As the reverse mortgage industry strives to improve the customer experience for borrowers and their families, there are some aspects of the Home Equity Conversion Mortgage (HECM) program that may benefit from simplification.
The HECM program has undergone significant changes throughout its 27-year existence, especially in the last five years alone. But amid all of the programmatic updates, the product’s terminology largely has remained the same.
Even the term “reverse mortgages” carries a negative connotation, in the sense that a person using this loan is “moving backwards,” argued industry members during the National Reverse Mortgage Lenders Association’s (NRMLA) 2016 Annual Meeting & Expo in Chicago this month.
“A reverse mortgage is something you earn,” said Marty Bell, senior vice president of marketing and communications for NRMLA. “You spend your whole life working and paying for it—it’s a privilege. We need positive language expressing what it [reverse mortgage] is.”
While distinctive terminology is necessary to distinguish reverse mortgages from their conventional mortgage counterparts and home equity lines of credit (HELOCs), industry members argue that congruous terms that are used in both the forward and reverse sectors communicate a consistent message that can help alleviate confusion.
Terms like “underwriting” and “origination fee” should remain unchanged, reverse mortgage industry members agreed, in efforts to be consistent with their meanings in the conventional mortgage market.
Key HECM terms, however, such as “Maximum Claim Amount” and “Principal Limit” garnered a few suggestions from audience members, who proposed renaming these terms “FHA Lending Limit” and simply “Available Proceeds.”
Industry members also sparred over new names for mandatory HECM “Counseling,” proposing in its place terms such as “Tutors,” “Navigators,” “Consumer Education,” and “Orientation.”
Rethinking key terms also means taking a fresh look at terminology used in reverse mortgage marketing. For example, marketers have routinely touted the “no monthly mortgage payments” feature of HECMs. Although this is a critical attribute of reverse mortgages, this messaging can sound too good to be true for an already distrusting consumer.
“There needs to be a conscious movement to retool that terminology and talk about a flexible payment feature, where you can pay as much or as little as you like, or make no monthly payments at all,” said Jean Noble, chief marketing officer at Reverse Mortgage Funding LLC. “That message really resonates with the customer base because they feel like they have flexibility and control.”
From a legal standpoint, renaming the reverse mortgage product is a tall order for the industry, as regulators like the Consumer Financial Protection Bureau can be sure to continue keeping a watchful eye on the marketing practices of lenders—not to mention the significant investments lenders have made to market “reverse mortgages” over the years.
But while a complete name overhaul may be years down the road, there is an immediate opportunity for lenders to revamp their marketing approaches with a renewed focus on providing better, free education to prospective borrowers without pushing a sales agenda.
“Reporters and consumers are thirsty for good, agnostic and organic content,” Noble said. “It’s up to all of us to make sure that is readily available as they are evaluating and shopping for their options. If we start making a conscious effort to make education available, people will be eager to learn more.”
Lenders who serve as an educational resource for prospective borrowers are also likely to see those individuals return when the time comes to actually make a buying decision, said Tom Evans, vice president of marketing at Finance of America Reverse.
“Just because you aren’t getting an immediate lead form out of someone doesn’t mean you won’t get a customer for life,” Evans said.
Written by Jason Oliva