Ninety-nine percent of the opportunity is in front of us. By most estimates, there are 20 million to 25 million senior households that are age-, property- and equity-qualified. This year will likely see around 50,000 reverse mortgages written, giving the industry 0.2 percent penetration into its target market. While this can seem depressing at times, it really means we have an incredible opportunity to help more seniors.
The Extreme Summit is the industry’s name for a five-year initiative to increase volume and penetration. It’s built on the difference between how customers and non-customers perceive the product. According to most surveys I’ve seen, seniors who have gotten a reverse mortgage score a 90 percent-plus satisfaction rate. That’s in stark contrast to non-customers, more than 80 percent of whom say they have an unfavorable impression of the product, partly because they don’t fully understand it. We need to fix these education and perception issues.
NRMLA members brainstormed the challenges and solutions in San Antonio at the end of last year. Through surveys of industry participants, the list was boiled down to the nine most impactful ideas. Teams then developed each idea into a plan and presented it to some forward-thinking firms for funding.
Some of the industry’s leading firms made almost $2 million in voluntary contributions to fund pilots of the highest payoff ideas. If these ideas work through the pilot, the fully scaled initiative will be an investment of $30 million or more in industry growth. The three initiatives are all focused on increasing volume.
Everyone in the industry now has the opportunity to benefit from and help drive the pilot programs. Brokers, lenders, suppliers, influencers, counselors, senior advocates and regulators can help make sure that seniors thoroughly understand the product, which I believe will lead to many more seniors accessing their equity over time.
Three Simple Initiatives
Geo-targeting is literally identifying the geographic areas where sales and marketing dollars are likely to have the most success. John Lunde from Reverse Mortgage Insight has developed a model that identifies the industry’s best opportunities. As volume drops due to FHA program changes, becoming more efficient will be critical. Geo-targeting has a second benefit, because the data shows that as you increase the penetration of reverse mortgages in an area, volume increases and costs go down. It makes sense that if more people know about a terrific product, they’re more likely to tell their friends and neighbors. The next sale is a little easier and less expensive than the last.
We believe we can increase volume and penetration by concentrating resources market by market. Early next year, we’ll be sharing this data with all firms participating in this initiative. The firms can make their own decision on resource allocation, but I suspect we’ll see many choose to deploy in the target areas, driving up understanding and accelerating the education process.
Next we need to drive “3:1 positive” impressions. This is all about resources: people and content, putting an offense into the game. NRMLA has always tracked stories published about reverses, and has recently started to track impressions: how people actually see the stories.
Proactive weekly brainstorming sessions will generate ideas that will be slotted into a marketing calendar for everyone’s benefit. NRMLA is asking industry firms to step up their testimonial gathering, not only from people who needed the product, but especially from those who used a HECM as a smart financial planning tool. The best stories and press releases, however, are built on new and compelling research. The Extreme Summit will be funding a significantly expanded research effort. Columbia University’s Chris Mayer is helping the industry identify the most pressing and interesting research topics and partner with universities interested in doing the research. This initiative should produce a stream of new insights landing about every other month throughout 2014.
Finally, we need to rebrand. While it would be prohibitively expensive to rename the product, many industry leaders feel a rebrand is necessary. Thanks in part to the recent FHA changes, there’s an opportunity to reintroduce the reverse mortgage product to consumers as new.
Many of the negative views about reverse mortgages refer to a product that no longer exists. There used to be high loan origination fees (LOF), but today many consumers get the zero LOF product. The upfront mortgage insurance premium paid to FHA used to be 2 percent, and now it’s 0.5 percent for draws below 60 percent of the principal limit for the first year.
Most importantly, financial and retirement research now shows that seniors should consider how a reverse mortgage could improve their retirement plans. Taken together, these product improvements lower costs and new research is leaving the “product of last resort” myth in the past. Many seniors use the product today as originally intended: a tool to release equity over time.
Call to Action
Your participation is necessary for the success of this initiative. Early on, we discovered that no single firm could tackle this challenge. We need to leverage all the resources we have available in the industry. This starts with the fabulous and caring people who work locally in their market. This is a “ground game.”
First, strongly consider stepping up your outreach in the identified geo-target markets during the pilot periods. Your efforts will be magnified by others doing the same: increased seminars, more local advertising, increased local press and increased influencer discussions should all result in increased interest. Remember, these local markets were chosen because they already have the best return on investment (ROI) for your efforts.
Second, for the rebrand pilot markets, distribute and take advantage of the new marketing materials. These markets will see an increase in attention accompanied by significant TV advertising that will further raise the visibility of the product. The new brand (with the same name) should start to make it easier for seniors to understand the product and for you to help them decide if a reverse fits into their retirement plans.
Finally, take advantage of NRMLA’s increased PR efforts in all markets. You’ll have access to reprints of some significant and positive articles. You’ve already seen the start of this effort with positive pieces in the Wall Street Journal and The New York Times. You’ll have access to NRMLA’s marketing calendar along with more testimonials and educational materials on NRMLA’s site.
