There seems to be a fear that lenders who caused the downfall of the mortgage industry are entering the reverse mortgage industry and will be the next subprime product. Legislators here in Minnesota and elsewhere and even the US Banking Regulator, John Dugan, has made statements to this account. However, in reality those originators are few and far between in the reverse mortgage side of things.
Originating the reverse mortgage takes patience, kindness, a “social worker” attitude and a teacher aptitude versus a sales approach. The subprime lenders don’t fit this profile. They are looking for a quick and fast process to make money and move on to the next “deal.”
Because of this fear seniors and their families are afraid to consider a reverse mortgage that could really benefit them during their retirement years. Addressing this issue, Atlanta’s NBC affiliate featured Joe Morris, President of Generation Mortgage, a leader in the reverse mortgage industry and a lender whom we at Reverse Mortgages SIDAC, are partners. You can view the interview by clicking here: http://www.11alive.com/news/local/story.aspx?storyid=131277.
While seniors and their families shouldn’t be afraid of the reverse mortgages and lenders shouldn’t have the high fear factor of the induction of subprime lenders into the reverse mortgage arena, there are some lenders that shouldn’t be originating reverse mortgages. You can help protect against this. To help ensure that you are working with an originator (also referred to as Loan Officer/Reverse Mortgage Specialist, Reverse Mortgage Advisor or Reverse Mortgage Consultant) who is experienced, knowledgeable and meets the industry’s standards, consider the following when talking with reverse mortgage lenders. Yes, the list is long but knowing the answers to this list of questions will help protect you.
- How much experience does the Reverse Mortgage Originator have with reverse mortgages (not just conventional mortgages as they are quite different)?
- Work with experienced reverse mortgage lenders who specialize in reverse mortgages. Ask how many years they have been originating and if/what training they have received.
- How many reverse mortgage loans has the Reverse Mortgage Originator done?
- Experienced loan officers have originated hundreds of loans. Ask how many they have originated, not just their company or lender, but them personally.
- Do the mortgage company and Reverse Mortgage Originator have the required federal and state licensing?
- Mortgage Brokers/Originators have completed federal and state education, testing and licensing requirements. FDIC Banks and Credit Unions are registered but have not completed the education, testing and licensing requirements.
- Ask your originator to provide documentation that they are licensed and/or look them up at http://mortgage.nationwidelicensingsystem.org under “Consumer Access” – if they are not listed they are not licensed to originate loans.
- In Minnesota all individual mortgage loan officers (performing marketing, educating, originating functions) have to be licensed.
- Who is the mortgage company’s lender sponsor?
- Originating mortgage broker companies have to be sponsored by a Reverse Mortgage Lender who is FHA licensed.
- Do they offer all reverse mortgage programs available for FHA’s HECM and when available, proprietary (private)?
- Experienced originators should offer and be familiar with all the various programs available.
- Do they assist you in determining which program is most suitable for your needs?
- Experienced originators should discuss the various programs and help you to assess the program most suitable for your needs.
- Do they just try to “sell” the program to you or do they help you determine if the program is appropriate for your situation?
- An originator should not pressure you or sell you a particular program, they should discuss the various programs and have YOUR best interests at heart.
- Will they meet with you face-to-face for an information session and the application? Or do they just mail you the application package?
- Because of the complexities of the program, originators should meet with you face-to-face to complete the application package. These sessions normally take around 2 hours to review all the documentation and insure you understand what you are signing. Don’t sign a package that is mailed to you – find an experienced local lender to work with you.
- Do they disclose ALL information and identify ALL costs, explaining the program(s) and details and terms accurately and clearly so you understand them?
- Originators should be willing to disclose and discuss all information regarding reverse mortgages in terms and a way so you understand them. They should welcome your questions and be able to answer them to help ensure you have an understanding.
- Do they know what costs are not allowed by FHA?
- HUD regulates the fees and a mark-up of fees are not allowed – you should only be paying the actual cost of the service. Your originator should know which fees are allowed by HUD and which aren’t. They should fight for you if a title company is charging processing fees. (Many charge processing fees without the lender or originator addressing it with their title company.) The cost of the appraisal should be their actual charge – ask them what they charge, the settlement statement should reflect this actual amount. (Proprietary products, when available, followed these same guidelines.)
