Like most other industries, the reverse mortgage mortgage industry cannot operate in a silo. Growing the marketplace not only depends on more eligible borrowers using reverse mortgages, but also relies on educating the financial professionals who help these older homeowners navigate their retirement years.
Few industry leaders are tackling this goal as comprehensively as Reverse Mortgage Funding LLC (RMF). In the few short years since its initial launch, the Bloomfield, N.J.-based lender has grown from startup company to one of the reverse mortgage industry’s largest participants.
With approximately 400 employees and doing business in all 50 states, RMF continues to expand its network through the company’s many distributions channels targeting a variety of non-industry professionals, including financial advisers, home builders, real estate agents and others working with retirement age adults.
On what is now nearing the fourth anniversary since the company’s launch, Reverse Mortgage Daily recently caught up with RMF President David Peskin and Chief Marketing Officer Jean Noble to discuss RMF’s rise to become a top-10 lender, the leading Ginnie Mae issuer of Home Equity Conversion Mortgage-backed securities (HMBS) in 2016 and what growth opportunities lie on the horizon for the reverse mortgage industry in 2017 and beyond.
RMD: Reverse Mortgage Funding was launched in 2013 by a group of former MetLife leaders and reverse mortgage industry veterans. In the short time since then, RMF has grown from startup to one of the largest reverse mortgage lenders in the country. How has this experience and leadership positioned RMF for success in the reverse mortgage industry?
David Peskin: Because of our experience in running other large organizations, it made it easier for us when we started the company. We have been through the right way to grow a company; we learned from the past. It starts with bringing all of the right people around you. We were fortunate to bring back talented people and put a gameplan in place. It wasn’t like we were truly starting from scratch in the industry.
RMD: When we last chatted at NRMLA, we discussed some initiatives RMF currently has underway, including some focus groups the company has been conducting recently. What were some key takeaways RMF learned from these focus groups?
Jean Noble: We found that the general population is still under-informed about the HECM product. Unfortunately, the focus groups we recently did mimicked some of the results from groups we did in the past. Consumers still think you take their house. They also think the fact that the product doesn’t have a monthly mortgage payment is too good to be true. That’s a real problem we’re dealing with and it makes us sit back and reflect: Why do we keep saying ‘no monthly mortgage payments?’
It goes back to things we talked about in Chicago, where you market the HECM product as having a flexible payment feature. It makes people feel comfortable, makes the product more credible and gives customers a level of visibility that is not available in the product today.
Peskin: While perceptions are starting to change—and we saw it in the focus groups—people say they are reading that the product is better now, but we’re still hearing the same concerns.
Noble: A lot of that leads to the fact that there is not enough objective information that is free and available to customers. We as industry participants need to provide as much education as possible. Once we have the opportunity to truly educate somebody about the product, even if they are skeptical, after five minutes they become engaged. We need to give them the tools to make good, accurate decisions.
RMD: How does RMF plan to use the findings from these focus groups in the company’s marketing strategy?
Noble: We’ve already started tweaking our messaging. We eliminated using ‘no monthly mortgage payments’ as one of the key core benefits of the HECM product. Instead, we’re using the ‘flexibility’ payment feature.
Our motivation this year is to provide as much free educational content upfront on our website to give people the opportunity to do their due diligence on the product. NRMLA has done a good job of providing infographics on consumer-facing sites that give people a good snapshot of what the reverse mortgage product looks like today.
RMD: Were these focus groups be something that RMF routinely conducts in the future?
Noble: Absolutely. The product is not a one-size-fits-all. You are not just paying off the monthly mortgage. There are many different buyer personas out there, so it’s important that we do specific marketing to appeal to someone’s needs—whether it’s someone looking for an alternative to a HELOC, or the traditional customer looking to extinguish mortgage debt. There is a different message that appeals to these different personas. We’re doing very targeted messaging to target each niche market.
