Reverse mortgage counselors have recently been informed of the changes lenders may be making to their HECM underwriting procedures. While the changes are straightforward, they say, they have the potential to shake up the role of counselors in the reverse mortgage process down the road.
“For now, the general guidance is straightforward,” Daniel Fenton, housing director of Money Management International told RMD in an email. “It’s important that all counselors understand that some form of financial assessment may be completed as part of the application to avoid incorrectly contradicting HECM originators. It is also a good idea for counselors to be able to explain in general terms why an assessment may be completed.”
As lenders begin to make changes to underwriting, counselors have started informing their clients about the change after a letter from HUD informed them that official rulemaking was under way and would be coming soon.
“I think that it is as straightforward as it’s possible to be in a situation as murkey as this one,” says Christena Schafale, a reverse mortgage counselor with Resources for Seniors. Schafale has told clients that they may encounter some additional lender requirements, and that lenders may differ. While a client might not be approved by one lender, it is still possible to get approved elsewhere, she said.
The change isn’t likely to add any additional time to the process, the counselors say, but it may add an additional layer of uncertainty.
“I used to love being able to tell low-income borrowers that this time, with this loan, they would not be rejected because of their financial struggles,” Schafale says. “But those days are gone.”
New underwriting when done in advance of guidance from HUD could introduce some discrepancies on the lender front, but it’s the pending rule itself that could cause a shift on the counseling side, Fenton says.
“Things will get more complicated when HUD’s guidance is published. In the future we will have to decide how counselors should advise seniors who appear not to meet the assessment standards (whether or not they are already working with an originator),” Fenton says. “I expect a lively debate over exactly what the counselor role should be.”
Written by Elizabeth Ecker