Our job as reverse mortgage loan originators is to help senior homeowners, their families and advisors determine if the loan’s benefits make it worthwhile for their particular situation. A critical attribute for success is to go beyond mere communication and engage in real conversation. Top reverse mortgage producers share an ability to overcome the challenges that get in the way of productive conversation.
Have you grappled with the question of why the reverse mortgage is so widely misunderstood and why more seniors don’t consider its use? Part of the answer can be found in the discussions we often have about the product. What do we face when we first sit across the kitchen table? What obstacles must be overcome before homeowners can make appropriate, well-informed decisions? If we look closely, we see that the list is formidable.
1We are strangers. We know nothing about the homeowner and we are about to discuss extremely personal information.
2 We must quickly get to know the prospect’s problems and needs.
3 The reverse mortgage product is complicated and can be difficult to explain.
4 The typical homeowner’s mortgage experience is completely opposite of that of a HECM.
5 Misunderstandings and misinformation about reverse mortgages abound.
6 Indirect issues (like legacy beliefs) can confuse and cloud the decision.
To varying degrees, these challenges are present whenever we engage in an initial discussion about reverse mortgages. Whether we’re talking with a financial advisor at a networking event or across the kitchen table with a prospect, we must clear these hurdles.
Communication Versus Conversation
To tackle these challenges, I find that it’s helpful to examine the distinct difference between communication and conversation. Communication can be defined simply as the presentation of ideas. A billboard or a sign in a store window is communication. BUY ONE GET ONE FREE! It’s a one-way message. Conversation is defined as the spoken exchange of opinions, ideas, thoughts and feelings. Exchange is the key difference. In Monte Rose’s book, GO SELL. GO SERVE. – Kitchen Table Mastery for the Reverse Mortgage Professional, he emphasizes the importance of quality conversation, writing, “Successful communication at the kitchen table revolves around creating emotional clarity and connection with the senior client.” These achievements can only be realized through effective, two-way conversation.
Luckily, I learned the importance of conversation early in my reverse career. I was a green loan officer with little training and no applications under my belt. Armed with little more than self-confidence, I was absolutely sure I had charmed my way into my client’s good graces and that she would choose me over a competitor. I sent a handwritten note thanking her for her time. I wanted to make it tough for her to select the other company. I confidently believed that the charm offensive would win, but it did not. After the shock faded, I gained some composure and asked why. She told me that the other loan officer answered her questions and described the reverse mortgage more clearly. “He was better able to help me see how it would work for me,” she said. I realized that I couldn’t rely solely on my “charming personality” and that I’d better improve my reverse mortgage conversation skills in a hurry.
Since that eye-opener, I’ve worked continuously to improve. I learn from my colleagues and prospects, and by simply reflecting on my encounters at the kitchen table. I have found that sensitivity to clients and the signals they give can be crucial. Sometimes it’s the raising of an eyebrow or a slight smile, often it’s a question or response. It may be the tone of voice. However recognized, the moment we sense that the prospect sitting across from us “gets it,” our confidence elevates, our focus sharpens and our ability to “tune in” becomes more acute. We are guiding the conversation and we are getting somewhere.
As reverse professionals, our ability to explain the product in easy-to-understand, customer-friendly and customer-centric terms is critical. HECM applications always depend on the borrowers’ understanding of the product and their confidence in you as their authoritative guide. Without an effective vocabulary, the conversation will be a struggle and the outcome uncertain. A rote dump of HECM facts and figures won’t expose senior homeowners to the benefits they may gain from a reverse mortgage. Three hundred years ago, British essayist Joseph Addison wrote: “If the minds of men were laid open, we should see but little difference between that of the wise man and that of the fool. The difference is that the first knows how to pick and cull his thoughts for conversation, whereas the other lets them all indifferently fly out in words.” My goal is to make wiser men and women and better reverse mortgage spokespersons of us all.
