A Reverse Mortgage Could Make All the Difference, with Tom O'Donoghue of Reverse Loans Now

0:01 Welcome to the Reverse Mortgage Podcast. I'm Bill Gross at Bill Gross on social media. We get together every week and talk to top producers and experienced originators, executives, vendors in the reverse mortgage space to learn how we can use this incredible tool effectively for customers and for our businesses. We're excited today to have Tom O'Donoghue from Granada Hills, California, not too far from where I live. Tom, thanks for joining us today. Thank you. I'm glad to be here, Bill. I've watched a bunch of your shows before and I feel honored to be here. Thank you so much for inviting me. Well, thanks. Thanks so much. So, you know, obviously there are a number of reverse mortgage originators, though there's not that many that are like you are CRMP. We'll talk about that just in a second, but talk about how is working with you different than some of the other originators I may have talked to. One major difference that I work with my clients, I look at a holistic approach to their whole financial world and their health world and family world and to find out where's the gaps and how could reverse loan step in there to help make a difference so that they can thrive, not be fearful about living your best life. So I really take a holistic approach and getting everybody involved. Get their children involved, their financial planners, their estate attorneys, their Realtors®, anybody that have any type of influence they're looking for and make sure that we're all on the same page. Make sure that I'm doing the right thing. That's the major I work with. And I think that's how I got involved in this business is because that doesn't happen and you know mom and dad get reverse mortgage pass away and the kids don't think there's a mortgage on property and probably facing foreclosure and wow what do we do? And so getting involved with everybody take a holistic view is really important. So I imagine if you do that and you talk to advisors you're more integrated during the time you originate the loan. You more integrated to help avoid problems when the loan is time to pay off or be adjusted.

2:00 Absolutely. And I do stay in contact with their kids. I mean, obviously part of the loan application process is having a second party contact because it's usually a family member. And I keep them in my database. I touch base to see how mom and dad are doing. I make it my mission to make quarterly phone calls to every client. It takes me a few weeks to go through that list just to touch base to see how things are going, making sure everything's on track, to have any changes. Part of that is I have a system that I call the Black Diamond Network and that's where I encompass everything that you can possibly think of to have done as a senior. So I provide services for gardening, house cleaning, car service, financial planning, living trust, getting your pool clean, inhome healthcare. I have a whole network of services that I provide for my clients that they can apply or use or not use. If something comes up, if they need a plumber, they call me. If they need to get a roof fixed, they call me. So they don't have to worry about where are they going to go to get help. I become that main contact person and I get to be the person to get to make those referrals for those that are in my network. So it's a pretty powerful tool that helps a lot of my clients. You know I find there's two types of originators, two types of real estate brokers. I'm a real estate broker. One that says I just do what I do. I just sell loans or I just sell homes and avoid all those other phone calls. And there's other people like you and I like to think like me that say, "Hey, you know, if you have a problem with your property, I'm your solution. Now, I'm not going to come out and mow your lawn, but I know a guy who will. I'm not going to do your estate plan, but I know a guy who will. I don't do mortgages, but I know a guy who will.

3:55 And but call me because I know all the good ones. I know all the bad ones. I can refer you to the right one for you." And so, it sounds like you do the same thing with your business. And that's so important, I think, in this in this particular project, right? It's important to have a what I call a giving attitude to give information to give referrals to give those clients that we work with again that peace of mind it's important. Yeah, I think that's a critical difference and that's what makes it especially with reverse mortgages where there's been such a historic problem of the reputation of the product when people have problems. I imagine the family member is more likely to call you than the service center than the average originator and that helps you help them avoid problems otherwise might become catastrophic. Right. And along those lines, something that I came apart going to an NRMLA convention a couple years ago on the West Coast where when they're taking the application for a reverse loan, they ask for, as I mentioned earlier, secondary contact people that will call if they can't get a hold of the borrower. But one thing I found out that I can do that I have been doing is adding my own name to that as a contact person to where servicing can contact me to get specific information. Now obviously we get the borrower's permission to do that making sure they're okay with that. So, that's been a big help when funny things come up that they're not aware of, especially simple things as, you know, the yearly home occupancy statements that need to be filled out, making sure they're still living in a home. So, that's real important to take care of. So, I get involved with those type of issues.

