Tom MacDonald - Reverse Mortgage Consultant






       Reverse Mortgage Consultant

      Tom MacDonald


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What does a Reverse Mortgage Originator actually do??

What do reverse mortgage originators do to earn their money?

This was posted on January 12, 2015 by Beth Paterson, CRMP - another mortgage broker.  I've made a lot of changes so that it fits the way I work.  But she certainly prompted me to create this page and deserves the credit.  See the full article and do business with her if you are in her area - St. Paul, Minnesota (BTW - her article includes an estimate of time associated with each step while mine doesn't. ) 

See her full article at :­1a2 © 2015 Beth Paterson, Beth’s Reverse Mortgage Blog, 651­762­9648

Frequently Reverse Mortgages are quoted as being expensive.  There are three parts to the costs:

  • 1.  The Mortgage Insurance Premium (MIP) which is 0.5% or 2.5% of the loan amount

  • 2.  Origination Fee - this goes to the lender or broker

  • 3.  Closing Costs - what I call third party fees - when some third party (escrow, title, attorney, county recorder, notary, etc) contribute to some aspect of the loan and get paid for whatever it is they do.

The origination fee, as noted above, is partly how a loan originator gets paid.  Depending on how they are employed, it might be a salary, a fixed commission or a percentage of the origination fee.  The origination fee could be a  small percent of the total.  In many cases, for those with a mortgage to pay off, I am able to waive the origination fee altogether.  This is because there could be what are called 'backend fees' the lender pays to the broker that can apply to my commission.  So, I don't need an additional fee paid by the borrower.

Originators may operate differently from each other.  Some work just with the initial contacts with a borrower and turn over the balance of the transaction to others.  Others may have a lender provide them with potential borrowers to work with.  Some lenders may do their best to automate as many steps as possible using technology.  For those borrowers that are technically oriented, this might be welcomed.  Others, like myself, are independent brokers and are basically running their own business dealing with marketing, accounting, taxes, expenses and all the other business needs in addition to the origination roll. 

What you will see below is just the origination duties in helping a borrower from the first contact to after the funding.  This also doesn't count all those times an originator works with a potential borrower and that person decides not to proceed with a loan.

  • 1.  The first step in working with a potential borrower is in the form of a phone call from the borrower or a referral from someone who knows the borrower and thinks I can provide them with some benefit.  I don't think of myself as an order taker so I need to determine what this potential borrower wants or needs that might make a reverse mortgage a good solution for them.  I have to convince myself, first, that a reverse mortgage makes sense for their unique situation.  With an estimate of their home value, the amount they might owe on a mortgage and their birth dates (what the computer uses to calculate ages), I can begin calculating their benefit (technical term - Principal Limit).

  • 2.  Many times the borrower doesn't have a good idea what their home might be worth.  It might involves a quick check of to get a ballpark figure or it might be necessary to develop a list of comparables (similar but different from what an actual appraiser might do).

  • 3.  I'll usually prepare some form of presentation folder.  Many times I'll visit a borrower and review it face-to face.  Other times, the borrower is afraid of me, thinking I'll twist their arm, and prefer I just mail or email the material.

  • 4.  The drive to the borrowers home usually runs 15 minutes to two hours each way.  Or maybe just 15 minutes round trip to the post office.

  • 5.  In my opinion, the first meeting is an educational one.  Even if they have reviewed sites on the Internet in advance, there are the basics to discuss to make sure we are on the same page and many nuances to cover that are specific to their situation.  The majority of our loans can have multiple issues that increase our time investment significantly including POA (Powers of Attorney), Conservatorships, Trusts, non­borrowing and non­occupying individuals on the title, private liens and a long list of property issues including manufactured homes, condos, rural properties, repairs, etc.  The presentation folder I leave for them will contain

    • A.  recaps of the numbers involved,

    • B.  a list of HUD qualified counselors that can perform a counseling session that is required before an application can be taken,

    • C.  a written discussion of what I've covered,

    • D.  a generic discussion of reverse mortgages and the use of a home as equity,

    • E.  a little about myself,

    • F.  some of what my own customers have said about their reverse mortgage,

    • G.  myths and misconceptions of reverse mortgages,

    • H.  many different ways a reverse mortgage could be used

    • I.  and a list of documents I'd like them to have available when/if I come back to take an application.  This also includes documents we discover are needed based on our discussion about their income and expenses which are now required as part of what is called Financial Assessment.

  • 6.  It is rare that a borrower is ready to proceed right away.  This is a big decision.  There may be a number of additional discussions with them, their adult children, their Realtor and/or their trusted advisors before they are ready to apply.  This may only take a few months to get to doing an application or it could be many years.

  • 7.  When they contact me to schedule the application, I'll open my software that will print out a foot tall stack of paperwork (I might be exaggerating just a little) and verify I have their information correct so we don't start off with any typos and ask for some information I might not already have.  We'll also make an initial decision on how they want the different variations of the reverse mortgage put together.  (This is their first 'draft' - after we have the appraisal and before we draw the final documents, we'll review the options again and finalize their choices.)

