Originators See Reverse Mortgage Potential in Renters ‘Test-Driving’ Retirement

A major lead generation firm found that more renters were inquiring about reverse mortgages in the first quarter of 2018, blaming the trend on a lack of education on how the products are largely designed for existing homeowners. But many originators on the ground say they haven’t seen a similar groundswell — and if they have, it’s not from people who don’t understand how the product works.

Best Rate Referrals reported that Home Equity Conversion Mortgage lenders were receiving an increase in interest from renters, who by definition could not qualify for a reverse mortgage outside of potentially using the product to purchase a home. The report was based on inquiries from consumers, all with at least fair credit scores, looking to be paired with mortgage lenders.

Best Rate placed the blame for this inferred trend on recent changes to the reverse mortgage program, which generally lowered the amounts that borrowers can receive and changed the mortgage insurance premium structure.

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“Many lenders left the reverse market due to restrictions placed on them with the program changes,” the company asserted. “When lenders left the reverse market, they stripped related content from their websites. Potentially the result of education gaps, inquiries from unqualified reverse borrowers (such as renters) increased involute during Q1 2018.”

But John Leer, a certified reverse mortgage professional at KleinBank, said that he personally has not had any inquiries from renters at his office in Minnesota. 

“I would think that Florida, Arizona, Texas, and New Mexico – southern, warmer states – probably have more going on than the frigid north,” Leer said. 

Indeed, Howard Frankel, senior reverse mortgage loan officer with Resolute Bank, in Naples, Fla., has noticed a steady trend of renters inquiring about reverse mortgages — but not because they weren’t educated.

“What I see down here is, from a lending perspective, seniors who are test-driving the area,” he said. 

While they decide where they might like to live long-term in Florida, seniors rent. By the time they pick where they want to settle, they are immediately ready to buy.

“If they’ve decided to drop anchor here, the question becomes: Do they buy with a Home Equity Conversion Mortgage, a forward mortgage, or cash?” Frankel said. 

Frankel said the main stumbling block is the cash needed to originate a reverse mortgage.

Tim Nelson, reverse mortgage sales manager for V.I.P. Mortgage in Arizona, said he hasn’t noticed any renters inquiring about or opening reverse mortgages in his area. He said the HECMs for Purchase that he’s worked on have been for current homeowners, and not renters.

At New American Funding in Tustin, Calif., reverse national sales manager Ellen Skaggs said she has not noticed an increase in renters inquiring about loans. If an increase exists, though, she said it’s probably due to seniors hearing more about the product and becoming interested, rather than an education gap caused by companies leaving the space. 

“There is more overall discussion of the product than there was even six month ago,” she said. 

She went on to say that if a lender had a website filled with educational material, they likely would still be in the industry. 

Written by Maggie Callahan