Hunch, Helping to Determine Suitability for a Reverse Mortgage?

image Reverse mortgage counseling is an important part of the process and lenders and counselors would agree that it can be improved.  Despite HUD’s plan to eventually release new HECM counseling protocols, one issue that still needs to be addressed is the “suitability” issue which continues to be a concern from legislators.

I came across Hunch and thought it or a similar tool could provide some value to the reverse mortgage industry.  Hunch is basically an engine designed to help people make decisions based on collective knowledge.  The people from Hunch talk a bit about their algorithm below:

At the core of Hunch is a question selection algorithm built by our small gaggle of MIT computer scientists with backgrounds in machine learning. The algorithm is always asking itself, "What can I ask you next which will lead to the best possible result for this decision?" The choice of which questions to ask and when to ask them will vary based on what you’ve already been asked (and how you’ve answered) so far, the same way that a human expert would adjust a line of questioning based on your responses. The idea is that if someone says they’re a vegetarian, you don’t want to then immediately ask them how they want their steak cooked.

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In choosing what to ask you, Hunch’s question selection algorithm tries to do two things. First, it tries to find a question which will discriminate well among the remaining possible decision outcomes for you – thus filtering the remaining choices from "many" to "fewer". Second, the algorithm looks for a question which can help optimize and rank the remaining decision results to present you with the ones you’ll like the most. It’s trying to ensure that you’ll like outcome #1 better than outcome #5.

I’m sure your wondering, what does this have to do with reverse mortgages?  Not much, but if you head over to Hunch and ask “Should I get a reverse mortgage?” you will see what I’m getting at.

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I ran through the list of questions Hunch asks and after going through the process half a dozen times, each outcome provided a balanced decision based on the answers provided.

Below is an example of a decision I received from Hunch, which said that It sounds like a reverse mortgage is probably right for you.  Why did Hunch pick this?  See the questions and answers below.

  • Do you: Own your home and live in it?
    You answered: ▸ Yes
  • For what purposes would you use the money from a reverse mortgage?
    You answered: ▸ For health care or routine household expenses
  • How strongly do you feel about continuing to live in your current home for the foreseeable future?
    You answered: ▸ I love my home and can’t imagine living anywhere else
  • Have you looked into alternatives to a reverse mortgage, such as a home equity loan or home equity line of credit (HELOC)?
    You answered: ▸ Yes
  • Do you currently have:
    You answered: ▸ Only fixed income from social security or another source
Answers that didn’t match.
  • How old are you?
    You answered: ▶ 62 – 69 years old
  • Do you think it’s likely you would sell your home and/or move out of it within the next 3-5 years?
    You answered: ▶ Maybe

The questions from Hunch are similar to many of the questions a counselor would ask to help determine whether a reverse mortgage is a good option for someone.  See where I’m going with this?   

I’ll be the first to admit that nothing can totally replace a good counseling session or originator who spends the time needed to explain the product but I do believe asking the right questions can help determine whether a reverse mortgage is “suitable”, maybe even before counseling. 

The industry needs to realize that concerns from legislators over suitability will not go away, so why not develop a way to define suitability by an independent third party.  It would be great to have counselors do this, but it’s not their job to be a financial planner anymore than a reverse mortgage originator. 

Many calculators and other tools available are lead generation vehicles (no problem with that) and involve getting a phone call(s) instead of independent information based on questions answered by potential borrowers.  Most lead generators only ask for age, loan balance, location, and I’ve yet to see any that qualify borrowers any further than the basics.

Someone could take something like Hunch (which does have an API), and build out on top of it with more detailed descriptions of why a reverse mortgage is or isn’t a good option based on answers given.  Now I know that a tool like this is far from perfect but why shouldn’t lenders have a tool like this on their webpage along with their calculator?

The internet age is already here, and while all seniors may not be part of it yet, they will be in the next few years.  These type of consumers want information before they pick up the phone and should have a way to receive basic feedback and information based upon a standard set of questions. 

Also, it’s not the same to answer these type of questions in a FAQ section part of your website.  Do you want to be like 99.9% of reverse mortgage lenders and do that or provide your visitors with an interactive experience to help them understand whether a reverse mortgage is the right product for them?

I also think something like this could provide new opportunities for lead providers as well.  Would you pay more for a lead which answered certain questions listed above more than others?  I sure would, because it provides more information based on individual answers which help to determine whether a reverse mortgage may be “suitable” for the consumer.

Like I said before, Hunch may not be perfect, but it’s a hell of a lot better than anything else we have in our industry.  I realize that using Hunch to determine suitability is a long shot, but I do think it provides a step in the right direction of where the industry needs to go.  So ask Hunch if you should get a reverse mortgage and let me know what you think.

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  • Great article.

    It seems like all of counseling could be handled by a combination of this approach plus a much shorter live session. This is one way to provide more consistency and insuring that every borrower receives the same basic information session.

