Are Forward and Reverse Mortgage Lenders Equally Matched Under FA?

In the months prior to the Financial Assessment, there was speculation that new credit underwriting requirements in the reverse mortgage program would offer somewhat of an advantage to originators with “forward” lending experience.

While in theory this would seem like a logical presumption, the reality is the reverse mortgage product today is anything but black and white.

Traditional, “forward” lenders have long conducted financial assessments and credit analyses to determine the eligibility of loan applicants. Only after April 27 were similar processes required for the Home Equity Conversion Mortgage (HECM) program, though some reverse mortgage lenders already conducted their own versions of the FA prior to its effective date.


But even though reverse mortgage originators are now doing more functions that are forward-like in nature—having conversations about credit and actually having to qualify income—that does not necessarily mean those with forward experience have a leg up on their reverse originator counterparts.

“It helps to have forward experience, but I don’t think it gives any advantage,” says Mike Gruley, a certified reverse mortgage professional (CRMP) and director of reverse mortgage operations at Plymouth, Mich.-based First Financial Reverse Mortgages, a division of Success Mortgage Partners.

Gruley acknowledges that while the income qualification requirements, as mandated by the FA, may be similar to traditional mortgage processes, the credit analysis side of the equation has its own nuances when it comes to reverse mortgages.

First Financial has provided its loan originators with certain checklists so they can look at credit and ascertain with reasonable accuracy if someone is going to pass the credit portion or not.

“Obviously, if someone has three ‘90-day lates,’ you pretty much know where you’re at,” says Gruley, who notes that FA then becomes tricky for originators when it comes to analyzing marginal cases where an applicant might have a few “glitches,” but nothing too glaring.

Different underwriting standards between reverse mortgages and forward loans also plays a significant part in leveling the playing field. Whereas traditional mortgage underwriting relies heavily on credit scores and debt-to-income ratios, reverse mortgages abide by a different standard, specifically one that is more based on the potential borrower’s residual income.

As long as the originator acknowledges that each product—though some of their processes might be similar—are still different and require their own specializations, having forward lending experience can be an advantage, suggests Harlan Accola, a CRMP and reverse mortgage planner at Fairway Independent Mortgage Corporation in Marshfield, Wis.

“Being a forward loan originator is a huge advantage in one respect, as long as you realize you’re playing basketball instead of football,” he says. “It’s still a game—it still has a ball, but there are different rules.”

Written by Jason Oliva

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  • I believe forward lenders with no reverse experience have a big disadvantage. That is they are not familiar with the change of focus for the borrower from concern about building equity and preserveing assets to an emphasis on cash flow and using assets wisely.

  • Mike,

    You made some very good assumptions and I agree with them. RMMyths made a comment that in actuality is true’

    However, if an individual is in the reverse mortgage space presently and came from the traditional lending world it does help some, it has to.

    First off, those that came from the forward world of lending and have been in the reverse mortgage space, let’s say for the past three years, will find dealing with the FA ruling will be easier to digest.

    One main reason is that those people with past forward lending experience know how to read a credit report, if they dealt with VA loans, they know what residual income means. Yes, as long as you have been in the reverse mortgage space actively, one’s past forward lending experience will give then an understanding advantage!

    The key is someone must be in the reverse space actively with a certain amount of experience in order for their forward background experience will be an advantage. However, as Mike Gruley said, Basket Ball, Foot Ball!

    John A. Smaldone

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