Will this Save the Reverse Mortgage Industry?

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More looking outside the HECM as a single solution

What will save the reverse mortgage industry or at least put us back on a trajectory of sustained growth? One industry leader sees a path for recovery- one that broadens our vision and approach. Finance of America Reverse’s President Kristen Sieffert has successfully made inroads in expanding the reverse mortgage’s appeal. First, by engaging traditional mortgage originators through a strategic campaign that couples education and motivation. More recently, she helped shape Finance of America’s flagship jumbo reverse mortgage- the HomeSafe Select. The loan’s unique features such as a line of credit and the ability to be placed as a second lien behind a low-interest rate first mortgage align with the lender’s mission to be a retirement solutions provider.

So what is the solution to stop the slide in loan production? “It’s critical to be focused on what will help Americans get to work on retirement more holistically”, says Sieffert in her recent interview with the Reverse Review. “Historically our industry has offered a single solution to everyone...

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5 comments

Kevin Vasquez March 4, 2019 at 10:55 am

Greetings

After following reverse mortgage daily and reverse focus for many years I decided that I should write you and get your thoughts on something

I have been in the mortgage industry for 25 years.

The first 15 years was spent as an owner and branch manager of several companies and I focused 100% on refinance transactions.

When the mortgage industry crashed in 2007 I transitioned into reverse mortgage lending

Since then I have installed reverse mortgage departments into several companies that had never originated a reverse mortgage prior to my arrival

Several of those company’s have reached as high as number 20 on the reverse market insight top 100 originators report

In fact, the company I currently represent is listed at number 47 on the most recent December 2018 top 100 originators report

By the way, we only have 10 loan officers.

Basically I have focused 100% of my attention on reverse mortgage lending since 2007 and I have never received a referral from a financial planner.

I have always marketed the product directly to the consumer who needs it.

As earlier mentioned, have followed reverse mortgage daily and reverse focus for the last 5 years.

I noticed that many of the articles as well as the industry in general tout the benefits of educating financial planners yet the industry’s continually declining numbers do not reflect that was a successful strategy

I have watched over that same five-year period as loan volume continues to decrease to where it is today

Now many people argue that the decrease in volume is due to financial assessment as well as several reductions to principle limit factors

But I believe the decrease is primarily due to the focus on financial planners and a decrease in direct to the consumer marketing efforts.

First of all, only a small percentage of the senior citizen population have assets that warrant having a financial planner

I don’t know the actual percentage but I would think it’s under 20%

I would also say that half of the seniors who have financial planners are quite wealthy and well off financially.

They do not need any type of loan or money whatsoever

Meanwhile, the other 80% of population of seniors DO NOT have assets that warrant having a financial planner

Those seniors are struggling through retirement and actually need the product to eliminate mortgage payments and could use cash out of their home equity to live a better quality of life

We all know that a very large percentage of the population has a negative view of reverse mortgage loans

Now most of that is due to a lack of understanding of how the product works as well as misinformation provided to seniors by the people whom they trust

That includes misinformation provided to seniors by lawyers, financial planners, realtors and everyone else who is not directly involved in the reverse mortgage lending industry

Because the majority of the people who are not in this industry, no matter what industry they are in, do not understand the reverse mortgages themselves let alone are able to educate a senior about a reverse mortgage.

What I don’t understand is how the industry has arrived at the conclusion that attempting to educate financial planners who represent the 20% of seniors who do not need a reverse mortgage is more beneficial then marketing directly to the consumers representing the 80% of seniors who actually do need the product?

To market to financial planners, First one would have to overcome their negative view of the product

Then one must convince them that it’s a good idea for their client which in essence is saying that they have been misguiding their clients for many years by not leveraging their home equity into their retirement plan.

Then if you’re able to overcome those obstacles (which is unlikely), you are hoping that they actually talk to their clients about using the product which is also unlikely

But even if that happens then you have to overcome their clients negative connotations about the reverse mortgage.

That’s just too much to hope for and how in the world can any business build any reliable metrics for growth based upon that strategy?

