Changing the Tune on Reverse Mortgages: An Educational Crusade

When someone forms a hard opinion on something, it’s tough to change their mind. But such is the undertaking of the reverse mortgage industry in its ongoing crusade to change perception and raise awareness of the “new” Home Equity Conversion Mortgage.

The Financial Assessment has profoundly contributed to the evolution of the HECM product into one that is better equipped to serve the retirement funding goals of today’s senior homeowners than ever before in its history. However, a widespread lack of reverse mortgage education among consumers and other financial professionals is stunting growth within this trillion-dollar market for senior home equity.

Age-qualified American seniors 62 years and older represent a record-high $4.08 trillion—and rising—reverse mortgage market opportunity, according to the latest National Reverse Mortgage Lenders Association (NRMLA)/RiskSpan Reverse Mortgage Market Index. As of the second quarter 2015 (the latest period measured by the Index), which is 3% higher than the last quarter. Since the post-Recession trough in 2011, that value of senior home equity has recovered 38%.

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Despite its size, market penetration of this $4 trillion opportunity is leagues from where it needs to be to move the needle on greater reverse mortgage utilization. The biggest hindrance: long-held misconceptions and miseducation of the reverse mortgage product in the eyes of consumers.

“You just say ‘reverse mortgage’ and immediately people recoil,” says Shelley Giordano, principal at Longevity View Associates, a consulting firm that provides educational training and sales coaching to reverse mortgage originators.

This sort of revulsion, however, is not without influence, as reverse mortgage horror stories covered by the mainstream media have fed into shaping public perception of the HECM product.

But now that the Department of Housing and Urban Development (HUD) has made changes to the HECM program to protect borrowers from potential loan default via the Financial Assessment, and updates to the non-borrowing spouse policy to ensure widowed seniors can truly age in place, much of the ammunition for negative press has been exhausted, though not entirely.

A gross misunderstanding

Even the most widely circulated news outlets like Forbes, to cite a recent example, don’t always get reverse mortgages right. Sometimes articles may just simply paint one side of the picture, highlighting things like reverse mortgage complaints with insufficient context, while others mischaracterize the product altogether.

“There is a gross misunderstanding of the reverse mortgage product,” says Celink’s Mary Katherine Quasarano. “You find yourself educating and reeducating, but you know that at its heart, the product has evolved to become better.”

Aside from her marketing communications role with Celink, Quasarao advocates for reverse mortgages as a member of the National Reverse Mortgage Lenders Association (NRMLA) “Blog Squad.”

A group of industry professions, the Blog Squad initiative seeks to create a better understanding of the reverse mortgage product by educating consumers, industry members and other affiliates also serving the senior market.

The Blog Squad primarily targets the mainstream press for its education efforts. Whenever a particularly salacious or erroneous article appears pertaining to reverse mortgages, Squad members are notified and given the opportunity to reach out to the author of the article or respond to any misinformed statements posted in the article’s comments section.

“It’s our opportunity to say, ‘you really have to think again about [reverse mortgages],’” Quasarano says. “It really takes an informative approach from someone with an informed opinion.”

Because anyone with an Internet connection and a keyboard is entitled to his or her own opinion, many times most of the opposition comes from comments written by those who don’t understand the reverse mortgage product, says Jenny Werwa, director of public relations for NRMLA.

“A lot of times, the misinformation is because writers or reporters don’t understand how the product works,” Werwa says. “As a professional association, we can educate reporters on our side of it, but it’s also important for some type of response to be visible.”

NRMLA encourages its members, any time they come across misinformed statements, to post facts about reverse mortgages in comments sections of articles just to show there is another point of view, especially one coming from an informed individual who works in the industry.

“The big thing is, it would be unfortunate if there were people who could really benefit from a reverse mortgage and be turned off, or turned away, just by reading a column that is incorrect,” Werwa says.

On a widely accessible platform like the Internet, it’s important to rightfully set the score on reverse mortgages and get that messaging out to a broad swath of consumers.

“Clearly, the negative misperceptions around reverse mortgages abound,” Quasarano says. “Because there are so many misconceptions about this product, education is a case-by-case, conversation-by-conversation, interaction-by-interaction event.”

Home equity no longer a ‘sacred cow’

The arrival of the Financial Assessment has given rise to an industry-wide push to expand reverse mortgage outreach to not only consumers, but financial planners as well. But while the new rules have given a certain credibility to reverse mortgages as viable retirement planning tools, old habits and opinions die hard.

“People have ideas about their house and reverse mortgages that pre-date what HUD has done to improve all of this,” says Giordano, who apart from her consulting work with Longevity View Associates, also chairs the Funding Longevity Task Force, an organization established in 2013 to help educate financial planners through various partnerships.

The Task Force consists of several distinguished academics and financial experts who have researched how reverse mortgages can be used in financial planning, including John Salter, associate professor of financial planning at Texas Tech University; and Barry Sacks, a tax and pension lawyer.

