The Servicing Process continued on page 30 than attached to you, and it is oftentimes necessary after closing that we call upon you to help us.” LOs should explain the servicer’s role and emphasize that communication is key. Borrowers must return phone calls, read statements and notices that come in the mail, and should provide an alternate contact. “Authorized contacts are very powerful and very useful,” Flynne says, adding that it is best to make those arrangements while everyone is “healthy and happy.” “It is critical in this loan product that people recognize that it is not forever,” she says. “Encourage them, prior to closing, to identify those alternate contacts, those authorized contacts, meet with the family or at least tell the borrowers to meet with the family.” Simply letting borrowers and family members know that the name and number of the servicer are on the monthly statement would help, she says. LOs also can reinforce the critical importance of having a will. And family members should know that they might need multiple copies of a death certificate, which is not something the servicer can always obtain independently. Lines of Credit LOs should fully explain how lines of credit work, such as the restriction on the amount that can be withdrawn in the first year—the initial disbursement limit. “For that first year, they can never borrow more than that initial disbursement limit,” she points out. Borrowers should be encouraged to use direct deposit, rather than paper checks, to avoid checks getting misplaced through the mail. The funds will be disbursed within five business days but only if the request for funds is filed correctly with a full signature and the exact amount being requested. And when a power of attorney is involved in requesting money from a line of credit, the correct format must be followed. Otherwise, “it doesn’t count,” Flynne says. Awareness Points She also cautions that a line of credit could be frozen if borrowers aren’t careful. “It’s subject to being frozen for some really annoying reasons,” Flynne says. Failing to certify occupancy, which must be renewed annually, is one reason. “If they do not return their occupancy certificate, we are required to put them in default because the [U.S.] Department of Housing and Urban Development (HUD) requires that they acknowledge that they live there each year,” Flynne says. “The signed occupancy certificate is the evidence that attests to that.” Delaying certification can lead to additional fees, such as costs for an attorney to start working up foreclosure documents, inspections and appraisals. “Please underscore how important it is every year on that anniversary date to be looking for one of these letters so that they can return their occupancy certificate,” Flynne advises. First-Year Repairs Another area that can lead to difficulty is ensuring homeowners make the required repairs. Oftentimes, it is the small jobs—such as $500 to fix peeling paint—that lead to issues because the repairs don’t get done within the required time. “If they don’t get those repairs done by the date, they end up in default,” Flynne says. “And now they can’t get a line of credit draw. So, it’s important that you tell them this repair set aside is not a casual thing.” Preparing Borrowers for Servicing Leslie Flynne says it is critical that borrowers provide alternate contacts or authorized thirdparty phone numbers and email addresses when a loan is originated. Reverse mortgage borrowers should prepare for loan maturity. Here is a partial checklist of what would be needed: • Name and phone number of the servicer, which are found on the monthly statement; • Copy of a recent monthly statement; • Power of attorney or authorized third- party letter; • Copy of a will or trust; and • Copy of the death certificate provided by the heirs. Loan officers also should discuss with borrowers the details involving line of credit advances, the occupancy certificate, the repair set aside and loss draft requirements in the case of an insurance claim. REVERSE MORTGAGE / SEPTEMBER–OCTOBER 2023 29
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