The reverse mortgage industry generally has a particular way of doing things, so when a partner is asked for something less common, it may ruffle feathers. However, that should not stop a reverse mortgage professional from fulfilling certain requests, as could result in a better customer experience, according to Lisa Moriello, the national retail reverse sales manager for loanDepot.
Having been in the reverse mortgage industry since the 1990s, making requests of her partners is well-trodden territory for Moriello. Still, it can lead to resistance in some cases, especially when the request includes a rate lock, she said.
Rate lock requests
“I have offended more than one of my partners,” she said. “And I refer to them as my partners, because I’m only able to do what I do with reverse mortgages because I have such great partners. But I’ve often offended them.”
Moriello is referring to requests made for a 30- or 60-day rate lock on the Home Equity Conversion Mortgage (HECM) for Purchase (H4P) product.
“If you meet me and you are an investor, it’s the first thing I’m going to ask you: ‘Can you give me a 30- or 60-day rate lock on the H4P?’ I’m not a numbers person in the sense that I can give you exact calculations on what happened, but what happened this year proves that if we want the H4P to become a force for good, we have to change the way we’re doing certain things.”
While H4P has its supporters within the industry, the product segment has struggled to break out of single-digit market penetration. According to FHA data for fiscal year 2022, which ended on Sept. 30, there were a total of 64,437 endorsed HECM loans, up from 49,207 loans in FY 2021. H4P endorsements accounted for only 3.2% of all HECMs in FY 2022.
Considering the lower level of activity and the transaction complexity, borrowers should have as much information as possible to continue and close the H4P process, Moriello said.
“You can’t take a borrower who has a certain amount of money for a down payment and tell them to cross their fingers that by the time we’re going to close, we’ll lock them when they’re clear. And by the way, you might have to bring a little more money,” Moriello said. “There’s been some significant changes in rate that have affected both what the borrower would have had to bring, and profitability to the person originating the loan.”
Expecting borrowers to bring additional money to closing is unreasonable, Moriello said.
“You cannot expect a borrower to come to closing with extra money, as much as you cannot expect someone who’s originating these loans to continue to originate them if they have to write checks to close them,” she said. “And the principal limit lock doesn’t address that.”
Moriello said that while partners are not overly resistant to the H4P rate lock, the matter can be complex.
“My piece is just to say, ‘This is what I need in order to make this product something that a borrower can count on,’” she said. “Because they can’t count on it without at least a short-term rate lock. And so they’re all listening, but I haven’t had anybody step up to the plate yet.”
The aging 1009
When asked about other industry issues worth addressing, Moriello pointed to the Fannie Mae Form 1009, the residential loan application for reverse mortgages.
“Why are we on a 1009? And I don’t say that because it’s a bad tool,” she said. “It’s not a bad tool. But anything that the mortgage industry has created to make it easier for borrowers has been created to work with the 1003.”
The 1003, “HUD/VA Addendum to Uniform Residential Loan Application,” is also aging, but has garnered more attention from mortgage services providers, Moriello said.
“Not really having the 1003 and the 1009 talk to each other, you can’t export one to the other,” she said. “By not updating the 1009 that we’re using, there are tools that I’m blessed I can work with in my system and then transfer them in cutting [through] a lot of things that my borrowers would have to provide me with, because I have tools built-in with the 1003. So I would like to see them either talk to each other, or some kind of upgrade happen.”
According to the version of Form 1009 available on HUD’s website, the form was last updated in May 2004. Form 1003 was last updated in September 2010. Still, the 1003 has had more attention in recent years, and vendors are generally more focused on the 1003 when developing integrations, Moriello said.
Listen to the full discussion on the latest episode of The RMD Podcast.