FIT for Reverse Mortgage Lenders, part 4

Talking About Funds Usage


“Not all that can be counted counts” wrote the physicist Albert Einstein, “and not all that counts can be counted.”

In assessing whether a senior can live at home and benefit from loan funds over time, reverse mortgage funds-usage counts.

The first “yellow flag” in the FIT process addresses funds-usage. HECM counselors must ask whether seniors plan to buy financial or insurance products. Then, they are to bring up reality-testing issues, including double costs, risk of running out of cash to pay steep premiums for older folks, risk of depleting cash to live well, and risk of losing their home should they fail to meet home maintenance, taxes, and insurance obligations.  

To do their own funds-usage risk assessment, lenders must find ways to discuss this issue with seniors. How they do this without inviting nasty none-of-your-business looks and alienating seniors will test their people’s skills.

It comes down to one strong question to begin the conversation. Typical yes-no questions about annuities and insurance in loan-application disclosures will not cut it.  They are too narrow, too close-ended, and too cold-blooded.

Originators need artfully framed questions to spark a warm conversation, get the information and insights they need without offending their customers and starting their relationships on the wrong footing.

How to frame the questions will depend on originators’ question-asking skills and the dynamics of their interaction with seniors during the loan interview. For illustration, I suggest the following:

“Mrs. Akuna, if your loan application goes through and you get all the cash you need and more, what other financial, investment, or insurance products would you like to have?*

Then, listen. Listen and ask “Why?” Then, listen more.

Let’s say she says, “I’d like to have an annuity. My daughter, the teacher, says they are good.”

Using a technique called “mirroring,” you might respond by  restating her words: “You like annuities because your daughter, the teacher, says there are good?” Before long, you have a conversation on annuities (assuming you know what you are talking about), their advantages and disadvantages, and other funds-usage issues.

The budget-analysis piece aside, FIT is about asking questions and talking with seniors to understand their near and long-run needs.  As NCOA’s Barbara Stucki puts it:

“FIT is a way of getting people, whose judgment may be clouded by immediate needs, to think long-term about how they plan on staying at home so that they can get the full value of this loan.”

In lending’s numbers-ruled world, asking more questions and talking a little longer with customers to better understand their needs may not be “efficient.” It may not even be as neat as calculating maximum claim amounts and principal limits, but it counts because lenders will know seniors better and make more prudent lending decisions.

 *Note: Please give me your feedback on the strengths and weaknesses of this question as well as your suggestions for improvement. You may post your comments or send me an email: Thanks,  Atare

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