7 Reverse Mortgage Financial Assessment Tips for Originators

The reverse mortgage financial assessment, by now, is old news. With its implementation date nearly a month in the past, originators have had even more months to train and prepare for the new rule. 

As was expected, the assessment is adding time into the reverse mortgage origination process. But those in the field say that in working with borrowers, they are more often than not, able to present the borrower’s story through documentation and by asking the right questions to net the right proof. And in most cases, borrowers still qualify. 

We spoke with several reverse mortgage originators who are seeing success under the new rule. Here are some tips they had to share. 


1. Don’t dwell on the past. 

The world before the financial assessment should be irrelevant for almost all borrowers.

“Most clients don’t know what a HECM was prior to FA, so don’t discuss what it was,” says Mike Gruley, director of reverse mortgage operations for1st Financial Reverse Mortgages. “Instead, promote what it is and what it can do for your client.”

2. Be upfront about the assessment. 

While it’s not necessary to explain to borrowers what they’re missing, it’s important to explain—upfront—what the financial assessment will entail, and the depth it will use to explore financial history. It will help give them a roadmap for where the conversation will go, and what kinds of personal financial questions will be asked. Explain that it is designed as a protective measure. 

“Explain the how and why of FA before you start asking questions,” says Colleen Moore, national reverse mortgage director for Golden Equity Mortgage. “If you fully explain the benefits and why it was put into place, then they will be more than willing to help you get them through the process.”

3. Conduct a pre-interview

This can be done on the phone, and it’s a good way to get a preview of any financial events that could bear outcome during the financial assessment. 

“I now perform a thorough phone interview before meeting face-to-face with the client, and I have had to become a much better, much bolder interviewer,” says Laurie McNaughton, reverse mortgage consultant with Southern Trust Mortgage. “Most clients already like to recount major life events; now instead of merely absorbing information as stories, I take note and circle back around for particulars if the information sounds likely to impact credit or financial obligations.”

4. “Lee-sa” or “Less-a,” get used to set asides. 

While the pronunciation of this important set aside is still up for debate, the life expectancy set-aside is here to stay. Don’t fear it. 

“A LESA is not necessarily a bad thing when explained the proper way,” Gruley says. “Being able to continually pay property taxes and insurance is clearly a concern for most retirees. A HECM with a LESA solves that problem.”

And further, not being able to meet the terms of the LESA upfront doesn’t mean the borrower is ruled out from ever qualifying. 

“If a borrower is not able to qualify for a HECM today due to a required LESA, discuss some strategies to repair the credit history and better manage property charges with the plan to applying for a HECM a year or more later,” Gruley says. “Maybe a year or two later, the LESA will not be required.”

5. Establish rapport early and often. 

Qualifying under the financial assessment is a completely new process, and it will take time. Originators advise approaching the conversation with patience, in order to establish rapport that will take both the originator and the borrower through the details. 

“My first and foremost tip would be for the originator to really get conversational and relational with the clients,” Moore says. “When you establish rapport, they will share their story with you and that will be the biggest tool in your arsenal.” 

And getting that story—in its entirety—upfront will also benefit all parties later in the conversation, should the need for compensating factors arise. 

“They will be more than willing to provide information and documentation if you don’t just pepper them with a list of questions,” she says. “When you have their story, if extenuating circumstances and/or compensating factors are needed, you will know where to go.”

6. Ask questions. Then ask more questions. 

Getting the ins and outs of a prospective borrower’s financial picture will not come by asking superficial questions. Make the client feel comfortable enough to share parts of their financial history that may not be favorable. You might also find factors that will help you understand why a certain underlying factor exists. 

“Don’t be hesitant to really drill down on their answers; after rapport exists, they will be comfortable with you,” Moore says. “If they give you an answer and you don’t understand fully, you can continue to probe until you see the real deal. Borrowers will have other business income or other expenses or resources that they would otherwise not think to provide.”

7. Examine credit early. 

Many lenders are offering a “credit desk” as a help desk for credit questions. Originators can conduct their own assessment, once a prospective borrower consents, to see what kinds of issues might arise. 

“Generally, before our first face-to-face meeting I pull credit after getting their written authorization to do so,” McNaughton says. “This enables me to see whether I’ll need to dig deeper for income, assets, or compensating factors. An example of this is an application I took this week: the client has a large credit card balance—and a large monthly minimum payment to go along with it. However, she also has two open cards with a zero balance. These can be used as compensating factors, as they’re access to credit.”

Written by Elizabeth Ecker

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  • 8. Please, please, please do not rely on the HECM Counselors to provide this information or to “pre-screen” your customers for the Financial Assessment.

    A – Counselors may *not* tell your customers whether or not they qualify for a HECM pursuant to the FA. You could just be wasting a lot of your time and your customer’s time (not to mention the counselor’s time) and, worse yet, the customer will remember that in the future if and when they do qualify.

    B – You may not like our answers if you do leave it to us.

    C – We do not know your individual company’s rules, we just know the standard HUD rules. We may think that they qualify, but they won’t under your company. This makes you look bad.

    D – Counselors are not going to sell your product.

    Of course, I would say many of the same things when it comes to any nuance of dealing with HECMs, but I am a counselor, not a salesperson. My job is different from yours, not better, not worse, just different. As such my priorities and who I answer to regarding them is different as well. If you end up relying on a counselor to “sell” your product or even just to educate your customer, you will not have a great experience with selling this product. I can usually tell which salespeople my clients have seen given the number of questions that they ask and how they ask them. There are a few for whom much of what I say is redundant, as their salesperson has already clearly explained everything. There are some clients for whom some of what I say is redundant, but some is new. And then there are those clients who seem like they have just heard about the entire concept of HECM’s for the first time yesterday, and they didn’t pay a lot of attention. I can tell you that the salespeople who make my session redundant close far more loans than those salespeople who don’t explain much. For the latter, it is hit or miss, for the former, it is very rare that their customers don’t take the loan. (Per HUD rules, counselors do follow up with our clients to see whether or not they take the loan.)

    Educating your customers is the key to properly selling this product.

    Frank J. Kautz, II
    Staff Attorney

    Community Service Network, Inc.
    52 Broadway
    Stoneham, MA 02180
    (781) 438-1977
    (781) 438-6037 fax
    [email protected]

  • I feel the article and what Frank Kautz outlined in his comment sums it up better than anyone could. Great job Elizabeth and Frank. I am sure everyone appreciates what has been spelled out here today.

    John A. Smaldone

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