It sounds ridiculous when viewed from this angle doesn’t it?

Just a few days ago I spoke to a financial planner from Morgan Stanley. I’m doing a VA refi for an individual and part of his income is derived from a Morgan Stanley investment account. I had a great talk with this financial planner so I felt comfortable enough to ask him why financial planners don’t traditionally use home equity in their calculation of a person’s retirement.

He said that if Morgan Stanley were to find out that he referred a client to a reverse mortgage company he would be terminated and furthermore he said he had worked at other large financial planning companies who felt the same way.

Does the industry understand this?

Furthermore, even if one was successful I would argue that a financial planner would only mention the reverse mortgage to a small percentage of their clients, if any at all.

One would think that by now, after at least five years of trying to educate financial planners and witnessing a continuum of decreasing loan volume that that line of reasoning and strategy has failed miserably.

However, what will always work is direct to the consumer marketing that is focused on the 80% of seniors who actually need this product to live a better quality of life

Why this concept has been so hard for the industry to figure out is beyond me but AAG and One Reverse (the top retail leaders) understand it completely

I believe that the entire industry has it horribly wrong with regard to financial planners and should abandon that failed strategy and place attention on advertising and marketing directly to the consumers who actually need this product

I think what has happened is that somehow the industry is comparing the financial planner to the realtor in terms of a referral source

But they are in no way equal to or similar to realtors

Realtors are looking for people to buy homes every day and in fact they need a mortgage loan to complete their transaction

The financial planner does not need a loan at all to do his job

in fact in most cases financial planners will argue against any type of loan

Please tell me how any of that makes any sense whatsoever?

And with regard to the HECM for purchase I don’t even know why anyone even talks about it?

there’s so few of them originated and so few people that will qualify for and utilize a HECM for purchase that its not even worth mention

Sincerely,
Kevin Vasquez

Sent from my iPhone

Reply
The_Critic March 4, 2019 at 1:19 pm

Kevin,

As to your points, we generally agree. Yet our views differ in several ways.

At the 2011 NRMLA Western Regional Conference, MetLife presented their financial adviser outreach strategy. In years before that Monte Rose trained originators for a fee on how to gain volume from financial planners. Back in 2004 (and earlier) NRMLA had a group that focused on reaching out to the financial industry. So your idea that reaching out to the financial community is relatively new is somewhat distorted. Many of us who have spent our reverse mortgage days with the top five HECM lenders probably have a different view on this subject than you.

BUT that does not mean that there is a pattern of success that is cookie cutter ready. Some originators in surprisingly small cities have focused on financial planners quite successfully for over a decade. Yet origination success through financial advisers and/or Realtors stands as the exception, not the rule.

Today there is a group who has risen up to say that the industry is approaching financial advisers incorrectly. Their primary spokesperson has his own session at the NRMLA Western Regional Conference. Are they right? Well, it seems for like minded people they make a very important point. Yet their track record is rather short even though it shows great potential.

Not all originators are the same. Each must find what is successful for them. I generally agree with your position that some originators and originating entities abandoned or lessened their direct marketing to targeted seniors to their own detriment. On the other hand, the best marketers in the industry are those who diversify but emphasize the type of marketing that works best for them.

I do not agree that financial assessment is a direct cause of lower endorsements; it is, however, a major contributor as to why principal limit factors are so low which in turn has driven down endorsement volume. The addition of financial assessment exposed how little both FHA and lenders understood the cause of actuarial losses in the MMIF. Now neither FHA nor the lenders can walk away from it since they sold it as a safeguard for borrowers.

Many believed that negative press suppressed increased origination numbers. NRMLA has exalted itself based on its response campaign. Yet endorsements were far higher when there was no response campaign (especially during fiscal 2009) than today. Yet again this is but ONE factor in evaluating the general collapse of the endorsement volume. By the way, it seems the HECM endorsement results for fiscal 2019 will probably be 70% lower than in fiscal 2009. If that prediction is close to correct, it will be the smallest endorsement volume in the last 16 fiscal years (including fiscal 2019).

In conclusion, we all have different views of this industry. Your voice, like those of so many others, is needed.

