Reverse Lenders Brace for Impact of Product Change, Train Accordingly

With the suspension of the Federal Housing Administration’s (FHA) most popular reverse mortgage product now two weeks in the past, many are confident their marketing efforts will not be dramatically impacted. But training will be essential, they say. 

According to a recent poll conducted by RMD, a majority believes at least 10% of business will be impacted with almost a third reporting they believe the change will reduce their business by more than 20% as a result of the product changes that went into effect on April 1.

While the fixed-rate Standard Home Equity Conversion Mortgage (HECM) was the product of choice for 70% of FHA borrowers in 2012, its suspension might impact larger lenders who use extensive marketing techniques, says Mike Gruley, director of reverse mortgage operations at 1st Financial Reverse Mortgages.

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While 1st Financial is mostly “feet on the street,” according to Gruley, he sees it having an impact on the larger players who utilize call centers and large direct to consumer marketing such as direct mail or TV.

“For us it won’t have a major impact on our marketing as we don’t do a lot of ‘paid for’ marketing,” says Gruley. “Of course, it will certainly have some effect on all of us in different ways.”

Maverick Funding Corp., which markets through several channels such as TV and direct mail, does not see the suspension impacting its marketing strategies, according to company Vice President Josh Shein.

Because there is still the HECM Saver product that offers a fixed-rate draw, albeit with less proceeds, Shein says Maverick has not made any “major changes” to the company’s marketing efforts, although other changes will have to take place.

“There’s not much to modify,” says Shein, citing that the amount borrowers receive from the Standard fixed-rate is the same as they would on the adjustable-rate option.

Although Maverick “feels pretty good about substantial overall business production,” according to Shein, he does admit that the company will have to do some tweaking to its strategy in the form of training, such as ensuring loan officers are “as knowledgeable as ever” on the remaining products available.

Net Equity Financial Inc. finds itself potentially fitting into the group that voted the suspension is likely to result in 1% to 10% fewer loans, says company President Bill Peterson.

“There’s definitely going to be fewer loans out there, but the impact will be on a small scale,” says Peterson.

A top-20 lender on Reverse Market Insight’s Top-100 Lenders, Peterson forecasts Net Equity will likely see the suspension hitting 10% of its business in the beginning as the company adjusts to the product change.

Part of this adjustment, according to Peterson, entails increased training for loan officers in marketing the adjustable rate options.

“It’s going to affect us in profitability,” says Peterson. “However, I don’t see it affecting us tremendously.”

Lenders who entered the industry before the fixed-rate Standard was introduced in 2009 might have a more difficult time adjusting their marketing efforts in wake of FHA’s suspension, says Shannon Hicks, vice president of marketing and product development at Reverse Focus.

“Most of the loan officers I’ve spoken with—those in the business before 2009—are not shaken up about the suspension,” says Hicks. “It’s more likely that those who have grown up selling the Standard fixed-rate product will have a harder time adjusting.”

Brian Cook, a reverse mortgage advisor with Alpine Mortgage Planning, carries a similar sentiment, especially for originators that may have been marketing the fixed-rate part of the reverse mortgage, as opposed to the entire product as a whole.

“If an originator has been in the industry for some years, they will have experience when reverse mortgages only had line of credit options,” says Cook. “So, it’ll be easier for them to translate marketing and education efforts.”

Originators might also encounter difficulties in re-tooling their marketing efforts depending on their area’s home values.

“If an originator in a lower-value area has been working in reverse mortgages for only a couple of years, they might not have as much experience in educating and working with seniors in the credit line feature,” says Cook.

While the elimination of the fixed-rate Standard does take a section of borrowers out of qualifying due to credits available, says Cook, reverse mortgage marketing is likely to remain the same.

Marketing is about creating leads and tweaking your strategy to the current environment, says Cook.

“You create a ‘call-to-action,’” he says. “Even if there is a change in the market, you have to turn that change into a different call-to-action.”

Written by Jason Oliva

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