Well, it’s finally here: the Financial Assessment everyone in the industry has been talking about. The protocol is new to all of us and has many in the industry wondering what it will mean for the reverse mortgage program. Personally speaking, I think it is a wonderful opportunity for reverse mortgage originators to educate the public about how a reverse mortgage can be an important financial tool for retirement planning. Financial Assessment will provide us with the tools we need to ensure that a reverse mortgage is the right option for a senior homeowner.
We all know that a reverse mortgage can provide funds for a senior who can use it to pay off an existing mortgage, establish a line of credit for future needs, receive monthly payments to supplement their income, or delay Social Security payments. With the HECM for Purchase program, they can also use a reverse mortgage to purchase a new primary residence. Under the new guidelines, credit and income qualifiers will be used to ensure the senior will be able to meet their future obligations and pay their real estate taxes and homeowners insurance.
As reverse mortgage originators, we now have to pull a potential borrower’s credit report, review their credit history and collect details about their current income. This information is now needed to see if a senior will qualify for a reverse mortgage. When to pull a credit report during the sales process might be a challenge as seniors may not want to give you their Social Security number. However, it is recommended that the credit report be pulled as early as possible and reviewed with your senior. Based on their credit report, it may benefit the senior to wait and work on any credit issues before proceeding with a reverse mortgage application.
The results of the new Financial Assessment may require the borrower to establish a set-aside of funds to pay future real estate taxes and homeowners insurance. It remains to be seen what impact this will have in the funds available for some senior borrowers. Here is where I believe the reverse mortgage originator will have an opportunity to either recommend the senior delay taking a reverse mortgage, or to refer the senior borrower to a forward mortgage partner as they may qualify for another type of mortgage.
Today is a new day for the reverse mortgage industry. While my passion for this product remains the same, what will change is the way I present it. With Financial Assessment in place, the hope is that seniors, financial advisors, elder law attorneys and others who service the senior community see this product in a new light. Recent policy changes will ensure that a reverse mortgage is no longer considered a mortgage of last resort. Some in the industry even believe that a reverse mortgage will be considered the fourth leg in retirement planning. In the end, it amounts to a new beginning for all of us in the reverse mortgage industry.
