Think about the ways in which you accomplish many of the daily tasks you have, particularly when it comes to personal finance. If you’re an RMD reader, then you likely remember a time of transition between needing to pay your bills by traditional mail, before becoming more aware of burgeoning online opportunities to do everything from paying those same bills, to ordering food, buying tickets to a movie theater, or doing your taxes.
Technological innovations and advances have transformed the ways that people all across the world accomplish their daily tasks, and leaning on those technologies has become increasingly important in the midst of stay-at-home and shelter-in-place orders that have stemmed from the COVID-19 coronavirus pandemic. A sometimes slow-to-adapt industry like the one we cover here on RMD has even begun to formalize and relax certain restrictions which have prevented it from evolving with other businesses, making the point more effectively than any writer could about the importance of embracing technology in this unique moment in time.
Even after the COVID-19 emergency goes away, though, the necessity to embrace new technologies will not.
The forced technological shift of the reverse mortgage industry
The COVID-19 pandemic has not only illustrated why the reverse mortgage industry should be embracing new technologies faster, but it has also forced the industry to adopt them in greater numbers. In Massachusetts, for instance, state law has long dictated that the only way a reverse mortgage transaction can proceed is if that client can meet face-to-face for the necessary Home Equity Conversion Mortgage counseling.
Massachusetts is unique in that it’s one of the only places in the country that has this requirement: telephonic counseling is not permitted for most borrowers, nor is real-time video conferencing. When this requirement was combined with a health crisis that is both particularly dangerous for seniors and has forced people to remain in their homes, the reverse mortgage business in the state was effectively put on hold until some kind of legislative remedy could be found. It ultimately came, but a question about whether or not this should’ve even been an issue in the first place is natural to ask.
More broadly from a national perspective, another recent relief provided by the Federal Housing Administration (FHA) revolves around appraisals. It’s understandable that seniors would be cautious about inviting a stranger into their home in the middle of a pandemic, especially being at higher risk of serious illness from COVID-19. A recent Mortgagee Letter allowing for desktop-only and exterior-only appraisals for reverse mortgages allows business to continue, while encouraging social distance.
Still, the codification of this relief in a Mortgagee Letter – while undoubtedly welcome – may also raise questions about how different kinds of appraisals can and should be used in the reverse mortgage industry in general, at least in comparison with the tools available to the forward mortgage industry. Of course, though, reverse faces difficulties that the forward side does not.
Impediments to incorporating technology
The spirit of the various technological restrictions that are in place for the reverse mortgage industry are, of course, not designed for the purpose of making business harder to conduct. Rather, the restrictions exist for the protection of borrowers. Seniors are rightfully a protected class, and streamlining some elements of the reverse mortgage process – especially elements related to their direct understanding of the transaction they’re getting into – has the potential to move things along perhaps too fast.
For these and other reasons, closing documents cannot be submitted electronically, nor can counseling certificates. The issue that gets presented, though, is that as later generations begin to age up into the senior demographic, the understanding – and indeed, the incorporation – of technology into their lives will only become more pronounced. By 2043, when the oldest millennials will first qualify for reverse mortgages, it’s likely that they will both insist and demand that processes related to the transaction that they seek will be further automated, or at the very least be accomplished from their phones or tablets.
Whether that’s signing documents, having a video call with a counselor, discussing specifics of a transaction with an originator, submitting a draw request from a servicer, etc. There are, of course, other difficulties that need to be addressed.
According to the Federal Trade Commission as of 2018, over 31% of Americans in rural areas have no access to broadband internet service. While more recent indications point to rural internet speeds and service reliability growing stronger, there’s no doubt that the nation’s internet infrastructure needs to grow universally stronger in order to assure industry stakeholders and regulators that seniors will be able to effectively conduct the necessary business related to a complex financial instrument safely and with stability.
However, the internet – and technology in general – is only growing more prevalent as time goes on. This unique moment in history only emphasizes that businesses at-large – and the reverse mortgage industry, specifically – should be making greater strides to accomplish more in the technological arena. There has certainly been progress, but there’s a long way to go.