OK, so the recent HECM changes make it harder for whom? Do they make it harder for the originator, the client, your professional referral partner, the loan processor or the underwriter? Here’s the good news: You, the originator, control the answer to this question.
Let’s evaluate each one.
The Underwriter Until the specifics of Financial Assessment are refined and released, it’s hard to tell if the new rules will make the underwriter’s job harder. That said, it is likely that their work will be more complicated at first, especially considering that they will now have to carefully examine borrower files while everyone adjusts to the new Financial Assessment guidelines. Now comes the time when an underwriter who has forward experience will have a leg up.
The Processor I am going to go with definite “maybe” here. Processors tend to be caught in the middle of the loan flow and starting soon, they will have to figure out “what’s what” in a file as the evaluation process changes. Newer processors may have a tougher time trying to evaluate the unknown at first.
The Professional Referral Partner No, your partners will not be affected. They will continue to refer business as in the past, but we do need to make sure they are informed about the basics of the new changes. Remember, you just want them to present the idea of a reverse mortgage to their clients as a viable option; you don’t want them pre-screening the client for qualifications and potential benefits. That’s your job.
The Client Well, these changes might be hard on the client for various reasons. They have more to understand, more to be confused about, more paperwork to collect and turn over, and possibly more complicated choices to make. They will also have more work to do with counselors, especially if the counselors expand their sessions to include information about the rule changes. Some will have information from before the program changes, and that may require further explanation. That said, a knowledgeable originator who has taken the time to understand the changes will be able to explain the program just as before. It may simply take a little longer.
The Originator Now we come to the originator. If you didn’t understand the product in its totality before this past October, please put this article down now and go back to studying the basics. The days of saying to a client, “So, you want a reverse? Please sign here,” passed us quite a while ago. Technically, that should never have happened anyway, but I’m sure it did when the program was simpler. The current changes will eliminate the “sign and drive,” and rightfully so.
The intent of the changes was to shore up the MMI Fund. But in doing so, we have created a process whereby the application stages have greatly increased in terms of time and effort. We have a little less money to offer the senior and more documentation, which could lead to fewer borrowers. But I say “could,” because it all boils down to how you do your job.
Here’s the good news: You control this process of information delivery. It’s true, we might have people who owe too much, but that has always been the case. Back in 2000, the lending limit was only $219,849. We had plenty of people we could not help then because of their debt. That situation will never go away.
Gone are the days of “no income or credit check.” And while you can still use the money for anything you want, you won’t be able to use it all right away. Now we have a longer explanation process, more documents to collect, more calculations to be made, and more time involved with each file. As of the writing of this article, FHA has postponed the January 14 implementation date for Financial Assessment for more evaluation.
So, it appears that the qualified LO will have the tougher job, at least initially. The good news is that all the other people involved in the loan process should not be too adversely affected and possibly not be too affected, if the LO is properly trained, understands the process and truly details everything to the senior without leaving any room for surprises. If that happens, then the rest of the people involved in the loan process, including the clients, will definitely benefit. An informed resource, which is what all of us should strive to be, will be of the most service to our senior clientele.