Financial Assessment Confusion

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Assessment Confusion with HECM Counseling & Loan Officer Responsibilities

reverse mortgage newsFinancial Assessment Confusion? Last week as the first borrower’s entered the Financial Assessment we received several reports of confusion of the roles that loan officers and HECM counselors play  in preparing the prospective borrower. Which came first, the chicken or the egg? That rhetorical question came to mind when hearing various reports of loan officers who found some confusion surrounding the gathering of a prospect’s financial data prior to HUD counseling. Once such loan professional is

Due to the nature of this interview there will be no transcript.

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7 comments

The_Cynic May 4, 2015 at 5:39 am

The level of training reflected in this post is not unusual in our industry. It is also inexcusable. It not only reflects badly on counseling, it also undermines and erodes the fragile trust between loan officer, prospect, and the public at large.

After months of introduction, it is a shame that counseling was not better prepared before implementation on Monday. This is both the clear fault of many counselors and HUD. To achieve the highest standard of execution, HUD should retract implementation and focus on ensuring that counseling is adequately prepared before it attempts to implement Financial Assessment in the future.

For the last five years HUD has refused to address the flaws and inconsistent practices found among counselors when it comes to FIT. The FIT report is not only false but also horribly misleading. In practice it provides NO budget for the counselee even though to a limited degree, BCU does. FIT is so bad several of the most competent counselors refuse to use it at all.

While the education provided through counseling has improved greatly since 9/11/2010, the quality of all other aspects of counseling is notoriously inconsistent and most of it is being executed incompetently due to the sophomoric approach to analyzing the financial information of the consumer through the Financial Interview Tool known as FIT.

Once again we see counseling running amok due to the lack of supervision by HUD of its counseling agencies when it comes to lender Financial Assessment. It is time for HUD to own up to its responsibilities for counseling before we have another GAO report showing how flawed counseling has once again become.

The purpose of the financial analysis performed by counseling and lenders are and should remain much different. That performed by lenders is a screening process while that done by counseling is to help the counselee assess whether or not the HECM will actually meet their financial objectives. One has to due with an analysis of affordability in qualifying the applicant including loan modification while the other is to help ensure that the counselee has thoroughly thought through how the HECM will help them provide the solution they need or are looking for. Both are needed and both should be done with the greatest competency and care.

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Shawna McDonald May 4, 2015 at 7:09 am

Thank you John and Shannon for bringing this situation to light.

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CLIFF RIDDLE May 4, 2015 at 11:41 am

A BIG THANK YOU

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Joyce Hanson May 4, 2015 at 11:54 am

Wait a minute, have they changed the ruling that we ARE NOT to do a loan application, gather information UNTIL AFTER THE COUNSELING SESSION IS COMPLETED??

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Julie Colangelo May 4, 2015 at 5:51 pm

@Joyce It depends which state you are originating in, and also on what you consider taking a loan application is. HUD states “process a loan application” and we cannot process until we have a Case#.

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Julie Colangelo May 4, 2015 at 5:59 pm

@Joyce to continue: at initial proposal you are determining at that time what their need for a RM is. We certainly can look at their finances, and determine if they will qualify. As far as Counseling Agencies wanting that Assessment documentation provided shouldn’t be a problem for the LO to do so., I agree with the cynic HUD did not advise the C-agencies as to their role in collecting information.

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RMMyths May 5, 2015 at 3:10 pm

Ms. Colangelo,

We have no right to give borrower information to anyone other than the prospect, his representative, or our employer. We cannot hand over anything to counseling.

What if the borrower does not want counseling to get verified information or even verbal information they give us? What if the prospect wants to lie to counseling? Counselees have that right but they do not have the right to lie on their application; that is fraud.

The information that a prospect provides us is confidential and our right to share that information is HIGHLY restricted. Be careful what you advise.

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