We all have read the a news stories talking about reverse mortgage borrowers’ really good or really terrible experiences with the product, but rarely do we hear much on either side about the product from borrowers themselves. At a reverse mortgage industry conference last week, four borrowers shared their first-hand experiences of the home equity conversion mortgage (HECM) product.
Of the four borrower’s on the panel, three of them had fairly positive or neutral experiences, while the fourth borrower’s controversial ordeal was enough to make reverse mortgage industry members cringe.
Diane Scholtes, a homeowner from Chicago, shared her story about learning about the reverse mortgage product from a friend as well as from commercials on TV. After having to quit her job, she was determined to stay in the house she had lived in for 30 years and raised her children.
“I thought I would work until I dropped dead,” Scholtes said at the National Reverse Mortgage Lenders Association’s (NRMLA) Annual Meeting & Expo. “I’m a nurse. I’ve been a nurse for over 30 years, so I had no intentions of retiring, but I got sick and I wasn’t able to do that full-time work anymore.”
Scholtes’ experience was what most borrowers and reverse mortgage professionals would like to expect in a loan process. She was given ample information and had all of her questions answered by the reverse mortgage counselor she had chosen.
“I had a wonderful young woman who really took a personal interest in me and she asked me about my bills, asked me about my finances, she explained what the whole process was like,” said Scholtes. “She wanted to make sure I really wanted to do it and that I’d explored other options. She even made a budget for me and told me when I could have all my bills paid off by doing these certain things after the reverse mortgage came through.”
However, on the complete opposite side of the spectrum, JoAnn Horton, a homeowner from Gary, Ind., started to look into the reverse mortgage product after a bad storm had ripped the roof off of her house.
She had started the process of getting a reverse mortgage and expected to close the payment gap for the roof with the proceeds. By the time she was actually able to get her roof fixed she was $27,000 in debt.
She did the entire process over the phone with a lender in Indianapolis and did not get enough from the loan to make up the difference.
“When it got down to the end and time for me to sign the paperwork, it was not the same paperwork I had seen before,” Horton said. “It was not the same numbers. I wasn’t going to sign any of it, but we negotiated a little bit more, but I still didn’t get what I wanted.”
The lender told Horton that the numbers were changed due to the fact that she owed more on her house than they initially thought, but in the end she received money back, which didn’t clear up the confusion.
Another area where Horton’s situation went horribly wrong was in her mandatory counseling. She was not told she could choose her own counselor, nor was she given a list of counselors to choose from, she explained. Even more, a counselor that her loan officer chose called her for counseling.
“I do think [a reverse mortgage] is a good idea,” Horton said. “If I didn’t think it was a good idea I don’t think I would have done it in the first place. If I had met these people and had done the whole thing face to face I think it would have turned out differently.”
Borrowers from the inside
The two remaining borrowers on the panel both had ties to the reverse mortgage industry. Stewart Strizak, a homeowner from Buffalo Grove, Ill., worked in the reverse mortgage industry and facilitated his own reverse mortgage loan.
Strizak didn’t have many complaints, as he was dealing with himself. But he did realize something about the recently added FHA rules
“I think some of the things the FHA has put in has unfortunately eliminated a lot of people from getting a reverse mortgage who really need the reverse mortgage and who could really use it, he said.”
But as a loan originator in the reverse mortgage industry, Strizak did have the upper hand and could pinpoint for example, if a lender he was working with was being unethical.
“It’s frustrating to hear things like this because when I talk to prospective clients and you sometimes get these stories of people saying well ‘I’ve heard bad things about it, I don’t like it because my bartender doesn’t like them’,” he explained. “They take someone’s word for it instead of listening to us professionals who are working with it all the time. I think that’s the uphill battle we are constantly waging when trying to sell reverse mortgages.”
Larry Lettow, a homeowner from Burlington, Wis., worked in the mortgage industry and was familiar with the product. He was the only person on the panel who completed a home equity conversion mortgage (HECM) to purchase a new home.
Lettow and his spouse were determined to purchase their dream home on a lake in Wisconsin in hopes of living out their retirement in it. He had one bone to pick with the program and that was the intensity of the recently-implemented financial assessment.
“I think I have an 800 FICO score and had more assets to show than the mortgage amount and yet the company I was dealing with requested some onerous things,” Lettow explained.
What the group of borrowers all could agree on though was the excessive number of documents that were involved in the reverse mortgage process. Regardless of if they had an overall positive or negative experience, they agreed that less paperwork would have made the process much more efficient.
Written by Alana Stramowski