Are Reverse Mortgages Experiencing a Sea Change?

For reverse mortgages, often the phrase has come to mind: The only true constant is change itself. For the last four years, the industry has seen change after change after change. But I wonder if, for the first time in the long time, that phenomenon itself is changing.

The year 2011, my first covering the industry, brought the exit of large banks from the originations landscape. In 2012, the HECM Saver came into focus and lenders looked to different product types to grow business alongside an ongoing game of originator musical chairs. Then in 2013, the fixed standard product went away, and principal limit factor changes took place. In 2014, the product changed again to reduce the amount of proceeds borrowers could take upfront. Finally, 2015 brought the reverse mortgage financial assessment and non-borrowing spouse protections took effect. 

It’s an over-simplified timeline, but the point is that change has been constant, proving that phrase to be true in the reverse mortgage conversation. 

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But for the coming year, the sound of change seems further off. At the inaugural ReverseVision conference last week in San Diego, the conversation was different, but more positive… for a change. 

The difference strikes me in three major areas: 

1. First, the home equity conversion mortgage has changed a lot, but for the first time, there aren’t a lot of concerns around it. Non-borrowing spouses are protected, and last-resort borrowers are no longer the norm. 

Instead of voicing concerns about borrower qualifications and loan troubles, attendees took an interest during the conference in some of ReverseVision’s new products and developments, such as a CRM-like add-on to its existing origination platform that will help originators keep track of their prospective clients. RVAccelerator, the new offering, considers reverse-specific information such as contact information for adult children and financial planners, and different loan scenarios. It’s not a CRM, but it does bring leads and loans into the same system.

With a safer product, originators can begin to focus on sales without having an uphill battle. Which brings me to my second point.

2. The media and messaging around reverse mortgages has changed. Also during the conference, NRMLA’s head of public relations Jenny Werwa shared with attendees some of the work the association has been doing around public perception—and the news is good. Jenny cited her recent media audit of the last six months or so, finding that 96% of media coverages on reverse mortgages has been positive or neutral. With fewer product changes and organizations that are unhappy about the product’s shortcomings, there’s much less media attention on the negatives. Frankly, there really aren’t many negatives to highlight anymore.

3. And finally, the conversation is changing when it comes to the use of reverse mortgages. We’ve been writing for years about financial planners as a possible referral source, and while most agree that educating financial planners is not easy, it actually is getting easier. 

That’s because one by one, influencers in the financial planning world are studying the benefits of reverse mortgages, and they’re finding, unanimously, they are a good idea. 

ReverseVision President John Button led several sessions during the conference, one of which focused entirely on work with financial planners and discussion points to highlight when working with them.

The event’s keynote speaker, Jamie Hopkins, Co-Director of the New York Life Center for Retirement Income at The American College spoke about his own research on reverse mortgages. The research is undeniable, it just needs a little time to gain traction. And originators are actually being helped for the first time, by several renowned thought leaders in the financial planning world. 

By definition, a sea change represents a long change over time. It’s a long road ahead, of course, but the road seems to be headed in the right direction. 

Written by Elizabeth Ecker

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  • A nice summary timeline even if not perfect. There is a more positive horizon than just a few years ago.

    Yet hanging over our heads is the one thing that could damage how attractive our product is, high expected interest rates. We have seen higher expected interest rates before but never the interest rates of the late seventies and early eighties.

    While few of us expect to see destructively high mortgage interest rates in the next decade, it is the one area that concerns us since it is built into the HECM model itself and cannot be easily harnessed or controlled.

    Perhaps we will see a revival of proprietary products before the next decade is through and might even see the most unexpected, the proprietary challenger to HECMs, but for now things are about as good as could be expected despite the massive wholesale changes we have seen with HECMs. Now for the short term, to see higher endorsement totals. Yet many of us are optimistic that even that will be coming soon.

  • Good article and summary Elisabeth. I have to semi agree with my college RMAdvisor. High expected interest rates, that is always a concern.

    High interest rates effect very facet of lending as well as the home purchase market but what ever will be will be.

    The change is positive, just like the article points it out to be. What companies and loan originators must do is to capitalize on these changes in a very positive way.

    We now see a greater opportunity than ever to be part of the financial planner community. We now have a safer and more attractive retirement planning tool for the financial planner and their senior clients.

    The media is now more positive in our favor, we can clip many of the positive ads out in newspapers and show them to our seniors and potential financial planner referral sources. Also, don’t forget the accountant and attorney’s, they are great source.

    However, in order to capitalize on all the opportunities we now have available to us, we need to have the knowledge to make intelligent presentations. More important than ever, companies to spend the money and time on training their people so they can represent their companies properly in the market place and reap the benefits that are available in todays age!

    John A. Smaldone

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

    • John,

      I respect you and your positions. I wanted to see if a few weeks would work any change on where I disagree with your comment. It didn’t.

      I honestly do not see how the changes we have experienced since the end of fiscal 2013 have made HECMs better for competent and trustworthy financial planners. Their upfront costs are higher than the Savers that drew the interest of Harold Evensky and Michael Kitces. As to proceeds available in the first twelve months, they are greatly more restricted. Procedurally HECMs are harder to originate, The proceeds today are slightly higher than Savers but not much.

      Yes, modified HECMs are better for the general public who do not have competent and trustworthy financial advisers.

      You are right about many of the positives you state yet with every change our endorsement volume drops. We have never experienced such low endorsements in the last decade as we have in the last four fiscal years.

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