Often stated, the reverse mortgage is expensive and the fee the originator makes is part of the reason. Originating reverse mortgages is not as easy as one, two, three but a very time consuming process.
As we were going through the application and process, Joan, a recent client, said, “I sure hope you are being paid well for all this time and effort you put into my loan.” I hear these comments from most all of my clients.
To help you understand the work and time we, as reverse mortgage expert originators, put into originating and processing a reverse mortgage let me walk you though an outline and approximate time involved. Note: While you may not read the outline word for word (yes, it’s long), you’ll at least have a good idea of the time involved for originating each reverse mortgage. Make sure you go to the last five paragraphs for the conclusion.
- Take the phone call from one interested in a reverse mortgage. Generally spend 30 to 60 minutes providing initial information and getting information to run calculations to determine eligibility.
- We generally spend time on researching property values. This can be critical to determining the feasibility of completing a reverse mortgage if there is a significant mortgage balance outstanding and important even without debt payoff concerns just to give the homeowner the most accurate estimate of loan proceeds possible – 20 to 60 minutes.
- Enter information into computer program, run calculations, prepare informational folder – approximately 45 to 60 minutes.
- Drive 60+ minutes round trip to the prospect’s home for an initial educational meeting.
- Discuss their situation and educate them on the reverse mortgage and possible other options – 1 to 3 hours.
- Leave a list of reverse mortgage counselors for the required FHA HUD insured Home Equity Conversion Mortgage (HECM) counseling.
- Generally there are numerous phone calls to answer additional questions. These calls can be 15 minutes to an hour or more each call.
- Sometimes talk with family members or have an additional 1 to 2 hours face-to-face with prospect and their family.
- Receive phone call that the prospect is ready to proceed with the loan. Schedule application time and date – 10 to 30 minutes (longer if they have additional questions).
- Call prospect to gather information needed for application as well as which option they are choosing – 15 to 20 minutes.
- Enter complete information into computer program – 20 to 30 minutes.
- Prepare the full application package for signatures and a separate borrower set – 60 minutes.
- Drive 60+ minutes round trip for the application. Drive time can be 5 to 10 hours round trip if the client is outside the metro area. (Some lenders will mail the application however I believe that the face-to-face meeting provides better explanations of each of the forms one is signing.)
- Spend 1 to 2 hours to review information on application and get signatures.
- If counseling wasn’t completed prior to the application, work with borrower to receive counseling and counseling certification with signatures of both the counselor and the borrower(s) which is needed prior to starting the processing of the loan – 15 to 30 minutes.
- Originators now need to make contact with the chosen counselor, prior to the counseling session, and provide certain financial information to the counselor (calculations, etc) – 15 minutes.
- Make phone calls to have the signed counseling certificate faxed – 60 minutes. Or will drive to pick up certification – another 60+ minutes round trip plus 10 to 15 minutes with borrower.
- Review file and prepare for submitting for processing – 15 to 30 minutes.
- Start processing. We are a reverse mortgage broker (one who works with more than one lender) and we process the loans in our office, we don’t send them off somewhere to another office or state to be processed. While the processor is different than the originator, the originator of a broker is often involved in the facilitating the processing by working with the processor and the borrower through to the closing and funding, not just taking an application.
- Enter information into processing software program (one we have developed on our own) – Processor: 30 to 45 minutes.
- Request FHA Case Number – Processor: 10 minutes.
- Order Title Report – Processor: 10 minutes.
- Order appraisal from Appraisal Management Company – Processor: 10 minutes.
- Order Insurance Binder – Processor: 10 minutes.
- Pull Flood Certificate – Processor: 10 minutes.
- Pull Credit Report – Processor: 10 minutes.
- Pull other required documentation – Processor: 10 minutes each when necessary.
- Review Title Report when received – Processor and Originator: 15 to 30 minutes.
- Review appraisal when received – Processor and Originator: 30 minutes.
- Review Insurance Binder – Processor: 10 minutes.
- Review Flood Certificate – Processor: 10 minutes.
- Review Credit Report – Processor: 10 minutes.
- Request any changes if necessary – Processor: 10 minutes for each change that is necessary.
- Phone calls with borrower for clarifications on any information that is on title, credit report, etc. For example if a mortgage is on title that we didn’t know about, showing taxes weren’t paid, a judgment is on title or the credit report – Originator: 15 to 30 minutes each call.
- When appraisal is received, enter new value, if repairs are required, etc. in software program for calculations – Originator: 10 minutes.
- Update processing software program with changes – Processor: 10 minutes.
- Call borrower to advise borrower of appraised value, required repairs if any, and any calculation changes – Originator: 15 minutes.
