Mr. & Mrs. Johnson (names changed to guard client privacy, of course) did their HECM loan with me back in 2003 when I originated for BNY Mortgage – Reverse Mortgage Division. Since that time the corporate name on my office door has changed several times due to merger & acquisition or better opportunity.  But I have always notified my clients and provided details on how to contact me should they need my assistance.

Reverse Mortgage Account Number Changed

Mr. & Mrs. Johnson’s loan was initially serviced by Seattle Mortgage and all went well for many years. But sometime in 2008 the Seattle Mortgage Reverse Division was purchased by Bank of America. Bank of America dutifully notified Mr. Johnson that they were assigning a new account number to his reverse mortgage account.  The new statements soon began arriving addressed to Mr. Johnson at his home in Massachusetts.  Balances appeared to be correct and the  Johnsons continued to draw a small amount of cash several times during the year to stay current with their financial obligations.  Then, unexpectedly, Mr. Johnson passed away in January of this year.

Within a few weeks, Bank of America forwarded a form letter to Mrs. Johnson advising that according to the terms of the agreement the reverse mortgage was now due and payable.   She was given a period of time to settle the outstanding balance due but the line of credit on the account was immediately terminated.  Mrs. Johnson was shutoff from any further draw on her account at a time when she most needed the emergency money.

Her phone calls to Bank of America were unproductive. She was repeatedly transferred from department to department and given inaccurate information.  At one point, a representative even suggested she refinance her reverse mortgage to avoid the possibility of foreclosure.  A very inappropriate recommendation.  She did not know how to resolve this very serious problem.

Help From Your Reverse Mortgage Loan Officer

Finally, Mrs. Johnson recalled communications from me informing her of my new position and encouraging contact for any reason.  She turned to me for advice and assistance. I could sense that she was distraught and emotionally drained.  I immediately met with her at her home accompanied by her daughter and her son. After some investigation we found an original copy of the Loan Agreement signed at closing by both Mr. & Mrs. Johnson.  We determined that an official copy of the reverse mortgage document with both signatures was on file at the county registry of deeds. An original deed to the property with both names was also located.  It then became obvious that when Bank of America assigned the new account number to Mr. & Mrs. Johnson’s loan, they arbitrarily dropped Mrs. Johnson’s name from their records. All future monthly statements and communications from Bank of America contained only Mr. Johnson’s name. Even checks drawn on the account were made out to Mr. Johnson only.

Correcting Reverse Mortgage Bank Error

Mrs. Johnson has retained an attorney to represent her to communicate with the bureaucracy at Bank of America to suggest they get their records corrected immediately. However, an error like this should never happen. And when it happens to an elderly person who has just lost a spouse, the confusion and desperation can be completely overwhelming.  Bank of America or any other lender should make a better effort to help customers deal with these situations. I’m sure this is not the first time something like this has happened.

Moral of the story: Save your paperwork and choose a loan officer who will be there to help you many years later if a problem arises. Keep at least your Loan Agreement and your Mortgage in a safe place known to both spouses. Always check your monthly statement for balances and note carefully any name, address or account number changes.  Contact the service provider immediately if you note anything out of the ordinary. Take names when you talk to people.

Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant

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Consider these as your pre-application documents. You should have received these documents from your loan officer prior to making your decision. They include (1.) the Reverse Mortgage Loan Comparison sheet, (2.) the Good Faith Estimate, (3.) The Amortization Schedule and, (4.) the Total Annual Loan Cost (TALC) calculation.  With these documents in hand you should be able to make an independent, informed decision.  You should also be able to accurately compare offers from a number of lenders if you have done your research properly.  If you do not fully understand the information contained in these documents, you need to find a reverse mortgage specialist willing to meet face-to-face in your home with you, your family and your financial advisor to explain every detail.

Reverse Mortgage Loan Comparison

We begin at the beginning; researching and accumulating information specific to your situation.  The single most important document to request from your loan officer is the Reverse Mortgage Loan Comparison sheet. To get an accurate estimate (at this point, it is only an estimate, not a guarantee) of how much you might qualify for, the loan officer will need to ask some questions about you and anyone else on the title to the property.  Then the data is loaded into a special calculator and the document is produced. Note that this information is much more detailed and accurate than online calculators designed to identify you as a reverse mortgage prospect.  If the information here has not been supplied by you, it is probably inaccurate.  Print out the sample Reverse Mortgage Loan Comparison and follow along as we go over some of the important items on this summary document. This document has almost everything you need to help you to make an informed decision.

Different lenders might have slightly different forms but the Reverse Mortgage Loan Comparison summary sheet should be arranged in 4 distinct columns. The extreme left column identifies each of the categories such as initial interest rate index, total principal limit, liens and disbursements, etc. found in each of at least 3 different specific HECM loans programs; the remaining columns.  (If you have been given a loan comparison sheet that only shows 1 or 2 options, find another loan officer.

The upper left corner shows borrower names (be certain all owners are listed), the principal residence property address and borrower ages (FHA rounds up to the nearest birthday within 6 months).  The youngest borrower is listed first and an assumed property value is indicated.  Note that this should not be the property assessed (tax) value.  It should be an informed, educated guess based upon recent sales of like homes in your neighborhood. Since this value is a critical factor in determining how much you qualify for, consult with your loan officer who should have the experience to help you to arrive at a reasonable estimate.  A seasoned reverse mortgage specialist will advise caution.  Better to be conservative here to avoid disappointment if the FHA appraisal comes in significantly lower.

If you later decide to work with more than one loan officer, be certain to use the same details, same numbers so you compare apple to apples.  Specifically note the date at the bottom left corner of the document.  Interest rates change every week (another critical factor in your calculation) so if you fail to make the comparisons from lender to lender in the same week – your comparison is probably flawed. You will be comparing apples to oranges.

(More – next post)

Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant

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HECM Loan Closing

I attended a closing yesterday with my borrowers and the lender’s attorney.  The paperwork and the time required to wade through it all has reached the point of insanity.  More than 125 pages of documents and 1.5 hours are now needed to get to the end of this process.  Disclosure after disclosure after disclosure…. and then the re-disclosures.

My favorite among all the documents my borrowers sign is what I call the “Nanny Statement”.  This is a piece of paper from the lender explaining to the borrower that they really should be careful about making any investments with this money.  In the opinion of some, this is more than a little condescending and simply another effort to avoid future legal action.  There are now so many silly disclosures that borrowers can’t help but be confused.  No matter how carefully we prepare them, too many are overwhelmed at closing.

This particular borrower ran his own business for 45 years and commented that he had never been through such an experience.  He was no dummy… and we held the closing in the nicely appointed offices of his certified financial planner who had referred me.  There was plenty of brain-power at the table.  I wonder how many borrowers would walk away from the closing ceremony if I was not actually present to answer all the questions that come up?  I think I would.

Your Loan Officer

Some borrowers get trapped into doing everything over the phone because their originator is located 3,000 miles away calling from a cubicle.  Face to face, one-on-one with the borrowers during the initial interview, the actual application, and the final closing are crucial phases of the reverse mortgage process.  It is the cornerstone of this business.  Choose your originator very carefully.  Eliminate anyone who does not ordinarily travel to your home and personally attend your closing.

In my office later in the day I received a phone call from the borrowers to thank me once again for attending the closing with them.  These borrowers had grown to trust me over the course of our relationship and I assured them that I was always available to answer more questions (there will be more) and help with any problem or issue that might surface.

Author – Robert H. Irving, CSA
Senior Reverse Mortgage Consultant

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