Lending in the Pandemic: Three Reverse Mortgage Surprises

It’s becoming a familiar 2020 mantra: These are unprecedented times.

The coronavirus pandemic has thrown the world into a tailspin, and there’s no clear end in sight. It has affected nearly every industry and institution on the planet, including the reverse mortgage industry.

While originators are reporting a spike in borrower interest over the last 10 weeks, they’re also noticing a few other unexpected side effects due to the pandemic — and some positive surprises stemming from the crisis.


Borrower motivation

One pleasant surprise, according to Scott Harmes, national manager of C2 Reverse Mortgage in San Diego, is the increased level of borrower motivation and speed to close some loans.

“I’ve been doing mortgages for 38 years — and reverses, specifically, for 10 of those years,” he says. “The decision-making cycle on a reverse mortgage tends to be very slow, but since the pandemic, that cycle has been shortened up significantly. There’s a sense of urgency to get your ducks in a row.”

Harmes’ daughter Christina Harmes Hika, CRMP, C2 Reverse Mortgage, has also seen quicker closings as a result of COVID-19.

“Over the years, I’ve done a ton of proposals and lots of people just never decide,” she says. “Then something like this happens and they realize their portfolio is shaken a bit, then they remember how great the product can be. A reverse mortgage often follows a big life event like this.”

Tech savvy

Christine Jensen, branch manager at Fairway Independent Mortgage Corp. in Arvada, Colo., says that she’s been surprised by her ability to walk her clients through their technological difficulties.

In many cases, prospective borrowers are isolated in their homes and are forced to lean on technology solutions to aid in communication, documentation and even the appraisal process.

“We work primarily with a demographic that’s not always technically savvy,” she says. “We’ve had to get creative about how we gather signatures, and I often start Zoom meetings with clients by giving them a short tutorial. Suddenly, tech support has become part of my job description.”

Younger borrower interest

The time to close has not been reduced for all, and technical difficulties and no face-to-face time has slowed the process down significantly for some borrowers, says Laurie MacNaughton, reverse mortgage consultant with Atlantic Coast Mortgage in Fairfax, Virginia.

“I’ve been mailing out applications, and talking through each page over the phone,” she says. “It’s definitely slowed things down a lot.”

But MacNaughton says she’s been surprised by an uptick in one demographic: younger borrowers — most in their 60s — who are calling her with questions.

And their level of preparation and information may bode well for new originations in the near term.

“Not only are they younger, but they’re hyper-informed,” she says. “People of all ages are just worried and trying to safeguard against the unknown.”

Written by Meredith Landry

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  • The norm in our industry is to be over optimistic when small changes occur (you know the principle — every cloud has silver lining or at the end of every rainbow is a pile of gold coins except no one ever says which end of the rainbow they are talking about).

    Will the use of technology by prospects die down after Covid-19 to resemble more closely what they did in 2019? Will the interest in reverse mortgages slip once again following the worst effects of the virus so that we find ourselves in the second worst fiscal year for HECM endorsements? Will proprietary reverse mortgage providers lift their suspensions in the next six months or so?

    We have been reading that financial advisors’ interest has swelled demand recently. Yet how loans have been captured from that activity? What is the percentage of closings from financial advisors’ referrals over last fiscal year at the same time.

    So far we have seen that the main source of a slight increase in HECM monthly endorsements totals for the first six months of this fiscal year versus last, have mostly come from refinances. As to proprietary reverse mortgages, is their total increasing or, in fact, DECREASING when compared to closings for the six month period ended March 31, 2020 (versus for the six month period ended March 31, 2019).

    To avoid embarrassment, it seems the articles we are reading skip from one optimistic subject to another. There seems to be little appetite in determining if the last group of anecdotes on a story about pots of gold coins from this reverse mortgage activity and that really had merit. Accountability is left floating in the air.

    The telling of tall tales in this industry needs some pruning. No doubt there are some flashes of opportunity in this pandemic but we need to highlight those opportunities and delve into them or we will return to fiscal year 2019 norms after the virus has substantially declined.

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