[vimeo id=”121413847″ width=”625″ height=”352″]
A Look Back at the Possible Genesis of the Financial Assessment
The Predecessor to the Financial Assessment? For those of you watching who have been in the business or reverse mortgages longer than five years you may be wonder how much more change our industry can absorb. The Home Equity Conversion Mortgage has undergone numerous product changes, regulations, new counseling requirements and protocols and reductions to lending ratios. Much like an aging celebrity who has undergone one too many plastic surgeries one may be left wondering does the new HECM even resemble the original product?
The upcoming Financial Assessment has many industry professionals concerned the new protocol will decimate our already fragile market share. Only time will tell. Now rewind to 2010 and we can find the first hints of HUD’s move…
Download a transcript of this episode here.
Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.
5 Comments
Hmmmmmmmm. Thanks for what you do. Hope is turning into hopeless now, at least for those who have depended upon us to restart their financial engines — and companies lining up for the next government bath are not as positive now, are they? Like the banks, if you need money, you probably won’t get any. But, this is the government, isn’t it? Those with the trading money (equity in their homes) will have to step aside for those on food stamps with no equity at all. Tell me how to get excited now. What I’ve been doing isn’t working.
Warren,
Your comments lately are pathetic. You want us to wallow in your mire.
HECMs are changing because they must. Even though I am nearing 70, I get it!! Those who loved helping needy seniors must either shift or lose heart. It sounds like you are in the latter condition already.
What happens if financial assessment is delayed once again or what if in a few months HUD has second thoughts are you in any kind of condition to move forward?
I really do not care if you are here or not but YOU should! Try not to lose heart until it is clear where we are headed but if you do, so long!!
There are no HUD published stats which allow us to determine how many seniors have been discouraged from doing a HECM by the marginally intrusive counseling look at suitability and to a small degree affordability called the Financial Interview Tool (“FIT”). In fact there are no published stats on counseling provided to the public at all. So all we can state about FIT is what seems subjectively true. Few mass affluent, however, must participate in the counseling segment known as Benefits CheckUp (“BCU”) so since Shannon briefly touched on it, there seems to be no need to do more.
FIT was designed around some financial misconceptions and with no reference to such documents as those used by CFPs in their initial interviews of clients or those used in analyzing credit, capacity, or capital in the forward mortgage world. Per the then leaders at NCOA, the creator of FIT, FIT was designed to be a springboard to look at the holistic future of the counselee with no detailed analysis of the financial situation of the counselee. In the interview, there is no verification of the information and no affirmation from the counselee that the information is accurate to the best knowledge of the counselee and there are absolutely no penalties for intentionally lying. Lender financial assessment is much, much different.
The purpose of FIT is to provide sufficient (even if the data from which it is taken is knowingly inaccurate?) information to the counselor so that the counselor can help the counselee determine if a HECM is the answer to the solution of the problem or “need/desire” the counselee perceives he/she has.
FHA lender financial assessment was not designed to help lenders determine if a HECM is the best or even a reasonable answer to the need or desire the applicant perceives he/she has. Instead its principal purpose is to determine if the borrower will be able to meet property charge payment requirements and if not, will LESAs help correct the situation.
It is not designed to “save” the MMI Fund or do any other ill conceived notion except analyze and support the payment of property charges over the life of the youngest borrower (not necessarily the life of the HECM). It is something lenders need in order to mitigate the number of payment defaults on property charges and minimize the risk of foreclosing on any more grandpas and grandmas due to the inability of the defaulters to recover and pay off the amounts they are in default. Unlike losses on the HECM note, FHA insurance does not reimburse lenders for the losses they may incur from property charge defaults.
Yet the question remains, is there a pressing need to implement lender financial assessment since home appreciation is still generally growing and many of those who might otherwise default on property charge payments have most likely been eliminated as a result of the lower principal limit factors which went into effect on September 30, 2013 (and as modified on 8/4/2014) and the new 60% disbursements limitation rule which also went into effect on 9/30/2013? How about waiting until the endorsement numbers begin to return to the endorsement level for fiscal 2007 before implementation or implement it earlier if the current economic and interest situation begins to erode?
(The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)
Just saw this post for the first time.
OK, but pathetic might be a little over the top. I don’t have a lender now so I’m not in the game for now. I hold it open for the future as I try to make a living encouraging people to avoid the RM altogether if I can. I think you told me once that was your gig for a long time. Good luck to you and yours. We both think each other is wrong about the future of the RM. Only time will decide the issue. In the meantime, looks AAG is going just fine. The one thing we do agree on is how important your contribution is. Thanks Shannon. Keep the faith. Somebody has to.
Warren,
It is clear you never understood this product and its proper use by seniors, if one day you make your living by selling it and in less than five months you proclaim you are making your living “by encouraging people to avoid the RM altogether.”
It is good for both you and the industry that you are no longer in our industry. We do not need people who lack any lasting conviction about what they sell.
HECMs are not for just one type of senior but for all seniors who qualify. I understand to some degree the social worker mentality and if that is yours, HECMs are not as useful to meeting your psychological work satisfaction and fulfillment as they were a few years ago. We have less opportunities to be “saviors” and are today more providers of a product which helps qualified seniors with their cash flow needs throughout retirement.
It is not pleasing to hear that you are now making a living by being a HECM naysayer. You are a man who lives in the realm of contradictions, not a great place to be.
It is time to move on.