There have been many efforts in recent years to increase education and make reverse mortgages more palatable to seniors and their influencers, but the biggest growth opportunity for the Home Equity Conversion Mortgage product depends upon improving the borrower experience, industry experts agree.
The reverse mortgage industry has been in a state of perpetual change over the last few years with the arrival of HECM program changes such as the Financial Assessment, imitations on upfront loan disbursements and the elimination of certain product structures.
But with many of these program changes already in effect, the reverse mortgage industry is now in a position to begin addressing both the complexities and customer service deficiencies of the HECM borrowing process.
“The customer experience is not where it needs to be, and that’s not surprising,” said Mark Browning, president and founder of HomeChex, during the National Reverse Mortgage Lenders Association’s (NRMLA) 2016 Annual Meeting & Expo in Chicago this week.
Everything from the information that is currently available to consumers about reverse mortgages, to the foreignness of HECM terminology and the complexity of loan documentation, requires an overhaul on the part of the entire industry.
“The current process is arduous,” Browning said, noting for example that it takes 13-18 hours—nearly two working days—to close a HECM.
In efforts to simplify the HECM borrower experience, Browning and several industry leaders formed a committee earlier this year, with the focus of better aligning the HECM program with the constituency they serve.
Alongside NRMLA, the committee released three educational resources meant to help walk reverse mortgage borrowers and their families through various phases of the HECM borrowing process, including what happens when the HECM loan becomes due; what borrowers need to know about HECMs post-closing; and a six-page reverse mortgage self-evaluation checklist of key considerations.
“The goal is to transform perspective—to view it from a consumer-centric perspective,” Browning said. “And to look at policies, procedures and figure out how we can make this a better consumer experience. It’s an essential initiative for us to thrive.”
A challenge the committee first encountered was how difficult it was going to be to make the HECM process more simplified, especially considering the various regulators that also have a stakeholder’s interest in serving the U.S. aging population.
“We need to deal with HUD and other agencies out there who already co-mingled themselves within this aging in America crisis that we’re bumping into,” said Scott Norman, vice president of national retail sales, and vice president of strategy and government relations for Finance of America Reverse, during the panel discussion.
The committee also reviewed HECM terminology that appears in loan documentation to see where it could find opportunities to make reverse mortgage language easier to understand for consumers and their families.
“Terminology creates misunderstandings and requires us to go back and look at things,” said Patty Wills, a Certified Reverse Mortgage Professional with Open Mortgage. “We are an industry that has evolved and we have accepted a lot of terminology that just came from HUD in the beginning.”
Technical terms like Principal Limit or Maximum Claim Amount, for example, may create uncertainty among borrowers as to what these key aspects of the HECM actually mean, Wills said. The necessity of lenders having to explain terms like these upfront may even create confusion or overwhelm consumers at the outset of the application and origination processes.
“We need to commit to evolution,” said Jeffrey Birdsell, vice president of professional services at ReverseVision. “We cannot keep presenting the HECM product the the same way and think we are going to grow this industry.”
Historically, the intrinsic nature of reverse mortgage marketing has emphasized how a HECM differs from a traditional mortgage. But while it is necessary to distinguish reverse mortgages from their “forward” counterparts, describing HECMs in this sense of being “the other” tends to subject reverse mortgages as being described as complicated products.
“We have a huge opportunity,” Birdsell said. “If we’re going to be able to get to that affluent borrower who isn’t a needs-based borrower, and could use a reverse mortgage to benefit their portfolio, then we need to change the way we are doing this and stop doing this the same.”
Written by Jason Oliva