Reverse mortgage counselingNelson A. Locke, CRMLHUD, availability, steering, cross-selling, intimidation, insensitivity
What to expect and how to prepare
This is certainly a touchy subject with most reverse mortgage
When the U.S. Department of Housing
and Urban Development (HUD) conceived of the counseling
concept, it was a visionary idea. To counsel seniors, validate
their knowledge of reverse mortgages, make sure they consider other
options and make a knowing and informed decision are all of the
highest priority. It is about protecting seniors and helping them
do what is right for their particular situation without making a
mistake under pressure or without the facts.
As the industry grew, so did the regulatory and consumer
advocate focus on counseling. Unfortunately, seniors are frequently
exploited, and there were legitimate concerns that the reverse
mortgage market would be no different. HUD has done its very best
to keep pace with demand, eventually appointing AARP to administer a nationwide
program with the intent to provide timely and knowledgeable
counseling to seniors as they sought it.
Back in the late 1990s, one could obtain counseling within a day
or two. Today, it can take anywhere from a day or two to a month,
depending on the senior's ability to travel to the counselor,
language barriers, the need to include non-borrowing spouses or
children in the session and more. Most reverse mortgage
professionals think the counseling step is one of the most
confusing stages of the entire process. Here's why:
-Limited availability of quick counseling by well trained
-Steering (where your client ends up with your competitor);
-Cross-selling of alternative services when what the senior needs
and wants is the reverse mortgage;
-Intimidation caused by fear or confusion, resulting in lost
-Insensitivity to senior hot buttons; and
-Incorrect calculations done by counselors that dont match your
quote. What's the senior to think? Someone is wrong.
I will try to give you some tips here that can help you serve
your seniors better and reduce the number of clients you might lose
as a result of the counseling requirement. These tips have helped
me - they were developed via experience.
Check out a group of counselors yourself - at least 10 to 20.
Determine who knows the most about the product. You are required to
provide a list of counselors to your client; you cannot steer. The
senior must choose. However, you can tell him which counselors you
find to be the most professional. That would be consistent with
HUD's goal of producing informed and knowledgeable seniors.
Just tell your senior right up front that this practice is
(unfortunately) all too common. Ask your senior to tell the
counselor that he is already working with a lender and knows where
to find another (National
Reverse Mortgage Lending Association, HUD, etc.) if he becomes
unhappy with your services.
I would bet that many of you don't know that some HUD-approved
agencies are suggesting debt consolidation plans and other programs
as alternatives to a reverse mortgage. They apparently have the
program's approval to do this. I guess it is because we are still
struggling with the misperception that the reverse mortgage is a
product of last resort. Let your senior know that this might
happen. Your senior has the right to ask the counselor to focus on
reverse-mortgage counseling only.
I don't mean that counselors are intimidating. I mean that many
seniors are easily intimidated. Something that might seem
inconsequential to you or I might send a senior into a whirlpool of
fear and doubt. The only way to prevent this is to educate your
senior about the process before the counseling session. If he knows
what to expect, he is less likely to become intimidated by
financial terms, budget questions and frightening technical
What I mean here is that unless you are a senior or have been
working with them for many years, you will not be aware that
certain words mean different things based on your generation's
culture. I learned this early in my career when I stopped saying
"mortgage" to my brand new clients. Again, the best way to cope
with this is to educate your senior when you meet with him so he
knows what to expect. Frequently, the counselor is much younger
than your senior. The counselor might discuss your senior's
finances in a quasi-critical way, making the senior feel like a
failure. It is your job to prepare your senior for this type of
situation. Make sure he knows he is a success in your eyes,
especially because he has recognized the single best financial
product for seniors that we have ever seen!
We have all seen this. The counselor arbitrarily selects a lower
servicing fee, discounts the origination fee, uses the wrong title
insurance factors or forgets about your state's intangible taxes. I
could go on. The only way to overcome this is to be sure you tell
your client to go to counseling with your disclosures in hand. You
are the expert here; make sure your senior recognizes that. Prepare
him to potentially hear some incorrect disclosures.
Always remember that the concept behind the counseling is
excellent. The industry is growing faster than expected. As a
result, you will face some challenges that you can overcome if you
take the time to prepare yourself and your senior.
Nelson A. Locke, CRML is a past president of the Florida Association of Mortgage
Brokers, a founding member of the National Reverse Mortgage
Lenders Association, the founder of the Association of Reverse
Mortgage Specialists Inc. and CEO of Value Financial Mortgage
Services Inc. He hosts the public television program "Ask Mr.
Mortgage," discusses reverse mortgages daily on AM radio and
designed the FAMB training course "Understanding Reverse
Mortgages." He may be reached at (800) 760-5363 or e-mail firstname.lastname@example.org.