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Product Innovation and Rebranding
Former British Prime Minister Harold Wilson said “He who rejects change is the architect of decay. The only human institution which rejects progress is the graveyard.” This admonishment could well apply to the reverse mortgage industry today. Due to economic and regulatory pressure the HECM program has evolved rapidly in recent years. The truth is the choices that our industry collectively makes today will determine the outcome of tomorrow. What changes can we anticipate in the coming year? Here are just a few elements we should be watchful for.
First are new HECM product. Not private or proprietary but variations of the reverse mortgage which meet HECM guidelines. Early attempts by some lenders to reintroduce a fixed rate HECM were halted by HUD who prohibited any future draws for fixed rate Home Equity Conversion Mortgages. As we push toward a more financially astute borrower lenders may attempt to fashion products that appeal to this demographic. We should keep in mind with HUD’s strict HECM guidelines innovation is limited. Future products should seek to…
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5 Comments
First off, Shannon you made a great presentation, it was a very good updating for our industry.
As far as re – branding a name for our industry, there are so many ideas that come to mind, one that comes to my mind is one that has no great Bells and Whistles to it but it is simple and it does not use the name, “Reverse Mortgage” it goes as follows:
HOW WOULD YOU LIKE TO HAVE
HOME OWNERSHIP
WITH NO
MONTHLY PAYMENTS
DO IT WITH THE
‘HECM”
What I have done is to create a slogan than use instead of the word, “Reverse Mortgage” is use the word HECM instead. Simple and to the point!
If marketed right on a continual bases in every media form, using the slogan with the name of the product, HECM, over and over and over again, eventually it would catch on, it would be great for the HECM for purchase program but still fit into our industry objective. That is my thought for the day!
John A. Smaldone
In justifying the need for change, Harry is not a great choice. Wikipedia quotes old Harry as saying: “Wilson joked about leading a Cabinet that was made up mostly of social democrats, comparing himself to a Bolshevik revolutionary presiding over a Tsarist cabinet….” And yet Harry was the Prime Minister of the Labour Party presiding over a Labour Party Cabinet. Was he the Communist among rabid Socialists? Many British Conservatives of his day thought so.
Wikipedia even cites Soviet defector Anatoliy Golitsyn as secretly claiming as early as 1963 that Wilson was a KGB agent.
The many changes ol’ Harry initiated seemed to be nothing more than gimmicks designed to tear away the fabric of British rule. Ol’ Harry seemed far more critical about British rule than Churchill’s arch nemesis on that subject, FDR.
While change is necessary, simply changing things for the sake of change is little more than anarchy since anarchy generally generates change ad infinitum. No society can withstand such change.
While some of the changes HUD has made need moderation and modification, they were not proposed in the spirit that ol’ Harry promoted. Most of the HUD changes, even a conservative like me believes, are more than justified. They were not changes for change itself.
I have a great name for the “New Reverse Mortgage”. Let’s call it a HECM
Where is financial assessment in all of this? Will it implemented in the next four months or not? It was supposed to have been proposed and implemented before Ms. Meg Burns left HUD four years ago.
Are product modifications significant changes? Were the PLFs implemented at the first of the month significant change? Is the Non-Borrowing Spouse ruling all that significant? To be clear, not even HECMs for Purchase can be said to be a real game changer at this point. Even the addition of Savers did little to change our picture.
Where change has produced the largest results is when it comes to significant reductions to Principal Limit Factors. Another change which seems to have a significant impact is the 60% limitation of first year disbursements. As to type of HECM being originated nothing has been as significant as the addition of fixed rate HECMs.
The senior market is growing significantly but so far our annual HECM endorsement production is slipping. We need to find ways to significantly turn the endorsement situation around, not dilly dally with training more staff to sell HECMs for Purchase to Realtors. For example, why not stratify our approach to financial advisors by specialization rather than treating them as one large homogeneous group or a bifurcated group of easy and impossible marketing targets?
(The opinions en xpressed are not necessarily those of RMS or its affiliates.)
Speaking to the title, our industry has little to say about its own destiny.
Some have stated that we are the masters of our own destiny. They obviously did not work for the aerospace industry in California during the late 70s, 80s, and 90s as the peace dividend from the war in Vietnam was devvied up between various Democratic inspired domestic programs. These companies which had spearheaded the arms race and provided the military equipment needed by our nearly half million troops in Nam (not like our small volunteer army of a much larger nation today) were forced by Congress to fall on their own petards.
Our industry has little similarity with the textile industry where markets rule but does have similarities to the California aerospace industry of almost four decades ago. Our life blood as a niche industry can be tampered with by HUD almost at will but do not be enraptured with proprietary products which are here one day and gone the next. Even Fast Boy and Democratic Presidential candidate Johnny Edwards has more stability and viability in politics than our proprietary products.
Reinforcing the concept of how little our industry controls its own destiny is hearing the calls today that our industry will eventually turn around due to the daily expanding population of those 62 and over. Like that says, we control our own destiny?
When you really look at HECM endorsements since Boomers first began turning 62 in 2008, there is no guarantee we will see growth in endorsement volume. But more troubling is not endorsement numbers but rather what we are seeing today is a significant erosion of revenues per endorsement. The continuing decline in endorsements combined with the erosion in revenues in the face of a growing reverse mortgage market speaks volumes about the ability of the industry to control its destiny.
What the Extreme Summit has proven to date is just how little we as an industry control our future.