Ingenuity, they say, is the mother of invention. We need some of that now. This industry needs people to think outside of the proverbial box about how our product can become better and, in turn, how those ideas can help the industry. As large companies departed from this space, some very innovative people stepped aside. Now, we need to rejuvenate ourselves. Our industry grew because there were some astute financial people who developed variances to our core product that allowed for growth and attracted investors. That was a good thing. There were also people who manipulated the products to their advantage, causing trepidation in the markets to the point that HUD has pulled a key product away from the consumer. That was a bad thing. Was HUD correct in doing so? From the simple, single standpoint of saving the reverse mortgage program, the answer is a very clear-cut yes, for now. But we’ll see how that unfolds. In the meantime, let’s get ideas—financially prudent, investable ideas—back into the marketplace.
Fannie Mae wasn’t always wrong in the restrictions it placed on the market, but it was very narrow in its insight into the growth of the program. But keep in mind that it wasn’t Fannie’s role to take this program to the next level. That job falls squarely on the shoulders of the lenders in the space.
Historically, the FHA’s role has always been to bring certain products to the marketplace in limited form, and then have the private sector develop something similar that would not require government insurance or involvement. We saw how that worked with the subprime market, which led to 97, 100 and finally 105 percent financing. Riding on the coattails of a soaring market, it took off. And boy, did it bottom out.
The FHA’s mission is to prevent that from happening to us now. I do think, however, that the FHA’s reluctance to continue lender approval, the loss of mini-eagle status and the TPO changes were counterproductive to the development of the HECM marketplace, especially from a product selection and quality standpoint. Is the elimination of the fixed-rate Standard also going to fall into that counterproductive category? Maybe not. Improvements to the stability of the MMI Fund over time will tell us the answer to that question.
Now we need to think! Here’s a starter: How do you get an elephant into a refrigerator? (The answer comes later.)
Connecting with your client and really understanding what this is all about. At last month’s NRMLA conference, I had the opportunity to participate on a panel titled “How to Present Your Customers With the New Product Mix.” This is a topic I am frequently asked about, especially lately, and the crowd appeared eager to participate.
To address the topic, we need to start with what every other industry calls “sales.” While our job is more about educating the client about the product than selling it, the concept is similar and the main goal is to connect with the customer.
But this can sometimes be a challenge. While we all like to think we are very good at what we do, the truth is that we all have different strengths and weaknesses. Some people are great at talking but can’t grasp the technical issues. Some people are great at technology but have a harder time connecting with humans. We have salespeople and we have teachers.
We need to play to our strengths while recognizing our weaknesses so that with every client and every deal, we get better at what we do. When talking to our borrowers, we need to accentuate the positive and explain the negative. Thorough explanations are required in order to make clients feel comfortable about the loan. In order to ensure that they will be satisfied with their decisions, we need to build trust. I don’t consider myself a salesperson; I try to “sell” by educating my clients and building on that level of trust by keeping them constantly up-to-date and informed.
Training, research and testing is incredibly important. Speaking of important, how many people out there know what a HECM is? No, I am not talking about the definition of a reverse mortgage. I am talking about the actual product itself. We talk about the products—the L200, L300, Standard, Saver—to clients like we are talking about the weather. If you don’t think it’s confusing, try pretending that you are 84 years old and never had any kind of mortgage. Recently, the son of my client, a financial professional who was acting under power of attorney, mixed up what I was saying about the Standard versus the Saver—and that’s after I had outlined it in writing. We had to adjourn the closing for a new date. The point is, even professionals with extensive finance backgrounds can be confused about the nuances of the product. When I did my first reverse mortgage back in 1998, we had one lender and one product: a HECM. That’s it. No options, no yield spread premium, an extremely minimal service release premium, no principal limit protection and certainly no fixed rate. A HECM was a HECM was a HECM.
Nowadays, a HECM has many shades, and it’s important to stay on top of the details. So how do you enhance your product knowledge? Is it the number of loans you do? Is it the training you get from the company you work for? Is it from the ancillary companies we partner with and the training they can provide? Certainly, all of these factors are a part of the bigger picture.
But what happens when the company a loan officer has worked for goes out of business and they have been trained solely by that company? Do they have the requisite experience to continue? How do you adapt to the changes from company to company, wholesaler to wholesaler? These situations highlight how important it is to manage your own product training and education. Our conferences are a great place for training, and reverse professionals can also brush up on product knowledge by reading this magazine and utilizing various online resources. It’s important to try to take advantage of all of these resources so that you can provide the best service for every client.
A lot of people think the reverse industry is headed for a downfall now that it has lost the big players and the fixed rate is gone. But honestly, it’s still a great industry and new ideas from innovative people can and will make it stronger and better. And about that elephant? Just open the door and put him inside. I didn’t say how small the elephant was, or how big the refrigerator was. It’s pretty simple! Now go forward (no pun intended) and think!