It has been exhaustively well-documented at this point that the COVID-19 coronavirus pandemic has been the most disruptive global event in a generation, at least. That has touched everything from the social lives of people to collective health, and of course, it was extremely disruptive to global businesses of all kinds. The reverse mortgage industry, however, was largely spared from much of the turmoil that many other businesses experienced.
Not only did it look as though more seniors were entertaining the incorporation of home equity into their financial plans, but professionals have noted that the borrowers themselves have been approaching the possibility through a variety of different lenses.
To get a better idea about how some borrowers have approached reverse mortgages in the age of COVID and how the professionals in the business are adapting to those realities, RMD recently sat down with Virginia-based loan originator Laurie MacNaughton — in the most recent episode of The RMD Podcast — as she shares her own observations based on business records she kept through 2020 and 2021.
Adaptability of reverse mortgage clients to new realities
One of the bigger pandemic-related disruptions to the reverse mortgage industry revolved around the changing of the face-to-face dynamic. While some reverse mortgage professionals took great pains to preserve client interactions through highly creative means in some cases, most reverse mortgage professionals had to rely on widely available tools, namely videoconferencing technology through computers or mobile devices.
As other professionals have said in the past, seniors may not often get the credit they deserve when adapting to the use of different technologies. That has absolutely been the case in MacNaughton’s business.
“I’ve been struck by the adaptability of my clients,” she says. “Historically, I’ve dealt with a much older, much more infirm demographic. Many of my loans come to me through attorneys, and as I like to say, ‘nobody wanders into an attorney’s office because they’re having a good day.’ For many of my clients, many things have gone very wrong for a very long time.”
The pandemic only exacerbated much of those realities, but in addition to doing a fair amount of her own work in facilitating those clients’ use of different kinds of technology, the clients themselves are determined to see things through, she says.
“To see especially my oldest homeowners really pick up [using things like] Zoom and DocuSign, it’s just been absolutely priceless to behold,” she says.
A boom in reverse mortgage for purchase business
In preparation for our discussion, MacNaughton sat down with her assistant to comb over her own business records to pick out what she feels might be trends, interesting developments or anecdotes she feels might be helpful for her peers in the reverse mortgage industry. The first thing she describes in terms of her own business trends is an uptick in the use of Home Equity Conversion Mortgage (HECM) for Purchase (H4P) loans.
“My team has always done a fair few purchases, either new construction or existing construction,” she says. “But purchases were way, way up. And I split those purchases into two separate groups. One [includes] aging couples who had been considering moving into a Continuing Care Retirement Community (CCRC).”
As many are likely to remember, nursing homes proved to be a devastating venue for COVID-19 infection, with the first outbreak spot being a Washington-state nursing home. This led to a spike in interest in MacNaughton’s community around Washington, D.C. around H4P, since certain concerned seniors began exploring options to avoid going into a congregate care setting.
Existing nursing home residents wanting out during the pandemic
However, purchase business also came from another group she noted: existing CCRC residents who wanted out.
“Many of these people were older, much more infirm, and Medicaid played significantly into these scenarios,” she says. “And most of the time — probably at least 75% of the time — the downpayment funds were gifted by an adult child, because by the time somebody had gotten into the CCRC, they’ve done their complete spend-down. And Medicaid, of course, is very income and assets sensitive.”
The concern that naturally extended to the adult child was understandable, she said. After the first instance of an existing CCRC resident seeking an H4P loan to get into a private residence, MacNaughton made a mental note of its uniqueness before more and more such loans started coming her way.
“The first time I saw it, I thought, ‘oh, what an interesting thing to do.’ Next time, it’s like two of them back-to-back,” she says. “And then after number five, and number seven, [it became clear that] this was an honest-to-goodness pattern. That I think we could almost call a trend for these people, during the darkest of the pandemic years wanting to get Mom or Dad sometimes out of continuing care into a private residency.”
When put on the spot to estimate how much purchase business has been taking up her loan pipeline, MacNaughton quickly estimated the figure at around 25%: more than five times the national average in 2021.
“[A real estate agent I know] brought many reverses for purchase […] to me,” she said. “And I asked him how he was doing this, wondering what he was telling his clients [about it]. He told me, ‘I sell the mortgage before we even go out looking for homes.’ He had just seen the purchasing power of homebuyers doubling.”
Many real estate agents who have brought her H4P business have a similar approach, but she’s also noted that the H4P clients themselves seem to be more aware of the product’s complexities than some other types of clients.
Listen to the full discussion on The RMD Podcast.