It’s a brave new world for today’s reverse mortgage lender. Once upon a time, HECMs were a little-known, often misunderstood product in which few lenders chose to dabble. Things certainly have changed in the past few years, particularly in the past several months. HECMs are no longer just a niche product, but rather a legitimate financial planning tool for retirement-minded seniors and an excellent revenue source for lenders. With these changes in play, the mortgage industry’s perception of reverse mortgages is shifting from a minor component to a significant product in the larger mortgage market.
Moreover, it’s an important time for reverse lenders to think bigger about this complex and ever-changing industry and what is needed for it to thrive and be recognized as a legitimate financial planning tool. Origination technology has played a major role in HECM lenders’ success strategies. Technology helps lenders stay compliant, keep up with industry changes and track the success of their loan officers, processors and underwriters.
One of the biggest areas in which a HECM loan origination system (LOS) contributes to a lender’s success is compliance. There have been tremendous regulatory changes to the HECM program over the last few years, including the most recent installment, Financial Assessment. While it is an undeniable fact that FA has made the HECM product safer, many lenders feel apprehensive about their ability to maintain compliance not only with FA, but also with all the regulatory changes that came along with it.
There are some major systems in the forward mortgage space that ensure their users are in compliance, but the HECM-specific loan origination system has become the de facto compliance system for reverse lenders. Therefore, it is critical that your system of choice guides you through a compliant HECM origination process and alerts you to potential issues. In addition, your LOS provider should continuously update the system to keep pace with compliance changes as they occur. There are a tremendous number of factors in play that affect how much equity a borrower will be able to tap, what happens when they pass away, how to assess the loan if they have a younger spouse, and what they need to do to qualify for the loan. Trying to navigate these loans without a guide that connects you to industry regulation would surely lead you off-course.
Documents are the genetic material of any loan and they derive their DNA, so to speak, from data gathered in the LOS. If your LOS’ compliance is up-to-date, then fully compliant loan documents should follow.
Overall, your LOS should serve as a platform that connects you to the entire reverse mortgage industry. When all of the moving parts are working from a dataset appropriately shared with your partners in a single platform, you ensure the integrity of the data and eliminate a significant potential for compliance errors.
Furthermore, the single-platform environment streamlines productivity. Working between multiple programs to get a loan completed creates tremendous inefficiencies that can slow turn times and result in poor customer service. Re-keying data into multiple systems further slows down the process and creates inaccuracies that can affect compliance and loan performance. Giving all of the players in the transaction access to the data when they need it within one location not only improves turn times, but also prevents data errors and provides the customer with a better borrowing experience.
It is also critical that your LOS assist in the sales processes by visually simplifying the loan when presenting the option to a borrower. Easy-to-understand graphics that visually represent the different loan options will help the borrower see the big picture and make the loan officer’s job easier.
The HECM origination environment is more complex than it has ever been. To succeed in this ever-changing landscape, it is critical to have the right tools at your disposal to ensure compliance while maintaining efficiency and accuracy.
