So, what is the fuss over FIT? We look at seven fusses and counter-fusses before moving on to the FIT risk factors and questions in other articles in the series. As designer of the Financial Interview Tool or FIT, the counter-fusses are the National Council on Aging (NCOA’s) responses to the fuss over FIT.
Fuss # 1: FIT is addressing a demographic that no longer exists (field data says average HECM borrower age is now 63).
Counter-Fuss: Younger borrowers are taking out fixed-rate Home Equity Conversion Mortgages (HECMs). As other products are developed, the demographic profile of borrowers may change again. FIT reminds seniors that their life circumstances may change rapidly because of an accident, illness or the loss of a spouse.
Fuss #2: FIT is too invasive. Seniors might refuse to answer the questions if a third person (family or an advisor) is present.
Counter-Fuss: Seniors can decide who will participate in the counseling session. Family members and advisors often find it difficult to discuss sensitive issues such as declining health with a senior. The FIT review may be a good opportunity to begin to address these issues and their implications for the senior’s well-being.
Fuss #3: FIT is static; it does not anticipate changes.
Counter-Fuss: As with many budgeting tools, FIT focuses on a client’s current financial situation. We may add questions about post-retirement income changes.
Fuss #4: FIT could add to counseling time.
Counter-Fuss: Absolutely! A good counseling session should last at least an hour.
Fuss # 5: FIT is borderline “financial planning,” but HECM counselors are not trained and certified financial planners.
Counter-Fuss: At one point, the U.S. Department of Housing & Urban Development (HUD) was considering having counselors conduct a very detailed budget analysis to determine the suitability of a reverse mortgage for their client. FIT brings a more holistic perspective to a client’s financial situation. It helps them understand their risks and options in taking out a reverse mortgage.
Fuss #6: FIT takes away the HECM counselor’s discretion.
Counter-Fuss: FIT helps to standardize counseling, a concern of the lending community for years. The goal of the FIT review is to stimulate discussion about issues that may impact the senior. In addition, FIT collects data about the characteristics of potential borrowers, which can help both lenders and policymakers to better understand the needs and vulnerabilities of older homeowners.
Fuss #7: Prospects’ failure to answer FIT questions could cost them their HECM Counseling Certificates, thus the ability to get HECMs.
Counter-Fuss: FIT questions have no right or wrong answers. It will be impossible for counselors to conduct a budget analysis as required by HUD if seniors refuse to answer FIT questions. Seniors can provide approximate income if this is a problem for them. Besides, there is no relationship between the FIT questions and the five comprehension questions (out of 10) HECM prospects are required to answer to be issued a certificate.
The fuss over FIT is understandable as FIT is fairly new. It is change. Change has come to reverse mortgage counseling (and lending).
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 firstname.lastname@example.org.