Fairway Eyes Community Banks for New Reverse Mortgage Growth

No business in America has been spared from the widespread impact of the COVID-19 coronavirus pandemic, but reverse mortgages are different insofar as the products are designed to alleviate additional financial burdens that may be afflicting seniors. Coming into a new role in charge of marketing reverse mortgages during such a unique time may be disruptive, but Timothy Harder says he’s ready for what comes next.

Having recently joined Madison, Wis.-based Fairway Independent Mortgage Corporation as its national reverse marketing specialist, Harder’s years of prior experience in the reverse mortgage space coupled with the company culture of Fairway lead him to see the challenges currently faced by the nation as a unique opportunity to expand business. From identifying the new possibilities in the sector to landing at a company like Fairway, Harder describes having an outlook that is also prepared for new challenges.

‘Blue ocean’ of opportunity, old challenges amplified

After having recently moved to Oklahoma with his wife and working in an entirely different business, Harder identified some unique potential that was building in the reverse mortgage space when he decided to transition back into it after having previous roles at Mountain Pacific Mortgage, and 1st Reverse Mortgage USA.

Timothy Harder

“Looking at developments and what’s going on with reverse mortgages and the economy, it was easy to see what I would call a blue ocean of opportunity coming down the pipe with reverse mortgages,” Harder tells RMD in an interview. “I felt that the timing was right to get into the mortgage business. And so I did my due diligence, and my research in looking at several different companies. Fairway was at the top of my list.”

Harder then reached out to Fairway’s National Reverse Mortgage Director Harlan Accola, and the two had a conversation about what they each thought the state of the business was, as well as what it could be.

“We found a good fit there,” Harder says. “It was an easy conversation to have, starting off well and ending well.”

In terms of how the current moment is different in terms of presenting the reverse mortgage product category to potential clients, many of the same challenges surrounding product education persist. However, the circumstances of the pandemic have augmented the old issues to the point that they’ve become even more pressing, Harder says.

“That’s not true just with COVID, but I certainly believe that COVID has accelerated the potential challenges coming down the pipe with the economy,” Harder says. “Along with the education to homebuilders, real estate agents, financial planners, bank and credit union presidents and managers, this product is continuously being more and more well-received. As we know, with 10,000 people turning 62 every day, this will be one of the answers to the future Social Security problem.”

New challenges stemming from COVID-19

While many of the perennial challenges may be amplified because of the current situation in the country, there are also plenty of new challenges spinning out of the pandemic that affect seniors, particularly those who are at a critical point in making the transition from working into retirement, Harder says.

“A lot of seniors have lost their jobs, and there’s a good chance that many of them will not get their jobs back as the economy starts to open back up,” Harder says. “Companies will open up with less employees going forward in a lot of areas of the country. The combination of the stock market challenges, the limitations on work going forward with seniors and the fact that 10,000 people a day are falling into our category just opens up that there needs to be some alternatives for retirement.”

That much is increasingly true for people in their early-to-mid 60s as much as it continues to be true for those in their 70s and 80s, Harder says.

Meeting seniors where they are

In terms of connecting with more seniors, it has to center on meeting the most pertinent trusted advisors that seniors — specifically baby boomers — maintain, Harder says. That primarily means banks and credit unions.

“A lot of us baby boomers are very comfortable with bank lobbies and doing our banking in person,” Harder says. “The younger generations are more used to electronic banking, but the baby boomers still have relationships with bankers, especially as you get into smaller towns and rural parts of the country. The bank president or the bank lending departments, and it’s the same thing with credit unions.”

Seniors’ continued affinity for banking in-person and relying on the relationships they’ve built at their bank often means that those same seniors seek counsel from those organizations, especially when it comes to both the forward and reverse sides of their mortgage questions.

“In addition, banks and credit unions are working more hand-in-hand with real estate agents, homebuilders and financial planners,” Harder adds. “Those three categories are also the trusted advisors for anybody purchasing or using their services. And therefore, the landscape is the continued education of banks, credit unions, realtors, homebuilders and financial planners. I believe it’s now all starting to come together, as we all felt it should have come together 5-7 years ago. Now, it seems to have a lot more momentum and traction in terms of people being more receptive to reverse mortgages.”

Standing out from competition

In terms of how Harder hopes to differentiate Fairway from its competition in the reverse mortgage space, much of it stems from directing the company’s efforts into areas that he knows will help to elevate the position of the company’s reverse offerings, he says.

“In this arena, what I bring to the table is multiple years of experience dealing with community banks and credit unions,” he says. “That’s a unique relationship, and it takes time and patience to build trust, and to educate and have a rapport with them. What I can do is continue to build that while the loan officers and branch managers continue to work on their day-to-day loan responsibilities. Then as the relationships come together, I can help make a clean handoff to the branches to facilitate the local banks and credit unions.”

In terms of making a more concerted push to local banks who may seek out reverse mortgages to solve a problem they may have related to delinquent loans, it’s unfortunate that’s happening but also fulfills the need for reverse mortgages in the first place, Harder says.

“It’s at least fortunate that we can continue to help seniors stay in their homes,” Harder says. “Certainly nobody asked for COVID, and to be quarantined and to lose their job overnight. But if the reverse mortgage can facilitate holding off a foreclosure or taking somebody out of forbearance and eliminating their mortgage payment, that is a very good thing. It’s unfortunate the way it’s had to come about, but it is here and we’ve all got to deal with that.”

