Reverse Mortgages have become a common retirement tool for senior homeowners and a recent study by the AARP showed that nearly 90% of those surveyed said they were satisfied with their lender.
According to AARP's study, "Reverse Mortgages: Niche Product or Mainstream Solution?" by Donald L. Redfoot, Ken Scholen, and S. Kathi Brown, 90% of senior homeowners who had undergone HUD counseling classified themselves as being "satisfied" with their experience with reverse mortgage lenders. This is certainly a positive statistic both for the reverse mortgage industry, as well as for homeowners who are looking into getting a reverse mortgage. But what kept the other 10% from being satisfied? What could have been done differently to make sure more senior homeowners answered "very satisfied"? Incidentally, 73% of senior homeowners that were surveyed did say that they were "very satisfied", but that means that 17% of senior homeowners saw room for improvement in some portion of their experience.
Nine percent of HUD counseling clients said that they were to some degree "not satisfied" with their lender. The AARP study asked them, open-endedly, "Why were you not satisfied with the lender?" In response, the senior homeowners most often cited one of the following seven reasons.
"The loan cost too much," was cited by 17 percent of dissatisfied senior homeowners. This is an important concern for homeowners since the typical costs of doing a mortgage exist, in addition to paying a large mortgage insurance premium. It is sometimes difficult to see all of the benefits of a Reverse Mortgage when you are looking at all of the costs of doing the loan. Remember that the origination fee can be negotiated in most cases. If you feel a reverse mortgage is right for you, but can't see yourself paying so much for it, make sure to discuss the fees with your loan officer, and see if there is room to reduce the origination.
"Gave me incorrect information," was cited by 16 percent of the dissatisfied senior homeowners. "The lending process took too long," was cited by another 16 percent of the dissatisfied group, and "Did not answer all my questions," was cited by 13 percent of the group.
It is important to work with a trained, licensed, experienced reverse mortgage professional. There are many details to know about, and sometimes it will happen that a question will be asked that even a trained and licensed loan officer will not know the answer too. They should, however, have the resources available to get the answer for you. If you ask them a question that they do not immediately know the answer too, they should have established relationships with title and escrow professionals, as well as be able to have dialogue with underwriters or managers that can answer more specific questions. Some questions that homeowners may have about Reverse Mortgages, or even mortgages in general, however, should rightfully be referred out to either a licensed tax preparer or an attorney. For example, a real estate professional cannot answer questions about tax implications of proceeds for a reverse mortgage or give legal advice.
"My loan application was not approved," was cited by 14 percent of the dissatisfied senior homeowners, and "The amount of money I would have received was too small," was cited by another 9 percent of the group.
Whether or not a homeowner is approved for a Reverse Mortgage, and how much money they can receive, if they are approved, is dictated by guidelines based on how old the youngest borrower is, how much is currently owed on the house, how much an FHA appraisal says the home is worth, and what the FHA lending limits are in the homeowner's zip code. Credit score, income and the borrower's liquid assets are not determining factors at all, so senior homeowners should not take it personally at all if they happen to not qualify for a loan.
Nonetheless, it is always disappointing to be told that you are "not approved," so it is very important for loan officers to be sensitive and respectful when telling a homeowner that they do not qualify for a Reverse Mortgage at this time. It would also be appropriate for the loan officer to explain why you don't qualify for a Reverse Mortgage at this time, if that is the case, and to point out what may change in the future that might allow you to qualify at a later date. Since your age, the value of your home, and the lending limits are factors that change over time, just because a senior homeowner doesn't qualify for a Reverse Mortgage today, shouldn't discourage them from applying again in a year or two.
If the homeowner is in a needs based situation, for example if you have payments that are adjusting, or are just too high for your current living situation, or extra cash is needed for necessary purchases, your licensed loan officer should be able to look into other traditional mortgage options for you. If other mortgage options exist, your licensed loan officer should be able to explain all of these options to you, and answer all of your questions thoroughly so that you can make the best decision for your situation.
"Did not treat me with respect," was a reason cited by 8 percent of the dissatisfied senior homeowners. Being polite and respectful is always critical. Although this was given as a seperate answer, it probably played a role in the other reasons cited for dissatisfaction. If loan officers always make an effort to be as respectful and thorough as possible, senior homeowners might not be dissatisfied even if they are not approved at this time. Ideally, they can walk away from any meeting with their loan officer, whatever the outcome, and think, "That agent really had my best interests in mind."
Written by Brianna Penley for the ReverseMortgageCity.com Media Center
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