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Pennsylvania industry appointments update - 7/5/2007

Jul 10, 2007

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 originators. 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 personnel; -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 clients; -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. Availability 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. Steering 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. Cross-selling 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. Intimidation 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 descriptors. Insensitivity 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! Incorrect calculations 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 [email protected].
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