Before you can get a reverse mortgage, you have to submit to financial counseling. And that’s why talking to HECM counselors can be a great way to gauge what’s in the pipeline and identify emerging trends.
According to two counselors certified by the U.S. Department of Housing and Urban Development to administer reverse mortgage counseling, volume is nearly back to normal following program changes that took effect last year.
For one agency, that has a lot to do with the new proprietary products that have come to market.
“This month alone, we’ve already done 20 jumbo counselings, and it’s only the 15th. That’s a lot,” said Jennifer Cosentini, housing director at Cambridge Credit Counseling in Massachusetts. “Six months ago, we would only see one every couple of months, it was so rare that the counselors weren't even sure how to do it.”
Cosentini said borrowers have been responding well to these non-agency offerings.
“In the beginning, we thought maybe borrowers weren’t going to like these jumbo loans because the interest rates were higher, but now interest rates are lower and the closing costs are less than a HECM,” she said. “We’re getting a pretty good response from all the borrowers.”
Cosentini said that their volume is back to where it was prior to the changes.
“Some of it has to do with jumbo interest, and some of it is that lenders have come up with different strategies to sell the HECM,” she said. “It took a little while, but they’ve finally gotten to where they needed to be.”
Christena Durost, a counselor with Housing Options Provided for the Elderly (HOPE), said that while their volume is not quite back to normal, they are seeing a gradual increase in referrals every month.
Durost said HOPE is not yet providing counseling for the new proprietary products but is interested in doing so. The most notable thing she’s seeing with the HECM right now is a significant variation in margins.
“There used to be a pretty tight range, normally within a quarter to half a point. Before, lenders would stay in the same range on margins and then compete on fees and lender credits,” Durost said.
“But now, there is a much wider range. I saw a 1.3% margin this week, and then I had client who was offered a 3.875% margin – that was really shocking,” she said.
Cosentini also said she is seeing major margin variation. “They are all over the place,” she said, adding that she’s noticed a trend toward a more sophisticated borrower as well.
“We do not see a lot of last-minute, desperate borrowers anymore. I’d say maybe 30% are last resort,” she said. “Most of them are really doing this for good reasons and are planning ahead for the future.”
Durost said she sees a mixed bag.
“I’m still getting desperate, low-income borrowers, but the loan just isn’t working as well for them as it used to,” she said.
“The most common reason for people to do this is still to pay off an existing mortgage,” Durost added. “Sometimes that’s because they can’t afford to pay the existing mortgage, and sometimes it’s because they are planning for retirement.”