After years of steady growth, the stock market took a significant tumble last week, and the choppy seas could have many older homeowners re-evaluating their retirement plans. But it would likely take a major market collapse before Wall Street uncertainty led to boosts in overall reverse mortgage originations.
“I don’t think seniors rush to apply when the markets correct,” Brett Kirkpatrick, partner ar Harbor Mortgage Solutions, Inc. in Braintree, Mass., told RMD.
If anything, using stock market woes to promote the reverse mortgage as an alternative retirement solution could have a negative effect on the product in the long term.
“It’s tempting to use something like this as a ‘make hay’ moment, but opportunistic pitches erode trust placed in us by professionals of other sectors — at least in my market,” Laurie MacNaughton of Atlantic Coast Mortgage in Virginia said.
The first call MacNaughton fielded last Tuesday was from someone asking about using a Home Equity Conversion Mortgage as a response to the Wall Street turmoil. In response, she cautioned that loan officers aren’t financial planners, and that they shouldn’t offer knee-jerk advice in the wake of a rough week for the Dow Jones Industrial Average.
In addition, MacNaughton said that even the 1,175-point drop in the Dow last week represents a small decline on a percentage-basis, and not a major crash.
“If a reverse mortgage was a good fit before a market plunge, it’s a good fit following a market plunge,” she said. “If it was a poor fit before a drop, it may well continue to be a poor fit.”
Dan Hultquist, director of learning and development for the San Diego-based software provider ReverseVision, agreed that it isn’t yet time to sound the alarm.
“Short-term volatility should have little impact on retirees, and therefore should not impact originations,” Hultquist told RMD. “A few days of this level of selling can be called a correction, but it would need to occur over a prolonged period before the term ‘bear’ is used to describe this market.”
Still, Kirkpatrick noted that a stock market decline could present an opportunity to discuss the potential advantages of the long-term line of credit strategy.
“Setting up a standby line of credit is precisely the buffer needed for market declines, and the psychological security of available emergency funds might give clients the grit to wait out market volatility,” he said, adding that potential borrowers who may have forgotten about the last recession could find a new sense of urgency in this correction.
“After all, look at all the fence-sitters who suddenly applied prior to October 2,” he said.
Written by Alex Spanko