With the hiring of a new business development manager specifically dedicated to growing Home Equity Conversion Mortgage (HECM) for Purchase (H4P) business, Fairway Independent Mortgage Corporation has chosen reverse mortgages for purchase as a major company initiative to develop in 2022. To get a better idea of how deeply Fairway intends to go in developing this business segment, RMD sat down with the company’s National Reverse Mortgage Director Harlan Accola.
It is not a business priority without unique headwinds. Competitiveness with traditional homebuyers, how aging in place goals for seniors could interact with home purchases, and existing conventional wisdom regarding aging in place are just a few of the topics explored in this conversation. It is also possible, Accola says, that expanding H4P business could be a welcome occurrence for millennials seeking to find a home in which they can raise a family.
H4P: ‘better’ than a cash offer?
While one of the key components of competition with traditional homebuyers is with the speed at which a loan can be closed, Fairway could have that component of the equation tied up with a 17-day timeline to close H4P loans. That does not happen in every case, as Fairway reverse mortgage trainer Dan Hultquist previously explained for RMD, but it is an active component of the business.
Another area that an H4P transaction may actually be seen as a potentially better option for a licensed real estate agent comes in the verification of the offer, Accola says. While H4P transactions can often require as much as a 50% down payment on the total value of the new home, in this case that could actually be beneficial with agents, Accola says.
“In Atlanta, one of our H4P clients beat out 45 other offers because we could close on time, and because we could prove that they had cash and that they had a loan,” Accola says. “Because after all, a 50% loan is better than cash because cash is often not even verified. There’s a lot of people who say they have a cash offer, and then they rush to get a loan done in the process. They don’t really have $500,000 in cash.”
In many cases, real estate agents are not required to verify that the borrower has the cash they say they do, Accola says. This allowed for a dialogue with the agent about the potential benefit of going with the H4P client.
“What we explained to that real estate agent is that we have a better offer than cash because we’ve verified our client has cash, plus we’ve verified that our loan can be done in that time period,” Accola explains.
Since Fairway has a pronounced forward mortgage presence, many of the professionals who work there know how to properly manage real estate agent relationships, he explains.
“Fairway has always been a purchase lender,” Accola says. “When COVID hit and the refinances went nuts, we literally suspended refinances for a month and said that we were going to cater to the purchases no matter what. We pushed off refinances for 60-90 days sometimes because we did not forsake the real estate agents. Some mortgage pros didn’t care because they had plenty of refinance business. You have to take care of the real estate agents.”
Changing minds about aging in place
Accola also describes a need for a larger change to conventional wisdom regarding when and where seniors should move, which would help to grow H4P business. Many seniors who have prioritized aging in place may be doing so in a home that isn’t right for their lifestyle in retirement, which could translate into accessibility and mobility issues for them in later life, Accola says.
“Everybody thinks seniors should move when they’re 85, and go into assisted living,” Accola says. “In fact, real estate agents who are senior real estate specialists have arrangements with a lot of assisted living centers. They’re missing the whole point, and I’m living this myself right now: I’m in a house that’s designed for my retirement. We sold our house last year, the house that we raised our four kids in. It’s a great big old house with six bedrooms and four bathrooms and a great big yard for playing football in the backyard. That doesn’t fit our lifestyle at all now.”
Accola and his wife wanted to move into a more appropriate house for their current lifestyle so that they wouldn’t have to worry about moving in later life, and the result is that they are living in a home that is more appropriate for life in later years, he says.
“We didn’t wait until our 80s and we fell down the stairs and broke our hips,” he says. “You move in your 60s, and there are so many real estate agents that look at us as competition because we’ll help 85-year olds stay in their house longer by helping them remodel the house or do modifications. [Agents might] think they are going to get a listing, and now those dang reverse mortgage people came in and now those people are aging in place.”
Could H4P adoption help younger generations find homes for raising families?
Looking at reverse mortgage professionals as a kind of competition in this regard is counterproductive, Accola says, because if more seniors looked into the H4P option to purchase a more appropriate home for them in retirement, then that could help to add to supply for the generation now coming up and raising families, he says.
“[Real estate agents should realize] that we’re their ally,” he says. “Yes, sometimes we help seniors to age in place. But we’re their ally in making sure that we get people out of [a house that doesn’t fit a retirement lifestyle]. Guess who bought our house? People with three kids who want to raise their seven- and nine-year-olds. That’s not a house that my wife and I should be in now.”
If too many older Americans are staying put in the homes they lived in while they were raising their families, inventory could be negatively impacted for younger families looking for houses, Accola explains.
Supply remains a key issue for millennial homebuyers
Issues being faced by prospective millennial homebuyers are numerous, but one such issue is housing supply. In a recent report on CBS news program “60 Minutes,” Redfin Chief Economist Daryl Fairweather described that one major issue keeping millennials from buying homes is a lack of adequate supply.
“We are not building enough housing for everybody who needs a place to live,” Fairweather told reporter Lesley Stahl. “We built fewer homes in the 2010s than in any decade going back to the 1960s, and at the same time millennials are the biggest generation and they’re entering into home-buying age.”
Broadly speaking, millennials are no longer living with their parents and they have stopped cohabitating with roommates, Fairweather said on the program.
“They want a place of their own, and we didn’t build any housing for them in the last decade because we are still so traumatized by the last housing crisis,” she says. “We didn’t put any investment into housing.”
Accola views higher H4P uptake as a potential solution that could help get older Americans into more appropriate housing for their needs in retirement, which in turn would free up single-family housing for the millennials that are having difficulty finding it.
“Everything’s on one level: my office, my kitchen, my bedroom,” Accola says of his own move. “It’s designed in such a way that I can still take steps fine, but it’s primarily designed for retirement. Get into a retirement house before you have to. That whole thought process needs to be changed.”