The Financial Assessment requires reverse mortgage originators to do a number of things now that they haven’t necessarily had to do in the past. And this includes one of the FA’s unspoken rules not found in any Mortgagee Letter: building rapport and trust with borrowers.
As originators must now gather extra documentation to assess a prospective borrower’s willingness and ability to sustain a reverse mortgage, they are getting to know their clients on a more financially intimate level.
As a result, some lenders say that educating seniors about the benefits of a reverse mortgage requires a “kitchen table” approach to help build trust and understanding between originators and potential borrowers.
The kitchen table is the hub of family life in many households. It’s the place where not only meals are shared, but also where important life decisions and conversations are discussed. And for homeowners age 62 and older, the kitchen table is also where they might find themselves discussing the prospects of getting a reverse mortgage with a loan originator.
Sue Haviland, a Baltimore-based national reverse mortgage consultant and branch manager at iReverse Home Loans, meets with the vast majority of her reverse mortgage clients in their homes.
“There is value in sitting down with customers in the comforts of their own homes, looking them in the eye, answering their questions and allowing them to ask as many questions to make sure they have a comfort level and that they are making the right decisions,” says Haviland, who is also a Certified Reverse Mortgage Professional (CRMP). “By meeting face-to-face, you are giving them that assurance that you are going to be with them every step of the way.”
Most of Haviland’s clients, she admits, have at least a general knowledge of reverse mortgages overall, however, the Financial Assessment has spurred more thoughtful consideration from prospective borrowers asking how a reverse mortgage might benefit their individual circumstances.
“The questions they are bringing to the kitchen table, so to speak, are specific to their particular situations,” Haviland says.
Clients, she says, are interested in how paying off mortgages and other debts will affect their cash flow on a monthly basis, and with the line of credit, they are looking at how this option can be used as a long range planning tool for future needs.
“It has really developed into some thoughtful conversations that I think shows the thought that borrowers are putting into the product,” Haviland says.
When it comes to requesting documentation like income statements and other records to prove a loan applicant has sufficient residual income—a process some have considered laborious for seniors to compile—it helps to be upfront with clients to let them know what is expected from them under the new rules, suggests Beth Paterson, a CRMP and executive vice president of Reverse Mortgages SIDAC, a division of Greenleaf Financial, LLC.
Based in St. Paul, Minn., Reverse Mortgages SIDAC derives the acronym for the latter part of its name from Security, Independence, Dignity And Control. Those elements are ultimately what the company strives to provide for seniors considering a reverse mortgage, Paterson says.
Before meeting with clients, Paterson asks them questions to gauge if they are going to meet Financial Assessment requirements; taking into account considerations such as whether or not they might have residual income and if there are any extenuating circumstances in play.
“We are asking more questions before meeting with borrowers, but then we are meeting with them to just get a feel; explaining the reasons why the Financial Assessment is in place,” Paterson says. “Once they understand the product, I think it’s easier to explain the calculations and go through them in-person.”
Face-to-face meetings also build trust by allowing seniors to get to know their originator and vice versa, says Paterson, who adds that this also helps seniors feel more comfortable with disclosing personal, financial information.
The biggest challenge, however, is helping seniors overcome their misconceptions regarding reverse mortgages, she notes.
“In some circumstances, borrowers are hesitant because they read something in the paper or their neighbor said a reverse mortgage is bad,” Paterson says. “Generally, there is a myth.”
But here is where originators can get involved personally to help dispel reverse mortgage misconceptions among seniors, many of whom may only have hearsay knowledge of the product.
“Part of that is the importance of meeting with seniors face-to-face and building trust, so that I’m not just a voice on the phone trying to get business,” Paterson says.
When Paterson meets with a prospective reverse mortgage borrower at her home, she follows a tried and true approach. First, she outlines the benefits of a reverse mortgage. Then she goes into the costs associated with the loan. And when the senior is ready to proceed, Paterson then details information regarding the Financial Assessment, including why the rule is in place and what will be expected of borrowers under the new guidelines.
The key is not bogging down seniors initially with all of the rules and requirements of FA, she says, but rather explaining that the Financial Assessment is really something positive for reverse mortgage borrowers.
“If you offer the hand-holding to help them, and not put the fear that this is a big burden to do, then it makes it easier,” Paterson says.
Written by Jason Oliva