Is Forward Experience Becoming More Valuable to Reverse Mortgage Lenders?

Reverse mortgages have traditionally required different skills to originate, but changes made to the program are making them increasingly similar to forward mortgage products.

Piqued by the growing number of baby boomers becoming eligible for reverse mortgages, many forward lenders have attempted to enter the business but have reported some difficulty in making the transition.

Yet, despite these challenges, reverse mortgage lenders are finding that skills developed in the traditional mortgage space are becoming valuable to an industry that has often shunned such training.

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One change comes in the form of the use of a financial assessment by MetLife that works to prevent tax and insurance defaults by examining a borrower’s credit history and income.

With other lenders and the Department of Housing and Urban Development expected to release their own guidelines, originators will need more experience in compiling documents and verifying income and credit history. The loan process is beginning to mirror that of a conventional 30-year fixed refinance.

“Underwriting certainly becomes more like forward because of financial capacity underwriting,” says John Lunde, president and co-founder of Reverse Market Insight, referring to the recent implementation of a borrower financial assessment by MetLife. “But the biggest difference is the client and all the differences that brings up.”

Another area where forward experience has proven useful is in successful loss mitigation in an effort to cure defaults, one lender/services says.

“We approach [defaults] more like a forward mortgage,” says Marc Helm, president and CEO of Reverse Mortgage Solutions. “People working with our borrowers have worked on loss mitigation on the forward side. I knew what we needed was that kind of resource,” he says, noting that RMS has had a success rate of more than 50% in effectively placing borrowers in default on repayment plans.

The origination of reverse mortgages has also shifted with the decline of retail giants, Helm says.

“It used to be the majority of the [reverse] loans were generated through retail establishments, and that’s changed,” he says. “Now it’s more knocking on doors, just like the forward business has been all along.”

But the similarities and experience may be more important to some parts of the process than others, and what differentiates the forward business from the reverse business at the end of the day will always be the borrower, Lunde says.

“There are a lot more differences than similarities because of whom we’re dealing with,” he says.

Written by Elizabeth Ecker

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  • The reverse mortgage industry is changing, their is no doubt about that! I have been in the reverse mortgage arena for 11 years, however, I was in the traditional mortgage field for over 32 years.

    The point I am getting at is that I have seen and have been heavily involved in both worlds, the reverse world is becoming more and more like the forward/traditional lending industry.

    I would strongly advise those that only have reverse mortgage experience to start learning what the forward/traditional world is all about. Those that heed this advise and learn all they can are the one’s that will be the survivors! 

    The article up above by Elizabeth is a good one and well presented. This is a good way to face the reality of some of the changes for 2012.

    Happy New Year,
    John A. Smaldone

  • John,

    HAPPY NEW YEAR to all.

    The first really major change that hit many originators directly was the NMLS exam.  Some of us have done well; others dropped out of the industry or found a federally chartered institution because of not being able to pass that exam.  It is time we all realize that we are governed by the same rules just in different ways.

    I do not understand the persistence of the NRMLA CRMP Committee that there are no significant formal education requirements other than sleeping through some NRMLA convention meetings and being semi-alert during a three hour ethics lecture.

    It would seem a college level course in real estate law and real estate finance would be required.  It is very odd they are not.  In fact a holder needs no formal education at all except those mentioned in the second paragraph.

    What’s your take on it?  I know Peter Bell goes off on this way of looking at the CRMP but then that is his take on the subject.  By the way I would not blame you for NOT responding.

  • I don’t know if I’d be as successful as I am if it wasn’t for my Forward Mortgage background.  Most of my presentations consist of comparing the two platforms, and I wouldn’t be able to do that effectively without Forward experience.

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