Residential Magazine

A Close-Knit Circle

Earn trust and referrals from families by specializing in reverse mortgages

By George Morales

Mortgage lending is a numbers game. The more sales volume a lender can capture, the lower their overall cost per loan and the higher their profitability. When volumes fall, lenders will begin to look for ways to leverage their existing technology stack and staff to originate more business.

In a refinance-heavy market, all the homeowner has to do is tell a friend they locked in a better deal on their existing mortgage and it’s fairly easy for the originator’s phone to start ringing. Winning the trust of a new refi borrower is not a high hurdle to clear.

“Smart loan originators are finding that referrals from family members carry a lot of weight. They can build a level of trust that’s otherwise nearly impossible to achieve.”

The purchase money business is different. Homebuyers know that no two deals are alike. They want to know that the lender they choose can help them navigate unfamiliar waters and arrive safely at the closing table. First-time homebuyers, in particular, have a high degree of anxiety throughout the purchase process.

These prospective clients aren’t going to call someone just because an acquaintance says you’re a good person and you once helped a friend with a refi. Unless, of course, the person telling you this loves you as much as your mother — or better yet, is your mother.

Smart loan originators are finding that referrals from family members carry a lot of weight. They can build a level of trust that’s otherwise nearly impossible to achieve. Getting these referrals will have a huge impact on an originator’s business.

If only there was a loan product that could, originated with the expertise that delivers an excellent borrower experience, make earning referrals easy. As luck would have it, there is. The secret is the reverse mortgage.

Effective marketing

Referrals from previous clients are invaluable in a purchase-centric market. First off, it’s the most cost-effective business the originator is going to get. It doesn’t depend upon new marketing and advertising expenditures. Unlike traditional advertising, this word-of-mouth marketing allows satisfied clients to do the work of targeting new applicants.

As you might expect, this results in higher conversion rates — or at least higher lead-conversion rates. Today’s borrowers have been trained to make a loan application with a number of lenders and then go with the one that suits them best.

“Reverse mortgages are a mature product set with easy-to-understand compliance rules that any lender can learn and apply to their institution.”

Experience matters now more than ever. But referrals pay dividends, too, after the deal is done. A referral builds a trust ladder two stories tall, which makes it more likely that both parties will refer to the lender again. When it’s a family member who is referred, they come into the transaction in the glow of their relative’s good experience. This makes it easier to provide them with a similar experience because they are already conditioned to receive it.

Best of all, a well-oiled system for getting referral business will improve the originator’s reputation in the community. As more clients recommend the originator to others, the originator’s reputation as a trustworthy and reliable source of financing will naturally increase. So, how does the originator make this happen?

Growing opportunity

Reverse mortgages are a fast-growing business for a number of reasons. The first reason is all about demographics. There are more people who are eligible for reverse mortgages now than ever before.

Census data suggests there will be more than 80 million Americans who are 65 or older by 2040. About 10,000 people each day are reaching the age of 62. That’s the minimum age for reverse mortgage borrowers through the Federal Housing Administration’s Home Equity Conversion Mortgage program. (Borrowers 55 and older can choose a proprietary reverse mortgage.)

Furthermore, modern medicine and better lifestyles among older homeowners means that these folks are living longer than ever. This is positive news, and it also means they’re more likely to eventually turn to their home equity to finance their retirement. After years of sales by the big reverse mortgage lenders, consumers know more than ever about these products and are ready to leverage their home equity for retirement planning and other expenses.

Second, it’s easier now than ever before for originators to get into the reverse mortgage business. It’s no longer considered a completely separate line of business because you can originate these loans with the same technology that lenders already use on the forward mortgage side.

Lastly, originators need to find more products to offer and they need to serve more borrowers if they want to grow. There are reverse mortgage prospects out there — more every single day — and they have families that can be a rich source of referral business for the originators who treat these older homeowners well. Anyone who has watched a parent obtain a reverse mortgage and witnessed the positive impact the loan product had on their life will look favorably on the person who made it possible.

Maturing product

The first significant hurdle that kept forward mortgage lenders from moving into the reverse mortgage market was compliance. It took some time for the rules to come fully into focus and for the specific actions taken by reverse mortgage lenders to satisfy regulators.

Because there was a fair amount of confusion in previous years — among both the lending community and consumers — about the rules, many lenders stayed away and gave rise to a group of specialized lending firms that only sold these products. They used specialized reverse-only technology.

This led industry leaders to think of reverse mortgages as an entirely different business line, similar to how they view auto loans or small-business financing. This made some sense from a risk management perspective.

Today, however, reverse mortgages are a mature product set with easy-to-understand compliance rules that any lender can learn and apply to their institution. Borrowers are also more aware of these products and how they can be used for retirement planning and other purposes.

In addition, today’s next-generation loan origination systems can handle reverse mortgages as easily as forward mortgages. Instead of looking at reverse mortgage products as a completely new line of business with its own infrastructure, staff and silos, lenders are simply making reverse mortgages available to their existing originators. It’s a better strategy in today’s market.

Emotional connections

Research has shown that family members are more likely to recommend high-value products and services to each other, and they’re more likely to accept a referral from family. Relatives tend to trust each other and are more familiar with each other’s financial situations, making them more likely to recommend products and services that they believe will be of value to their loved ones.

Families often share similar experiences and lifestyles, which can lead to a common need for certain products and services. This can make it easier for family members to recommend products and services that they have found to be useful or valuable.

Family members have an emotional connection that can make them more likely to recommend products and services that have been beneficial to them. They may feel a sense of responsibility or obligation to share valuable information with their loved ones.

Recommendations from family members are a form of word-of-mouth marketing, which is a powerful tool for generating new business. Ninety-two percent of consumers trust recommendations from friends and family members more than any other form of advertising, according to Nielsen.

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By offering reverse mortgages, lenders have access to a new source of business in a growing market. If their technology allows them to deliver an excellent client experience, these older homeowners will refer lenders to their children. These may be the best and easiest referrals an originator can get, making it worth their time to explore this loan option in today’s competitive market. ●


  • George Morales

    George Morales is the reverse mortgage product manager at Mortgage Cadence, managing reverse mortgage enhancements for the company’s platform. He supports products, provides business case support and rationale for these enhancements, and serves as an in-house reverse mortgage expert for both Mortgage Cadence and its clients. Morales has 24 years of mortgage and real estate industry experience, with 11 of them focused on the reverse mortgage market.

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