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