5:37 Well, you mentioned you call people four times a year. Most originators don't even follow up once a year. Yet, once a year, the customer has to fill out the form in order to continue the loan. It's a critical piece of the business. And I think that this product requires that type of intimate relationship more so than a standard mortgage, which can be more transactional, shouldn't be, but can be. And the fact even try four times a year at least tells me you're making the best effort you can to help people stay in touch. And I think that's the key to avoiding problems is having communication both early and having the right people involved with you. So, good for you, right? I mean, if you do that right, I find that probably the last stat I ran about probably about 48% of my clients are coming from past clients. The referrals are from them. Now, the other big portion of that is coming from u Realtors® and financial planners. They're a big source of my business. Realtors®, financial planners, CPAs, and past clients are the hits. That's just how my business grows. I don't do any real marketing at all. It's just all referrals. So, I noticed your website is reverse. You have the reverse over your shoulder there, the graphic. What percentage of your business is reverse versus forward mortgages?

7:03 100% reverse. And so what? I did standard loans for about 23 years and 14 15 years ago is when I broke the chain and I went strictly to reverse. And what was it that caused you to make that change? Well, I thought I was going in a total different industry completely and that got closed and this door opened up. But I read about reverse loans about 25 30 years ago, 35 years ago probably. And I just thought I would never do reverse loan reading this article in the GQ magazine about these guys in Florida that were doing these questionable loans. I found out they were calling them reverse loans. I remember sitting there in the hair salon waiting for my appointment saying, "I'll never do those. Those are horrible. You're just screwing people over." lo and behold, part of my career doing forward loans, I worked for Wells Fargo, which at the time was the largest reverse mortgage lender. And I got some training on them. Got a little bit more information, a little bit more comfortable with them and finding out that you know in the mid 80s late 80s the whole program got revamped through AARP, MetLife, you know the Reagan administration and FHA kind of took over the product and I got more comfortable with it and I started learning more about it. But when I made that choice to go strictly to reverse, I tried to do reverse loans and forward loans together for about six months and I just couldn't do it. It was just too complicated, too different. I mean, I could do a regular loan in a coma. I mean, I was pretty good at it. I was a sales manager for Countrywide and had a good staff of people that I mentored with, but I just couldn't do it. So, I decided I'm either going to be 100% reverse or get out of business completely or just do standard loans because I realized if I got really good at something, I don't have to worry

9:06 About business coming in. I get really good at becoming a professional. And I made that commitment just to dive straight into reverse. And I've never gone back. And even my previous clients that did forward loans, I refer those out. I give them out to friends that do forward loans. Even my own son six months ago when he bought his first house, he came to me to get a loan and I had to give him away. I thought I can't do it. I don't even have the software to do a regular loan. The guidelines have changed. So, just focusing straight on that. I mean, the best analogy I use for when I'm doing public presentations is if I have a brain tumor, I need a brain surgeon. If I have a crown that's needed in my mouth, I need an oral surgeon. I don't want my oral surgeon working on my brain, and I don't want my brain surgeon working on my teeth. They're only this far away from each other, but it's just night and day. And when I see forward loan officers trying to do reverse loans, it just I get the shrieks. It very rarely works. And more often than not, my friends that try to do reverse loans, they usually call me up to bail them out, to save them, and to get the deal saved. It's just too many nuances that if you don't know it, you're going to screw it up. You know, if I ask a 100 originators, do you do reverse mortgages? 99 are going to say yes. And 98 haven't done one in the last two years. So, I think consumers don't understand that. Or if you respond to an ad on TV or cable, you may be getting a call center rather than a specialist. And I think that most time for the same price that you would get or better through the online call centers or from a forward originator who does what he's doing, you might as well get a professional. And that's why we launched this podcast was to reach out to the professionals and talk to them and promote them and educate the public. In fact, one of the things I found and

