Reverse mortgage business — and mortgage business generally — is not where people want it to be.
That was a repeated idea shared by a group of reverse mortgage professionals when asked to assess what they see as the biggest industry challenges of the year. With Home Equity Conversion Mortgage (HECM) volume declining on an annual basis, many industry participants cited at least one key factor that could’ve driven the decline, but the view was not universal.
Rates, rates and rates
Mortgage rates were by far the most-cited challenge among the pool of industry professionals who spoke with HousingWire’s Reverse Mortgage Daily (RMD) about the challenges of 2024.
Peter Sciandra, who serves as EVP of reverse lending secondary marketing at Fairway Independent Mortgage Corp. noted: “High inflation and high interest rates unfortunately kept a lot of borrowers on the sidelines. As the year went on, we heard a lot of talk from the Federal Reserve about starting to look at rate cuts in the latter part of the year, and that’s when we started seeing some of those borrowers sitting on the fence begin coming out of the woodwork.”
That led to some improvement in business during the third quarter, before the enthusiasm for potentially lower rates appeared to evaporate. Rates re-emerged as a challenge and continue to be as the year winds down to a close.
But despite challenges posed by rates, industry professionals continue to find a way forward. At New American Funding (NAF), reverse mortgage division leader Shannon Robinson talked about the need for persistence in a high rate environment.
“It’s continued to be, unfortunately, the same story when it comes to our industry facing these challenges,” Robinson said. “We’re seeing market headwinds, and not really seeing a lot of release in the rates. But we’ve continued to work through those challenges. We’ll have those loans that come in where we have to look at every opportunity that we can to save that deal and help that client.”
Mortgage rate challenges also did not derail the industry according to Jim Cory, managing director of reverse mortgages at Guild Mortgage.
“A lot of people predicted that if rates don’t come down, we were going to be in for a very, very rough year,” he said. “We had maybe two dips in rates, but they didn’t appreciably come down and it wasn’t as bad as everyone expected or predicted. I think that’s true from an industry standpoint. We were resilient, and were able to even grow at Guild.”
Education and distribution
A longtime challenge for the reverse mortgage industry continues to be its marketing and messaging, particularly in ways designed to overcome longstanding reputational hurdles that the business has had to contend with for years.
For Cory, education is tied to the wider industry challenge of broadening product distribution, he said.
“Distribution is one of the things that we’re trying to solve over at Guild,” he said. “And I think companies like Guild are trying to solve it for the whole industry. I just think that that’s a really key point. As an industry, we need to really focus on growing the distribution as far as who can originate the reverse mortgage.”
Robinson added that one of the ways that NAF is aiming to address the messaging challenge is by spreading it across multiple platforms and divisions, including the retail lending and distributed field sales divisions at her company. This also feeds into conversations with referral partners and a potential borrower’s adult children, who are often a borrower’s most trusted advisors.
But growth can also bring a series of challenges. At loanDepot, the company has worked to grow its stature broadly, which has impacted the reverse mortgage division, according to Lisa Moriello, its national retail reverse sales manager.
“We’re expanding our reach, becoming a principal agent in a lot of states,” Moriello said. “And we do that like we do everything else: very carefully. So for us, that has been both pleasure and pain. We’re so excited to be able to be a principal agent now nationally, but it has been a long road for us to get there, because we’re very careful about the way we do things.”
“A lot of people predicted that if rates don’t come down, we were going to be in for a very, very rough year,” he said. “We had maybe two dips in rates, but they didn’t appreciably come down and it wasn’t as bad as everyone expected or predicted. I think that’s true from an industry standpoint. We were resilient, and were able to even grow at Guild.”
What an odd statement, HUD (and NRMLA posted it) reported that in the twelve months ended 9/30/2024 (HUD’s fiscal year), total HECM endorsements were slightly over 26,500. Since 10/1/2003, the industry has not had ONE fiscal year with less than 30,000 HECM endorsements until fiscal year 2024.
This is not simply an interest rate issue. The industry has seen higher expected rate indexes in earlier fiscal years. According to an industry expert on HECMs, one of the basic problems is insufficient education of originators (not customers).
For example, a common reason for turning down applicants and even prospects has been STC (short to close). For many originators, this is a hopeless cause but for a smaller better trained group of originators who understand how valuable the loan is and how to present and explain that value have been able to overcome this issue in a relative high percentage of cases. Many times the solution is in the senior seling other assets that they hold or in helping the senior see that a few (or more) existing mortgage payments paid now in the near future could allow them to be able to get a reverse mortgage and improve their monthly cash flow.