This article is not about the economic valuation of reverse mortgage servicing rights. These are thoughts on the tangible benefits lenders receive from the quality servicing of their reverse mortgage portfolios.
Valuation of a lender or investor’s servicing rights is directly linked to the value the servicer brings to bear on the portfolio; they fit together like the proverbial hand in glove. Economic valuation models calculate the dollar figures associated with mortgage servicing rights for those who engage in the practice of buying and selling them. To my knowledge, none of these models takes into consideration the quality of servicing, as quality servicing is too often assumed.
Counselors, loan officers, processors, underwriters and closing/title agents are first points of contact for the borrower, and these professionals form and frame the reverse mortgage experience. These individuals ensure that each loan is timely and properly executed and that borrowers have a pleasant and informed experience. The sales and closing process of a reverse mortgage can vary and take up to six months.
When the servicer receives a loan after closing, it is being entrusted with a valuable asset that will be in its possession an average of seven years, and that timeframe is getting longer as life expectancy increases. Frontline industry professionals will touch borrowers in the origination process, but these touch points number fewer than the touch points a servicer will have with their borrowers over the life of the loan.
These touch points begin with the servicer’s initial contact with a new borrower. On forward loans, the initial call to a borrower might take 45 to 60 seconds. In the reverse world, initial borrower calls average four to five minutes, and it’s not uncommon for them to last for up to 20 minutes. The average senior borrower requires more explanation and patience, and those who service this product understand and accept this responsibility.
Senior borrowers are attentive to detail and they will ask about anything they do not understand, and at length. Servicers at times have to answer the same types of questions every month, month after month (often to the same borrower). Since Celink began servicing reverse mortgages in 2005, the percentage of incoming calls every month is approximately 20 percent of its portfolio, and it has remained at that level for years.
Additional touch points between a servicer and borrower are the requisite annual certification of occupancy, monitoring and overseeing repair administration (requiring communication between borrowers, contractors and HUD-certified
inspectors), tax and insurance defaults, and perhaps the most challenging contact of all: the death of a borrower or their spouse.
Servicers work with grieving family members, offering them gentle hand-holding, advising them of their responsibilities regarding the loan, and helping them properly dispose of the property if the last surviving borrower has passed away. My father, Celink CEO John LaRose, has said, “Servicing staff overseeing this challenging process must have the patience of a saint, the calm presence of a Tibetan monk, and the sensitivity and compassion of a funeral director.”
The truest value of reverse mortgage servicing extends well beyond the economic valuations associated with the servicing rights themselves. When a servicer takes on each and every new loan and for the life
of loan thereafter, he becomes the calm, reassuring voice of reason for the lender, the monthly point of contact for all things financial and the helpful hand to hold during grief and transition.
