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Circling the Wagons


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Prepare Your Clients Before Counseling or Risk the Consequences

reverse mortgage newsCircling the wagons. It’s something our early pioneers did to protect themselves and their party from attack during their perilous journey to settle the western frontier. Not unlike the settlers we must take proactive measures to protect our hard-earned applicants from fear, doubts and mostly confusion during one of the most critical phases of reverse mortgage origination: the counseling process.

As reported in our video last week the CFPB’s Reverse Mortgage Guide tells consumers that a HECM counselor is their best resource for information. First, to be fair, most HECM counselors provide accurate and concise information about the reverse mortgage when speaking with your applicant. However, with numerous changes recently made to the HECM program several of our viewers report accounts of incorrect information or damaging statements made by counselors which led to their borrowers choosing to withdraw their application. So here are some steps each of you can take to avoid loan fallout during the counseling process or at least reduce it. 1- Know your product. It goes without saying…

Download the video transcript for this episode here.

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  1. good advice

  2. Another great article that shines a bright light on a growing problem that will only get worse as the number of products increases and the regulatory compliance bureaucracy continues to metastasize.
    All of the above have seriously elevated the level of complexity that impairs the delivery of this much needed product to the consumer.
    Some other areas that exacerbate the problem are presented below.
    The HECM consumer is confronted with a blizzard of so called disclosures and pronouncements of protection that are nearly incomprehensible. They don’t really know what they’re reading or signing and there isn’t a simple reliable way to bring clarification or understanding to the process without violating some other rule that prohibits simplification!

    Advertising rules demand so much “black tongue”, i.e., “truth in lending disclosure” that there is no space left for communicating the basic, meaningful information that would be useful to the consumer at a very early stage of awareness. It should be fairly obvious that people don’t select mortgage products strictly from a single advertisement but rather after an inquiry, interview, mandatory third party Housing Counseling, a lengthy loan application process replete with myriad disclosures and notices that are mandated by the regulatory entities that oversee financial products. It’s foolish and counterproductive to demand that EVERY nuance or technicality of the product be PROMINENTLY DISPLAYED in the initial solicitation. It is a virtual impossibility to completely educate a consumer at this early stage of awareness and contributes to distrust, misinformation and discouragement due to the required complexity. Regulators are confusing “marketing” with “full disclosure”….The two can’t happen at the same time without confusing the consumer, in my opinion.

    Another odd situation: below.

    The Good Faith Estimate which was recently adopted, January 1, 2010) is so complicated and confusing that even seasoned loan representatives have trouble comprehending it and honestly can’t explain it. The absolutely most bizarre feature of it is that it DOES NOT require the borrower’s signature!! YES! you heard me correctly! The BORROWER IS NOT REQUIRED TO SIGN IT! Can you even get your mind around such abject stupidity???? This living, breathing, palpitating Rosemary’s Baby is even mandated and approved by TILA/RESPA!!!!!! I just might faint from the fumes!!!!. Imagine what the consumer is experiencing when they are presented with this thing! It has metastasized from a single straightforward page with one column of itemized fees to a 5 page monstrosity of obfuscation that leaves the consumer totally bewildered and unenlightened. If anyone honestly wants to make Good Faith Estimates helpful and informative they need to make it a 3 column, one page affair with the first column containing estimated costs for the estimated value, column two for 15 percent less value and column 3 for 15 percent more value. COVERED!…..customer is adequately informed…NOTHING more to do until the CLOSING which entails a 3 day mandatory Right of Rescission! Anything more than this is embarrassingly counter-productive.! The regulatory bureaucracy also has no legitimate right to encourage consumers to “shop around” for the lowest fees because they have no way of knowing what constitutes competence, experience, or basic capability or likelihood of being able to deliver a successful loan to the consumer. Simply preposterous! The most obvious flaw in the advice is that “cheaper is always better”. What about “pull through rate” ? A free loan that does not close is not worth very much but worth even less in a rising interest rate environment that is eroding the available loan proceeds to the borrower as delay after delay takes its toll! What do you think about this? Who are these baffoons who dream this stuff up?????

    This is not progress nor is it an advancement in consumer protection but rather just the opposite. If we don’t do something to re-introduce logic and common sense this imbalance of compliance over legitimate commerce will continue to drive up the costs of services to the consumer while driving down available loan benefits and harm the housing finance engine of our economy during the process

    • hecmvet,

      Let’s see; only four of your lines of venting addressed counseling. Your never presented your techniques or practices for addressing possible misinformation during counseling.


  4. Mr Hecmvet, we’ll said my good man.

  5. Without venting over regulations, regulators, or conflicts in the regulations or among the regulators, let us do as Shannon suggests, rationally discuss what we, the originators, can do to mitigate confusion because of counseling and the resulting distrust which can lead to the loss of a loan.

    First forget what counseling executives and HUD advocate; do not provide the counselor with the most teachable moment. You need to provide all significant information about the loan before counseling starts. You need to inoculate the prospect about the confusion that recent changes can result in especially during the early months following implementation. Warn the senior that it takes time for new rules to work themselves through counseling.

    Also know what is in FIT and BCU. Warn your client that although the information being gathered is personal, the plan and ideas discussed by the counselor are based on general information rules provided to the counselor by those who are not financial planners. We need to tell the prospect again and again that a HECM counselor is not an experienced financial planner and the counselor has no accountability for whether the plan they develop turns out positive or negative.

    As to lower cost shopping which might be suggested by a counselor, the prospect needs to be reminded to be leery of “good deals” that amount to a few hundred dollars in upfront savings since many HECM discount originators are not generally concerned about competence, the level of service, or the experience of the service providers as much as cost.

    Using the above techniques have normally meant few prospects have been lost due to counseling.

    • My dear Cynic, I have NEVER lost a client due to “counseling” for the very reasons cited in your unecessarily condescending rebuttal.
      You are either part of the solution…..or……you are part of the problem.
      If you want something to busy yourself with that could benefit all of us….consider monitoring and critiqing the activities of NRMLA so we can make a rational and informed decision as to their usefulness and efficacy in furthering our best interests instead of nit-picking what you like….and don’t like about my comments.
      We should become better acquainted…off the record.

      • hecmvet,

        Why do you worry about NRMLA? NRMLA is not an association of originators. It represents lenders. I do not represent a lender other than as an originator with some administrative duties.

        Perhaps you should join the NRMLA board as a director. You could then have a voice in what NRMLA does and does not do.

        I have been directed to the IRS filings NRMLA makes and am troubled by its apparent worsening financial situation. This is something which is rarely discussed but should be a topic of concern.

        As to my reply regarding your initial comment in this thread, I believe helping less experienced to understand how to avoid lost loans due to problems with counseling is a worthwhile endeavor. It seems you do not hold the same view.

        Finally, it would be a good idea if we became better acquainted; however, due to personal attacks and threats, I have no interest in revealing who I am.

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