Reverse Your Mortgage

NEW REVERSE MORTGAGE COUNSELING PROTOCOL

Starting September 11, 2010, reverse mortgage counselors will be implementing a new counseling protocol.  HUD counselors will be required to use the national Council on aging is Financial Interview Tool  (FIT) to create a budget for their clients based upon their income, assets, debt and expenses.

This tool is designed for counselors to help their clients understand their current situation, and if a reverse mortgage can assist them in their long-range goals of aging in place.

While some potential reverse mortgage borrowers may consider this new protocol unneeded, meddlesome or a bit lengthy considering that less than 20% of Americans have not had any kind of budget training others might think that it might be helpful and a protocol to prevent disasters for older Americans in the future in the area of successful aging in place with a reverse mortgage.

This new protocol will help potential reverse mortgage clients assess their current financial needs and their future financial needs and if a reverse mortgage should be considered. Counselors will also be completing a BenefitsCheckUp for clients whose income falls 200% below the poverty level or are disabled. This checkup can quickly screen clients for more than 1800 public and private benefits programs that they may be eligible for.

The counselor will provide the potential reverse mortgage client with (the loan originator may also provide):

Benefit Summary/Comparison Scenario

Amortization Schedule

Preliminary Estimated Fee Schedule

Total Annual Loan Calculation

“Use Your Home to Stay at Home” – National Council on Aging Guide

 

The role of the counselor is that of an independent third party. Their job is to provide objective information on reverse mortgages to their clients so that they may make a fully informed decision as to if it's for their highest benefit. It's been my experience in working with clients that at the very least HUD reverse mortgage counseling can be a review of the information I've provided for my clients on the nuts and bolts of how reverse mortgages work.  For the 20% of potential borrower's that may find this reverse mortgage counseling a bit tedious, in my opinion it's a safety net for those consumers who might not think about the implications of how reverse mortgage will affect them in the long run. This will help avoid defaults from the failure of paying taxes and hazard insurance that would only cause more stress to the FHA insurance program that puts the entire reverse mortgage program at risk, along with that a healthy future market.

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SENIOR BENEFITS CHECK UP

Anyone attaining a reverse mortgage must attend a reverse mortgage counseling session conducted by a HUD approved counselor. This is a consumer protection mechanism that is mandated by HUD and is a reverse mortgage industry standard.

This summer HUD will implement a new counseling protocol. One of the new tools that the counselors will be using to assist clients is the national Council on Aging's benefits checkup online screens service.

Benefits checkup is designed to help seniors discover benefits from existing federal, state and local programs that they may not know about. These benefits can include heating and energy assistance, restriction savings programs and income supplements.

Millions of older people have limited incomes and are eligible for these benefits but do not know about them. Benefits checkup includes more than 2000 public and private benefits programs from all 50 states and the District of Columbia. They include:

• Prescription drugs
• Nutrition (including Supplemental Nutrition Assistance (SNAP)/Food Stamps)
• Energy assistance
• Financial
• Legal
• Health care
• Social Security
• Housing
• In-home services
• Tax relief
• Transportation
• Educational assistance
• Employment
• Volunteer services

Since 2001, millions of people have used BenefitsCheckUp to find benefits programs that help them pay for prescription drugs, health care, rent, utilities, and other needs. If you know of an older American who might benefit from this program refer them to http://www.benefitscheckup.org. The process is a little time consuming but worth it for those in need.

FHA to INCREASE MIP and CUT PROCEEDS FOR REVERSE MORTGAGE PRODUCTS

Earlier this month the Obama administration announced that it was requesting a $250 million credit subsidy for the housing administrations reverse mortgage program. Sec. Donovan of HUD, also announced that HUD would increase the ongoing annual mortgage insurance premium from 1/2% to 1.25% (.75% increase). He also shared they would lower proceeds (gross principal loan limit) from a low to mid single digit cut. This is a far cry from the 10% cut that HUD executed last year to the program.

Sec. Donovan added that the subsidy of $250 million is a reaction to last year's adjustments in order to keep the integrity of the reverse mortgage program and the availability of the program to older homeowners.

By law, FHA must operate at par. However what's interesting is the program has only had a shortfall this last year. For the past 20 years it has run at par, or even better.

FHA is projecting  endorsement of over 120,000 reverse mortgages in 2010.

For some reverse mortgage recipients, the increase in MIP premium might hold a slight advantage. If one opts for the adjustable reverse mortgage with the credit line, the unused credit line does increase at the same rate as the loan rate plus MIP. For example, the increased .75% MIP could provide a $100,000 credit line, would increased value of $7758.25. Growth rate compounds annually on any unused portion a reverse mortgage credit line.