The essential mission of the Task Force is to analyze housing wealth quantitatively to help American retirees and their financial consultants (i.e. planners, bankers, lenders, CPAs, etc.) look at how home equity can be a valuable asset during retirement.

Housing wealth can be a critical asset for retirees today, Giordano says, especially when considering that not many people have pensions and that we as a population are living longer, which only puts further stress on the sustainability of one’s savings.

Even still, the idea of leveraging housing wealth is not obvious to everyone.

“People still have the idea that the house is this ‘sacred cow,’ but the tide has to turn, because people are living longer and there are not enough resources to support that longevity,” says Giordano.

“If we can arm loan officers with at least a rudimentary understanding of what financial professionals are trying to do for their clients, and give them an understanding of the research that has been done and is ongoing, then we have a real opportunity to help middle America,” she added.

There is still a lot more work to be done to lift the shroud of misperception of the reverse mortgage product from the eyes of consumers, financial professionals and other senior influencers. As the industry combats misinformation one conversation at a time, one prevailing message should resonate.

“The bottom line is that a reverse mortgage, in and of itself, is neither good nor bad,” Giordano says. “It is how it’s used that matters.”

Written by Jason Oliva

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  • I remember 15 years ago when I entered this business the goal was to change the perception of reverse mortgages. I guess some things will never change. Maybe it is time to realize the loan is what it is. A loan you utilize when you have no other options and want to stay in your home.

  • The views expressed above are quite amazing since it was over six years ago that we last saw over 100,000 endorsements in a single fiscal year. Yet the alleged education message has been declared with more and more growing fervor in the last six years than at any time in our history. What is amazing about that is we just finished our four worst years for endorsements out of the last 10 fiscal years.

    So someone should be checking if our form of education will really turn things around or simply make things worse? We have a tendency to blame regulations or two major banks that left the industry for our ills. Perhaps part of the problem is the reality that our education content leaves a lot to be desired.

    And what if our endorsements do not keep pace with those of last fiscal year, will we heed the message that carries? What endorsements fall by 15%? Last year total endorsements for the calendar quarter ended 12/31/2014 was 14,203. This year endorsements for that same quarter are most likely to be over 20% less that. Once again we will be going backwards if that occurs.

    Yet the message of today has changed little from the summer of 2010 when Met Life management came to NRMLA proclaiming the positive results they had seen by reaching out to financial advisors. So the question once again is, will we change if our endorsements keep getting worse? Change is way overdue.

    • And what, Cynic, do you think should be done? And by whom? Since you have so much insight and wisdom, why don’t you make some helpful suggestions? That’s much more useful than just picking apart others’ attempts to broaden acceptance of RMs.
      You impress me as being the smartest guy (or gal) in the room. So, what do you say? What should this industry do?
      I know you fancy yourself on being a cynic, but why not try being a leader instead?

  • This was a very interesting article, yes it seems the industry is continually faced with educating the borrower and we still have a major understanding of the reverse mortgage product.

    Let us break down what is really happening and what we can do about it!!.

    Change, we have seen major changes, especially over the past two years, right?

    Change brings confusion and frustration, especially with our senior population. The reverse mortgage product has always been more complex to seniors than traditional loans, we have to understand this and realize it more today than ever.

    However, we can do something about this. First off, we as industry representatives owe it to our seniors to be as educated as we can about our product and all the changes that have occurred. If we don’t tackle that problem right off the bat, we will confuse the senior even more because of our own ignorant doings!

    We can reach out, start holding many community educational work shops in conjunction with senior citizen recreational centers, community departments on aging, local community banks, hold workshops in conjunction with Elder Law Attorneys and long term health care providers.

    I could go on and on with those out their that will welcome partnering up with for the purpose of holding these educational workshops.

    Did you notice I called it an educational workshop, NOT a seminar? Educational, that word means something different, it means you are there with your partners to educate and help the community seniors to truly understand the NEW reverse mortgage.

    In just about every case, if done properly, the local newspapers and in some cases TV and Radio stations will carry the announcement of the educational workshop as a community service announcement free.

    Call radio station talk host shows, get them to bring you on their shows as a guest to talk about the new reverse mortgages and the misconception of them around the country. Reach out to the media sources, this is news!

    We really can do so much to offset what truth is in this add and turn it into positive efforts on our part for our seniors. We have so much potential and if the FA ruling if embraced positively can be our greatest sales tool.

    John A. Smaldone

    This is the expressed opinion of John A. Smaldone only and does not represent an opinion of Willow Bend Mortgage or our affiliates!

    • John,

      Once again partnering up with some sales people can create huge problems in places like California. We have to be circumspect and prudent in what we recommend.

      Also your educational workshops ignore the need to educate financial advisors about HECMs. It also completely ignores reaching out to Realtors in regard to HECMs for Purchase. While what worked a decade ago will work today, it will not work as well.

      I believe in the adjustable rate HECM as a very useful cash flow tool for seniors in retirement. I have a totally different attitude about fixed rate HECMs especially the fixed rate Standard.

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