The reverse mortgage market has seen its share of ups and downs in recent years — in terms of loan volume, program rule changes, and the evolution of private products, among other measures.
Yet today’s industry leaders see the industry at a point of stability, for a change, and stress the message that today’s players need to focus on the long term for the market and look beyond today.
A review of the last two years shows a positive trajectory for the program, despite declining Home Equity Conversion Mortgage (HECM) volume said Scott Norman, vice president field retail and director of government relations for Finance of America Reverse, in speaking with attendees of the National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting in Nashville this week.
“Now we talk about a product that is more viable, more a piece of the overall pie,” Norman said. “Look at today versus where we will be two years from now, and the private products will be even more significant. That will cut into the HECM piece of the pie, which is good for the government and good for the country. If the reverse mortgage was a stock, for the first time [in recent memory] you are buying it, not holding it.”
Yet the stability should be viewed as a near-term benefit, with attention to some of the growth challenges the industry has long confronted.
“The snapshot at this point in time looks really good,” said Reza Jahangiri, CEO of American Advisors Group, who serves with Norman as co-chair of NRMLA’s board of directors. “But nothing stays the same. Leadership could change; rates can rise… and at the end of the day we don’t have a robust industry that is growing.”
Reverse mortgage lenders have a great opportunity given the current climate, the co-chairs noted, with Jahangiri stressing the message Federal Housing Administration Commissioner Brian Montgomery relayed to the industry earlier this week.
“Now we are seeing an uptick in volume, strong economics and margins… that is a positive thing,” Jahangiri said. “But what I want to stress is what the commissioner said: we need to fix the roof while the sun is shining.”
In addition to structural long-term program changes under discussion from the Department of Housing and Urban Development, there are positive growth indicators, Jahangiri noted, with reference to recent conversations with policymakers, think tanks and academics, who today have largely shifted their thinking in favor of the use of home equity in retirement. The new product innovation and growth of private reverse mortgage products is similarly encouraging.
“The proprietary focus and effort is phenomenal. I don’t think it will solve all of the growth [issues] but we are starting to address borrowers we have not historically,” he said.
Additional opportunity lies in greater shifts such as the potential for technology innovation that will help financial planners incorporate home equity into retirement models for their clients, and changing marketing to a message that is not specific to reverse mortgages, but rather more about home equity in general — an effort that will require capital, innovation and new approaches.
“Things are really good,” Jahangiri said. “I agree… Let’s fix the roof while the sun is shining; deploy capital to reposition this market; help more people rethink how home equity fits in retirement and change 10 year growth line from contracting to a growth market.”
