Financial Assessment Accepted by Industry

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The origins of the now-accepted HECM Financial Assessment

Screen Shot 2017-05-18 at 10.19.25 AMDespite it’s initial chilly industry reception the HECM Financial Assessment has been accepted- so said HUD’s Phil Caulfield. During his remarks at the NRMLA western regional meeting in Huntington Beach Caulfield emphasized the importance of the assessment stating “if we hand’t done this, there probably would be a HECM program. It’s that important”.

Necessity is the mother of invention. Several factors contributed to the genesis of the Financial Assessment, but the two most notable were lenders seeking to reduce the risk of paying delinquent property charges before or during the prolonged foreclosure process, and the reputation risk of issuing loans to borrowers who would likely default on property charges and the subsequent public fallout from the resulting foreclosure.

In October 2011, FHA issued guidance that HECM lenders could consider an applicant’s credit history and financial capacity- perhaps in response to pressure from lenders seeking a public statement. The largest HECM lenders weighed whether to launch their own financial assessment guidelines in the hopes that other lenders would follow suit. MetLife was the first to venture into the uncharted waters of HECM underwriting in November 2011.  

Some See the HECM Financial Assessment As A Benefit

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Two Years Later the Financial Assessment Receives Mixed Reviews

The implementation of the HECM Financial Assessment was met with mixed reviews when it was launched in April 2015. While many industry professionals have remained critical of the new underwriting guidelines some welcome the assessment as see it as a net benefit.

reverse mortgage news‘Every loan is a problem loan’

The seismic shift of the Financial Assessment’s restrictive and complex underwriting guidelines have many feeling that the reverse mortgage underwriting has now matched or surpassed traditional mortgage underwriting guidelines. Bill Smith with Reverse Mortgage west told Reverse Mortgage Daily, “Tighter regulations have resulted in tougher underwriting standards that have made most HECM loans far less routine. Complaints from my colleagues that ‘every loan is a problem loan’ are much too frequent and clearly not what used to be when I started.” Not only is the sales cycle prolonged but the assessment has limited the number of qualified applicants carving out many who would have been previously eligible for the loan.

The Paper Chase

The complexities of the reverse mortgage are difficult enough for many to communicate to a borrower. Now many find themselves spending considerable time gathering the required documentation needed for the assessment which reduces their time spent originating loans…

 

This is why we have the Financial Assessment

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One couple’s story highlights the rationale behind the Financial Assessment

reverse mortgage newsIn an ideal world, the government and housing agencies would not have to protect people from themselves. The truth is that is not the world we live in, especially when it comes to reverse mortgage borrowers. A recent survey by the American College shows a widespread lack of financial literacy for both retirement  and reverse mortgages with the vast majority of respondents receiving a failing score.  It should come as no surprise that some senior homeowners who lacked basic knowledge of both are facing foreclosure today.

Reverse mortgages are biting back, this according to a recent article in the Eagle Tribune. It outlines the woes of what was once uncommon; an older couple in financial crisis who are facing foreclosure after getting a reverse mortgage. The story begins with Kenneth and Sadako Miller who saw a reverse mortgage television ad six years ago.

Download a transcript of this episode here.

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Does the Assessment Require the Kitchen Table?

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Does the Financial Assessment Require Face-to-Face Meetings in the home?

reverse mortgage news

Much has been written about the Financial Assessment, especially the level of personal financial information required and the rapport needed to build the trust to gather such information. Does this mean that the assessment requiresface to face meetings with potential borrowers?

A recent article in Reverse Mortgage Daily addresses this vexing question. Until a few short years ago the vast majority of reverse mortgage sales took place at the homeowner’s kitchen table. An intimate setting where seniors typically handle their personal finances and paperwork. With the advent national television campaigns call centers began to…

 

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Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

Assessment Confusion: Extenuating Circumstances

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Many Originators Seeking Clearer Guidance Under Assessment

reverse mortgage newsYour applicant’s credit history isn’t so rosey. A smattering of late payments on credit accounts, an overdue property tax installment or problematic medical bills. Such issues often require an explanation of extenuating circumstances.

