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Making the Complex Simple…

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The reverse mortgage is deceptively simply to the casual observer and even loan professionals. As we know under the surface the product is quite complex. Which brings us to the question: “How do I explain the complex in simple terms?” The most knowledgeable individual can make the worst salesperson. Why? They get lost in explaining the minutiae of their product or service confusing their prospect in the process. Einstein was the master…

 

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  1. The biggest problem I face is overcoming the inherent misconceptions that seniors have about the Reverse Mortgage such as “losing title” “bank taking over the home” “can’t sell the house” “don’t have a mortgage so I don’t need a Reverse”, etc. For the most part, the loans that I have closed have closed ONLY after rebutting those types of misconceptions and doing it over and over and over again until the borrower finally understood. I have found that you have to continually show the borrower that they ARE wrong and only when they fully realize it can a loan be closed.

  2. Mr. Messeloff,

    You are right to ensure the borrower understands basic HECM concepts. But the following is an example of where arguing about something almost cost the originator a loan.

    Back in 2004, when first investigating HECMs for a widow, an originator who knew how to compute upfront MIP and the origination fee as well as reasonably estimate other upfront costs got terribly upset with me when I casually informed him that total upfront costs per immediate dollar available (the net principal limit) for existing mortgage payoff and to the borrower was about 9% based on the information he was providing. He immediately reacted by saying that I was wrong because the cost was just 2% for the origination fee plus 2% for the upfront MIP and the rest of the costs were less than 1% so at the most the cost was 5% and no more.

    There was no doubt the originator had correctly derived what the upfront costs of the HECM would be but it was also obvious that he did not understand what it was I was doing even though he was so free to argue I was wrong. I then tried to explain to him that one of the many ways used to compare loans especially if the loan was going to be short-term was simply total up all upfront costs and divide them by the net proceeds from the loan. He argued and argued that the costs could not be determined that way to which I agreed. Finally I thanked him for his persistence in persuading me that I needed to look at this loan differently. Of course his arguing about how to determine the costs had absolutely no impact on how I did my analysis.

    Despite the arguing, this gentleman discussed the HECM more intelligently than the other originators interviewed. After much discussion with the widow and her other advisers, I recommended the widow obtain the HECM from the originator who was so argumentative. The others,including the borrower, liked the idea of the HECM but did not like the idea of using an argumentative originator. Finally based on my evaluation of the other originators everyone agreed to go with the one I recommended as long as I was the person who worked with him. To this day I am not sure the originator knows how close he came to losing the loan.

    As another example, during the period in which there was a lot of fighting about how using the word “income” by originators was misleading and wrong, one originator argued that he was merely using the language the seniors were using themselves and did not want to argue with prospects when they used the word “income” rather than correct terminology. What I reminded him was that it is not up to us to argue about the words prospects use just as long as we use the correct words and prospects understand the concepts despite the exact words they use to talk about it.

    Even though this comment may not necessarily be the view of Security One Lending or its affiliates, there is a big difference between correcting loan misconceptions and arguing about things which are not.

    Thanks, Shannon,

    Jim


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