With a housing market in transition, originators are looking to seize profitable opportunities that benefit both borrowers and their own bottom lines. HousingWire recently spoke to Jonathan Scarpati, Senior Vice President of Wholesale Lending at Finance of America Reverse, about tapping into the reverse mortgage market in light of the changing market.
HousingWire: With interest rates gradually rising and refinance volume on the decline, how can originators benefit from adding reverse mortgages to their product mix?
John Scarpati: Reverse mortgages add diversity to the loan offering of originators during the current economic climate, but the benefits that make reverse mortgages such a valuable product addition aren’t only driven by interest rates or current macroeconomic trends. Of course, it is helpful right now that reverse mortgages are not interest-rate-sensitive loans in an environment where forward mortgages will undoubtedly feel the sting of rising interest rates and lower refi volume. But originators need to see the big picture that extends beyond our current economic climate—the market for reverse mortgages is enormous and growing. Ten thousand baby boomers reach retirement age every day, and that number is expected to double over the next several decades. By 2050, 20% of Americans will be 65 or older. And they’re sitting on an estimated $10 trillion in home equity. That equity can be leveraged to help people live better lives, starting at age 55 in some states for certain products and throughout their retirement.
It’s also essential for originators to understand that reverse mortgages are not loans of last resort. This may be contrary to how what they’ve heard. Increasingly, financial professionals are viewing reverse mortgages as strategic tools to be used as part of a comprehensive retirement plan. New research has even shown that reverse mortgages can be used to reduce market risk and increase portfolio growth. More and more financial and wealth advisors are going to be looking to reverse mortgages—and reverse mortgage originators—as they advise their clients. So, adding reverse just makes good business sense.
HW: What can originators do to dispel some common misconceptions borrowers have about reverse mortgages, and how does client education play into originator success?
JS: It all starts with originators educating themselves. It’s so important that they understand the product inside and out before they go out to sell. The more they know, the more successful they will be in navigating and originating reverse mortgages. Reverse mortgages aren’t necessarily more difficult than writing traditional mortgages, but they are different with some different terminology and concepts. That said, these don’t have to be complicated products.
Using home equity isn’t anything new. Most people understand the concept of a home equity line of credit (HELOC). Similarly, a reverse mortgage allows borrowers to access their hard-earned equity in a monthly payment, lump sum, line of credit, or a combination of the three. And a reverse mortgage doesn’t require monthly payments. Instead, the amount borrowed plus interest and fees are added to the loan balance.
Originators who are successful with reverse mortgages are the ones who put in the time to learn about the product and how to market it. It may be a slower process than they are used to, and they may need to communicate to borrowers in different ways to address their concerns. But we can assist with all of this. We have a dedicated training department that can teach originators all about reverse mortgages, our products, and how to make the sale. We have recorded trainings. We have live trainings. We also have a lot of marketing support. We offer fliers and one-on-one consultations with our marketing department, and we can help you ease into getting started with reverse.
Misconceptions come from a lack of product knowledge, and many poeple don’t know that industry safeguards were put in place over the past few decades. In fact, out of 32,000 mortgage-related complaints submitted to the Consumer Financial Protection Bureau in 2021, only one percent were brought against reverse mortgage companies. Reverse mortgages are a safe product for borrowers and loan originators’ reputations.
HW: As retirees become more concerned about outliving their retirement funds, how can originators offer strategic options that benefit both the borrower and their own business growth?
JS: Outliving retirement savings is a major concern for many people, but reverse mortgages have a role to play here. In a study co-authored by Phil Walker, our VP of Strategic Partnerships in our retirement strategies division, they found that a reverse mortgage can be a powerful tool to reduce the risk of portfolio exhaustion. That is powerful, and it’s just one of the many ways these can be beneficial. For most Americans, your home is your largest asset, and a reverse mortgage gives you the unique opportunity to access your home equity and not have to make monthly payments. So, the advantages to borrowers are pretty clear.
For originators, business growth is all about opportunity. A lot of the easy refis in the forward world have dried out. Reverse mortgages are a way for originators to differentiate themselves and sell a product with an exploding target market. It’s the next big product. The stars are beginning to align for us. Our industry is going to experience a lot of growth in the coming years, and originators can be a part of that if they add reverse. In the crowded forward space, the opportunity is shrinking by the day. In reverse, the opportunity is growing by leaps and bounds.
HW: How can Finance of America Reverse help originators successfully incorporate reverse mortgages into their product mix?
JS: We cater to customers who don’t know how to do reverse mortgages, and we assist at every step along the process. We can hold an originator’s hand and help them understand the most important aspects of a reverse mortgage that they need to know to sell to their customer. We offer learning and development, all different types of courses at different levels, live trainings, marketing materials and we have a calculator to cut through the numbers.
We’re here to help originators be successful. With FAR, originators have a dedicated account executive and sales support, an online loan, training, and marketing portal; and an innovative line of proprietary products to help you match more borrowers with the right loans for them. That all equals more business. And that also helps explain why FAR has been the No. 1 reverse mortgage wholesale lender for the past 11 years, according to Reverse Market Insight.
For more information, visit www.far.com.
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