Financial Assessments for Reverse Mortgage Borrowers?

With echoes of earlier calls for “net tangible benefits” from the forward world resonating, suggestions now are being floated for “financial assessments” of seniors in the mood for a reverse mortgage. Washington, D.C. attorney Jim Milano says “one policy floating around is whether seniors need some kind of financial assessment and, if so, who should perform that assessment and what should the bulk of that assessment be.” The Housing and Economic Recovery Act of 2008 “requires HUD to establish by July [this year] protocols on this,” according to Milano.

Yet, such a prospect is raising some goose bumps. “Financial assessment is a very slippery slope,” cautions Regina Lowrie, president and chief executive officer, Vision Mortgage Capital, LLC, Blue Bell, Pa., who was tapped to head an executive task force on reverse mortgage lending created by the Mortgage Bankers Association last year.

She says consumers are “the best ones to determine which products are right for them.” At the same, though, Lowrie advocates for the required counseling currently embedded in FHA regulations. “Our concern is that as the secondary market improves and liquidity comes back there will be new products introduced by the private investment community and when that happens we [need] the same protections [that are] built into FHA/HECM,” says Lowrie.

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But, when does counseling become financial assessment and then outright instruction on what to do? “I think taking the decision away from the senior would be a mistake and demeaning,” asserts Sherry Apanay, senior vice president, Generation Mortgage Co., Atlanta. “We already have mandated counseling and encourage seniors to consult with ‘trusted advisors’,” she notes.

Recently HUD issued a mortgagee letter (ML 2009-10) to reiterate its policies on counseling for seniors who apply for a HECM, adding several new requirements. That letter strictly forbids lenders from assisting would-be borrowers in scheduling counseling and borrowers must take the initiative when it comes to contacting a counseling agency.

While the new mortgagee letter “requires counselors to peak under the ‘financial hood’,” according to one insurance company executive, it is not sufficient. “We need [improved] underwriting guidelines,” the executive declares, adding: “We need curative and preventive solutions [because] the industry is changing at warp speed.”

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at nmorse@morsecommunications.com

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  • There are 2 possible outcomes to the “financial assessment” issue. First, and worst of all, this could be the beginning of “minimum qualifications”. I couldn’t imagine a HECM world that would tell a senior they do not qualify because they make too much money or have too much in assets, or anything of the like. Please be kind in replies, this is just a worst case scenario idea.

    Second, it’s just an assessment tool to help seniors identify the “affordability” of their current situation. In other words, it could try and answer the question: will the homeowner have enough money to pay for taxes, HOI and all other obligations in the future? This isn’t saying that all senior homeowners are incapable of assessing their own situation, but it can help reduce fears that senior homeowners are being taken advantage of. But, it would be important to allow the homeowner to make the final decision about the HECM. We still live in a free country, right?

    This outcome makes good sense and could be completed on one piece of paper by, oh let’s say, the counselor. Most counseling agencies perform first time homebuyer/mortgage counseling already. Could we see an increase in counseling fees because of it? Yes, and it would make sense because we are asking the counselors to perform additioanl work in the HECM counseling process.

    However, if a more extensive assessment is requried or the powers that be decide that a particular “group” must perform the assessment you can bet that even higher fees, compared to a small increase in counseling fees, to the borrower will result. A fudiciary responsibility or an analysis of financial health requires that the party performing the service have extensive education and certification in their field. Now who wants to see borrowers pay more fees for this service? I hope HUD doesn’t. There’s enough fees to explain on the GFE as it is. It won’t be cheap to do that kind of assessment and it will only create needless bureaucracy.

    My challenge to HUD: Keep this assessment simple should you decide to go ahead with it… (I’m already preparing to eat these words. Anyone have any ketchup…some salt maybe?)

  • I think all of these regulations are getting out of hand. The feedback I recieve from my clients about their counseling session is that a lot of the counselors do not know what they are talking about and now we want them to act like financial planners??

    We do not give seniors enough credit to make their own decisions and know what is best for them. I know their are concerns about the senior being able to afford their taxes and insurance once they do a reverse. Well, considering most of the time we are paying off a pretty hefty mortgage and they still have money available to them it would make sense that the reverse puts them in a better financial position then if they didn’t have one.

    I always ask my clients who they want to attend our initial meeting. It is very important that you get the adult childresn involved and/or a trusted advisor. We in this industry all know that this is not a hard sell and our clients are much more educated on the subject than we give them credit for.

    There is no need for another 3rd party to assess our clients needs. If anything, offer more training to the reverse mortgage specialists to better educate them on how to assess their clients needs.

  • Is there one Senator, Governor, or any strong voice saying to our senior homeowners & their loved ones,
    “look into the pros & cons of the Federally Insured FHA Reverse Mortgage”.

    It may not be your last resort, but your best resort,and your smartest plan.

    The word is EDUCATION…..Why make it any harder.

    As a senior and a FHA Reverse Mortgage Specialist,
    if you train dedicated, honest, sincere loan officers how to educate our seniors,the rest might not be needed.

    The Old Man

  • Who is training, educating and monitoring these counselors? Financial planners and mortgage brokers need to be licensed with the state, participate in continuing education, and must comply with state and federal guidelines regarding how they do business and communicate with clients. If we are going to expect counselors to act as financial planners and mortgage brokers, by reviewing borrowers’ financials and running calculations of loan proceeds, then we should expect they fall under the same scrutiny as the rest of us. Right now, they’re just poorly educated rogue obstructionists who dole out partial truths and misguided advice. The counselors are equally responsible for the miseducation and misrepresentation of our products as the media – except HUD requires that every borrower be subject to their drivel. As counseling requirements increase, so too will the damage counseling causes.

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