HECM Industry Growth May Come from Forward Lenders

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Substantial HECM Growth Requires a Larger Sales Force

It could be argued that recent indicators show we’ve reached the bottom but a more significant question has been largely ignored. Is the key to reverse mortgage industry’s long-term growth and recovery lie with traditional mortgage lenders? It’s a sincere question that begs examination considering there are tens of thousands of FHA-approved originators.

At the height of our market, it was commonly thought that traditional or forward mortgage originators lacked the proper mindset to work with senior homeowners not having the patience and expertise to effectively origination reverse mortgages. Today, ironically we are reliving a sequel of Trading Places with a twist. HECM lenders are branching out into originating traditional home mortgages while more traditional lenders incorporate reverse mortgages in their sales force. Download the video transcript


George Owens September 16, 2018 at 10:53 pm

This is an important conversation. It is represents a substantial diversion from the most significant issue facing this industry put into play by the largest lenders in the industry. It will take months if not years for this tact to have any influence on the growth in endorsements. We need more demand immediately. This is like Bentley Motors saying that it will sell more Bentleys if it gets more if its Volkswagen sales people pitching Bentleys. Really? Most business analysts would be asking why Bentley is so desperate. While Bentley may drive up Bentley sales but the increase would be slow and only marginal.

Demand is our central need. We have had no change in the HECM marketing message that has done a single thing to significantly move the demand meter forward. Imagine the courage it would have taken to say in fiscal 2012 that fiscal 2018 will see six months of the lowest endorsements that the industry has seen in over a decade. That person would be described as negative and a pessimist of the highest order and by many as a traitor to the HECM cause. Yet here we sit. The largest attempt at collaboration in marketing collapsed within months of its initiation just five years ago. We are so desperate that we no longer see forward originators becoming part time reverse originatiors as a problem but rather as part of the solution.

Rather than seeking new sources of demand, sales management is putting more emphasis on the poorly designed and low producing endorsement product, the H4P. We are seeing more emphasis than ever before on financial planners as our most hopeful means of gaining more endorsements. Lenders were telling us on September 1, 2017, that the changes on 10/2/2017 would create change but would not mean substantially lower endorsements. Even as late as June 6, 2018, we read in RMD that we reached the low for monthly endorsements after 10/2/2017 with the endorsements for April 2018. What has followed the 6/6/2018 announcement is three straight months of endorsements even lower than the total for April 2018.

The problem is not 1) an insufficient number of originators, 2) more effort in H4P, or even 3) better financial planner education. It is first and foremost not seeking out new demand. If we had demand, would we have a lack of originators? If we had demand would H4P be struggling to see even 2,700 endorsements in a single fiscal year? If we had demand, don’t you think financial planners would be knocking at our doors to educate them and introduce their clients to HECMs? Our whole industry is going in “reverse.”

If lenders spoke about their actual condition, we would hear how bewildered they were about the lack of response to their marketing campaigns as well as their purchased lead campaigns. Yeah, yeah, we hear some individual lender stories about fighting the tide and seeing success but how does that relate to the 2,838 endorsements we saw for the month of June 2018. After the June 6, 2018 announcement, a few spoke out to warn that the predicted nadir was problematic. Yet June was a drop of over 15% from even May 2018 total for endorsements.

Shannon is not wrong for reporting this false hope nor is he the source of that statement. Shannon is doing his job of informing us about what is happening in the industry. I hope I am wrong, but Fiscal 2019 looks like another leg of secular stagnation, and most likely WORSE. That statement might change if HUD announced a return to even fiscal year 2010 PLFs and its PLF expected interest rate floor of 5.5%. Remember five years ago, fiscal 2018 was to see at least 100,000 endorsements if not 300,000?

Here is what I am saying. The industry has a poor marketing record after the 10/2/2017 PLF changes and reduced expected interest rate floor. Industry changes will mean marginal increases to monthly endorsement numbers for some time to come without HUD back tracking on the reductions it made on 10/2/2017.

John A. Smaldone September 17, 2018 at 10:11 am


Great report this morning. The forward part of the business can make a significant impact on the HECM and reverse mortgage space as a whole. We have seen a great deal of negativity breeding on the part of our originators since all the changes, many have not been able to adapt!

We must change our way of doing business, we must diversify ourselves and capitalize on the availability of the vast amount of senior home owners and the equity they have in their homes. In order to do this, as you say Shannon, we must set aside the negativity and look at the Glass of Water as half full!

The forward loan originators can be an asset to our industry, providing the companies they work for are will in to spend the time, money and effort on training and educating their people properly! Another important factor in being successful with forward loan originators, is choosing the right candidates they have in their origination bank of people!

As far as George Owen’s comment, I agree with him 100%. George’s comment was eloquently presented and his facts were right on target! However, I do feel we have a lot of potential with the H4P product. I am not saying to put your Eggs all in one basket, on the contrary but if approached properly, the H4P can be part of ones portfolio of business!

John A. Smaldone


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