11:11 I'm not a CRMP. I have nothing to do with the organization. I'm in real estate. We give out designations for Halloween like candy. And the more the more designations I think the worse agent you are. But the CRMP certified reverse mortgage professional I have found that almost every originator I talked to their focuses almost exclusively most time on reverse only they have minimum production standards they have minimum education standards continuing ed they're committed to the industry talk a little bit about how you came to find CRMP and what that means to you as far as your business chilling for them to be honest I'm just if you're watching me and you see numerous episodes I've said the same thing it's because like pay attention to me This is fascinating. I'm sorry, Tom. So, tell us about the CRMP designation for you. When I got into reverse 14 on 15 on years ago, the CRMP program was just coming around at NRMLA. And I was petrified of it. I just thought I would never be there. I'll never get that good, have that type of knowledge. And I actually just got my designation about a year and a half ago. I took the exam and I passed it the first time which is shocking because only 27% of people passed the first try. Wow. Did but I was thrilled to that. It really made me pick up my game. I mean my success is for a loan originator with a small team I do pretty good. I mean I'm kind of surprised that my production matching some other companies that are much larger how well we do but it gives me more confident it separates me out from other people because there's less than 200 CRMPs in the whole country that the back the standards are it's tough to even be nominated to even be involved with the program and then it's the background checking it's the testing it's just all that it's just a lot of

13:17 Work. But to me it's totally worth it. I mean my clients see the difference when they talk to somebody that's just from a call center then you work with Yeah. They're like it's just night and day. So I think it I think it really helps. If you're able to do it, go for it. So I really am you know committed to this product as a real estate agent for my customers. I believe anybody buying a house for cash who qualifies as a as a senior should get the line of credit and keep some of the cash or the reverse mortgage and keep the cash invest it. I believe anybody who owns a house and it's not going anywhere should have the line of credit to access the equity at a minimum if not a loan and a minimum get the line of credit. So if your house burns down say in the Palisades fires you at least act access some of your equity you don't lose it all waiting for the insurance company. I really believe in this product deeply. Tell me what where do you see the value of reverse mortgage for consumers as a product? You commission yourself this product for a reason. What are the one or two things that you see are the main benefits to consumers of this product? There's no other financial instrument that I can think of in America can match what a reverse loan can do. It's federally insured. It protects the equity of the borrowers. It's what's known as the non-recourse loan, meaning that the borrowers and the heirs never have to pay back more than what the house can be sold at 95% of value, which is very unique.

14:46 With the reverse loan, I'm sure you already know this, that the equity position is guaranteed as long as the borrower's living the house, the property taxes are current, their homeowners insurance current, it's still their primary house, they still have full access to that line of credit. For example, in our area, if a home is worth a million dollars and 75 years old, then you qualify for reverse loan for $450,000. That $450,000 line of credit cannot be stopped as long as they keep doing those items. If somebody gets a HELOC or a home equity loan, they're only good for maybe 10, maybe 15 years worth of access. And god forbid if your property goes down in value, they can freeze those lines of credit. They can start make you to make principal and interest payments on the reverse loan. Your house could be worth $1 and we don't care. They'll still have access of $450,000. Even right now, I have clients that referred to me that lived in a Palisades whose house is burnt down, right? And you're like, Tom, what do I what do we do? I was referred to you from my financial planner that you are the reverse mortgage guy u in this area and you're the only one that can help us. And I said, go get your money. We, you know, it's burnt to the ground and you still have access to those funds, right? Which is just an incredible. You tried doing that as a HELOC.

16:18 No way. Right. Yeah. And I think that having lived through the mortgage you know fallout or destruction in 2008 every lender virtually stopped their lines of credit. You say HELOC a home equity line of credit. Virtually every lender closed lines stopped draws on them set up payment requirements. The banks went bankrupt. You know today we see Bank America and Wells Fargo, but they weren't those aren't the same companies. Bank America went bankrupt and were bought for pennies by North Carolina National Bank and they used the name Wells Fargo went bankrupt and was bought and the name the branding name was used. These companies went bankrupt so they didn't honor their commitments. They could not honor their commitments whereas this loan is guaranteed by the federal government. These are government-insured loans. In fairness, they're at a lower loan to value which makes it easier for them to honor the guarantee. Like in the burned down houses now, you might be at a low loan to value in a $2 million house. That's $400,000. That's $100,000 and the lot's worth at least that or more. So the loans are different than they were a while ago. But to the consumer to be able to access that money without recourse could be lifechanging. You could, you know, where you living, you're waiting for the insurance company to pay off. They're going to they're going to leverage you and force you to accept less because you're desperate for the money versus you can take that line of credit, $400,000, and move, buy a house, you know, live in a hotel for six months or a year, however long you want to. So that definitely is an important feature.