- Where are their loans processed?
- Your loan should be processed in an office where they can provide a personal touch vs sending them across the country to a processing center.
- How fast do they process their reverse mortgage loans?
- Because the rates can change so quickly, processing (application to closing) should be able to be completed in 30 to 45 days under normal circumstances. If additional documents are needed from you and you don’t provide them, the processing could take longer.
- Who does the processing of the reverse mortgage loans? Does the processor have experience processing reverse mortgages, not just conventional mortgages? How much experience does the Reverse Mortgage Originator have with processing and solving the issues that arise during processing?
- Because reverse mortgages are different than forward mortgages, the processor should have experience with reverse mortgages. Loan Officers should also have an understanding of the processing and assist in solving any issues that arise during the processing – they should not just be focused on getting the sale and then moving on.
- What type of customer service do they provide? Do they have testimonials and/or references?
- Experienced originators should pride themselves on their customer service and be able to provide testimonials and references – ask for them.
- Will they (the Reverse Mortgage Originator) answer questions and continue to provide customer service once the loan is closed?
- Originator’s customer service should include being available even after the loan is closed. If they don’t have a lot of experience and/or they move from one lender to another you may not get your future questions answered.
- Does the Reverse Mortgage Originator have the knowledge and experience on how the reverse mortgage and other Minnesota programs interact? Programs such as Medical Assistance/Medicaid, Elder Waiver, home improvement loans from cities and counties.
- Originators should be familiar with how the reverse mortgage interacts with other programs. If they don’t find a different lender to originate your loan. You may not need this now, but you may in the future.
- Does the Reverse Mortgage Originator have the knowledge and experience with the requirements of the reverse mortgage if there is a power of attorney, guardian or conservator, a bankruptcy, Trust or Life Estate?
- Originators should have knowledge of what the requirements are or you may start your loan but it may not make it through underwriting or be insured by HUD if your loan doesn’t meet their requirements.
- Do they or the companies work with (mortgage company, lender, underwriter, servicer, etc.) offer financial or insurance products in addition to the reverse mortgage? Are they trying to cross-sell (selling more than one product) during the origination of your reverse mortgage? Will you be contacted and offered other services such as financial or insurance products by them or the companies they work with after the loan is closed?
- Cross-selling is not allowed. Originators should only specialize in reverse mortgages and not sell or encourage you to purchase other products. You are not required to purchase annuities, insurance or financial products with your reverse mortgage proceeds.
- Are you treated with respect and dignity?
- You, of course should be treated with respect and dignity. If you feel you are not, find a different lender.
- Do they protect your privacy and confidentiality and not distribute personal financial information to any third party without permission from you?
- To protect against identity theft you want to be assured that your information is private and kept confidential. Ask what their policies and procedures are.
- Do they encourage you to discuss the loan transaction with family and/or trusted advisors?
- Originators should encourage you and welcome talking with your family and/or trusted advisors about your decision to do the reverse mortgage.
- When completing the application do they leave you copies of what you have signed and copies of the sample closing documents?
- At the time of application or within three days, originators are required to leave you copies of what you signed including the calculations and Good Faith Estimate, two booklets, and samples of the closing documents. If you do not receive these, request them, if you have problems receiving them, change to a different lender.
- Do they provide a list of FHA counselors without steering you to a particular one?
- HUD does not allow a lender to steer or be involved in your choosing or receiving counseling.
Be cautious that you do not complete an application or give the lender the counseling certificate until you have made your final decision of the lender you are choosing. Once an originator or lender has the counseling certificate they can obtain a FHA number and lock you into using them when they might not be your choice of originator or lender.
Don’t be afraid of reverse mortgages or reverse mortgage lenders. Reverse mortgages won’t be the next subprime product. Be educated on reverse mortgages and work with an originator and lender who is experienced, knowledgeable, meets the industry’s requirements and fulfills the above list of expectations.
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