While debate continues about the reliability and source of increased business for the reverse mortgage industry in 2020, some originators from across the country continue to report that business in their communities remains heightened in the early months of 2021.
While proprietary reverse mortgages continue to present an opportunity to expand the business, activity seems primarily focused for now on the more typical Home Equity Conversion Mortgage (HECM) according to originators who spoke with RMD.
Still, the experience of heightened business activity is not universal. Another originator describes how the combined effects of the COVID-19 coronavirus pandemic and new, additional reverse mortgage regulations have combined to create a more difficult origination environment.
Reverse mortgages and a ‘whole new mindset’
Some reverse mortgage professionals are encouraged by the level of business they’re seeing in their own practices, including George Downey, originator and founder of Harbor Mortgage Solutions in Braintree, Mass.
“Business has been good,” Downey tells RMD in an interview. “Last year, given all of the upsets that we experienced internationally, we had a very good year. And I think, obviously, this has led to a mind reset with a lot of people. And so far this year, things are continuing well. So, at best we’re encouraged for 2021.”
In terms of that new mindset, people seem to be taking greater stock of their own financial situations due to the overall economic disruption generated by the pandemic, Downey explains.
“Given the dynamics of what the pandemic has created, there is a whole new mindset in people’s minds about their concerns about cash flow, liquidity and the emergence of forbearance. Many people took advantage of forbearance.”
Through forbearance, some people were given an opportunity to see what life without their forward mortgage payment looks like, which may make it easier for originators to explain the potential benefits of a reverse mortgage, Downey says.
“People are really taken to gaining the ability to not have to make mortgage payments,” Downey explains. “Well, when you put that in the context of the reverse mortgage, what we’re really actually able to do with that is to provide ‘permanent forbearance’ for people. So, it puts a new light on things. And so, I think this will be an interesting area for us, particularly with people that have significant amounts of current mortgage debt on their homes, and people that are burdened by high, and perhaps extremely high mortgage payments.”
Heightened activity not universal, regulatory climate challenges
That’s not to say that originators across the country are universally feeling heightened levels of business activity. In New York, increased regulations recently implemented on the reverse mortgage loan process are not combining with the dynamics of the COVID-19 pandemic to create an ideal reverse mortgage origination situation according to Pat Whitlock, an originator operating out of Long Island, New York.
While some of the relief handed down at the state and national levels has been nice, it hasn’t been conducive to a general increase in business activity, she says.
“The fact that we are able to do virtual notaries in New York has been very helpful,” Whitlock explains. “But if you remember, in New York [as of last] winter, the state now requires a second attorney at every closing. It’s just one more complication. That’s the reason why I’m staying away from closings, because I know there’s a settlement agent, a borrower and another attorney, and I don’t need to be there. I don’t want to be another breathing human in that space.”
With the pandemic having hit the New York area particularly hard in the early days, many of those experiences are still fresh in the minds of many seniors who already have a higher likelihood of serious illness from COVID-19, Whitlock says. Other relief measures such as allowing for exterior-only appraisals sound good in keeping things moving, but the results may not always be beneficial, she says.
“As much as it seems like it’s a great idea to be doing exterior-only appraisals, I don’t think we’re getting wonderful appraisals, or better values, because the appraiser doesn’t go inside,” she says. “So, I feel like some of the regulations we have in place, for example, requesting a second appraisal, or having the second attorney complicates things and just adds one more moving part.”
Education remains a top priority
For others, the ability to communicate the existence and potential benefits of the reverse mortgage product has been paramount in the beginning of 2021 business. This is according to Matt Harrison, an originator with loanDepot based in Cottonwood Heights, Utah.
“Right now, [the core issue] is a lack of knowledge across the board,” Harrison tells RMD. “Everything that we’re trying to do right now — those of us that are in the industry — is to really promote how amazing the program is and how to use it.”
Harrison noted seeing an uptick in his 2021 reverse mortgage business specifically through the use of the HECM for Purchase (H4P) program, which he is attempting to promote through a multimedia strategy including radio advertising, while also increasing the number of continuing education classes that he teaches through a certification with Utah’s Division of Real Estate.
“There’s so much false information out there [in terms of] what people think they know,” he says. “And so, to make it really clear for them, this is very rewarding, because it is a premium program. It is a wonderful program for people. So, I’ve seen an acceleration of that already into 2021, with the number of people that are jumping on board, and I hope to continue to build on that.”