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Reverse Mortgage Software Companies Report 2017 Influx

Companies that provide software services to the reverse mortgage industry have seen a boost in new users so far in 2017, providing an indication that there may be increasing interest in the products from traditional “forward” lenders.

The San Diego-based ReverseVision has added just under 500 brokers or new broker companies in 2017, according to vice president of sales and marketing Wendy Peel. Today, the 50 direct-user companies that have have licensed the software amount to double or triple the number seen in previous years, Peel said. And these users aren’t just doing one-offs; they’re actively attempting to learn about the products and incorporate them into their offerings.

“They’re already doing more loans than previous brokers,” Peel told RMD.

Peel specifically pointed to the data regarding licensing figures, noting that firms must pay to license the software — indicating a deeper dedication to the reverse mortgage product.

Over at Bay Docs, president Megen Lawler says the number of users on its Reverse Express loan origination software has quadrupled, indicating a similar boost in broker demand for Home Equity Conversion Mortgages. And last month, Reverse Market Insight reported that the number of reverse mortgage originators increased by 23% during the year ended May 2017.

In search of “forward” momentum

At the time, RMI president John Lunde speculated that a stagnating forward refinance market had driven many traditional originators into the reverse mortgage space in search of volume. Jim Cameron, a senior partner at the mortgage advisory firm STRATMOR Group, told RMD that lenders around the country have told his company exactly that.

Employees at the Greenwood Village, Colo.-based STRATMOR meet with more than 100 lenders annually, and over the past year, many of them have discussed a desire to enter the HECM space amid rising interest rates and cooling demand for refinance transactions.

“When interest rates went up after the election, that side of the business declined,” Cameron said of traditional refinances. “So forward mortgage lenders had excess capacity and declining loan volumes and loan revenue, and that caused them to think: Well, gee, I’m pretty good at mortgages in general — let me look at diversifying into reverse.”

Forward lenders frequently cite favorable demographic trends, high levels of home equity, and seniors’ general desire to age in place as other reasons why they enter the HECM space, Cameron said.

But they also acknowledge the challenges that newcomers face to the industry — especially those used to generating quick commissions. Unlike with traditional mortgages, Cameron noted, HECMs generally take longer to originate due to counseling requirements and greater levels of family input.

“You’ve got to have enough of a pipeline and enough patience to deal with what is really a longer-term sales process,” Cameron said. “I think that goes against the grain of some salespeople. They’re driven by short-term cash commissions.”

Cameron also pointed to the upcoming changes to the reverse mortgage program on October 2 as potential challenges, predicting that the higher mortgage insurance premiums for some borrowers will lead to lower origination volume in general.

“While I stand by my statement that more people have talked about getting in, I think that there’s been some headwinds created by that,” Cameron said of the premium changes and smaller draw amounts. “I think we’re going to see lower industry volumes.”

Written by Alex Spanko