One Month In: Lenders React to Reverse Mortgage Financial Assessment

The Financial Assessment (FA) officially took effect a little more than 30 days ago and the reverse mortgage industry is experiencing a shift in strategy as it adapts to entirely new processes.

When the Financial Assessment finally arrived April 27, it lifted a shade of uncertainty, signaling an end to the series of false-starts the Department of Housing and Urban Development (HUD) slated for the rule in prior months. Initial feelings were mixed as lenders tried to gauge the potential impact on volume, and the time it would take to train and prepare originators.

For many the rule has presented some relief, as well as a few more unknowns one month into its implementation. Lenders tell RMD they are wrestling with their own pipelines and workflows, while also facing certain delays with HUD systems that are impacting their abilities to originate loans on the time frame they are used to.

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Even originators with forward lending experience, though initially speculated to have somewhat of an advantage under the Financial Assessment, are having to learn and relearn new processes.

RMD reached out to several industry members to hear their feedback as they continue to move forward under the Financial Assessment.

“We are experiencing the effects in the loan origination system; workflow and HUD systems that are creating some delays to originate at this present time. We do believe this is part of the process and at this point we do not know what the long term effects will be. We at 1st Reverse Mortgage USA will need to continue to redefine the workflow and systems integration as well as provide continued education and training to assist us through this process.”

—Dan Harder, vice president, 1st Reverse Mortgage USA

“At this point, we have not seen much of a change in the volume numbers. Probably, the only issue has been in the unknown—What will HUD accept? Did we calculate correctly? Partial LESA vs. Full LESA? We have a seasoned Underwriting Team that is confident in their abilities but since Financial Assessment is so new, we are not certain of HUD’s review and what to expect at Insuring. We have completed several underwrites and have closed about two and are anxiously awaiting how HUD will view our finished product and what insuring issues if any will be. Our production continues to grow and we at UNMB feel that this is a new challenge and in the long run will have no negative impact on our industry.”

—Carol Dujanovich, director of wholesale operations / DE underwriter, United Northern Mortgage Bankers, Ltd.

“I’ve noticed a slowdown in business since the onset of FA. There are various factors from LOs working on learning the new processes and guidelines, to underwriting turn times longer than usual because of the pre FA boom and the new more involved FA underwriting process. There has only been a small percentage of files that would have no chance against FA because of High LTV, mortgage lates [late payments], and behind on taxes. Others, even if borderline, have a fighting shot, so we’ve submitted them. No closings yet for post-April 27 case numbers.”

—Phil Stevenson, owner and principal, PS Financial Services

“A lot of my peers are working on their existing pipeline and absorbing Financial Assessment slowly. Originators that haven’t experienced Forward Mortgages seem to be most hesitant, although I have a Forward background, and am moving slower than normal, too. Most consumers I’ve spoken with the past month seemed okay with the income and credit requirements, but annoyed with having to gather documents, and I’ve been hearing ‘let me think about this’ more than usual. I’ve had two files that would have been fine prior to April 27th. Capacity was the problem with both of them. I haven’t seen a problem with Willingness yet.”

—Raymond Denton, reverse mortgage specialist, Proficio Mortgage Ventures

Written by Jason Oliva

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