trust them. We know they’ll do right by the members and treat them the way we want them to be treated,” she says. “It’s important to find a reliable third party,” agrees Dorsa. He warns, however, that credit unions need to stay involved the entire time. “Your job is never done with due diligence,” he says. “It’s a living process. There’s no sticking the program on the back shelf and calling it a day.” “Make sure if members are trusting you to refer them to someone, it’s someone you’re sure is honest and competent,” advises Boucher. Educate applicants No matter who administers a reverse mortgage program, education is a critical component from ‘We’re up-front. We tell our members [reverse mortgages] aren’t for everyone.’ Robert Boucher members’ primary residences. Los Angeles Firemen’s established a maximum 65% loan-to-value ratio with a $200,000 loan limit. Participants receive $500 off closing costs. “We want to make the loans as affordable as possible,” says Seltzer. So far, eight members have taken out loans totaling $1.3 million. “We didn’t anticipate tremendous volume at first,” he says, although the credit union projects volume will increase to 12 to 24 new reverse mortgages a year as popularity increases. Build trust Credit unions have a built-in advantage in offering reverse mortgages. Unlike many other financial institutions, they’ve steered clear of higher-risk mortgage investments. “Because of the economy and the strength of our organization, members see us as a secure place,” says Selzer. “Trust is extremely important, especially with long-term members,” adds Boucher. “We have members who’ve been with us since the 1950s.” Most credit unions offering reverse mortgages use a third party for various aspects of the transaction—such as servicing, underwriting, and training. “From our standpoint, we’re not large enough to run it in-house,” says Wetterlin. “We don’t have a big enough reverse business to be in it with both feet.” the start, says Boucher. A reverse mortgage is a complicated transaction, and members must be familiar with how it works and what’s involved. For members in the right situations, reverse mortgages may be the best solution to staying in their homes. For example, one member at Sikorsky Financial—a homeowner since 1958—had trouble paying increasing property taxes. “They’re high in Connecticut,” says Boucher. “Property taxes were rising to a point where she had to consider whether she might need to go to an apartment.” A reverse mortgage enabled the member to keep her home and pay the higher taxes. While reverse mortgages may benefit many members, there are drawbacks. For one, fees are costly. According to NRMLA, many costs of a regular mortgage also apply to a reverse mortgage: origination fee, mortgage insurance, appraisal fee, and other standard closing costs. Fees for a $200,000 loan typically are in the $10,000 range. “There are a lot of factors to consider,” says Wetterlin. “They’re creating debt. They have to consider their estate, how long they plan to stay in the house, and what other family members think. It’s critical members understand what they’re getting into.” “We’re up-front,” says Boucher. “We tell our members [reverse mortgages] aren’t for everycuna.orgÉ JANUARY 2009É CREDIT UNION MAGAZINE 27 http://www.cuna.org

Table of Contents Feed for the Digital Edition of Credit Union Magazine - January 2009

Credit Union Magazine - January 2009 Contents On My Way Leading Edge Spotlight President's Perspective Game Plan Washington Insider Wright Stuff Executive Suite Reverse Mortgages Come of Age Six Merger Myths Leading-Edge Lenders TwentyFour/Seven Bankruptcy Compliance Tools of the Trade Trendlines Rates & Ratios Council Corner Shoptalk System Scan Marketplace Branching Out Advertiser Index

Credit Union Magazine - January 2009

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