“Not all that can be counted counts” wrote the physicist Albert Einstein, “and not all that counts can be counted.” Reverse mortgage funds-usage counts in judging whether a senior can live at home and benefit from loan funds. The first “yellow flag” of the Financial Interview Tool (FIT) looks at funds-usage. Home equity conversion mortgage (HECM) counselors must ask whether seniors plan to buy financial or insurance products with cash from their reverse mortgage loan. Then, they are to bring up reality-testing issues, such as double costs, the risk of running out of cash to pay older folks’ higher premiums, the risk of burning through cash they need to live on, and the risk of losing their home should they fail to meet home maintenance, taxes and home insurance obligations.
To do their own funds-usage risk assessment, lenders must find ways to discuss this issue with seniors at the loan interview. How they do this without inviting nasty “none-of-your-business” looks and offending seniors will test their people skills.
It comes down to one strong question to begin the conversation. Your typical “yes-no” questions about annuities and insurance in loan application disclosures will not suffice as they are too narrow, too close-ended and too cold-blooded.
Originators need to compose artfully-framed questions to spark a warm conversation inn order to obtain the information and insights they need without displeasing their customers and starting their relationships off on the wrong footing. How to frame the questions will depend on an originator’s question-asking abilities and the dynamics of their interaction with seniors during the loan interview. For illustration, I suggest the following:
►“Mrs. Akuna, if your loan application goes through and you get all of the cash you need and more, what other financial, investment or insurance products would you like to have?*
►Then, listen. Listen and ask, “Why?” Then, listen more.
►Let’s say she says, “I’d like to have an annuity. My daughter, a teacher, says they are good.”
►Using a technique called "mirroring," you might respond by restating her words: "You like annuities because your daughter, the teacher, says they are good?" Before long, you have a conversation about annuities (assuming you know what you are talking about), their advantages and disadvantages, and other funds-usage issues.
The budget analysis piece aside, FIT is about asking questions and talking with seniors to understand their near-term and long-term needs. As NCOA’s Barbara Stucki puts it, “FIT is a way of getting people, whose judgment may be clouded by immediate needs, to think long-term about how they plan on staying at home so that they can get the full value of this loan.”
In the “numbers-driven” world of lending, asking more questions and talking a little longer with customers to better understand all their needs may not be “efficient.” It may not even be as neat as calculating maximum claim amounts and principal limits, but it matters because lenders will know seniors better, and help them make more prudent decisions.
*Note: Please give me your feedback on the strengths and weaknesses of this question as well as your suggestions for improvement. You may post your comments or send me an e-mail at firstname.lastname@example.org.
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@example.com.