  • I received varying levels from 99% no to 99% yes by changing the answers. I answered the age and occupancy so that I would qualify. It seems moving soon, welcoming a move, and income from investments/employment, support a no decision.

  • Over the telephone and after preliminary introductions, the first question I ask a potential Senior FHA HECM Client is: If your health allows, and you are not forced into a nursing home because it is impossible to care for you at home, would you prefer to live in you house until you pass on? If I get a “No” or any hesitation, I get right to the bottom of what is on the Senior's mind. If for any reason, the Senior is considering
    a move, I emphasize an FHA HECM is not an option until one's plans are set. I thank the Senior for their time, once again give them my name and telephone number, and say goodby. If yes, I move forward with my pertinent questions. Simple and effective. Never be afraid of bringing the grim reaper into the conversation–at our age, it is always in the back of our minds (sometimes the front).

  • I am sick and tired of nanny tests to experiment with seniors.Many of my senior clients are college graduates the idea they need a legislator to hug them is wishful thinking. The Reverse Mortgage program works stop tinkering with the lives of seniors in a sick economy.It doesn’t matter what they want the money for. It is their money. Keep the reverse mortgage it has been around since 1989 when Claude Pepper, a Democrat and Ronald Reagan a Republican decided to help seniors. Counseling is all right if the seniors are respected not looked at by elite counselors as dummies needing help. At the end of the day the HUD HECM is loan product no more no less Counselors as gatekeepers scare me to death. Treat seniors with respect and treat them as you want to be treated.Test taking is a liberal left idea to be sure that the counselors can be elitists. Enough already! Every senior should be able to get a reverse if they want one. They are citizens and taxpayers. No whooda thunk it?

  • If I am planning to use the money for investing, that doesn't seem to be enough to change the yes to a no, but if I already have income from other sources, i.e. investments, that is enough to switch it to no. Using the money for investments in these interesting times is not enough to make a no but having money from investments in the same interesting times is enough for a no?

    Just wondering who weighted the matrix on this one.

    Of course, if the typical pattern is followed of a needy senior with only equity available, there is a definite yes.

      • It's certainly not perfect, but is should get better the more people use it and rate whether it's a good answer or not.

        It's a great start for this type of a tool.

  • I think you are mistaking advice for suitability. A third-party can only assist Consumers in determining the suitability of any financial plan. Counselors, Originators and Financial Planners alike, cannot make decisions for Consumers, we can only encourage them to objectively question thier goals and give them advice to consider.

    I do agree with you that good advice only comes AFTER asking the right questions.

    Let’s not encourage the Government to introduce more regulation that takes decision making away from Consumers, as they attempted to do with some of their Counseling Protocol ideas that gave Counselors decision making authority over the homeowner’s.

    Travis De Renzo
    http://www.HECM.net

  • If I am planning to use the money for investing, that doesn’t seem to be enough to change the yes to a no, but if I already have income from other sources, i.e. investments, that is enough to switch it to no. Using the money for investments in these interesting times is not enough to make a no but having money from investments in the same interesting times is enough for a no? rnrnJust wondering who weighted the matrix on this one. rnrnOf course, if the typical pattern is followed of a needy senior with only equity available, there is a definite yes.

  • Hello,rnrnI just installed the “Should I get a Reverse Mortgage” in a test website. It is very easy. The only negative is the launch of a window to Hunch when you want more info, but that is kinda expected. At least it’s in a blank window and not just a direct link.rnrnI believe you will need a developers license to do this. I signed up before I tried so I don’t know if that is a option available to a general account or if you need to create a developers account. Anyways, it’s very cool and I am just using the simple iframe version. I will look into the JSON version, but I don’t think it will be necessary for a Reverse Mortgage site. I think that is more for a full decision site or something more complicated.rnrnAnyways, I thought everyone would be interested. Nice find Admin!

  • It’s certainly not perfect, but is should get better the more people use it and rate whether it’s a good answer or not.rnrnIt’s a great start for this type of a tool. rn

  • Hi, this is Kelly from Hunch. Thanks, everyone, for giving the reverse mortgage topic on Hunch a try. It's one of 5,000 decision topics on the site.

    Just wanted to point out that Hunch's “decision trees” are all contributed by users, and anyone (including you!) signed in with a free account can make edits or improve them. So if you have improvement suggestions, we'd welcome you as experts to add them to the site. You can create a free Hunch account here: http://www.hunch.com/people/create-account/

    Kelly Ford
    Hunch Inc.

  • Hi, this is Kelly from Hunch. Thanks, everyone, for giving the reverse mortgage topic on Hunch a try. It’s one of 5,000 decision topics on the site.rnrnJust wanted to point out that Hunch’s “decision trees” are all contributed by users, and anyone (including you!) signed in with a free account can make edits or improve them. So if you have improvement suggestions, we’d welcome you as experts to add them to the site. You can create a free Hunch account here: http://www.hunch.com/people/create-account/rnrnKelly FordrnHunch Inc.

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