Reverse Mortgage Lenders Train for Change as Financial Assessment Nears

The reverse mortgage industry nears what is arguably the product’s biggest change in a decade as the Financial Assessment’s March 2 effective date draws closer. And like the new rule or not, lenders are getting ready with a variety of training initiatives.

In the past, lenders may have performed their own versions of a “financial assessment” as part of their processes to measure borrowers’ financial profiles before and after getting a reverse mortgage.

MetLife, before exiting the reverse business in April 2012, pioneered an official financial assessment for reverse mortgages in November 2011 only to suspend the initiative shortly after its launch, citing consumer confusion and lack of industry buy-in.

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But come March 2, lenders will have to comply with much more formal requirements that are here to stay.

The Department of Housing and Urban Development (HUD) has issued various resources to help lenders prepare to comply with the Financial Assessment, including Mortgagee Letter 2014-22 and a Home Equity Conversion Mortgage (HECM) Financial Assessment and Property Charge Guide. These resources are serving as cornerstones to lenders’ training programs, many of which are relying on technology to educate their sales forces and operational management. Some have even created focused committees specializing in the Financial Assessment to help spread critical know-how throughout their companies.

Whichever the method, lenders have put a premium on training, directing considerable resources to these efforts.

“Training is a key area where we’ve dedicated a considerable effort for retail, wholesale and operations,” says Sherry Apanay, chief sales officer at Urban Financial of America. “Ensuring our teams and partners are best prepared with knowledge of the requirements and understanding of the process is our goal.”

Financial Assessment task forces

Merriam-Webster defines “task force” as group of people who deal with a specific mission. And some lenders, like Urban Financial, have established dedicated teams tasked with ensuring enterprise-wide compliance with the Financial Assessment.

“Our Learning and Development team is working in lock-step with our FA Task Force to ensure that our LOs and operations staff can set the industry standard in dealing with these upcoming changes,” says Tom Evans, vice president of marketing and business intelligence for Urban.

The company also is adding to its operations team to account for the expected changes in length of time to complete file reviews, to ensure that its service levels and turn times are not negatively impacted by the introduction of the Financial Assessment, Urban Chief Operating Officer Kristen Seiffert tells RMD.

Urban isn’t the only lender tackling training preparation with the help of a specialized group. American Advisors Group (AAG) has also formed a Financial Assessment team that is responsible for addressing the HUD updates as they relate to its business, focusing on key areas including training, technology and process changes that will need to be incorporated in response to the new requirements.

“Our highest priority at the moment is in the area of training, since FA impacts how we will conduct businesses as compared to what has been required of us in the past,” says Paul Fiore, executive vice president of retail lending at AAG.

To prepare for the approaching rule, AAG’s retail and wholesale sales teams and operations staff will be required to undergo mandatory training on the company’s new Financial Assessment curriculum. The coursework explains the changes in detail to help personnel understand and deal with key provisions of the Financial Assessment, notably compensating factors and extenuating circumstances. The curriculum also drills down on how to work with borrowers to educate them on the Financial Assessment process and documentation that will need to be collected, Fiore says.

AAG is the largest reverse mortgage lender in the country by volume, with 12,698 total units in the 12 months trailing November 2014, according to Reverse Market Insight data. Given its size, AAG’s biggest challenge lies in making sure its entire team, including origination, wholesale and operations, is up to speed on the program changes prior to the March deadline, Fiore says.

“We believe the industry as a whole will be challenged by how it interprets the mortgagee letter as it relates to extenuating circumstances and compensating factors for its reverse mortgage clients and where those scenarios fit in the loan approval process,” Fiore says. “The ability to define what is acceptable is clearly a challenge every lender will face. We’re confident we’ll achieve this and will be compliant with all Financial Assessment requirements.”

While the idea of creating dedicated teams to facilitate Financial Assessment training initiatives has proven feasible for large, national lenders, smaller players have turned to technology to coach their teams.

Leveraging technology

When it comes to preparing for the Financial Assessment, size isn’t everything. Smaller lenders may even have something of an advantage when it comes to training in the dwindling weeks leading to March 2, especially compared to firms with expansive sales teams.

“It’s hard to change the tires while the car is moving,” says David Entrekin, chief operating officer and chief credit officer at Retirement Funding Solutions (RFS), one of the industry’s newest reverse lenders. “We’re uniquely positioned because we don’t have a large operational force or sales team. So training will be a little less arduous for us than it would for someone with 200 salespeople, for example.”

A division of Synergy One Lending, the fledgling RFS was launched in January by former Security One Lending executive Torrey Larson, who headed the firm’s retail lending division and served as company president before it was acquired by Walter Investment Management Corp. (NYSE: WAC) in 2013.

Currently in the process of recruiting and onboarding additional sales personnel, RFS plans to use technology like webinars and an intranet “Knowledge Coop,” where staff can ask questions and receive consistent answers on what to expect from the upcoming changes.

“As much as we can clear up any ambiguities and make it as black and white as possible, it will help us draw a line in the sand,” Entrekin says, referring to the ambiguous nature of the Financial Assessment’s extenuating circumstances and compensating factors as they apply to different borrowers.

Playing it forward

Because the Financial Assessment’s credit qualification criteria bears resemblance to more traditional mortgage lending, other lenders plan to lean on their personnel’s experience in forward lending to ease their training programs.

“Fortunately for us and our originating partners, much of the operational staff have significant forward experience,” says Bruce Barnes, executive vice president at Live Well Financial. “As Live Well Financial was already underwriting loans on the forward side with credit qualification, we already have the systems in place to seamlessly integrate Financial Assessment into the reverse side of our mortgage platform.”

The bulk of the company’s training, Barnes says, will be designed to get processing and underwriting staff up to speed on the new requirements.

“Sales training is essential to being effective in this market and that will only be increased in scope with Financial Assessment,” he says. “Our biggest training is reserved for our underwriters with several large training sessions. Our other functions will be coming together to train our account executive, loan account managers, processors and loan originators.”

No matter how lenders execute their training strategies, the Financial Assessment forces them to play in a new arena, where the teams that are best conditioned will ultimately succeed.

“Financial Assessment is a sea change, and with any such change there will be plenty of opportunity,” says Barnes.

This edition of the RMD Report is sponsored by national appraisal management company Landmark Network.  

Written by Jason Oliva

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  • Some of the statements in the article are somewhat alarming. Relying on experience in the forward world seems like that reliance sits on a clump of loose and water filled moss on top of a rock that sloops down toward a cliff with a 300 foot drop that the rock hangs over.

    When management refuses to own mandated change by proper delegation of resources to master such change, risk rises and in most cases substantially rises. Those management teams that ignore the preparation needed to understand the intricacies of HECM (not reverse mortgage) Financial Assessment in areas such as extenuating circumstances and compensating factors will be paying the price in lost business, lost time in trying to qualify those who cannot qualify, or misleading borrowers as to how their HECM may be modified for required payouts or LESAs.

    It seems rather than leading in getting the information seniors need to show financial responsibility, some lenders are relying on others to do that for them (i.e. counselors). All lenders need to invest what it takes to have their staffs become experts in HECM lender Financial Assessment in accordance with the function they perform.

  • Prep all you want, I still expect delays since people with soft brains and CYA initiatives will be running at full power. I envision entire committees looking at each loan. But hopefully not.

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