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While the reverse mortgage industry is full of professionals who aim to take the time and effort to explain every part of the loan process to clients, sometimes those borrowers can still feel blindsided when it comes to what they can expect after their loan closes. Briefing originators — who often maintain direct contact with borrowers months or years after a loan closes — on how to best inform their clients about this phase of the loan experience is critical.
This is according to a pair of reverse mortgage servicing professionals — Gail Balettie, SVP of client satisfaction at Celink and Leslie Flynne, director at PHH Mortgage Services — during a panel discussion at the National Reverse Mortgage Lenders Association (NRMLA) Western Regional Meeting in Irvine, Calif.
The importance of educating borrowers
Balettie and Flynne are also members of NRMLA’s servicing committee, and began the panel discussion by talking about common points of conversation when that committee convenes.
“What we talk about a lot on our servicing committee is, how can we get the message out to these seniors sooner rather than later about what they’re going to see after their loan closes?,” Balettie says. “You guys are holding their hands and walking them through step by step. And then, you cut the ties, and they’re handed off to us. We want that transition to be as smooth as possible, and we want what they hear on the front-end of the transaction to be consistent with what they hear on the back-end of the transaction.”
That’s why the proper discussion and education of loan officers about the best information to impart to their borrowers remains critical.
“So our goal today is to help you guys and give you the tools and resources you need to be that connection for us,” Balettie explains. “Because a lot of times — especially when a borrower goes into default — they’re going to reach out to their loan officer, especially if you’ve kept in contact all those years with them.”
The first thing that Balettie mentioned was about the proper rights that originators have when talking about sensitive financial matters with their clients.
“Sometimes loan officers don’t understand that their permission to discuss ends after the loan closes,” she explains. “If you want to help a borrower in the servicing world, it’s important that you get a third-party authorization from that borrower in writing. We can’t talk to you about the servicing of the loan until we have that.”
There is also a difference in such arrangements between an “alternate contact” and an “authorized third party,” she says, which not everyone may be totally clear about.
“The alternate contact is on your loan app,” Balettie says. “That person is designated by the borrower so that we can find the borrower if for some reason their phone number changes, we need to get in touch with them and we’ve tried, and we can’t find them. That person is used to locate the borrower, that person is not authorized on the account. There needs to be an authorized third party form or a letter written by the borrower.”
Other designations do have the right to represent the borrower including attorneys-in-fact, guardians, and conservators who can act on their behalf.
”They have legal authority to represent the borrower,” Balettie says. “So, keep that in mind: loan officers require that borrower authorization if you’re going to help a borrower post-closing.”
After the death of the borrower, line of credit
After the borrower passes away, any permissions “die with the borrower,” Balettie says.
“We don’t know at that point who’s authorized on behalf of the estate,” she explains. “So we want to make sure that we get [the forms we need]. We need a death certificate, the will, the personal representative appointed, and we need to know who’s going to be able to speak on and act on behalf of the estate.”
That is the person who becomes the authorized party. The authority of attorneys-in-fact, guardians and conservators all die with the borrower, and the executor or personal representative of the estate is the person who can then authorize other people, she explains.
Things can also get complex for a line of credit, Flynne says.
“Many loans close where the borrower has availability [in] a line of credit,” she says. “And we want to make sure that if you’ve closed the loan with a power of attorney, that they understand that when that power of attorney would request a draw, they need to sign it exactly as they sign it when the documents closed with their name and attorney-in-fact for the borrower.”
Some borrowers may also have incorrect perceptions of what they can do when they wish to make a draw, so the particulars about how a reverse mortgage draw works often need to be emphasized, Flynn explains.
“Funds are released to the borrower, or whoever requests them, within five business days,” she says. “So, you want to make sure that you tell your borrowers that this isn’t a ATM machine. We do a lot to protect the borrowers to make sure there isn’t elder abuse, or that somebody [inappropriate is] drawing funds, or they’re drawing too much. So, it’s a five-day business process. And if they’re in default, it’s really important that they understand there are no draws, even if they have line of credit.”
This is why signed occupancy certificates and the completion of any requested repairs on the property are so important, Flynne says. Also an important detail today is how a borrower gets access to their draws.
“Don’t believe that anyone today at any age should be getting things by check,” she says. “That’s just not a good idea. So, encourage your borrower to take direct deposits. They can check their bank statement — lots of borrowers today have their bank statements on their flip phones, or on their smartphones — so they’ll know when they got there.”
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