Reverse Mortgages in 2017: Has the Industry Hit a Breaking Point?

While the last few years have been tough on the reverse mortgage industry, I’m starting to feel like the tide is changing—and it has nothing to do with our new president.

With RMD turning 10 years old, I’ve been to a lot of reverse mortgage trade shows over the years. After being on the circuit for so long, you get to a point where you seem to know everyone at each event.

Rather than going to trade shows to meet new customers and develop new relationships,  the trade shows have been more about seeing old friends and wholesale account executives trying to steal business from each other by offering better pricing and fancier steak dinners.

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However, after my experience a couple weeks ago at the ReverseVision UserCon event in San Diego, I think that might be changing.

New Faces in the Industry: The Missing Link?

As I was walking to the opening reception, I expected to see all the usual people who travel the reverse mortgage circuit. But as I stepped into the room and looked around — I barely knew anyone.

I soon found a small group of people I’ve known for a decade, but as I looked around more closely, I realized there were a lot of new companies at the event. About an hour earlier, RMD editor Liz Ecker had been in a session designed for lenders new to the industry and it was packed — standing room only.

According to ReverseVision, there were more than 90 people signed up for the session designed for those new to the business, and the number of ReverseVision platform users has been increasing steadily over the last few years.

At most reverse mortgage events in the past, you might see a few new faces, but they were always the minority and rarely would you ever see them again. Most came into the space with dreams of “changing the game.” They would look at the current players and think they could build a better business based on all their success in the forward market.

Every company I’ve seen come into the space with any sort of “game changing ideas” has been out of business within a couple years. All of them.

What outsiders don’t understand is that the reverse mortgage business is hard. It takes a long time to close your first loan and success doesn’t come overnight.

Look at American Advisors Group, the largest reverse mortgage lender in the country. While it’s a well oiled machine now, it couldn’t have been further from that at the beginning — talk to founder Reza Jahangiri about how the company almost didn’t make it before seeing any results.

After talking to a few companies coming into the space at the event, it was clear they were attending to educate themselves on reverse mortgages as a new line of business that was going to supplement their forward volume. Rather than the game changing attitude, they were realistic and excited about the opportunity the product offers their business.

Education — We all Must Put in the Work

Part of the problem is that educating lenders about the industry is hard work. We’ve known this for years. Wholesale lenders have to put in tons of work to bring on new clients, and if they only do a few loans a year, is it really worth it?

Most AEs would rather spend the time going after someone else’s client and getting a piece of their production because that requires less work than training someone new to the industry.

As a result, vendors like ReverseVision are being forced to educate people on our industry through crazy efforts like having former Chicago Bears coach Mike Ditka at their Mortgage Bankers Association conference booth or having their own customer events. While I haven’t seen Ditka make a second appearance at a mortgage trade show, these initiatives to educate banks and forward lenders on the space seems to be paying off.

The challenge the industry must address is this: Can we teach other lenders to be successful in the reverse mortgage industry?

The reality is that we don’t really have much of a choice at this point. We continue to see large players exit the space and dream of the day Wells Fargo might return, but I for one can’t see that happening anytime soon.

Until the industry is able to encourage other lenders to take the business seriously, we will continue doing 50,000 loans a year for the foreseeable future? And let’s be honest — where’s the fun in that?

I’ll still be excited to see all the familiar faces at the upcoming NRMLA event in New York, but this new lender interest I saw last week may actually be the key to industry growth. It’s important that we all manage this interest from new players in the space and welcome them to the reverse mortgage industry with open arms.

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  • If this can happen all the better. Fresh blood who is ready to meet with financial advisors (forget for now Realtors) could be a huge positive impact on the outreach efforts we see today. If these newbies are just looking for another vein for new business without any specific long-term training going into their originators, it will still be nice to have them at least for awhile.

    Right now, fiscal 2017 is heading towards becoming the worst HECM endorsement total for the first half of any fiscal year in 12 years. If this endorsement trend does not reverse itself quickly, fiscal 2017 will turn from being just another year in stagnation to one of a renewed trend in endorsement losses (last fiscal year was also a loss year for endorsements).

    It is great John is reporting this new vibe. Yet for now all it is is exciting news. Meaningful news will only come with substantially higher case number assignments, and substantially higher endorsements. For now we are all rooting that John is right.

    In all likelihood it will not be until at least towards the end of fiscal 2018 that will see the impact in higher endorsements from the lenders John speaks of. But 2018 is still better than 2021.

  • The_Cynic hit it right on the head when talking about fresh new blood ready to tackle new changes and opportunities out there.

    A lot is happening with the financial planning professionals, the DOL has made an impact on them as well as the implementation of the FA ruling. This in itself has added a new found credibility factor to our product!

    However, I do not think we will wind up with the worst HECM endorsements in the first half of 2017 in over 12 years, not if we go after these new untouched markets the right way and swiftly!

    I did not entirely agree with my friend The_Cynic on forgetting realtors, the market is out there for us to tap into if we approach it properly.

    Properties are selling, seniors are down sizing and purchasing. I feel it would be a major mistake to forget about the real-estate broker and the H4p product.

    Let us not forget the small community banker, they need a lot of help and new ideas in this never ended day of regulations hitting them. It has been an expensive process for the small community banker, they need all the help they can get to increase their customer base.

    The HECM can do a lot for them in the customer increase category and I don’t mean for them to originate the product, that is the last thing they would want to be burdened with! In short, there are many ways we can be there for the small community banker in a way they can offer the HECM product without the involvement with it.

    Offering a HECM can be a saving grace in saving a senior customer and attracting new ones for the small community banks!

    I am not detracting from the vast opportunity with the financial Planner that The_Cynic has pointed out, on the contrary.

    On the other hand there are other markets available to all of us to target. A HECM loan specialist may feel comfortable working with one professional sector of the market over the other one. It is the end results that counts and what will put endorsements on the books so 2017 will NOT be the worst HECM endorsement total for the first half of 2017!

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

    • John,

      Unfortunately The_Cynic is right. As they say in Las Vegas, “the fix is in.” It is too late for originators to have any impact on the endorsement count for the first half of fiscal 2017. In fact as of today, there is little originators can do to change the endorsement count for the first half of calendar 2017. It takes about four months for applications that will close to become endorsements.

      Nothing originators can do now can turn around the endorsement picture for the first half of fiscal 2017. For example, if a HECM closed today, the average closed HECM takes between three and four months to close.

      The first half of fiscal year 2017 ends at the end of March. The only thing originators can do now is bring in applications between now and May 31. After May 31, chances are, if those applications close, they will not be endorsed until fiscal 2018 which starts October 1, 2017.

      We will know the endorsement count for the fifth month of the current fiscal year tomorrow morning; that just leaves the endorsement count for March, 2017 to close out the endorsement count for the first half of fiscal 2017. The fiscal year gets by us much quicker than we think.

    • John,

      The February 2017 HECM endorsement count was the worst endorsement count for any February in 12 years.

      The sliver of silver lining in the count was that it was sufficient enough that as long as the endorsement count for March 2017 is at least 4,113 then the endorsement count for the first half of fiscal 2017 will come in as the second worst endorsement count for any first half of a fiscal year in 12 years. We have 30 days left before we have the missing endorsement count.

      How will fiscal 2017 play out? Now is the time for originators to close loans. Nothing is set in concrete until a little after May 31, 2017, since the average time for a HECM to go from case number assignment to endorsement and fiscal year 2017 ends on 9/30/2017.

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