boutiquehotelChase Manhattan Bank announced that they intend to offer reverse mortgages to customers throughout their branch network.  They hope to join Bank of America, Wells Fargo, Financial Freedom (the post IndyMac Bank bankruptcy version), MetLife Home Loans and various other big dogs with a large reverse mortgage retail footprint.  Smaller regional banks and even some credit unions have jumped on the bandwagon, too.  Pretty soon you should be able to walk into your neighborhood bank and walk out with a Home Equity Conversion Mortgage (HECM).  Right?  Well… maybe not.

Reverse mortgages are unique loan products.  They are offered to seniors only… who naturally have a healthy dose of skepticism when it comes to their own finances.  It’s hard to imagine how a teller will be able to explain all the pros and cons and all the features and benefits of reverse mortgages to customers.  Even though banks have always offered mortgage products, they have concentrated on the conventional (forward) mortgage business with specialized staff.

No Experience

With respect to reverse mortgages, however, banks have no institutional experience to draw from.  The forward mortgage business is not at all like the reverse business.  Skills do not easily transfer.  Banks must go outside to recruit and hire specialists.  Then they have to train their specialists.  After a number of years of mistakes, lots of trial and error, these newly minted specialists eventually become skilled.  The amount of time required to become an “expert” in the reverse mortgage business is pretty substantial – maybe five years of full time focus, at least.

So why would anyone risk becoming the victim of a neophyte so early on the learning curve?  A reverse mortgage is the second most important financial decision you make in your life.  Why wouldn’t you seek out the most directly experienced person you could find to guide you, your family and your trusted attorney, financial planner, etc. through your reverse mortgage due diligence?  This is not the time to go to a one-size-fits-all supermarket. Perhaps you are better served with a specialty store (or boutique) likely to have exactly what you need with a highly knowledgeable employee/owner at your call.

Botique Broker

OK, I just made up the term boutique broker.  But I do think it helps conjur the image of a seasoned, expert, mortgage professional who has no institutional bias and no product bias.  This is a critical point; the bias.  This distinguishes the broker from the bank rep.  Admittedly, some bank reps are experienced, but they are also captive.  Bank policy dictates what products to show you and what prices to charge.  Brokers have access to many lenders with many programs.  Bank reps only have access to products offered by their own institution. That product may or may not be competitive today or tomorrow.  More important, that product may or may not exactly match your needs. The boutique likely has exactly what you need.

More Options For Your Benefit

Brokers also have more processing options.  For example, if lender B is overwhelmed this month and slow to complete loans, Lender C may be faster.  And perhaps Lender D is not quite so strict when it comes to underwriting issues that could impact you.  Finally, bank reps probably have limited authority to reduce fees.  Brokers do have the authority… and will, if necessary.  They don’t need to have a board of directors meeting to discount a couple of hundred dollars.

House Calls

But the best part of dealing with the Botique Broker is that it will be a face-to-face transaction.  The broker who is a true specialist (focused on reverse borrowers exclusively) will meet with you and your family in your home to respond to everyone’s questions… try to understand your needs.  The broker will visit your attorney and/or your financial advisor in his/her office to answer questions and detail your proposal and costs. Your broker will come to your home to take your application. Your broker will personally monitor your paperwork throughout the processing and underwriting steps keeping you informed each step of the way.  And your broker will bring the lender’s attorney to your home to close the loan so that you will not be inconvenienced by travel to a regional banking center.  That’s personal service just like you might expect from a specialty store… or boutique.  Or, you could go wait in line at your branch!

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

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