Put Your Business in Reverse
Gear up for new business with reverse mortgages
The mortgage industry is differ- ent today than it was just four years ago. We have witnessed
a recession, a drastic drop in housing prices and a significant increase
in foreclosures. In addition, regulatory
changes have altered compensation
methods and reduced mortgage brokers’ options when working with potential borrowers. Brokers who adapted
are still in business, and those who
didn’t are not.
To remain relevant, mortgage brokers must continue to adapt their business. One underused product option is
the reverse mortgage.
The Federal Housing Administration
(FHA) Home Equity conversion
Mortgage (HEcM) program has several
new loan options, including competi-
tive fixed and variable rates for home
purchase and refinance. Last year, the
FHA introduced the HEcM Saver option,
which significantly reduced the cost of
the upfront FHA mortgage-insurance
premium. HEcM loans are safe and
government-insured, and the qualifica-
tions may better suit senior borrowers.
Future for reverse is bright
The outlook is positive for the reverse-mortgage industry, even though the
economy and regulatory changes have
affected it in many of the same ways as
the for ward market. There is one major
difference between forward- and reverse-mortgage loans that keep them
viable for many seniors, however.
With reverse mortgages, there are
generally no income or credit requirements. Although seniors who just retired may not have enough income to
refinance or get a home-equity line of
credit, they may have enough equity for
a reverse mortgage.
Another positive feature of reverse
mortgages is their stability. HEcM loan
originations have decreased in the past
two years, but according to Reverse
Market Insight, the numbers are stabi-
lizing and trending slightly higher. There
are several reasons to think that reverse
mortgages will continue to grow in the
future. One reason is the math. The
first baby boomers turned 65 this past
year, and according to the Pew Research
center, about 10,000 Americans will turn
65 every day through the end of 2030.
able to meet the downpayment requirement and be happy not making a new
mortgage payment. Another example is
seniors buying a home in a senior community. This is traditionally not a home
that will be left to heirs, so selling the
property when the loan becomes due
is probably something the homeowners have already considered.
Financial planners also can be excellent partners. clients who are at or
near retirement age may benefit from a
“Mortgage brokers looking for an additional
revenue stream should consider adding reverse
mortgages to their product portfolios.”
The economic downturn has many
seniors and those about to retire concerned about outliving their retirement income. Gallup reported that, for
the first time in 10 years, 52 percent of
working Americans doubt that they will
have enough money to live comfortably
upon retirement. This concern goes
hand-in-hand with the current economy
and significant drops in the stock market in the past few years. These individuals are questioning where they will
find the money to retire.
There is no solution that will solve
everyone’s specific need. A reverse
mortgage can help a number of seniors
access the funds they need, however.
By eliminating their existing mortgage
payment, many retirees will find relief. With the remaining equity in their
home, borrowers can take a lump sum,
establish a monthly payment, create a
line of credit, or use a combination of
all three options.
reverse-mortgage loan, and the financial planner can explain how using a reverse mortgage can delay the need for
Social Security, allowing for larger pay-outs in future years. Financial planners
also can point out that by not withdrawing funds from retirement accounts
now, there is the potential for the account to return to the higher values it
had before the market decline.
Time to act
Mortgage brokers looking for an additional revenue stream should consider
adding reverse mortgages to their product portfolios. Recent changes to the
reverse-mortgage landscape created significant growth opportunities for motivated brokers. Two of the top originators,
Bank of America corp. and Wells Fargo
and co., stopped originating reverse
mortgages earlier this year. combined,
these institutions originated almost
43 percent of all reverse mortgages,
according to The New York Times.
Brokers interested in pursuing reverse mortgages have several new partnership opportunities. For example, real
estate agents and senior-community
homebuilders are two potential partners who may have clients interested
in a HEcM for Purchase. This product
allows borrowers to bring in a downpayment and pay off their remaining mortgage with a reverse-mortgage loan.
Although the product is not designed
for everyone, there are situations where
it may make sense. For example, if a
couple is selling their existing home
and looking to downsize, they may be
Getting started
Getting involved with reverse mortgages has gotten easier in the past
year. Before this past Jan. 1, the FHA
required all brokers who originated
reverse mortgages to be approved as
loan correspondents. Now any licensed
mortgage broker can originate and process reverse-mortgage loans without
needing additional approval.
Learning about reverse mortgages
and how they differ from traditional
mortgages will be key for any broker
looking to start in this niche. Many
reverse-mortgage lenders offer training and have service teams dedicated
to helping brokers new to the reverse-mortgage industry. Some offer online
courses with more about HEcM products, how to submit loans, tips on submitting clean files, etc.
The mortgage industry has gone
through significant changes in the past
few years, but it may turn out to be a
good thing in the long run. Resilient
brokers will change with the times and
continue to succeed. Adding reverse
mortgages may not be the right decision for every broker, but including the
reverse-mortgage product in your product portfolio is worth considering. •
Jud Lyman, marketing manager for Genworth
Financial Home Equity Access Inc., has more
than nine years’ experience in the mortgage,
financial-services and insurance industries.
As one of the nation’s largest reverse-mortgage lenders, Genworth Financial Home Equity
Access Inc. is dedicated to the wholesale marketplace and committed to helping its broker
partners succeed. Reach Lyman at (916) 384-
1275 or judson.lyman@genworth.com.
