Reverse mortgages, specifically Home Equity Conversion Mortgage (HECM) products, are highly regulated and sponsored by the U.S. government. However, they still have reputational issues and there’s a lot of misinformation about them.
Marketing reverse mortgage products at a high level naturally comes with a need for accuracy.
In an interview with RMD, Eddie Herda, VP and creative director of brand strategy at loanDepot, said that acting transparently and ethically plays. critical role in the development. and execution of the strategy. He shares ideas and experiences about marketing the products to the industry’s biggest players.
Compliance and regulation: transparency is key
When it comes to the compliance side of the equation, Herda explains that the best way to ensure that a marketing strategy acts within the proverbial goalposts is to be open and transparent about what the requirements are.
“[With] regulatory compliance, [it’s] very simple: just stay ethical,” he said. “Don’t be deceptive. The one piece I wish we could change, for example, are the terms and conditions at the end of a commercial, which is like a wall of text. But if you actually looked at the wall of text, close to seventy percent of it is just NMLS numbers that are required by state regulators.”
These often come with long URLs, compounding the wall of text that tends to sit at the end of a TV commercial. Such requirements may be “an unfortunate constraint,” but a necessary one.
A byproduct of this is that a consumer may naturally be turned off by the appearance of “legalese that isn’t really legalese,” Herda explained.
“I wish there were some wiggle room there, but it is what it is, so we move forward,” he said.
The most important rule to observe ties into the desire to stay ethical, and that is to maintain transparency, Herda explained.
“The most important thing is, don’t be deceptive,” he said. “Stuff I’ve seen in the past from other companies [include] when they send a fake check, for example, as a direct mail piece.”
Such a tool could work, but it could also be considered a potentially deceptive tactic and may not serve the longer-form mission of normalizing the reverse mortgage as a viable financial tool, he explained.
“I would stay away from trying to get the quick wins if the overall goal is to grow the pie, and to get more people talking about reverse mortgages [while] changing the negative perceptions,” he said.
Negative perceptions among comedians, financial commentators
On that note, negative perceptions can be a trickier thing to challenge in reverse mortgage marketing since they often come from a variety of different sources. One such source could be comedians looking for joke fodder.
“It’s an easy punchline for comedians,” he said. “You can go onto YouTube and you can search for ‘reverse mortgages,’ and you’ll find some comedians making fun of it or making parody videos.”
He continued: “Laughs get views, and that’s what comedians need, and it’s a punchline. But who are they making fun of at the end of the day? They’re not making fun of the company, they’re making fun of people who actually are struggling in retirement.”
They may not think it through to that endpoint, he said. But another pervasive source of product misconceptions is people who either are or present themselves as financial professionals who openly cast aspersions or denigrate reverse mortgages under the auspices of financial advice or commentary.
“If you go and you listen to their videos discussing the product [or its] benefits and how it works, they’re getting it wrong,” Herda explained. “And you’re seeing that this video has 800,000 or 900,000 views, and it’s misrepresenting the product features, benefits and how it’s used.”
“I wish the CFPB would take a look at YouTube every once in a while and [realize that] these guys are actually misrepresenting the product, and they’re making money off of it for their YouTube channel.”
It’s not clear what the lines are with such platforms, Herda said, though he believes additional scrutiny is warranted.
Simplifying the language
In terms of what Herda has found most effective in combating misconceptions, he said it often comes down to the choice of language used in outward-facing marketing materials.
“First, try to simplify it and make it less complex,” Herda recommended. “It’s not a complex product when you just look at it from all of the attributes on their face.”
He continued: “You have the ability to eliminate your monthly mortgage payments, and for compliance’s sake, in order to do that you have to maintain your homeowners insurance, property taxes and maintain the home.”
In that sense, a HECM sounds like an FHA loan, which has similar requirements.
“Speaking about the features on [a reverse mortgage] at their face value is important,” he said.
Discussion about features can easily overtake discussions of the product’s benefits, Herda observed. Putting the benefits, particularly in the long-term, at the center of a conversation can be beneficial.
Over the course of his career, Herda has profiled the stories of customers and how they used a reverse mortgage to accomplish their financial goals, putting the benefits and use cases at the forefront of certain materials.
“Think about all the different ways that people retire,” he explained. “The way that I’ve always viewed reverse mortgage, just like any financial product, is that it’s a tool to achieve an outcome. And so, I think the first thing I would suggest to anyone marketing the product is to really think about your customer experience.”