The reverse mortgage industry has been forced to evolve and adapt quite a lot in recent years, particularly after a reduction to principal limit factors (PLFs) instituted by the Federal Housing Administration (FHA) in October of 2017. The industry was forced to go through a multi-faceted adjustment brought about by that disruption, but now that business appears to be progressing positively over two years after those changes were handed down, many within the reverse mortgage industry have set their eyes on newer, larger goals.
That’s not to say that some of the old, perennial issues that the industry has faced for much of its existence are gone, however. RMD readers have expressed that ongoing issues related to the reputation of the products and proper product education continue to remain proverbial thorns in the sides of lenders, brokers and originators, based on the results of a recently conducted survey.
Survey results: reputation, education remain major roadblocks
Reverse Mortgage Daily conducted its 2020 Outlook Survey and Report online in December 2019, soliciting the input of more than 330 reverse mortgage professionals at multiple levels to offer their thoughts on the Home Equity Conversion Mortgage (HECM) and proprietary reverse mortgage landscape in 2020.
A combined 62% of respondents express that the biggest challenges in the industry remain negative product perception and lack of product awareness among consumers. To combat that, nearly half of respondents say that their own growth efforts in 2020 will revolve around refined marketing and consumer education practices.
Negative product perceptions among consumers still account for the biggest industry challenge, according to over a third of survey respondents. A general lack of product awareness, which correlates with a low participation rate for reverse mortgages among seniors, is the next top challenge according to respondents.
To combat the perennial issues of product education and awareness among consumers, nearly half of respondents (47%) say that their 2020 growth plan will include refined product education and marketing efforts, either as a primary or secondary component of a growth strategy.
The persistent issue of consumer education
Connecting with potential clients due to widespread reverse mortgage product misconceptions is still a key concern for Rich Pinnell, originator and branch manager with Primary Residential Mortgage, Inc. in Redding, Calif.
“The biggest thing that this industry has a problem with is education of the potential clients,” Pinnell tells RMD in an interview. “For every client I take on, I spend the first meeting making it all about education. We hardly ever even get into the real numbers until they understand that they really do want to do a reverse mortgage.”
Even after devoting a first full meeting strictly to informing a potential client about the ways that a reverse mortgage might be able to alleviate a senior’s particular financial issues or help them to meet their goals, the conversation invariably comes back to another widespread product misconception, Pinnell says.
“The misconceptions in the marketplace are still rampant,” Pinnell explains. “They think they’re giving up their house to the bank, or that the banks will come in and take it whenever they want to. That education process has to go on, and that’s always been the case.”
Still, one potential silver lining in regards to this issue relates to the increasing prevalence of financial professionals as referral partners, since they are often embedded in the numbers and do their jobs best when clients are adequately informed about the options that are open to them, Pinnell says.
“Our best referral partners are still financial advisors, and they always will be because they’re the ones who see the numbers and see how people are struggling,” Pinnell says. “I had a gentleman in my office recently that was trying to retire a little early, at 62 years old, but he can’t do it with a house payment. So he has a couple of options. In looking at what he was doing, a really good [financial planner partner] referred him to me because he believes in what I do.”
New products as educational hurdles
The introduction of more proprietary products into the marketplace is promising, but likely comes with its own educational concerns since some seniors may find their questions increasing with the amount of reverse mortgage products they become aware of. This is why the industry needs to be concerned with creating ample educational opportunities, according to Jamie Hopkins, head of retirement research at Carson Group.
“The industry needs more of an educational push at the highest levels of why housing wealth and retirement planning are so important,” Hopkins told RMD in a 2019 interview. “This means looking at ways downsizing, H4P, HECMs, LOCs, refinancing, paying off debt, and other mortgage products fit into the bigger picture. I think the more coordinated with the overall planning, the better.”
A semantic debate has also emerged due to the addition of new products, since some in the reverse mortgage industry are actively attempting to determine what certain proprietary reverse mortgage products should be called in order to adequately communicate their differences from a more traditional HECM, as recently explored by RMD.
Look out for the full results of the RMD 2020 Outlook Survey and Report, which will be made available to email subscribers of our daily newsletter in the coming days.