Characterizing the heightened reverse mortgage business activity which is taking place during the pandemic is not universal to every region or professional in the country, but taking a look at measurements of business volume – including Home Equity Conversion Mortgage (HECM) endorsement data and HECM-backed Securities (HMBS) issuance – does indicate that the business has remained healthy during these very unusual times.
One place this is evident is in a very active region for reverse mortgage originations: Southern California. Taking stock of some of the reasons why business has increased is very important for Christina Harmes Hika, originator with C2 Reverse in San Diego. Determining the needs of senior borrowers as the nation continues to grapple with a pandemic that hits older Americans harder than others is important to keeping business moving forward, but it’s also become important to see how a new swath of professionals might be brought into the fold.
It’s also worthy to examine how the pandemic has changed the business dynamics of the reverse mortgage product category. Christina shares her thoughts on these topics and more in the latest episode of The RMD Podcast, available now.
What keeps younger professionals from entering reverse mortgages
As a reverse mortgage professional who is a part of the millennial generation, Harmes Hika says that it does not appear like there are an abundance of younger professionals which are operating in the reverse mortgage business.
“I don’t see a lot of younger people that come into the space,” she says. “I can probably count on my hands a dozen people, who [work in] reverse that actually work with the client [as] loan originators themselves, sitting at the kitchen table with the client doing the work.”
That relatively small pool of younger professionals that she knows don’t always demonstrate the passion that can be required to carry a senior through the full consultative reverse mortgage process, but cultivating new reverse mortgage professionals likely comes down to communicating an image of promise in the space from a business perspective, she says.
“I can’t say those dozen are really passionate about it and really doing well,” she says. “So I think that passion, and that success will naturally bring others in. Is that happening yet? Is it that happening at all? Where is it happening? It’s hard to tell.”
That being said, the predominance of professionals who are older than her in the space is a definite benefit to the industry, since the differences and nuances of reverse mortgages tend to require someone who knows exactly what they’re getting into, and experience is one of the traits that helps to provide that, she says.
Managing business during COVID-19, further embracing HECM
The early days of the pandemic were likely some of the more unstable days that the reverse mortgage business had seen over the course of this whole ordeal, and observing what was happening to forward mortgage brokers helped Harmes Hika prepare for some of the early turbulence that would come to the reverse side of the business.
“I had the benefit of being very involved in the broker community,” she says. “And, I get to see what goes on with the forward mortgages a lot with brokers. It was interesting, the forward world changed very, very quickly. All their guidelines got thrown around back and forth. I was kind of glad to be under FHA, and I wasn’t fully expecting our jumbos/portfolios to go through the same transitions. And they did.”
This made proprietary reverse mortgages less stable, and because Harmes Hika has aimed to build her reputation in the business on the principle of stability, she found herself naturally moving away from the kinds of clients that might be more attracted by a proprietary reverse mortgage, she says. This naturally led her to assess how she interacts with clients during these unusual times.
“When all of the instability came in with that, it definitely changed my outlook on how to interact with clients,” she says. “The conversations that I had, the clients I was attracting really shifted to more FHA HECMs than jumbos and portfolios. I get a lot of referrals from financial planners as well, and the financial planners skewed down towards their lower-end clients who needed the most help.”
This shift was a natural reaction. In addition to the fact that the pandemic itself disproportionately impacts the health of older people, coupling that difficulty with the ongoing issues related to financing and cash flow in retirement caused a lot of reverse mortgage industry players to shift to the ways a HECM could offer support in the wake of the economic turbulence caused by the ongoing pandemic, Hermes Hika says.
“I think everyone’s focus shifted from really ‘planning and protecting’ and having high-level financial conversations, to more of […] the phrase in sailing is ‘bolt the hatch,’” she explains. “Everybody just kind of grabbed on, and [said] ‘let’s protect the people who need the most.’ And that’s really more of the FHA-type product.”
Wanting to come home
It also became clear to Harmes Hika that the reverse mortgage business requirement for originators to act in a more consultative fashion, sometimes in close contact with the client, necessitated that she prioritize her own health for both herself, as well as the safety of others, she says.
“I actually had a signing at the beginning of March in a nursing home, and everyone was in masks and gloves,” she says. “And there were a few powers of attorney, a few family members. It was really obvious to me at that point that, if I have to come to these signings where I need to hold hands and be very attentive, I need to stay healthy. So, that changed my personal outlook and my personal activities.”
In the case of clients themselves, many seniors saw what was happening around them as the pandemic accelerated, and just wanted to be able to return to their own homes, and this was the mindset of the client at that March signing, she says.
“It was very apparent to me that [at that] signing, the client herself wanted to come home,” Hermes Hika says. “She was just desperate to get out of there, and that changed my outlook immediately. What’s followed [is that] I’ve seen a lot of that: people coming home from care, doing the reverse mortgages for that specific situation of getting out of a nursing home, or hoping to not have to get into one.”
Listen to the full episode of The RMD Podcast featuring Christina Harmes Hika, available now.