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Closing a reverse real estate loan is a huge opportunity for everyone involved, especially the borrower.
However, thanks to the generally low penetration rate of the product category compared to the forward portion, sometimes borrowers might not understand the details required to close a reverse mortgage or they may not be adequately explained to originators.
That’s why several reverse mortgage industry professionals expertly in the field offered designers several ways to navigate some of these issues at last year’s National Reverse Mortgage Lenders Association (NRMLA) regional meeting in Baltimore, Md.
Allegiant Reverse Services vice chairman Tina Meilinger and Notaroo COO John Connell outline some of the most common pitfalls that can get in the way of a reverse mortgage and how to avoid them.
Close from each side
When asked specifically about common pitfalls he encounters during the closing process, Connell Meilinger explained that there are often two different parts to what’s often considered a normal closing process: the escrow part and the underwriting part.
“The closing process from an escrow perspective is once we prepare the file for closing, we ensure all the documents are there [and that] we update the payment requirements and different things,” he said.
“The second part of it is the signing itself, which takes place within the presence of a notary who represents you and us during the final process.”
A common pitfall on the escrow side of the equation comes in the form of late notices when an updated payment information table is required, which may come with a long turnaround time depending on factors including who the lender is.
Additional sensitivities often arise from the necessity for an updated payment request, which may further complicate the process, he explained.
Title issues also can be another big complication, he said.
“Access to information to clear the title is another [problem],” he said. “The more information that comes out, the higher we are in the closing process.
Of course, there are outliers like examining a will, tracking down private beneficiaries, the borrower not having a legitimate ID, or trying to seek out their trust.
Other changes are according to her trust, her death, and her power of attorney.
Power of attorney, discharge of debt to the debtor
A Power of Attorney (POA) can also be an important thing to consider when closing because sometimes people who think they have a POA in order can’t provide all the information they need.
” Meilinger also explained that there are cases where parties thought they had the original POA, but they didn’t. This isn’t much of an issue for a borrower with full faculties, but in instances where a borrower may have cognitive issues then there might be a need for a conservatorship, she said.
“That’s a lengthy, expensive, and drawn-out process [which is] not in your borrower’s best interest,” she said.
“So, if we could make sure at the onset, we’re happy to truly hold that and even talk about the possibility of recording it in advance to ensure that that’s already of record, but we’ll [usually] do this in a sidebar conversation.”
Having the proper payoff information is also always critical before transitioning into the actual signing process, she explained.
Notary issues, document execution
Delays on the side of the notary also can be a factor in hampering a closing’s progress and can occur if the notary for some reason cannot reach the borrower to confirm the appointment’s time, location, or both.
“We need to remember that there’s location, distance, period, traffic, and other varying factors that inherit play,” she said.
Naturally, documents that aren’t executed correctly or a delay in the approval process on the side of the U.S. Department of Housing and concrete Development (HUD) can also preclude a loan from going to closing.
The documented side was challenged particularly during the pandemic, which caused a rush and necessary documents to urge out late, she explained.
“That pushes the signing out,” she said. “After sending the documents, sign again because the knowledge on the originals is incorrect this is often probably the biggest critical factor we have seen in this segment.”
Reference Source: Reverse Mortgage Daily
