Liberty President Talks Customer Focus, the Future for Reverse Mortgages

There’s a great deal of responsibility that comes with being a leader in the reverse mortgage industry, but when someone recognizes the importance and impact of their work, that can make leadership in your industry both important and necessary. That impact is something that stays with Mike Kent, the president of Liberty Home Equity Solutions, since he often hears directly from his customers about the ways that a reverse mortgage has made a difference in their lives.

When sitting down with RMD for the latest episode of The RMD Podcast, Kent describes how having direct conversations and correspondences with reverse mortgage borrowers was something he had to get used to, while such things also became something he valued about the reverse mortgage industry in general.

Customer response as motivation

“I’m always kind of amazed at the amount of letters, emails and calls I get from customers, and that was part of the job I had to get accustomed to,” Kent tells RMD. “Having that kind of level of customer interface. It’s been a long time since I’ve been one-on-one with individual customers. It goes all the way back to my loan officer days, so I talk to quite a few customers.”

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In some cases, learning about the tougher financial situations of borrowers emphasizes what he feels is important for Liberty to deliver in facilitating a reverse mortgage loan, which is different from other financial services businesses.

“I think the part in this business that’s a little different than others – and I don’t know if it’s just me – but [customer perspectives inform] the amount of pressure I feel to make sure we follow through and get that job done,” Kent says. “That sometimes can be a fairly significant responsibility. You can get pulled into some of these individual circumstances and the next thing you know, you’re virtually living it with the customer. So, that’s tough part of it, but it’s also just an incredibly rewarding part of it.”

Industry evolution

In terms of changes that the reverse mortgage industry has experienced over the course of his career, Kent relates general optimism about what they mean for customers since changes to the Home Equity Conversion Mortgage (HECM) program are primarily designed to offer a refined product to the customers that are served.

Citing changes the industry has undergone related to homeowner taxes and insurance, institution of an initial funding level, and changes to principal limit factors (PLFs), Kent says they are all made in an effort to strengthen reverse mortgages for the long-term, as well as motivate innovations from proprietary products.

“I think a couple of years from now, when we look back with that longer lens, we’re going to say [these changes were] really smart things for the program, because what they did is opened the door a bit wider for proprietary products to get a better foothold in the marketplace,” Kent says. “If you want to have innovation in the reverse mortgage market, you’re not going to get it through a government program. You’re more than likely get it through the private sector.”

That’s not to say that there isn’t optimism to be had specifically about the Federal Housing Administration (FHA)-sponsored HECM program as well, however. The changes made to the program will help ensure the HECM program’s viability into the future, Kent says.

“I’m overall quite optimistic about our future, too, in part because of those changes we made that will ensure that at least this product offered by FHA will be able to continue on serving serving seniors,” he says.

The future of the industry

In addition to expressing positivity about the recent launch of Liberty’s EquityIQ proprietary reverse mortgage, Kent sees the future of the reverse mortgage industry as growing on both the proprietary and HECM sides of the business, he says.

“With the HECM product itself, I think we’ll see steady growth over the next five years,” he says. “Nobody’s going to accuse it of being rapid over five years, but I think it’ll be steady. And then, I think where we’ll see the most significant growth from where it is today, over the next five years is probably in proprietary products, and maybe other equity release products.”

The reverse mortgage product may also begin finding its way into more prominent positions on other product menus, Kent predicts.

“I think that reverse mortgages in general over the next five years, I think they’ll start finding places on the product menus of non-reverse mortgage lenders, like forward lenders, and we’ll probably see some banks get back into the industry.”

For the full conversation, be sure to listen to episode 6 of The RMD Podcast, available on iTunes, Google Podcasts, and wherever you listen to your favorite podcast content.

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  • There is nothing wrong with being optimistic. There are great problems with being overly optimistic.

    At the end of six years of secular stagnation which had a slightly downward hill to valley trend, we saw fiscal 2019 experience a 35.3% drop in total HECMs endorsed compared to the HECMs endorsed in fiscal 2018. That is the worst such shrinkage from one fiscal year to the next in the history of the industry. Even fiscal 2010 only saw a 31% drop in HECM endorsements when compared to the endorsements for fiscal 2009. Worse the six year period of stagnation ended in fiscal 2018 with a 12.5% drop in endorsements. So the total two year drop in HECM endorsements from the total in fiscal 2017 is 43.4%. Of course a great contributor to the reduction are the changes that went into effect on 10/2/2017 virtually at the start of fiscal 2018.

    Although Mr. Kent is a superb leader in the industry, he provides no justification for any grow in HECMs following fiscal 2019. Some have pointed to the new FHA approval policy for condos as reason for hope. That is not our experience on the left coast. So what is so compelling that fiscal 2020 will produce any more HECM endorsements than fiscal 2019? According to his testimony in the House Financial Services Committee on 10/22/2019, HUD Secretary Carson seems committed to ending HECM refis. If that is implemented, we are more likely to see a prospective drop in HECM endorsements. Some expect that announcement next month about the same time as the HUD Annual Report to Congress for fiscal year 2019 on the Financial Status of the FHA Mutual Mortgage Insurance Fund (MMIF) and the Fiscal Year 2019 Independent Actuary’s Annual Review of HECMs in the MMIF are posted on the HUD website.

    The reason for the pessimism is that the actuarial review for fiscal 2018 showed that the net present values for the projected cash flows from the 103,651 HECMs endorsed during fiscal years 2017 and 2018 totaled ($3.4) billion. That means that 16.1% of the HECMs endorsed since 9/30/2008 of 644,090 produced 21.7% of the losses in the MMIF portfolio of HECMs. Worse, that means that the average loss per HECM endorsed in fiscal years 2017 and 2018 was $32,800 while the average loss for all HECMs endorsed since 10/1/2008 is $24,375. So is the loss situation in the MMIF getting better due to financial assessment and everything that has been changed since or are things getting worse?

    Will HUD need to lower PLFs by 11/15/2020? Nothing will be clear until we get the Actuarial Annual Review and HUD’s Annual Report to Congress for fiscal 2019.

    The only thought I can share about proprietary reverse mortgages is that if they are doing as well as anecdote and hearsay claim, why aren’t we seeing monthly reports on their success. The more secretive that lenders are about them, the less credibility there is in all of the originator directed marketing put forth by proprietary reverse mortgage lenders. Please provide us with verifiable data so that we can be as optimistic as leadership seems to be.

  • I tend to agree somewhat with Jim Veale. Like Jim, I am cautiously optimistic about the future of the HECM and the reverse mortgage as a whole.

    However, we are faced with many challenges for the future of this industry. The reverse mortgage world of today is not the same world it was prior to 2015.

    The changes to our industry has caused all of us to be re-educated, it should be teaching us that our approach can’t image the past! Companies, especially companies have to realize this. They need to choose their personnel wisely, they must take special notice to the passion of the people whoa will represent them in the field. Companies must also be prepared to offer their employees as well as to require to be part of stringent initial and on going training programs!

    Jim Veale points out very important data for all of to head. The future is there for those that realize the road is a hard one to travel!!!

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

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