Better Borrower Experience Critical to Reverse Mortgage Industry Growth

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.

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“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

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    • Warren,

      As usual you confuse me. You comment after the blog, “right issue” and then follow it up with what is the right issue — “competition with forward mortgage….”

      So what is the right issue?

      Even you name the blog as the “wrong answer.” So what is the right answer?

      Your comment as usual defies rational understanding.

  • An innovative proprietary reverse mortgage product that competes directly with the FHA HECM is the only thing that will contribute to any significant growth for the industry. Currently, the industry does its best to sell a pig with lipstick, but its still a pig.

    • B C,

      Your idea is both bold and inane. It has been called for many, many, times before. Goldman Sachs and several others have the innovative minds to create such a product but how can they make the product both competitive and profitable? The risks of such products are enormous, even if they could be made recourse (which they cannot be by federal law).

      HECM insurance costs related to operations are paid for by taxpayers and again it is not designed to generate anything other than minimal profits, if that.

      So with your imagination, skill, experience, and a little time, no doubt we all will be saying: “Why didn’t we think of that?” So please tell us how your idea can come into being. Do an article for Reverse Review on this topic.

      So best of luck.

  • Mark Browning made many very good points that we all need to take notice of. I don’t know if “Right Issue, Wrong Answer” is on target, with all due respect to my colleague wstrycker.

    We are in a changed industry and we are behind the times on so many things. Our clients, the borrower, relies on what we put out to them in advertising, marketing material and what we in the industry give as answers to our clients!

    One main area we must make sure of is that each one of us that talk and counsel our senior clients on a reverse mortgage is knowledgeable. We must make sure we understand the changes, our product and how it will effect the life’s of our seniors.

    It is no different than if we were dealing with financial planners/advisors, banks, credit unions or anyone in the professional arena, we need to understand their world but we better be knowledgeable enough to explain our product and how it can fit into their world!!

    John A. Smaldone
    http://www.hanover-financial.com

  • Warren,

    This reply to the reply from you above and immediately below.

    First what is a RVD article?

    Second, your posts are off point. Yes, seniors have more debt and some is mortgage but much of it is consumer recourse debt as well.

    As to the forward mortgage lenders being in charge, why not? Even a number of our own approved FHA Mortgagees and TPOs offer forward mortgages. They cover all those eligible to borrower not just those over 62 years old.

    How was it I got smacked down? Please point that out.

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