Rewards Outweigh Challenges in the Post-Financial Assessment World

In recent years, the reverse mortgage program has undergone substantial policy changes as the product has been revamped and fine-tuned to better meet the needs of older Americans. Many of those who have made a living originating HECM loans have weathered the changes, but it hasn’t been without its challenges. For seasoned HECM loan officers, the work is not what it used to be.

“Tighter regulations have resulted in tougher underwriting standards that have made most HECM loans far less routine,” says Bill Smith of Reverse Mortgage West. “Complaints from my colleagues that ‘every loan is a problem loan’ are much too frequent and clearly not what used to be when I started.”

Smith, who has been originating HECMs for 15 years, says regulatory requirements have added considerable length to a loan’s turn time.

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“The requirement that counseling precede the application has made the sales cycle far less efficient. Prior to the regulatory change, I was able to qualify most prospects over the telephone and arrive at the first appointment with an application ready to sign. Probably 90 percent of my loans were one-time visits to close. Now, two home visits are required, making the process less efficient,” he says. “This aggravates me because I do not see any clear advantage for the borrower.”

Less Originating, More Explaining

Beth Paterson of Reverse Mortgages SIDAC, a division of Greenleaf Financial, agrees. “A lot more work and a lot more time are involved in closing a loan,” says Paterson, who has been in the business for 18 years. “Now, with Financial Assessment, we spend a lot more time trying to get the documents needed. We need to explain what a LESA [Life Expectancy Set-Aside] is. There are a lot more conversations and much more legwork involved.”

Some LOs say explaining all the rules and regulations to a borrower can be a challenge.

“Putting FA into layman’s terms for my clients can be tough,” says Mark Draper, a 10-year HECM LO with Amity Mortgage. “They just want to know they are being treated fairly and it’s going to help them.”

Smith says reverse originators now need to do a lot of legwork to close just one loan, a fact others outside the profession may not recognize.

“People may think we are well paid for doing little,” he says. “In truth, they cannot know how many homeowners we must advise and counsel just to secure one loan that actually closes.”

Seeking New Audiences

Florian Steciuch, a HECM specialist with Retirement Funding Solutions who has been originating for seven years, says he has altered his approach in order to adapt.

“I’ve turned my focus to financial planners and estate planners, who are open to learning how a HECM can be used for retirement planning. Rather than marketing to the general consumer, I reach out to specific professionals,” Steciuch says. “Most advisors welcome the Financial Assessment and feel the HECM is a safer product with these changes. With a booming real estate market, serving Realtors and builders has become a larger part of my efforts.”

But getting through to these professionals can be difficult. “The greatest challenge is getting the commitment from financial planners other professionals, like Realtors and builders,” Steciuch says. “They still view the HECM as a last-resort option, even though that changed years ago.”

Outcomes Worth the Extra Work

While increased regulations may have complicated the loan process, HECM specialists are traditionally invested in helping their clients, and this aspect of the work has not changed.

“We are more than loan officers who calculate DTIs or chase conditions. We listen to the sometimes very urgent and sensitive needs of our older borrowers,” Steciuch says. “We understand retirement planning, cash flow, home safety. Of course, we never provide financial, legal or health care advice, but we do understand them. That makes us more than just an LO. We are professionals who can provide life-changing solutions.”

Though some may enumerate the challenges of the work in today’s post-FA world, they are just as quick to list the rewards of the job as well. For many reverse mortgage originators, helping clients solve their financial problems offers a reward great enough to outweigh the challenges faced along the way.

“The reward for me is and always will be that feeling of satisfaction when you’ve helped someone obtain a reverse mortgage and see the financial stress leave their body,” Draper says.

Steciuch says seeing his clients’ relief motivates him to keep at it. “At my last closing, the borrower clasped her hands over mine and said, with a tear in her eye, ‘Thank you. The pressure is lifted from us.’ All the no’s I face each week are worth that one yes.”

Paterson says helping seniors incites a passion that is her driving force. “As the saying goes, if you love your job, you never work a day in your life. That’s how I feel. It’s not work to me; I’m really passionate about it. To me, it’s a ministry.”

Written by Jessica Guerin

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  • Good article by Jessica but she usually does do a great job! The timing of her article could not be any better than it is!

    We are in a different environment for sure. Many have left the industry but many as Jessica pointed out have weathered the challenges, still tough to cope with but are still plugging away. Why, because they love what they do and they love the satisfaction of knowing how many seniors they have saved and improved their lives!

    What each and everyone of us must do on a continual bases is learn, learn and educate yourselves every chance you can take advantage of!

    It is a MUST to understand FA inside and out as well as keeping up with changes that are happening. If we all do not do this, we will fail at our jobs but most of all, we will fail to meet our senior clients needs!

    If the company you work for does not offer the proper training for you, ask them to, if they won’t, go to a company that does care enough about your education and their senior clients! I can’t get any plainer than that!!

