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How Financial Planning is Changing the Reverse Mortgage Training Process

Since the implementation of new rules over the last year, reverse mortgages have been increasingly touted as being more viable retirement tools than they once were, requiring lenders to adapt their training processes to best serve borrowers in this new era of financial planning.

 

While some lenders may have already been conveying the potential retirement planning benefits of reverse mortgages in their messaging and conversations with prospective borrowers prior to the Financial Assessment, new underwriting guidelines demand originators obtain a thorough understanding of seniors’ personal financial circumstances.

This means not only knowing what bills borrowers face, or how they want to live during retirement, but also having a deeper understanding of their financial situations, including their housing needs, ability to maintain ongoing expenses like property taxes and homeowner’s insurance, and above all, what they plan to accomplish by getting a reverse mortgage.

“At the end of the day, a reverse mortgage is a financial tool that isn’t going to be the right answer for everyone,” said Jud Lyman, training manager with Liberty Home Equity Solutions. “We have to find out if a reverse mortgage is the right answer for borrowers and how we can customize this tool to help them the most.”

 

Reverse mortgage 101

 

Liberty’s training for sales associates has focused on the discussion of using reverse mortgages as financial planning tools for several years now, Lyman said, with the Rancho Cordova, Calif.-based company constantly adjusting and modeling its training processes as new regulations come and go.

For all new Liberty hires, Lyman hosts a “reverse mortgage 101” class, which all company sales associates are required to attend. This session not only provides an overview of reverse mortgages, but also explores more complicated subject matter, such as using various HECM disbursement methods to create a solution for whatever needs the borrower has.

“If we’re just helping borrowers pay off their mortgage [with a HECM], we are missing the boat,” Lyman said. “It’s really about understanding the borrower, learning what they need and how you can help them be successful—not pushing a sale.”

But before originators can effectively help prospective borrowers find the right HECM solution that accommodates their particular needs and circumstances, they must first learn how to communicate the potential benefits of a reverse mortgage without over-encumbering the customer with a data-dump of information.

One way to navigate this challenge, Lyman says, is to not discuss the actual HECM product too quickly. This allows the originator to learn more about the client’s situation before discussing technical features like rates, terms and principal limits.

“The individual needs to understand how they are going to benefit from the reverse mortgage before the conversation can really turn to ‘what rate are you going to offer me, and what are the fees?’” Lyman said.

Liberty holds biweekly sales sessions to help its originations team overcome certain challenges they may have faced when speaking with prospective borrowers. The purpose of these sessions is to help sales associates understand the concept behind the reverse mortgage tool and how it can help borrowers’ unique circumstances, rather than just the nuts and bolts of the product.

“It’s not the nuts and bolts of reverse mortgages that are going to get you where you need to be,” Lyman said.

Engaging seniors’ trusted advisers

The Financial Assessment is forcing reverse mortgages to move away from the heavy, needs-based borrower of the past who may not have been viable candidates under these new underwriting rules, to retirees who are now looking for another solution to add to their retirement planning tool belt.

As loan originators have conversations with seniors about reverse mortgages being new and improved financial planning resources, it is important that they continue to stress the safety and soundness of the HECM product, especially as compared to the product of old, says Mike Crossett, executive vice president at The Federal Savings Bank in Chicago.

“As we sit down to discuss the new HECM with customers and look at it from the financial planning perspective, we like to keep it at a very conceptual level and keep it simple, at least in early discussions,” Crossett said.

In the past year since the Financial Assessment’s implementation April 27, 2015, The Federal Savings Bank has increased the level and depth of training for its origination staff, in efforts to make sure they understand the fundamentals of the new program changes, as well as to teach originators how they can work within these new guidelines to help borrowers obtain a HECM that is right for them.

“We’ve really stepped up our training, both internally as well as leveraging third-party investors,” Crossett said.

Because the Financial Assessment requires loan originators to collect more documentation from applicants than they were previously required to do, one key emphasis for The Federal Savings Bank has been training LOs to be cautious of bothering prospective borrowers in their collection efforts.

“Asking for and getting all of the documentation we’re going to need upfront from the borrower, right away at one time—borrowers are going to expect that, especially those who have been through the forward mortgage process in the last 10 years,” Crossett said. “If you’re going back and forth with the borrower every couple of days or weeks, that wears them out.”

Working to understand if a HECM is right for a particular borrower, Crosset said, is really about doing a needs assessment on the front end to determine how a reverse mortgage might fit into their financial plans. This includes engaging both the prospective borrowers as well as their trusted advisers in the reverse mortgage conversation.

“We welcome senior’s trusted financial advisers,” Crosset said. “We want them involved from the very beginning to make sure that whatever their clients are thinking about doing with a HECM makes sense with their financial plans.”