Reply
Kevin Vasquez March 4, 2019 at 3:48 pm

The Critic,

I never said that approaching financial planners is a new concept.

I said that it doesn’t work.

Not then, not now and not ever!

And the sooner the industry accepts that fact and abandons this strategy, the better off we will be.

You mentioned that there is a group who has risen up to say that the industry is approaching financial advisers incorrectly.

Well what I am saying is that “generally speaking” there is no correct way to approach financial planners because the ones who work for the larger firms are forbidden from suggesting a reverse mortgage.

I understand that it seems unfathomable not to use housing wealth in long term financial planning but financial planners with many of the larger firms are forbidden from doing that, especially suggesting a reverse mortgage to extract that equity.

Yes. Its absolutely stupid but it is what it is.

Therefore, this new idea is going to be yet another waste of time and resources.

And the industry doesn’t have anymore time or resources to waste

Let it go!

It just doesn’t work.

Now direct to the consumer advertising and marketing does work.. and it works consistently.

Furthermore, our industry needs to take the advice on closing reverse mortgage loans from individuals who actually are directly responsible for closing reverse mortgage loans.

I know.

It sounds crazy, right?

I recently listened to a broadcast of sorts by someone who was supposedly endorsed by our industry as knowing their reverse mortgage stuff.

I went to look up their company to see where they appeared on the top 100 originators list.

Guess what?

They didn’t even appear on the dang list!

I thought to myself, you gotta be kidding me!

What the heck is this guy doing teaching anything about reverse mortgage lending when his company doesn’t even appear on the Top 100 originators list.

Furthermore, who was the yahoo that thought that he would be worthy of educating others about closing reverse mortgage loans?

I see this kind of thing all the time.

My company may not be in the top 10 but with only 10 loan originators last year we reached as high as #38 on the top 100 originators list which is far ahead of many other company’s that have hundreds of loan originators.

And 100% of our business comes from direct advertising to the consumer and always has.

I believe that if just 1/3rd of the industry just does what we do then reverse volume would increase significantly.

But noooooooo.

Lets instead listen to a new group of individuals about how to approach financial planners in a different “better” way.

By the way, regarding this new group of financial planner marketing wizards who are suggesting that we deliver the reverse mortgage message in a different way, that will be better received by financial planners.

Where do they appear on the top 100 list?

Let me guess?

They don’t.

Reply
The_Critic March 6, 2019 at 1:13 pm

Kevin,

As someone who is in his 70’s, something in use “at least five years” is RELATIVELY recent. The word relatively has the idea of something comparatively rather other than ABSOLUTELY so. Beyond that, at the beginning of the industry there was mild but open debate about whether financial advisers (particularly life insurance and annuity producers), Realtors, or forward mortgage originators would be the best field originators. With that debate in the early 90’s, came the discussion of which of the three could be developed into referral sources and what would be needed to achieve that with a somewhat lesser emphasis on Realtors.

Over ten years ago, the idea of reaching out to financial advisers came into focus again with the advent of some early papers on the fundamental value of the growth in the line of credit by such people as Barry Sacks and others. Even then there was resistance to the value of financial advisers as referral sources. One prominent voice capsulized that position by noting that if the industry was to become dependent on the financial advising community for referrals, then the industry should prepare itself for lower endorsements.

It is not unfathomable to believe that financial and retirement planning essentially ignores housing wealth. On what day has been otherwise? What is hard to imagine is that the financial community will adopt the analysis and advice on housing wealth as part of their standard practices.

It is NOT my duty to protect those reaching out to the financial advising community even though it seems you believe it is your duty to end their outreach. Unfortunately, I believe the product is so valuable that there is room for those reaching out to the financial advising community as well as for you and me.

Reply
Jumbos compliment a challenged HECM market | HECMWorld.com May 20, 2019 at 1:00 am

[…] Two months ago we asked if private reverse mortgages would stop the slide in our industry’s overall loan production with the increasing popularity of the jumbo or proprietary- this as the HECM’s volume has dropped considerably. […]

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