Imagine walking into a doctor’s office with general complaints about your health. You’ve been feeling sluggish and tired. Unlike previous medical visits you’re not given a patient questionnaire. After a few minutes, you’re escorted to an exam room to meet the doctor.

The doctor walks in,  greets you, and asks some cursory questions shortly followed by a presentation about the latest wonder drug which he claims will eliminate your lethargy leaving you energized. Leaving the office you collect your prescription as you pay your bill. Yet, you feel uneasy and decide you’ll forgo the prescription. 

One Reason They’re Saying ‘No’

The doctor jumped right into pitching you the benefits of the medication without taking the time to review your health history much less give you an exam. In much the same way many reverse mortgage professionals make the same mistake when recommending a reverse mortgage to homeowners.

Without fact-finding, reverse mortgage professionals are presenting a product– not a solution. No wonder many older homeowners are not interested. After all, how can they see the benefit if we haven’t shown them?

It All Begins with Your Mindset

What’s your goal when you meet with a potential borrower? If it’s to sell a loan- that’s fine for those who’ve already decided they want a reverse mortgage and like and trust you. But what about those who remain undecided? What will make them see the value of a reverse mortgage?

If you’re going to effectively break through a homeowner’s apprehension about a reverse mortgage you’ll have to leave your needs at the door. The minute you walk it it’s all about them–their concerns, desires, worries, and hopes. Focusing on these you cease to be a salesperson and instead are seen as a problem-solver. Certainly, a reverse mortgage is not a panacea for every situation, but it may solve a host of problems if we incorporate fact-finding into our practice.

Why Many Are Reluctant to Fact-Find

It’s easier to visit for a few minutes and then explain the features and benefits of a reverse mortgage. We can do it in our sleep. There’s little risk and we get to do the talking. However, many are uneasy or reluctant to do basic financial fact-finding with potential borrowers. Why? Because it requires a deeper level of rapport and trust with the homeowner than merely presenting a loan. This requires time and skill–both of which can be accomplished with practice.

Is Fact-Finding Giving Financial Advice?

Some have said that getting into the specifics of an individual’s finances is akin to acting as a financial advisor. I would counter, that it’s what a professional mortgage professional does to see if the mortgage is a good fit for homeowners and if it addresses some of their pressing concerns. 

Doesn’t HUD Do This for Me?

While HECM counseling sessions must address a homeowner’s current income counselors are not tasked with extensive financial fact-finding. Yes, the Financial Interview Tool is used to create a budget based on income, assets, debt, and expenses but it’s not an in-depth analysis of their specific sources of income and expenses. A HECM counselor’s job is to ensure the homeowner understands the loan and if it appears to be a fit in their circumstances. Even if a HUD counselor conducted a thorough financial analysis how would you get the numbers? You wouldn’t.

Setting the Stage

Most homeowners won’t balk when asked out their finances if you set the stage. When originating I typically accomplished this by saying something like this after warming up and small talk.–“Today I’m obviously here to talk about reverse mortgages (chuckle). To get the most out of our time together I’d like to first ask you a few questions to get a better understanding of your unique situation which will help me better explain how a reverse mortgage works in terms that are meaningful to you. Does that sound fair to you?” The answer was typically yes. 

Sources of Income

Unlike any other mortgage, a reverse mortgage can transform a retiree’s cash flow in a significant way. To uncover how we must first ascertain what are the homeowner’s present sources of income. Here’s what you should know about their income sources.

Where is the money coming from? Social Security? Employment? A pension? A business sale? A rental property?

Are any sources of income subject to a reduction in the future? For Social Security, the answer is ‘yes’ as the surviving spouse only receives roughly the equivalent of the largest monthly benefit but not both.

Are any sources of income only for a fixed period? For example, if the homeowners sold a business they may be receiving payments from the buyer for 5, 10, or 15 years. After that, the income stops.

Workers with pension benefits can typically choose to have their spouse receive 50,75, or 100% of their monthly payout. It’s important to know which option they’ve chosen so you can account for any potential reduction of income.

Expenses

Most homeowners have similar monthly expenses. You don’t have to itemize each however, it’s important to know the specifics of ongoing debt payments such as a mortgage, second lien, line of credit, credit cards, or vehicle payments.  These figures will be useful in determining how a reverse mortgage could improve their monthly cash flow. 

Putting It All Together

If you say it they may doubt you. If they say it it’s true. 

Effective fact-finding is the cornerstone of presenting a compelling case of how a reverse mortgage could help transform their retirement and improve their monthly cash flow. Many times, after showing them a before and after comparison with or without a reverse mortgage they’re more likely to see the loan as a solution instead of just a mortgage. 

Here’s one simplified example of a before-and-after comparison after fact-finding.