Reverse Mortgage Originators Diversify Amid Low Volume

When the Department of Housing and Urban Development implemented the changes to the Home Equity Conversion Mortgage program last year, reverse mortgage professionals braced themselves for the impact of the lower principal limit factors.

As volume started dropping, some big lenders — like AAG — diversified, some got creative designing new reverse products to bring to the market, and individual loan originators went to the drawing board to figure out ways to stay afloat.

Some turned to forward mortgages, some peered more closely at the private product options, while others left the industry entirely.


After 10 years of focusing on reverse mortgages, Michael Banner, president of Professional Mortgage Alliance LLC in Clearwater, Fla., began shifting his concentration to forward mortgages even before the program changes last year. He said it wasn’t possible to live on reverse mortgages alone, and his 25 years of forward mortgage experience made it an made it an easy addition.

“I decided the reverse mortgage world was too comatose,” Banner said. “But the passion is still there. I love this product.“

Looking at the month of September, Banner said he will have seven closings — six forward and one reverse, and he hopes to close one or two reverse loans in October.

Banner, who is a leading educator when it comes to the HECM for Purchase product, will continue his classes for realtors — but with a slight twist.

“I use my passion for reverse to get me lots of forward mortgages,” he said. “Now after class, I’m very blunt by saying, ‘You can see I love reverse mortgages, but it’s a very small niche in today’s world, so I hope you’ll send your forward clients to me, too.”

In terms of expanding his product offering ever farther, Banner said he might begin dabbling in private reverse products, describing himself as “slightly enamored” with Reverse Mortgage Funding’s Equity Edge.

“I just did a quote and the rate surprised me,” he said. “I hope to be doing a lot of those.”

Until this past January, Tim Linger, broker and owner of HECM Senior Home Financing in Orlando, Fla., had spent about 20 years focused exclusively on selling HECMs. Although his employees had been pushing him to explore forward mortgages, he was hesitant. But when their pipeline was getting close to empty earlier this year, he decided to consider them.

“I had to seriously change my attitude,” he said. “How are we going to pay bills? It wasn’t until January that we made a formal decision to go and do forwards.”

Overall, Linger said it has been a relatively easy transition thanks to the automation of the forward mortgage process and a similar marketing philosophy aimed at real estate professionals: Linger’s reverse business has been largely focused on HECM for Purchase.

“We specialize,” he said. “We haven’t changed anything except offering mortgages we didn’t use to offer.”

While he is interested in exploring the new reverse products, he doesn’t see his product line expanding much more.

“I’ve thought:’ ‘What else can I do to diversify?’ he said. “Not insurance. Not property insurance. I can’t think of anything else to diversify into that makes sense.”

In Connecticut, Pete Mendenhall, the HECM vice president for the Federal Savings Bank, has dedicated himself to establishing more relationships with other senior service professionals as a way to grow his business.

“Business to business partners, like elder care attorneys, medical durable products specialists, and all these other associations around aging or living at home — that’s where everybody needs to focus,” Mendenhall said, adding that home modification specialists, skilled nursing facilities, and in-home service providers are also good contacts.

Aside from being a Certified Aging in Place Specialist, he has also obtained his life and health insurance licenses only to better understand the needs and concerns of the senior population; he was clear that he does not sell insurance products.

Instead, Mendenhall wants to stay exclusively in the reverse mortgage game.

“I have no plans to sell forward mortgages at this time, but rather be a master of one product type, not a Jack of all trades,” he said.

Written by Maggie Callahan

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  • I can fully understand why industry leaders and those originating loans are leaning toward forward mortgages to diversify their portfolios.

    I came from the forward world, 30 years worth, been in the reverse mortgage space for just about 21 years now. When I entered into reverse mortgages, I had a tremendous passion for our seniors and what our product could do for them.

    I am not giving up on our product and what the reverse mortgage, (HECM and proprietary products) can do for our seniors and for us as well.

    What I am afraid of is that with all the diversification going on in the industry today, will this cause the reverse mortgage to eventually fade away?

    I am hoping not, at times I feel the Fed’s would like to see the HECM go away. I even feel at times our government does not have our seniors best interest at heart in many ways, not just with the HECM!

    With the proprietary products coming on the market the way they have, along with the HECM as it now stands, we can survive. Yes, we have to physiologically prepare ourselves differently, and yes, we must seek out and capture other markets. This will take a lot of work and research but if you have a true passion for our seniors and our industry, we can still make it work!

    I am not saying you should not look to diversify, but please, don’t let it over shadow your true talents and what you originally entered the reverse mortgage space for!

    Just my opinion and how I feel about it all, for what ever it may be worth!

    John A. Smaldone

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