Reverse Mortgage Crystal Ball: Biggest Opportunities in 2017

As the industry struggles with falling endorsement volume and a shrinking market, lenders are largely optimistic about the future of the reverse mortgage space in 2017.

Many agree that growth in the next year will depend on a variety of external and internal factors, such as the industry’s ability to expand its messaging to more financial service professionals, and how well the industry looks within itself to improve the customer experience in efforts to better meet the financial needs and situations of its client population, among other objectives.

“The largest opportunity in 2017 for the Home Equity Conversion Mortgage industry resides in its professionals and their abilities to help seniors fully understand and embrace the aspects of the loan,” said Mike Crossett, executive vice president at The Federal Savings Bank. “That is, companies who have HECM professionals, must work in concert with each client’s team of trusted advisors to inform and meet the needs of retirement-age individuals in a safe and sound manner.”

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Favorable demographics

More aging Americans today may find they don’t have the proper financial security that they had hoped for, either due to not saving enough or carrying significant debt into what should be their retirement years. Some may also have less-than-expected investable assets or a lower-than-expected income.

“With this in mind, more individuals should consider a HECM as part of their overall financial strategy—and they need a team of professionals they can trust to guide them through the process, including a HECM Mortgage Banker,” Crossett said.

 

For some, the greatest opportunities for the reverse mortgage industry are three-fold, according to Mike Kent, president at Liberty Home Equity Solutions.

“I believe the greatest opportunities for Liberty and the industry are to (i) improve the reputation of the HECM product, (ii) enrich the borrower’s experience with the origination process, and (iii) continue spreading the message that a HECM can be a valuable retirement tool,” Kent said, adding that he also believes the HECM for Purchase will start to become a more viable and accepted financing option for retirees looking to purchase a new home.

“Demographics continue to be favorable for the HECM product, which offers enormous opportunities for the industry,” he said. “Our collective commitment in 2017—for lenders, brokers, vendors and settlement agents alike—should be to educate the public by providing our customers with all the information necessary to make an educated and informed decision; and to deliver our reverse mortgage solution to the consumer via a customer-centric process.”

Challenges to driving growth in 2017

Growth in the reverse mortgage industry will not arrive without challenges, particularly when it comes to bringing non-industry professionals and lenders into the market.

Recruitment in every area of the mortgage sector is a concern, but the reverse mortgage space will be especially challenged with attracting fresh talent to its industry—talent that must be up-to-speed on the latest financial planning research and can explain these concepts to a more sophisticated borrower population than has been seen in the past.

 

“The reverse mortgage industry will need to solve for an increase in savvy borrowers wanting information on reverse mortgages mixed with a shortage in Loan Originators capable of adequately explaining how a reverse mortgage works for a well-funded or semi-funded retiree,” said John Button, president and CEO at ReverseVision.

Broader mortgage market trends will also play a part in the potential for reverse mortgage lenders to attract new entrants into the marketplace. For example, an expected reduction in traditional mortgage refinances—with estimates as high as 60% lower in 2017—could force lenders to seek replacement production opportunities.

“While purchase business will likely increase in 2017, such growth is unlikely to replace the lost refi volume,” he said. “The entry of mortgage lenders into the reverse lending space, which is already occurring at an elevated pace, will likely increase in 2017, bringing new ideas and approaches to the industry.”

Despite record low volumes in 2016 and the likelihood that downward pressure will continue to impact originations this year and in the near future, some lenders, like Nationwide Equities Corporation, are bullish on the industry’s prospects for 2017 and beyond.

“Although we will almost assuredly be dealing with higher interest rates in the coming years, we should also be experiencing increased equity growth, due to higher home values,” said Nationwide Equities President Glenn Wallace. 

This edition of the RMD Report is sponsored by national appraisal management company Landmark Network.

Written by Jason Oliva

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  • Where are all of these H4P endorsements going to come from this fiscal year? Yes, we should see some increase due to the normal operation of the irregular M shaped secular stagnation we have experienced following fiscal 2012 — BUT any prediction of enough growth from H4P for fiscal 2017 to make a profound difference in total endorsements for this fiscal year most likely came from the same pollsters who had Hillary winning the electoral college by a wide margin.

    For the first six months of fiscal year 2016 there were 1,196 endorsements. The first two months of fiscal year 2017 (the latest data from HUD) shows H4P endorsements running 12.3% behind the same two months of fiscal 2016.

    H4P case number assignments are up 4.6% for the four consecutive months ended November 2016 when compared to H4P case number assignments for the same period in 2015. Using the modified annualized H4P conversion rate, we can expect 24 more endorsements for the first six months of fiscal 2017 over the H4P endorsements for the first six months of fiscal 2016. That would be a 2% increase for the first six month period of fiscal 2017 over the same period in fiscal 2016, hardly the stuff to stir up the industry about. As the saying goes, the fix is in (for the first six months of this fiscal year).

    So are we to believe that in the last six months of this fiscal year, the sleeping giant will actually awake and produce endorsement results which will shake the industry? Hardly!!! We will be fortunate to see 3,000 H4P endorsements this fiscal year. That would be a 25% increase for fiscal 2017 but would require a 46% increase in the last six months of fiscal 2017 over the same period in fiscal year 2016. That seems next to impossible but even if it was achieved, THE very most that would add to HECM endorsements in increased H4P production in fiscal 2017 over fiscal 2016 would be JUST 600 endorsements which amounts to 1.2% of total HECM production for fiscal year 2016, the worst such total in over a decade.

    H4P predictions have rarely been reasonable in this industry. The post above is only another example of the same.

  • I agree with The_Cynic on the H4P endorsements and about some increase in its popularity.

    However, what interests me even more is what the real opportunities are ahead for us if we capitalize on them properly!

    I am talking about the professional sector and the alternative source of business waiting for us out there! The financial planners, the home health care providers, small community banks, credit unions, real-estate brokers and so many more in that professional sector.

    It is true as the article written by Jason alludes to, we don’t have enough originators that truly understand how to approach and work with this new found wealth of business professionals.

    Companies need to bring people on staff that understand the financial planner, the insurance company and others so they can orientate their originators as to what that different professional world is all about.

    This was a well written article in my opinion and brought out the opportunities we have out there. Mike Crossett, Mike Kent and John Button said the right words. We need to take head and learn and capitalize on the new environment we are in today!!

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

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