working to help new brokers get educated on how adding reverse mortgages to their portfolio of products can help grow their business and help their current clients,” says Lori Erskine, CRMP, vice president of wholesale for Mutual of Omaha. “By educating brokers on how the product works and when a borrower might be a good fit, we open up the communication, which can help the broker be more aware of what’s in their current pipeline and what situations are a proper fit for reverse products.” Here is a closer look at how each plays out in the reverse world. The Broker Brokers play a similar role in the reverse market as they do in other areas of financial services. They are independent agents who match borrowers with lenders who offer reverse mortgages. No additional licensing is needed beyond what a loan broker already has, Smith says. It is ideal for originators who may not sell many reverse loans and thus don’t want to build the in-house capacity to process them at a higher level. Brokers meet with clients, describe how reverse mortgages work, provide quotes, disclose the loan terms and ensure borrowers get the required counseling, O’Neil says. Other tasks handled by brokers include ordering property appraisals and credit reports, as well as checking for flood certificates. The lender, such as RMF, orders a case number from the Federal Housing Administration (FHA), if the loan is a government-backed Home Equity Conversion Mortgage (HECM). No case number is needed for a private-label reverse mortgage. When the loan is approved, the broker then works with the borrower to schedule the closing. Some brokers work with just one lender, particularly if their volume is relatively low or they are comfortable with a particular lender’s people and processes, O’Neil says. Other brokers may work with more, so they can present a range of options to borrowers. For lenders who are new to reverse mortgages, being a broker is often the first step, O’Neil adds. The Principal Agent Originators that handle more loans may opt for what is called a principal or authorized agent. It requires a higher level of certification and entails taking on more risk in the lending process. For example, principal agents for AAG need to have direct endorsement underwriting authority for forward loans from the U.S. Department of Housing and Urban Development, Smith says. They also need to secure warehouse lines to fund loans before they are sold. The channel is popular with forward mortgage companies that write a lot of reverse mortgages but don’t necessarily have the internal resources to train underwriters or obtain direct endorsement authority specifically for HECMs. Reverse lenders handle some of the back-office functions, such as underwriting and preparing closing documents, says O’Neil. The ranks of principal agents include banks, credit unions and other FHA-approved lenders, O’Neil says. At RMF, they have to go through a lengthier internal approval process than brokers do since they are taking on more risk—though they also benefit from higher fees. Correspondent Lender Originators can opt to become correspondent lenders when they want to handle reverse loans from start to finish and then sell them to the highest bidder. They are approved for reverse lending in their states and with the FHA. RMF refers to them as closed-loan sellers and puts them through a review similar to the one it conducts for principal agents, O’Neil says. But there are some extra hoops. RMF, for example, asks to see resumes of underwriters and their experience underwriting HECMs. REVERSE MORTGAGE / JANUARY-FEBRUARY 2022 23
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