Finance of America Reverse (FAR) is a reverse mortgage industry leader due to its place in the top 10 originators, its informational partnerships and its proprietary product developments. In spite of those strides, however, the ongoing need to continue providing meaningful education to borrowers is something that FAR has consistently pursued along with most other major industry players.
To gauge how these efforts are currently progressing, RMD sat down with FAR President Kristen Sieffert to discuss the nature of the educational work being undertaken by FAR, how such efforts could grow the business and her own philosophies about revisiting conversations surrounding home equity and retirement on a very regular basis.
RMD: In terms of the most commonly misunderstood components of the reverse mortgage business by other segments of the housing industry, where do you see these misunderstandings most in your business?
KS: I would say it’s the same thing that has been pervading the industry for years, which really is the misconception that the product is best suited as a loan of last resort, or for people that maybe didn’t plan as well as they should have. I was with some of our traditional mortgage originators earlier this week, and in addition to that belief that these are a loan of last resort, a lot of them still think of the product in the same way that a lot of the consumers think of the product, which is [based on its attributes from] 10-15 years ago.
We all know that there have been huge changes made over the past couple of decades in reverse. The product has really created a great option that is sustainable for many different borrowers. The existing product is used as a tool to create better outcomes for an overall retirement plan. That is really how the product is positioned today for those educated properly about it.
RMD: How much work would you say goes into correcting product or industry misperceptions both at your company and industry-wide?
KS: Personally, I feel like I’ve made it my life’s mission to change the perception. I think at FAR in general, we’ve kickstarted many initiatives to create better access to education around the product. I think first and foremost, education needs to happen so that people can make the best decision for them rather than making decisions based off of ideas or those misconceptions.
[Some strides include] our arrangement with the Stanford Center on Longevity, and research into the use of reverse mortgages to reduce the market risk in portfolios by the likes of the Urban Institute and by the Journal of Financial Planning. When you look at all of those avenues that we pay service to [in order to] create relationships and educate the more credible entities out there, that really can make a difference for financial planners, mortgage professionals and borrowers. Ultimately, I think that I would say this work is a top priority of our company. It’s been a long journey, and I think we still have quite a ways to go.
RMD: Because education is such a big focus of the industry, do you think your personal tolerance for having to reiterate so many product details is generally high? Is this a conversation you relish, or is it grating at times?
KS: I relish it. And I would say even more than just talking about how the product works today, I believe it’s important to transparently talk about why the product has a bad rap. For a long time, there were facets of the product that really did create some of the negative press that the industry ended up becoming known for. I think it’s really important that while we’re educating people, we begin by addressing those points.
At one point, I wasn’t even proud of some of the things being done in our industry, and we need to explain why. We need to detail the things that we have done to change all of those [formerly problematic qualities] since then. Again, I feel like it’s my life’s mission to really look at every area of our industry and be very confident that we’re creating a product that does result in sustainable, lasting solutions for consumers.
That will allow us to create an industry that also becomes sustainable and lasting. I think when you look at the landscape around us, tapping home equity is such a necessary function, and it’s going to be more necessary as we progress into the future. It’s on us, the industry, to make sure that we’re creating a sustainable outcome for everyone involved.
RMD: Regarding how the economy is doing right now, it seems like housing in particular is going through a pretty challenging period with historic levels of inflation and a volatile rate environment. How do these realities manifest most for FAR and for the industry at-large?
KS: It has felt like a perfect storm, in general, for the mortgage industry. I think the industry as a whole is working as quickly as possible to make sure all of our companies are in a good position to weather the current market dynamics. I think, more interestingly, that it’s a perfect storm for our demographic, as well. When you look at where retirees are, and their current lifestyles and lifecycles, they’re in the drawdown phase of their portfolios, if they have them. The market volatility that’s happening and the quickly dropping valuations for people’s portfolios are scary.
On top of that, the rapid levels of inflation hurt a lot for people on fixed incomes. Going to the grocery store or going to get gas, really puts a tremendous amount of pressure on people. One of the biggest things our demographic did when they felt like they needed to create a different cash flow for themselves was to downsize. But when you look at the market, there’s very little inventory. Downsizing these days doesn’t necessarily mean finding a less expensive home. So, the options have really blown up.
I think it’s creating an opportunity where we’re seeing increased interest in people who want to understand how a reverse mortgage may be able to help them, especially when all of these dynamics seem to be working against them. One area [which remains] a bright spot for some is home equity. Finding ways to use home equity to help alleviate their financial pressure is probably going to be top of mind for a lot of people.
And, for those that can afford a home equity payment and do things like a HELOC, that’s great. But again, when you’re on a fixed income, that might not even be possible. So a reverse mortgage becomes a really elegant solution for people that may not have ever looked at it before.
RMD: The larger Finance of America organization has made a lot of investments into diversifying its portfolio of product offerings. Do you think that adds to the flexibility an FOA borrower can have if they all of a sudden have to pivot to a different product based on certain economic realities?
KS: Yes. I think when we went out to create the reverse mortgage product suite that we have, we were always trying to address the gaps in the market. You and I have talked about this before when we launched HomeSafe several years ago. The industry was not doing a lot of production at the initial launch of that product. But, when there was a big shift in the market, HECM [loan-to-value ratios] came down quite drastically. HomeSafe became a huge part of our overall business, and we were uniquely positioned because we had had it in the market for so long.
So operationally, we were able to handle that increased capacity. When we look at what’s going on in the market around us right now, HECM LTVs are being reduced with the rising interest rate environment. Proprietary/conventional product LTVs have been reduced recently, as well. And when we look at the potential fallout in the pipeline based on these changes, one shining spot for us is EquityAvail. That’s a product that hasn’t gotten a ton of traction yet because it’s still very new. But, when you look at borrowers who need to access capital in order to pay off the existing debt on their homes, EquityAvail could be the answer. If LTVs change too much on the reverse products then EquityAvail’s looking like it could fill a gap in that market where other products can’t.
So to answer your question again, yes. Our product suite was purposely built to address those gaps. And it’s interesting to see that when the market shifts unexpectedly, a lot of times there will be products that shine that maybe didn’t do so prior.
Editor’s note: This interview was originally published in the August 2022 issue of HousingWire magazine.