Could HECM for Purchase Take Off Without the ‘HECM’?

While originators agree that the underutilized reverse mortgages for purchase program needs a boost, they are divided on whether removing the words “reverse mortgage” from its marketing is the solution.

During a recent webinar for Realtors, Chris Bruser from Retirement Funding Solutions briefly hinted at the idea of separating the concept of Home Equity Conversion Mortgage for Purchase from the concept of “reverse mortgage”.

Christina Harmes, assistant director for C2 Reverse in San Diego, said that omitting the words “reverse mortgage” makes the product more palatable for baby boomers. Boomers may not look to a reverse mortgage because of negative connotations or because they don’t know it is available for the purchase of a new home, said Harmes, who co-presented the H4P webinar with Bruser.

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“I think it’s a huge opportunity to market it differently, and it does work a little bit differently [than a traditional reverse mortgage],” she said, adding that the best terminology she has heard is “flexible purchase payment loan.”

Laurie MacNaughton, a reverse mortgage specialist with Atlantic Coast Mortgage, LLC in the Washington, D.C. area, said she understands why there is discussion, but is “absolutely not in favor of a product rebrand.”

“I’m highly leery of any attempts to avoid the hard questions surrounding the product,” she said.

MacNaughton said that she recently had two separate calls, one from a senior homebuyer and one from a referral source provider, asking about a new “seniors only” purchase loan they had heard about. As they explained the program to her, it became clear they were describing a reverse mortgage.

“This type of marketing to me is shady at best,” MacNaughton said. “We have fought to gain credibility and we’re talking about doing this? What a tragedy that would be.”

Harmes said she does not think rebranding is misleading.

“We would never want to create a name that was deceptive but instead could open more opportunities for the boomer market,” Harmes said.

Tim Linger, broker and owner of HECM Senior Home Financing in Orlando said he definitely supports dropping the words “reverse mortgage” in exchange for HECM.

“No one is using “HECM” in conversation,” Linger, who sells mostly HECMs for Purchase, said.

Harlan Accola, national director for reverse mortgages at Madison, Wis.-based Fairway Independent Mortgage Corporation, agreed with MacNaughton, saying that rebranding H4P could leave potential borrowers feeling tricked when they learn that it is a reverse mortgage —  further hurting the loan’s image.

“Sooner or later we would have to confront the fact that it is a reverse mortgage,” he said. “We’re far better off saying, ‘It is a reverse mortgage, but it’s not what you think it is.’”

Whether rebranded or not, originators agree that one key to more H4P sales is providing more education to Realtors so they are better equipped to sell – and defend – this type of mortgage.

Written by Maggie Callahan

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  • The title is very deceptive. With one exception, the article is about removing the term “reverse mortgage,” not HECM. H4P is not “flexible purchase repayment loan.” It is a nonrecourse mortgage. A “flexible purchase repayment loan” could be an auto loan, a loan for securities, a loan to purchase insurance, etc.

    What is wrong with calling the H4P, a HECM for Purchase? HECM must be defined early in the discussion or counseling will disclose it as such. Imagine the loss in confidence in the originator if that is the case. The problem I have with using the name “HECM” is when a proprietary reverse mortgage is being marketed.

    Why I have a problem with the term “flexible purchase repayment loan” or “flexible purchase repayment mortgage” is that name is what the H4P can be used for, while HECM is part of the H4P name.

  • IMO, the answer to the branding question lies more in replacing the words, “reverse mortgage” with the term “Home Equity Conversion Mortgage”. This needs to be done EVERYWHERE, including all marketing, application and loan documents as well as all or our verbal communication. To drop the term “reverse” from our marketing only to have it re-appear in the documents would be a HUGE mistake from a public perception standpoint.

    The term, “reverse mortgage” harkens back to the days of the original reverse annuity mortgage and all the negative baggage that went along with it. It is unfortunate that when HUD got into the picture with the HECM in the late 80s they did not separate the HECM program from its predecessor, to which it was related only in general concept, but rather completely embraced the term “reverse mortgage”.

