As the industry struggles with falling endorsement volume and a shrinking market, lenders are largely optimistic about the future of the reverse mortgage space in 2017.
Many agree that growth in the next year will depend on a variety of external and internal factors, such as the industry’s ability to expand its messaging to more financial service professionals, and how well the industry looks within itself to improve the customer experience in efforts to better meet the financial needs and situations of its client population, among other objectives.
“The largest opportunity in 2017 for the Home Equity Conversion Mortgage industry resides in its professionals and their abilities to help seniors fully understand and embrace the aspects of the loan,” said Mike Crossett, executive vice president at The Federal Savings Bank. “That is, companies who have HECM professionals, must work in concert with each client’s team of trusted advisors to inform and meet the needs of retirement-age individuals in a safe and sound manner.”
More aging Americans today may find they don’t have the proper financial security that they had hoped for, either due to not saving enough or carrying significant debt into what should be their retirement years. Some may also have less-than-expected investable assets or a lower-than-expected income.
“With this in mind, more individuals should consider a HECM as part of their overall financial strategy—and they need a team of professionals they can trust to guide them through the process, including a HECM Mortgage Banker,” Crossett said.
For some, the greatest opportunities for the reverse mortgage industry are three-fold, according to Mike Kent, president at Liberty Home Equity Solutions.
“I believe the greatest opportunities for Liberty and the industry are to (i) improve the reputation of the HECM product, (ii) enrich the borrower’s experience with the origination process, and (iii) continue spreading the message that a HECM can be a valuable retirement tool,” Kent said, adding that he also believes the HECM for Purchase will start to become a more viable and accepted financing option for retirees looking to purchase a new home.
“Demographics continue to be favorable for the HECM product, which offers enormous opportunities for the industry,” he said. “Our collective commitment in 2017—for lenders, brokers, vendors and settlement agents alike—should be to educate the public by providing our customers with all the information necessary to make an educated and informed decision; and to deliver our reverse mortgage solution to the consumer via a customer-centric process.”
Challenges to driving growth in 2017
Growth in the reverse mortgage industry will not arrive without challenges, particularly when it comes to bringing non-industry professionals and lenders into the market.
Recruitment in every area of the mortgage sector is a concern, but the reverse mortgage space will be especially challenged with attracting fresh talent to its industry—talent that must be up-to-speed on the latest financial planning research and can explain these concepts to a more sophisticated borrower population than has been seen in the past.
“The reverse mortgage industry will need to solve for an increase in savvy borrowers wanting information on reverse mortgages mixed with a shortage in Loan Originators capable of adequately explaining how a reverse mortgage works for a well-funded or semi-funded retiree,” said John Button, president and CEO at ReverseVision.
Broader mortgage market trends will also play a part in the potential for reverse mortgage lenders to attract new entrants into the marketplace. For example, an expected reduction in traditional mortgage refinances—with estimates as high as 60% lower in 2017—could force lenders to seek replacement production opportunities.
“While purchase business will likely increase in 2017, such growth is unlikely to replace the lost refi volume,” he said. “The entry of mortgage lenders into the reverse lending space, which is already occurring at an elevated pace, will likely increase in 2017, bringing new ideas and approaches to the industry.”
Despite record low volumes in 2016 and the likelihood that downward pressure will continue to impact originations this year and in the near future, some lenders, like Nationwide Equities Corporation, are bullish on the industry’s prospects for 2017 and beyond.
“Although we will almost assuredly be dealing with higher interest rates in the coming years, we should also be experiencing increased equity growth, due to higher home values,” said Nationwide Equities President Glenn Wallace.
This edition of the RMD Report is sponsored by national appraisal management company Landmark Network.
Written by Jason Oliva