Colorado is an interesting place for reverse mortgage business. Not only does the state seem to have a greater affinity for other kinds of reverse mortgage business including Home Equity Conversion Mortgage (HECM) for Purchase (H4P), but practitioners there are always seeming to try new and novel ways to connect with borrowers.
It was a Colorado-based brokerage that outfitted a giant RV to serve as a “mobile clean room office” during the pandemic, and one of the first reverse mortgage professionals RMD spoke to about starting his own radio show was Bruce Simmons, a reverse mortgage specialist with American Liberty Mortgage in Denver.
To get an idea about how business is progressing in the Centennial State in what is hoped to be a wind-down period of the COVID-19 pandemic, RMD sat down with Simmons to get an idea of how reverse mortgage business is progressing in Colorado in 2022.
Reverse mortgage business in early-mid 2022
Simmons described a prolific business environment in 2021 and while things appeared to be maintained in the early part of the year, the biggest difference that has made a material impact in his production is in the rate environment.
“I had a good end of the year and carried a lot of loans,” he says. “The application volume has slowed up. Namely, I’m still getting calls for HECM-to-HECM refis for one, but it’s not making that much sense or it’s more borderline for a lot of people. I closed some deals with the HECM-to-HECM that I took in December or January in February.”
While he still gets a fair amount of inbound calls for HECM-to-HECM refinances due to advertising materials sent out to seniors by other lenders, he says, the actual advantage such a transaction would make for borrowers has diminished due to rates. However, Simmons also described a desire to move away from refi loans.
“That’s one of the things that I’m trying to I’m trying to get away from, because over 40% of my business last year was HECM-to-HECM,” he says. “I had an excellent year, but I knew that that wouldn’t last with these rates going up now. I think rates are going to come back down beginning next year, probably. I think all these rate increases are probably going to cause some kind of a negative effect on the economy which will bring rates down a bit.”
Simmons’ self-described HECM-to-HECM refi business level is actually lower than the national average for 2021, which hovered at around half of all reverse mortgage loan production being HECM-to-HECM refinances. Instead, Simmons wants to focus on hiring someone who is specifically dedicated to seeking out referral partnerships to cultivate business, but unfortunately the hiring for a position like that hasn’t materialized for him yet.
“I haven’t had any luck finding someone to fill that position, and I’ve been trying for at least the past couple of months,” he says.
Predominant reverse mortgage loan types
Simmons has mostly been conducting straight HECM loans for 2022, he says. While some proprietary business has come across his desk this year mostly concentrated in Denver-proper, Simmons has not seen any H4P business as of yet though has come close a couple of times, he says.
“I’ve tried to get some H4P business,” he says. “Six months ago, a customer tried to buy a house with a reverse mortgage, but they ended up getting outbid with a cash deal that closes in a couple of weeks.”
Some reverse mortgage professionals at other lenders have described an idea that it’s possible real estate agents simply don’t understand that H4P loans can be a longer sales cycle, however that has not been the case for Simmons. Many of the homebuyers in Colorado are simply able to make cash deals that close sooner as opposed to entertaining a more complex H4P offer, he says.
However, even if business conditions have become more challenging as the year has gone on, generally Simmons is confident in his ability to be in the reverse mortgage business in Colorado.
Business conditions in Colorado
“We’re lucky in Colorado, because really the state legislature doesn’t bother too much with reverse mortgages,” he says. “That’s a good thing. I see these other states, like Massachusetts or Pennsylvania that have all these state issues, so we’re lucky here.”
Here, Simmons is referring to issues stemming from reverse mortgage counseling in each of those states. In Massachussetts, restrictions on in-person meetings stemming from the pandemic conflicted with a requirement for reverse mortgage counseling to be done in-person. Initially, business halted before that state’s legislature intervened to allow telephonic or video counseling. When that relief expired, business was threatened again until the legislature acted once more after encouragement from local professionals and associations.
In Pennsylvania early this year, minority party members of that state’s legislature had introduced a bill with a similar restriction for counseling only to be conducted in-person, albeit with exceptions not available in Massachussetts. As of late April, that bill has yet to move forward beyond its legislative introduction.
Colorado also has a beneficial home price environment, Simmons says. According to data from Zillow, the average home price statewide currently sits at $569,952, which is a 23.9% change from the same point in time in 2021. Prices have been rising on a very stable basis over the past five years, where home prices in the state averaged at approximately $343,000 in December, 2016.
“We’re very lucky in terms of home values,” he says. “I think that we have a pretty solid economy, and I think the values are going to hold. I think that through the first half of the year, the values probably will continue to go up a little bit, and then hopefully to level off at some point. I do not believe they’re going to go down, but who knows.”