Reverse Mortgage Guide

The National Reverse Mortgage Lenders Association has an updated code of ethics, a 10-page document that is worth reading. There is also a one-page digest version for distribution to consumers.

If I were king I would like to see these documents re-written. The issue is not limited to reverse mortgage lenders, rather the concern is a generic matter that applies to all lenders: The Code in both the long and short version never mentions the term “client.”

A “client” is not a “customer.” A client is someone who goes to a professional  such as an attorney and knows that the lawyer must work on his or her behalf in a fiduciary capacity, a term which represents a list of requirements and obligations. A “customer” is someone you sell stuff too, without any obligation to act in their best interest.

The mortgage industry is vehemently opposed to the idea of a fiduciary relationship with borrowers, an obligation to get the best possible price and terms for every borrower.

“A lender underwrites, approves and funds the loan,” according to John Robbins, a former Chairman of the Mortgage Bankers Association. “The lender does not hold himself out as an agent of the borrower. While a lender must serve its customers fairly, and the industry has done much to assure high professional standards, a lender owes a duty to its shareholders and investors. A borrower knows a lender offers its own products and does not offer to shop for borrowers.”

Really? Do borrowers know that?

Here’s another one.

“Some have proposed,” saysHarry Dinham, a former president of the National Association of Mortgage Brokers, “that a fiduciary duty standard should be implemented and mortgage originators and their loan officers should act in the ‘best interests’ of the consumer. NAMB remains opposed to any proposed law, regulation or other measure that attempts to impose a fiduciary duty, in any fashion, upon a mortgage broker or any other originator.”

Until all lenders agree to act as agents for clients, borrowers will need to work diligently to find ethical lenders and loan officers. The good news is that such lenders and loan officers are out there. The bad news is that it may require a lot of searching to find them.

In the case of reverse mortgages, borrowers should always get independent advice and counsel from an attorney who specializes in elder law before signing any paperwork.

Related Resources You May Like

This entry was posted on Thursday, February 21st, 2008 at 3:39 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.