A reverse mortgage is a financial tool. It's an effective financial tool for many people and appropriate for many.  It's important to work with a professional who is educated and who helps you ask the right questions about your unique situation. It's one thing to know the product, it's quite another to be able to ask the correct questions and provide thorough information in order to help the client make an informed appropriate decision. If you have a reverse mortgage question, call me. I'm happy to help.

Angella Conrard

Reverse Mortgage Advisor

Individual Branch Operator

iReverse Home Loans

866-949-7030

or log onto www.reverse-your-mortgage.com

Highlights and Trends from the National Reverse Mortgage Lenders Association 2009.

I have just returned from the national Association meeting on reverse mortgages. It certainly was a whirlwind of information, considering today’s economy and real estate environment. Here are a few highlights from the meeting:

1.    Trends in FHA, by law. FHA must have a positive cash flow. It cannot have a shortfall. Last year, the reverse mortgage program had $800 million shortfall and requested resources from Congress. It was denied. In order to sustain the program HUD cut the by 10%. A HUD official from the single-family housing program, commented if housing values continue to decline, HUD may have to further make changes ( reduce reverse mortgage proceeds further) to maintain the integrity of the program.

2.    There will be changes in reverse mortgage counseling protocol. HUD counselors will be required to assess household budgets. This will help the counselors gather information so that they can help borrowers decide whether a reverse mortgage makes sense for their financial situation.

3.    Financial materials will be required to be provided in advance to borrowers. Prior to their counseling. These materials may be provided may be provided by the lender. The borrower has chosen to work with.

4.    There will be no more on-demand reverse mortgage counseling sessions.

5.    Counselors will be required to make sure the clients fully understand how a reverse mortgage works. They will be asking a series of questions of the potential borrower during the counseling session.

6.    HUD is seriously working on developing what is called an ”HECM Mini”. This is a reverse mortgage for borrowers 62 years old and older similar to the current HECM products. The difference will be that the borrower will not be required to take the full amount of the proceeds. This is an option for seniors who do not need as much money of a reverse mortgage. This HECM Mini will be at least a year in the making.

7.    There recently was a legislative notice of non-concurrence. In regards to reverse mortgages and co-ops. This means there will be further delay on the mortgagee letter to allow reverse mortgages to be done on co-ops. When asked, Meg Burns, head of single-family housing at HUD about this delay, she gave the opinion that they would be able to resolve this issue by the first quarter of 2010.

8.    There is a new standardized good faith estimate that will be implemented in January 2010.

9.    There have been 650 reverse mortgage is used for purchase to date.

10.   Mortgage insurance is required on reverse mortgages. It has been long perceived as expensive loan due to the insurance. It was commented by Meg Burns had a single family housing at HUD that the current structure of mortgage insurance on reverse mortgages is the least expensive. There has been talk for years, about reducing the upfront premium and increasing the ongoing percentage a borrower pays in mortgage insurance on reverse mortgages. HUD is still considering a restructuring of the program. But it was reiterated that by law, FHA, must have a positive cash flow. A 1% up front premium will be considered.

11.   Demand is still growing on reverse mortgages.

12.   There is over 93% satisfaction rate amongst borrowers who have attained a reverse mortgage.

13.   FHA and the housing Commissioner are focusing on risk. The current housing market has created this focus.

14.   On a positive note, Ginnie Mae A Federal Corporation that insures mortgage-backed securities is ensuring reverse mortgage securities.

15.   There is an increased investor and Wall Street interest in reverse mortgage securities.

16.   Floating-rate products are attractive to banks.

17.   As the market expands, it will make way for the development of jumbo reverse mortgages. However, it was the general opinion that we are at least 12 to 18 months before the development of jumbo reverse mortgages. The property value will have to be $1 million or more in order to make sense in the utilization of a reverse mortgage.

18.   HUD is concerned about tax and insurance defaults amongst reverse mortgage recipients.

19.   Ethical advertising is a must in the reverse mortgage business. Anything less will not be tolerated. Association members are asked to help police the industry and keep our industry clean. The Association has published updated guidelines and requirements in the advertising of reverse mortgages.

20.   Condominium projects approved prior to October 1, 2008 will need to be recertified. They can be recertified by HUD or an approved lender. Every two years all projects will need to be preapproved. It takes a local HUD office, approximately 4 to 8 weeks, with proper documentation to approve a project. Associations subject to lawsuits may come up against some difficulties in getting approved. HUD recognizes nuisance lawsuits, however the projects subjected to these lawsuits will need to submit supporting documents, and will be considered on a case-by-case basis.

