Lenders, Builders See Mutual Reverse Mortgage Benefits

Many reverse mortgage lenders have identified the reverse mortgage for purchase loan as a potential opportunity for expansion, though few are capitalizing on that product segment. Marketing the HECM for purchase, lenders who have successfully made inroads into the market say, requires relationships with realtors, as well as those who develop and market to the 55-plus housing demographic.

That demographic is vast, said panelists at the National Reverse Mortgage Lenders Association conference in New Orleans last week.

“If we really understand the opportunity with the HECM for Purchase, this could be the most exciting time,” said Ron Fetcher, of Security One Lending. Security One has recently launched education efforts on the product to educate and build referral relationships with Realtors. 

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Cherry Creek’s 1st Reverse Mortgage USA has also targeted the market segment, with an eye toward the growing demographic.

“The numbers of baby boomers, and [the fact they are] living longer mans they are going to need housing options more and more down the road,” said Tim Harder, vice president of business development for 1st Reverse Mortgage USA. 

The company has recorded success in the reverse mortgage for purchase market, both through connections with real estate agents and builders who are focused on the aging demographic. But while those opportunities have been identified, Harder said, the sale of the purchase product requires building relationships and ongoing education among affiliate partners.

“This product, in 2003 and still in 2013 is about eduction and the opportunity to be out in front of Real Estate agents and homebuilders,” Harder said. “There are no secrets. It’s still about getting out in front of people.” 

Offering continuing education credits is one mechanism that has proven success among lenders, as has attending open houses and association gatherings. 

Among a recent meeting of 1,100 Realtors in Southern California, only 12 had heard of the HECM for purchase, Fetcher said. 

“Let them know it exists,” he said. 

Homebuilders say the loan can improve sales potential by offering more buying power for consumers. 

“It caught us by surprise that many [consumers] were not doing [the HECM for purchase] for affordability reasons,” said Tim McCarthy, of homebuilder Traditions of America, who attributes 20% of his business to the niche reverse mortgage loan. “A lot were thinking about it as ‘I think I can now buy more.'”

The loan can benefit both the homeowner and the builder mutually because of the additional customization options owners can afford through the HECM for purchase, McCarthy said, noting a typical builder profit margin of 10% to 15%, with customization netting 35% instead. 

“Customization enhances profitability,” he said.

Written by Elizabeth Ecker

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  • The realtors currently believe they are on the highest rung of the ladder now that purchase biz is so important to lenders/banks/homebuilders. Unfortunately most can’t comprehend how reverse for purchase works, even after several repeated attempts. I give them 2 shots before I move on until I find someone that sincerely wants to learn and then begins to put the plan into action. Those are the ones to plug into to.

    • wealthone,

      What is your success rate even when you find the REALTORs you are looking for? What does your repeat business from those individuals look like?

      So far the numbers say that despite all of the emphasis being placed on the Purchase product results are limited and increased endorsements are dismal.

      • The 3 or 4 for the year we’re OK last couple of years but I’m expecting over 6 in 2014. The success rate to ME is when the realtor is having the discussion about R4P with all their older clients, not just the ones that ask about it. They have at least piqued interest in more opptys than I’ve ever had so I like being “in the mix”. That’s a success to ME.

      • wealthone,

        Interesting what you call success.

        It is often said that other HECM products do well in that mix as well. It is surprising to see you do not reference anything in that regard.

  • We had a booth in the National Realtor Convention In San Francisco last week. 24,000 real estate agents attended. 90% of the Realtors that stopped by our booth had never even heard of the H4P.
    The product has not failed us. We have failed the product. The truth of the matter is most reverse mortgage professionals have literally no idea how to develop relationships with Realtors and when they discover how much work it really takes they suddenly look to “the past figures” to justify their current frustrations.
    Security One Lending is growing a huge presence in the Realtor and builder market and our numbers reflect just that.
    If you are interested in this business model then give us a call,..

    • Mike,

      So how many actual REALTORS out of the 24,000 who allegedly came to the convention dropped by the booth??

      The problem is the H4P endorsement numbers disappoint. That is the objective test. When you have an objective comeback for those numbers then you can spend your time belittling those who are less motivated about H4P.

      Numbers are king; the rest is anecdote and hearsay. If the numbers were even close to the level of talk going on about them, H4P would be at a bare minimum 10% of all HECM endorsement volume. Yet five years after introduction they are less than 4% of HECM endorsement volume; that is miserable.

      There will actually be something to dispute when H4P endorsement volume is at a 10% level, until then you have an upward fight just to be heard by anyone other than “true believers.” I hope you prove me wrong SOON!!!

  • There is a major difference in the business model of builders and real estate agents. Because most real estate agents (buyers agents) are not top producers closing a huge volume of deals, they are relying on each deal to pay their bills next month. Therefore we have found they cannot afford/are not willing to recommend a reverse an potentially offend their client unless its the only way they could make it work. Most agents on the resale side seem to want to take the path of least resistance. Builders on the other hand have hundreds of people who come through their developments to sell one home, and are motivated to sell homes at any cost.

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