NY Times: Small Banks Bring Main Street Respectability to Reverse Mortgages

The reverse mortgage industry is constantly trying to educate potential borrowers on the benefits of the product using late night TV ads with famous celebrities. But there are far more companies who are on the smaller side in communities all over the country who are bringing a real respectability to the industry without all of the bells and whistles, according to a recent article in the New York Times.

Two community banks in the Pittsburgh area originate reverse mortgages and have been doing so for years, but their focus is not on commission and numbers, it’s on bringing in clients and building meaningful relationships for years to come. Each bank originates about 100 reverse mortgages a year, but their caution appears purposeful, the article writes.

All of the loan officers at each of the banks are on salary. “You don’t have an environment where people have to get the loan closed or they won’t be able to pay their mortgage next month,” Mike Henry, senior vice president for residential lending at Dollar Bank, located in Pittsburgh, was quoted saying in the article.


Another aspect that one of the banks focuses on is advising potential borrowers to come in for a meeting with family members or another trusted advisor.

“Many reverse mortgage borrowers are in their 70s or 80s, and some of them may be in the beginning stages of cognitive decline,” the article writes. “If I were a banker, I would want adult children in the room so they knew that their parent had willingly signed up — and so those same children won’t be blindsided by the debt later.”

Another reason these banks do this is to try and prevent some adult children from taking advantage of the reverse mortgage funds or pressuring their parents into applying in the first place. “Customer-facing employees undergo training in recognizing elder abuse,” the article says.

There are no hard and fast rules for reverse mortgages, the article explains, but they can be a huge help for the right person in the right situation, at the right time.

Read the full article from the New York Times

Written by Alana Stramowski

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  • It is interesting that this article gives three different reasons for the senior getting a HECM and all three when taken together seem quite prudent: “Mr. Schindler used his reverse mortgage to pay off the last bit of his original mortgage on his condo and to open a line of credit. By tapping it, he built a sizable enough down payment to get a better interest rate on a car loan. The reverse mortgage also gives him some breathing room because he did not want to tap retirement money from an annuity that will be worth more if he waits longer to use it.”

    Mr. Schindler has no choice on the first use. As to the second, he will save overall interest, at least on his car loan by a larger down payment and as long as the HECM interest on the increased down payment is less than the car payment would have been, he has used those proceeds productively. The final reason is quite apparent since he is gaining more value in an annuity which can make a lot of sense unless the there is more interest expense and other accrued costs from the strategy than growth in the annuity.

  • Interesting the philosophies these two community banks share! However, this is so true of community banks all over the nation. Believe it or not, it is not the commission they can make on a reverse mortgage but it is what the reverse mortgage can do for their customer base that is important!

    The small community banks have more seniors patronizing them than the large banks, why? The reason is personalized service, seniors still remember the good old days when service meant everything, small community banks focus on this immensely! Their customer relationships is their primary reason for existence.

    In our every day world most of us don’t go after the small community banker or credit union as far as that goes. We don’t have the patients and time it takes to gain the executive at the bank the trust and warm fuzzy feeling in us they need to have in order to do business with us. Also, most of us don’t understand the mindset of the small community banker and what motivates them.

    If we lick those hurdles, we have a wealth of opportunity out their with the community banking industry!

    John A. Smaldone

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