When the reverse mortgage industry made its transition in appealing to members of the baby boomer generation from borrowers primarily born during the years of the so-called “silent generation,” it presented a very unique opportunity for growth in the business. Growing up in an era of post-World War II dominance that solidified America’s place as a “superpower” on the global stage, baby boomers as a generation benefited greatly from a vibrant period of economic activity throughout the 1980s and 90s.
In the next few years, however, the reverse mortgage industry will have to prepare for yet another generational transition. Though there is some wiggle room among some scholars concerning the exact point at which the next generation starts, most academics agree that the oldest members of “Generation X” were born in 1961. This means that starting in 2023, the oldest members of Generation X will be eligible for Home Equity Conversion Mortgage (HECM) loans, but some will be eligible for proprietary reverse mortgages as soon as 2021.
These facts come with some distinct realities when directly comparing Gen X to their baby boomer parents, particularly when it comes to ways that the reverse mortgage industry can appeal to a new generation.
Differences between baby boomers and Generation X, debt sources
A 2013 study by MetLife describes Gen X’ers as independent, resourceful, self-managing, adaptable, cynical, pragmatic, skeptical of authority, and more concerned with work life balance when compared to boomers.
In their book “Generation X 13th Gen: Abort, Retry, Ignore, Fail?,” authors William Strauss and Neil Howe identified a few key attributes that have come to define the worldview for many people that are part of Generation X. The authors contend that one key element of Gen X children is that they were coming of age during a time when society was less focused on children and more focused on adults, while writer Robert Klara of AdWeek also describes that Gen X members were kids during an era of increasing divorce rates.
Strauss and Howe also contend that a cultural shift was taking place for those in Generation X, where self-actualization started taking on more societal importance.
Economically, Generation X is also the first to have a lower economic standing than that of their parents, according to a recent study conducted by Hometap. Much of this extends from the fact that the 65.8 million Gen X’ers in the workforce as of 2018 found themselves hit hardest by the onslaught of the 2008 financial crisis, according to Pew research cited in the Hometap study. The median net worth of Generation X households declined by a massive 38% between 2007 and 2010, with their associated home equity falling 43% during the same time period.
However, the data also suggests that Generation X recovered from the economic hit more efficiently than baby boomers did, since boomers were far more likely than their Gen X children to have their assets spread between their homes and financial accounts. Since 2010, the median net worth of Generation X households has grown by 115%, and as the largest segment of the contemporary workforce, they’re working the most today. With a higher-than-national-average income of just over $50,000, Generation X is earning the most money actively, and are accruing the most equity in their homes, according to the Hometap study.
This makes members of Generation X a huge potential demographic through which to expand the reverse mortgage market, and some lenders are already looking ahead a few years at their entry into the arena of reverse mortgage qualification.
Lender preparations, greater borrower knowledge
Some in the reverse mortgage industry see the oncoming dawn of catering to Generation X borrowers as bringing a necessity to change the conversation about how a reverse mortgage loan is positioned in peoples’ minds. The differences between baby boomers and Generation X makes that very obvious to Sherry Apanay, Chief Development Officer at Finance of America Reverse (FAR).
“I think the messaging must change from ‘this is a loan of last resort’ to ‘this is a smart financial option,’” Apanay tells RMD in an email.
Part of the reasoning for this, Apanay explains, is that new borrowers brought into the fold often bring with them a more sophisticated knowledge base in terms of how financial decisions affect their lives in an ongoing manner.
“I’ve seen an evolution of the ‘common reverse mortgage borrower’ develop over the past several years and I can tell you, we are seeing much more financial knowledge, diversity and an eagerness to learn more,” Apanay says. “I believe people want to be educated and empowered to make smart financial decisions for their retirement. This is why FAR has such a high-level commitment to education and why I personally moved from Sales to Development over the past couple of years.”
More borrowers, she explains, continue to believe in an old, time-honored adage.
“Knowledge is power; and I see no reason to expect the next generation to deviate from this trend,” she says.
A focus on family
Another element that some marketers have identified for future Gen X borrowers is appealing to them through the relationships that are important to them. Positioning the reverse mortgage product as a solution that borrowers can use to help with expenses related to those relationships could be important for the future, according to Eve Kroepke, director of marketing at Longbridge Financial.
“Since this group is often referred to as the ‘lost’ generation in terms of marketing, it’s important that we create tailored messages to connect with things they care about, like family,” Kroepke tells RMD. “For example, messages that focus on how a reverse mortgage can help pay off their kids’ college loans versus how it can help pay for healthcare might be more appealing to this audience.”
Keeping in mind the individual traits of many members of Gen X is also going to be important in order to establish a meaningful connection between lenders, loan officers and the new wave of future borrowers, Kroepke says.
“[Generation X members] are savvy and skeptical consumers, so it will be even more important than ever to develop campaigns that are educational and authentic with relevance and meaning,” she says.
Generation X, individuality and customer experience
Another lender actively preparing for the generational transition is Reverse Mortgage Funding (RMF), and Chief Marketing Officer Jean Noble has unique insight into how to prepare for Generation X, she says, because she is a part of it. One of the ways the industry can better prepare itself to accommodate Gen X borrowers is by leaning into their value of individuality.
“In terms of bracing for Gen X, the industry needs to continue its focus on personalizing the customer journey,” Noble tells RMD in an email. “The ‘one size fits all’ model does not work, people want choices in how they communicate with a company – whether it is over the phone, email, live chat or a face-to-face meeting, companies need to adapt to their marketing / sales approaches to an individual’s needs.”
Part of the necessity the industry faces in adapting to a new generation also comes with an increasing familiarity and comfort with expanded technological options. Naturally, Gen X will be more adaptable to incorporating technology into all aspects of their lives when compared with their parents or grandparents, and the industry will have to take this into account when attempting to appeal to a group of borrowers that grew up during a period of pronounced technological advancement.
“Gen X is tech-savvy and they are comfortable with technology – we need to continue to expand our digital footprints and develop great educational content that can be used across social media platforms and content publishers,” Noble says.
This, of course, will have to be mastered by 2043, when the first members of the highly tech-oriented Millennial generation will qualify for a reverse mortgage loan. Only 24 years to go.
This edition of the RMD Report is sponsored by national appraisal management company Class Valuation.
Former staffers from HUD, FHA and the GSEs weigh in on how to press ahead in this volatile reverse mortgage climate.