Elevating Your Pitch
After my initial loan officer training, I could not plainly describe the HECM loan to family and friends. I knew that I needed an elevator pitch. As a former telecom executive and technology consultant, I learned that effectiveness required salesmanship: the ability to seize opportunities to clearly and convincingly tell a story. Most successful salesmen have learned the value of the elevator pitch, which is a short summary used to quickly and simply define a product and its value proposition. Tom Peters, author of In Search of Excellence, neatly described this important element: “The elevator pitch [is] about communication. And caring. Can you take the hopelessly complicated set of problems that you’re juggling… and reduce those problems to three bullet points that anyone can immediately understand?”
I crafted my reverse mortgage elevator pitch to introduce the product so that a discussion of its benefits could follow.
To begin, I established three fundamentals:
ONE I assumed that my audience would have little or no understanding of the product or its application.
TWO My description needed to be simple, clear, easily understood and reassuring to a skeptical audience.
THREE My pitch needed to resonate with senior homeowners as well as with professionals in order to stimulate additional discussion and questions.
Here’s what I came up with:
Reverse mortgages have been around for decades. In the ’90s, Congress was concerned about the financial well-being of retirees and the future of Social Security. It found that America’s seniors owned trillions of dollars in home equity. If a way were developed that allowed seniors to safely and securely tap into a portion of that equity to receive funds or additional income during retirement, millions of people could benefit. As a result, the government-sponsored reverse mortgage was created and signed into law by President Reagan in 1998.
The reverse mortgage is simply a mortgage on the borrower’s principal residence. Under the FHA program, three things determine how much money is available: the age of the borrower (you must be 62; the younger the borrower, the less money available); the value of the home (the greater the value, the more funds available); and the interest rate at the time of the loan. These factors are fed into the computer and HUD’s formula spits out a number. That number is the amount that a borrower can get at that age, at that interest rate and with that home value. 8 After deducting the fees and costs of the loan, borrowers can receive cash, a line of credit or monthly income checks that are guaranteed to come tax-free for the rest of their life as long as they continue to live in the home. Unlike a regular mortgage, there is no requirement to make monthly mortgage payments. The loan is eventually repaid when the home is sold after the borrower permanently moves out or dies. The amount that is repaid is the amount the borrower received in cash and payments, the original fees and costs that were financed in the loan, and the accrued interest and mortgage insurance premium. The remaining equity is the borrower’s or their heir’s to keep. And, if the sale of the house is not enough to pay off the mortgage, HUD eats the loss.
This can be delivered in less than two minutes. I am fully aware that some of the terminology I use may not be up to compliance standards and that a lot of important factors were left out, but come on, folks—this is an elevator pitch! Brevity is crucial. The details come later.
Let’s take the pitch apart and examine its message. In the first paragraph, I have several specific objectives:
1 I put the reverse mortgage product into a solid, comfortable and elevated context. While many citizens are currently discontented with our federal government, I have found that most seniors like the government of Tip O’Neill and Ronald Reagan and embrace the notion that at its best, Washington looks after the welfare of the people.
2 By stating that it could benefit millions of Americans, the statement serves to dispel the notion that the reverse mortgage is a bailout for poor financial planning or a last-ditch ploy for the down and out.
3 Finally, the statement infers government regulation, which implies safety and oversight.
In the second paragraph, I explain the how of the reverse mortgage in simple, unambiguous terms. Everyone can visualize age, home value and interest rate data being fed into a computer and the computer then “spitting out a number.” Of course, many important details are left out. These details will be discussed in the conversation that inevitably follows.
My elevator speech vocabulary does not include terms like Financial Assessment, non-borrowing spouse, appraisal, principal limit, etc. Such specifics should be reserved for later conversations intended to dig deeper into the facts. But before that conversation, what usually follows is a discussion about the homeowner’s circumstances, their financial situation and lifestyle needs. If a reverse mortgage can address these issues, it will be clear to both parties that it’s time to move forward.