Recently recommended servicing reforms may boost HECM image
It’s a fact every salesperson and reverse mortgage professional must embrace- the vast majority of consumers inherently distrust salespeople. Will recent HECM changes help bolster the product’s legitimacy in the public eye?
The irony is that every major purchase from buying a home, a car or investing in your retirement entails working with a sales professional. The same applies to reverse mortgage professionals who approach a distrustful public. Further compounding this general skepticism are products whose unique features are highly advantageous leading many to say ‘if it sounds too good to be true, it probably is’. The good news is that recent changes to the federally-insured reverse mortgage may have helped us close the credibility gap.
One problem that has garnered the most press and Congressional ire are HECM ‘foreclosures’. While the vast majority of HECM foreclosures are the result of the last borrower passing away thus terminating the loan, many could have been avoided with better communication and outreach. At least that’s the consensus among lawmakers- some who are pushing for increased scrutiny of the servicing process- more specifically how those who are overdue on their property taxes are managed. Are they sent a reminder before their property taxes are due? Are HECM borrowers who are delinquent on their property tax installment notified of any available local and state tax-deferral programs? Lawmakers are pushing for reforms to help avoid the fiasco that we call a ‘technical default’.
For a summary of last week’s Congressional hearing click here.
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Personally, I feel these are some MUCH needed and LONG overdue topics. I constantly hound my clients that “communication solves most problems” just like in the rest of life. Then to find out later that other lenders do not have the same type of chat with their clients, or that the letters are so overwhelming to borrowers and their families that they just give up trying to communicate. Part of the fix, I believe, is when you send out the Annual Occupancy Certification, also send out a reminder of who was listed as their “alternate contact” or “next of kin” and ask if they need to update that information. ALSO ask if there has been an added or change to a POA. If these can get on file sooner, a lot of the problems that family members cannot talk with the servicer can be resolved. I believe our servicing industry can do much more in thoughtful communication and training of their employees and not simply use the “HUD says we must do it this way….” line.
Last month I sent an email to Shannon telling him that his commentary was great except he forgot THE most important point. The HECM program got through the hearing all but unscathed. One cannot say the same for HUD and servicing.
Yesterday I had a call from a larger volume originator who asked why one servicer insisted that a significant pay down on an adjustable rate HECM would decrease the unpaid balance but would NOT increase the available line of credit. This was not a servicing contractor but the servicer answering the phone for one of the long-standing top five lenders. So this is not just a matter of poorly educated servicing agents at a vendor but rather a servicer at a major lender. By not HUD is not fulfilling its responsibilities as to overseeing servicers, one can NEVER depend on an answer that sertvicing provides to our questions.
I know most originators want to believe that the statements that servicers provide HECM and proprietary reverse mortgage borrowers are correct, such may not be the case. Borrowers beware. You are responsible for scrutinizing your mortgage statements monthly; NO ONE is automatically going to do that for you. We are now just beginning to hear and see the tip of the iceberg of this problem.