Amid Refinancing Boom, Reverse Mortgage Professionals Recognize Need for New Borrowers
[ad_1]
In recent months, reverse mortgage industry analysts have issued a warning to the industry. Even though the home equity conversion mortgage (HECM) volume has remained above 4,000 units each month for much of the past year, the amount of HECM to HECM refinancing transactions – in an estimate totaling up to ‘at 40% of the industry’s overall volume – is unsustainable for much longer, they said.
To gauge the attitudes of reverse mortgage professionals across the industry, RMD surveyed major lenders and brokers on the state of the business with regard to refinancings, and whether or not there are concerns. among reverse mortgage business leaders and direct practitioners about the refinancing boom. is currently taking place.
The responses received were enlightening. Many lenders do not want to cut off a valuable source of business, especially at a time when refinancing can make sense for many borrowers due to the current rate environment, while others recognize that a boom refi is not a sustainable way forward for the future of the reverse mortgage industry and its ability to attract new borrowers.
What a refinance business looks like right now
The old adage “a rising tide lifts all ships” is the attitude of many reverse mortgage lenders. While industry leader American Advisors Group (AAG) has seen a noticeable increase in refinancing requests, this is also true for its number of general requests, according to James Mittleman, senior vice president of retail sales at AAG.
âAlthough we’ve had some pretty successful refinancing campaigns this year, that hasn’t been our primary focus,â Mittleman told RMD. âOur overall requests per loan officer are the highest we have seen in the history of our business and that includes higher than normal refinancing requests. This trend is the result of older Americans seeing their homes appreciate significantly and cash in on what has become their most valuable asset. And with interest rates remaining low, those who already have an HECM are seizing the opportunity to access additional equity.
Other lenders immediately indicate that they recognize that the current level of refinancing activity is not particularly sustainable going forward, but these are also activities that should not simply be left on the proverbial table. This is part of the view shared by Patty Wills, National Reverse Mortgage Retail Sales Manager at Open Mortgage.
âOur retail branches have a diverse pool of reverse mortgage types and referral partners and sources at Open Mortgage,â Wills told RMD. âOf course, the HECM activity at HECM remains strong, but we believe, and the data shows that this activity cannot stay at the current level all the time. Senior Open Mortgage executives emphasize the continued need to develop new business. At the same time, we are working with current opportunities to refinance existing HECMs for our clients. “
Other entities specifically aim to broaden the base of new borrowers. C2 Reverse Mortgage, a division of C2 Financial Corporation, based in San Diego, California, focuses its reverse mortgage borrowers on high-value properties in the western United States. The company aims to focus on new borrowers and does not have a specifically dedicated refinancing program according to C2 Reverse Country Director Scott Harmes.
“We don’t have a call center, we don’t keep track of who has a setback [and at the] 18 months [mark], [approach someone] for refinancing, âHarmes told RMD. We get some anecdotal refinancing deals, but most of our business is with new borrowers. “
However, concern about the industry’s tendency to go for existing borrowers isn’t on Harmes’ mind either, he says. While he believes C2’s average refinancing volume is around 20% of its total – half of the industry average of 40% – the effect of the COVID-19 coronavirus pandemic clearly shows borrowers that C2 serves that home equity unlocked through a reverse mortgage is an effective way to age in place.
âMy point is that the unfortunate and tragic pandemic we have been through has really highlighted the reverse as a viable option for a lasting solution to help people age in place,â Hermes said. “Because at this point I think most old people would do anything [to avoid going] in a retirement home or a group residence for the elderly. Tapping into their home equity with a reverse mortgage is a proven way and a great option for it.
The importance of referral partners, leveraging various marketing materials
Reverse Mortgage Referral Partners are more important than ever to the proliferation of new business, and many lenders and reverse mortgage brokers are well aware of this fact. Current industry trends help to underline the importance of maintaining good relationships with partners from all walks of life, from financial planners to real estate agents.
âOpen Mortgage encourages our loan officers to constantly stay in touch with their group of referral partners and sources to develop new businesses,â says Patty Wills. âWe offer programs that help and train our initiators to locate, create and continue to communicate with new referral partners. He continues to build these relationships that will increase business now and in the future. Growing relationships is essential to successfully moving forward.
The importance of using a diverse marketing strategy is also key to attracting new borrowers according to Don Currie, president of HighTechLending.
âAt HighTechLending, we focus on a healthy mix of new borrowers and existing HECM borrowers,â Currie told RMD. âNew prospects can be found using all current marketing media such as mail, internet, telemark, television and social media. The bottom line is to have a foothold in both ponds, new and existing reverse borrowers. This will lead to a pool of loans that our investors will continue to generously remunerate us, the producers. It will ultimately benefit our seniors, and that is the end goal. “
For AAG, locating new borrowers has actually become easier. As more people reach the threshold of eligibility for reverse mortgages, a new level of technological understanding makes past education efforts on the product category less important than they were previously, according to James. Mittleman.
âEach year our customer base gets a little younger as the baby boomer generation becomes eligible for reverse loans,â Mittleman said. âWith this, we are seeing a change in our customers’ understanding of the products before they contact us. As online resources become more readily available and seniors become more tech savvy, a large percentage of our customers come to us with a better understanding of how products work, whereas in the past most of our initial interactions were focused on pure product education. “
This education brings more diverse use cases and different types of applications of a reverse mortgage product to new borrowers, says Mittleman. With the emergence of new eligible borrowers each year, the indication seems to be that AAG remains convinced that new eligible borrowers each year make the need to rely on existing borrowers less important.
[ad_2]