Over the course of the last year, the reverse mortgage has changed. And along with it, so has the approach to reverse mortgage marketing.
For some time, lenders have been moving away from the tried-and-true TV advertising model, featuring the familiar celebrity spokesman. Several have tried more focused messaging, including recent campaigns launched by Finance of America Reverse, and One Reverse Mortgage.
But in addition to experimenting with different advertising campaigns, lenders say the approach has changed quite completely when it comes to today’s borrower. That means shifting from a needs-driving borrower to a consumer who has many choices and may be tapping into home equity not because he or she has to, but because he or she wants to.
The tools are in place, but thriving in this new landscape also requires adapting to it accordingly.
The new borrower
With new reverse mortgage requirements and restrictions comes a new level of credibility. The industry has seen mainstream messaging adapt accordingly, and lender marketing is also shifting based on the fact that the reverse mortgage is no longer a taboo term.
“We have been able to capitalize on that and tailor our messaging to the financial practicality of the loan, which in some cases has moved us away from some of the emotional aspects, away from the needs-based,” Barry Scoles, division sales manager for Reverse Mortgage Focus, a division of Georgetown Mortgage, said on a panel during the National Reverse Mortgage Lenders Association Western Annual Meeting in Huntington Beach in May.
The new borrower is familiar with the loan process, although past borrowers do not qualify as easily due to the new financial assessment requirements, said Paul Fiore, executive vice president of retail lending at American Advisors Group. However, the “new” borrower meets different criteria, such as having a home that is paid off.
“With more positive press, more free and clear people are calling in or are interested in using RM as a retirement planning tool,” he said.
The new average borrower’s age has ticked up slightly since 2013, and is between 72 and 73 years old, versus 71 years on average three years ago, according to data from the Department of Housing and Urban Development. Just 11% of borrowers have taken fixed rate loans year-to-date in 2016, HUD’s data shows. And a major push among some finance professionals is leading some households to consider a reverse mortgage now much more so than they would have in the past.
Some lenders are having success with the new prospective borrower and are finding that even if they are very familiar with financial tools and mortgage products, several basics should not be missed in working with them.
“Our client is relatively new to the reverse mortgage product,” says Mark Reeve, reverse mortgage national director for Plaza Home Mortgage, based in San Diego. “We want to make sure they understand the benefit, and the amortization schedule. Where will the equity position be in 10 years? They have to understand that. And No. 2: What is the credit line growth rate? These can’t be missed in the presentation of the program.”
The new sales professional
Selling the new reverse mortgage has driven some lenders to change the borrower approach. Depending on the sales model, the approach may change a lot, or a little. Many originators who work under a “kitchen table” approach report having changed their conversations slightly. Call center originators say for their process, consistency is key.
“We teach a consultative approach to the sale,” Fiore says. “We encourage a conference call with every family member. [The changes] shouldn’t inherently change your process; you need to create consistency.”
With the new reverse mortgage have come new questions. Given a more savvy prospective borrower pool, lenders are having to come prepared with answers to those questions.
This comes into play in particular for training loan originators who have experience with forward mortgages but may be new to reverse mortgages. While those salespeople are very in tune with specifics relating to the financial assessment, they need to be able to address product questions just as well.
“We are getting far more questions and have to be far better at answering questions about the financial aspects,” Scoles says. “For the credit line growth rate, we get a lot more questions where [prospective borrowers] are asking: ‘How will this benefit me? How can I use it? Do I really need it?’ We have to connect those dots.”
Messaging around the product is one area that is changing to accommodate the new borrower, but salespeople must adjust as well, Fiore says.
“Sales people are still stuck in the mindset of what they have been selling before. We have to make an adjustment to the non-needs based consumer,” he says. “They are using it as a retirement tool and helping their investment portfolio. That’s a different conversation we need to have.”
The new opportunity
Many of the tools needed to succeed in the new reverse mortgage landscape are already available, originators say. With a marked shift in the number of positive news stories about reverse mortgages and a growing positive opinion among financial planning professionals when it comes to reverse mortgages, the industry has a unique opportunity.
But it must use this opportunity wisely.
“The industry has handed us all the tools we need,” Scoles says. “[Research from] Texas Tech and the American College has been handed to us on a silver platter. The issue is not that the tools aren’t available, it’s that we need people who can take the tools and [do something] with them. It takes education.”
Being prepared for conversations both with borrowers and prospective referral partners is essential. It’s an opportunity, but it won’t be around forever.
“When you are selling someone an adjustable rate mortgage and line of credit growth rate, you need to be able to speak about an amortization schedule,” Fiore says. “We need to educate on speaking intelligently with financial planners.”
A poor conversation with financial professionals could deter them further from recommending reverse mortgage options to their clients, he says, resulting in a negative outcome.
It’s also OK to acknowledge that changes have taken place across the reverse mortgage program, lenders say.
“Understand the changes that have happened,” says Reeve. “When you are sitting at the table [with a prospective borrower], make sure to say: ‘We did have some problems. We have fixed them.’”
This edition of the RMD Report is sponsored by national appraisal management company Landmark Network.
Written by Elizabeth Ecker