  • 8.  Drive (15 minutes to a couple hours each way) to their home to go through the paperwork, explain each page and have them sign all the required pages.  There have been a few times when the borrower is remote to me and quite willing to have me overnight the paperwork to them.  When that is the case, we arrange a time for a call to review each page with them as they sign the paperwork.

  • 9.  In my case, after the application paperwork is signed,  I'll scan in all the documents, some of them individually, and upload securely to my processor.  This can be a time consuming process.  Here is a quick recap of the processing steps.

A. Enter information into processing software program

B. Request FHA Case Number   

C.  Order Title Report 

D. Order appraisal from Appraisal Management Company

E. Order Insurance Binder

F. Pull Flood Certificate

G. Pull Credit Report - originator needs to do this now with Financial Assessment

H. Pull other required documentation

I. Review Title Report when received - Originator should do this too

J. Review appraisal when received - Originator should do this too

K. Review Insurance Binder

L. Review Flood Certificate

M. Review Credit Report - Originator needs to do this now with Financial Assessment

N. Request any changes if necessary

O. Phone calls with borrower for clarifications on any information that is on title, credit report, etc.  – The Originator will frequently get involved with this; sometimes 3, 4 or more calls.

P. When appraisal is received, enter new value, if repairs are required, etc. in software program for calculations

Q. Call borrower to advise borrower of appraised value, required repairs if any, and any calculation changes – The Originator should do this since several hours may be involved based on the appraised value, repairs, or other factors.  The borrower may decide a program change would be in their best interest.

R. Prepare re­disclosure for borrower

S. Mail re­disclosure to borrower

T. Review all documentation to make sure everything needed is in the file for underwriting. Multiple follow up calls to the borrower may be necessary to remind them and/or advise them on missing, corrected or additional documents that are necessary (i.e., SS card shows maiden name, etc)

U. Scan and submit file to underwriting

V. Request final fees from title agent

W. Address any underwriting conditions by contacting title company, appraisal management company, borrower, or making other necessary changes.  Conditions are required so that HUD will insure the loan and the investors will provide the funding.

X. Gather, review and Submit changes/conditions to underwriter

  • 10.  We are now ready for the final signing of the loan documents.
    • A.  This is when we review the borrower's options and how they want to exercise their reverse mortgage options.

    • B.  Schedule a date for the final signing.  Typically I will go to the borrower and a notary will also go.  There could also be a Power of Attorney and/or other family members to coordinate the date and time with.

    • C.  The processor and originator are again involved in work with the lender and title/escrow/attorney to correctly draw the documents as desired by the borrower.  As much as possible, I like to get a copy in advance of the signing so I can review and make sure all the details are correct.  However, it isn't unusual for this step to be still in process the morning of the signing.

    • D.  Drive 15 minutes to a couple hours to the borrowers home.

    • E.  Like the application package, each page should be explained as needed and signed.  Typically, the notary will manage the signing portion with me there to go into any detailed explanations that may be required.  Usually, by this time, the borrower and I have gone over the details enough that there are no mysteries and a minimal amount of explaining is needed.

  • 11.  There is a three business day recission period that allows the borrower to change their mind.  The loan won't be funded until this time has elapsed.  In the mean time, the funder is reviewing the documents they received from the notary.  Something might have been missed such as a signature or title (i.e., Trustee) that requires the document be fixed before the loan can fund.  In most cases, that occurs prior to the recission period deadline.

  • 12.  I usually quote a calendar week from the time the final documents are signed until the loan is finalized and the borrower receives any funds they might have requested.  This is the three days plus a day for the loan to be funded, escrow to receive and record.  Some counties will only record in the morning so this could cause one extra day.  So while most loans are funded within four days, I call it a calendar week since sometimes 'things' happen.

  • 13.  Once I hear the wire or check to the borrower has gone out, I'll give them a call so they know.

  • 14.  Post closing, I make sure my clients know that I am available for any of their questions.  I'll note that their lender's servicing department will have their current numbers (loan balance, line of credit balance, monthly payment information, etc.)  but they may not have the same level of knowledge of the reverse mortgages ins and outs that I might have.    I'll usually send some written communication a couple times a year encouraging them to contact me as needed.  It is not unusually for me to get questions years after we finish the loan.

As you can see, this process is very time consuming.  While this is the client that chose to go forward with a reverse mortgage, items 1-6 are steps that are performed with most anyone who might contact me to see if a reverse mortgage is right for them.  Even if it is 'right for them', in my opinion, they might choose not to go beyond step 6.  Even so, those are time consuming steps for which I am not paid.

Hope this gives you some clue as to the time and processes involved by a loan originator helping you with your reverse mortgage.