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   ARTICLE   |   From Scotsman Guide Residential Edition   |   February 2010

Choosing Reverse Partners

Title companies make a big difference when working with reverse mortgages

The U.S. Department of Housing and Urban Development (HUD) has been paying close attention to reverse-mortgage brokers and lenders lately. This includes levying fines for failing to implement Federal Housing Administration quality-control plans and for lending violations and marketing practices.

Brokers must pick industry partners familiar with reverse mortgages so they can implement added protections and guidance. Specifically, title companies focused on reverse mortgages can mitigate exposure to fraud, document errors and general liability matters.
A properly trained title company can help spot fraud in numerous ways. One of the most-common areas of fraud exists with power of attorney.

Special measures for reverse borrowers include using an affidavit if the borrowers are competent — or if they are incompetent, reviewing a doctor’s letter for specific verbiage on competency. Often, follow-up phone calls to borrowers are necessary to verify information. In addition, upfront counseling requirements help provide third-party verification.

Reverse-mortgage title companies help mortgage brokers find potential fraud by researching anything that looks questionable as it pertains to documents and loan closings, including monitoring signatures.

In addition to powers of attorney, trusts often are used in conjunction with reverse mortgages. Because most reverse-eligible clients have prepared a trust for a reason, it’s important to try to keep their home vested in it.

Lenders must meet HUD provisions for trusts to qualify to stay on title. Their interpretations and implementations vary.

Often, mortgage brokers and loan processors from the conventional-lending arena aren’t aware that title companies exist that will review trusts as they pertain to title, lender and HUD guidelines for reverse mortgages. Because conventional wisdom says to deed borrowers out of the trust during a refinance, it’s usually a new concept to keep the borrowers vested in the trust.

Some lenders require attorneys to review trusts and to provide opinion letters stating if the trust is acceptable and qualifies for a reverse mortgage. Such services could cost borrowers more than $150.

Other lenders have implemented systems under which qualified title companies can act as a second set of eyes for the trust and provide further clarification before needing an attorney’s opinion letter.

If brokers or processors are unsure about a title company’s experience with reverse mortgages, ask how many reverses the company has closed, if it has reviewed reverses used with trusts and what occurs during trust review.

For borrowers who haven’t placed their properties into trusts, matters such as probate or conservatorships often arise during reverse-mortgage transactions. Title companies can clarify what’s needed to proceed with the reverse mortgage.

Title companies also prep notaries they work with on the differences of working with reverse clients, including those regarding hearing sensitivity, dress and listening skills. Picking a title company that specializes in reverse mortgages — and that stays current on the changing landscape — represents one of the most-important choices for brokers.


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