Should the Industry Rebrand the Reverse Mortgage? Tell RMD What You Think!

It’s an argument that has roiled the Home Equity Conversion Mortgage industry for probably its entire existence: Should the industry ditch the “reverse mortgage” name — and its associated baggage in the public imagination — for something else? As RMD reported last month, surveys have shown that consumers tend to be far more receptive to the idea of taking out a reverse mortgage if they don’t hear the words themselves.

Or is the moniker permanently embedded in the financial world, leaving it up to the industry to rehabilitate the reverse’s image?

That’s where we need your help. RMD has created a list of potential new names for the reverse mortgage, and we’d like you to vote on your favorite — or make your own suggestion if you don’t see one that strikes your fancy. Think the “reverse mortgage” name is fine the way it is? You can vote on that issue, too.

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We here at RMD know that it won’t solve the argument once and for all, but we hope to create a lively discussion that will flow into a separate post in the coming weeks. If you find that the comment section is just too short to contain your thoughts, feel free to drop me a line.

Cast your ballot below, or if the embedded survey isn’t working on your browser, click here. We’ll keep the polls open through Friday, with a full report on the results on Monday morning.

Happy surveying!

Written by Alex Spanko

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  • First, reverse mortgage is not a term coined just by the industry but a defined term found in federal law. It is the law that makes all reverse mortgage transactions nonrecourse transactions and can be found at 15 USC 1602(cc) and can be found online (near the bottom of the page) at https://www.law.cornell.edu/uscode/text/15/1602

    Second, when entering the industry I was recommended to a company for marketing who told its customers from the start that get going in the industry you must call this loan by any name other than a debt or mortgage. In fact they had a return envelope with a seal much like HUD’s with a DC address and on the envelope said find out about your government benefits inside.

    Third, we have a reputation that may not be the best but neither is it the worst. If we make the change without notification (the best way to make a true name change) and the public finds out that it is the same animal called by a different name will they picture us as acting with more integrity or less? Will they trust us more? Are we in this “game” (to some) for the long haul or the short one?

    Everyone is claiming that all the changes of the last three years have helped the industry and the reputation of reverse mortgages. If we make the change with little notification to the public, AAG is still the model for the industry and they promote Tom Selleck. Dump the Fonz and the other less effective players and we would be doing even better.

    Keep the name “reverse mortgage” but define it as a financial product, not the opposite of a regular mortgage. That idea should be DEAD such as first and foremost a nonrecourse mortgage like any other nonrecourse mortgage except that it has special benefits just for those over 62 years old.

    Remember HECM is the name (which I also support) for a specific type of reverse mortgages. All reverse mortgage are NOT HECMs but all HECMs ARE reverse mortgages.

    • Points well taken. I am quite comfortable calling it a reverse mortgage or a HECM. I feel it’s a way to start a conversation and have the opportunity to share the real story. However, I also like the name “Equity Release Mortgage” because that’s what it does in every case and is less confusing to the public. They are the ones that don’t understand why we call it a “Reverse Mortgage”.

      • Michele Kole,

        How does it “release equity” if interest is growing on an amount DUE to a lender? I have yet to meet the senior who is competent and owns a home who does not understand what a mortgage is. This product does not release equity but it does provide liquidity.

        There is true equity release in the marketplace that is not a debt. They are real estate options, trusts, and other arrangements that gives cash (with no interest due the provider) but does impair home ownership; other than liens, reverse mortgages do not and can be terminated through an amount due under a mathematical calculation without appraisal; the same is generally not true with equity release products.

  • I think The Positive Realist made some excellent points. We should NOT hide from who we are or what we do – doing that will continue to damage the reputation of a reverse mortgage or HECM, whichever you prefer. This is a financial product which can be very useful to many people and it should be promoted that way. It is up to those of us who originate reverse mortgages to “reverse” the negative perception. I find that many people have an initial impression but admit to a lack of knowledge and are open to communication. Take that opportunity and educate the public and reap the benefits.

    • I disagree 100% – The word “:Reverse” is so polluted by the negative associations with it, people literally shut their minds to anything else you say in defense of the program. I prefer to discuss the Home Equity Conversion Mortgage product and let them say that sounds like a Reverse Mortgage where I will tell them not to use that dirty misconceived word when we ‘re taking about the best product conceived to help seniors like you and I! I can say that since I’m 80 and have been guiding seniors into this program for the last 18 years!

      • Paulieboy,

        You cannot call a proprietary reverse mortgage a Home Equity Conversion Mortgage (HECM). So I did not find how you propose to stop representing them as reverse mortgages. All reverse mortgages are nonrecourse because they are reverse mortgages.

        Some prefer to deny what HECMs are but muddy the water by saying FHA insurance creates nonrecourse, which is a flat out lie. It is the mortgage documents and federal law that creates nonrecourse for all reverse mortgages, including HECMs.

        The HECM program is a reward to lenders who create mortgages in conformity with HECM rules.

  • As I have said so many times, our industry is its own worst
    enemy.

    Are we really having a serious discussion about this? Is
    this industry still so weak we can’t defend a name that so perfectly fits exactly what this product is?

