What To Consider When Choosing Your Reverse Mortgage Originator

Reverse Mortgage Originator Explaining Documents to a MN BorrowerWhen you have decided to explore or to proceed with a reverse mortgage you want to make sure you are working with an originator you are comfortable and has the knowledge and experience to guide you through the process.  Originating the reverse mortgage takes patience, kindness, a “social worker” attitude and a teacher aptitude versus a sales approach.  There is a difference in originators with their expertise, knowledge and experience with reverse mortgages along with the customer service they provide.

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 choosing your reverse mortgage originator.  Yes, the list is long but knowing the answers to this list of questions will help support and 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 originators 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 reverse mortgage loans.  Ask how many they have originated, not just their company or lender, but them personally.
  • Does 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 personally are licensed and/or look them up at the National Mortgage Licensing System  – if the person you are talking with is not listed they are not licensed to originate loans.
      • Make sure they are licensed in the state you are located.  In Minnesota all individual mortgage loan officers (performing marketing, educating, originating functions) have to be licensed.  This includes completing the application – the originator should be guiding you through the application and explaining the documents you are signing, not just having a notary at the application as they are not approved to provide you information or explanations on the documents you are signing.
  • Who is the mortgage company’s lender sponsor?
  • 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.
  • If you are in a manufactured home, log home or unique property, do they work with a lender who will accept these properties?
    • Many lenders no longer accept these properties but some do and as a broker, we, Reverse Mortgages SIDAC work with lenders who do accept these properties.
  • 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.  Originators should be showing you at least 3 if not 4 options.  Is the adjustable rate program better than the fixed rate program for your situation.  Are they discussing how you may be able reduce the upfront Mortgage Insurance Premium (MIP)?
  • 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 options and have YOUR best interests at heart, i.e. is an adjustable rate better than a fixed rate for your situation.
  • Will they meet with you face-to-face for an information session and the application?  Or do they just mail you the application package or send a notary to the application?
    • 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 or one where a notary is observing your signature – find an experienced originator who is local/in your state 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 or “junk” fees.  (Many charge processing fees without the lender or originator addressing it with their title company.)  The cost of the settlement statement should reflect this actual amount.
  • 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.  Originators 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 from their reverse mortgage clients – 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 originator to originate your loan.  You may not need this now, but you may in the future and need assistance with this.
  • 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 originator.
  • 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.  But respect you if you chose otherwise.
  • 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, 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 originator.
  • Do they provide a list of FHA counselors without steering you to a particular one?
    • HUD does not allow an originator to steer or be involved in your choosing or receiving counseling.  Minnesota law requires borrowers be counseled by a counselor located in Minnesota, they cannot choose any of the national counselor.
  • Are they familiar with the Minnesota state laws (or whichever state they are originating in)?
    • If an originator is originating in your state they should be familiar with the state’s laws, i.e. Minnesota has some particular laws that pertain to reverse mortgages – all originators are, unfortunately, not familiar with them.

Be cautious that you do not complete an application or give the originator the counseling certificate until you have made your final decision of the originator 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.

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.

© 2009-2014 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: http://wp.me/p4EUZQ-YR

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.

You Don’t Need To Have A Mortgage To Do A Reverse Mortgage

A reverse mortgage is often used to pay off a mortgage which improves the homeowner’s cash flow by eliminating their mortgage payments.  But you don’t have to have a mortgage to “reverse the mortgage.”

You Don't Have To Have A Mortgage To Benefit From A Reverse MortgageMy borrower, Marjorie didn’t have a mortgage on her home but did a reverse mortgage to be prepared for future needs.  She used some of the initial funds to purchase hearing aides and left the rest in a line of credit.  She was happy with her decision to do her reverse mortgage because she now has security knowing she has funds available for her needs, independence to live on her own without relying on her family for financial support, she’s maintained her dignity of being able to pay her own bills, and continues having control of her life and the ability to make her own choices.  She recently took some funds from her line of credit to make a trip from Minnesota to California to visit her daughter who lives there – she wouldn’t have been able to do this without having her reverse mortgage.

