Sky-high mortgage rates have made it difficult for industry pros to connect with new and existing borrowers. Refinance business is paltry, while new originations are harder to come by as high rates and high prices push out prospective customers.
In reverse, the rate environment and existing equity levels or mortgage obligations are making it more challenging for industry professionals to connect with new and potential borrowers, requiring industry loan officers to determine a path forward. To get a picture of the guidance they may be receiving, RMD reached out to company leaders at different reverse mortgage lenders.
Business moves in cycles
Making sure that people are aware of the way the reverse mortgage business has typically evolved in challenging times can provide important context for a loan officer corps according to Eric Ellsworth, EVP of sales at HighTechLending.
“No doubt this is a tough environment for everybody,” Ellsworth said. “We see industry numbers down across the board. What we’re talking about internally is that this is one of those cycles where we’re in the down part of the cycle, and you have this natural thinning of the herd. Now is the time to build your processes stronger.”
Those processes include the old standbys of the reverse mortgage business, Ellsworth said. Build out referral relationships, take stock of current outreach and strategy efforts and broaden it to reach further, he explained.
“You name it: social, your web presence, your digital footprint, your local footprint, [industry professionals should be] making sure that when this cycle starts to go the other direction, we’re positioned firmly in our local markets to take as much advantage of that as we possibly can.”
Focus on what you can control
Looking at the way things have been playing out for the past year at least, it can become easy for an industry professional to grow pessimistic about future business prospects. However, staying focused on what is within your ability to control can be a big difference-maker according to Paul Fiore, chief sales officer at Finance of America Reverse (FAR).
“The mantra I’ve always lived by being in this industry for as long as I have is you’ve got to focus on the things you can control,” he said. “We’re in a high interest rate, lower LTV environment, and in the 17 years I’ve been in this industry, this is a very unique and difficult time for everybody in the space.”
That unique challenge stems from 7% expected rates and lower LTVs for borrowers, translating into people who may have previously qualified for a reverse mortgage now no longer being able to, he explained.
But focusing on the challenge and macroeconomic or business trends could distract an individual professional from the people they can serve, he said.
“If you focus on that part of it – whether you’re in sales, operations or even in my role – what you’re failing to do is understand that you are talking to lots of people every month who can benefit from the product in the way it’s currently constructed,” he said. “They’ve never gotten a reverse mortgage before and so for their financial future and their specific circumstance, the reverse mortgage still does a tremendous job for accomplishing their goals and what they’re trying to do in the next five, 10 or 15 years.”
Punctuating the challenges faced by front-line originators are trends related to Home Equity Conversion Mortgage (HECM) counseling sessions. Jackie Boies, senior director of partner relations at counseling agency Money Management International (MMI), has seen a slowdown for HECM sessions at her agency.
“What we’re seeing is the negative impact of higher interest rates shrinking the principal amount borrowers can receive from their reverse mortgage,” Boies said. “It’s definitely made some borrowers take a pause to consider if a reverse mortgage is best for them right now.”
Interestingly, Boies explained that less ideal conditions on the HECM side seem to have raised the interest level for proprietary, non-HECM reverse mortgage products.
“We’re happy to provide counseling for these reverse mortgages – and so pleased that lenders continue to view counseling as an important component to their proprietary loan work,” she said. “These loans differ from the HECM, and we want to ensure borrowers are fully aware of those differences and make informed choices.”
In terms of the numbers, Boies disclosed that in 2022, reverse mortgage counseling session volume exceeded 2021’s levels by twenty-three percent. The sharpness of the current climate is reflected in projections for 2023.
“For 2023, we’re on pace to see our volume shrink to about 77% of 2022,” she said. “That puts us back to volume similar to 2020 and 2021.”