George Downey was initially a bit skeptical when it came to reverse mortgages. But after an experience nearly a decade ago that opened his eyes to the essential tool a reverse mortgage can become for seniors who have all of their wealth stored up in their homes, he launched a successful reverse mortgage business as a complement to his Braintree, Massachusetts-based Harbor Mortgage Solutions.
Today, Harbor Mortgage consults borrowers on the best option for using their home equity, and has grown its business almost entirely upon referrals from the financial advisor community. George, a NRMLA board member and longtime mortgage veteran, sat down with RMD to talk about the timely challenges facing reverse mortgage lenders and why it’s important to fix the roof before the storm comes.
When did you get into the reverse mortgage business?
We first got into the reverse mortgage business in 2003. We had been in the forward mortgage business for about 30 years at that time, and we knew about reverse mortgages, but then it was with the idea, “Those are things you should not do.”
What made you change your mind?
We were referred to a case in Nantucket with a woman who had a private reverse mortgage. Her neighbor was trying to get control of the land and she had all this real estate wealth but almost no liquidity. It got us into learning about reverse mortgages and we were intrigued. We then got hooked up (like everybody did) at Financial Freedom.
How have you built your business over time?
We are really a bit different from most: virtually all of our business has been referred to us from the financial services community, rather than from ads or other forms of marketing. Our sources are financial advisors, wealth managers and attorneys, among others. We have very high and high net worth clients, and as a result, the nature of our business is different. We really don’t sell. We’re more a consultancy to help clients sort through their options and make the best choice.
What’s the most important thing to know about a reverse mortgage?
The reverse mortgage is not a product, it’s a—a tool to help fund longevity. It is appropriate for many people, and it is inappropriate for many others. It’s a case by case thing.
What’s on the horizon for this industry?
I think this is going to be an important year in our business for all of the changes that have taken place and all of the adversity we’ve seen. Inevitably, if these economic trends continue, seniors are going to be forced to monetize home equity in some way. Their income is fixed, yet their cost of living is not. We need to provide a solution before they get into trouble. You don’t fix the roof in the middle of the storm, you fix it on a sunny day before the storm comes.
What has to change?
The No. 1 problem is lack of understanding. In the financial planning world, very little attention is given to home equity because of cultural restrictions. In a way, home equity is a third-railed issued with financial planners, meaning you don’t touch it. If they fully understood it, a reverse mortgage would be a complementary program. It could be particularly important today with interest rates as low as they are producing a paltry return on investment for most people. We need to close the gap.
OK, as for your hometown. What’s something a visitor to Boston must not miss?
There are so many things! Boston has ample amounts of everything—historical significance, the schools. Oh, and the food. (Editor’s note: We perused Boston’s North End at the last NRMLA conference and let’s just say… we wholeheartedly agree on that last point!)
Written by Elizabeth Ecker