A reverse mortgage is a mortgage with special terms for seniors 62 and older that provides them cash for whatever they need or want.  Monthly mortgage payments are not required and income or credit scores are not considered to qualify. The funds can be received in a monthly payment, paid to you, a line of credit with a growth rate, a lump sum or a combination of these.  The loan is due when the home is no longer the primary residence of the borrower(s) or on the 150th birthday of the youngest borrower.  The borrower is still responsible for paying taxes, insurance and maintaining the property.

A reverse mortgage doesn’t mean you are reversing a current mortgage, it means that rather than having to make payments on a mortgage, funds can be available to you without monthly mortgage payments.

The amount loaned is based on the appraised value (determined by a FHA licensed appraiser) or FHA Lending Limit, whichever is lower, the age of the borrower, the expected interest rate and the program chosen.  Any liens or mortgages need to be paid prior to determining the amount available in a line of credit, monthly payments or lump sum.

When there are no current liens or mortgages on a property, more accessible funds are available for borrowers.

As an example, with a $200,000 home value for a 75 year old person and the current interest rate on an adjustable loan (the program that offers the monthly payment, line of credit option, lump sum or combination option; the fixed rate requires all funds be drawn in a lump sum), the amount available after closing costs is $128,805.

The $128,805 can be left in a line of credit or taken in monthly tenure payments of $767, this means you are paid this amount each month as long as you are living in the home as your primary residence.Enjoying remaining at home with a HECM reverse mortgage

If there is a current lien or mortgage that needs to be paid, say in the amount of $50,000, the amount available after paying for the current lien or mortgage and the closing costs is $78,804 which can be left in a line of credit or $469 received in monthly tenure payments.

Either situation can provide security, independence, dignity and control for borrowers but with no current mortgage to be paid off, more accessible funds are available.  The funds can be used for whatever the borrower needs or wants, such as enhancing one’s retirement, home modifications or repairs, medical expenses, home care, or even just giving that extra elbow room.

Some pertinent facts about reverse mortgages:

  • You own the home, no one else does.
  • You won’t lose your home because of a reverse mortgage – you don’t have to make monthly mortgage payments.  If you don’t pay property taxes, insurance, maintain the home or abide by other terms of the loan, the loan may be called due and payable.
  • Tax-free money – consult tax advisor but make sure they know the facts about reverse mortgages
  • The most common reverse mortgage, HUD’s Home Equity Conversion Mortgage or HECM, and only one available in Minnesota, is government insured and funds are guaranteed to be there for you.
  • You or your heirs get to keep any remaining equity after the loan balance is paid off.
  • There is no personal liability to you or your estate when repaying the loan and the loan balance is higher than what the home can be sold for.
  • There are no out of pocket costs other than the cost of the appraisal.
  • Closing costs typically become part of the loan balance.  Closing costs compare to those on a conventional or “forward” mortgage – the difference is the FHA Mortgage Insurance Premium.
  • A credit report is pulled to check for any federal liens or debts that would be required to be paid.
  • You can’t access 100% of your home value at the time of your closing – the amount available is based on your age, your home value or FHA lending limit (currently $625,500), an Expected Interest Rate and the program chosen.
  • The funds may be received in a line of credit, lump sum, monthly payments or a combination of these.
    • Line of credit grows based on the current interest rate plus 1.25%
    • Monthly payments may be received as tenure payments (for life as long as the home is your primary residence) or structured to fit your needs.
  • Historically the interest rate is lower than conventional loans.

Just because you don’t have a current mortgage doesn’t mean a reverse mortgage wouldn’t be beneficial to you.  Consider having security knowing you have funds available during your retirement years with the benefit of improved financial health just like Marjorie did.

© 2012 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link:  http://wp.me/p4EUZQ-YQ

Related articles:

Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.

This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.