Being behind the proverbial “desk” at RMD for nearly three years now has shown me that if there is anything that the reverse mortgage industry says that it’s dedicated to improving and expanding, it is education about the product category and the potential benefits that it can provide to senior clients.
Public relations and education have been major sticking points for the industry for many years, and while the pace of positive progress has shown some recent signs of acceleration, it doesn’t take a whole lot to encourage a swath of people to cast suspicious eyes on the reverse mortgage product, its variations, and by extension the people who champion them.
The most recent example comes from some apparent “testimonials” shared by syndicated columnist Ilyce Glink and co-writer Samuel J. Tamkin published for the readers of an American journalistic staple, the Washington Post. The outlet currently has nearly 2 million readers (across print and digital platforms), and while negative press coverage is nothing new for the reverse mortgage industry, it seems to hit a bit harder when it appears in prominent outlets which the Post certainly qualifies as.
‘Testimonials’ on reverse mortgages published in WaPo
The thing that may be particularly disconcerting to reverse mortgage industry players about the stories shared in the Post is that they are apparently not from actual reverse mortgage customers. One story is from a senior who considered getting a reverse mortgage but ultimately decided against it, while the second is also from a prospect who was put off by the tone of advertising materials sent directly to them before choosing to walk away once learning more specific details about the product.
“I almost got a reverse mortgage with my wife a few years ago,” the first story begins. “The thing that stopped us was I had a low credit score, and the amount of money we’d have access to in the line of credit was pitiful. It was also expensive: the only way there would be any house value left for heirs after 15 years would be if the real estate market was on fire.”
This person goes on to say that out of five “financially knowledgeable” people they sought out for reverse mortgage information, “literally no one […] would speak positively about reverse mortgages,” they related.
Instead, this person recommends an alternative option – a cash-out refinance – saying that it avoids the “pressure” of taking out a reverse mortgage, while also contending it will leave clients in a stronger financial position.
“This is what we ultimately did,” the reader said in the article.
In the second story, the person who wrote in describes being initially open to the idea of getting a reverse mortgage, but was so put off by the lender’s advertising materials that they ultimately chose to avoid it, undoubtedly the opposite intention of the materials themselves.
“I looked into a reverse mortgage that I saw advertised on television,” this person said. “I received the CD from that company by mail. The CD was all advertising, with no specifics or details about reverse mortgages, and nothing about financials, dollar loan amounts and costs. I had to call them to get the details.”
On the phone, the senior explained that they wanted to get a reverse mortgage loan on their home valued at $200,000. This potential borrower is 68 years old with a FICO credit score of 810, and owns their home outright. The lender – which the senior declines to name – told them that the loan’s proceeds would be about 50% of the home’s value, of which 15% would go to the “cost to get the loan,” the person said.
“With the higher interest rate and the huge upfront fee, I found the reverse mortgage from them to be utterly ridiculous,” the person concluded, seemingly indicating that this was an option they chose not to explore any further.
Education and reputation remain steep challenges for reverse mortgage industry
As a regular observer of the reverse mortgage industry at-large, the regulatory landscape governing it and the public perceptions which define it in the eyes of many people, a few things stand out about both of these stories. First, they were chosen not for firsthand experience with a reverse mortgage, but for perceptions about them based on relatively limited interactions. No one can say for certain if those perspectives would be abundantly different for these individuals if they had gone through with a loan, but it’s curious that the writers who compiled these stories chose not to include at least one actual reverse mortgage customer.
However, that’s not to say that these perspectives are totally invalid, or even without merit for people who work in and around the reverse mortgage industry. If a common refrain emerges from industry leaders at lenders, in the trade association and even from certain government officials, it’s that the proverbial reverse mortgage “umbrella” of customers needs to be expanded to ensure that the industry both survives and thrives.
Many major companies operating in the space have devoted entire staffs to this goal, and speak ad infinitum about both the need for comprehensive reform of the industry’s education practices, and what can be – and is being – done to improve the industry’s performance in connecting with new borrowers.
The industry is more actively seeking out academics and financial planners to explain why the product shouldn’t be overlooked for seniors in specific situations, industry educators are encouraging professionals to adhere to codified regulations and guidelines, and many of these efforts appear to be having an impact on perceptions about – and coverage of – reverse mortgages.
Perennial problems, few solutions
And yet, the stories shared by the Post are not new, nor are they isolated. And indeed, instead of expanding the umbrella of reverse mortgages, recent data metrics seem to indicate that the industry’s highest growing business segment is for refinance transactions, going back to customers already engaged with the product category to take advantage of the current low-rate environment.
This is an understandably concerning development for industry analysts, and may only compound some of the reputational issues being faced by the industry over time, in addition to the potentially deleterious effects that excessive refis could have on investors and data metrics.
If people who don’t even end up getting the loan in the first place are using words like “pressure” to describe their interactions with the business while also saying that lenders are not doing a good job in providing detailed information about how the product works, then an image is conjured in the mind of a hunter shooting at a fly that’s sitting on their own foot.
Granted, these issues are not entirely the fault of the industry. With the exit of major banks like Wells Fargo and Bank of America from the space in the last decade, reverse mortgages are simply far less visible – and by extension, less accessible – now than they have been previously. That does not mean, however, that such complaints about reverse mortgages from potential customers – people that the industry says it is trying to win over – should be summarily dismissed.
Academics and analysts continue to forecast a retirement crisis for seniors as retirement savings stagnate. If that rain does come, then the reverse mortgage umbrella will have to be far bigger than it is to adequately keep American retirees dry.
A previous version of this commentary described the story published in the Washington Post as the work of the outlet as opposed to that of a nationally syndicated columnist. RMD regrets the error.