As the parent entity for leading reverse mortgage lender Finance of America Reverse, the larger umbrella of Finance of America Companies (FOA) has pronounced influence in shaping the future of the reverse mortgage industry. They have already made efforts to exert that influence through a series of business and educational partnerships and the development of new products. FAR also recently became only the second American reverse mortgage lender to offer some of its proprietary products to borrowers as young as 55 in certain states.
Previously, Finance of America Companies Chief Product Officer Kathryn Amor spoke to RMD about the importance of reverse mortgages in terms of FOA’s own efforts toward greater product diversity, and the product’s growing potential importance to address issues facing seniors who are struggling in some cases to access adequate cash flow in retirement.
Amor shares additional perspective on her journey toward understanding reverse mortgages, why education must remain front-and-center for the reverse mortgage industry as it attempts to attract new borrowers, and the commitment that FOA and FAR share in aiming to push the reverse mortgage industry forward.
Educational efforts, broader sustainability goals
In addition to the importance that FOA sees for FAR’s ability to provide a broadly diversified product range to customers at very different points in life, the development of its HomeSafe proprietary product suite or the hybrid EquityAvail forward/reverse mortgage product are only part of the larger formula for the organization in terms of its reverse mortgage business activity. Like many other leading lenders and brokers, education remains an essential priority for FOA/FAR.
“[We have made] considerable contributions to national research and education efforts leveraging our resources to help inform customers about our complete array of financing options,” Amor says. “We are official education partners for the Financial Planning Association, are affiliated with the Stanford Center for Longevity, and just recently sponsored research published by the Urban Institute examining mortgage denial rates among older Americans.”
Another component for FOA’s reverse mortgage activity is catering its bonds to the social bond framework established by the International Capital Market Association (ICMA), which describes a social bond as the “use of proceeds bonds that raise funds for new and existing projects with positive social outcomes.” This helps demonstrate FAR’s commitment to positive outcomes, Amor says.
“FAR is also the only issuer of bonds backed by reverse mortgage debt that has received a Second Party Opinion, which confirms its social bond framework is aligned with ICMA Social Bond Principles,” she explains. “By issuing bonds that are deemed to be social bonds, FAR continues its commitment to engage with the United Nations Sustainable Development Goals key focus on accessibility to financial services and community inclusion for senior borrowers.”
Amor’s journey toward reverse mortgage understanding
Beginning in the mortgage industry right out of college in 2007, Amor had never heard of reverse mortgages until she joined the Mortgage Bankers Association (MBA)’s Federal Housing Administration (FHA) Subcommittee, where the product was a regular topic of conversation, she says.
“[Those conversations] centered mainly how reverse mortgage performance might impact the FHA fund,” she says. “While I had conversations about reverse mortgages in passing, I never had enough information to form a strong opinion or take a position on them. It was not until I started at Finance of America that I came to fully understand and appreciate the benefits that a reverse mortgage product can offer to qualified borrowers and how it could truly help people have more financial flexibility later in life.”
Arriving at FOA, Amor was armed with many questions, a natural precaution when introduced to any kind of non-traditional finance product, she says. Learning the details about the function of reverse mortgages convinced her of its viability as a financing tool for qualifying borrowers.
“More importantly, while I was never preconditioned to have a negative perception about reverse mortgages, my journey underscored the importance of education in the context of a product offering,” she says. “Providing customers with all of the facts along with all of the potential benefits associated with any financial tool, but especially a reverse mortgage, is critical to broadening the retirement planning conversation and building awareness of sound alternative products.”
Reverse presents a ‘large growth opportunity’ for FOA, FAR
While FAR remains a leading reverse mortgage lender, occupying a visible position in the top 10 lenders by Home Equity Conversion Mortgage (HECM) volume, there is still much room to grow for FAR specifically and the broader reverse mortgage industry, Amor says. A vital component of this perspective is the demographic trends in the U.S.
“Reverse mortgages and, more broadly FAR, are important differentiators and a large growth opportunity for Finance of America as they provide specialty and non-mortgage options to our diverse range of […] consumer lending solutions,” Amor said. “These alternative products are becoming increasingly important and needed for aging Americans to be able to afford to retire. In 2019, about 16.5% of Americans were 65 or older; that figure is expected to reach 22% by 2050.”
The increase in the share of older Americans as a portion of the U.S. population indicates that reverse mortgages should be offered by mortgage lenders, even if they opt to broker such products to a specialty lender like FAR, she explains. When asked about FOA’s larger company goals across the mortgage space, trends indicating diminishing refinance potential illustrates the importance of reverse mortgages even further, she says.
“We are preparing for the pivot to purchase as the refinance market wanes in a rising rate environment, which is why it is an opportune time to get innovative offerings like reverse mortgages on everyone’s radar,” Amor says. “Education is critical in this effort and can help us to change perceptions and address misinformation about this vital retirement strategy.”
FAR and FOA will aim to continue to be leaders in the reverse mortgage industry through product enhancements and expansions, Amor said, and the lessons the company learns across its entire product suite will play a part in informing where it goes next in reverse and beyond. However, Amor makes clear that FAR will continue to embed itself in the industry’s leadership structure.
“Keep an eye on us,” she said. “We are committed to moving the industry forward.”