21.   The average borrower of reverse mortgage is 74 years old.

22.   The average borrower’s income is $2500 a month.

23.   The average borrower has a $1000 shortfall. Every month.

24.   When surveyed, three years later, reverse mortgage borrowers showed a 91% improved financial situation.

25.   Reverse mortgage program is 20 years old.

26.   30% of loans that are currently done are FHA. 8% of FHA loans are in default.

E Street interview by AARP’s Sheilah Kast, on Retirement Living TV is an frank & excellent discussion on reverse mortgages.

HUD’s New Reverse Mortgage Counseling Set of Rules Includes Test for HECM Borrowers

 

The Department of Housing and Urban Development (HUD) is introducing a new counseling protocol to help borrowers consider whether a reverse mortgage is the right choice for them.

·       The new guidelines make sure that the clients initiate contact with counseling agencies.

o   There have been some instances where lenders have made the calls on behalf of their clients and then handed them the phone. This will no longer be allowed.

·       It also requires that lenders provide every client with a list of no fewer that ten HUD approved counseling agencies, five must be with in the state where the borrower resides and one must be within a reasonable driving distance.

o   HUD used to require counseling be performed face to face unless the client requested to receive telephone counseling. This proved to be difficult for some elderly borrowers and a majority of borrowers preferred the telephone counseling.

·       HECM counselors are required to review a client’s unique financial situation during a HECM counseling session. In order to conduct this review, a counselor must document a client’s budget based on financial information (e.g. income, assets, debts, monthly expenses) provided by the client.

o   It’s true that a majority of reverse mortgage recipients need a reverse mortgage. It is also true than less than 30% of counseling recipients have had any kind of financial or budget training. However, a reverse mortgage is a personal choice. The purpose of counseling is to make sure that the borrowers understand the loan, how it works, the costs and what the loan might look like in the future. I can understand this kind of review in the case of bankruptcy counseling where a client is attaining help for relief of debt. Will borrowers really want to share personal financial information with a counselor? What of the borrowers that attain reverse mortgages to help a child or enhance their lifestyle? Is income and budget information required to justify a personal decision? Reverse mortgage counseling is absolutely an excellent HUD and industry standard. It is imperative that a borrower fully understands any loan or financial product before attaining it. I believe that setting policies to help people make decisions that set them up for success is good, but I question requiring borrowers to provide personal information and personal reasons to a counselor before they can attain a loan. I think it would be a better policy to offer the option to the borrower to review their budget.

·       Counselors will have the authority to hold back counseling certificates if they feel the borrower fails to comprehend basic reverse mortgage concepts. Counselors will ask 10 questions from a list of 20 items published in the protocol and borrowers are required to answer at least 5 questions correctly to be eligible to receive a counseling certificate. If the borrowers fail the test, they are required to wait 7 days and then go through another counseling session.

o   I think this will be a good practice to incorporate into the counseling session. It is vital that borrowers understand their loan. If a lender has done their job properly a counseling session should simply be a quick review for the client. Reverse mortgages are not easy for everyone to understand. Even educated professionals are often challenged to understand the concept much less the intricacies of a reverse mortgage.

·       All counselors who wish to continue counseling borrowers will have to pass an exam demonstrating their knowledge of reverse mortgages.

o   This is an excellent requirement. The quality of counseling has increased dramatically over recent years. In the past borrowers have had to endure some counselors reading from a script. I personally have corrected counselors in some of the information that they have provided to borrowers. I would further have counselors trained in techniques in counseling. There have been instances in that a counselor’s accent or cadence of speech has inhibited a borrower’s ability to understand them.

I think certain portions of the new protocol are excellent. Testing of the counselors absolutely needs to be required. Counselors quizzing borrowers isn’t necessarily a bad thing. It can be done in such a way so as to document that borrowers understand reverse mortgages. I am however opposed to counselors asking for personal financial information which feels more like a violation of privacy. A borrower shouldn’t have to justify if and why they want a reverse mortgage. Reverse mortgages are a personal decision. Yes, it should be an informed one; however financial information is as personal as medical information. We have HIPAA laws protecting medical information, financial information should be the same.

Counsel for National Reverse Mortgage Association had this to say about reverse mortgage law making

According to James Milano, an attorney with the Washington, D.C. firm, Weiner Brodsky Sidman Kider, the urge to regulate may be reactionary. “State regulators may feel responsible for the subprime mortgage meltdown and don’t want to be fooled again,” he posited. Milano cites Washington State, California and Minnesota as having recently introduced bills and says “a couple of others may do something administratively.”

Further impetus may come from the fact that “government has a historically embedded role in reverse mortgages,” according to Peter Bell, president of the National Reverse Mortgage Lenders Association. That tendency could be played out in new state initiatives coalescing around “who can play - that is, loan-officer licensing, company approvals and product approvals,” he suggests.

