With the changes and permutations the HECM program has undergone since 2010 one could argue we have already undergone a makeover of sorts. The Saver program, HECM for Purchase and the introduction and revocation of the standard fixed rate. True. However HUD’s recent revamp of the program stands apart as it’s first and only change that is a hard push back to the program’s original intent…to help senior homeowner’s age in place. The Saver gaves us increased crediability with lower costs and opened doors in the financial community. The HECM for Purchase expanded our legitimacy amongst real estate professionals and builders while the fixed rate maximized proceeds while securing interest rates. With recovering home values and a consolidated product what does 2014 hold in store? Here are just a few speculations on what we can anticipate.
#1- New marketing. While the traditional reverse mortgage ads of the past increased public awareness of the reverse mortgage product, they have also attracted detractors concerned the typical message attempts to lure seniors with promises of vacations, luxury purchases and a flush retirement lifestyle. That may be a stretch yet it warrants our attention. In 2014 expect to see new and creative campaigns focusing on the HECM’s role in retirement planning versus cash alone. Will this attract a more affluent borrower? Time will tell.
#2- Further lender consolidation. We have already seen some medium sized lenders exit the space since last October. Expect a few remaning key players to step to the sidelines in the coming months. Today’s lending environment presents particular challenges to smaller shops with increased regulatory and compliance costs.
#3- Tenure, the loan de jour. Just as the Standard Fixed rate was the rage expect lenders and loan officers to begin promoting the powerful flexibility and growth potential of deferred tenure payments or a line of credit. Though some have lamented the loss of the standard fixed this new product landscape will convert many back to presenting the HECMs true flexibility and long term value when structured properly.
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2 Comments
The makeover did take place last year. Everything you pointed out about origination production shows why both fiscal and calendar years 2014 are the year of transition. The makeover of the product except for the addition of financial assessment took place before October 1, 2013. It was surprising to read that the FHA Production Report for September 2013, actually showed 57 case numbers being assigned to revised (or new) HECMs.
The problem for the industry is moving away from a luxury style concept particularly for those who are still promoting partnership relationships with boat and RV retailers to a more prudent use of proceeds. Old habits and ideas die hard even those ideas which damage the perception and reputation of our industry.
I am not so sure if the prospects themselves will necessarily be that much more financially astute on home mortgage matters in 2014 but in dealing with the 98% we will be reaching out more to financial advisors, SOME of whom actually know something about home mortgages and, yes, even HECMs.
As to the HECM for Purchase with less than 7,200 endorsements in five years as claimed by James Veale, who can take this product seriously? I remember in 2008 when the staff of Barney Frank was explaining to the folks at NRMLA why the House Committee on Financial Services adopted a reduced and capped origination fee computation as part of the HERA legislation. The most significant part of the rational was that we would get a huge boost in initial fundings from purchase transactions. After all they argued, the loss in origination fees will be more than offset by the number of purchase originations. I remember waiting for five months for H4P implementation thinking that thousands of seniors wanting the product would not have it; nothing could have been farther from the truth.
If I sound pessimistic about H4Ps, it has more to do with the Congressional explanation why origination fees should be lowered than anything else. Of course now that origination fees are lowered and capped, no one will remember why, especially with the Congressman now in retirement.
2014 will prove once for all, that H4P is more marketing tool with Realtors than game changer. Those 70,000 H4P endorsements that John Lunde and others rationalized as a realistic goal will be proven to be a bunch of carrots at the end of a stick “too far” to reach but always driving the horses on.
Tenure payouts are great but they are not annuities. They are contingent and not portable. Their math is based on annuity principles but they must terminate if the loan goes into due and payable state or be reduced if the borrower takes funds set aside for the tenure payouts, and be suspended if the borrower is involved in a bankruptcy.
One thing we all need to hold in mind is that advisors hate fluff and inaccuracies which could cause embarrassment to them somewhere down the road. The standard they judge by and hold us to is far greater than our historic customer base. Even more today, what we tell people about HECMs will be the difference in how our businesses succeed in the future.
Shannon,
One thing you did not mention was your expected impact of the Extreme Summit on the endorsement numbers now and through 2018. Do you think there is much of a chance that the Summit will meet or exceed any of its three objectives: (1) 300,000 endorsements during 2018 (no one has stated if that is fiscal 2018 or calendar 2018), (2) reaching a 3 to 1 ratio of good messages to bad, and finally, (3) success at re-branding?
While I found the Reverse Review article to be more propaganda than information, the article in the NRMLA Reverse Mortgage magazine for November-December 2013 brought out more of the questionable assumptions used in concluding the likely success of the Summit. Quite frankly, it looks to be in trouble already. Of course so was the Continental Army throughout most of the American Revolutionary War.
Someone should be providing a monthly update on the campaign to the industry so that we can follow its successes and failures. If the first so called “initiative” is achieved, we all have much to be thankful for; however, that is an all or nothing measurement. Who knows when there is success with re-branding; however the 3 to 1 messaging is more measurable especially since NRMLA is tracking negative messages.
I would hope if you or someone like you cannot follow the Summit’s progress, Darryl Hicks or Marty Bell could and report on it in the NRMLA Reverse Mortgage magazine.