17:46 So, if you could change one thing, I think there's a question actually you offered me to ask you, which is if you could change one thing in the industry, what do you think it would be? I think that the what I and I just had this conversation with one of my mentors that I work with Jim V and I said I just wish we could change what's known as the principal loan limits in reverse loan industry they use different terminology to mean the same things but the principal limits I think should be increased right now in this market if you're 70 years old in a house is worth a million dollars, you're usually capped out at around 400,000. I wish we could go back up to 60 to 70% loan values amounts just to give a little bit more because with the interest rates changing, it's just dropped the loan limits what we can do. So either we got to drop the loan interest rates which I don't think is going to happen. There's no need for it in our economy. Maybe in six months to a year there might be some change for that but the economy doesn't call for lower rates. I know a lot of people hate to hear that but it's just the reality of it. But if we could increase the loan limits, I think that would be a huge increase.

19:09 And I think the you know what's happening right now is the history of this product is growing and getting better and because these are big changes that were made when they when they came out and I think it's done well and if it stands the test of time they'll be a little more aggressive with those limits. FHA it has lost money on forward loans but the reverse mortgage program has been really solid for them. So let's hope as we do a good job as an industry we more of it and in October 2017 we have what's called the October surprise where they just changed the guidelines literally overnight and it just shocked to where instead of having one appraisal done on a property about 17 to 18% of percent of the time FHA will just randomly do a mandatory second appraisal to be done on a property. So that gave more protection. They added what's called the life expectancy set-aside accounts or we call the LESA which is similar to like an escrow type account to help bank part of the escrow for taxes and insurance to make sure that the foreclosures. That's really the main reason why these properties go into foreclosure is for lack of property taxes being paid or homeowners insurance or again not getting that owner occupy statement filled out and done.

20:36 Yeah. So if we they can eliminate those that would just take a lot of burden. Has taken a lot of burden off of the that what's called the MIP pool of funds that's used to protect that fund doing extremely well since they implemented that. So that was a really good thing. It brought in more consumer protect. Yes, it did drop down to loan limits. U but this it kept the product alive and it kept it so it's now thriving. Yeah, I think the statistics are we do about one quarter one-third of the loans we did back then. And yet it's a much safer product. And I think there's plenty of room to run with the product we have. I agree with you. It'd be nice to loosen limits a bit. Obviously, but that said, we still have such underutilization of this product for I think the marketplace. And I'm saying this as a Realtor®, not as originator. So many of my customers don't have a reverse mortgage that should. So many are paying cash for houses rather than getting at least an equity line if not a reverse mortgage to hold on to cash. It makes no sense at all to me. And right now the market the market share of reverse loans it's less than 1% of the whole market of the industry. It is mind. Yeah. At least it could be 10% and that wouldn't be a massive change in the market but that'd be 10 times the business. And I think that's where we're headed. So just to kind of wrap up you know you're you are a CRMP, you're one of the more successful originators you focus in this market.

22:01 What is one piece of advice you would give an originator who may be struggling a bit, business is off, whatever reasons, looking to improve their business or maybe they're new and they're looking to build their business. What's one piece of advice you would give an originator to improve their business? Become a reader. There's so many good books out there. I'm a big fan of reading. There's to help grow your business, how to grow your It's more about growing yourself. The business is out there. It's just a matter of opening up your mindset to go find it and to be access to get involved in your local real estate community boards, get involved in your chambers, get involved as nonprofits, get involved in any type of organization to where people meet and they can be part of it. It doesn't even have to be related to your industry, but just becoming a source to help give back to those communities, sales functions, and people invention will find out where you work and what you do. And they'll start referring business. Like I said, my business is 100% referral-based. But I'm very involved on I'm with two different real estate network groups. I'm part of part of some other like B&B team type meetings that I'm involved in. Just giving back and looking for those opportunities. If you're trying to grow your business, start calling on your clients. If you're doing forward loans, trying transition, start going to the financial planners that they work with and start calling them up and just offer how can I help grow your business? What's the biggest problem you're having in your business that I can help you with? Where are the holes in your business model? Just be a source to help grow the business. And then that's what I would do. I mean, the business is there.

