Despite years of program changes and new financial assessment underwriting guidelines coming in 2014, the reverse mortgage industry is confident the number of seniors using the loans will continue to rise. But before the industry starts to see the growth, it will likely face some growing pains.
“There is no denying the next six months will be challenging to adapt to the changes being made to the program,” said Reza Jahangiri, chief executive officer of American Advisors Group during the National Reverse Mortgage Lenders Association annual conference in New Orleans earlier this week.
As a result of the principal limit changes that took effect October 1, AAG estimates its application levels have fallen by a measure of 12% to 15%. The drop will require that AAG increase operational efficiency as well as working with employees to take a different look at how the product can help seniors.
“[The changes] will a big adjustment for the sales force,” Jahangiri said. “A lot of loan officers [in the industry] are down and frustrated, but they need to change their mindset.”
Demonstrating how the mindset needs to shift, Marc Helm, chief executive officer of Reverse Mortgage Solutions suggested that if a borrower asks an originator: “How much money can I receive?” the originator should turn the question around to “How much money do you need?”
“We need to take our product of desperation and [turn it into] a product of opportunity,” he said.
Even after the changes, the Federal Housing Administration’s reverse mortgage program remains attractive and viable for the future, the panelists agreed.
“We don’t have a product problem, we have a public perception problem,” said Colin Cushman, chief executive officer of Generation Mortgage.
The industry hasn’t even scratched the surface of how the product can help seniors, Cushman said. In the coming years, the growth will come from positioning the product as a retirement planning tool and how to responsibly utilize home equity.
“We have the opportunity to give seniors options and cash flow, but we haven’t scratched the surface in presenting it to them,” Cushman said. “We have talked about how to utilize home equity, but we haven’t talked about the value proposition it offers. I’m very bullish on where we can go. This is our opportunity to change public perception.”
Written by John Yedinak