While states like California and Florida get most of the attention in the reverse mortgage industry, there is lots of buzz about Puerto Rico being the next big hotspot for reverse mortgages. After a bit of research it became obvious that the business in Puerto Rico is dominated by one company, Money House.
Money House has built an incredible business in Puerto Rico, making it the 9th largest reverse mortgage lender according to HUD data. With three branches made up of 25 originators, the company controls over 60% of the reverse mortgage market in Puerto Rico and its volume is up over 450% YTD.
Almost halfway through 2009 business continues to be strong and I had to opportunity to speak with David Levis, President of Money House to discuss the booming market in Puerto Rico.
Q: So tell me about your background and how you entered the reverse mortgage business.
A: I have been in the mortgage banking industry for 12 years. I used to be the President of the largest mortgage lender in Puerto Rico (HF Mortgage Bankers – now Doral) and at that time, I always wanted to offer the product. Nevertheless, we wanted to be able to service it as well and that would take some considerable time, so we were never able to offer it then.
Thereafter, as soon as we assumed the Management of Money House (an already established mortgage lender from 1997) in January 2007, we began to look into the product once again.
Initially we were doing mostly forward loans but six months in we began to do reverse mortgages and little by little after spending so much time educating the community it started to take off.
Q: How are you marketing the business for reverse mortgages?
A: We do not try to sell the product, so our “marketing” is really based on educating the public of all the great benefits the product offers. Over the last two years we’ve been using a variety of channels like newspaper ads, seminars, radio and TV interviews, and press releases in all the local newspapers.
We’ve found that to have success with the product, you can’t “sell” it to seniors. Educating is key and it’s what I instruct all of our originators to do.
Nevertheless, our best marketing effort is our satisfied clients. When your client loves the product and service they receive, they will spread the word.
Q: So word of mouth helps generate a good amount of your business?
A. It’s definitely a word of mouth business in Puerto Rico. When seniors hear about the product and its benefits, most tend to believe “its too good to be true”. But when they speak to a client that has already closed a HECM or come to learn about it from our seminars, they are usually convinced that it’s a great product.
Also, we’ve been able to help a lot of people who were having serious financial difficulties and have been able to help some of them save their homes using a reverse mortgage. That’s the kind of story that people tell their neighbors about and it has certainly helped our business.
Q: The way you describe the business in Puerto Rico, it’s very grass roots?
A: Most of the business here is word of mouth. And people during these hard economic times need the money for whatever reason, even to help children or grand children out, everyone is different.
When you look at it, some really don’t need the money but they want the security of having the money in their bank account. And it’s just part of their culture. The other thing that’s really different than in the States is over 95% of people will ask for a lump sum.
Q: What other ways is the business in Puerto Rico different from the states?
A: Puerto Rico’s our culture is very family oriented, so at the closing you may have children, grand children, and a bunch of people trying to understand the transaction to make sure grandpa and grandma are doing the right thing.
Even through our marketing using seminars, TV, and radio, we encourage family members to get involved. It’s important and the seniors have the support of the family because if the children can help them out instead of getting a reverse mortgage that’s great.
Also, in Puerto Rico, it’s very typical for the children to take care of their parents when they get older. However, there are many seniors who want to remain independent.
They want to be able to take their children out to dinner on Sundays and not the other way around. That independence is something very important to many people in Puerto Rico.
Q: You mentioned that you have a couple HECM for purchase deals in process, do you think it will be successful in Puerto Rico?
A: We closed the first HECM for purchase in Puerto Rico around 2 weeks ago and have another three in our pipeline. In the beginning I though it would not work (b/c of the high down payment), but little by little more clients are coming in asking for more information.
One interesting note is that we are starting to get people that are moving from Orlando to Puerto Rico for their retirement. Orlando has a huge Puerto Rican community so many are selling their homes and taking out whatever $80-90,000 and come here to purchase a new home using a reverse mortgage.
Q: Not everyone offers wholesale in Puerto Rico, has that been a problem?
A: Not at all. We have great wholesale investors that have believed in us since day one but now that they see the volume here, a few more investors are coming in interested in the island. I cant blame them, Puerto Rico is a great market for Reverse Mortgages.
Q: HUDs data shows that Money House has over 60% of the total market share in Puerto Rico and it makes you one of the top lenders in all of the US. Were you surprised about the level of interest about the product in Puerto Rico?
A: Not at all, our culture is part of the reason we have seen such success with the product in Puerto Rico. We are very family oriented we (Puerto Ricans) tend not to plan for our future (in terms of retirement, etc). We live life one day at a time.
With the problems in the economy, we haven’t seen nearly as much depreciation in home values as in the US. In Puerto Rico we are an island of 100 by 35 miles, so there is nowhere else to move. Most people live in their homes for many many years. When they are younger, 30 or 40 years old, they’ll find a house and that’s the house they are going to live in forever. People just don’t move around as much as they do in the states.
Q: Your business would be a great acquisition for someone looking to acquire a strong foundation in Puerto Rico. Is this something that you are open to?
A: We are a family business want to stay that way for a long time.
Q: Looking back from when you started doing reverse mortgages is there anything that you would do different now?
A: Not at all.. We wanted to become experts in the product before we launched an ad campaign to educate the public… We did it little by little…and we did it right!