How to Sell a Reverse Mortgage
Reverse mortgages, commonly called Home Equity Conversion Mortgages by the Federal Housing Authority, are the opposite of traditional mortgages. These arrangements allow the borrower to get monthly payments from the equity of her home while remaining in the house. The lender recoups the mortgage when the borrower dies or sells the home. Loan officers must confront serious obstacles when attempting to sell these products--namely, the large fees involved. Fortunately, there are many advantages to the loans, too.
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Instructions
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Market the reverse mortgage product effectively. Some lenders like to research the Registry of Deeds to find mortgages that are nearly paid in full. You can also target specific neighborhoods with direct mail pieces and targeted phone solicitations. Remember to screen all potential calls through the Do Not Call Registry (see Resources).
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Make sure your potential borrower meets the eligibility requirements for a reverse mortgage. All HECM borrowers must be at least 62 years old. In addition, the applicant must own the house free and clear (or have a very small mortgage balance), not be past due on any federal loans, and must use the property as a principal residence.
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Schedule a meeting with your applicant(s) to review the HECM product. It's best to meet face-to-face when soliciting this product. Review the advantages of the loan first--cash on-hand, ability to pay off loans, increased standard of living (if a borrower is on a fixed-income).
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Review the fees thoroughly on the HECM product. These will likely be the largest obstacle in the mortgage sale. Points, fees, and mortgage insurance on these loans can reach well over $10,000. Explain the reasons behind each of the fees (e.g., mortgage insurance is required because it ensures the borrower will continue to receive monthly stipend checks even if the lender goes under).
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Discuss the flexibility of the HECM. Borrowers can choose several payment options: lump-sum payments, monthly stipend checks, or a combination of the two. Borrowers can structure their reverse mortgage to their needs.
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Collect the customer's Social Security number, income documentation (pay stubs, W2s, tax returns) and existing mortgage information (mortgage note, mortgage statement) to get a pre-approval. Re-review the terms with your applicant--especially if underwriters have changed any terms. Schedule a meeting with a reverse mortgage counselor and your applicant(s). A reverse mortgage counselor is an independent, unaffiliated third-party advisor who fully explains the advantages and disadvantages of a reverse mortgage. All reverse mortgage customers must undergo this federally mandated counseling.
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Schedule a closing once the customer completes the reverse mortgage counseling session. Make sure to schedule one last meeting prior to the closing to answer any final questions, iron out any lingering issues, and re-emphasize the benefits of the loan.
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