Through the launch of a new loan comparison tool announced this week, reverse mortgage software provider ReverseVision is taking aim at the way originators and borrowers view reverse mortgages in the current lending environment.
A departure from traditional reverse mortgage calculators that take a sole focus on reverse mortgage product options, the calculator redefines the research process for originators and borrowers by offering a comparison among reverse mortgage options as well as other loan types.
“The significant regulatory changes of the past 6 years made the HECM much more aligned with traditional forward mortgages,” said John Button, president and CEO of ReverseVision, in an email to RMD. “The siloed approach many lenders took worked well when focusing on the ‘needs-based’ borrower. With the many changes, a new approach was needed.”
Identifying the need for change
Particularly in light of recent regulatory changes and a push toward generational lending, the company sees this new tool as meeting the needs of today’s borrower—someone who is approaching the reverse mortgage less from a place of need and more as someone exploring a wide array of product choices including forward mortgages and home equity lines of credit.
The tool, called the “Comparison Calculator,” allows loan originators to offer consumers side-by-side comparisons of how HECMs and their unique features, like the adjustable rate HECM’s growing line-of-credit, can perform against other loan products over the loan term.
ReverseVision specified that some compelling HECM-related research released by the National Council on Aging (NCOA) provided further impetus for the development of the Comparison Calculator, which is available via the company’s ReverseVision Sales Accelerator (RVSA) platform.
“Given the results of the NCOA ‘blind test’ study where seniors more often chose a HECM over a HELOC, it seemed logical to create a tool where all things being equal — i.e., payments and benefits — seniors could make a fact based choice for the loan product that best meets their needs,” Button said.
The new tool also facilitates generational lending, due to some shortcomings ReverseVision identified in the way different products are presented to different age groups.
“Meeting borrowers where they are in life means giving all options to seniors,” Button explained. “A HECM or other reverse lending product is rarely even offered to a senior borrower unless they explicitly request it. One reason why is the lack of easy methods for loan officers to show the HECM loan’s financial performance — particularly [when] compared to other options.”
The power of visualizing options
Comparison Calculator enables loan officers to show prospective borrowers additional options and the potential benefits of more solutions, Button says. One of the ways it can accomplish this is by creating visual representations of different options, along with their corresponding benefit statements.
“A borrower benefits in seeing data with all factors being equal in determining what works best when making financial decisions,” Button said. “This tool with its displays combines benefit statements to ‘normalize’ the HECM while showing performance when all things are equal. Our research showed very rarely do loan officers stress payments can be made, instead they focus on payment flexibility, or even more so – no payment benefit.”
This can translate to borrowers’ lacking trust when something appears “too good to be true,” Button said.
“Demonstrating the line of credit growth while seniors continue to work and make payments is impressive. It might not be for every situation, but if it can increase the over 1 million senior loans in a traditional market to leveraging a HECM, well you can do the math,” Button said.
HECM or senior lending alternatives would double with a 10 percent conversion of borrowers 62 and older leveraging one of the reverse mortgage products in ReverseVision versus a traditional loan, Button added. “It’s good for the borrower and the lender.”
Industry response, vision for the future
Industry response thus far has been positive, Button shared, which leads ReverseVision to make an offer to anyone willing to try out the features of the new tool.
“We are so sure that it’s a game changer we are offering a 30-day free trial on all premium features in ReverseVision Sales Accelerator (RVSA) so that loan officers can go in and literally run common scenarios and get comfortable in this new approach,” Button said.
The overarching vision for the future of this tool comes down to one thing, Button said: the coexistence of forward and reverse.
“[It’s] that simple. The only way more borrowers have the incredible opportunity to experience or at least be given the chance to adequately review a HECM for their financial future is if it is normalized with traditional lending,” Button explained. “These calculators were built on our new API-driven platform. This means that very soon you will be seeing this ability in traditional marketing and pricing tools usually only seen in the forward lending market. It’s a very exciting time.”