Nearly every professional working in the reverse mortgage space has been impacted by Financial Assessment in some way, but perhaps none have been affected as much as the underwriter. According to veterans in the field, the job of a HECM DE underwriter has changed drastically in recent years due to the advent of FA’s credit history analysis.
“The profile of the underwriter has changed. HECM underwriting used to require a more global view of the borrower profile,” says expert underwriter and Money House Senior VP Ralph Rosynek. Now, says Rosynek, FA’s credit analysis has underwriters adopting a more concentrated review.
Underwriters have to assess how borrowers live their credit lives, Rosynek says, and determine how extenuating circumstances might have come into play. “You still have the same compassion for helping seniors get a reverse mortgage, but the qualifiers or limiting factors that are placed upon the underwriter are a bit more detailed today.”
Cynthia Danzy, underwriter and help desk manager at Open Mortgage, says the new requirements have dampened the pace of an underwriter’s work.
“Because there are so many things you have to analyze now, it takes longer to underwrite a loan. You have to be more in tune with their credit and their finances [to determine] their ability to pay their taxes and insurance. Before we were just concerned with the title and the property, and now we’ve got to make sure that it’s not a needs-based loan.”
Britany Luth, an underwriter and VP of best practices at Finance of America Reverse, says the sheer volume of documentation can be burdensome.
“In addition to the added documents necessary under FA, because much of the industry is still learning what documentation is necessary, generally the file is submitted with documentation for any and all of the borrower’s income and assets. The underwriter then has to wade through all documentation and determine what is needed and what is not to document the file,” Luth says. “This can be very time-consuming and causes underwriters to spend more time underwriting fewer files.”
HECM underwriters operating in today’s post-FA world must also assess any outside circumstances that have impacted the borrower. Luth says learning how to apply these is a challenge.
“While compensating factors are a defined list, extenuating circumstances could be any number of events that may have happened to the borrower. The circumstances may be one of the examples in the guide—i.e., the death of a spouse, divorce, hospital stays, major property repairs, etc.—or they could be more complex family situations,” she says. “It is difficult to prepare the underwriter for all of the potential extenuating circumstance scenarios that may arise during underwriting of a file.”
Danzy says it takes a certain type of person to navigate this challenge. “A good underwriter is someone who can think outside the box,” she says. “There are so many different ways of looking at what the customer is going through. You have to think, ‘If I allow this to happen, if I put this reverse mortgage through, will it be a sustainable fix for the senior?’”
With this broadened scope of analysis, the nature of the work has changed, requiring a type of underwriting more in line with that of the forward mortgage world.
Rosynek says that because of this, forward underwriters are now finding a place in the reverse market. “Today’s underwriters are coming from the forward FHA underwriting group of talent,” he says, “largely because of their strengths in doing credit analysis and their ability to work with varying property standards as we are dealing with properties that are coming in and out of the eligibility picture.”
While FA may have changed the pace and scope of an underwriter’s work, it might also help them better assess a borrower’s need.
“Financial Assessment allows you to see the bigger picture,” Danzy says. “It helps you determine if the loan will help the senior maintain their home and live there for the rest of their life.”
Rosynek says that although the underwriter’s job has changed in recent years, the spirit of the work remains the same. “The essence of credit review and the approval of a quality loan is still the primary directive.”
Written by Jessica Guerin