A HECM for purchase can be the ideal loan product for seniors seeking this sort of flexibility. It can enable borrowers to purchase a dream
home without digging into their retirement savings or committing to a
required monthly principal-plus-interest repayment obligation.
Of course, not all retirees are looking to purchase another home.
Today, many prefer to remain in their homes and age in place. A HECM
can be the perfect product for an aging homeowner who’s accrued
a lot of home equity but is worried about having enough income to
live comfortably. With a HECM, homeowners can tap into a portion
of their home’s equity to help pay for living and other retirement
expenses, especially during months or years when stock markets are
down and investment savings are best left untouched.
Like a typical mortgage, the HUD-insured HECM can be structured
with a fixed rate or an adjustable rate. Fixed-rate HECM loans are disbursed as a single lump-sum payment. For adjustable-rate HECMs,
borrowers can choose to receive a monthly payment or a line of credit.
Unlike a typical mortgage, however, a HECM requires no monthly
mortgage payment. As long as borrowers maintain the home as
their primary residence and remain current with their property taxes,
homeowner’s insurance and any other required property charges
(like homeowners association fees), the HECM does not have to be
repaid until the borrowers die or move out of the home.
Many federal- and state-sponsored first-time homebuyer assistance
programs require potential borrowers to complete homebuyer
education before purchasing their first home. Similarly, borrowers
considering a HECM must obtain counseling from an independent,
third-party counselor so they can make an informed decision.
These counseling requirements help ensure that first-time buyers
and HECM borrowers receive coaching on their obligations as bor-
rowers, what is required to avoid defaulting on the loan and what
happens if the required payments aren’t made. This education greatly
reduces default risk for both borrowers and lenders.
This required counseling can extend the origination timeline, but
usually by no more than a few days or weeks. As long as lenders
understand the origination timeline upfront and communicate the
need for counseling to their HECM borrowers, they can manage their
workload and their borrowers’ expectations accordingly.
HECM loans are a specialized product, so it is important that originators receive specialized training on how they function and how to
work with borrowers. Mortgage companies with dedicated reverse
mortgage divisions may offer in-house HECM training programs,
but training also is available from external providers or through the
National Reverse Mortgage Lending Association (NRMLA).
Build a pipeline
In the end, both forward and reverse mortgage products can help loan
originators grow a robust pipeline of future business. Most first-time
homebuyer programs, for example, are built with the goal of creating client relationships that will pay dividends for years — especially as
young borrowers mature and their incomes grow.
With reverse mortgages, the long-term pipeline comes from involving family members in the HECM decisionmaking process. By
treating senior borrowers with dignity and helping them make the
most of their retirement years, originators can become the family’s
go-to lending resource when the next generation reaches the age of
Upon closer inspection, originators will find that reverse mortgages are not fringe products at all. Rather, HECM loans have much in
common with traditional loan products — especially those designed
for first-time homebuyers — and are an important part of a generational lending approach that caters to the changing needs of borrowers
over time. n
Wendy Peel is vice president of sales and marketing for ReverseVision, a reverse mortgage
software and technology provider. Under Peel’s leadership, ReverseVision’s RVX LOS has
grown to serve nearly 10,000 active users and 10 out of 10 top reverse mortgage lenders.
She previously served as vice president of sales and marketing for CommercePromote
and in similar roles at iCoStore, Take Notice, PNA and TransPerfect Translations. Peel
graduated from the University of West Florida. Reach her at email@example.com.
120 Scotsman Guide Residential Edition | ScotsmanGuide.com | November 2017
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