RMD: Last month, RMF attended the National Association of Home Builders’ (NAHB) International Builders’ Show. RMF has been a frequent collaborate and partner to NAHB, particularly with involvement in NAHB’s 50+ Housing Council. Also, in 2015 RMF sponsored a national survey on Baby Boomer housing preferences. How has being a partner to an organization like NAHB benefitted what RMF does in the reverse mortgage space?
Peskin: For us, it has given us the ability to have relationships with certain builders who focus on the 55+ community. It also allows us to have direct dialogue with a lot of NAHB members and helps create awareness and buzz for the HECM product. We’ve seen a big difference in the last 12 months for requests for information to learn more about this product.
We have always taken the view that financing in general can help across all spectrums of products and services. You see financing offered for cars, appliances, medical treatments—why shouldn’t 55+ communities be looking at this as a vehicle to sell more homes?
Noble: Based on NAHB’s research, 62% of Boomers say their intention is to buy a new home using a forward mortgage. In many instances, a HECM for Purchase could be a more suitable solution than a forward mortgage, if the borrower can qualify.
Approximately 32% of Boomers are paying all in cash for new homes as well—we’re seeing this trend among our builder partners. Instead, buyers may choose to keep cash on-hand, only put 50-60% down, and finance the rest with a HECM for Purchase.
RMD: Have you found that collaborating with home builders at these types of events has generated more business on the H4P side?
Noble: Absolutely. In fact, Rob Cooper (RMF National Director – Builder/Realtor HECM for Purchase Program) and Julie Didyoung (RMF Reverse Mortgage Specialist) from our team did a fabulous presentation [at NAHB’s International Builders’ Show] and we got a lot of great inquiries. People are really embracing the HECM product and want to learn more, because they know that not all buyers qualify for traditional financing.
RMD: What do you find is still a significant hurdle or roadblock for the HECM for Purchase side of the market? What needs to happen to overcome these obstacles?
Peskin: I think the biggest challenge is still the Certificate of Occupancy (CO) for new construction homes. With a forward FHA loan, you can buy a home, apply for a mortgage and have the approval conditioned upon the final CO coming in and then you close.
In our world, for whatever reason, you need to wait for the CO to come in, then apply for a HECM and then close. That could take closing time from one day to potentially 45 days, depending on how long it takes the lender to get the client approved and loan closed.
Builders have risk because if the buyer can’t get approved, they have already funded the home, got the CO and are now sitting on a home that the borrower can’t get approved for. Clearly, resolving this issue would get a lot more builders comfortable with the HECM for Purchase product.
RMD: RMF led the way as the top HMBS issuer in 2016. What were some of the forces at play that helped the company become the top issuer for the year?
Peskin: We have a great team in place. We invested a lot of money into the infrastructure since the beginning and were able to invest heavily into building out our team. It’s a whole host of reasons, but our people are the main reason for why we were able to become the largest Ginnie Mae issuer in 2016.
RMD: In RMF’s experience, what is the investor appetite currently in the HMBS market?
Peskin: There is a lot of appetite, but still from a limited pool of investors. It continues to grow, but we’d like to see it grow a lot more. HMBS is still an interesting security to understand, but there is still a tremendous demand for the product. It’s a great asset to own.
RMD: Where does RMF view growth opportunities coming from in the reverse mortgage industry, for the company specifically and for the broader industry as a whole?
Peskin: It comes from professional distribution channels—builders, Realtors, financial advisers, lawyers and others. The growth comes when these professionals recognize they need the HECM product to better enhance their businesses or provide better services to their customers. That is when you will see the reverse mortgage industry go as a whole. As a builder, walking in and saying you can buy our homes with roughly 50% down and have flexibility—when that happens, this industry takes off.
Secondly, messaging plays a key role. We need to get out of advertising reverse mortgages as a loan of last resort and start advertising them as a smart financial tool. A reverse mortgage should be viewed as a traditional mortgage product.
Noble: Influencers are critical to our success. It really is word-of-mouth marketing. Each influencer has a number of clients they are affiliated with, and if we have all these product advocates out there in local markets talking about the benefits of reverse mortgages today, we can see a huge production lift.
Written by Jason Oliva