This year marks the beginning of a new era in the U.S. housing market. For the first time in nearly five years, borrowers, lenders and investors do not need to concentrate so much on delinquency and foreclosure. Rather, attention can once again turn to purchase-money lending, rising home prices and the return of the housing market as a positive economic force.
The latter two factors are positive signs for reverse mortgage lending. Stable to rising home values make reverse loans more attractive. This will become increasingly important as large numbers of baby boomers retire and look for ways to finance the next phase of their lives. It is no secret that too many saved too little. It is also no surprise that the last five years were hard on investments; the closer to retirement, the harder it is to make up lost value. And despite all that has transpired in the housing markets, there is still equity in homes, and that will prove important to the financial security for the current generation of retirees.
Fortunately, a great deal has changed for the better in the housing and mortgage markets. But one thing that has not changed—and is unlikely to—is the regulatory environment. Never in the history of both forward and reverse mortgage lending have compliance requirements been as dynamic or as stringent. Frankly, it’s hard to keep up. And it’s only going to get more difficult.
What to do? Regulations are rules. Following rules consistently is, unfortunately, not something human beings do very well. Try as we might, we’re just not equipped to track so many
A properly executed application eases every other step in the mortgage process, right up to closing. So much goes into closing a compliant loan, including details on how it is originated, disclosed, processed and underwritten. Closing documents, since they are likely to be the first element reviewed in any questionable loan, are absolutely essential to the creation of a compliant loan. Here, too, a technology-driven document solution is essential. Think about it: Less than 20 years ago documents were drawn by hand, plunked out one key at a time using IBM Selectrics. Try using typewriters today. Along with the tremendous loss of efficiency comes frightful inconsistency and, therefore, risk. Back to technology and rules. Since lenders have to follow rules we may as well enlist all the help, and the technology, we can get to enable us do so.
The housing market is on the rise, a welcome change for everyone in the industry and for homeowners too. Lending regulation is on the rise as well. Now is the time to review the solutions and technologies you are using to make sure they’re easing the compliance burden and helping produce quality loans that are good for both you and your borrower.