- Or up to several hours based on the appraised value, repairs, or other factors, the borrower decides a program change would be in their best interest (i.e., a change from fixed rate to adjustable rate), or contractor bids or additional inspections are needed for repairs.
- Prepare re-disclosure for borrower – Originator: 10 to 15 minutes.
- Or up to several hours or more if, based on the appraised value or other factors, the borrower decides a program change would be in their best interest (i.e., a change from fixed rate to adj rate).
- Mail re-disclosure to borrower – Originator: 10 minutes.
- Review all documentation to make sure everything needed is in the file for underwriting – Processor: 20 to 30 minutes.
- Multiple follow up calls to the borrower may be necessary to remind them and/or advise them on missing, corrected or additional documents that are necessary (i.e., SS card shows maiden name, etc) – Originator: 10 to 20 minutes each call.
- Scan and submit file to underwriting – Processor: 15 minutes.
- Request final fees from title agent – Processor: 10 minutes.
- Address any underwriting conditions by contacting title company, appraisal management company, borrower, or making other necessary changes – Processor: 30 minutes to several hours depending on the condition. Conditions are required so that HUD will insure the loan and the investors will provide the funding.
- Have borrower sign loan commitment – required in MN to be signed and dated by borrower and can’t close for 7 days – Originator: 60+ minutes round trip to get borrower’s signature plus 10 to 15 minutes with borrower. Can be done via fax or scanned and emailed if borrower has this capability. If they live outside the metro area and don’t have capability to fax or scan and email the commitment will be done through the mail delaying the time for the closing (not what the borrowers want at this point).
- Gather, review and Submit changes/conditions to underwriter – Processor: 10 to 15 minutes.
- Discuss with borrower how they want their reverse mortgage funds and their availability for closing – Originator: 15 to 30 minutes.
- Schedule closing according to availability of title agent/signer (and possibly a notary), borrower and loan officer and lender’s closing department’s timing requirements, and possibly with family members and/or Power of Attorney (POA) – Processor and Originator: 30 to 40 minutes each of the phone calls.
- Prepare closing document request to send to lender – Processor: 15 minutes.
- Receive closing documents, review that the numbers match those in our program – Processor: 10 minutes.
- Attend closing. We believe in attending the closing with our borrowers to assist in explaining the closing documents. We generally close at borrower’s home for their convenience or would drive to the title company’s office – Originator: 60+ minutes round trip drive time. Drive time can be 5 to 10 hours round trip if the client is outside the metro area.
- Closing with borrower – 1 to 1 ½ hours.
- Follow up on funding conditions, i.e. missed signatures or documents, if there are any (we rarely have any) – Processor: 10 to 30 minutes.
- If necessary, we may make another trip to the borrower’s home to get a signature on a document in order to keep on schedule for funding) – Originator: 60+ minutes round trip drive time. If outside of the metro area we will assist borrower via phone and having sent over-night the necessary documentation – 60+ minutes.
- Keep borrower advised of funding status, i.e. when funds were wired to their bank and payments made for paying mortgages, taxes, etc. – Originator: 10 to 15 minutes per phone call, generally 2 calls.
- Once funded, send thank you letter – Originator and Processor: 15 minutes to prepare and mail.
- Answer questions from borrowers during the life the loan – generally 15 to 30 minutes each call. We often talk with our borrowers once or twice a year.
What is described above is an ideal no-problem/issues loan. The majority of our loans can have multiple issues that increase our time investment significantly including POA, Conservatorships, Trusts, non-borrowing and non-occupying individuals on the title, private liens and a long list of property issues including manufactured homes, condos, rural properties, repairs, etc. These can result in additional huge time requirements on the originator’s and processor’s part.
We also continually market for new clients meeting with referral sources and reverse mortgage prospects (some of whom decide to wait or not do the reverse mortgage), as well as other marketing efforts.
A good loan originator will take time to meet with the prospects, educate them, their families and advisors. They will also be familiar with the processing and assist with the processing as well as be available to answer questions even after the loan is closed. Originators, processors, underwriters, lenders, title companies and their settlement agents, and all involved in the loan process need to be compensated for their time, experience, and expertise.
The originator does NOT receive the full fee collected. The fee received by the reverse mortgage broker covers the originator’s salary, the processor’s salary, marketing expenses, overhead for the business such as computers, office supplies, copiers, health insurance for employees, etc. Originating a loan is not charged by the hour. However if we calculated time versus pay, with some borrowers, because of various problems that come up or they need some extra hand holding, if we were to be paid by the hour there have been times when I would make less than $10 an hour.
As we go through the application and process, my borrowers, as Joan did, recognize the time we put into helping them with their reverse mortgage and don’t question the fee we are paid. I hope this outline helps you also understand that it is a time consuming process and the reason the fees are what they are. And when broken down “all that money” is not really all that much compared to the time involved.
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