While comparatively lesser-used than traditional forward mortgages, reverse mortgages contain significant challenges for loan originators who are seeking out success based primarily on that specific product category. Success is not entirely elusive for reverse mortgage loan originators, however, but it requires overcoming a series of unique hurdles and challenges that are often not present on the reverse side of the business.
This is according to a panel discussion between reverse mortgage loan originators at the National Reverse Mortgage Lenders Association (NRMLA) Virtual Annual Meeting & Expo, moderated by Christina Harmes Hika of C2 Reverse in San Diego, Calif. In addition to discussing challenges that exist in the reverse space, the panelists also discussed some of the most effective methods for success that they have seen during their careers in the reverse arena.
Combating misinformation, sowing trust
For a primarily forward originator to become involved in reverse mortgages, there can often be a component of self-education in order to combat many of the misinformation and distortions that exist about the reverse mortgage product category. That also naturally extends into the point at which an originator does actively start working in reverse, and is a major impediment to proliferating business according to Loren Riddick, national director of reverse lending at Thrive Mortgage, LLC in Alcoa, Tenn.
“I think the biggest thing [to combat] is probably just misinformation, and [spreading] the ability to trust,” Riddick said on the panel. “My practice is both forward and reverse, but I know it took about 13 years of my 20-year plus career just to open my eyes, because I didn’t understand [reverse], and I really [believed] negative connotations about the program. And that’s really what’s fueled me through the future, is trying to make up for some of that lack of adoption early.”
Part of sowing trust with clients comes from the referral partnerships an originator is able to cultivate, but finding referral partners on the forward side often requires the reverse originator to spend a lot of time and effort bringing the prospective forward referral partner up to speed on common points of inaccuracy believed by people both inside and outside of the larger mortgage business, he said.
“Getting over that hurdle of the confidence [is key, so] that the forward loan officer can trust someone else with their name and reputation,” Riddick said. “[We need to allow them] to be able to admit that they don’t know what they don’t know. So I would say that would be the biggest hurdles that we have there.”
One of the most common pieces of misinformation in existence about reverse mortgages is that “the bank owns the home” if a borrower moves forward with a reverse mortgage. Getting over that single piece of misinformation is very effective for Riddick, and helps to put forward mortgage partners, Realtors and borrowers at greater ease, he said.
“I believe that if we can pair [reverse] on the complement of forward lending, and let folks understand that you do not give up ownership of your home when you do a loan, contrary to popular belief, then that takes a lot [of pressure] off,” Riddick said. “I think all of us would agree that that’s half the battle: letting people know they don’t give up ownership of their home. As simple as that is, that is something that we all strive to help folks understand.”
Some clients can also be wary of a reverse mortgage if the terms sound too good to be true, but keeping the conversation focused on an area where there is higher awareness, like the forward mortgage space, can help to properly contextualize what a reverse mortgage could mean, Riddick said.
“When someone says it sounds too good to be true, I’ll just quickly explain: just like on a forward loan, it’s just like a mortgage insurance for VA or FHA. Who does that [insurance] protect, the client or the servicing bank?,” Riddick said. “Well, obviously, we all know that answer. And so I think that once we can address those two things in a really quick elevator speech, I’ve found that it takes that unknown factor to a known one really quickly. So, I think that goes a long way.”
Providing continuing education classes to Realtors
Another novel approach to combating the misinformation present in the minds of potential referral partners is to make an effort to educate those partners about the specifics of the reverse mortgage program. This was the approach taken by Matt Harrison, an originator with loanDepot based in Cottonwood Heights, Utah.
“[I realized that] I needed to go to the people who work with the people that I need to get to know,” Harrison said in developing his educational initiative. “And so, I immediately went to the real estate community and started talking about [reverse mortgages]. Many of them have been in the industry for years, and have said, that they’ve never really understood this program. So, I got the bright idea: real estate agents need continuing education classes.”
After that germ of an idea took root, Harrison then went to the state’s division of real estate to inquire about getting a class approved that he could teach to provide real estate agents with sufficient knowledge of the reverse mortgage program free from the common misconceptions that exist about the program.
“Agents [also need to] be incentivized to come to not only to learn, but to get CE credit,” Harrison said. “And so, that was the beginning of what I did to start a process [that has allowed me to] get into doors I could never get into otherwise.”
Having that kind of a dedicated focus can help real estate agents to get into a market that they already potentially wanted to enter, so Harrison created a presentation specifically designed around Home Equity Conversion Mortgage (HECM) for Purchase (H4P) business, and submitted it to Utah’s real estate division. His presentation was approved, and it immediately allowed him to tap into something not being used by his local competitors.
“The process was actually rather simple,” he said. “And fortunately for me, so far, I don’t really have any competition here. There’s no one else teaching this class, so if they want to have this class, I’m the only one that they can go to to get it. Getting it done should be pretty simple, you just need to go in and provide information, say how [you plan to] do this and provide a presentation [on what you’re] going to teach.”
After the real estate division in your state reviews the proposition and ensures it falls in line with what the teaching curriculum allows, you’re then “off to the races,” Harrison said.