Reverse Mortgage Lenders Manage Demand as Financial Assessment Nears

With the Financial Assessment less than three weeks away, lenders have been experiencing strong demand for reverse mortgage applications as borrowers rush to get loans in process before April 27.

Some lenders have been seeing an increase in application activity as far back as February, when the Financial Assessment was previously expected to take effect March 2, before the Department of Housing and Urban Development (HUD) pushed the implementation date to the end of this month.

For others, application volume has more than doubled since late last year, when further details of the FA such as guidelines for calculating life expectancy set asides (LESAs) and extenuating circumstances were clarified by HUD. And some mainstream news reports of the changes are further supporting the new demand.

Advertisement

“Volume as far back as 60 days ago started ticking up significantly, and it’s continued through today,” says Joe Morris, senior vice president of reverse mortgage lending at Open Mortgage.

Within the past two months, Open Mortgage has seen reverse mortgage applications rise anywhere between 35-40%, a shift Morris says may have been possibly triggered by the false start when preparing for the previous March 2 deadline.

“It’s going to be a different world after April 27th,” said Morris.

PS Financial Services saw a similar trend in heightened application activity up until the February deadline and continues to see “a lot of apps now as well,” said Phil Stevenson, principal at the Miami-based lender.

Going back to late November/early December, when lenders had a better idea of the changes that would be taking place under the Financial Assessment, PS Financial Services saw between a 130-150% increase in applications.

While some are with a sense of urgency to get loans before the April 27 deadline, Stevenson notes that he’s been seeing a surge of HECM-to-HECM refinances as well.

“We’re going back to clients and letting them know the Financial Assessment is coming and that if a reverse mortgage is something they’re considering, then they might want to look into it a little bit more,” said Stevenson.

Other lenders, who have reported slight upticks in volume, though not as much as before the original March implementation date, are turning their efforts to ongoing training preparations as April 27 draws nearer.

“We have implemented a lot of FA training and have put the process in place for our loan officers and operations staff now, even though we are not necessarily underwriting those rules yet,” said Ed O’Connor, reverse mortgage marketing and sales director at FirstBank. “That gives us quite a leg up on understanding how to deal with everything. FA is here and we are confident that it is just another learning curve for all.”

Written by Jason Oliva

Join the Conversation (10)

see all

This is a professional community. Please use discretion when posting a comment.

  • If the new rules for the program are in the best interest of the senior, doesn’t this rush on apps indicate that the RM Companies are not currently acting in the best interest of seniors, but themselves?

    • Peter,

      What you bring out is how valued truth and integrity are among many who originate these products. It seems both have been sacrificed to some degree. Yet we also know that 90% of HECMs did not go into default even during the peak of the housing crisis and the problem years thereafter but then again how many of that 90% would have failed financial assessment?

      Many reverse mortgage salespeople brag they do not sell but educate. There is little question that the method used is that of an education infused into a sales pitch. Yet what is the content of that education before April 27th and after April 26th?

      So the question at this point is whether or not informing the 10% is a matter of notifying them of the deadline or trying to stir the 10% pot to get as many of these as possible to get HECMs before the deadline.

      Many seniors believe that financial assessment is a poor method to determine affordability in their situation. Reverse mortgage salespeople are appealing to those seniors to act now.

  • Peter Brown brings up a good point but in fairness to our industry players a lot has to do with the unknown. Loan officers and companies know the industry they are in today but are concerned what will take place after April 27th.

    I don’t believe it is greed on the part of our industry players or that they are thinking of themselves only, on the contrary. I truly believe we are experiencing more of a fear driven aggression that we see going on. Embracing this kind of a radical change on those that have only been in the reverse mortgage space of the business is a major adjustment.

    We all need to be patient and learn as much as we can before April 27th, we will be better off than many may feel we are going to be. We will for the most part, fair out well.

    By the way, many of the changes we have seen as well as the FA ruling will benefit the senior borrower in the long run.

    John A. Smaldone

    • John,

      Then why are these same originators calling Saver v3, the “NEW” reverse mortgage and saying that the changes (especially after the implementation of Financial Assessment) ARE in the best interests of the consumer? Unfortunately this time, I agree with Mr. Brown. We cannot have it both ways!!!

      • Cynic,

        As I said, Peter Brown made some good points but I still stand by my comment. I am not fully understanding your question back to me and what do the both of you mean by “We can’t have it both way”s”?

        I am in one of my brain dead periods:)

        John

  • John,

    It is common to read and hear today among our leaders and peers about how financial assessment makes HECMs a safer financial product. It is even in the mainstream press. The premise is that financial assessment determines if a senior can afford to pay property charges and when the conclusion is no, financial assessment allows for the modification of the HECM so that the borrower will be able to get one which has part of the HECM held back for the purpose of aiding in the paying of (if not outright paying) property charges (such as property taxes and insurance) if they still want to proceed with the origination.

    So if financial assessment makes HECMs safer, what is motivating originators to close HECMs with those who could not get them after financial assessment is in effect? If It is not concern for the welfare of those seniors, what is motivating this wave of originations that are based on getting a HECM before financial assessment is implemented?

    It was telling some months ago when one industry leader stated that he was tired of seeing closings where it was obvious that within a few years the borrower would be in default for failure to pay taxes and insurance. So again is this wave of originations something that goes against the conscience? Mr. Brown has a point.

    • Cynic,
      You make some very good points, I think many of us look at FA ‘s impact on the industry differently.

      I am trying to embrace it in a positive way, I really don’t have a choice if I want to remain in the industry. I think that holds true of all of us.

      I have a question for you, if you don’t mind. Yesterday the client I am working for as a consultant tried to get 3 different borrowers set up for counseling. Two different agencies came back and said before they could do the counseling they would have to see a required budget form filled out first.

      I have not heard of this form requirement before counseling could be done. I called the counselor and she verified what the borrowers had said and the counselor said this form will allow us to determine whether or not we should approve the borrower and give them a certificate.

      Have you heard of this before and where can a counselor come off to approve or disaprove a borrower in order to get a cert? If you can let me know, I sure would appreciate it.
      Thanks,

      John Smaldone

string(113) "https://reversemortgagedaily.com/2015/04/12/reverse-mortgage-lenders-manage-demand-as-financial-assessment-nears/"

Share your opinion