Lenders See Reverse Mortgage Change as New Opportunity to Educate

With a new reverse mortgage product and marketing landscape under way, some lenders are taking the opportunity to reignite—and start new—conversations with potential and existing referral partners.

In spite of the product changes implemented October 1 and new rules to take effect in January, the conversation remains relatively the same, they say, from financial planners to banks and credit unions. And many are seeing the new rules and product modifications as a way to re-educate some senior-facing partners.

“We are using this opportunity as a tool to guide referral partners and teach them that all the more reason they would need us: the experts in the field,” says Diane Creasy, vice president of marketing for Austin, Texas-based Open Mortgage. “The qualifications are different and the HECM for Purchase programs are different. It’s a great way for us to get back to them and say we want to help you and our seniors.”

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Open Mortgage has recently launched new efforts in addition to its existing partnerships with banks and credit unions that can refer interested senior borrowers to a reverse mortgage specialist, or can field inquiries accordingly. The company has trained its 104 reverse mortgage staff accordingly and has marketing materials updated with the new program requirements.

“We have done the homework on the changes,” Creasy says.

Security One Lending has also made recent strides in educating potential referral partners, though a more targeted approach has focused heavily on the financial planning community.

Through the launch of an initiative including an advisory board to help educate and raise awareness among financial planners about reverse mortgages and their uses as they relate to retirement planning, the company is seeing rising interest among planners as the changes are under way.

The timing of the changes has been beneficial from an educational standpoint, says Michael Banner, National Education Director for Security One.

“This is almost a final step to say that the reverse mortgage is outgrowing the needs-based last resort image and are now more a part of a viable retirement plan,” Banner says. “The changes may be scary to the reverse mortgage industry, but the product is starting to act like a real financial planning tool.”

The initiative under way at Security One also recognizes that the product changes can be an entry point for new conversations about the all of the product options.

“These changes are not deterring financial planners,” Banner says.

Several researchers published detailed reports in 2012 pointing to the merits of reverse mortgages as a financial planning strategy with financial planners as the audience. Though the rules have changed, the effect has not, says Dr. John Salter, one of the researchers who published his study last year in the Journal of Financial Planning on the use of the HECM Saver as a saving tool.

“It costs a little bit more [than the former Saver], but we don’t see a big change,” Salter says.

Salter and his team will be revising the research to account for the program changes, but do not anticipate major alterations.

“The goal should still be to educate people on it,” he says.

Although the conversation is not changing when it comes to reverse mortgage education, there are few additional upsides presented by those changes, as borrowers will ultimately qualify for less and with additional rules in play.

The comeback of proprietary reverse mortgage products could change that, says John Lunde, president and founder of Reverse Market Insight.

“I think as new reverse mortgage products come out there may be opportunities to tailor toward referral partners in ways that are more attractive than the universal HECM,” Lunde says. “But there are significant hurdles to bringing new products to market that will limit the number of companies able to introduce new reverse mortgage products.”

For the HECM reverse mortgage, however, there are ample opportunities to make more connections with referral partners, he says.

“There is absolutely ongoing value in farming bank and credit union distribution networks to get in front of clients that our industry does not interact with routinely and has to spend significant dollars to generate that contact,” Lunde says. “The more relationships an individual has the broader the network to create leads at a reasonable cost.”

This edition of the RMD Report is sponsored by national appraisal management company Landmark Network.   Written by Elizabeth Ecker