In the past, borrowers could search the Department of Housing and Urban Development’s Lender List for approved Home Equity Conversion Mortgage (HECM) lenders and brokers. But since the Federal Housing Administration made the shift to include non-FHA-approved third party originators to originate HECM loans, the list has cut all non-FHA approved brokers, even though they are approved through their lenders.
“It creates a disadvantage, especially for brokers that are dealing with customers who come from websites or lead purchases, when those customers are shopping around heavily and/or possibly concerned about a broker’s legitimacy,” said Lance Jackson, of Castle Reverse Mortgage. Jackson says that there is little impact on his business, which is largely referral driven. But a concern arises when it comes to HECM counselors who are asked by borrowers for lender recommendations.
Counselors are instructed to point borrowers to the HUD Lender List if the borrower asks for a recommendation. While the vast majority of borrowers have already spoken with a lender once they come to the counseling session, still a fair percentage end up seeking guidance and going to the list for more information.
“If a borrower asks, ‘How do i find a lender?’ we do point them to that lender list,” says Christena Schafale, Director of Information Services for Resources for Seniors. Schafale estimates that while 90% of her clients have already made contact with a lender, still 20-30% will still ask for guidance in finding additional lenders to talk with. In that case, the Lender List is the only HUD-approved resource.
“HUD has told us that’s the only thing we can do,” she says.
For other counselors, while they may not point borrowers to the list directly, HUD is the sole resource for approved lenders.
“My biggest concern is the counseler issue,” says Beth Paterson, executive vice president of Reverse Mortgages SIDAC. “If they only recomemend the HUD list, they are leaving out brokers,” she says.
Paterson noticed the change in the national list after finding her company had been removed from a local resource listing reverse mortgage originators, due to the HUD update, which the Department says would be difficult to change.
“Our responsibility is to FHA Approved entities,” a HUD spokesman told RMD. “It would be very difficult for us to list ‘sponsored originators’ since those individuals are managed by and have a relationship with the FHA-approved lender, not with FHA.”
Not listing those sponsored originators is problematic from the viewpoint of those originators, who are just as qualified and approved as their lenders, but don’t make the cut when it comes to the list.
“It’s a disadvantage to us because we no longer have to go though the FHA approval, but we are lender-approved,” Paterson says. “My frustration is that it’s a disadvantage if counselors do reference the HUD list, or if a borrower is looking to verify that we are approved. Somehow, we as brokers need to be able to be identified as being legitimate.”
Establishing legitimacy is the biggest concern of brokers who spoke with RMD.
“One could conclude if you’re not on the list, then you’re suspect,” says George Downey, of Harbor Mortgage Solutions.
That could create problems from a competitive standpoint, brokers say.
“The problem with a list of HECM lenders from the HUD website is that it excludes all of the broker population that originate HECMs,” says Lynn Wertzler, president of Greenleaf Financial. “The implication is also that if a broker is not listed on the HUD website, then the broker is not a legitimate firm to do business with. To the extent the HUD list is referenced by people looking for a HECM lender, this will guarantee the business will go to the Full Eagle with the brokers having no chance to win the business.”
One potential solution, Paterson noted, could be distinguishing HECM originators through the National Mortgage Licensing System, which tracks all licensed brokers and lenders. Currently, the database does not identify which brokers originate HECMs.
“There may not be an overnight fix,” Paterson says, “but there has to be a solution.”
Written by Elizabeth Ecker