In two separate sessions that touched on reverse mortgage counseling, industry insiders revealed emerging trends that shed light on what’s coming down the pipeline for HECM lenders.
At the National Reverse Mortgage Lenders Association’s annual meeting in San Diego on Monday, panelists from three different counseling agencies reported an uptick in borrowers interested in getting a proprietary reverse mortgage, a HECM for Purchase, or in refinancing their existing reverse mortgage.
The HECM counselors all agreed that interest in these products was the most notable trend they’ve witness as of late.
Jennifer Cosentini of Cambridge Credit Counseling said the influx of borrowers seeking counseling on proprietary reverse mortgage products – most of which have just come to market this year – has been sizable, with the average number jumping from 17 per month to 80 so far in October.
“The biggest trend we’ve seen would definitely be the proprietary reverse mortgages,” Cosentini said.
The counselors also said they’ve seen an uptick in needs-based borrowers, despite the fact that the Department of Housing and Urban Development has taken steps in recent years to curb this and reposition the product as more of a financial planning tool than one of last resort.
“Since the principal limit factor change, we’ve seen it actually come back a little bit more to the needs-based, which is pretty disappointing,” Cosentini said.
Mohan Lalwani, of Florida-based ReverseMortgageHelper.org, said the uptick in borrowers who have a more immediate need for funds is related to the increase in those looking for a HECM-to-HECM refi.
“The borrowers who are coming for a refinance, it seems like a high percentage are needs-based,” Lalwani said.
His fellow panelists nodded in agreement.
John Olmstead, HUD’s senior housing program officer of the Office of Housing Counseling, presented stats in a separate panel featuring representatives from the agency, showing that of those borrowers who have sought reverse mortgage counseling so far this year, more than three-quarters moved on to origination.
Olmstead said that of the 61,258 reverse mortgage counseling certificates issued so far in 2018, 78% went on to origination.
By comparison, 2017 saw 103,960 certificates, but only had a 53% conversion rate.
Olmstead said 2017’s high number of counseling certificates likely reflects the number of borrowers who tried to get through origination before program changes reduced the amount of proceeds they could extract.
He also said that 2018’s lower number of issued certificates is probably a result of two factors: lenders instituted their own screening processes and fewer people now qualify for the loan.
But even though the number of certificates has declined, the higher conversion rate points to a sign of health, Olmstead said.
“With the conversion rate being higher, that means that a healthier client share is coming to counseling, and there’s a greater chance of the loan going forward on your end,” Olmstead said. “And, they are stronger clients, so there could be less issues down the road than our past portfolio.”
Olmstead also noted that while 270 agencies across the country provide HECM counseling, an average of 60% of the counseling is carried about by 10 agencies, and an average of 54% is completed by four.
Finally, he shared that most borrowers connect with a lender first and that 90% of HECM counseling is now done over the phone, but that that wasn’t a concern to HUD.
“What we're most interested in is not whether it’s face-to-face or telephone or Skype or FaceTime,” he said. “What we’re interested in is that the counseling is complete and thorough.”
When talking about how to be complete and thorough with their clients, the counselors said during their panel that they sometimes take extra steps with those who are clearly needs-based.
Melinda Opperman of Springboard Nonprofit said she digs deeper into their long-term plans.
“So often, when we set up the counseling session, asking to have their adult children involved in the counseling session has helped,” Opperman said. “And really peeling that onion of ‘what are your plans?’ That helps set the tone.”
Cosentini agreed that bringing in family members can be helpful and that loan originators should set this into motion if they sense there could be some pushback from the family.
“If a loan originator knows this could be a little difficult for counseling, they need to bring in the family members and get them all prepared beforehand so they know what to expect.”
Finally, Opperman said it’s important that loan officers properly prepare their clients for the time commitment.
“Let them know to plan plenty of time to have the session, because we’re not going to rush the counseling session – it can take anywhere from 60 to 90 minutes,” Opperman said. “Telling them it could be 30 minutes is an error… It can’t be rushed.”
