Active 55+ Communities Present Growing Reverse Mortgage Opportunity

Lifestyle communities for residents over the age of 55 can be popular retirement locations for seniors, with a whole host of regular activities, encouragement of an active lifestyle and engagement with people from a senior’s own generation.

On top of the benefits to potential residents, builder confidence in age-restricted 55-plus housing ended 2018 on a high note, with reports of strong current demand and increasing sales forecasts for this specific housing segment.

According to the National Association of Home Builders’ (NAHB) 55-plus Housing Market Index (HMI) released at the end of January, where survey answers are converted to a diffusion-type index, the organization’s survey of members revealed that “present sales rose six points to 72, expected sales for the next six months increased five points to 70 and traffic of prospective buyers jumped 10 points to 53.”

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Given the influx of 55-plus communities coming onto the market, some reverse mortgage professionals are viewing the opportunity for a surge in HECM for Purchase (H4P) transactions to follow, and some of them have shared that they are actively seeking these communities and prospective residents out in order to generate business.

While communities like these haven’t been easy for the reverse mortgage industry to establish business in – as evidenced by barriers at Sun City in Arizona or property incidents at The Villages in Florida – the potential opportunity is still pronounced.

The state of Florida continues to be a very popular retirement location, particularly because of its climate, tax structure and wide variety of senior living communities. It also turns out that area reverse mortgage originators have specifically looked at the prevalence of active senior communities as a potential avenue to generate H4P business.

“Over 55 communities are popular in Florida with our target demographic,” says Malcolm Tennant, president and co-founder of Access Reverse Mortgage Corporation in Clearwater, Fla. “Ownership structure of these communities can be critically important to successful completion of a reverse mortgage for purchase.”

Tennant added that specifics of property deeds and a facility’s observance of regulations both need to be taken into account for an H4P transaction in one of these communities to go smoothly.

“We have to look at the way the properties are deeded, not the physical appearance of the buildings. Any new developments coming online must be conscious of FHA regulations and structure their communities without hurdles to using FHA reverse mortgages in their financing,” Tennant said. “We have seen increasing scrutiny of Planned Unit Developments (PUDs) which is how many of these over 55 communities are structured. Of particular concern are mandatory upfront fees for use of common area amenities.”

Still, some reverse mortgage originators have issues when looking at active senior communities as a possible source of H4P business, largely because many of the lenders they do business with need to be preferred, which is not always an easy designation to get.

“The 55-plus plus communities were one of the first areas I had thought of when I directed my focus on the H4P,” said Mike Peerless, reverse mortgage director with Holland Financial Services in Ormond Beach, Fla. “Unfortunately for me, the practice of using preferred lenders is still the norm.”

Peerless also shared that he reached out to Latitude Margaritaville, predominantly serving the Daytona Beach area, since they estimate a total unit amount of around 6,800 when they’ve finished developing their properties sometime in the next decade.

“I did reach out to [them] in the Daytona Beach area directly twice last year at their corporate sales office – along with smaller developers – and I was told that they already have a mortgage company handling reverse mortgage transactions.”

That’s not going to stop Peerless from exploring this avenue, however, as he plans to remain persistent through outreach and referral efforts centered on Realtors with experience in active senior communities.

“I am hoping to be able to establish a few relationships with real estate professionals this year who are active in these communities and hopefully, through a smooth closing process, can convince the builders to give me the opportunity to be on their list of approved lenders,” Peerless shared.

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