When lost sales are an opportunity

Our sales appointments are our best teacher

As professionals steeped in the enthusiasm and promotion of reverse mortgages, it’s easy to miss important lessons in our daily sales activities. Our confirmation bias may insulate us from valuable feedback and observations when meeting with homeowners and other professionals.

For example, you thought your appointment with a local financial planner was going great, but then suddenly they were no longer amenable to the potential benefits a reverse mortgage could hold for their clients. They turned cold. After the meeting, you get in your car, scratch their name off your list, and move on to your next appointment. Two weeks later you have a similar response from another advisor in a different town.

Instead of scratching off their name perhaps we should be scratching our heads and asking why.

Each encounter we have with a potential borrower or outside professional is an opportunity to fine-tune how we communicate certain concepts, the terminology we use, the analogies given, and how we deal with objections. With that in mind, it’s best to take notes immediately afterward. Note their name, title, and where they closed their mind to reverse mortgages.

Did they close up when you attempted to explain how a HECM can provide retirement income? If you were meeting with a CPA such a statement could easily undermine your credibility. Therefore your chances of being an originator who could be trusted with their clients are nil. Why? Because the money received from a reverse mortgage increases the homeowner’s debt and cash flow. It is never income. Income increases one’s net worth over time.

At some point did the borrowers state they needed to talk things over even though they have been researching the loan for months? If so did you take the opportunity to excuse yourself and step to your car to grab some additional information or did you press one only to lose the sale? As Norcom Mortgage’s John Luddy teaches, finding a reason to leave for a moment gives the couple a chance to settle their concerns privately and allows you to return with a better chance of closing the deal.

So take the learning challenge. Note what opening story worked best in your public seminar. Write down the statements that triggered a negative response and then find a more effective way to communicate them. Did taking a tour of their home and envisioning the improvements that could be made help? Unless we write it down we may forget and scratch them out as a ‘no’. Instead, look back and ask what I could have said better or what triggered them. We can learn from others, especially our potential borrowers.

2 comments

Sue Haviland January 24, 2023 at 3:06 pm

Shannon,
Timely segment here. Thanks for sharing these thoughts.
Would love to see the comments from other readers

Reply
The Positive Realist January 27, 2023 at 5:22 am

Shannon,

It is true that our follow up techniques lack and gloss over our painful experiences. We need to overcome that but there also seems to the need to take a more realistic look at where we stand as an industry following an index change from the one month CMT index to the one year CMT index for even monthly adjusting HECMs. Soon thereafter came a crash in origination compensation.

This comment is not directed to any one specific person but to an industry which seems to be confused by all of the ultra optimistic rhetoric.

The proof of where we are as an industry is in the numbers that result from our total combined HECM origination activities. In this particular instance, it is all about HECM CNAs (Case Number Assignments). For example, the HECM CNA count for November 2022 (the latest data HUD has given us as of 1/26/2023) was the worst such count for ANY NOVEMBER since November 2003. Yes, it is true that a total for one month does not mean much, so let us look at six month totals and see if there is better news there.

(For clarity, the largest 12 month group of HECM applications receiving HECM CNAs impacting the HECM endorsement count for this fiscal year began with the HECM applications receiving HECM CNAs on June 1, 2022 and will end with those receiving them on May 31, 2023, just over four months from now. That same principle applies to every fiscal year. Why this principle applies is because it takes the average endorsed HECM approximately four months to go from HECM Case Number Assignment to HECM endorsement. This four month process is known as the four month HECM endorsement lag rule. In the instant case, the HECM Case Numbers assigned through the six months ended November 30, 2022 will mainly become endorsed, if endorsed, during fiscal year 2023. Again the same principle applies to each and every fiscal year.)

In the six months started on June 1, 2022 and ended November 30, 2022, total HECM CNAs have only added up to 27,446. Comparing that to the six month period ended November 30, 2018, the total HECM CNAs were only slightly lower at 26,195 — BUT — fiscal 2019 was our worst fiscal year for HECM endorsements since fiscal year 2003, i.e., in the last 19 straight fiscal years. During fiscal year 2019 only 31,274 HECMs were endorsed. On the other hand, total HECM CNAs for the six months ended November 30, 2021 were 43,670 and total HECM endorsements for fiscal year 2022 were 64,485 — the highest such total since fiscal year 2011.

In the six months ended May 31, 2022, total HECM CNAs were 39,886 meaning that the total HECM CNA production in the next six months ended November 30, 2022 was 31.2% lower. Worse, since August 2022, the monthly HECM CNA count has been getting worse and worse each and every month. So has the HECM CNA monthly count reached bottom at 3,313 (the total HECM CNA count for the month of November 2022)? With six months of HECM CNA totals yet to be analyzed for this fiscal year, the odds of 3,313 being the lowest seem unlikely. Since a slight rebound in August 2022 to 5,302, HECM CNA monthly totals have been getting progressively worse each and every month. The November 2022 CNA count was 37.5% worse than the August 2022 HECM CNA count and 20.5% worse than the October 2022 HECM CNA count.

There is no trick here. Without HECM CNAs, there are no HECM closings and endorsements. It is our goal as originators to turn our HECM applications that get a HECM CNA into a closed HECM quickly so we can be paid ASAP for our efforts. As an industry, we work hard to do just that and the conversion rate over the last twelve months has been a very respectable 74% (using the annualized conversion rate adjusted for the four month lag rule) verifying that effort.

Many lenders may be doing better in fiscal 2023 than in fiscal 2019 due to 1) lower and soon to be lost origination production at RMF and 2) the transition of a significant portion of the AAG origination production to FAR —. BUT — how are originators doing collectively and individually? That seems most pertinent.

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