As Rates Rise, Reverse Mortgages Gain Appeal Among Forward Lenders

As rising interest rates make home purchases and refinances more cost-prohibitive for forward mortgage borrowers, reverse mortgages could be a worthwhile addition to forward lenders’ offerings, reverse professionals say.

With traditional mortgage rates hovering around 5%, forward loan volume has dropped, taking jobs in its path. According to a recent article from the New York Post, Wells Fargo, JPMorgan Chase, Movement Mortgage, and USAA have collectively cut more than 1,400 forward mortgage jobs, and if interest rates continue their climb, more jobs could be on the line.

Getting forward loan officers involved in the reverse market has long been the target of some lenders that offer both traditional and reverse loans, and now the opportunities have improved, they say. San Diego-based C2 Financial Corp. has 600 loan officers, 130 of whom have gone through the reverse mortgage training offered by the company’s reverse division, C2 Reverse. Of the 130, about 50 of these loan officers focus on reverse as a main part of their business, and 20 work exclusively with reverse mortgages, Christina Harmes, assistant manager for C2 Reverse, told RMD.

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Harmes says that forward loan officers are facing tougher sells in the current rate environment.

“When rates were low, it was easy pickings,” she says. “The client already trusts you. They already like you. It was a simple way to refinance into lower rates. But now their pipelines are drying up.”

Mortgage Professional America reported that this year’s refinance volume is forecast to be at its lowest level since 2000. While there will always be borrowers looking for money to renovate a bathroom or pay off student loans, the interest rates make refinancing a harder sell, Harmes said.

“Unless you focus on purchases, the inventory is not really there,” Harmes says. “Even if they focused on purchase where they used to focus entirely on refis, they are having to chase that business, which means chasing Realtors, which means Realtors are getting chased a lot harder.”

Recently Harmes encouraged a loan officer to get trained in reverse mortgages after the loan officer expressed her frustrations about forward prospects.

“I asked, ‘Why aren’t you doing reverse?’” Harmes says. “She said she hadn’t taken the time to learn the reverse business yet, but I told her to get certified. She said, ‘Well, the rates are so much higher, I do have more time on my hands.’”

1st Reverse Mortgage USA is also using its closely related forward channels to drive reverse mortgage business. A division of Cherry Creek Mortgage, which offers traditional lending, 1st Reverse Mortgage USA also last year launched 1st Mortgage Solutions USA, which offers conventional, FHA, and VA loans.

With interest rates increasing and thousands of baby boomers turning 62 every day, senior vice president and reverse division manager Dan Harder says it is the ideal time to unite these loans.

“When we look at the product today and the demographics over the next 15 years, it’s the perfect storm to roll the HECM into the traditional mortgage lender’s products,” he says.

For loan officers who have been in the forward business for years, Harmes tells them to revisit past clients to see if they are now candidates for a reverse mortgage.

“It’s the way of the future and they can go and look at past clients again,” Harmes says. “You just pull out your book of business and see who’s over 62 and could open a reverse mortgage. Go back to someone who already knows and loves you. Start there.”

As far as why a HECM is an alternative to a traditional refinance, it can make sense for some borrowers in today’s market, said Jamie Hopkins, professor of retirement planning at the American College of Financial Services, in a recent webinar about using home equity in retirement.

“Often someone with poor credit or not a lot of income might not be able to refinance under favorable rates to a traditional 30-year mortgage in their mid-60s or 70s, but they might be able to refinance at [a lower rate] if they use a reverse mortgage,” he said.

Written by Maggie Callahan

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  • I wonder if those who were interviewed understand that the HECM endorsement pattern since May 2018 has been stalled. It has not been pretty and there has been no endorsement growth, just vacillating HECM endorsement monthly totals in the range of 4.4% lower to 15.2% lower than the first supposed nadir (April 2018 with 3,345 endorsements) following the 10/2/2017 changes. Just last month the endorsement count was 7.6% lower than the April 2018 count at 3,091 endorsements.

    Last month we saw the worst endorsement count for any October since October 2004, 14 years ago. It is expected that there will be a worse endorsement count for either November 2018 or December 2018 than for October 2018 and the other month will also be lower than 3,200. The endorsement count for October 2017 was 45% higher than the endorsement count last month.

    As to HECMs, with expected interest rates anticipated to climb over the next year and the addition of a contingent second appraisal, it is no wonder that the agenda at the NRMLA Convention last month did not include the typical sessions on how things are getting better. Knowing that the attitude of yesteryear was to avoid forward originators as reverse mortgage originators, it seems reverse mortgage lenders are now set on finding reverse mortgage applications wherever they can find them, despite certain reputation risk..

  • What concerns me the most about a lot of the forward lending loan originators and companies wanting to get into the reverse mortgage space is their current lack of knowledge and understanding of what the reverse mortgage space is all about!

    I came from the forward lending arena, 30 years worth, reverse mortgages and the senior market is a different world! I am still old fashion, but I never looked at my senior clients as a dollar bill or how much commissions can I make off these people.

    Will many of these loan originators making the transition or trying to add to their current mode of doing business ,adapt and approach our market properly?

    Concentrated training efforts on the part of companies will be needed for their people. Interviewing their loan officers wanting to make the transition will be as equally as important. We need those entering into the reverse mortgage space to have the passion for senior seniors.

    Not only that, the forward loan officer must be made aware of the time and the patients needed to be successful in this arena. It is very different than the forward lending world.

    All of these areas I covered are very important considerations companies need to make before entering the reverse mortgage space. They should not just look at the reverse mortgage arena as another avenue to just supplement their income!

    I may be behind the times but I don’t think so! I feel today, especially, our seniors need more direction and patients taken with them on just about everything! We live in a very fast paced and hectic sociability today, many of our seniors are having problems keeping pace with it.

    I hope the banks and mortgage bankers wanting to make the transition, truly and sincerely understand this!

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

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