As part of the Department of Housing and Urban Development’s new HECM Counseling protocols, counselors are required to use the new Financial Interview Tool to help prospective borrowers consider the immediate financial needs and long-term challenges that can make it hard to stay at home and benefit from a reverse mortgage.
The tool includes a serious of questions to help discuss the borrowers situation and “help to inform the decision older homeowners make about the appropriateness of a reverse mortgage for their situation and the loan features that might meet their needs,” said Dr. Barbara Stucki, vice president of home equity initiative at NCOA during an interview with National Mortgage Professional.
Developed by the National Council of Aging (NCOA) in 2007, Stucki said it felt that reverse mortgage counselors should discuss the loan using a holistic perspective that looks at factors that could affect a senior’s stay in the home and their level of dependence on the loan funds. This lead to the development of the FIT tool and is meant to help clients look at the big picture.
“It is a tool to promote discussion, not just a checklist,” she said. “It is a way of getting people, whose judgment may be clouded by immediate needs, to think long-term about how they plan on staying at home so they can get the full value of this loan.”
Stucki also said through the FIT tool, “NCOA collects data on counseling clients to better understand the potential needs and risks of this group of seniors.” The data could help to inform product design, develop seniors-sensitivity training for lenders, and provide a better handle on the nature and magnitude of the potential vulnerabilities of reverse mortgage borrowers beyond anecdotes she said.
According to John Lunde, President of Reverse Market Insight, the data will help understand what financial indicators are linked to things like taxes and insurance defaults down the road. It can also provide insight into the difference between counseled seniors that borrow all the money and those that leave the money in a credit line. “Having this type of data presents a lot of new opportunities for wider analysis of impact and decision making in reverse mortgage process,” said Lunde.
Read a copy of the interview here.