While the reverse mortgage has been available to consumers for nearly 30 years, it has been slow to catch on. The product has long been plagued by misconception, challenging those who work in the field to combat the myths and educate consumers about the pivotal role this financial product can play in retirement.
Since the Great Recession it has become increasingly obvious that a sizable portion of the nation’s aging population could find tremendous benefit in a loan that allows access to home equity. Numerous retirement experts and high-profile finance pros have publicly discussed the advantages of the loan. Still, consumers are largely uninformed about how a HECM can help.
Educating seniors and professional partners has been the focus for originators across the industry. But for many, progress has been slow. To jumpstart this mission, some are getting creative, employing new and inventive ways to reach potential borrowers or increase efficiencies. We reached out to a handful of these innovators to talk about what they are doing to advance the market. Our hope is that their determination and creativity will inspire others in the space to think outside the box.
What: Teaching a HECM sales strategy to traditional lenders
The initiative is built around the concept of Generational Lending, a term trademarked by ReverseVision that frames the HECM as a logical next step for older consumers. In the cycle of one’s lending life, according to the concept, a typical consumer will seek a traditional mortgage as a first-time homebuyer. Later, they may relocate or refinance as their needs change or family grows. Finally, as they age, they may consider a HECM as a means to support their retirement and a desire to age in place, or utilize a HECM for Purchase to move to a more suitable home.
Wendy Peel, VP of sales and marketing, says the Generation Lending strategy is designed to position the HECM as a natural step for consumers. “What we want to do is normalize the HECM program,” she says. “We’re putting training programs around forward sales people to help them start selling this way.” Once lenders commit to offering HECMs to clients, their staff undergoes special training to learn more about the loan through RV University.
Peel says it’s a great way for traditional lenders to engage their older customers. “Lenders spend all this time and money bringing people into their lending family, but a time when the customer probably could use a loan the most, they don’t offer a product they can use.”
ReverseVision’s sales program explains to lenders that including a HECM in their suite of products could help them replace shrinking re-fi volume, assist their customers with retirement, provide an alternative to a HELOC and build a pipeline using the Generational Lending strategy.
“We’re having a ton of success; there are lightbulb moments going on,” Peel says. “This year alone, we’ve closed 12 top-50 traditional lenders that are directly licensed, who are now coming into the space.”
Peel says the ultimate goal is to see the market grow. “The more lenders that offer HECMs, the more people we have in the market; the more the industry grows, the more investors will actually come into the market. We all know we need more investors in the market, and the only way to do that is to start getting some of these larger lenders super engaged.”
Who: Reverse Mortgage Funding LLC (RMF)
What: Helping platform users navigate FA with a loan qualification function
RMF is using technology to make the originator’s work easier. The lender’s proprietary loan origination system, Tango Reverse, is set to release a new loan qualification (LQ) feature intended to help users better navigate FA requirements.
“LQ is designed to make it easier for originators to close more loans by providing them with the power to instantly do a preliminary assessment of a customer’s eligibility to qualify for the reverse mortgage they have in mind,” says RMF President David Peskin.
The LQ feature works by generating rules and conditions based on the characteristics of a loan scenario. Once the LO enters data into the system, the platform relays compensating factors that might help the loan qualify. Peskin says the new feature, which he calls the first of its kind in the industry, will significantly help reduce loan cycle times.
“Innovation is fundamental to our mission of helping older Americans achieve greater financial flexibility and peace of mind, and we are confident that LQ is a game-changer in regard to helping reduce uncertainty, facilitating a more expedient process from the very beginning and enhancing the end user experience,” Peskin says.
The LQ feature was recently rolled out to RMF’s retail staff and will be available on Tango Reverse to approved brokers and principal agents later this year. [Click on the image to see the platform on a larger scale.]
