Reverse Mortgages Start at the Kitchen Table, But Scaling Proves Hard

Today’s prospective home equity conversion mortgage borrowers can access a vast wealth of information on the internet and over the phone, but local originators across the country say that higher-tech options still can’t beat the personal touch of the “kitchen table” approach. Still, despite the upsides, some companies run into the problem of scale.

“People still say there’s nothing like a face-to-face meeting to really build the relationship,” said Beth Paterson, executive vice president at Reverse Mortgages SIDAC in St. Paul, Minn.

In a space where major players such as One Reverse Mortgage and American Advisors Group conduct much of their business by phone, smaller originators still rely on in-person contact.

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Even when Paterson’s firm used to do business with customers in Michigan, she said, Reverse Mortgages SIDAC would still overnight all the necessary documentation to her potential clients to facilitate a virtual “kitchen table” meeting over the phone the following day, in which she’d walk through each item step by step. Part of the need, she said, stems from the local “Minnesota nice” culture: Older folks in that state and across the Midwest just prefer face-to-face meetings when making such an important decision.

But originators at smaller firms like Paterson’s aren’t alone in adopting the “virtual kitchen table” concept: Paul Fiore, the executive vice president of retail lending at AAG, says his company’s goal has always been to provide a phone operation that “mimics” the consultative touch of an in-person interview.

Reaching Out to Both Borrowers and Influencers

Laurie MacNaughton, a reverse mortgage specialist at Southern Trust Mortgage in the Washington, D.C. suburbs of Northern Virginia, said she’s been using variations on the “kitchen table” method since she first entered the HECM marketplace in 2007, starting with a technique she called “carpet bombing.” In that strategy, she would target all the businesses within a designated one-mile radius and provide them with literature about reverse mortgages, in the hopes that the owners and patrons would in turn share it with older people in their lives.

“Everybody’s got parents or grandparents or older neighbors,” MacNaughton said.

Over time, MacNaughton refined her approach to focus more on service providers that work closely with those who might be interested in reverse mortgages, including elder-law attorneys and financial planners, in order to become a trusted go-to referral — differentiating herself from 800 numbers and other remote services.

“It is getting to know one reverse mortgage specialist and feeling you can trust that one person,” she said.

Despite her emphasis on the personal touch, MacNaughton doesn’t always physically meet over the kitchen table; if she’s familiar with the potential borrower’s neighborhood and feels comfortable about the state of the property, she’ll have the client come into her office. But if the customer is older and less mobile, or if MacNaughton hasn’t had much experience with similar homes in the area, then she’ll venture out — which also allows her to get a feel for the community and determine if there are any maintenance issues with the property.

An issue of scale

When Quontic Bank entered the reverse mortgage space about three years ago, chairman and CEO Steven Schnall followed the blueprint he’d developed in his previous job at the helm of a standard mortgage firm. Quontic Bank opened an office on Long Island and used a boots-on-the-ground approach, in which originators made connections with the traditional array of attorneys and financial planners.

“It was a very profitable, controllable, safe way to engage in mortgage banking,” Schnall said.

The strategy has been successful for the Queens-based Quontic Bank, which recently moved its Long Island reverse mortgage office from Jericho, N.Y. to a larger space in Melville, N.Y. in anticipation of new hires. But in order to expand the business further, Schnall and Quontic Bank opted to diversify their approach, opening a call center in Carmel, Ind. last year. Talented retail originators are generally hard to find and the relationships take a long time to build, Schnall said, while the call center allowed for more rapid growth: During the last 12 months, the call center — using only paid leads with no other advertising — generated about 70 percent of Quontic Bank’s total number of HECM originations.

According to data from Reverse Market Insight, Quontic Bank finished 2016 with a 282% gain in loans from 2015, jumping from 97th place to 34th on the research firm’s list of top U.S. HECM lenders.

Low Pressure

At Direct Finance Corp. in the Boston suburb of Norwell, Mass., president Alain Valles doesn’t even like to bring any paperwork to the first face-to-face meeting, which he says can typically last upwards of two to three hours and include the potential client’s children or other family members.

“I want to be invited into the relationship,” Valles said, noting that some borrowers might see the presence of paperwork as a sign of a hard sell, or at least an assumption that Valles was looking for an immediate application.

“I want to be perceived as an educator, give the pros and cons, how I can help and how I can’t help.”

Written by Alex Spanko