    The truth of the matter is that for majority of the reverse
    mortgages existence it was a greatly flawed product. Those of you that won’t admit this, or refuse to see this fact, are just not quite the experts you think you are!

    Until April of 2010 the reverse mortgage was a needs based product of last resort! End of story!

    It was the most expensive mortgage in the history of the
    mortgage industry, it had junk fees like “monthly set aside fees” and “monthly service fees” that added thousands of dollars in junk fees to every mortgage.

    Unscrupulous loan officers were charging huge origination
    fees to their clients that had no choice but to agree as the client needed the money so badly.

    Unscrupulous loan officers partnered with dishonest
    financial advisors to cross sell inappropriate financial products, that by the way, DID NOT benefit the client but made themselves lots of money!!!

    Because of having no qualifications of any type for
    approval, people who in no way qualified to receive large sums of money did so, and then could not meet their financial obligations very quickly thereafter, and then lost their home!!!

    And we wonder why people cringe at the words reverse
    mortgage???

    But then we changed…first the elimination of those monthly
    fees and a cap on origination fees. (2010)

    Shortly thereafter we decreased the UPB, or to put in
    English, the loan amounts that clients could receive.

    Now the non-borrowing spouse is protected and of course we
    now have financial assessment that does not allow us to lend large sums of money to people who are not cable of maintaining their property and the rest of their debt structure. (And other positive changes as well)

    We have evolved… the last couple of years has been the most
    positive press cycle in the history of the industry, financial planners are starting to see the light, even the Purchase Reverse Mortgage is showing signs of life… (That’s right, the purchase reverse mortgage, not the HECM for Purchase!)

    So instead of being proud of these great changes and
    screaming them from the roof tops, a fairly large portion of our industry are whining about the name…

    People don’t like the name! Why should they? The reverse
    mortgage of yesteryear’s bad reputation was well earned!

    The point is, we are NOT that industry anymore!!! Be proud
    of what we have become and how we have changed!!!

    Oh wait a minute, I have an idea. Let’s change the name and
    try to fool the public into thinking this really isn’t a reverse mortgage! Wow…that will certainly help our credibility…

    Give me a break!!! That would undo all the great work this
    industry has done in the last several years to start gaining respect.

    No problem in the world, in the history of time, has ever
    been solved by running from it.

    It is what it is! Deal with it! Be proud of it! And represent it as it should be!

    And then watch as the Country changes its mind on reverse
    mortgages….

    • Mike,

      Is that really you? This is one of the zaniest comments you have written yet. I agree with your underlying argument to some degree but your reasoning is hard to swallow.

      First a servicing fee set aside is simply the capitalization of the servicing fees which is the amount that has to be held back from the amount available to the borrower for the monthly payment of servicing fees. Yes, the available loan amount was reduced by that amount but the actual cost was not accrued until once a month. For example, a borrower gets a principal limit of $100,000 but upfront fees of $4,200 and a servicing fee ($25 per month with an expected interest rate of 4.8%) set aside of $4,000 back on June 1, 2007. UPB at closing was just $4,200. The amount due on the first day of the following month would have interest of say $14 (at 4% interest), ongoing MIP of $1.75, a servicing fee of $25 for a total amount due of $4,240.75. While the servicing fee set aside would be $3,992.56 has no impact on the UPB and simply goes away when the loan is paid in full on July 1, 2007 for $4,245.75.

      Nothing from a regulatory point of view happened in April 2010. You will find servicing fee set asides and their related monthly accrual in both the old regs and the new ones. Lenders realized that charging servicing fees made HECMs much less desirable so almost all lenders stopped charging them on new originations sometime in early 2010.

      Some lenders did in fact charge unconscionable fees and a portion of originators did cross sell in a manor that was favorable to the originator and added no value for the borrower but most that was addressed in HERA which became law on July 30, 2008 preceding the April 2010 date you point to by almost 2 years.

      Borrowers have always had to meet minimum qualifications to get a HECM, even minimum financial qualifications but those qualifications were insufficient to stop seniors with a lack of financial capacity or willingness from entering into a HECM when borrowers were expected to pay all property charges timely and keep the home in structurally sound condition. BUT HUD stated that lenders could have had their own financial assessment at any time; they just did not want to. They wanted HUD to create it for them.

      HUD has never reduced the UPB other than at termination when the HECM was in assignment. In fact by increasing the ongoing MIP to 1.25% one could argue they raised it to the point that they had to lower principal limit factors just to keep the program from imploding.

      Mike, to be clear I have been waiting for the industry to change its view on reverse mortgages and it did. You argue that 2010 was the start of the change and that was when endorsements were 79,100 and for fiscal 2016, they were 48,900. So you are exactly right, the country has noticed and spoken by lowering endorsements by over 38% in six years just at the time when over 21 million Baby Boomers were turning 62 years old.

      So, please, correct my argument about the country speaking its mind about HECMs. I am not saying that HECMs have not been improved even for the better but NOT in the perception of HECMs. One originator I know has a common saying perception is reality. Despite better news articles, backing from financial academicians, and even TV coverage, the perception of a growing senior population about HECMs as reflected in endorsements is not good. That IS reality.

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