Reverse

Originating: Sign, Sign and Sign Again

Written by Bill Smith, as originally published in The Reverse Review.

In my 14 years as a reverse mortgage loan originator, I have observed the insidious creep of an insensitive unfairness inflicted upon the seniors we serve. It has been a subtle development and one perpetrated without malice. Yet it is always recognized by our borrowers and begrudgingly accepted by them. Most often they blame the fact that a HECM is “the government.” I often hear adjectives like “stupid” and “ridiculous,” or the rhetorical question, “Are you kidding?”

I’m talking about the number of pages and signatures required in the HECM application process. The sheer volume of pages has expanded without regard for the most important people in the process: the borrowers. This is a call to lenders, NRMLA, title and escrow companies, state governments and HUD to reduce, streamline and even automate (perhaps through the e-signing process?) the doc sets and, in so doing, to better serve those upon whom our industry depends.

I recently printed an application document set that was 187 pages and weighed 1.75 lbs! One notary recently reported a closing package of 225 pages! A week ago I attended a signing of final documents by an unmarried woman. The closing documents were 160 pages. As the notary went through page by page, I took a stroke tally of the signatures. Eighteen signatures were required on the escrow documents, 65 on the lender documents and 12 on the Also Known As page, coming to a total of 95 signatures! The home was in a trust so an additional (and understandable) burden was required due to this factor. Nevertheless, the borrower expressed dismay at the task she faced. The notary, who leads a team of eight associates, suggested that the process has become “worthless and burdensome to the signer” and added that her colleagues feel the same. The burden on both the signer and the notary is exaggerated when the borrower suffers from a physical limitation that impairs their ability to sign.

Last year, upon seeing the stack of application documents, an 83-year-old HECM applicant produced the final documents from the purchase of her home in 1957. The purchase and mortgage documents totaled 14 pages.

We all understand that among the reasons that such a plethora of disclosures and agreements exists is to inform and protect the borrower as well as to protect the lender and HUD. However, I would challenge the idea that any loan originator or notary has ever sat across the kitchen table while a borrower read and understood every word of every page of every document. Signing is not an indication of understanding, comprehension or even agreement. Conversations within the reverse mortgage industry indicate that electronic signing for HECMs is in the distant future if it occurs at all. That leaves us with either accepting the status quo or addressing the issue. An admittedly complicated and difficult regulatory and legal challenge, addressing the problem and developing solutions should be a priority for the stakeholders.

One obvious solution is to eliminate duplication and merge documents wherever possible. Is it possible to create one document that satisfies both a state’s and the federal government’s requirement for the same purpose or issue? Why is it necessary to resign the application documents at closing if they were correctly completed at the time of the application and require no updating? Can documents such as the lead paint disclosure be included and combined in another, more comprehensive document? Is it possible to merge five or more individual documents into one and thus reduce five signatures to one? If the answers to these questions are yes, let’s identify what entity will take the lead (NRMLA?) and develop a plan of attack. Much industry and government attention is paid to “protecting” our industry. Equal attention is paid to “protecting” our borrowers. I don’t think it is asking too much to give consideration to the seniors we serve by removing a little of the unfairness inflicted upon them when it comes to signing our documents.

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