It is a new day in HECM counseling (and lending) in America. Beginning this month, the U.S. Department of Housing & Urban Development (HUD) is mandating extra questions that HECM counselors must ask reverse mortgage prospects in pre-lending counseling. These questions and processes are packaged as the Financial Interview Tool or “FIT.”
Along with FIT, HUD is also requiring HECM counselors to do a benefits audit for seniors, using an online resource called BenefitsCheckUp (BCU). Across the country, there are public and private benefit programs for seniors with limited means. For those who qualify, these programs could supplement reverse mortgage cash or render it unnecessary, preserving it for times of real need.
The National Council on Aging (NCOA), a HUD counseling intermediary since 2007, created these tools—results of years of exclusively serving seniors.
Lending, including reverse mortgage lending, is over-weighted in left-brain skills and processes and severely under-weighted in right-brain insights and perspective. The FIT questions are designed to correct this structural intellectual imbalance and bring about a more holistic or whole-person approach to HECM counseling (and lending). FIT questions cover areas such as funds usage, absence or presence of other safety nets, for example, insurance policy or pension benefits for a surviving spouse, and transitional issues like widowhood, divorce and separation, among others.
The FIT/BCU approach has been used through the NCOA national network since 2007, and NCOA’s data and experience show that it has been a success with seniors. Like any good organization attuned to good ideas and best practices, HUD got wind of FIT and BCU, studied them, and adopted them for its own ends: Protect seniors and manage its insurance business risks at the Federal Housing Administration (FHA).
A review of some initial industry participants’ comments suggests there are some misconceptions about FIT (and BCU). With focus on FIT questions and risk-factors, the series explain these new realities in reverse mortgage lending in the age of the Dodd-Frank Act.
We look at FIT risk factors and frame questions to help loan officers talk with seniors about soft risks that may affect their ability to stay at home and benefit from the reverse mortgage. Although FIT is a HECM counseling tool, the issues it addresses can help lenders appreciate and manage reputation, litigation, and financial risks uniquely associated with HECM lending.
Here are the series’ goals:
►Address FIT misconceptions among lenders and promote better understanding;
►Sensitize lenders to some of the soft risks in HECM lending;
►Promote a holistic or whole-person approach to HECM lending;
►Advance the idea that protecting FHA’s HECM Insurance Fund from losses is the business of every industry participant. The industry’s health depends on the insurance fund’s soundness.
FIT is all about asking questions, talking about risks seniors may not consider because of the pressures of immediate needs, and helping them make better borrowing decisions. Sound borrowing decisions help lenders, investors and HUD avoid losses.
Atare E. Agbamu is author of Think Reverse and more than 140 articles on reverse mortgages. Since 2002, he writes the nationally-distributed column, “Forward on Reverse.” A former director of reverse mortgages at Minneapolis-based AdvisorNet Mortgage LLC, Agbamu has years of hands-on experience marketing and originating reverse mortgages. Through his advisory, ThinkReverse LLC, Agbamu advises financial professionals, institutions and regulators across the country. In a 2007 national report on reverse mortgages, AARP cited Agbamu’s work. He can be reached by phone at (612) 203-9434 and e-mail at
[email protected].
