National Association of Realtors Blog Features Reverse Mortgages

image The National Association of Realtors posted a feature about reverse mortgages on its Let’s Talk Blog yesterday.  They linked to one of its members posts and while I’m glad to see they’re promoting reverse mortgages, it didn’t mention anything about the HECM for purchase.

I know there is interest because when I spoke at a real estate conference here in Chicago, a handful of realtors asked me about the partnership between Financial Freedom and NAR.  They were excited to learn more about reverse mortgages since they had their Seniors Real Estate Specialist designation.  Has anyone been working with Realtors to educate them about the HECM for purchase? 

I tried to leave a comment on NAR’s blog about the HECM for purchase but they don’t allow them.   Note to NAR, if you’re going to name your official blog the “Let’s Talk Blog”, you should probably allow comments to be posted.

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  • Hey John,

    I am generally confused by the HECM for purchase guidelines. First we get ML33-08 which states that the benefits calculation is to be based on the appraised value not the sales price or the lower of the two. Then NRMLA sends out their buzz kill about HUD changing the guidelines to where the benefits are driven off the appraised value or the sales price, whichever is lower. NRMLA’s letter said we would recieve a HUD revision shortly, but I have yet to see any new HUD revisions and the first is in two days. Any thoughts other than the fact that this is quite typical for HUD. Thanks

  • Here’s a thought… What is to stop someone from refinancing their reverse mortgage a week after the initial purchase transaction is completed. If the sale price was considerably lower than the appraised value (which is common in FL), the client would start with a considerable amount of HECM tappable equity. It would only make sense for the client to want to refi to get the money out that they originally invested. However the real irony is that HUD originally created the program to prevent two closing and two sets of closing costs. So it only makes sense that you would go off the appraised value. Even if HUD instituted a seasoning requirement for refis or a cooling off period after the purchase, the client would still close twice and pay two sets of closing costs, defeating the original purpose for the program. There is no way around it, it needs to go off the appraised value to prevent two closings.

  • Dear Mr. Bell, The recent foolish change in the counseling process might be one reason: Some Seniors
    have to be led by the hand through counseling by the
    Loan Officer–not because the Loan Officer is practicing “commission coercion”, but because some Seniors are unable ( or afraid or unwilling) to start and complete the process by themselves. (Even though the reverse mortgage is a Godsend and the ONLY answer to their financial situation.) Whoever at HUD made the decision to take the person dealing directly with the Senior at the start out of the process made a serious mistake indeed, regardless of what someone such as you on high thinks about their capabilities. I’m sure most HUD employees are competent and dedicated in their work; However,it doesn’t mean they are infallible and not subject to criticism.

  • I’m not sure I understand what James Nelson is referring to when he speaks of the “recent foolish change” in the counseling process. Is that a reference to the fact that HUD has recently reaffirmed the statutory requirement that each prospective borrower obtain counseling independently from the loan origination process? That has always been the requirement, except that, over time, the industry began to employ counseling delivery mechanisms that undermined the spirit and intent of the Congressional madate for counseling. The idea behind counseling is to make sure that all prospective borrowers have an opportunity to make sure they understand the reverse mortgage transwaction they are contemplating, can ask questions to a third-party who has no financial stake in seeing the loan get made and are not rushed into a transaction before they are ready.

    Surveys have shown that when lenders contacted counselors on behalf of prospective borrowers, sometimes the clients didn’t even realize that this was the formal counseling session. In fact, in a number of the problem loans that had hit the press and created a negative image of our industry, the borrowers didn’t even know they had received counseling, although they had spoken over the phone to a counselor for a relatively brief session.

    The idea now is to require that a prospective borrower go ahead and select a counseling agency from a list provided by the lender, call the agency and make an appointment for the counseling session on the prospective borrowers own schedule. That way things move at the pace chosen by the client, not the loan officer.

    This is an important protection, not only for the prospective borrowers, but for lenders, as well. I have seen several cases over the years where heirs or others have challenged the circumstances under which an individual entered into a reverse mortgage transaction. In every instance where there was proper counseling done in a meaningful way, where it could be shown that the borrower had the opportunity to fuuly understand the transaction, the case proved to have no standing and was dismissed.

    The independence of counseling is an important hallmark of the HECM program and HUD is right in taking steps to assure that it remains so — even if that seems inconvenient at times.

  • Inconvenient? Are you and HUD nuts? It’s not inconvenient for me, Sir, It’s inconvenient for a
    Senior who depends upon the Loan Officer (me) to help him/her start the process. Just handing a Senior a Counseling telephone number list and expecting that Senior to follow thru in a timely manner in most cases is rediculous.Real people are struggling to remain in their homes (tostay out of a nursing home at times); they are trying survive on six, seven, eight hundred dollars a month on Social Security and the only other financial asset many Seniors have is the equity in their house. All are scared to death of making a serious financial mistake–most Seniors expect a Loan Officer to “hold their hand”while they go thru the reverse mortgage process. Why do you think the counseling process evolved to the point of the Loan Officer being so involved–the Seniors expect and demand the loan Officer’s help.Just because the regulation was written as is, doesn’t make it realistic. As far as Congress and their mandates–what the hell do they know about integrity?
    Look at the financial shape Congress has helped put our Country in. I’ll match my integrity and personal honesty in dealing with Seniors throught the Reverse Mortgage process (including counseling– although HUD, believe me, it doesn’t stop until the loan is funded.
    And seldom there.) with anyone at HUD or Congress.

  • James,

    I see where you’re coming from but I also agree with Peter’s comments and HUD’s reasoning behind requiring the senior to initiate the counseling session. They want to make sure that loan officers aren’t rushing seniors into get counseling.

    Is there a way that you think they could set things up to make things easier while still providing the level of protection?

  • Yes, leave the Loan Officers alone to assist in any way possible to help that needy Senior get Counseling.
    I assure you, Admin, when I get through explaining what a Reverse Mortgage is (and is not) most times the Senior even wants to know why he/she has to go through the extra financial cost of third party counseling, especially when I have laid out the details to their satisfaction. I explain it’s great to have someone else confirm my information. HUD wants the Senior to understand what financial choices they are making. In most cases, there is no choice: Seniors need the money and having access to some of their home equity is a Godsend. I believe my immediate Manager, My Division Manager, and, ultimately, the Executives in our Company will protect Seniors against any attempt on my part to take advanage of my clients. I will be fired and deservedly so. The only real problem I have encountered in my short Reverse Mortgage career has been watching some young people ( ages 30,40 and believe it or not, even 50) who have no comprehension of the very human issues one faces in this work. Even the simple, tragic thing of dealing with the grief one occasionally encounters when talking with a Senior who stills suffers the loss of a mate of 50 years or more. The Reverse Mortgage Officer’s position is more than a job, it’s a calling. And only those totally dedicated to doing what’s right to help Seniors should be involved.

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