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.
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