Reverse Mortgage Leads Provider Sees Opportunity in Financial Assessment

One reverse mortgage leads provider launched a new campaign last week that touts its ability to connect borrowers with lenders that have yet to implement a financial assessment that examines credit history and income.

“Reverse Mortgage Lenders Direct is currently able to match seniors nationwide with reverse mortgage lenders who will not determine the loan based on income/credit scores. This is an advantage to seniors who receive a fixed income and/or don’t have perfect credit, have late payments, or who were denied by other lenders,” said Michael Benhayon, CEO. “We predict many more lenders will have financial underwriting in place next year, so for some seniors now is the time to consider a reverse mortgage loan.”

MetLife implemented a financial assessment of borrowers in November, becoming the first lender to do so publicly. The change comes following guidance released in October by the National Reverse Mortgage Lenders Association that outlines a way for lenders to determine whether borrowers are willing and able to meet their property charges after getting a reverse mortgage.

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The leads provider has adapted the language on its website, reversemortgagelendersdirect.com to clarify that there are still reverse mortgage loans that do not have a borrower credit or income requirement.

“We wanted to take advantage of MetLife implementing these changes,” says Chris Stevens, of Reverse Mortgage Lenders Direct. “Some seniors who are needs based would be turned down. We wanted to see if this would get any exposure and let seniors know there is still opportunity to qualify if they don’t have excellent credit, or if they have a bankruptcy [on their record].”

Written by Elizabeth Ecker

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  • The business model of this company is quite disturbing.

    Regardless of what you think, MetLife has taken a proactive approach to help reduce the sheer volume of tax and/or insurance defaults. If this industry fails to deal with this critical issue, HUD will run from this program like a rabbit being chased by a dog.

    So now we have a company that is actively promoting that they will find leads of those seniors that would not qualify under a prudent lending standard. This company is doing nothing other turning a blind eye to an industry-wide problem, and in effect helping seniors get a reverse mortgage that will eventually go into default.

    Personally, I hope this “new offering” fails miserably.

    • reversemaniac,

      There is little doubt that taxes and insurance defaults will grow.  It could be well over 12% of all outstanding HECMs before all is said and done. 

      Why would HUD run from the industry for technical defaults?  Unless the issuer goes under, Ginnie Mae will not lose anything.  So what makes you think HUD is prepared to run away from the program over this?

      • More defaults will lead to foreclosures, which will inevitably lead to some seniors being displaced from their homes. Do you think HUD wants to be involved with a program that could negatively impact seniors?

      • More defaults will lead to foreclosures, which will inevitably lead to some seniors being displaced from their homes. Do you think HUD wants to be involved with a program that could negatively impact seniors?

      • reversemaniac,

        Everyone hates bad press.

        The program was designed for both good times and bad.  This is the Great Housing Depression as to values. 

        FHA is beginning to take the steps which will reduce exposure long run.

        BUT my concern is not FHA; it is CONGRESS!

      • Critic,

        In my opinion, when the first waves of negative press begin to hit next year due to tax and insurance default foreclosures, HUD will be forced to take a second look internally at the program.   It also will give ammo to those in the government who already are fighting to eliminate or significantly scale back FHA as a whole (because they feel that the government should not be involved in the housing business). 

      • ReverseGuy,

        Please see my last response to reversemaniac above. 

        Who are these government people who are against government in housing?  The HERA program is an insurance program.  I know of Republicans who do not believe that government should not be in the insurance business.

        Anything is possible. 

  • I understand what you’re saying but take a step back for a moment.  I’m not justifying their behavior or defending their position, I’m just trying to think my way through this one. If they have some type of pre-assessment capability to vet the client before hand, then they are proactively identifying clients that fit into the majority of other lenders, its not necessarily a bad thing. The BIG caveat is that the borrower may need to be well aware of their particular situation, be it cash flow related or whatever the circumstance.  The other side of this argument is that the lender just sticks it against the wall to see if it sticks and with underwriting times being what they are with certain lenders, that’s a long time to wait for a no. 

    I could be completely wrong on this, not arguing, just thinking out loud online.   

  • What this lead provider is doing is what one expects such entities to do; focus on providing riskier but more plentiful prospects.  The risk in originating HECMs for those who are barely meeting HUD minimum standards is much greater than originating HECMs for those who would only be marginally disqualified under MetLife Bank (“MB”) financial assessment underwriting standards.
     
    A focus of this nature means centering on potentially less profitable loans long-term.  While it is admirable to want to help less qualified prospects, it would be a huge mistake for lenders to focus primarily on them.  If the HECMs being originated by the MB retail unit are actually 85% Savers, the financial assessment underwriting adopted by MB is clearly in line with that production.  So is MB really throwing away that much more business than it has been for months?
     
    The default base is growing.  Continuing the questionable underwriting practices of yesteryear could prove very costly for lenders.  If HUD procrastinates in providing financial assessment underwriting guidelines, more lenders need to establish financial assessment underwriting standards similar to but not as harsh as those adopted by MB.
     
    While no one seems happy about 46,000 HECMs in default in July, at least one spokesperson seemed upbeat that the vast majority of the amounts in default averaged about $2,000.  Over $200 million of payments in default is not thrilling news.  Then there is the issue of how much of this potential loss relates to Fannie Mae owned loans.

  • bottom line is that there are different groups/subsets of seniors who are using the product – not every borrower has $600K equity, home paid off, perfect credit, and income/assets/investments 

    We simply want to make it easier and less stressful for those who are considering the reverse mortgage but dont have the best credit/income/equity scenario – and as everyone knows there are many seniors for who this loan is their last resort.

    ( selling the house in this market is easier said than done – repairs may need to be made ( can be financed with HECM)- their credit is not going to allow them to find new financing – many are living in larger homes whose value dropped significantly – but with a mortgage to pay off and smaller homes whose prices have been stable downsizing is not as attractive opportunity)

    MB is targeting very specific subset and that works for them – other banks/lenders are approaching us to create specific campaigns which includes seniors who might be turned down elsewhere. 

    http://www.reversemortgagelendersdirect.com

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