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Navigating Uncertainty after Assessment Delay

reverse mortgage newsThe last year has been similar to walking across a pond only to have the stepping stones move from under your feet. Sound familiar? Speaking with several of you the common sentiment is ‘just tell me the rules so I can move forward’. Indeed with the numerous delays and false launch of the financial assessment one could be left with a sense of uncertainty while trying to originate reverse mortgages. You’re not alone. Here are three tips to manage uncertainty today.

1- CRM- Crew Resource Management.  This famework was initially developed by NASA and later adopted by airlines to promote safety. It focuses on situational awareness, open communication, problem solving, teamwork and effective decision making. The manage the risks that uncertainty bring to our business practice or lender requires intentional training and communication. Situational awareness. Keep yourself or your sales team informed about recent changes, impacts and potential outcomes. Do not leave them to sink or swim on their own. Uncover the details…

Download the video transcript for this episode here.

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  1. Shannon – I ran the numbers and I am in Fairfield County CT. Out of the 15 Reverse Mortgages that I did from 1/1/14 – 12/31/14 – 0 would qualify under FA which I have to tell you is extremely unsettling. Basically HUD is pulling the carpet from underneath individuals that desperately need the financing available to them via a Reverse Mortgage.

    Think of the job losses and company closings – it goes on and on. The small shops like me are going to be affected the most.

    • Mr. Meyers,

      If that is your case, you will need to be very conversant on cash inflow and outflow, extenuating circumstances, compensating factors, and both LESA computations, knowing when the partially funded LESA is available and useful.

      Assuming you correctly included all forms of income and cash inflow, did you look into and evaluate extenuating circumstances and compensating factors? What was the range of partially funded LESAs and separately what was the range of fully funded LESAs?

      Educating yourself through reading and reaching out to knowledgeable sources can help bring some perspective on how financial assessment will work out. But I also do not doubt that some originators will end up just like what you present in your comment.

      (The opinions expressed in this reply are not necessarily those of RMS or its affiliates.)

  2. Recently I was asked to sit in on a presentation of the financial assessment. It covered two main topics I have interest in, compensating factors and LESAs. Most of the time was not spent on these two subjects but far more basic information.

    When we got to compensating factors, nothing of real substance was shared although the moderator did chime in that we should thoroughly understand them so that our customers who might not otherwise qualify, can qualify. That was exactly why I listened but the speaker was more in guess mode than in a position of having hammered out details with her underwriting team.

    Then we got to LESA. The presenter showed us her interpretation of the formula. It was obvious that she had no idea what a term raised above another term indicated. So rather than showing the correct formula as containing two terms which must be raised to the indicated powers, she showed the formula as a simple multiplication problem. While her result on a 75 year old with applicable annual property charges of $6,000 at a 4.75% expected interest rate was less than $1,000, the actual computation was $61,792. It turned out that the speaker was a gifted presenter who many liked listening to even though her participation in the financial assessment adoption process at her lender was more passive than active.

    So my warning is be careful what you listen to and read the guide. Some of the information is so basic most of us will pick it up in no time but it is the more difficult topics and understanding how individual lenders and even individual underwriters will subjectively apply them that will end up saving some of your loans. Also if your customer has more than enough income, still try to be as thorough as possible so that the stats will reflect who our customers are and what are their financial circumstances. This could help all of us later down the road when HUD is thinking about tweaking financial assessment.

    • (The opinions expressed in the comment above are not necessarily those of RMS or its affiliates.)

  3. very good Shannon
    I look back the last few years that I can remember and can say I would have lost one however my education on the assessment is not complete enough to really tell or guess,,,,i don’t have a crystal ball, ,,,, to tell what an underwriter is going to do or how their going to interpet the rules and regs, they will be in a position to select what they want it would be great if the lenders would consider the L. O.s

    • Hey Cliff,

      It is really past time for your being ready for financial assessment. Knowing as much as you can about it will give you a much different perspective about it and may help you understand how you might be able to save some applications and also prevent some LESAs being put on your customer’s loan.

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