    Florian Steciuch brought up a very good suggestion, go after new markets, start working with the financial planners, and advisors, go after the community banks, They can be great markets and sources of stable business for you!

    However, like Florian Steciuch mentioned, “Getting through to these professionals can be difficult. The greatest challenge is getting the commitment from financial planners and other professionals, like Realtors and builders. They still view the HECM as a last-resort option, even though that changed years ago.”

    Well, it does not have to be that way! First off, the changes, like FA has put a new found credibility tool attached to the HECM. It is NOT a loan of last resort and many financial planers through the DOL finally are well aware of it!

    We as an industry need to realize, we have as much if not more to learn about their world as they do about ours. We would all be wise to try and understand their world first first, then help them understand ours!

    As I said in the beginning, Jessica’s article was very well timed Embrace change, turn any negative into a positive and it will work for you, I know!!

    John A. Smaldone
    http://www.hanover-financial.com

    • John,

      I am not sure how the DOL has changed the perspective of any financial planner regarding HECMs. DOL oversees employee benefits and IRAs, not the personal assets of citizens, including their homes or the mortgages, such as HECMs, for which the homes are collateral. Those who made claims about financial advisors having to look at HECMs due to the DOL fiduciary rule, did not fully appreciate how fiduciary rule was to be applied.

      What is true about HECMs today that make them less of a loan of last resort is that fewer needs based senior consumers can qualify for them and the lowering of principal limit factors since fiscal 2009, have made them not only less useful as loans of last resort but also less beneficial in financial planning although the latter impact was far less than the negative effect that reduced principal limit factors have had on the effective use of HECMs as loans of last resort.

      • Jim,

        I have met with various financial planners, one is a close friend if mine. I met with him and his team, including their attorney. The DOL was a topic of discussion.

        Where the DOL came into play is when they were and I believe still looking at recognizing the financial planner professional’s as being a fiduciary to their clients when it pertains to reverse mortgages, allowing them to charge a fee for this service.

        However, this has not officially become fact as of yet but it has brought to light to the financial planning industry, many questions about FA.

        FA in itself has brought a lot of credibility to the HECM product with the professional sector. This is one very good reason for all of us in the industry today to look heavily at going after financial planners, financial advisors, attorneys, accountants and small community banks as well.

        I hope I helped clarify that point for you my friend. I hope all is well with you Jim, take care and we will talk soon.

        John

      • John,

        That is the strangest application of the DOL fiduciary rule I have heard yet. Where your friends should be concerned is with HUD and its position on estate plan advisers who charge fees for providing advice on HECMs.

        There is no rule of which I am aware that prevents paid advisers from charging fees for advice on proprietary reverse mortgages.

        I hope the attorney of your close friend is experienced and competent in DOL matters. While Congress in ERISA granted direct, mutual, separate, and specific oversight powers to both the IRS and DOL when it comes to employee benefit plans and IRAs, I am not aware of any powers ever being granted to DOL when it comes to HECMs or those who advise on them. Perhaps your close friend or the attorney who advises your friend can show you where that power was granted and then you can tell us where that can be found.

        The DOL fiduciary rule does not apply to all advice given by those who charge fees for services provided. the rule is limited since the authority DOL was granted by Congress covers labor matters such as employee benefit plans and IRAs.

        As monthly endorsement counts continue to be stagnant with a downward slope, it is hard to see how anyone is viewing HECMs as more desirable after the implementation of financial assessment especially since no new major HECM rule changes have been implemented since financial assessment was implemented on 4/27/2015. Again anecdotes can be helpful but it seems to be misleading when it comes to the desirability of HECMs post financial assessment.

  • While the timing of counseling vs taking an application is a valid point made by Bill Smith, it is not a HUD requirement that the application cannot be completed until after counseling, that is state law(s), i.e. CA. In many states we are still allowed to take the application prior to counseling however we cannot start processing until after the counseling is completed and both the counselor and borrower(s) have signed the counseling cert and provided it to the originator.

    • Ms. Paterson,

      Some would get mad at your comment and call your employer to complain that you had just thrown them under the bus, pleading for your dismal, even refusing to take a call from both your employer and you to discuss the comment.

      What you did was to alleviate confusion. This is an important function of veteran originators even when the person being corrected is also an industry vet. In a maturing industry, toes sometimes get stepped on to preserve a correct understanding of the program.

  • It is curious that Bill Smith states: “tighter regulations have resulted in tougher underwriting standards that have made most HECM loans far less routine….” Also the author declares: “While increased regulations may have complicated the loan process….”

    Neither statement is true. First there have been no tightening in regulations that have resulted in tougher underwriting standards. Regulation changes may be forthcoming on September 19, 2017 but today it is Mortgagee Letters which have changed underwriting standards. Again it is not increased regulations which may have complicated the loan process but Mortgagee Letters.

    In trying to decide what takes priority, understanding the priority of authority as to law, regs, and regulatory rules is crucial. It is even more crucial in researching the details of how rules are to be applied.

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