Three months have passed since implementation of the Financial Assessment, and many industry members are keeping a close watch on reverse mortgage volume to assess the new rule’s impact.
But despite poll data suggesting the Financial Assessment (FA) may be negatively impacting reverse mortgage volume more than originally anticipated, smaller lenders say the FA is having a positive impact on business—even if volume is slightly down compared to pre-FA numbers.
In fact, the FA has been a “breath of fresh air,” says reverse mortgage professional Robert Wyatt, president of Lady Lake, Fla.-based Reverse Mortgage Advisors LLC, an independent reverse mortgage broker.
“As a small independent shop I’m seeing that the FA has created a need to really sit down face-to-face, or kneecap-to-kneecap, with potential borrowers to explain the process,” Wyatt tells RMD. “This has really been a benefit to us.”
While one segment of the industry grapples with how to accommodate the increased amount of time needed to explain the new rules, smaller brokers are seeing what is a challenge for counseling agencies as an opportunity to build relationships.
Discussing in person the application process and new requirements brought on by the FA is helping smaller industry members to develop trust with prospective borrowers, something otherwise difficult to achieve during a phone call. When going through larger lenders prospective borrowers may only have access to representatives of a call center, sometimes hundreds of miles away.
“The reverse mortgage is one of the most misunderstood financial products out there,” Wyatt says. “Clients see a lot more value in the product if they are able to meet with a local person.”
Indeed, the FA is spurring smaller brokers to offer a “personal touch” when meeting with clients, says Certified Reverse Mortgage Professional Beth Paterson, executive vice president of Reverse Mortgages SIDAC.
“It gives us the chance to sit down and provide that hands-on approach,” Paterson says.
But adapting to a post-FA landscape is not without challenges, industry members admit. Wyatt notes that average loan volume is down compared to pre-April 27 volumes.
“Many were not sure what to expect, even with all the early training sessions,” he says. “In addition, many companies are focused on their current pipelines and trying to close them out. This caused a lag that we are seeing now at the closing table.”
Paterson says inquires for reverse mortgages have continued at the same level as prior to FA implementation and the company’s volume is about the same, “although it takes longer to get the loans through underwriting” because of the FA.
The stricter credit underwriting now required by the FA is creating its own set of obstacles for some originators, particularly when it comes to qualifying loan applicants.
“My biggest gripe is with the income guidelines, especially with south Florida’s high property tax and homeowners insurance rates,” says Certified Reverse Mortgage Professional Phil Stevenson, owner and principal mortgage originator of PS Financial Services, based in Coral Gables, Fla. “Many seniors get help from family members, and we are finding over 30-40% of loans are not qualifying. This is overkill since we are trying to reduce the 10% default rate.”
Indeed, the FA still has a few things “to work out,” Wyatt says, noting that adapting to the new rules felt like finding “a light switch in the dark.”
“But we found it and we understand it,” he says. “It’s a pill to swallow for people now, but once the industry gets through this learning curve the reverse mortgage will continue to be, as it has been, a great product.”
Written by Cassandra Dowell