23:57 My phone rings every day for people that want to do something. Nice. So, it's a good opportunities are out there if you're willing to help people more, then you want to try to help yourself. So, that's really the key for that. And some of the good books out there that I have in my library that I Oh, I have here the great book called The Go-Giver. That's a great book. Yeah. This Is Marketing from Seth Godin, great. Another one by Dan Sullivan is Who Not How One of my favorites is from Chris Voss, Never Split the Difference. That's an awesome book. And a classic, I'm sure they've heard of this one, is High Trust Selling from Todd Duncan. And then this is one that's one of the top business books that I just finished reading. It was so good. I hated I hated reading the end of it. Unreasonable Hospitality. It's another Yeah, that is an incredible book. And I would highly recommend that. If you're not reading, you're not learning, you're not growing. So take the time to invest in yourself. And just do that, as I call it, come to Jesus, come to Moses, come to Muhammad, come to that tree meeting with yourself and find out what motivates you. Why do you get up in the morning and do what you do? Why do you think the reverse industry is right for you? And what value can you bring to that industry or any industry that you're in? And how can you change to make lives better? That's really the key for any type of sales that you're into.

25:47 But in the reverse industry, it's totally different because you're dealing people that the majority of these people are what we call need-based where husband and wife 75, 80 years old, both on social security, and the husband passes away, and their social security goes from $5,000 a month down to $3,000 a month, and they're barely scraping by. Yeah. And now they lost $2,000 worth of social security income. And then on top of that, they get a notice from State Farm saying that the homeowners insurance of $1,800 a year is now going to $9,000 a year. I mean, that's a dramatic change of lifestyle. How can I bring this product to these people to help make a difference? But when you're working with your clients, part of my philosophy is I come with a non-need-based mentality in the sense that Mr. Mrs. Johnson, I'm why am I here on a Tuesday night when I could be watching a bachelor with my wife, you know, or spending time with my family or my grandkids? Why am I here? What's going on in your life that you think you need a reverse loan? And then I start listening intently and start making notes to see if this is the right product because I tell them I don't know if I can help you or not. I don't know.

27:13 Let's find out together. But having a mindset that you're not desperate and you're not needy, takes all the pressure off of you and it takes it off the clients and they start opening up and sharing. And then you start filling in the blanks to see what you can do. Because I tell my clients, I'm going to give you some ideas. You may like them. You may not, but it's kind of like going to the doctor. He's going to ask you, "Where's the pain? Where's the hurt? What's it do? He's going to do an X-ray. He's going to take a temperature. He's going to check your blood pressure." I'm going to do all those things to find out how I can make you thrive to get your life going the way you want it to go. Man, you dropped some pearls there. I think we have to have to re hit rewind and listen that over a few times on how to be more successful. But the bottom line to me, it sounds like be of service to customers. I appreciate that. Tom O'Donoghue is a successful focused reverse mortgage expert. You can find him at reverse loelones.com as well as his phone number [phone number]. Tom, thank you so much for being on today. I really appreciate your time and you're willing to give to us. And oops, I lost my spot there. Where are you at? You're supposed to in and I Oh, I lost There we go. There you are. Appreciate your time today. Thank you so much for sharing both the challenges of the industry and some keys to success. I really appreciate your help. Thank you so much. I'm glad I could be here. If anybody has any question, I do a lot of business coaching, things of that nature. So, if anybody needs any help or insight, be more than happy to help out.

28:44 Fantastic. And the contact information is on the screen now. Tom, again, thank you so much. And for the rest of us, thank you for joining today. This is the Reverse Mortgage Podcast. We do this every week. We talk to top originators as well as executives in this industry. A really important industry I believe powerful opportunities for financial planning and for building wealth making avoiding problems avoiding the pain as one enters the end of their financial career. On the podcast if you go there in the Facebook group the Reverse Mortgage Podcast we have people who are posting referrals and questions feel free to join in the conversation there as well on the Facebook group. I'm Bill Gross at Bill Gross Probate on social media and if I can help any way, please reach out. Please like this or don't like it. Subscribe if you like this. Put comments in, suggest where we should get our next guest from or topics we should cover. As always, make today your best day ever. Thank you so much.