Reverse mortgage industry activity is heightened in the first few months of 2022, as exemplified by volume levels on the Home Equity Conversion Mortgage (HECM) side not seen in over a decade coming to pass as recently as March. While higher rates might indicate that some slowdown is inevitable, certain pockets of the country are conforming to higher levels of industry activity, including the Pacific Northwest.
This is according to Brandi Braley, reverse mortgage originator with Neighborhood Mortgage in Bellingham, Wash. With local business visibly slowing down at the end of 2021, Braley believed that higher rates might begin to slow down the amount of incoming reverse mortgage inquiries she would see. However, the rate of business early in the year has accelerated instead of diminished.
One potential source of heightened business could be through mailers from national lenders, leading to more inquiries from local customers, she says.
Pace of reverse mortgage business, source of interest
For Braley, the holidays are always a moment in the year when things tend to slow down, she tells RMD. Since people are generally more focused on celebrating the holidays, it’s natural for calls to slow down and she expected that external factors like rates could lead to a slowdown in 2022.
After the first of the year, however, she noticed the opposite happening in her office.
“Since the beginning of the year, I’ve seen a lot of people calling and inquiring about reverse mortgages, and I was kind of surprised at the volume that I’ve seen since the first of the year,” Braley says. “Immediately after the first of the year, I was getting so many phone calls and inquiries about reverse mortgages. A lot of them were new clients that had never done a reverse mortgage before. It was honestly kind of surprising to see how many people were calling.”
One of the reasons that the inquiries started coming a little faster after the first of the year — at least based on Braley’s and her boss’ perceptions — could be the very factor that she thought might depress incoming inquiries: rising rates.
“I think that one of the things that we have come up with is that people are hearing that rates are going up,” she says. “And even though reverse mortgage rates don’t always correlate with what’s happening on the [forward] mortgage side, there’s still interest. So […] anyone who thought about possibly looking into a reverse mortgage, they’re hearing that interest rates are going up, so they figure that they might as well look into this now.”
Many of Braley’s more recent client conversations have centered on rates, giving credence to this perception, she says.
“That’s my thought, because a lot of the conversations that I’ve had have been about rates going up, so I’m thinking that’s where it’s coming from,” she says. “The fear factor rates climbing, and people wanting to take advantage of it before they get too high.”
Advisor recommendations and the local preference
Something else which could be playing a role in accelerated business is that more of potential clients’ trusted advisors are recommending at least exploring reverse mortgage options, Braley says.
“A lot of times, people have heard about a reverse mortgage through friends or their financial planner,” she says. “I’ve been hearing a lot about how people are starting to recommend reverse mortgages more. And of course, I think a lot of times people just haven’t saved up as much money as they thought that they were going to need when going into retirement, so they see this product as something that they can definitely take advantage of.”
However, another thing that could be helping to drive more business, Braley says, is actually her competitors. With a lot of reverse mortgage lenders latching onto heightened refinance business as of late, many are sending out more direct promotional material through the mail. Instead of that receptive senior reaching out to the company that sent the mailer in some cases, they’re instead reaching out to Braley.
“One of the things that I have noticed is that people will give me a call because they start receiving things in the mail for reverse mortgages,” she says. “And a lot of times, it’s the larger companies that are sending those materials out offering information about how to get a reverse mortgage. But then, people want to deal with somebody local. So when they start looking at local companies, they find me.”
Home price appreciation
While the Seattle area has made national headlines regarding the heat of its housing market, other areas including Braley’s region of the state just below the Canadian border has also been seeing pronounced levels of home price appreciation (HPA). Given the proliferation of promotional materials that certain larger lenders are sending out, she has benefitted from greater business resulting from both HPA and more active industry advertising.
“Whatcom County is in this little bubble area, and people haven’t always explored it as an alternative or a place to live,” she says. “All of a sudden, people are reaching out, and there’s a lot of people that are moving here. That, of course, is driving up the prices of houses significantly. And so, I think when people start seeing the value of their home going up that much, then of course if they’ve had a reverse mortgage in the past, they’re going to start exploring that option again.”
Seeing how HPA remains on the rise — albeit not at the rate it was in 2021 — seems to be enticing northern Washington state residents to explore options to tap the newly-available equity in their homes, Braley says. In terms of refinance business, Braley says that a lot of her business is about evenly split between refis and new borrowers, though the rate of new borrowers appears to be increasing, she explains.
Braley’s ratio of new business to refinances is reasonably well in-line with last year’s national averages. HECM-to-HECM refinances composed 45.9% of all HECM loans in 2021, and 50.8% of all loans in the fourth quarter of the year, according to data from the U.S. Department of Housing and Urban Development (HUD).