Here are some statements I received just today from a few different borrowers by email and on the phone. “I talked to XYZ reverse mortgage lender and he says that if everyone else has me getting less than $8,000 dollars and you have me at $11,000, then you are doing something wrong”. Another gem, “I was talking to XYZ, he says that other lenders low-ball the interest just to get a client hooked and the industry standard is 5.06%. He says that the interest rate that you quote will be raised later”. I thought it was interesting that this was put in writing to a borrower by an originator “I looked up All Reverse Mortgage on the internet and they only did 8 reverse mortgages last year”. And finally, another borrower told me, “I just spoke with a guy who told me that all lenders have to use the same numbers so anyone sending me anything else is lying!”.
These are four quotes I received from borrowers today alone trying to obtain a reverse mortgage quote both by email and by telephone. There are a lot of very knowledgeable and credible Reverse Mortgage originators in the marketplace, but apparently there are a few that, like any other business, do not mind bending the truth a bit to get your business. So I just want to take a few minutes and clear up a few things for reverse mortgage borrowers.
It is true that all reverse mortgage lenders who are originating the FHA-insured Home Equity Conversion Mortgage (HECM or “Heck-um”) use the same calculator to determine your benefits. As long as each lender is using the same property value and the same birth dates, then the only things that can affect the amount of money you would receive would be the interest rates (and then only if one or both lenders are far enough over the floor of 5%) or the fees. When borrowers question me why quotes vary, I ask them to compare the line items to see where the differences are. A difference in benefit amount could mean that one company had a different date of birth for the youngest borrower or could be a rate issue, but a difference in fees could mean that they have a different fee structure (either with the originator or a third party provider) and only a careful review of the items being charged by each company can reveal the difference.
It is true that reverse mortgages account for such a small percentage of the total number of loans produced that there is not as great a number of originators and nowhere near the secondary market for the product. While this tends to narrow the range of programs and rates available as compared to forward or traditional mortgages, there is no one set or “Industry Standard” rate. When we send borrowers proposals, we encourage them to compare our rates to other reverse mortgage lenders. We know that pricing varies at different companies and we encourage borrowers to be educated and informed consumers. We inform borrowers from the very first contact which rates can be locked and which rates float until closing, giving borrowers the most information available to make their decisions. Borrowers should be given the facts and then be allowed to make a choice, not be frightened into making a decision that they may later regret.
HUD changed the way they approved lenders and originators and that also changed the way the closed loans are reported in 2010. A casual internet search will no longer reveal the number of loans every originator has closed and therefore, most people have no way to determine the exact number of loans done by many originators doing reverse mortgages. Even though companies are required to file reports on the National Mortgage Licensing System, those numbers are not available through the NMLS system to consumers or other originators so any originator coming up with a number of any sort for any given company is tough to determine whether or not that number is accurate. In this case, the number is many times fewer than what we close in a month’s time, let alone a year so the originator really showed his ignorance (or his willingness to be untruthful to his borrower).
Finally, when I spoke with the potential reverse mortgage borrower in Pennsylvania who told me that he had been told that all reverse mortgage lenders had to use the same numbers and anyone sending him anything else had to be lying, I wasn’t quite sure what to say. Was this originator referring to the same calculator results based on the same figures input? For that I would say he was “semi-right”, if we input the exact same numbers into the HUD reverse mortgage calculator we should get the same print out but many lenders have different rates and fees available, and those numbers will affect the calculator results. To say that one originator is “lying” simply because they come up with a different set of numbers is harsh at best and again, the best way to resolve that is to do a line by line comparison, starting with the borrowers’ ages and the property value then going through the fees and rate being charged.
If you are not sure whether you have a reputable company, find out if they are members of the National Reverse Mortgage Lenders Association (NRMLA). It would be an ethics violation to knowingly under-quote rates and NRMLA is very proud of their superior ethics requirements as are their members. Aside from an ethics violation with NRMLA, it is illegal to advertise and offer rates that are not actually available. This is known as Bait and Switch advertising and any originator who quotes rates that are not available is in danger of losing their license to originate. Finally, borrowers can always go the Better Business Bureau website and check out the company’s rating and see what, if anything, their customers are saying about them. If you have a company who will or will not deliver what they said they would, who would know better than their customers?
Reverse Mortgages are complex financial transactions and borrowers need to feel comfortable with the individual with whom they are working. There is no need to push a borrower into the transaction, especially by denigrating your competition. As a borrower, you need to feel comfortable with your originator and their company. If you feel that they are a bit too quick to give you reasons why the other guys are bad or that the other rates and fees aren’t available, do a little homework on your own. You can drive yourself crazy by trying to get a quote from every company in the United States, but a few extra calls or emails surely won’t hurt if you don’t feel like you’re getting the whole picture. And I really encourage you to use resources like NRMLA and the Better Business Bureau, you’ll be glad you did!
“Reverse Mortgage Lenders” by www.allrmc.com
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