Reverse Mortgage Analyst: Easy methods to Broaden the Market and Enhance Penetration
While a significant portion of the movements in the broader housing market are well beyond the control of those in the reverse mortgage industry, there are several important steps industry players can take to combat the low penetration of reverse mortgage products. This includes adding financial planners to the referral partner repertoire and speaking with more forward mortgage professionals who may not know when to recommend a reverse option to a senior client.
This is what John Lunde, President of Reverse Market Insight (RMI) said, during a presentation at the National Reverse Mortgage Lenders Association (NRMLA) summer virtual meeting. After discussing and citing possible reasons for a decline in the penetration rate of Home Equity Conversion Mortgage (HECM) loans in the broader mortgage landscape, Lunde and RMI partner Jon McCue turned their attention to ways how the decrease in penetration may be caused by the people living in the reverse mortgage industry work.
What to look for in the mortgage market and a long-term perspective
In terms of what can be done to combat the falling rate of reverse mortgage loan penetration across the industry, Lunde describes a larger market that is often impervious even to the actions of the collective reverse mortgage industry. These movements should be kept on the mind of a reverse mortgage practitioner for the sake of perspective, he says. This can help contextualize some of what is being seen in light of the HECM-to-HECM refinancing boom.
“I think the HECM-to-HECM refinances […] largely driven by macro forces beyond our control, ”says Lunde. “We talked earlier about interest rates and house prices, nobody in our industry controls both. And so we can react to it and really serve our customers better, if this is with refinancing, if these forces change and these factors change. “
However, a reverse mortgage professional can get used to playing a long game as well, as focusing on something that has the potential to pay off in the proverbial way can pay off huge dividends as long as someone can avoid being in the short term, says Lunde.
“Just like in the forward world, there is a bit more reach that we really need to keep focus and balance on,” explains Lunde. “Refinancing can be a good short-term activity that can generate volume, and of course you should serve your clients well here as well. But at the same time continue some of those longer term efforts that may not bear fruit tomorrow, maybe not on today’s phone call, but keep laying the foundation and foundation for your own personal business and ledger, your local reputation, but just that [reputation of the] Industry as a whole. “
The reverse mortgage industry has been built over a period of more than three decades on the basis of longer-term activity by professionals, although the reverse mortgage product itself and many of its applicable regulations have changed so dramatically over this entire period.
“[Our industry is] and was built out of some of those longer-term activities and investments in the 30 years it’s been here that really help push the industry forward, ”says Lunde.
Maturity of the futures market, advantages of expanded distribution
The longevity of the forward mortgage market compared to the much younger reverse sector should also be considered, says Lunde. Because of this, and the only focus they have on forward loan origination, good opportunities to put a borrower over 62 in a potentially more beneficial reverse mortgage situation can easily be overlooked by a forward professional.
“Given the maturity of the forward mortgage world, there are many more forward mortgage companies and originators who may not even see a reverse mortgage situation, use case [or] Customers when they run over [them]“Says Lunde. “So to be able to use and build some of these relationships and keep adding that balance to your business [can be beneficial]. “
While there isn’t much point of comparison between the practices and profiles of the forward mortgage business when compared directly to the equivalent characteristics of reverse, one potential characteristic that might be worth looking into is the sales model, says Lunde.
“One of the things we’ve seen over and over again is the number of reverse mortgage companies, which correlates positively with growing approval,” he explains. “The more companies approve of credit and the more active lenders there are, the higher the number of reverse mortgages. It just tells us the same thing again: It’s a good thing to increase its reach, get more people around the table, get the message out, and really get more businesses involved. “
It can work both ways, he says. As companies see additional volume on the reverse mortgage side, more companies are likely to consider whether or not to get involved in this area. What is inhibiting this overall, however, is the already mentioned low market penetration in the entire American mortgage business, he says.
“The important point to keep in mind here is at this stage of our product awareness – 2% market penetration – more companies involved is a good thing,” he says. “That really helps everyone involved. Obviously, more credit can really help get the message across, increase our market share as an industry, and more companies are helping. “