Without audience targeting are Google Ads Dead? Think again…
Early this month Google announced new restrictions for targeting specific audiences. The restrictions apply to content related to housing, employment, credit, and those who are disproportionately affected by societal biases. The news of these restrictions created quite a stir among industry brokers and lenders who heavily rely upon targeted Google ad campaigns. All which may have you asking if these changes will kill future reverse mortgage advertising on the world’s most popular search engine. In just a moment we’ll hear from our online SEO expert Josh Johnson to find out.
Google’s restrictions are not necessarily novel nor unexpected. It was just over two years ago Facebook faced scrutiny from federal regulators for allowing those offering credit or housing finance to restrict ad audiences by race or religion among other questionable metrics that would violate HUD’s fair housing rules. An investigation by ProPublica broke this news in October 2016. It was nearly two years later in August 2018 that HUD filed a formal complaint against the social media giant for discriminatory advertising practices. Seven months after HUD’s complaint Facebook announced sweeping changes. Both Facebook and later Google, took a blunt approach much to the chagrin of lenders and service providers.
What ad filters are going away? In its official release Google revealed, “credit products or services can no longer be targeted to audiences based on gender, age, parental status, marital status, or ZIP code.”
Is this the end of Google ads for reverse mortgages? To answer that question I reached out to Josh Johnson who heads up Reverse Focus’ Online Dominance SEO program and Google marketing. Here’s his explanation.
Here’s what makes Google unique from other platforms and why reverse mortgage Google ads will continue to reach the intended audience.
To summarize, older homeowners are intentionally seeking out reverse mortgage information on Google which means, yes-your ads will be seen by your target audience, even though you can no longer target specific age groups.
The Mortgage Professor points to common mistakes made by HECM borrowers.
Mistakes. HECM borrowers make them and of course, so do originators. I was intrigued by Forbes’s most recent column in which Jack Guttentag warns the full advantages of the loan can be significantly diminished by avoidable mistakes. “They [HECMs] are a potentially powerful tool for helping seniors live better lives during their retirement years. However, the benefits can also be frittered away, with little lasting benefit to the senior, and all too many seniors are doing just that.” What are the common pitfalls by which a borrower may find themselves missing out on the full benefits of the loan?
First is the ‘lure of upfront cash’ as Guttentag calls it. Lump-sum withdrawals can lead to runaway spending, but even worse for some the loss of future loan proceeds when homeowners may need it most; in some cases to pay property taxes. The preference for lump sum withdrawals and the former popularity of loans requiring a full disbursement of proceeds at closing compounded the issue; a concern which led me to write a column in June of 2010 entitled, “The fixed rate is popular, but is it the best loan for your client?”. Guttentag references first-year distribution limits enacted in 2013 but finds the one-year waiting period a “minor inconvenience to cash-hungry borrowers”. While strongly discouraged by HUD and prohibited by lenders Guttentag touches briefly on the topic of incorporating annuities with HECMs touting an annuity purchase as ‘the only sure method of converting cash draws into a steady source of cash flow over the homeowner’s lifetime”. The rub of course is that such annuities pay significantly less commission to licensed insurance agents, some of who are more incentivized to sell a costly deferred annuity that pays out a much more attractive commission to the agent. Either way, financing an annuity with a lump sum withdrawal rapidly accelerates the HECM loan’s negative amortization where a HECM line of credit or tenure payments would only be added to the loan’s balance as the funds are taken.
In 2008 as the housing crisis mounted, fixed-rate reverse mortgages were quickly growing in popularity to represent the lion’s share of HECM loan production. They were certainly an attractive proposition for many as they typically paid out more than their adjustable-rate counterparts. However, Guttentag points out another explanation, seniors who were biased against adjustable rate mortgages or ARM loans not understanding such loans only pose a risk of payment shock for traditional or forward mortgage loans. In my career, I found dozens of older homeowners, some in their 80’s, who were sold ARM loans by brokers seemingly motivated by generous yield spread premiums. Speaking of yield spread premiums Guttentag finds fault in some compensation plans which payout significantly more for full draws in a fixed-rate loan and much less for adjustable-rate loans for those choosing only to finance their closing costs instead of preferring to leave an open line of credit. However, there are two sides adjustable rate HECMs. While rising rates certainly escalate the loan balance they also credit more funds to the principal limit or line of credit for future use.
Here are my closing thoughts. Guttentag’s column rightly points out the risk of homeowners not having the best possible structure to meet their long-term needs and wants. In other words, how the HECM is structured is just as important as the benefits of the loan itself. For example, a risk-averse borrower using a HECM to purchase a home may find a fixed rate more attractive while a homeowner with a small existing mortgage to pay off would likely be best served by an adjustable-rate HECM with its flexible payout options. Structuring a loan begins with knowing your client. That means open and frank discussions of their goals and thorough fact-finding. In the end, the biggest mistake is for the borrower or loan officer to approach a HECM without clear and specific goals and consideration for future contingencies.