In Midst of Refinance Growth, Reverse Mortgage Professionals Acknowledge Want for New Debtors
Over the past few months, reverse mortgage industry analysts have given the industry some warning. Although Home Equity Conversion Mortgage (HECM) volume has remained above 4,000 units per month for much of the past year, the number of HECM-to-HECM refinance transactions – up to 40% of total industry volume, it is estimated to total – is long no longer tenable, they said.
To gauge the recruitment of reverse mortgage professionals across the industry, RMD asked major lenders and brokers about the state of business on refinancing and whether there are concerns among reverse mortgage managers and direct practitioners about the refinancing boom currently being held takes place.
The responses received were instructive. Many lenders do not want to get a valuable deal at a time when refinancing can make sense for many borrowers due to the current interest rate environment, while others recognize that a refi boom is not a sustainable path for the future of the reverse mortgage industry and their ability to bring new borrowers into play.
This is what the refinancing business currently looks like
The old adage “a rising tide lifts all ships” is the attitude of several reverse mortgage lenders. While industry leader American Advisors Group (AAG) has seen a noticeable surge in refinancing requests, so has the general number of requests, according to James Mittleman, senior vice president of retail sales at AAG.
“While we’ve had some pretty successful refinancing campaigns this year, that wasn’t our main focus,” Mittleman told RMD. “Our total requests per loan officer are the highest we’ve seen in our company’s history, and that includes more than normal refinancing requests. This trend is the result of older Americans seeing their homes grow in value and capitalizing on their most precious asset. And if interest rates remain low, those who already have an HECM will take advantage of the opportunity to acquire additional equity. “
Other lenders make it immediately clear that they recognize that the current refinancing business will not be particularly sustainable in the future, but also business that should not simply be left on the table. This is part of the view shared by Patty Wills, National Reverse Mortgage Retail Sales Manager at Open Mortgage.
“Our retail branches have a diversified pool of reverse mortgage loan and referral partners and sources at Open Mortgage,” Wills told RMD. “Of course the HECM-to-HECM business remains strong, but we believe and the data shows that this business cannot continuously stay at the current level. Open Mortgage executives emphasize the continuing need to do new business. At the same time, we are working on the current options to refinance existing HECMs for our customers. “
Other companies specifically aim to broaden the base of new borrowers. San Diego, California-based C2 Reverse Mortgage, a division of C2 Financial Corporation, focuses its reverse mortgage borrowers on high quality real estate in the western United States. The company aims to focus on new borrowers and does not have a dedicated refinancing program, according to C2 Reverse National Manager Scott Harmes.
“We don’t have a call center, we don’t keep track of who has a reverse [and at the] 18 months old [mark], [approach someone] for refinancing, ”Harmes told RMD. We get anecdotal refinancing deals, but we do most of our business with new borrowers. “
However, concern about the industry trend of reaching out to existing borrowers is also absent at Harmes, he says. While he believes C2’s average refinancing volume is around 20% of the total – half the industry average of up to 40% – the impact of the COVID-19 coronavirus pandemic is making it clear to borrowers that C2 is for home equity Being unlocked through a reverse mortgage is an efficient means of aging.
“In my view, the unfortunate, tragic pandemic that we have been through has really shown the opposite as a viable option for a sustainable solution to help people age on the spot,” says Hermes. “Because I think most seniors would do anything at this point [to avoid going] in a nursing home or a senior group. Using your home equity with a reverse mortgage is a proven way and a great option to do so. “
The importance of referral partners using different marketing media
Reverse mortgage referral partners are more important than ever to growing new business, and many leading reverse mortgage lenders and brokers are well aware of this fact. Current trends in the industry underscore the importance of good relationships with partners across the spectrum, from financial planners to real estate agents.
“Open Mortgage encourages our loan officers to keep in touch with their pool of referral partners and sources to generate new business,” says Patty Wills. “We offer programs that support and train our originators in finding new referral partners, creating them and continuing to communicate with them. It continues to build those relationships that will grow the business now and in the future. Growing relationships are crucial for continued success. “
The importance of a diverse marketing strategy is also key to attracting new borrowers, according to Don Currie, President of HighTechLending.
“At HighTechLending, we focus on a healthy mix of new borrowers and existing HECM borrowers,” Currie told RMD. “New prospects can be found with all common marketing media such as mail, internet, telemark, TV and social media. The bottom line is to have one foot in both ponds, new and existing reverse borrowers. This creates a credit pool that our investors continue to generously compensate us producers. Ultimately, our seniors benefit from this, and that is the ultimate goal. “
Finding new borrowers has even become easier for AAG. As more people reach the reverse mortgage eligibility threshold, a new understanding of technology is making prior education about the product category less important than it used to be, according to James Mittleman.
“Every year our customer base is getting a little younger as the baby boomer generation is eligible for reverse credit,” says Mittleman. “We can see that our customers’ understanding of the products changes before they contact us. As online resources become more readily available and seniors become more tech-savvy, a large percentage of our customers come to us with a better understanding of how the products work, while in the past much of our initial interactions have focused on the mere training of the products. “
This training brings with it more diverse use cases and different types of applications of reverse mortgage loan proceeds for new borrowers, Mittleman says. With new qualified borrowers popping up every year, the AAG appears to remain confident that every year new qualified borrowers make the need to rely on existing borrowers less important.