Even with Financial Assessment, It’s Still a Reverse Mortgage Originator’s Ballgame

Even though reverse mortgage underwriting now bears some similarities to traditional mortgage lending as a result of the Financial Assessment, that doesn’t necessarily mean forward mortgage originators are better equipped to adapt to the new rules.

The results of a recent RMD poll indicate that forward originators do not have a competitive advantage in the reverse mortgage market now that the Financial Assessment is in place, with 54% of the total votes expressing this view and 46% voting in favor of the opposite.

While originators agree that having forward lending experience does help from an underwriting perspective, they cite that reverse mortgage product abides by different standards with an emphasis on residual income rather than credit scores or debt-to-income ratios, criteria required in traditional mortgage lending.

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Having forward experience is good because the expectation is right, but it could be an issue if originators don’t distinguish between the respective rules and standards of each loan, suggests Harlan Accola, certified reverse mortgage professional and reverse mortgage planner with Fairway Independent Mortgage in Marshfield, Wis., which offers both forward and reverse mortgages.RMD Poll Results

“Forward originators have more of an understanding that it’s a problem if you have a 90-day ‘late,’ so it helps from that perspective that there’s a good chance a borrower won’t pay their taxes,” Accola says. “But the bad thing is, they try to go back to credit scores or ratios because they are used to doing that.”

On the opposing side of the debate, experience with credit analysis was one of the biggest factors driving sentiments that forward originators have somewhat of an advantage under the Financial Assessment.

“Forward originators have a slight advantage in that they have worked within credit analysis on a daily basis as part of pre-approving buyers, whereas the reverse mortgage-only originator never viewed credit for qualification until after application unless judgement was evident,” says Brian Cook, a Washington-based loan officer at Primary Residential Mortgage.

In the days preceding the advent of the Financial Assessment, speculation abounded that originators could leverage their forward expertise in weathering the new underwriting requirements that would arrive as a result of the new rule. While that may be true now as the industry moves further into FA territory, even with the program changes the ball is still in the court of reverse mortgage originators.

Written by Jason Oliva

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  • The article for the most part is very good. However, if you have been in the reverse mortgage space for any length of time and came from the forward mortgage world, you will now have an advantage over those that have only been in the reverse mortgage space.

    Especially having a heavy background in VA loans will help a lot. Overall, I think we are adapting to the FA ruling pretty well and the potential is stronger than ever out there.

    I have said this repeatedly, if you embrace the FA ruling with open mindedness as well as with a positive outlook, you have it made. More seniors in the market today and more equity in the hands of seniors in their homes, wow, how do you beat that!

    Look for different markets to go after, use the HECM as a retirement planning tool. However, don’t give up trying to help those that truly need a HECM to improve the quality of their life’s.

    Sure many seniors will not be able to qualify for a HECM that might have prior to April 27th but the HECM can still be a helpful vehicle to help those in need. We all have to understand the FA ruling and know how to work within its guidelines, there are ways to use it to our seniors advantage. If you know the ruling well, you will figure it out!

    John A. Smaldone

    • John,

      It is interesting you draw us into the past. What got rid of a significant portion of our needs based market is not financial assessment but rather the strategic changes on September 30, 2013. Eliminating all Standards and adding a first year disbursements limitation (even to a small degree the increase in upfront MIP) ended the HECM opportunity for many needs based seniors.

      Until our endorsement numbers are up, way up, we need a lot more emphasis on penetrating the greater senior market including the mass affluent and as Barry Sacks describes them, the almost affluent.

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