It is already well documented that the reverse mortgage industry is set to change again this year. For most participants, that means a modification of their processing and underwriting standards, different products to consider and new economics to calculate. For those involved in marketing, the new reverse landscape is forcing us to think more about who this loan program is meant to serve, and how best to develop the appropriate messaging in a tightening net of eligibility.
At times, the creative marketing process in the reverse space is a clearly defined set of parameters. At others, subtleties continue to create a murky misalignment of intent and response. The proposed changes this year are designed to ensure the program’s safety and security with all responsible lenders holding hands to be on board. Yet it is clear that previous borrowers with any tax and insurance default history, or others who retain very little debt but still want all their funds up front, may be denied access in the new reverse world. It is now up to the industry to not shy away from its responsibility and use the new guidelines (once they’re confirmed) to build a better picture of the ideal reverse mortgage borrower.
Of course, the intended product changes are being designed to smooth these corners of the marketing spectrum while improving the FHA’s balance sheet, but it does beg the question: What are we now? Which socioeconomic segment of the senior community does the government, the FHA and other influencers of this program really want this loan to serve?
In the past, pressure to ensure we were soliciting the “right” kind of borrower meant a constant grappling of who that really was. Coupled with undeniable forces from the sales floor, which is providing constant feedback on what’s working and what’s not, the message began to gravitate toward the core customers who converted the best: mainly, a senior who needed funds to pay off an existing mortgage or cover additional household expenses.
Now that understanding may be more difficult. Together with new product guidelines, the marketing message has to find new ways to appeal to seniors who may not otherwise have considered a reverse—the clients of financial planners and wealth management advisors, for instance, as well as potential homebuyers using the underutilized HECM for Purchase. With this come more B2B marketing, new relationships and, potentially, a very different kind of borrower.
On the consumer front, the dilemma remains but now with a little less focus on the guideline fringes. Should we include any mention of those seniors who desperately need the funds to stay in their homes but are in danger of default? Alternatively, do we market to the credit-worthy, financially stable boomers who are all too easily accused of throwing their money away in the name of a “retirement lifestyle”? As an advertisement is constructed, are you sending the wrong message by saying, “no credit score required” and “tax-free cash”? Is a photo of a smiling, attractive (young?) couple enjoying a sunny day sailing on a yacht too aspirational and “lifestyle” as to give the wrong impression? Are such images soliciting unwelcome scrutiny?
The proposed changes have also highlighted the way in which it is becoming increasingly appropriate for the HECM program to decide how senior homeowners should be “allowed” to spend their hard-earned equity. Even for a Democrat, this is hard to swallow! There is no doubt that every borrower should be held to normal loan obligations and be accountable for any shortfall, but is it the industry’s responsibility to tell them how to spend those funds? Furthermore, is it irresponsible of the marketer to use images of a couple sailing if it might then influence a borrower to buy a boat and sail away with their newfound wealth without any consideration for their potential needs further down the road?
The impending changes cement the long-term sustainability of the reverse mortgage program, but it’s going to be another interesting ride as we center our marketing aspirations while negotiating the new economics. Certainly, it was those very ends of the spectrum that provided the loan numbers to support many reverse businesses and therefore players with less knowledge and experience of the product’s nuances may struggle. But it also means that many seniors who would responsibly use a reverse mortgage to age in place—using their only asset, their equity—might be denied their loan and fall through society’s cracks. Aren’t they the stories that make this program meaningful for those that do it day in and day out? Without a doubt, they provide the testimonials that have the most dramatic consumer impact, offering strong, persuasive counter stories to negative media attacks. It’s ironic that these same borrower stories are also the ones the media focuses on when such borrowers fall into trouble.
At the very least, the negative perception of this product will dissipate as the new guidelines process more “vanilla” lenders and sensational media opportunities decline. Maybe it will be the push we need to crest that elusive “tipping point” of senior acceptance—that tipping point that we all know is out there.