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

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  • More interest usually means more sales. While this is August, the best measure of interest we have, case number assignments is still low for the last month reported by HUD, May 2018.

    As to the industry as a whole, local increases as nothing more than anecdotes as is with the alleged trend of renters acquiring interest in HECMs. Florida is an oddity.

    • Ed,

      While the interest of renters may be true due to greater marketing of the H4P, most likely the inspiration for reporting this trend comes from the need to find silver lining to the cuts in demand that the 10/2 changes resulted in. But all this shows is we as an industry still have no idea how to target our marketing when it comes to H4P.

      Originators did much better with Savers, that were implemented long after HERA was enacted creating H4P and have now been eliminated for almost five years. In other words the demand for Savers proved to be stronger in just 4 years than H4P has been in the last decade. Yet compare the complaining of originators about Savers vs. H4P. Could some of that be due to the overwhelming lucrative but inappropriate practice of pushing fixed rate H4P rather than focusing in on the usefulness of the adjustable rate HECM to the borrower?

  • I would think the interest from renters in the H4P product is geared more to certain geographical area of the country rather than others. Places like Florida, California, Arizona, Nevada and other similar states due to climate.

    As seniors are moving into these areas, they are not buying immediately, they are renting. They are renting because they are looking around and shopping for properties and making sure the place they are contemplating moving to as their permanent residence is the right place for them!

    Another point, we can’t expect automatically these renters are going to seek you out to learn about a H4P loan. Heck no, we need to go out, find them and educate them on the H4P program. This means leg work, putting out flyers around to different apartment projects, putting on educational workshops in your community and advertise when the workshop will be and where!

    There is the potential with renters and many of these renters may have the cash reserves but are not aware of the H4P programs!

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

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