Today’s reverse mortgage borrower is decidedly different from years past. Recent changes to the HECM program now require that prospective borrowers undergo a financial assessment, effectively retooling the program for the more financially savvy.
Now, originators are working with a new type of borrower, one who is considering a HECM as part of their overall retirement plan rather than someone who has turned to the loan as a last resort.
“The new reverse borrower tends to be a more educated and more informed consumer, and because of Financial Assessment, they trend toward a more responsible and more credit-worthy borrower with regard to their payment history and income,” says Joshua Shein, senior director at Home Point Financial.
But while they might be more informed about the loan, these new borrowers can also be a harder sale.
Mike Gruley, executive VP of reverse mortgage lending at 1st Nations Reverse Mortgage, says the “new” financial planning borrowers can be less motivated than needs-based borrowers.
“They are a ‘higher hanging’ fruit for originators, who are often more focused on clients with immediate needs and a willingness to do business,” he says.
To connect with them, originators are crafting a new message about the role a reverse mortgage can play in retirement income planning.
Mark Browning, president and founder of Home Chex, says this is a message that will resonate with the new borrower. They are attracted to the HECM because it can provide “safety, income stability, financial sustainability and overall flexibility,” he says. “Deploying housing wealth in a comprehensive retirement financial plan using a HECM supports all of these goals.”
Browning says that oftentimes, these borrowers will seek advice from other financial professionals. “They tend to have other confidants, advisors and information sources,” he says.
Browning suggests originators get in front of these advisors “armed with accurate information about the power of housing wealth and the unique safety features of the HECM. Recently, there has been a big increase in positive media as well as meaningful research by respected academics. Use it to inform,” he says. “People in these roles are not going to recommend HECMs to their valued clients unless they, themselves, understand and trust the product together with the provider.”
Shein says originators should get online to educate these borrowers.
“Education, information and an established presence online is more important than ever,” he says. “The borrower is able to do more research, understand more and come to the conversation better prepared than in the past.”
Whether networking with other financial professionals or promoting reverse education online, most agree that finding a way to connect with this new type of borrower is essential to the product’s success.
“Successfully connecting with the more affluent borrowers, those who fit the FA profile and represent the least risk to the MMI Fund, is good for business and good for the HECM program,” Gruley says.
Browning agrees. “The retirement boom is already underway. Defined retirement plans are far fewer and many are approaching retirement underfunded,” he says.
“For most Americans, housing wealth is the largest balance sheet asset,” he says. “Trust, confidence and changing misconceptions are the challenges. But, the power of HECM to transform lives and retirement viability is overwhelming.”
Written by Jessica GuerinPrint Article