Opportunities for Banks to Get Involved with Reverse Mortgages in 2017

As the reverse mortgage industry strives to attract conventional mortgage lenders to the market, the year ahead offers opportunities for banks and other non-industry lenders to get involved in the space, according to one traditional mortgage professional.

Forging pathways for traditional banks and mortgage lenders to become involved in the reverse mortgage space has long been an objective for industry technology provider ReverseVision, which will spotlight this discussion at the company’s second annual User Con 2017 event February 8-10 at the Hilton San Diego Resort & Spa.

Rob Chrisman, consultant with Capital Markets, Chrisman LLC, will participate in the Special Speaker Session at User Con 2017 on Thursday, February 9. A frequent commentator on the mortgage market, Chrisman will provide a unique perspective on traditional mortgage lenders’ views of the reverse mortgage industry and their potential actions and involvement in 2017.

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Similar to the reverse mortgage sector, which saw significant program changes in recent years, the forward lending arena has been operating in a period of ongoing regulatory scrutiny.

“Everything has been a constant battle and continues to be a battle in terms of litigation and settlements that have been going on today between investors and regulators,” Chrisman told RMD. “From lenders’ perspectives, the last thing they want to do is incur anymore wrath from public or government regulators.”

This stifling environment, in which banks are overtly cautious about headline risk, is discouraging companies from adding new products. But certain market forces may soon find more banks welcoming to the idea of diversification.

A rising interest rate environment, where margins are getting squeezed, could serve as an opportunity for banks and mortgage lenders to be more open with the idea of bringing new products into their offerings, including reverse mortgages, Chrisman says.

“With 10,000 people each day turning 62, it’s a hard demographic to argue with,” he says. “The question companies now have is: how can we take advantage of this in a compliant manner that doesn’t subject us to regulatory scrutiny?”

Chrisman began his career in mortgage banking—primarily in capital markets—in 1985 with First California Mortgage, assisting in Secondary Marketing.

With more than three decades of mortgage industry experience, he has held various executive positions, including president of OnCall Mortgage, which was acquired by Wells Fargo Bank in 2000; director of secondary marketing at CMG Mortgage, a wholesale mortgage bank; and serving as director of capital markets at RPM Mortgage, a retail residential lender.

Currently, Chrisman serves on the board of directors for several organizations, including Peoples Bank, a mid-sized depository in Kansas; Inheritance Funding Corporation, a financial services company which advances capital to heirs; as well as International City Mortgage of Axis AMC; and the California Mortgage Bankers Association.

Additionally, Chrisman is also a senior associate of the STRATMOR Group, and of the Mortgage Bankers Association of the Carolinas and its membership committee.

In his experience, Chrisman finds lenders have traditionally viewed reverse mortgages through a “volume-driven” lens, in which closing a only a few reverse loans each month may be seen as a tougher sell when convincing banks to adopt the product.

“For a forward industry that is focused on volume, to have somebody have a great month and do 3-4 [reverse] loans is a hard concept for some to grasp, and so the traditional measures of forward lending don’t really apply to the reverse mortgage side,” he says. “There’s a bit of a learning curve involved that some companies may or may not want to go through.”

But this doesn’t mean all is lost for the potential of banks and forward lenders expanding into the reverse market. At the end of the day, this decision will ultimately rely on education of management teams And this education must start at the top executive level, as well as how bank and traditional “forward” lenders entering the space could benefit or impact the reverse mortgage industry.

“I would think that some of the forward LOs out there who are going to watch the refinance business go away may want to take a look at what’s involved and perhaps embrace the reverse mortgage business given the demographics,” Chrisman says. “It has to begin with management’s acceptance and seeing the logic of offering this kind of product.”

ReverseVision User Con 2017 takes place February 8-10 at the Hilton San Diego Resort & Spa. For more information about this year’s event, including a daily schedule of conference sessions and how to register, visit the User Con 2017 webpage.

Written by Jason Oliva

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  • This article by Jason is very well timed, especially in our changing environment.

    There are great opportunities out there for us with the small community banker, the credit unions, financial planners, insurance companies and more.

    As pointed out in the article, yes, we have many regulatory restraints and compliance concerns we have not had in the past. However, we still can operate effectively within the regulations and restrictions placed on us, if we no how to do it?

    Take small community banks as an example, they are very skittish and cautious about having any connection with reverse mortgages because of the sensitivity and fear of violating some regulation or something the CFPB has in the works!

    Yet on the other hand, these small community banks and credit unions realize how many seniors daily are turning of age and looking at taking out a HECM to provide for many of their needs. Seniors like to do business with the small community bank because of the personalized service they receive that they do not always get from the large bank, bank!

    We as an industry are always concerned about our legal position we may get ourselves into when trying to work a reverse mortgage into a community bank or credit unions business strategy. Could it be it just has not been approached properly?

    John Button, President of ReverseVision has always seen the opportunity and need for our industry to partner up with the small community bank and credit unions.

    John in my opinion is a valuable and asset to the entire reverse mortgage space! We can learn a lot from John with his extensive knowledge.

    First and foremost we must understand what motivates, especially the small community banks and credit unions. We cannot go in and approach these professionals as loan originators or with the philosophy of yesteryear, period! This also pertains to financial planners and insurance companies. We must understand their world before we can expect them to understand ours!!

    I know this first hand, I have worked for years with small community banks, financial planners and credit unions. Call me, I would love to partner up with you and grow this new important sector of our marketing strategy.

    The traditional way of doing business is not there anymore, in order for us to survive we have to go after new markets, the professional sector of the market place that deals with senior citizens.

    I feel very confident in what I am saying is the pathway to the future for the reverse mortgage space!

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

    • Chrisman states: ““For a forward industry that is focused on volume, to have somebody have a great month and do 3-4 [reverse] loans is a hard concept for some to grasp….'”

      Yet only 229 FHA approved mortgagees had any HECM endorsements in December 2016. Out of that only 64 had more than 4 endorsements that month and only 72 had more than 3 endorsements.

      Until qualified demand rises, entering the HECM marketplace will be little more than a curiosity. Who wants to enter an industry that is in downward sloping secular stagnation or worse?

      Let us not live by sticking our collective heads in a hole in the ground and declaring that our situation is conducive to others wanting to get in it with us. Is this misery loving company?

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