The CFPB’s recent study on the state of the reverse mortgage industry noted concerns regarding advertising practices. The study states that false or misleading advertising creates confusion among consumers and contributes to misconceptions about the loan.
Among the concerns listed in the study were materials that implied a government affiliation or referred to the program as a government benefit, noted time limits on the loan’s availability, or stated that borrowers can never lose their homes.
In light of the CFPB’s concerns, it’s important that we assess our advertising practices to ensure that we are being as clear as possible about our product. But transparency is not the only key to creating an impactful ad. There are other tips one must consider. I believe there is a specific way to write reverse mortgage ads that can result in a much higher response rate than what is likely garnered by the ads dominating the marketplace today. What way is that, you ask? My way. Immodestly stated? Perhaps so, but I believe it’s true.
A Cause for Confusion
Because we are marketing our product to the senior population, it’s especially important that we are 100 percent clear and up-front in our descriptions of the loan. There are several elements that can be found in reverse mortgage advertising that can create confusion among our target audience.
To the ethical mortgage professionals who author such material, it appears well written, straightforward and transparent. But the intended audience of that content is unfamiliar with reverse mortgage complexities and jargon. Explanations that seem to be self-evident to an ad’s author are often not sufficiently comprehensible to its intended readers, which can lead to a decrease in ad response.
The fact is that the general public is confused by the reverse mortgage product, and therefore often wary of it. This resistant mindset of our target demographic must be assuaged by advertising that clearly and soundly describes the ins and outs of our product. Many seniors could benefit greatly from taking out a reverse mortgage but don’t know enough about it to know that it may be a viable option. So how does one achieve the goal of educating the public while selling the product? I recommend you keep in mind the following:
Among the ubiquitous elements that decrease ad response are those that cause readers to assume that they do not qualify for a reverse mortgage, when many of them could. Implied qualification phrases such as having a “low current mortgage” and/or “substantial equity” dissuade responses from readers who could qualify even if their mortgage is high and their equity is low. In fact, alleviating the payments on a high mortgage is actually one of the main reasons borrowers today obtain a reverse mortgage. I recently spoke with a married couple who thought they could not qualify for a HECM because their current mortgage exceeds the amount of the projected reverse mortgage loan. Prior to contacting me, they had done a substantial amount of research on
Among content factors that breed potential deception are claims that home value appreciation will offset negative amortization. Most consumers know that home values have depreciated in recent years, so these claims appear deceptive and decrease response rates.
Ambiguities can also arise when touting a great advantage of a reverse mortgage with sentences like: “The unused credit line increases at the same rate as the initial interest rate, which is capped at 10 percent above the initial rate.”
Although that seems clear to mortgage professionals, seniors have asked me questions regarding that sentence, including: Does that mean my credit line is also capped 10 percent above its initial amount? Does the initial interest rate include the 1.25 percent mortgage insurance? Once I use a portion of the credit line, is it still considered “unused”? Is there an eventual limit on the increase of my credit line, even if its related interest rate is capped? Is it possible for my credit line to rise far above the value of my home?
Generally, it is wise to avoid making statements in your advertising that lead to more questions.
Acronyms & Jargon
The definitions of industry acronyms and other loan-related terms (e.g., net principle limit, maximum claim amount, nonrecourse, margin, arm’s-length sale) are too unfamiliar to be understood by most readers, even when in context. These words, along with acronyms isolated from immediate explanation, are often enigmatic and confusing, and when they must be followed by an asterisk referencing a footnote, they can interrupt continuity and reader concentration. Be wary of using such terminology in your advertisements and check to be sure that your language is clear enough for the layman to grasp.
Misleading phrases and buzz words can come across as disingenuous. Avoid using high-strung action words that might seem false. You may think you are encouraging potential customers to “Act now!” But in reality, you are walking a fine line that may suggest to some that there is a time restriction on the product’s availability.
So, what is this unique way of creating reverse mortgage ads that will result in a much higher response and how did it evolve?
After helping a number of confused seniors decipher reverse mortgage explanations, I took on the task of assessing the content of Web and print ads for various reverse mortgage brokers. In revising their ads, I crafted explanations that were easily comprehensible to general public. I made no assumptions regarding what the public may already know. My format replaced all of the confusing elements mentioned above with clear and simple language enhanced by examples that offered clarity.
Moreover, my format avoids the use of contractions such as “aren’t” and “can’t” because I believe they can easily be misread as “can” and “are” by a senior reader, and this is especially the case when the print is small. Instead, I spell out the word and bold and highlight the “not” part of the phrase.
I also suggest that ads avoid claims that may seem too good to be true and that might make a reader think, “They are hiding something.” Instead, I focused on emphasizing the integrity of the product with a brief but straightforward explanation of what some see as potential downsides of a reverse mortgage. Additionally, I avoid any content that can be construed as deceptive, because even the slightest whiff of potential deceit can greatly decrease ad response.
When it comes to content, I recommend highlighting the tax advantages afforded by the HECM. With wealthier prospects now showing interest in the product, you might consider including content that outlines the use of the product as a financial planning tool and the tax breaks involved with the loan.
Finally, when possible, take out full-page ads that not only grab the attention of the reader, but are large enough to accommodate all of your content in a large font size. The enhanced visibility of the larger ad will offset the expense. And of course, don’t discount the benefit of just a touch of redundancy to drive your message home.