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Resistant Reverse Mortgage Borrowers
What Turns Reverse Mortgage Prospects Away?
Nearly 1 in 4 borrowers decide against a reverse mortgage after HUD Counseling. Is it HUD counseling or low appraisals? Watch the video to learn more.
10 Comments
Shannon,
Good video but you missed property condition as a key fallout factor. We see a significant number of files cancel post inspection but before the final appraisal is completed.
Good point Erik. Property conditions often come into play. Needs-based borrower’s properties are more prone to have these issues.
Mr. Richard,
It is only the increase in the fallout rate that is really at issue. The long-term rate seems systemic and difficult if not impossible to gain much appreciable change.
For the first time in HECM history, the pull through rate of certified counselees is less than 50%. This is outrageous and needs a great deal of work to “reverse.”
I just one client call me after counseling with Greenpath in Hauppauge, NY. She was screaming but she was paralyzed with fear. The counselor was bullying and telling her if she took a vacation, she would be at risk for foreclosure, he thought she was incompetent, she had no right to the Reverse Mortgage becasue she understood nothing.
She was so frightened, she called to say she will not do it. I saved it by going over the costs, the GFE. He told her that at closing I would most likely ask for the closing costs upfront.
I suggested that she may have been his first client and he was probably new.
After working so hard with her, to lose to counseling is just frustrating.
Wow, so I am confused did you salvage the deal or not? You are probably right though you probably got a rookie.
Shannon,
The rise in the fallout rate is far more dramatic than currently depicted. I have been working both with an industry expert and HUD in attempting to develop a reasoned and rational presentation on the issue.
HOWEVER, like you stated, it seems HUD does not want the public to have access to available counseling information even in summary form.
What we know is that based on the 4 month rule of thumb (of case number assignment to endorsement) and using case number assignment and endorsement data available to the public, the dropout rate between case number assignment and endorsement has risen on applications with case numbers assigned after September 30, 2010 [the month of required new counseling protocol implementation (specifically 9/11/2010)]. On an annualized basis it rose from just over 27% to over 30.4%. There is good indication that a significant portion of that increase is due to the FIT report. It may be that more than 3.4% of the current 30.4% is due to this source but there is no data to establish the exact amount. Remember total fallout or dropout following counseling certification is higher; we just do not know how much higher.
So why 27% before the new counseling protocol was implemented especially when the dropout or fallout rate was below 5% back in September 2007? It is clear that at first the rate rose due to lower home values and the surprise low appraisals had on certified counselees. But the question is if originators have been managing prospect expectations since at least early 2009, why has the percentage stayed about the same for over the last four years and is now at a slightly higher level?
While a small portion of the problem may be attributed to the less than credible FIT report which many certified counselees do not receive until after counseling and is normally not read until after a case number is assigned to the application, the overwhelming majority has to do with managing expectations of applicants regarding appraised values. As to why certified counselee expectations are not being bettered managed, that is a completely different topic. One which needs research and in-depth analysis.
In my opinion you must spend the time on what is store for people going through counseling.To that end, I have not lost a case due to counseling,on the other hand you must be honest with people after searching home values and feel their home will not pass muster.
The fallout has risen and appraisal is the common denominator. Even setting expectations low for appraisal, the hope that they will get a favorable appraisal keeps clients emotional values alive. In addition, bad information from their uninformed trusted advisors are adding to fall out. I am disgusted watching clients slip through the cracks because of appraisal expectations only to discover they no longer qualify at a later date.
I have lost (or had to re-educate) many clients to misinformation from the counselor. Just today one of my borrowers who was counseled yesterday called to tell me that counselor told him that not only was he not ‘required’ to take a lump sum on a fixed rate loan but that he was not ‘allowed’ to take a lump sum on a fixed product. A month ago, another client was told that the amount we told her she would get was wrong because we forgot to include the origination fee in our quote so she would really get $6000 less than we told her. #1 it is a $200,000 appraised value so where did she get $6000 and secondly it is a fixed rate zero origination fee loan. These are just 2 quick examples off the top of my head. I spend a lot of my time overcoming borrower’s fears and doubts created by lack of knowledge on the part of the counselors. Is there a way for NRMLA to provide (mandated) training for the counselors. I understand not allowing lenders to do the training but someone needs to be training these people. How many seniors lose their homes, lose out on the benefits of a reverse, or make decisions that are not in their best interest because of misinformed counselors.
I’m assuming we’ll need to start preparing our borrowers for not only a low appraisal but misinformation from the counselor. Let them them know in advance there might be some confusion and that they need to talk to you before they get alarmed or need clarification.