What a roller coaster ride! If you are one of those originators who is running and screaming into the night because of all the changes we have endured, take a breath!
I think we were all relieved to have a short reprieve in the launch of Financial Assessment. FHA announced the delay and most reverse professionals across the industry breathed a collective sigh of relief. I think it was critical for all of us to use that time as an opportunity to learn the new requirements and get a grip on the changes that had already been implemented.
While some may complain about the implementation of Financial Assessment, I appreciate that it forces lenders and originators to really determine if a reverse mortgage is the best solution for the client. It can help protect them from themselves or others in their lives. I would love to challenge the industry to actually embrace the assessment process and use it as a tool to enhance your client’s loan experience. If you only view it as a deal killer, then I believe you will miss the point.
I admit that the difficulty in launching FA is the extensive documentation required. Part of the wonder of a HECM has been the ease for the borrower. But I believe we can still maintain a piece of that wonder, and at some point down the road, perhaps FHA will look at simplifying the documentation involved. Providing basic income and asset information makes sense, and our process as lenders to evaluate a client’s situation is critical, but some of the “drill-down” documents could be a hardship for our borrowers. It is our job to help them through this as best we can.
That said, FA is now a reality and it needs to be embraced. If mastered properly, it can be another way to set yourself apart from other originators. If you see this as an opportunity, you can enjoy tremendous success. I have always been inspired by this motto, and it seems to apply in the reverse business now more than ever: “If it’s too tough for you, then it is perfect for me.”
Our industry has carried the burden of a negative reputation and the horror stories of clients wronged for too long. This is our moment! FA can help the industry gain the public’s trust. Perhaps now consumers will see the value of the HECM and understand that we are doing what is absolutely best for our clients.
Where There Is Challenge, There Is Opportunity
With FA in place, we can approach financial advisors, estate attorneys and CPAs with authority. This will become a loan that borrowers will want to qualify for. Higher-net-worth clients will like that a HECM is not just a product for those in dire straits. We all love helping needs-based borrowers, and FA will not exclude them entirely—many will still be able to utilize the product, even if a set-aside is required. FA will simply identify which borrowers would only postpone inevitable foreclosure if they were to take a HECM. I don’t believe that it will eliminate a substantial number of borrowers. In fact, I think it will propel the program in the long term by paving the way for other borrowers, those who are willing to strategically leverage this product and can see the value offered by this “new” reverse mortgage.
Our industry is evolving. We have all believed in the great potential of the product we sell; soon, the public will see it too. The ability to introduce the HECM as a new reverse mortgage is incredible. It provides us with a tremendous opportunity to restart the conversation. In recent years, program changes have been cloaked by negative press. But now, with policy change nearly complete, the program’s overhaul will give the HECM a chance to come out of the background and emerge as a phenomenal tool for people over the age of 62. And with the astronomical number of baby boomers, there is no shortage of potential.
Allow yourself the luxury of falling in love with our product. Remind yourself that the true benefits of the product are completely untouched by FA. How many people would be thrilled to have a choice when it comes to their home loan? With a HECM, your borrower can choose to make a payment, not make a payment and change the terms of their loan at any time without a refinance. Wouldn’t anyone welcome that flexibility in their own home loan?
Allow yourself to really ponder the line-of-credit growth feature and compare that with conventional lines of credit. I know that in my history of property ownership, I have had credit lines canceled, frozen, fully amortized and pretty much disappear. That feature alone should give you the weaponry to approach any professional with your product. Understand every aspect of what you have in your hands and you will become a force to be reckoned with.
Would you have preferred to keep things the old way? Most of you would probably say yes, but we have a choice in how we approach the new reverse mortgage. Will the changes cripple you or encourage you to work even harder to connect with consumers about this great product? Is your glass half empty or half full? Mine is filled to the brim and about to spill over.