Reverse Mortgage Information

The SAFE Act requires Mortgage Loan Originators to pass a written qualification test. The SAFE Act Mortgage Loan Originator Test consists of two components— a National Component and a unique State Component.

On July 30, 2009 NMLS released the National Test Component and 11 Unique State Test Components. In October, 2009 it deployed another seven State Components and then six more State Components in December, 2009. On January 4, 2010 the New Jersey State Test Component was released, and on February 22nd, so were an additional five unique State Components. On April 12th, another set of five state components became available, and on June 14th, seven more were released. This brings the total of state components available to 42. More will eventually be added.

From June 2009 to June 2010, about 76,000 loan originators sat for the National Component test. 71% passed on the first attempt. About 82,000 loan originators have also taken a State Component test. 80% passed on the first attempt.

For those who fail either test, a re-take may be scheduled after 30 days. Up to 3 re-takes may be completed before the originator is disqualified for six months. Approximately 44% of these test re-takers eventually pass the National Component and 61% eventually pass the State Component.

NOTE: My score on the Massachusetts Component was 92%, New Hampshire Component 93% and National Component 85%… all on the first try. Maine, the third state where I am licensed, has not yet deployed a State Component test.

Find Details About Your Reverse Mortgage Loan Officer

To retrieve information related to any registered reverse mortgage loan officer, simply enter their unique Nationwide Mortgage Licensing System & Registry (NMLS) number here. Test scores are not available to you at this NMLS Consumer Access site but at least you will know if the loan officer you are working with is licensed or registered in your state. If not registered or licensed, consider seriously if you really want to do business with this person who has not been vetted by your state regulators. A reverse mortgage is a big financial decision and it is imperative that you deal only with a reliable individual. Don’t gamble your home with someone you know nothing about.

Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant – NMLS #19086
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In this and following posts we review the 4 reverse mortgage documents you need to examine closely as you research, select, and finally apply for your loan. This is only an overview and is not intended to be an exhaustive explanation of every line in every document.

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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Throughout this blog we may use terms you might not be familiar with. Following are some definitions. Some are unique to posts in the blog and some are unique to reverse mortgage lending. We will expand as time and circumstance permit.  Check this post frequently for updates.

Big Dog

A national lender that has a specialized reverse mortgage division. These are direct lenders (processing and actually lending in their own name under FHA authority).  Included are Wells Fargo (largest in terms of unit volume), Bank of America, Financial Freedom (post IndyMac bankruptcy), MetLife Home Loans and a very small number of others.   These institutions usually have both retail and wholesale operations.  Customers walk into the local branch (retail) of any of these organizations and are routed to an internal specialist.  Other borrowers (wholesale) are brought to them by brokers, agents and correspondents – who might be your local mortgage broker or regional bank or local credit union.

Boutique Broker

A phrase we made up to help illustrate the significant value a broker provides to you while you are considering a reverse mortgage transaction.  Most (not all) offer close personal attention and are available 24/7.  Ever try calling your local bank on Sunday morning with a troubling question or concern?  Each of my clients has my cell phone number and instructions to call me anytime… anytime.  Even years after the loan closes I am still in touch with most of my customers.

Call Center

A call center is a physical place where customer and other telephone calls are handled by an organization, usually with some amount of computer automation. Typically, a call center has the ability to handle a considerable volume of calls at the same time, to screen calls and forward them to someone qualified to handle them, and to log calls. Call centers are used by mail-order catalog organizations, telemarketing companies, computer product help desks, and any large organization that uses the telephone to sell or service products and services.

Direct Lender

Very few institutions qualify as reverse mortgage direct lenders.  Nationwide, there may only be a handful.  Almost all “lenders” except the big dogs are agents, correspondents or brokers allied with the handful of direct lenders.

NMLS

Nationwide Mortgage Licensing System. NMLS website

Preferred Lender

There is no such thing as a “preferred” lender as far as HUD/FHA is concerned. It’s really important to understand that this terminology is merely somebody’s opinion – probably because the lender paid a fee to be listed in a directory and/or online source. Lenders are either FHA approved (have met the requirements) or they are not.  NRMLA (National Reverse Mortgage Lenders Association), the reverse mortgage industry’s trade group, publishes a list of “preferred” lenders but this is nothing more than a membership roster. If you pay your annual dues, you get listed.  If you research the AARP web site you don’t get much help, either. They simply refer you to the HUd.gov list or NRMLA’s list of paid members.

Principal Limit

The Principal Limit is the gross amount of money the lender is willing to lend to the borrower… based upon a formula using the following criteria: the lower of the FHA appraised value of the home or the Maximum Claim Amount (currently $625,500), the age of the youngest borrower, and the expected interest rate based upon 10-year LIBOR (London Interbank Offered Rate).

SAFE Act of 2008

On July 30, 2008 President Bush signed into law the Secure and Fair Enforcement (S.A.F.E.) Mortgage Licensing Act of 2008 as part of the Housing and Economic Recovery Act. This provision sets forth procedures, requirements, education, testing, and standards including mandatory registration and state licensing of mortgage loan originators through the creation of a Nationwide Mortgage Licensing System and Registry (NMLSR). The goals NMLSR hopes to accomplish are: 1- Helping ensure that loan originators be required to “act in the best interests of the consumer”, 2- Giving consumers easy access to a loan originator’s employment history, and any disciplinary/enforcement actions taken, 3- Uniform education and licensing requirements, and 4- Accountability and tracking of loan originators

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

Sometimes we assume everyone else knows what we mean when we use abbreviations or, in this case, an acronym. HECM (heck-um) simply means Home Equity Conversion Mortgage, the most popular reverse mortgage used by over 400,000 senior homeowners.

This loan product is insured by FHA (Federal Housing Administration) – a department under HUD (U. S. Department of Housing and Urban Development).  According to AARP (American Association of Retired Persons) 93% of seniors report satisfaction with this popular loan product available only to homeowners 62 years of age and older.  We don’t know of any other financial product that enjoys such a high level of acceptance…   None!

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

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There is controversy brewing over the statement that a Home Equity Conversion Mortgage is truly a non-recourse loan. Specifically, it has been reported that many lenders tell borrowers that they “can never owe more than the loan balance or the market value of the home, whichever is less.”  This has always been true… except now HUD has decided to revise the interpretation where the borrower’s heirs might wish to keep the home.  As with most things, you need to rely upon information from an experienced professional reverse mortgage specialist who is up-to-date on how this is presently interpreted by HUD.

Heirs Pay Full Balance

According to a Mortgagee Letter issued by HUD in December, 2008 (ML-08-38) the new arm’s-length rule interprets this feature to mean that if a relative wants to purchase the family home they must pay the full balance owed on the loan – which could be substantially higher than the market value of the property. Many in the mortgage industry are trying to reverse this interpretation but it could take some time. Meanwhile, be forewarned. For more details see Atare’s Report www.thinkreverse.com/?p=91#respond

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

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