Virtual Reverse Mortgage Originations Present Promise, Risk

With seemingly everything available with the click of a mouse, some reverse mortgage product innovators don’t want their products to be an exception.

In October, Liberty Home Equity Solutions president Michael Kent told RMD that developing this type of system is one of his priorities for 2018. He said that personally he would want to open a forward or reverse mortgage right from home.

Since he already conducts a significant amount of his everyday business online — from booking travel to Christmas shopping — he sees no reason why today’s seniors wouldn’t be open to completing a reverse mortgage in the same way.

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“I’d be perfectly comfortable transacting a mortgage transaction online, and we see it in the forward space — the Rocket Mortgage coming out of Quicken,” Kent said.

Kristen Sieffert, president of Finance of America Reverse, said that while consumers are becoming more tech-savvy and conducting a large portion of their mortgage research online, she does not see a fully virtual origination happening any time soon.

“Eventually, we expect consumers to have an increasing appetite to begin loan applications online, but we aren’t seeing a strong desire for that today,” she said.
Sieffert pointed out that there are a some online origination products, such as ReverseVision and the All Reverse Loan Optimizer (ARLO), that already automate parts of the origination process.

“These tools, coupled with increasing consumer appetite for online transactions, integration with the HECM counseling requirement and Financial Assessment, and perhaps some best practices from the forward mortgage space, could see the industry offering online origination sooner than we might expect,” she said.

Regardless of consumer interest, some industry insiders say that reverse mortgages are too complex for a totally online origination.

From the third-party originator’s perspective, Beth Paterson, executive vice president at Reverse Mortgages SIDAC in St. Paul, Minn., said she sees a virtual reverse originator as a “major negative” — and that nothing beats a face-to-face meeting. She said it could lead to a misinformed borrower, which in turn could lead to more bad press for the industry.

“I am very hands-on and give lots of explanation — meeting with clients, going through all the details, and explaining all the fees, and I still have borrowers who call me years later and ask for clarification. If people are just signing documents and they are not understanding what they are signing, they are going to get into trouble,” Paterson said.

Kent, however, said he envisions a future where loan officers can respond to potential borrowers’ questions through instant messaging, or even through an animated avatar that can chat with the borrower just like a flesh-and-blood employee.

“I’ve told people: I don’t need someone to come to my house,” he said.
Megen Lawler, president of reverse mortgage software company Bay Docs, Inc., echoed Paterson’s concerns regarding the complexity of the product, both from a consumer and developer perspective. Bay Docs offers the reverse mortgage origination software Reverse Express.

“I just don’t see why — compliance-wise — why any one would want to do that,” she said, adding that her company is not working to develop a fully automated mortgage origination.

This edition of the RMD Report is sponsored by national appraisal management company Landmark Network.

Written by Maggie Callahan

Alex Spanko contributed reporting.

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  • Right now all of the pros and cons are far too theoretical but it is clear we cannot take the ostrich approach or that the Internet approach need be free of human interaction to work. Some seniors desire anonymity in applying for reverse mortgages that somehow the Internet falsely seems to provide them; this approach may help them to apply. As the saying goes: “Don’t throw out the baby with the bathwater”

    This is not a faulty step into the unknown but rather a much over needed new proposal for gaining applications to answer the secular stagnation that we have passively endured for far too long. As Dr. Alvin Hansen and Dr. Larry Summers have so forcefully admonished, there is little which can be done to overcome secular stagnation without developing new sources of business; it is that or passively wait it out low endorsement numbers.

    Those who can only see negatives seem bound to continued stagnation. How is that not pessimistic? While it is ONLY right to address negatives, we should never allow the pessimistic to stifle the air out of innovative ideas and fixes to perceived negatives. What is needed NOW are the ideas that will mitigate the negatives which have substance.

    As many of our bosses have advocated: Don’t come to me with negatives without providing answers.

    Adding to negative perceptions is imperative but unfortunately none of those taking a negative position have supplied what those added negative perceptions might be. Some of the negative is simply fear of the unknown and an expected loss in HECMs that supply compensation to outside originators. While that reaction is natural, it seems even those objections can be overcome if lenders incorporate the use of the human touch into this way of originating.

  • Hud won’t even allow electronic signatures on application docs. I think our industry is capable of designing this type of 21st century consumer friendly process but HUD/FHA must first come out of the dark and into the light…..With the right visual aids and clickable links for more information and customer verifiable certifications, it is more than possible….the weak link will by HUD.

    • hecmvet, HUD most certainly allows e-signatures such as docusign on all application docs, and has for at least a couple of years. 9 out of 10 of my application packages are done that way. The only live signatures that you Might need are on the 4506-t, SSA-89, and possibly the borrower authorization. But those do not have anything to do with HUD and can be electronically signed as well if you know the limitations.

      • …..and the final 1009 and 92900? as well as a few others? If so, I need to have a chat with my underwriters.
        I use docusign all the time by the way……

  • Right about now seems to be where “internet users” are finally catching-up to the people-of-retirement-age. But, on the other hand, these same people are probably not particularly in favor of going through the process on-line, anyway. And this would be those in their early 60s, where the reverse mortgage of course has many applicants in their 70s and even 80s.

    In other words, for a financial product intended mostly for people under say, 39, it would seem that an on-line process would be extremely attractive v. face-to-face.

    For example, most people in this younger age group would rather spend an hour searching on-line, or “posting” on a travel forum for an answer to a vacation, hotel reservation question, than simply making a two minute “800 number” phone call to the hotel front-desk itself for the answer.

    So, you really wouldn’t want to encourage a situation where the elderly end-up having their young relatives actually running-the-show on-line, because the actual, elderly applicant isn’t comfortable using an internet device. As an originator, you’d want to see first-hand that the elderly are understanding the process and know what they’re getting into.

    Comparing what’s done (with regard to on-line application processing)
    with forward mortgages to Reverse Mortgages is very misleading.

    I’d have to say that “The Reverse Mortgage” isn’t ready for becoming “on-line oriented” by any means.

    Most of these new proposals for generating business seem to be trending further away from the “soul” of the Reverse Mortgage Program (help the seniors) and too concerned with the ol’ bottom line. Strive to make the process more “familiar” and comfortable for the applicant, not the other way around.

    • Ed,

      You bring an interesting perspective but I find it somewhat dated. You speak of children from the Depression not younger seniors.

      As a senior who is turning 70, there is a huge difference between the reaction of office automation between the middle management of the silent generation and Baby Boomers. My closest friend is from the silent generation and only adopted computer use at work when pressed upon him. While I was an early adopter who proved from budget and accounting that our department was far better off with desktop computers with electronic spreadsheet and word processing software than excellent but expensive secretaries. While we still maintained a large clerical staff, our administrative costs took huge hits.

      At the community colleges in Southern California, there is a two decade old (and growing) outreach to the senior community to master basic computer use and learn related software. Even in this industry the Mortgage Professor, Jack Guttentag, a professor emeritus from Wharton and now in his 90s, has created a website where seniors can compare rates and costs currently offered by various HECM lenders.

      Most of today’s younger seniors are far more computer savvy than you seem willing to recognize. There is little question that older seniors will by and large prefer to originate HECMs through face to face meeting with originators. But why is there any need to change the preference of older seniors? There is room for both face to face meetings as well as online application and even a blending of each style of originating.

      I fully encourage development of mortgagor data entry on personal computers and other appropriate secure electronic products. I would argue this is one way to reach out in a perceived friendly manner to a large segment of the younger senior marketplace.

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