On the Docket Seniors are deliberate and careful when making decisions about reverse mortgages. They seek advice from trusted advisors and they primarily use the proceeds from their reverse mortgages to age in place, according to a new survey of 501 reverse mortgage borrowers released by NRMLA in early September.
The survey was commissioned specifically in response to the CFPB’s Notice and Request for Information published in the Federal Register on July 2, 2012. To obtain evidence-based answers that reflect the real-life experiences of reverse mortgage borrowers, NRMLA retained ORC International of Princeton, New Jersey, one of the oldest, most established consumer research firms in the U.S. and abroad. ORC staff conducted live phone interviews over the course of two weeks in August from a sampling of borrowers with active reverse mortgage accounts. Almost all the borrowers interviewed have loans that began between January 2007 and the present.
“The reputation of reverse mortgages is too often based upon personal conjecture, anecdotes and unsubstantiated opinion rather than factual evidence and data,” NRMLA President and CEO Peter Bell said. “The CFPB has been given huge responsibilities and we want them to have the facts about actual borrowers as they consider reverse mortgages and any possible future actions.”
On August 31, NRMLA submitted a detailed response to the CFPB Request for Information, utilizing the new data as well as other industry data to answer the questions issued by the bureau.
Data from NRMLA’s Consumer Research:
- 88 percent of borrowers rated their overall experience with reverse mortgages as positive. (This finding is in line with 2007 AARP and 2010 NRMLA data.)
- Before closing on their reverse mortgages, in addition to consulting with lenders and going through mandatory counseling, most borrowers consulted with someone they considered knowledgeable, seeking opinions and guidance from trusted sources including family members, friends, financial planners or advisors, and attorneys or accountants. More than 60 percent of borrowers surveyed sought advice from two or more additional sources.
- 76 percent reviewed the disclosure documents with a range of advisors that included family members, knowledgeable friends, attorneys, accountants and financial planners. Once again, well over 60 percent reviewed them with two or more additional sources.
- Respondents used their reverse mortgage proceeds responsibly to pay off mortgages and other debts (53 percent); create standby cash reserve (49 percent); supplement monthly income (43 percent); modify or repair their homes (41 percent); cover health care expense (22 percent); or provide financial assistance to a family member (14 percent). (Many respondents gave more than one answer.)
“HECM borrowers utilize their funds judiciously and purposefully, and are fairly conservative where they park unused funds,” NRMLA stated in its written response to the CFPB.
There is evidence throughout the consumer research that, since October 2010—when HECM program improvements like a new, robust counseling protocol were implemented and the lower-cost HECM Saver was created—borrowers are shopping for their loans more vigorously and making better-informed decisions on lender and product selection. “Overall the data from this survey presents a revealing snapshot of the state of the reverse mortgage borrowing community,” Bell said. “Some of the CFPB’s questions and conclusions, such as the results of the average age of borrowers declining, cannot be properly addressed until we have some more history from which we can compile evidence.”
NRMLA’s full response to the CFPB can be found at nrmlaonline.org.
In Print The September/October issue of Reverse Mortgage magazine contains a number of stories that inadvertently address concerns raised in the CFPB Report:
In “Two Generations—Both Seniors,” Paul Fiore of American Advisors Group examines the differences in values and experiences between the WWII generation and the boomers that result in a need for two separate sales approaches.
In “It’s a No Brainer,” Jim Cory of Legacy Reverse explains how a loan officer can take advantage of the three recent research reports by distinguished academics that show reverse mortgages can be an effective retirement planning tool.
Both of these stories indirectly address the CFPB conclusion that the sharp increase in younger reverse mortgage borrowers is a path to a shortage of resources in later life. Like the NRMLA consumer research, these stories illustrate a new generation of young seniors who are good and thorough shoppers and will likely make wise use of this financial product.
In “A Good FIT,” experienced counseling administrator Sue Hunt of CredAbility shows the effectiveness of the new counseling protocol elements, the Financial Interview Tool and BenefitsCheckup, again indirectly addressing the validity of the CFPB Report conclusion that counseling is inadequate.
In San Antonio The exciting agenda for Reverse Mortgage Roundup: NRMLA’s 2012 Annual Meeting & Expo is brimming with distinguished speakers and valuable information, including:
Keynote Speaker Carol Galante, Acting FHA Commissioner
Featured Speakers Ted Tozer, President, GNMA Charles Coulter, Deputy Assistant Secretary, HUD Michael Stolworthy, Director of Fraud Prevention and Program Integrity, HUD Office of the Inspector General Fred Thompson, former U.S. Senator Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities, former Chief Economist to Vice President Biden
Panel discussions include: HUD Update with Karin Hill and Erica Jessup Life Stages and Segmentation—Two Generations, Both Seniors Compliance in Marketing—What You Can Say and Can’t Say Selling the HECM for Purchase Working with Financial Planners Secondary Market Developments
Roundtables—Share Your Thoughts with Colleagues Loan Originators Roundtable Underwriting Roundtable Counselors Roundtable
Plus: CRMP classes and credits Wholesaler celebration CRMP reception And lots of time for networking
You can still register at nrmlaonline.org.
In the Committees Committee work slowed down a bit during the summer due to member vacations and our staff’s focus on the CFPB response.
The Servicing Committee continues to identify its challenges with the impending HERMIT conversion. A letter has been submitted to HUD and NRMLA staff met with HUD senior staff to discuss the topic.
Requested comments are being submitted on the CFPB’s Integrated Disclosure proposed rulemaking and the HOEPA proposed rulemaking.
The State and Local Committee is beginning to focus on working with local members to advocate implementation of the HECM for Purchase in Texas. We anticipate a long process.
New Members Reverse Mortgage Lenders Direct Inc., a lead generation company based in Boca Raton, Fla.,
Housing Opportunities of Fort Worth and Texas Tech University in Lubbock, Texas, all became NRMLA members in August. Texas Tech, home base for financial planning researchers Harold Evensky, Sean Pfeiffer and John Salter, became the first university to join the association.