HECM originators today are faced with the challenge of Financial Assessment. There are many complexities to this new program, and we as lenders are trying to find the sweet spot: that place where we can satisfy HUD’s new requirements and still help seniors who could benefit from a reverse mortgage.

As a lender, one consistent issue that I see when files are sent for review is a lack of clarity. Often, an originator will not clearly identify what is happening with a borrower. I am a strong believer in the adage, “a confused mind says ‘no,’” and there could be no truer example of that then when your underwriter is trying to make a determination on a file. I see this repeatedly when concerns arise involving credit, property charges or income, and there is no explanation whatsoever accompanying that submission.

My earnest plea with originators in this industry is to tell the story. Explain the borrower’s circumstances clearly so that the underwriter can get a sense of the full picture: Who lives there? Why were there credit issues? What other source of income do they have? Are there any assets? What are they planning to do once the loan is in place? If there are any issues with credit or property charges, what are the extenuating circumstances? Be specific and document the situation. There is nothing worse than making an underwriter try to figure out if there are any extenuating circumstances for credit or property charge issues, or if compensating factors exist for a residual income shortfall.

For many files, we need to address why something happened, what is being done about it and why it will not be an issue in the future. Anything short of that will not satisfy FA requirements. Sometimes you can glance at a file and it seems obvious that something happened, but without an explanation, the file could either be denied or a full LESA could be enforced. It is so much easier to address those issues before submission, since climbing up a hill is far more difficult than rolling down.

I can promise you, we as lenders want to approve files and we do not want to impose unnecessary LESAs on a borrower, but we need the help of our originators. Take the time to talk to your borrower, and if it makes sense, help them substantiate their story. Hand your underwriter rose-colored glasses instead of dark ones; let them know and feel the borrower’s story. Without a true and valid story, prepare your borrower for a LESA account and show them what a beneficial and positive thing it can be for them. Some borrowers have always struggled to pay their bills and property charges, and you can help them remain in their homes safely with no concerns of future defaults.

I truly believe FHA wants us to make loans—appropriate loans that help our borrowers. They are just asking that we make sure the loan will genuinely be to the borrower’s benefit, that it makes sense and that we are not just using a HECM to postpone the inevitable. Sometimes, although not often, the kindest answer is no, even though as originators that may be painful.

So do your borrowers a favor: Ask the questions and tell their story to help them find financial security.