Counselors Adapt to New Private Reverse Mortgages as Volume Falls

Reverse mortgage counselors have seen their demand fall in tandem with originations and endorsements, but many are already adapting their educational programs to include the wide array of private products entering the marketplace.

Counselors logged 7,198 visits during July, according to data from Ibis Software Corporation — representing a sharp decline from the recent peaks of 11,534 and 17,059 last August and September, respectively.

Those high-water marks came in the immediate run-up to the introduction of lower principal limit factors in October of last year, which prompted a crush of borrowers attempting to lock in the higher proceeds available under the old rules. Demand was so high that the Department of Housing and Urban Development put out a call to all approved counselors, asking them to provide information about any open slots remaining.

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But as the industry began to adjust to the new Home Equity Conversion Mortgage math, demand dried up considerably, with a fall off to 6,866 counseling sessions in October. That number has yet to crack 8,000 since the new rules were introduced, and hit a recent cycle low of 5,083 in December.

For comparison, the counseling figures between January and July 2017 — the seven months before the rule changes were announced — never fell below 8,000, with a high of 10,677 in June.

These counseling numbers serve as an important leading indicator for HECM endorsement figures, which lag several months behind.

“Only half ever result in an endorsed HECM,” Ibis Software CEO Jerry Wagner told RMD.

On the ground level, individual counseling firms have seen similar trends, including at the Sugar Land, Texas-based Money Management International.

“MMI has seen a decline in HECM volumes … as expected,” senior director of housing and bankruptcy services Jackie Boies told RMD. “That hasn’t changed, and neither have the HECM clients.”

Earlier this month, MMI waived its $150 reverse mortgage counseling fees for clients after receiving a grant from non-profit NeighborWorks, offering space for about 400 prospective borrowers.

And as counseling demand for HECMs slows, providers are moving to adapt to a landscape that also includes a wide swath of private mortgages that hit the market this summer. Reverse Mortgage Funding, One Reverse Mortgage, and Longbridge Financial introduced their new non-HUD products over the last few months, joining Finance of America Reverse in the jumbo marketplace.

Like the HECM, private reverse mortgage loans still require counseling, and lenders have been proactive in offering educational materials to counselors.

“Each private mortgage comes along with its own counseling guidelines or ‘scripts’ for us to follow, and a unique counseling certificate as well,” Jennifer Cosentini, housing director at Cambridge Credit Counseling Corporation in Agawam, Mass., said.

Cosentini reports “much higher demand” for private mortgages at her practice in the months following the roll-outs, which have also included webinar trainings for housing counselors.

Focused topics

By the time the prospective borrower makes it to a counseling firm, he or she generally has decided on a certain product.

“In these sessions, we combine our standard HECM protocol with the product and senior-specific information, in a blended session,” Boies said. “Our session will meet all of HUD’s HECM counseling requirements and educate the senior regarding the reverse mortgage loan product they have chosen.”

The Cambridge Credit Counseling session follows a similar path, according to Cosentini, with counselors only comparing the specific private reverse mortgage a borrower has selected with the HECM — and not pointing out the differences between one proprietary loan and the others.

The private-mortgage counseling process is also more of a locally focused endeavor for borrowers and lenders alike, with specific products only available in certain areas as companies gradually ramp up marketing and sales efforts.

“We aren’t including any information about them in our educational materials just yet,” Cosentini said. “These products are continuously changing and evolving over time, and they aren’t offered in every state.”

Written by Alex Spanko

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  • Finally some clarity in counseling numbers thanks to Ibis. I have seen stats that show about a 10% dropout rate in approved counselees going from counseling to case number assignment. Then from case number assignment to endorsement the dropout rate was over 35%. But the data I was looking at was much older so it comes as no surprise that today’s dropout rate from approved counselee to case number assignment is much closer to 15%.

    What is interesting is that “with a fall off to 6,866 counseling sessions in October” we only saw 2,750 case number assignments in October 2017. It is rare that there would be a 60% drop in approved counselees obtaining case number assignments, but there it is in black and white. Normally counseling certification and case number assignment are days apart. (We know the dropout rate for case number assignments to endorsement has little error since HUD maintains and posts not only the case number assignment counts but also the endorsement counts. HUD does NOT maintain and post the counseling numbers.) Is it any wonder demand as seen in endorsements is so low?

    In the last four months endorsements have not exceeded 3,345 (April 2018) and at their low they were 2,838 (June 2018). Of course the case number assignments for December 2017 through April 2018 reached a high of 4,606 (March 2018) and a low of 3,864 (January 2018). The reason for the different case number assignments months is the four month rule of thumb which states that it takes the average endorsed HECM four months to go from case number assignment to endorsement.

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