As the reverse mortgage industry continues to adapt to the lower principal limit factors introduced last year — and the resulting volume declines — diversification has become a key watchword. Offer a wide range of potential solutions for a senior borrower, from reverse mortgages to forward refinances to real estate brokerage services, and you’re likelier to generate business from any one particular lead.
The Home Equity Conversion Mortgage for Purchase program represents an interesting middle ground between true diversification and the bread-and-butter HECM for reverse mortgage originators. While it remains a traditional HECM loan, it requires the involvement of real estate agents and builders, as well as a sizable up-front cash payment that some borrowers may not be able to afford.
Many originators believe that adding HECM for Purchase loans to their product mix can expand their customer base and grow their business. But doing so successfully requires preparation and a grasp of the changes to the day-to-day workflow. The area introduces new details, processes, and partnerships that have led some HECM originators to work entirely in that area.
“It’s really apples and oranges,” says Rob Cooper, a national sales leader for Reverse Mortgage Funding, which last year launched a certification program for H4P third-party originators.
RMF’s program consists of six modules that walk originators through the potential areas where problems can occur, including contractual language and marketing challenges. The unique aspects of H4P are about more than underwriting in lending agreements and what credits the Federal Housing Administration will or won’t allow. Much of the business stems from newly constructed condos and communities aimed at senior homeowners, so many H4P originators work with builders directly. Realtors and builders need education on the loans, and homeowners moving long distances and will want assurance that the occupancy certification will be ready in time for closing.
“Most of the originators I know who are successful with HECM for Purchase have an emphasis on the HECM for Purchase product,” Cooper says.
Part of RMF’s motivation for rolling out the program was the persistent lack of consumer interest in H4P, which the Department of Housing and Urban Development first sanctioned in October 2008.
“We all recognize that it’s fallen short of its promise,” RMF national sales leader Mark O’Neil said of H4P when the training effort was rolled out last year. “So we were looking at: Why is it that more originators aren’t embracing this? Why is it that more H4Ps aren’t getting written in this country every year?”
A stronger focus on the purchase product could be a logical step for lenders looking to offset losses in other areas, but some originators emphasized that balance remains key.
One of the top originators at KleinBank, a hybrid lender in Minnesota, “works exclusively with a builder that keeps her very busy” with H4P originations, says John Leer, a reverse mortgage origination officer. But she can also originate traditional mortgages and other loans.
But Leer, who is also H4P-certified through RMF, says that strictly “segmenting” by loan type “wouldn’t make business sense.”
Laura Brannock, an RMF loan officer of seven years, also attributes the majority of her business to H4P. Like Leer, she doesn’t see this as a barrier to doing other loans based on clients’ requests, which she says can arrive in phases.
Giving loan officers a way to ensure accuracy throughout the process is also key to their success. If Brannock has a question about either type of loan, she e-mails her company’s internal purchase help desk.
“It’s not just for those starting out,” she says. “Each deal is different and occasionally I’ll come across something I haven’t had experience with.”
As for the type of loan — it’s “not hard to shift gears at all,” Brannock says. “I just juggle both.”
Written by Clare Curley