Who: Curt Larson, Alliance Home Loans
What: Generating partnerships with builders to promote the H4P
Curt Larson is spreading the word about the HECM for Purchase one major builder at a time. Working with Alliance Home Loans in Phoenix, Arizona, Larson turned his focus to the builder community about three years ago, pursuing large developers of active adult communities in the West and Southwest. He now works with five different builders, three of which have multiple communities in several states.
Larson says succeeding in this mission requires one to know how to speak to builders, and that the best way to get a builder’s attention is to bring them business. Once he is able to secure an H4P buyer, he uses that success story to pique the interest of both buyers and builders, eventually creating a testimonial marketing strategy that he presents to developers as proof of what he can bring to the table.
Once he makes a deal with a builder, Larson works to connect with their sales staff. “I train them how to get the conversation started, and also how not to go into the program in depth. We create scripts for them.” Larson says properly educating the sales staff is essential. “We’ve had a lot of success when I’m able to deal with the salespeople directly and teach them how to broach the subject.”
Larson also stresses the importance of providing professionally produced, sleek brochures for the sales staff to share with prospects. “It’s something they can hand to potential buyers that helps explain HECM for Purchases, or they can share a PDF,” he says. “Smart-looking collateral has a lot to do with the success of this.”
Larson says there are clear advantages for builders who present the H4P to interested buyers. “It gives them a competitive advantage over the subdivision down the road. All of these active adult communities are extremely competitive,” he says. “The HECM for Purchase also allows people to buy more house than they originally expected. Builders and buyers really like that.”
Who: Joe Conrad, Skyline Home Loans
What: Helping Realtors sell homes with the H4P
“It became obvious that the H4P is a great farming tool for Realtors. We could provide real value to them by explaining the different options made available by a reverse mortgage. They’d have a better shot at getting listings in the future,” he says. “But I realized that to get to Realtors, I needed to get them more than just a door hanger.”
Conrad’s realization led to the development of the Silver Circle Network, a comprehensive guide and catalogue of resources for Realtors looking to generate business using the H4P. The program, in the final stages of development, is set to be released by Skyline Home Loans this summer and includes direct mail materials, co-branded websites, scripts and seminars designed to help Realtors connect with senior clients about buying or refinancing using an H4P.
The program will be for sale for loan officers and Realtors who want to leverage the H4P to generate business. Realtors who are interested will meet with a reverse specialist from Skyline to establish a strategy and undergo webinar training to educate them about the loan. Realtors can also buy in at different levels, depending on how many resources they’d like to access, with different packages available.
Conrad says be believes Realtors will find great value in the Silver Circle Network’s resources. “The direct mail resources in particular will generate listings,” he says. “To be able to get listings for a Realtor is a very compelling value proposition. At the end of the day, I want Realtors to get buyers and sellers from this and to incorporate it into their strategy.”
Who: Finance of America Reverse
What: Helping financial advisors understand reverse mortgages
At the start of 2017, Finance of America Reverse (FAR) launched an initiative designed to educate financial advisors about the role a reverse mortgage can play in a comprehensive retirement plan. Led by Stephen Resch, FAR’s VP of retirement strategies and a certified financial advisor himself, the program aims to teach compliance departments about the product’s safeguards and educate originators on how to better understand the needs of the advisor community.
Resch’s team hosts live presentations for advisors, wealth managers and CPAs nearly every week with the idea that a face-to-face interaction fosters a connection that is much stronger than what one might glean from a webinar.
As FAR’s in-house financial advisor, Resch also teaches an on-site workshop for advisors in which he illustrates how a HECM can be used in wealth management strategies. The class is CFP-approved for continuing education.
Part of the program also involves education for originators. Resch’s team teaches HECM specialists how to build effective relationships with advisors, discussing marketing campaigns that can help spur interest among advisers and strategies to maintain the relationship once established.
“Reverse mortgages are no longer a product of last resort and can provide much-needed flexibility in retirement,” Resch says. “We want to educate the financial adviser community about how they can add another tool to their toolkit. The more we can raise awareness of this tool, the more we can contribute to growing our industry.”