Despite some reverse mortgage stakeholders believing the HECM for Purchase loan would be looked at as a “sleeping giant” for the industry, loan counts have represented a plateau for the product at around 7% of volume.
Many see the product’s potential, and have touted it across the country to Realtors and other real estate partners, yet few have seen measured success.
One lender, however, is bucking the trend and is attributing nearly 30% of its volume to the H4P.
Discovering a niche in HECM for Purchase
In terms of its employment of HECM for Purchase in comparison with the larger reverse mortgage industry, VIP Mortgage has a demonstrably higher percentage of H4P transactions when compared with other entities. Nearly a third of the loans they’ve completed in 2019, 28% in total, have been H4P transactions, based on data shared with RMD by Reverse Market Insight (RMI). This figure is four times higher than the industry average, which sits at just 7%.
VIP’s continued success with the HECM for Purchase program has encouraged other non-lenders to take a closer look at utilizing the product as a path toward higher origination volume, according to Tim Nelson, the head of VIP’s reverse mortgage division.
“The HECM for Purchase product is a huge opportunity,” Nelson tells RMD. “Realtors, builders and financial planners need to understand the concept because of the impact this product can make when creating liquidity versus tying up a large portion of their retirement assets and paying cash to avoid a mortgage payment.”
Something that has helped VIP tap into a greater segment of H4P business is informational programs with partners to help them realize the full scope of opportunity that HECM for Purchase can represent.
“Counseling these partners through lunch-and-learns and continuing education classes have given us the exposure to help educate these referral partners to understand there is a strategic reason for purchasing a home with a reverse mortgage,” Nelson says.
Looking ahead to 2020
As the company plans for business in 2020, key to continuing its momentum will be new marketing methodologies oriented toward maintaining the reverse mortgage product’s presence in the minds of referral partners.
“We have created an automated marketing campaign to keep in front of our referral partners so they don’t forget about us 6 – 12 months down the road. I have found this to be an issue with the reverse mortgage product because of it being a niche product,” Nelson says. “A Realtor or a financial planner may not see an opportunity for our product for several months and how do we keep our product in the forefront of their mind? We have created an automated drip campaign with pertinent articles and videos just to keep us as top of mind to our referral sources.”
In a late August press release touting the company’s success in the reverse mortgage space in spite of reduced industry volume, Nelson directly credits HECM for Purchase as a major driving factor of his division’s success.
“Much of our growth comes from using the product for purchase transactions. Instead of paying cash to avoid a mortgage payment, a reverse mortgage allows homeowners to put 50-55 percent down and leave the remaining dollars in their retirement portfolio, having no mortgage payment,” says Nelson in the press release. “Reverse mortgages should no longer be considered a product of last resort, but a way to reduce the fear many seniors have of outliving their assets.”