  • The H4P program has a tremendous amount of potential if approached properly.

    I feel removing the words, “Reverse Mortgage” is a great idea. However, from a legal standpoint at some time during the process, the term “Reverse Mortgage” will have to be disclosed!

    However, from a marketing point of view, this could be what we all have been waiting for!

    I am NOT advocating eliminating the brand, we can’t do that but we do not have to market it as such. I understand where Laurie MacNaughton and Harlan Accola are coming from.

    However, in this case, if done properly, it does not have to be a trickery move placed on our seniors, on the contrary. This will be a different method in marketing the H4P product in a way our seniors will understand it for what it is!

    The term “reverse Mortgage” coming out of the gate is unfair to the senior and realtor. We need to give all of them the opportunity to understand the product for what it truly is.

    the last thing we want to do is scare our realtors and seniors before they actually do get out of the gate!

    Remember, the H4P program has never really been marketed in a big way and has not really caught on the way it should have!!

    Also remember, a great majority of the marketing will be done to the real-estate industry, this is how we will be successful with the H4P program!

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

  • Here’s how I look at it from the traditional mortgage side. I will always DESCRIBE the loan product before I tell a Realtor what the name of the program is. For example, I NEVER say, “do you know about USDA loans”? I will say, “do you know there is loan for lower income borrowers outside the city limits with NO down payment requirement and lower interest rates and mortgage insurance.” That gets their attention even if they have never heard about USDA loans. Then they find out that the areas for the properties MIGHT be way outside of town, but it’s still a program designed for a certain identifiable group. Just as a HECM is designed for a specific identifiable group. I try VERY hard when educating to give my Realtors key things to listen for and that way they can ask if their clients might want to look at another option. Just as that focus group done last year showed that most folks were acceptable to a Reverse Mortgage when offered under different language, they liked the concept. ESPECIALLY with the purchase, I think it would benefit us greatly to find a term to utilize. We just REALLY need to get the paperwork to be consistent from lender to lender and truly get the larger companies that do all the advertising to talk about the HECM for Purchase as a loan for an identifiable group of borrowers.

  • I have had the same opinion on this topic since this discussion started several years ago and it’s not going to change.
    The “bad reputation” the reverse mortgage industry has was well earned by the practices of lenders and loan officers of the past. (And unfortunately a few are still around today)
    You don’t change a bad reputation by running away from it, or “calling a reverse mortgage something different.”
    You change that reputation by screaming from the roof tops “we are no longer the reverse mortgage of the past!” You change that reputation, as an industry, by doing what’s right for your client. Not what makes you the most money!!!
    Try that for a while and you will be amazed how the public starts to “love reverse mortgages.”
    Look, there is no way to deny a reverse mortgage is a HECM.
    But when the client gets to the closing he will be executing a Reverse Mortgage NOTE, and a Reverse Mortgage Mortgage, and a REVERSE Mortgage Comparison…and the list goes on and on…
    You don’t change a bad reputation by hiding what this product really is! You only make it worse….

    • Mike,

      Your basic premise is correct with an exception.

      You state: “Look, there is no way to deny a reverse mortgage is a HECM.” That is except when it is not!

      Are you telling us Home Keepers were HECMs? No proprietary reverse mortgages is a HECM. That in part is why the adjective proprietary is used before the term reverse mortgage.

      It is not right to say all animals are bison but it is correct to say all bison are animals. So only HECMs are HECMs.

      It is only right to say that not all reverse mortgages are HECMs but all HECMs are reverse mortgages [that is, unless you have a HECM in mind that is not a reverse mortgage as defined at 15 USC 1602(cc)].

      • Mike,

        My WWII vet dad will be 100 this June. Because he is at home and we are his primary caregivers, we are learning a whole lot about the interaction of hospice care and Medicare. Nonetheless, it is well worth the effort.

        I hope you enjoyed the holidays with your family. Take care.

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