Several weeks following what most industry members are calling the biggest change ever to take place regarding the home equity conversion mortgage, lenders are moving ahead with solutions that accommodate the new rule. And for the most part, they are viewing the change in a positive light.
From credibility for lenders to a safer, sounder product for borrowers, the financial assessment offers opportunities across the market, industry leaders say.
“Ten years ago, ‘no income, no credit’ was a great tagline,” said Sherry Apanay, chief sales officer for Urban Financial of America, during the National Reverse Mortgage Lenders Association Western Regional meeting in Huntington Beach, Calif. Tuesday. “Not so much today. That puts us in a subprime market, and that’s not good.”
The risk associated with default potential has long been a major problem for the industry to resolve.
“If we want to grow our market, we have to fix this problem,” Apanay said. “Financial assessment is the solution to do that.”
The transition to financial assessment has been long and not without its challenges for retailers, wholesalers and independent originators alike. For those who have spent long careers in reverse mortgages, the document collection aspect of the assessment is new. For many, approaching the details contained in those documents is a new process as well.
Urban Financial of America has established a credit desk as a resource where its partners may seek help when approaching the conversation with borrowers. Though not a technical pre-qualification, a full or partial credit assessment can indicate upfront whether a borrower is likely to be able to qualify for the loan before the borrower—and originator—goes through the whole financial assessment process.
American Advisors Group, which began testing the financial assessment months ago in some capacities and has found the initial fall through rate for borrowers is less than 10%, is offering a similar credit desk available to its wholesale partners.
“It has been an evolution and will continue to be,” says Cheryl Chargin, account executive with AAG. “We are trying to train to the conversation and we are coaching people to ask bullet-pointed questions on property charges, credit card debt… it’s an opportunity to open the financial landscape.”
It’s also important to not assume a borrower will be ruled out based on a single criteria, Chargin says.
“Some originators are looking at the credit report and are seeing X, Y or Z factors and they are assuming the [borrower won’t qualify]. Don’t assume that. Look at it and see what we can come up with and see if the numbers end up working.”
Originators will need to work harder to gain the trust of their clients and to ask for detailed information—a process that may not be new, but should not be seen as difficult, says Colleen Moore, national director at San Diego-based Golden Equity Mortgage.
“You have to get to know your borrower. Don’t be afraid of that. Learn how to be relational and the rest will fall into place,” Moore says.
Further, borrowers will have not only more trust in the originator, but in the reverse mortgage product itself.
“Financial assessment is a positive thing,” Moore says. “The reality is, if [the borrower] doesn’t pass financial assessment, you weren’t saving that borrower anyway. Embrace this process and the credibility financial assessment gives us.”
Written by Elizabeth Ecker