How Refis Fuel Wholesale Success, and Why Reverse Mortgage Education Remains So Important

The divide between the wholesale and retail channels of the reverse mortgage industry can often be stark for people who operate in each sector, but there are also some potential lessons that one can take from the other in appropriate instances. In this heightened climate of reverse mortgage business activity, the successful initiatives of wholesalers could potentially lead to success for originators operating in one or both channels.

This is just one idea expressed by Jonathan Scarpati, VP of wholesale lending at Finance of America Reverse (FAR) in an upcoming episode of The RMD Podcast. As someone charged with overseeing the wholesale operations of a major national reverse mortgage lender, Scarpati has a very informed perspective on what the most successful wholesalers are doing, and what lessons originators may be able to take from them.

Successful wholesalers and reverse mortgage refinances

Among some of the trends being seen among successful wholesale clients, the beneficial rate environment and the general level of home price appreciation make reverse mortgage refinances a promising channel of business in the moment, Scarpati says.

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“I think the biggest opportunity in short, is our past customers,” he says. “A lot of times, I find people always going against the grain and looking to reach out with cold calls versus going after past customers. But with rates being so low, I think refis are a pretty great opportunity. Again, it’s just really important to not lose sight of the opportunity we have [right now] with historically low rates, and the ability to go after new [clients], as well.”

Jonathan Scarpati

That’s not to say that it’s unnecessary to continue going after new prospective clients, Scarpati says. One of the other things that enhances opportunities on the refinancing side in this moment also goes back to product education, where refinance customers by definition have already overcome many of the educational hurdles that can stand in front of new customers who have never interacted with the product category before.

“As great of press coverage as [our industry has] received over the last couple of years, it still takes a little bit of additional time and effort to educate the customer, because it is still a complex product,” Scarpati says. “So I think in short, HECM-to-HECM is an easier sale, where it’s a little longer of a sales cycle to go after a new customer. But, we also know how the mortgage industry works, and that there are cycles and volatility [with] rates being up and down.”

That ability for the housing market to turn, where there is some general uncertainty stemming from the pandemic, communicates why the particular time is right for refinancing and gives an indication at the higher levels of refinance activity the industry has been observing over the past several months.

“People are enjoying lower rates, maximizing proceeds and [we’re] able to do a lot of refinances to help borrowers get into more advantageous loans,” he says. “But, again: at some point, rates will go up. It’s important to always have an additional iron in the fire to get after those new-to-reverse customers.”

What originators can take from successful wholesalers

In terms of what front-lines originators can take from what he is seeing fro successful wholesale clients, Scarpati is adamant about one of the major, long standing principles that has guided the reverse mortgage industry: never underestimating the value of solid product education among prospects.

“Education is probably one of the most important [lessons] because regardless of what type of model you run, if you have a large forward division, a lot of that is going to be educating your forward originators about the benefits of a reverse mortgage,” he says. “To teach them when to be able to identify a potential reverse mortgage. [Asking if a client is] the right age, if they have enough equity, and just identifying that customer who could potentially get a reverse mortgage.”

Leaning on product education remains important for attracting the right kinds of referral partners as well, who can point an originator into the direction of gaining additional business based on the flow of good information between partner and originator, he says. Since the reverse mortgage product is prone to changes, it’s also not a bad idea to prepare to educate any potential repeat customers about how a reverse mortgage may have changed between their first origination and a possible refinance transaction.

‘Irons in the fire’

Still, education is not a “silver bullet” in and of itself, Scarpati says, so it can be important to have as much diversity as possible in terms of an approach and the information an originator makes available to a prospect.

“I think educating is still probably one of the most important ways to continue to have success in this industry,” he says. “There really is no one way, or one easy solution to produce a lot of business. It’s really more about having a lot of different approaches, and that’s the way your business is going to be more consistent. And that’s the way your business will thrive for years to come.”

Look for the full discussion with Jonathan Scarpati in a brand new episode of the RMD Podcast, which will be made available later this week. You can subscribe to the podcast on Apple Podcasts, Google Podcasts, Soundcloud, or wherever you listen to your favorite podcast content.

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  • I would like to hear the perspective from the secondary market on the current wave of HECM-to-HECM refis and what the associated prepayments may be doing to the premiums being paid for HMBS. Scarpati is certainly correct that these past customers are ‘low hanging fruit’ … I just hope we’re not ‘poisoning the tree’ by picking it so aggressively.

  • “I think the biggest opportunity in short, is our past customers,”

    This 100% correct. I’ve reviewed thousands of files over the years and it’s common to see 2,3, even 4 HECMs with the last one now often being a jump to proprietary.

    Not all are looking for cash out either. I’ve had a few inquires from folks that just wanted a lower rate to reduce the equity burn.

    Unfortunately a wide majority will still not qualify due to insufficient equity and the more restrictive terms in place. But no doubt, the interest and desire are there.

  • Johnathan Scarpati hit on the right topic, he hit on the importance of sound educational knowledge on many areas of his article.!

    I can’t emphasis enough how important education is today, maybe even more important today because of the lack of face to face interviews with our senior clients caused by Covid-19.

    Educating the customer/Client is so important, however, in order for an originator to educate, they must be educated themselves!!!!

    There is not anywhere near enough emphasis is placed on educating our originators and staff by the mortgage companies and mortgage bankers they work for!

    Our senior potential borrowers deserve the best counseling and knowledgeable answers given to them on the part of our originators and our industry as a whole!

    Good job Johnathan on this article, in fact, FAR offers my webinar educational courses to our industry players, all of should take advantage of them on an on going basis!

    John A. Smaldone
    http://www.hanover-financial.com

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