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   ARTICLE   |   From Scotsman Guide Residential Edition   |   April 2008

Look Ahead to Reverse Mortgages

Educate yourself and your clients on this growing market

Reverse mortgages have received a lot of press and government scrutiny lately. As brokers, it is essential that you have your eyes open if you are just starting to originate reverse mortgages or are considering adding them to your product lineup.

Let’s start with the numbers: There was a 26.5-percent increase in reverse-mortgage Home Equity Conversion Mortgage (HECM) loan production between 2006 and 2007, according to Reverse Market Insight, a market-intelligence firm for the reverse-mortgage industry. That is a healthy increase compared with the forward-mortgage market. It shows a slowing trend, however, as it is down from a 77-percent increase the year before. Total HECM originations for 2007 were 108,287.

Reverse-Mortgage Guidelines and Links

  • All borrowers must be at least 62 years old.
  • Borrowers must own the home.
  • Owners must occupy the property as their primary residence.
  • Borrowers must receive U.S. Department of Housing and Urban Development-approved, third-party counseling prior to taking a reverse mortgage.

More on reverse mortgages:

There also has been an increase in the number of approved reverse-mortgage originators, which the Federal Housing Administration (FHA) refers to as lenders. At the end of 2007, there were 1,674 lenders, up from 888 the previous year.

So this slowing market is inundated with new entrants who wish to stake their claim in the reverse-mortgage marketplace. Everyone is buying leads and shotgunning mailings. Senior home-owners are likely overwhelmed with marketing materials on reverses, and it is safe to say that the low-hanging fruit has been picked.

Brokers, then, must think carefully about how to market this product to the public.

Debunk misperceptions

The current press on reverse mortgages has been mostly favorable, but there are still misperceptions about how these loans work. One of the biggest misunderstandings is that the lender will take the home when the borrower no longer lives there. Another common misconception is that the title to the home changes and the homeowner no longer has control of the asset.

The more you learn about the product, the more you can debunk these and other misperceptions for your reverse-mortgage clients and prospects.

Brokers also must think wisely and market honestly and clearly. Reverse mortgages are not a slam-dunk kind of product. They require a tremendous amount of education for borrowers, along with their families and trusted advisers. Become knowledgeable about the product. Be your community’s go-to expert.

In addition, make sure you have the resources to close reverse mortgages before you jump in. This means getting full FHA approvals and getting approved with a wholesale lender or working as an adviser with an FHA-approved company.

Be the expert

There is a lot to learn, particularly now that many new products have exploded onto the scene. For years there were only a few reverse programs, and now there are at least seven HECM programs and about another 20 different choices for proprietary or jumbo reverse mortgages. So do your homework and know what you are talking about. Remember, you want to be the expert in your area.

Don’t forget your contacts from the forward-mortgage business. These include financial planners, certified public accountants, attorneys and Realtors. Their clients may be asking them for reverse-mortgage information. Financial planners, for instance, might like to see how this could help their clients keep their assets under management longer. Remember, people are living longer and need more money and therefore more time to grow their assets.

Your previous clients are also a possible source of reverse-mortgage referrals. Some may be eligible, and those who are not yet 62 years old likely have parents, grandparents, friends and neighbors who may need the product. Call them, send an e-mail or put in your newsletter that you can help them get information on reverse mortgages. They may not have business for you today -- or they may and not know it yet. Give them examples of how this loan type has changed people’s lives.

If you have an opportunity to write a column for a local newspaper, grab it. That kind of public relations is worth its weight in gold. Though you may not immediately get many phone calls, you can send a reprint to everyone you know and meet and include it in your marketing materials. This helps establish your credentials as a reverse-mortgage expert.

Reaching out to religious communities is another idea. If you have contacts in churches and synagogues, call them. Find out if you can address the seniors at one of their regular meetings and post information on their bulletin boards or Web sites. Ask if you can advertise in their newsletters, as well.

•  •  •

If this sounds like a lot of groundwork to lay, it is. If you want to develop long-term business with referral sources, you have to stay in touch, communicate, call and visit. Look at your current communication and see what needs to be implemented or improved.

Remember, the reverse-mortgage market is getting more competitive, and you must step up your game to survive and thrive.


 


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