Peter Bell said, “simple format that gives the senior or their family all the pertinent information they need, detail by detail. It’s there now,” he acknowledges, “but it’s buried in a thick sheaf of papers that you have to go digging through, and you’re at the mercy of your loan officer to figure them out.”

My Letter to my local Assembly woman re: AB329, Reverse Mortgage Elder Protection Act of 2009

Monday, March 09, 2009

 

Dear Assemblywoman Harkey,

 

I respect the proposal of AB 329 and the spirit of its creation.

My name is Angella Conrard. As a reverse mortgage originator of 4 years with a background in healthcare I can speak from experience. I am also the president of the National Aging in Place Council-Orange County and the director of the South Orange County National Care Council Chapter.

 

This bill if passed into law would be ineffective and only create hardship for seniors.

 

HUD already prohibits brokers from paying any of the counseling fees or referring to a specific agency. So the section stating that if they do pay the fee, they must notify the borrower of the conflict would be a violation of HUD regulations. We are also required to provide each client with a minimum of 5 counseling agencies. We are required to have our clients sign a disclosure upon the receipt of this list. With new agencies popping up continually this is an unrealistic provision. A more realistic provision is a list of 3 local counseling agencies and 3 referring agencies such as HUD or AARP.  The quality of counseling has increased significantly over the last few years. 99% of the time they provide good consumer counseling and it has proven to be an excellent consumer protection mechanism. A provision forbidding lenders to make any kind of donation to counseling agencies would be more effective.

The right of recession period of 30 days is excessive and would provide many problems for seniors. It is unfortunate but most seniors who attain reverse mortgages need them. In many cases you would be creating hardship with a 30 day right of recession period. We are not a society of planners. It is not uncommon for a senior to wait until they are in despite need of money before they attain a reverse mortgage. One third of reverse mortgages are done to pay for medical or home care.

 

I am currently working with a borrower who is 87 and has Lou Gerrigs disease. She needs her reverse mortgage to be able to continue to pay for her 24 hour caregiver.  Lenders will not fund a loan or release proceeds until the right of recession period is completed. The average completion time for a reverse mortgage from application is 30-45 days. She is just beyond 30 days from application date and has run out of money to pay her caregiver. VA and state benefits take over 6 months to attain. My client is just one of many who are doing the best they can to take care of themselves but who would be side swiped by such a law.

 

Many seniors whom I talk to got caught up in the refinance boom and no longer qualify for a reverse mortgage because they do not have enough equity, however with the new home purchase reverse mortgage product, they can often sell their home and retain enough equity to downsize so they can attain a more manageable home. They can move closer to children so they can have the support they need as they age. This bill would make home purchases with reverse mortgages impossible. No seller is going to consider selling to a buyer with financing of a reverse mortgage with a 30 day recession period. Such a recession period would not only inhibit the growth of the secondary market which eventually will create an environment to offer more products, but more seriously, lenders would not release funds until the right of recession is complete. This delays seniors from being able to pay for caregivers get relief them from burdensome mortgage payments, delays their ability to pay for medication and property taxes. You will hurt seniors with this bill.

 

In my opinion, a professional designation to qualify loan originators to provide reverse mortgages would be much more affective. The National Reverse Mortgage Lenders Association (NRMLA) has started the process to create such a designation with continuing education requirements. I agree, in that the originators need to be educated and be held to the highest ethics and levels of integrity, but do it by the educational requirements of the messenger not with legislation that will hurt seniors and the quality of their lives. I can assure you, I can recite many stories similar to this as other reverse mortgage originators can. I urge you to work with NRMLA to discuss this bill. It would be catastrophic for many people. NRMLA needs to complete the designation requirements and states need to adopt this as a requirement to originate reverse mortgages. It would require loan officers to take continuing education and ethics classes on a annual basis.

 

PLEASE DO NOT SUPPORT this bill. Contact Peter Bell, president of NRMLA 202-939-1741. I assure you this industry overall is dedicated to helping and protecting seniors.

 

Kind regards,

Angella Conrard

Reverse Mortgage Advisor

Changes in HUD Counseling

Revised 6-1-07 Latest Update from Direct Connect
Direct Connect is a service commonly used by reverse mortgage advisors to order third party counseling reverse mortgage counseling for their borrowers. One of the questions I posed to the head of the HUD counseling department in Santa Ana, CA is how are HUD counselors going to keep up with this rapidly changing industry. To their credit, each counseling session is performed with product specific information and the numbers that are discussed are specific to the loan estimates of the borrower. See below for further information.