The HECM Financial Assessment has transformed the process of originating reverse mortgages and consequently complications will arise, often around the issue of extenuating circumstances. Extenuating circumstances put quite simply are factors that explain the underlying reasons for blemishes in the applicant’s credit history. This is key as the credit history and payments help determine the borrower’s ‘willingness and capacity’ to meet the ongoing obligations of the loan.

HUD notes that lenders must make a “connection between the specific occurrence(s) and the measurable impact on the occurrence(s) on the mortgagor’s finances”. Quite honestly it is a subjective process.

 

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

It’s Getting Personal: The Financial Assessment

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The Challenges of Diving into an Applicant’s Highly Personal Financial Information

reverse mortgage newsFrom building trust or diving into one’s very personal financial data the financial assessment presents challenges and opportunities alike.

In marking the division of history one may refer to B.C. or A.D.. For the reverse mortgage industry we have NA and FA, no-assessment and financial assessment. That point in time can be marked as April 27th 2015 when HUD’s Financial Assessment guidelines went into effect forever changing the face of the Home Equity Conversion Mortgage program.

The in depth review of an applicant’s highly personal financial data has created a mental hurdle that many struggle to overcome…

 

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

A Boiled Frog?

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“I’ve seen my share of boiled frogs”

One industry titan said of struggling industries “I’ve seen my share of boiled frogs”.

While resilient the reverse mortgage industry has struggled since 2009. Battered by the storms of the housing crash, principal limit reductions, numerous product changes and the financial assessment those who remain may feel like they have been slowly boiled as the heat of change is continually turned up.

reverse mortgage newsHowever amidst upheaval there is opportunity; the opportunity to revamp our approach, improve our internal processes and create new efficiencies in doing business. The fact is the paradigms that applied to our industry just a few short years ago no longer apply. To adapt and thrive both industry leaders and loan officers should examine the steps necessary for long term survival and success.

Here are some take-aways I’ve found in watching how other industries have dealt with chaos and adversity.

1- Throw away faulty perceptions. That’s right, throw them away. From needs-based borrowers, easy qualification standards and quick…

 
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Financial Assessment Welcomed by Some

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Some Lenders Welcome Financial Assessment

reverse mortgage newsThree months following the enactment of the Financial Assessment some smaller reverse mortgage lenders are finding the new guidelines a breath of fresh air.

A welcome change? Surprising since reverse mortgage endorsement numbers have fallen after the assessment became baked into the origination of Home Equity Conversion Mortgages. Where is the sweet spot for the assessment? It would appear to be with smaller lenders.

Robert Wyatt, president of Reverse Mortgage Advisors, LLC said “As a small independent shop I’m seeing that the FA has created a need to really sit down face-to-face or kneecap-to-kneecap, with potential borrowers to explain the process. This has really been a benefit to us.” While many may not share the same sentiment due to numerous guidelines and documentation requirements, some have found a silver lining despite the overall pushback by many loan originators. That silver lining is…

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.

The Angst of Caring

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Loan Officers Torn Between Borrower Need & Product Restrictions


reverse mortgage newsAfter reconnecting with a friend who had reentered the reverse mortgage space after a year and a half absence I told my wife “you know what I love about the folks I work with? They are mission-driven”.

Most of the reverse mortgage professionals like those of you watching are mission-driven individuals. Certainly we want to succeed, make a good living and a healthy income but never at the expense of our mission to help older homeowners have a more comfortable and secure retirement. Being mission driven does have it’s downside: the angst of caring. Beyond the challenges of overlapping regulations, numerous product changes and the financial assessment is the frustration encountered when we simply cannot help those who don’t qualify.

I can recall hundreds times sitting in the kitchens of…

 

Download a transcript of this episode here.

Looking for more reverse mortgage news, commentary and technology? Visit ReverseFocus.com today.