Fairway Bucks Market Trend With Reverse Mortgage Success

The reverse mortgage industry has struggled with adapting to changes made to the Home Equity Conversion Mortgage (HECM) program handed down by FHA two years ago. In 2019, the industry recorded a 32.3% loss in volume for the period of January-July compared with the same period the prior year. As a result, finding standout success stories can often be difficult in such a challenging business climate. Difficult, but not impossible.

While much of the industry adapts to a climate of reduced HECM volume, there are some reverse mortgage companies that have managed to not only maintain business, but also grow it by leaning on key elements they’ve identified. One such company that has recorded HECM volume growth is Madison, Wis.-based Fairway Independent Mortgage Corporation.

The company currently sits at 3.29% market share between January and August 2019, which is up from 2.17% in same period last year indicating that its performance is outperforming the industry’s level of decline, according to data from Reverse Market Insight (RMI). Endorsements for Fairway in the same period are also up 3.7% from 2018, compared with the market overall which is down by over 30%.

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Not all success stories are created equal, though, and Fairway’s business success has not been achieved by taking a single path. Instead, a company representative describes embracing the reverse mortgage product from its primary position as a forward company as pivotal to its current growth position.

Embracing reverse

A lot of stories concerning the crossover of the forward and reverse mortgage businesses have usually seen a company expand into the forward space to bolster its business, as opposed to the other way around. The story regarding Fairway is based on an opposite scenario: it sees itself as a forward mortgage company first, and has found greater success by expanding into – and leaning on – reverse mortgage origination.

Based on end-of-year endorsement data from 2017, Fairway’s originations were not enough to make it a top 10 lender. They became one the following year and based on the most recent data from September 2019, Fairway is the only lender in the top 10 that has recorded a volume increase compared with endorsements at the same point in the prior year, having risen 9%.

While the company primarily sees itself as a forward mortgage company, Fairway is quick to attribute its reverse mortgage success to the company’s willingness to embrace the reverse side of the business in a very full and demonstrable way.

“Fairway has a unique culture. The leadership, branch managers, and many loan officers have embraced the product and it is gradually spreading throughout the organization which is hard to find in a forward mortgage company,” says Jared Gibbons, national reverse mortgage sales manager at Fairway. “[Our] culture of doing what is right for the client helps reverse mortgages to be accepted.”

Key to Fairway’s reverse mortgage approach and general success is borrower education, particularly in positioning the reverse mortgage as part of a comprehensive retirement solution as opposed to something a borrower can look to out of financial desperation.

“Continuing to educate that this is not a loan of last resort but is part of an overall retirement plan [is important to remain successful],” Gibbons says.

Another potential path forward for Fairway’s reverse business is in offering proprietary products, but the company has yet to fully embrace them. Still, it acknowledges that proprietary reverse mortgages offer yet another path toward growth as it continues to embrace the possibilities that come with the reverse mortgage business overall.

“We are just getting started with proprietary and it has not been a big impact [on us] yet,” Gibbons says. “But, we believe it will be in the future.”

Looking ahead to 2020

In terms of looking ahead and maintaining its business momentum into 2020, Fairway intends to bolster its ranks on the reverse side by educating and recruiting more traditionally forward loan officers to operate in the reverse space, Gibbons shares.

“Fairway is growing dramatically on the forward side to the tune of closing over $4 billion each month,” says Gibbons. “As more loan officers and Realtor referral partners join, that will naturally increase [on] the reverse side as well. We will continue to educate and infiltrate the forward ranks to get the word out there.”

That belief in the overall aim of the reverse mortgage product seems present at all levels of the company. Fairway National Director Harlan Accola describes the role he sees reverse mortgages playing in the ongoing retirement financing issues being faced by American seniors in an interview with Financial Advisor Magazine.

“There is over $7.1 trillion in home equity owned by seniors over the age of 62,” Accola says. “Let’s put the size of this potential solution in context – there are currently outstanding over $1 trillion in car loans, over $1 trillion in student loans, and in excess of $800 billion in credit card balances. The truth is that using the $7 trillion in home equity must be [leveraged] in order to give baby boomers the retirement they need and want.”

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  • Based on HUD’s HECM Endorsement Monthly Summary Reports, some of the data in this article is over 100 days stale. The latest report HUD has posted is for September 2019.

    So what are some of the differences? First the percentage of total HECM endorsements that Fairway had for fiscal 2018 was 2%. As of September 30, 2019, the Fairway percentage of total HECM endorsements moved up to 3.2%. So their percentage share of the HECMs endorsed in fiscal 2019 rose to 1.8 times of what it was in fiscal 2018. Yet their total HECMs endorsed last fiscal only rose 60 endorsements from 948 in fiscal 2018 to 1,008 for fiscal 2019; that is a 6.3% increase.

    Yet let us look at total HECMs endorsed by all lenders during fiscal 2019. The total was just 31,274 new HECM endorsements. Fiscal 2018, had 48,379. Fiscal 2019 saw a drop of 35.3% in new HECM endorsements. That is the largest percentage drop of that nature EVER in the HECM industry. Fiscal 2019 saw the smallest fiscal year total HECM endorsements since 2003, 16 years ago.

    What Fairway proves is that any lender which stays relatively static when the overall endorsement volume is dropping will gain a larger share of the market. Of course, this says nothing about the method that Fairway used in reaching its fiscal year 2019 total. Did they go and hire a large group of originators near 6/30/2018 or in the nine months that followed? Did they launch a new or enlarge an area of marketing such as opening or enlarging a call center?

    Congratulations to Fairway!

    Now as to the conclusions made at the end of the article, is the interviewee looking to wealth redistribution to achieve the lofty goal of using the home equity of seniors to wipe all American debt??? A novel concept for the reverse mortgage industry to espouse but one that does not appeal to many seniors.

  • I say congratulations to Fairway just as my friend Jim veale stated. I still see it as a positive news break, which this industry can always use!

    As Harlan Accola put it, “There is over $7.1 trillion in home equity owned by seniors over the age of 62”. That is a significant number, but it also tells us there is plenty of potential business out there for reverse mortgages!

    I have said this over and over, the business is not going to walk up to you anymore, originators have to go out and find the business, Originator must do their homework. Research, look up records on senior homeowners, you can find out values and debt obligations, yes, it takes work!

    Hold educational workshops, go out and expose our industry, educate our seniors, business is out there and at the same time, you will be helping many seniors live a more comfortable retirement.

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

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