New Homes, Retirement Savings: Originators Share HECM Success Stories

Despite industry concerns about lower endorsement volumes and constrained principal limits, reverse mortgage originators continue to see success stories on the ground level.

Kathy Collins, a branch manager at UMAX Mortgage in Carlsbad, Calif., recently assisted a couple who opened a Home Equity Conversion Mortgage to fund their grandson’s education.

“I presented them with what the reverse would do, and they talked with their family and compared it with liquidating assets or taking out a loan with scheduled payments,” she said. “I think they felt like it was by far the best option for them.”


The couple’s home was worth more than $1 million and was owned free and clear, allowing them to comfortably tap into the equity with the bonus of not having a rigid payment schedule.

The grandson was equally grateful.

“He told his grandparents, ‘When I become super successful, I’ll just pay it off for you,’” Collins said.

For two clients of Beth Paterson, executive vice president at Reverse Mortgages SIDAC in St. Paul, Minn., a HECM was the best solution for their estate planning goals. The spouses had each previously been married, and the husband was looking for a way to take care of his current wife and his heirs. Because he was the original owner of the home, they added his new wife to the title and jointly opened the HECM.

“When something happens to him, she will remain in the house and get a portion of the funds – enough for her to maintain it and for her needs – and a portion will go to his heirs,” Paterson said, adding that they also worked closely with an attorney.

Paterson said that the wife has funds of her own that will go to her heirs, so, with everyone taken care of, both spouses were very satisfied with the outcome.

“Everyone was happy,” Paterson said. “At closing, he said he would do another reverse mortgage if they sold the house in 10 or 15 years. They would do an H4P.”

Pete Mendenhall, HECM vice president at the Federal Savings Bank in Connecticut, recently closed a HECM for Purchase for a client who had a new home built near Sacramento, Calif.

The clients had closed a HECM when they sold their previous home, and when the time came to buy the second home, the client was proactive and inquired about H4P.

Because construction on the new house wasn’t completed until about seven months after the sale of their previous home, they rented, and invested the proceeds from that sale. Mendenhall said the extra time gave them the opportunity to weigh all financing options, concluding that H4P was the best.

“They had plenty of money to buy a house, but he and his non-borrowing spouse wife decided: Why tie up all that cash in a house when they could use the H4P and save cash – and leave it at work invested, as well as not have a mandatory mortgage payment every month. Win, win, win,” Mendenhall said.

Written by Maggie Callahan

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    • John,

      I am sure I am not alone in wanting to know “the proper approach.” What is this “secret sauce?” I have done them but not consistently. There is little new home construction in our area and what little is going on is principally for first time home buyers of which few if any are seniors.

      While the anecdotes in the column are great to hear, what kind of comp were they paid? Even though this kind of question begs an attack about “putting comp before senior care,” if one can no longer make a decent living doing these “deeds of kindness,” then those of us needing to make a living for the sake of our families need to move on and occasionally do works of kindness.

  • I appreciate hearing these stories of homeowners and homebuyers thoughtfully using a HECM. I feel that the tide is turning as far as public perceptions of the HECM is concerned. More work, honest dialogue, integrity and follow up will help this trend to gain strength. As an originator, Im feeling quite positive about our business.

  • The column presents three no-name borrower, anecdotal testimonies about reverse mortgages. All three are about HECMs which is appropriate considering how few proprietary reverse mortgages are being originated today.

    Yet one of the three stories is about H4P. Why? Total H4Ps have been less than 5% of the HECM market for well over the last 21 months. So why is H4P, one of these three stories?

    H4P is more “Howard the Duck” that “Star Wars, Episode 5” (i.e., more of a flop endorsement wise than winner) but with most H4P being fixed rate (inappropriately?) with generally higher compensation perhaps there we find the rational. (H4P may be very unpopular with seniors but just the opposite for fixed rate originators.)

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