Borrowers More Interested in Benefits than New Reverse Mortgage Rules

Despite lower reverse mortgage volumes in the wake of last fall’s program changes, originators say that the differences between the “old” and “new” product are largely unknown among the general public — and their main task is still upfront education about how Home Equity Conversion Mortgages work.

“Reverse mortgages, in general, are a foreign subject,” John Leer, a reverse mortgage officer at KleinBank in Chanhassen, Minn, said. “Typically, families or potential customers know very little about the product until they talk to a reverse mortgage originator or counselor.”

According to Lisa Moriello, branch manager at loanDepot in Fairfield, Conn., discussions with family members rarely have to do with the most recent changes from the Department of Housing and Urban Development. Rather, the conversations and concerns are similar to those of the past.


“They are typically focused on what the benefit to their family member is, and what are the possible concerns,” Moriello said.

Some disappointment

Among those who are aware of the “old” and “new” reverse mortgages, there is some disappointment over the October 2 rule changes, which generally lowered the amount of money that borrowers could access.

“They don’t like that the principal limit is lowered,” Ed O’Connor, marketing manager for the HECM division of FirstBank, said. “Everyone would love to have access to more money.”

Yet Jeff Cota, senior HECM advisor at CrossCountry Mortgage, Inc. in San Diego, says the feedback he has received has been mostly positive.

“One of the largest topics with homeowners previously was that of the annual cost of the loan,” Cota told RMD in an e-mail. “With the lower, more competitive rates — coupled with the reduction in ongoing mortgage insurance premium — borrowers are able to realize the program benefits without the double-edged sword feeling of losing equity to higher annual fees in order to access their home’s equity.”

“Overall, these changes do impact the equity allowed to be accessed, but in turn create additional benefits in the form of savings for the borrower,” Cota continued. “We see this via both a decrease in rates and fees, while creating an interest rate environment more competitive with forward lending rates.”

Education imperative

In general, O’Connor noted that more education is necessary to get the word out about the reverse mortgage program.

“There are still plenty of people out there who could use a reverse mortgage, but they don’t know about it,” O’Connor said. “They haven’t heard of it.”

The opportunity for the industry continues to grow despite a serious post-October 2 reverse mortgage origination decline. Reports released in June, for instance, show that the level of untapped home equity in the U.S. keeps rising, while a variety of voices continue to raise the alarm about seniors’ lack of retirement preparedness.

“The reverse mortgage is another tool for today’s homeowner to help plan their retirement,” Moriello says. “We pride ourselves on helping to educate both the borrower and any family members they would choose to include in the conversation on the real-life applications of the reverse mortgages in their retirement planning.”

And because reverse mortgages are such a foreign subject for most, Moriello says the changes don’t have much of an impact on the consumer.

“Unless a borrower inquired into or considered a reverse mortgage before the most recent changes in October 2017, they typically have no opinion on the changes,” she said.

Leer echoes this sentiment.

“I don’t go into what it was before,” he said. “Only how it works today.”

Written by Yasmin Rammohan

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  • I feel the article is sending us all a message, the message is that we all must go out into the market place to educate and educate our senior homeowners!

    We know equity in properties owned by seniors are rising, we also know more seniors homeowners turning 62 years of age daily is at an all time high. To me that tells us we have more prospects!

    This means going back to basics, hold educational workshops at senior recreational centers, call on the department on aging in your county. Ask them to work with you on announcing an educational workshop and put one on at a location of their choice.

    Call on the professional sector, try to reach out to their senior clients or customers to educate them on the new reverse mortgage. Obviously the professional you are working with has to agree for you to talk to their client or customer.

    The point I am getting to is that for us to educate, we have to be out there in the public networking, simple as that!

    John A. Smaldone

    • Hi John,

      Please see the RMD article titled “Boomers, Older Seniors Still Recovering from the Great Recession” on July 29, 2018 by Alex and then advise me about how you then look at your statement that “we know equity in properties owned by seniors are rising.”

      • George,

        If you do your research, you will find many seniors turning 62 have their homes paid for, this is one reason why equity is rising.

        Also, since 2009, housing values have been on the rise, this is also adding equity in those homes, especially homes that were purchased in 2009, 2010 and 2011!


      • John,

        Old news!

        I guess you refuse to believe what the Pew Research Center wrote. Are you doing your research?

        See Alex’s July 29th article cited in my last reply to you. Perhaps your take on things is overly biased by industry stats.

        The Pew Research Center is an independent body.

  • There seems to be a myth being created that the would-be borrowers contemplating a HECM are unaware and, therefore, unaffected by the difference between the pre and post “October Change” in the PLF.

    All an interested borrower has (had) to do is run the numbers on the free, HUD-website calculator to see the drop in available cash after the “October Change.” Unless the presumption is that “today’s,” typical, interested, would-be borrower hadn’t ever used the HUD or any other, similar calculator, before the “October Change.”

    That would be a whole lota assumin’.

    • McSherry,

      Ask the average HECM sales manager and they will tell you that most prospects are ignorant of the changes and have no way to find out differently unless we tell them.

      Thanks for joining in to say why that is rather naive and mythical wishing, when dealing with today’s internet savvy senior.

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