When the Financial Interview Tool (FIT) was rolled out as part of the new reverse mortgage counseling protocols in August 2010, many in the industry felt the Department of Housing and Urban Development had gone too far
Developed by the National Council of Aging (NCOA), the tool is a guide that counselors use to ask a series of questions to create a budget for the client based on their income, assets, debt and expenses. It’s also meant to help discuss life factors such as declining health, limitations in home environments, and other issues that are important considerations when taking out a reverse mortgage.
Some claimed the process would be cumbersome and even a bit “Big Brother,” saying that borrowers don’t need to lay out their budgets or tell a counselor when the last time they fell was in order to take out a loan. But whether or not you’re a fan of the FIT, we’re starting to see how the data can help inform the industry about its borrowers.
For the first time, a lender—MetLife—worked with NCOA to publish a report on how the profiles of reverse mortgage borrowers are changing—specifically getting younger. While data showing borrowers getting younger has been available from HUD for quite some time, the report goes deeper than any Excel spreadsheet the agency provides by asking why borrowers are obtaining reverse mortgages.
For example, the study shows borrowers who used FIT in 2010 were not using a reverse mortgage in the same way as people in 2006, when AARP conducted its own study and asked the same question. In 2006, AARP found that 70% of the survey respondents indicated that one reason they considered this loan was to improve their quality of life. Today, things are much different.
“Among HECM counseling clients in 2010, only 27% were considering a reverse mortgage to enhance their lifestyle,” said the report. “Even fewer (23%) saw the need to plan for the future as a reason to take out this type of loan. Instead, most of these homeowners wanted to lower household debt.”
Most originators might say this is nothing new; we see this with clients every day. But for the first time, the industry has a way to tap into its borrower demographics to show exactly how the clients it serves are changing without the need for AARP to do a study.
More to Come
The first report with MetLife is just the tip of the iceberg, according to those at NCOA.
“We want to spend more time analyzing the data to help HUD, counselors and the industry to better understand this dynamic population,” said an executive working on the project at NCOA.
While sources wouldn’t give me any specifics about what they have in the works, expect more to come after HUD just announced additional funding for the agency earlier this week.
For the first time, the industry has a steady stream of data about what consumers plan to do with their reverse mortgage and insight into why they’re taking out the loans. It will no longer have to rely on surveys from AARP every five to 10 years; it can see the changes sooner and adapt as needed. Lenders can also use this data to help meet the needs of borrowers that the HECM can’t.
MetLife has been rumored to have a private product in the works for the last two years, so it shouldn’t be too surprising that they’re the one interested in using this data.
Even if you’re not a big fan of FIT, hopefully a study like this shows you how the data can be applied to help inform the public about reverse mortgages and why they’re an important option for retirement.