Third Party Reverse Mortgage Originators, Experience is Key

The Department of Housing and Urban Development’s decision to eliminate correspondents has the potential to open up the reverse mortgage industry to a new group of brokers, but not everyone is welcoming them with open arms.

“We are not trying to bring a lot of new players into the market,” said John Nixon of Bank of America during the a session on new third party originators at the National Reverse Mortgage Lenders Association Conference in New Orleans.

According to Nixon, BofA’s current third party originator approval process is already rigorous but it will specifically look for prior experience with reverse mortgages when approving new brokers to sponsor.

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Without specific guidelines from HUD, mortgagees are responsible for sponsoring brokers (third party originators) and setting any minimum requirements necessary to do business.  For the most part, panelists said net worth requirements will remain at previous levels but all agreed it’s not a huge factor in determining who they sponsor since it’s not enough to repurchase a bad loan.  Instead, they’re paying close attention to the credit history of company principals and compliance checks to ensure brokers are operating correctly.

“We need to intensify what we’re currently looking act,” said Kimberly Kerrigan, VP of Generation Mortgage.  Specifically, the company plans to conduct quality control audits, extensive reviews of files submitted, and may require some type of errors and omissions coverage for third party originators.  As far as official guidelines for correspondents currently approved with Generation, “we are getting ready to roll out the procedures for current brokers in the next couple weeks,” she said.

Others wholesale lenders like Urban Financial are already approving new TPOs and pulled its first case number earlier this week. “In the last 30 days, we received at least 40 applications from loan officers who left companies that originated reverse mortgages,” said Sandy Tennekoon, Operations Manager at Urban Financial Group/Reverse It.  “They’re joining companies who were not previously approved with FHA.”

Reverseit plans to keep the approval process the same as before and will do onsite visits, run credit and MARI reports and require financials from third party originators.

Pete Engelken, President of Genworth Financial Home Equity Access said the company will start to take new TPO applications later this month but added that much will change in how it approves brokers. “We’ve added some additional features to make sure we’re comfortable with the loans.”

Genworth will not require financial statements but brokers must comply with state licensing requirements and agree in writing to NRMLA’s ethical lending and advertising guidelines.  To help make sure marketing materials are compliant, Engelken said it will offer brokers “consumer facing advertisements that are high quality and non-branded.”

The only panelist already closing business with new TPOs was Sun West Mortgage Company.  “Our experience is that these brokers pick up an occasional loan through a referral,” said Pavan Agarwal, executive VP at Sun West in an email to RMD.  The company has seen a lot of interest from its “forward” wholesale clients but whether or not it will be a big part of their business isn’t clear.  “It’s a very new channel and only time will tell,” he said.

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  • Good day,

    I guess time will tell on this one? Government intrusion is becoming over whelming. Old policies, procedures and regulations thrown out the window one day and replaced the next day. Replaced with those that have the potential of doing more harm than the one’s they did away with originally.

    I think a cartoonist sits up on the roof of the Whitehouse, thinking up ways to remove one piece of legislation and replace it with another one. The problem is, the cartoonist knows not what he or she is doing! Guess what we come up with, one big laugh and a lot of incent people hurt.

    Why did they do away with the old and bring the TPO into play? I could never understand why this was done. Is it to protect the consumer, is it do away with brokers, is our government thinking it is passing the buck where responsibility is concerned from them to the larger lender? I am getting to old, I can’t keep up with these cartoonists.

    My own opinion for what it is worth, I see many problems ahead. I see bad Apples entering the arena no matter what the sponsoring lender does. I think we could have kept what we had and just massage the program. We did not have to do away with the correspondent program!

    Have a good day,

    John A. Smaldone

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