Based on April 2020 endorsement data compiled by Reverse Market Insight (RMI), Fairway is the eighth largest reverse mortgage lender in the country, with 1,266 endorsements over the prior 12 months.

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  • Midway through the recent aughts decade there was great hope that the Boomer Generation with its large population base would turn 62 and create an avalanche of reverse mortgage activity. So starting on January 1, 2008, the industry was introduced to the first Baby Boomers who turned 62. There were not quite 10,000 per day in that year (but it is over that figure now) but their impact to reverse mortgage production was like they never turned 62.

    Fiscal 2006 had seen its highest increase in HECM endorsements over the prio fiscal year at 33,220 for a 77% increase. The increase for fiscal 2006 was greater than the total HECM endorsements produced in fiscal 2019. Then came fiscal 2007 with its surprising number of proprietary reverse mortgage originations including Home Keepers (a Fannie Mae competitor to HECMs). The increase in total HECM endorsements was not as great as in fiscal 2006 but the increase was still 31,207 which was a 40.9% increase over the totoal HECM endorsements for the prior fiscal year. The increase that year was less than 100 endorsements from the total endorsements from fiscal 2019. Fiscal 2007 was the first year that the industry experienced over 100,000 endorsements in a single fiscal year. The total count was 107,558.

    Fiscal 2008 was a rude awakening. In that year we saw the proprietary reverse mortgage (except Home Keepers) completely grind to a halt not only because of the Great Recession but even its byproduct — falling home values. That year had a total increase in HECM endorsements of just 4,596 for a 4.3% increase. By the beginning of fiscal 2008 many of us expected at least a 20% increase in total annual fiscal year endorsements. But not even with the first Baby Boomers turn 62 did we come close to that. Even the increase for fiscal 2020 is expected to be around 7,000 HECM endorsements.

    Then fiscal 2009 came with its meager 2,538 total HECM endorsement increase. That is just a 2.3% increase over the prior fiscal year which seemed like a plateau in comparison to the growth we saw in fiscal years 2004, 2005, 2006, and 2007. That decline in HECM endorsement growth put many of us on edge even wondering if we would see a loss in HECM endorsements in fiscal 2010 but no one was prepared for the size of the loss in fiscal 2009. Yet in both 2008 and 2009, the number of seniors over the age of 62 was booming.

    Fiscal 2010 was the worst. HECM endorsements in fiscal 2010 fell by 35,586. We had never even seen a year of increase of that amount and that endorsement count loss is the highest we have seen it. The drop was 31% from the highest fiscal year HECM endorsement total of 114,692 down to 79,106. The next two fiscal years saw even more loss in HECM endorsement totals. By the end fiscal 2012, the total HECM endorsement loss in fiscal 2012 when compared to the total HECM endorsement production in fiscal 2009 was 59,870 for a loss of 52.2% in total fiscal year HECM endorsement production in just three fiscal years.

    Then came six straight years of downward sloping, peak to trough, secular stagnation. How did it end? It ended in the largest percentage loss from one fiscal year to another of 35.3%. When this kind of loss was being predicted, no one would believe it. It did not seem possible in 2019 after 10.75 years of Baby Boomers turning 62. Now there are just six and one-half years left of Baby Boomers who have yet to turn 62. The infusion of that group has never shown any real growth for the reverse mortgage industry as to HECM endorsements. In fact we could very well be entering into another four year stretch of stagnation based on the type of HECM that is the main source of growth in HECM endorsements this fiscal year (HECM Refis).

    It is almost an irrational mantra to keep mentioning the benefit (?) in reverse mortgage growth that we should expect from the Baby Boomer generation of seniors. There is simply no proof that they have helped the industry grow over previous generations with smaller population bases.

    Ever since coming into the industry 15 years ago, I have been hearing about how community banks will bring enormous growth to the industry. It kind of reminds one of the Baby Boomer mantra. While in some years there MAY have been some growth from this source, it was not so significant that it could be identified.

    Beyond that small towns are just fine to work but they have not driven in the demand that larger population bases have. I hope to be proven wrong.

    Since our HECM endorsement growth is principally coming from HECM Refis this fiscal year, aren’t we overplaying the Corona Virus angle a little?

  • Timothy Harder has recognized the industry that has the potential of driving a lot of business his way. With what Timothy brings to the table, which is his experience with Community banks and credit unions is priceless!

    As Timothy pointed out, these are unique relationships that takes a lot of time and patience to build the trust, and to educate them and have a successful business relationship when it is all said and done!

    About 8 years ago, I developed a program called, the, “Financial Institutional Partnership Program”(FIPP).

    FIPP was a similar program to what Timothy is developing. I worked hard and long on developing it along with all the marketing material, projections, business plan and you name it!

    Unfortunately I could not get a mortgage company or another financial institution to buy into it. The commitment on the part of any company entering into this space has to realize it will take a lot of time and patients to develop it successfully. Also, the financial commitment companies will have to take to reap the fruits of their labor can be a sizable one, in order to do it properly and be successful with it!

    I am going to go under the assumption that Timothy Harder has been able to show Fairway Independent Mortgage this is the way to go! I am sure Timothy was able to convince fairway that making a sound commitment to launch the program he is embarking on, will have its reward at the end!

    Good job Timothy, I will be watching you progress on how you are doing, I also wish you every bit of luck to bring this program to fruition successfully!

    John A. Smaldone

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