Close followers of reverse mortgage endorsement numbers know recent growth has been slow at best: Despite some recent months that harkened back to the pre-Financial Assessment days, overall Home Equity Conversion Mortgage endorsement numbers have remained stubbornly below the salad days of years past.
But pure endorsement figures don’t tell the entire story, and data from software company ReverseVision shows some alternate signs of hope for the HECM industry. The San Diego-based firm has recorded a 14% increase in its active user base between November 2016 and March of this year, a metric that ReverseVision vice president of sales and marketing Wendy Peel says is a more accurate indicator of demand in the reverse mortgage marketplace.
“I don’t base what I’m doing on endorsements,” Peel told RMD in a recent phone interview. “What I’m finding in the industry right now is that there’s a lot of growth.”
Peel indicates that the spike in active users — based on ReverseVision logins over that period — is particularly impressive given the size of the brokers that tend to use the company’s loan origination and servicing software.
“If you give context to that, the average company has five users. That’s a huge amount of growth into our software,” Peel said, adding that 320 new brokers and 12 lenders have begun using ReverseVision since the beginning of the year — and all of those lenders were forward companies looking to expand into HECMs.
Among those companies was Skyline Financial Corporation, a top-50 mortgage lender that is seeking to bolster its presence in the reverse marketplace.
“The Home Equity Conversion Mortgage is often overlooked as viable home-equity alternative, and it’s especially underutilized as a means of purchasing a home,” said Joe Renner, Skyline’s reverse-mortgage division vice president, in a release announcing the Calabasas, Calif.-based firm’s partnership with ReverseVision. “By growing our retail efforts and expanding HECM products to our wholesale channel, we can better serve the needs of Skyline customers.”
It’s a model that’s gaining increasing traction in the industry: As RMD reported last week, C2 Financial — California’s largest forward mortgage broker and the second-largest in the nation — has rapidly accelerated its HECM program this year, partnering with Liberty Home Equity Solutions, Finance of America Reverse and Reverse Mortgage Funding to develop HECM training materials for its forward brokers.
The emerging partnership between forward and reverse lenders is focused in part on a novel concept: “generational lending.” The idea is that no mortgage broker operates in a vacuum, and that a wide knowledge of the various options available to potential borrowers can lead to overall growth on both sides of the equation.
Peel gave the example of a traditional forward broker or lender offering first-time homebuyer programs. He or she isn’t likely to make a huge profit from a Federal Housing Administration-backed loan for a young couple looking to make their first purchase, but that’s not the goal, Peel said. If the company made a good impression with the first transaction, the couple will return when it’s time to move into a bigger home — and bring a bigger payday along with it.
“That’s the loan they make money on,” Peel said. “That’s the loan they want.”
The same concept applies to offering the HECM alongside a typical array of forward options. If you did your job well with earlier forward mortgages, the homeowners could turn to you for a reverse mortgage once they turn 62 — or younger homeowners can refer you to their aging parents, or even vice versa.
“You’re engaged with seniors, and guess what? They have kids and grandkids,” Peel said.
The hurdle, of course, is “normalizing” the HECM in the minds of older borrowers, which Peel said could be accomplished by comparing the FHA-backed reverse mortgage to government loans designed to help first-time buyers. Both forward and reverse FHA products offer flexibility, but instead of a lower down payment and a more forgiving credit-score requirement, the HECM offers older borrowers the flexibility to access their equity and make payments only if they can.
“It’s that simple,” Peel said.
Written by Alex Spanko