Written by George Lagarde, as originally published in The Reverse Review.

Financial Assessment is finally here! We have talked about it for months, speculating about its potential effect on the senior population. But all that is behind us now. It’s here and we have to accept it, learn about it and move on so that we can continue to help seniors who could still stand to benefit from this unique financial tool.

Since last year’s audit of the MMI Fund, FHA has been trying to lower the potential foreclosure rate of the HECM program. The facts suggest that the foreclosure rate is high because a number of senior borrowers have neglected to pay the real estate taxes and insurance, in some cases because they simply cannot afford them. It’s important to understand that if the real estate taxes are not paid it is the county, not the banks, that starts the foreclosure process. The bank is drawn into this procedure because it has an equity stake to protect. It is the banks, and the FHA, that look bad in the public eye when a senior is foreclosed upon.

To remedy this, FHA has determined that some seniors should not qualify for a reverse mortgage because the risk they pose is too great. Financial Assessment will be implemented to determine those who are likely to pay their yearly obligations and therefore at low risk for default. Those who do not pass the assessment will have to look elsewhere for housing assistance.

Financial Assessment will take effect March 2, 2015. Are we prepared? The new regulations come with 78 pages of instructions and a four-page Financial Assessment worksheet. As FHA said, “Financial Assessment includes, but is not limited to, credit history documentation, income verification, asset verification, property charge verification, residual income analysis, documentation of extenuating circumstances or compensating factors, and calculations for life expectancy set asides and residual income shortfall set-asides.” It’s hard to deny that these new documentation requirements will have an impact on reverse mortgage processing as we know it, and it may take some time to rework our methods to maintain efficiency.

I urge HECM loan officers to seek out all available educational opportunities between today and March 2 to learn as much as possible about FHA’s new directive in order to be in a good position to educate potential borrowers who will be coming to us for guidance. It is up to us to make the process easy and comfortable for them, and we will accomplish this by learning as much as we can about the new guidelines. Like the changes of last year, we need to embrace these recent regulations in order to conquer whatever obstacles they present.

The reverse mortgage industry has undergone several radical changes in the past couple of years and we have survived those changes. Although loan officers are reluctant to accept new regulations, and we admittedly stamp our feet sometimes, we know these changes are for the benefit of the program and our seniors. In time, we will see the benefits of Financial Assessment. We will learn that four-page worksheet until we can fill it out in our sleep, and I believe we will come to see that it is for the best.