Are Reverse Mortgage Borrowers in Need of “Re-education?”

Most agree that reverse mortgage borrowers now come to the table with more education than in past years when they are looking into a reverse mortgage. However, some are finding that more doesn’t always mean “better.”

“When we compare our clients today with our clients ten years ago, there is a difference,” Mike Gruley of Plymouth, Mich.-based 1st Financial Reverse Mortgages told RMD in an email. “Ten years ago, we were most likely the ‘first educators’ to prospective borrowers who really had no idea of what a reverse mortgage was. Most of them had never heard about reverse mortgages, and didn’t know anyone who had one.”

Most RMD readers agree. In a recent reader poll of 102 readers, an 80% majority said that borrowers today are more informed than they were five years ago. But that initial information may only be half the battle.

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Today, the role of “first educator” is largely occupied by word of mouth referrals, with originators seeing a large number of potential clients who at least know of someone else who has a reverse mortgage.

The awareness has changed, says Alain Valles, founder and president of Norwell, Mass.-based Direct Finance Corp. Valles recalls an appointment with a potential borrower couple some time ago during which the clients were apprehensive about the idea of a reverse mortgage because of how others in their social group would perceive them

Today, he says, less so.

“It has slowly moved in another direction,” Valles says. More recently, he was doing a loan for someone who was falling behind on credit card debt. The borrower said she was a little embarrassed to be in the situation, but that her friends had asked her if she had heard of a reverse mortgage. “We all have them,” her friends had told her.

But, Valles says, “We spend a lot of time going over the myths.”

“Many prospective clients know someone who has taken a reverse mortgage, however we don’t think that point of contact typically contributes much to their education about the program,” Gruley says. That “herd mentality,” however, can prove to be effective in getting the conversation started.

“Knowing that a friend or relative has taken a reverse mortgage has, in our view, made prospective borrowers feel more comfortable taking the initiative to learn more by searching the Internet, reading articles or contacting a lender,” he says.

Some of the initial information gathering has already been done, but originators say there is still more to do on the education front when they first meet with a borrower.

“I love when they say, ‘reverses are terrible,’ or ‘they’re expensive,'” Valles says. “It gives me the opportunity to say: ‘Well did you know this? Or did you know that?'”

Being a second or third educator comes along with correcting the wrongs, Gruley says.

“In most cases, our job as educators has become easier because of the wide availability of accurate information today as compared to years ago,” he says. “However, because there are still ‘misinformants’ in the media and elsewhere, we still have occasional clients that must undergo a very difficult and uncomfortable ‘re-education’ process.”

Written by Elizabeth Ecker

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  • Two years ago I originated a short pay reverse mortgage that allowed a woman to keep her home. At that time her brother swore this was a scan. I spoke with her the other day and her brother still believes the reverse mortgage was fraudulent and she is going to lose her home. We both laughed!
     
    I told the homeowner there must be a reverse mortgage Mayan calendar out there for so many to have a blind belief that a reverse mortgage will cause financial apocalypse. These are the people we need to educate.

  • Today presents different challenges compared to even three or four years ago. We have an unstable economic environment, more bankruptcies than ever, greater depreciation of home values and many more regulations smothering the industry and our seniors. We also have many seniors in a different financial position then they were. Many have lost their retirement nest egg, many are heavily in debt and many are facing foreclosure.
     
    My point is leading up to the question, “Are Reverse Mortgage Borrowers in Need of “Re-education?”. There is no doubt that the educational problem is an important if not more important today than it was a few years ago. The article said that seniors are coming to the table more educated today, is that a true statement? I feel they are more versed in the art of shopping around for the best deal they can get, however, that does not mean more educated. We are starting to put more emphasis on “Counseling Agencies” educating the senior rather than the originator and the company they are employed with. This will never work in the long run!
     
    I don’t think we ever fully got the message across to seniors about what is a “Reverse Mortgage”. If the housing and economic crash did not hit us, seniors would still be in dire need of education! Today an originator almost needs to be a “Financial Advisor” because many seniors are in so much trouble, financially. Yes, we need not only to re-educate our seniors but we need to spend more time in just plain old educating them!
     
    One of my concerns are the changing of the guard. We are seeing new originators entering the industry, we are seeing many of the old timers leaving. I see a less passionate originator coming on the scene and an industry that is less caring for the senior unfolding right in front of our eyes. Many originators are in call centers today. Call them, get the senior to agree as quickly as possible and go on to the next one. I am not saying all fit this description but many more do today than four or five years ago. Please do not misunderstand what I am saying, we have great companies out their, doing what they should do but I am comparing what is happening today compared to yesterday!
     
    I realize I am taking a long time to answer a simple question but is it really a simple question to answer, given our environment of today? To much has come down on our senior citizens. Many are living in fear, they are seeing all they worked for and dreamed of all their lives disappearing very quickly. They turn on the TV and hear this one or that one saying your social security and Medicare will have to be changed, it may not be there for you any more in so many years. In short, what they hear every time they turn around is this country can’t afford you any more, Mr. and Mrs. Senior!
     
    With all the regulations hitting the industry and the originators along with so many compensation changes occurring, the last thing on many originators and companies minds are education for our seniors. That is sad but it is a reality. Our Federal government in trying to so call protect the senior from us so called Wolfs, and by doing so, they are destroying a major program that has helped seniors survive and hold their heads up high with dignity!
     
    Those of us that are old school and have a strong passion for our industry owe it to our seniors to make sure they fully understand what a reverse mortgage is and the product we are putting them into. We also owe it to our seniors to teach and help new people coming into our industry what their responsibilities are to our seniors.
     
    We need to educate, re-educate and teach everyone that is even remotely involved in the reverse mortgage industry what we need to be to our seniors! We need to give our seniors the best of us we can give, this is what we are all about folks!
     
    Thanks,
     
    John A. Smaldone

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