New Financial Assessment Date Gives Industry Time to Breathe
When the first effective date for the financial assessment was first announced to be March 2015, there was a collective groan in the industry.
It was finally here, that which would determine the eligibility of a borrower based on income and credit, the one thing that set the reverse mortgage apart from all other loans, and the potential implications (good and bad) of this action have yet to determined.
This is why when HUD announced that there would be an extension to the financial assessment of possibly 30 to 60 days, the industry realized it had time to breath, gauge the situation and make sure everyone, from brokers to their computer systems, were correctly set up, trained and ready to go.
Officially, HUD has finally set the new effective date for the financial assessment: April 27, 2015.
A few days later, Reverse Mortgage Daily published an article detailing “The Good, The Bad and the Reverse Mortgage Financial Assessment Delay,” outlining how the delay will benefit the industry and how the delay has the potential to hurt it as well.
At the top of the good list was more time to train and prepare but at the top of the bad list was more time to prepare as well. Simply put, while the extension gives the industry more time to get ready, it also stalls the inevitable by making people think they have more time than they actually do.
And it’s not just the reverse mortgage industry: it is also borrowers, who see the extension as more time to think about their decision and not as the time crunch it really is. In order to be grandfathered into the program, under the old rules, a borrower needs to submit an application and go to mandatory counseling but the extension may stall those who were ready to go just a few days ago.
The financial assessment is a double-edged sword for me. On the one hand, it will make the program a lot safer for borrowers and finally cement the reverse mortgage as a long-term retirement planning tool as opposed to a loan of last resort. In addition, it will also be more advantageous for borrowers who have no mortgage or have accurately planned for retirement.
But, it will leave out those borrowers who need the reverse mortgage to get rid of a stifling mortgage payment but don’t have enough equity to pay off their mortgage and have a fully funded Life Expectancy Set Aside (LESA).
The silver lining still remains consumer safety and the fact that every case file may use compensating factors in order to prove they can make the necessary payments to their financial obligations without a LESA or with a partially funded LESA. In addition, this change will help the program’s reputation as an alternative, long term, retirement planning tool for affluent clients and not just a loan of last resort for less wealthy clients.
I don’t know how well everything will work out those first few weeks of the financial assessment but, with extra time to prepare, it should be smoother sailing from the start. I’m happy to see the seed of change, which began with the Reverse Mortgage Stabilization Act of 2013, begins to bear fruit.
Interested in obtaining a reverse mortgage before the change is implemented? Give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.com.