How to choose the right Reverse Mortgage Lender
Michael G. Branson 5/6/10 3:31pm
Finding the right reverse mortgage lender is sometimes similar to finding the right bank, or the right accountant or the right grocery store...it has to be right for you. A reverse mortgage is a complex financial decision and you have to be comfortable that the people with whom you are dealing are reputable, knowledgeable, honest and are making sure that they have your best interests at heart. And how do you know who that is just by making a call or by looking at a website?
Firstly, check the lender's affiliations and recommendations. Is the lender affiliated with industry associations designed to protect the interests of borrowers, promote education and ethics such as the National Reverse Mortgage Lenders Association (NRMLA)? Does the lender have a solid listing with the Better Business Bureau? What is the experience level of the people who will actually be working on your loan file? Many people think that a large bank is the best because they do thousands of Home Equity Conversion Mortgages (HECM or "Heck-um") every year, and then they are shocked to find that the Loan Officer they talk to has less than 12 months experience or the processor who is responsible to put their loan together has even less. Did the quote you receive come in very high only to have the Loan Officer then offer to lower his fees only after you showed him how others had his quote beat? Or did one company quote extremely low fees in their "proposal" that were below the competitor's quotes for things like title insurance, intangible taxes (if your states has them), mortgage taxes, recording fees or any other fees completely out of the originator's control?
Reverse Mortgage lenders who maintain affiliations with NRMLA are required to adhere to a strict code of ethics. Most of which are designed to protect borrowers. Lenders who maintain the highest ratings with the Better Business Bureau do so because they are concerned with treating their customers right and when those occasional "hiccups" do occur, they do everything in their power to make them right. Experience is key for your reverse mortgage originator and lender.
If you are dealing with someone who originated sub-prime loans a couple years ago and loan modifications last year and this year they are trying to do reverse mortgages, they are probably not going to be the most knowledgeable people to work with on your reverse mortgage. As I started, reverse mortgages are very complex financial transactions and not advisable for those who have not had ample experience to jump in and try to originate without sufficient supervision.
We have seen borrowers bring us quotes wherein it appeared that one reverse mortgage lender's fees were lower than most others, only to find out that third party fees were under-stated on the proposal. When the actual disclosures were delivered, the fees did in fact increase to the fees that were being charged by the state or third party provider. Some borrowers spend extra weeks and months to get their loans closed by selecting a lender with little to no experience simply because the quote looked a little bit better, only to find that what they thought they were saving never materialized.
That is why we say look for a reverse mortgage lender who gives you a good quote the first time around, not one that lowers rates and fees (particularly margins on adjustable rate loans) only after seeing other people's quotes. Obviously you will want to question any large discrepancies though, higher or lower, if one lender is substantially different from others on costs like the ones stated above. But don't get hung up on the third party fees that the reverse mortgage lender actually has no control over unless you are applying for a program in which they are paying those fees for you and then the bottom line is what is important.
Talk to your intended reverse mortgage lender and ask them all the questions you can think of. Did they do a good job of answering all your questions and concerns? I always encourage borrowers to ask the independent counselor some or all of the same questions they ask me and that way they know they're getting the right answers. Reverse Mortgage Counselors are not infallible either though so if you do receive a different answer on any given question, make sure you find out who has the correct answer before you come to any conclusions. If you have a loan officer who seems more interested in selling you a reverse mortgage than making sure it is right for you, that's a problem.
Reverse Mortgages are great for the right borrowers, but they are not for everyone and you should never feel pressured into taking one. And that gets me back to what I said when I started...it has to feel right to you. Ask all the questions you want - there is no such thing as a "stupid question". After all, a reverse mortgage is meant to be the last loan you will ever need. Shouldn't it stand to reason that you should feel good about the last lender from whom you obtained your reverse mortgage loan?
Links of Interest:
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G. Branson, CEO - All Reverse Mortgage Company
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