Winning the Battle
Every great product in history had to battle and overcome obstacles to become widely adopted. Even utilities that we take for granted, such as electricity, were at one time maligned and discouraged. Marketing, advertising and gritty determination for folks who wanted a better life ultimately overcame these challenges.
It’s our turn to take on this challenge for one of the greatest products ever invented and help seniors live a more secure retirement. The reverse mortgage is not right in every situation, but it can help many more people than we’re helping today. Many seniors I speak with simply want to retire in their homes and not worry about losing their homes. Reverse mortgages are tailor-made for this situation, and when originated properly to the right consumers who maintain their tax, insurance and repair obligations, there is no better alternative.
We will need to overcome many obstacles, including perception and education issues. Many of the HECMs that have been sold have been to “needs-based consumers.” The industry’s sales and marketing efforts are largely targeted toward people whose other options have run out. We should be proud of these loans. Many homes were saved from foreclosure and hundreds of thousands of seniors are living a more secure retirement.
Refocusing some of our efforts on the “planning consumer” will target the larger market opportunity. These individuals may not need the money today, but including a reverse mortgage may strengthen their financial plans. Unfortunately, some are turned off by the product’s “government guarantee,” seeing it as a handout, and by the industry’s strong direct-sales approach. We need to introduce them to the new reverse mortgage.
We need to recruit local allies (Realtors, financial planners, etc.) for this effort. Many of these individuals will be perceived as more credible, but this is early in the process; we just need the arms and legs to get the message out. Some of the Extreme Summit was modeled on the “Got Milk” campaign. In that effort, they attempted to include everyone with an interest in the product, including cookie companies and health advocates.
There are detractors of the old product, and we have an opportunity to win them over with the new product. Many of the issues identified by the product’s critics have been solved by FHA and industry efforts over the past year. Regulations and industry efforts over the past two years have made significant improvements to disclosures, steering and product cost. I’m confident the industry will keep working with FHA to continue these improvements. Even while that’s occurring, we need to be more vocal about how dramatically the product has changed and how much better it is for the consumer.
What It Is
The Extreme Summit is all about increasing volume. There are many paths and activities to get there, but it’s our litmus test for every effort and every investment. We get ideas from anywhere, encourage our critics to help us make the ideas into robust plans, investing in the highest payoff ideas in the shortest amount of time.
Admitting “we don’t know what we don’t know,” the entire program is built on experimentation. While only the best ideas get funded, they’re all turned into pilot programs with specific goals and measurements. We will either succeed (deliver volume) or learn significantly from the pilot, or both.
We let the best idea win and have a brutal process for selection—it’s the “will you spend your own money on this?” test. Outstanding ideas have been set aside because better ones proved to be more promising. Even when a plan is fully fleshed out, we ask people to find something better. Only once we fail do we declare an idea “the best for now” and proceed.
The Extreme Summit is incredibly bold in declaring a goal to grow industry volume to 300,000 by 2018. While this is only 1 percent of the available market, we don’t know if we’ll achieve it. Declaring a bold goal forces us to think above and beyond what individual companies are able to accomplish today on their own.
We anticipate this to be a multiyear, multimillion-dollar effort. If the pilots succeed, we’ll need an increased and sustained effort to win over the country. Even our success will uncover new challenges and obstacles. By design, however, the initiative was constructed so that success will create the resources to reach the next step. Every journey, including a mountain climb, starts by putting one foot in front of the other and repeating.
What It Isn’t
Defining the Extreme Summit is also about what it isn’t. Anytime there’s a new initiative with momentum, companies (or politicians) try to attach additional items or divert some of the funds. Getting ground rules about what something isn’t can help minimize this distraction.
The Extreme Summit won’t duplicate any existing NRMLA initiatives or other industry efforts. There are many wonderful things being done by NRMLA and industry firms. These should all continue as appropriate with the current budget and spending. We will coordinate wherever appropriate, but never divert or get in the way. We won’t reprioritize existing resources or efforts underway at PR and other committees. This is an incremental effort.
The Extreme Summit won’t fund other industry initiatives; it is strictly about generating incremental volume through education. There are many pressing needs at NRMLA and within the industry. If the last couple of years have taught us anything, it is that we can expect significant change. We’ll need to muster other resources if required to manage these situations.
The Extreme Summit won’t exclude anyone. While the initial program was kicked off by a handful of large firms, we want all NRMLA members to participate and benefit from the effort. We also hope non-NRMLA members join the organization to take advantage of this and other resources.
The Extreme Summit isn’t a lead-generation campaign. Companies (and whole industries) often think about marketing in terms of “brand” and “direct response.” Industry firms are doing a great job with direct response, and some even spend resources on improving the brand. To use a farming analogy, this isn’t about harvesting the corn; it’s about preparing the soil and nurturing the environment.
How We Got Here
This all started with an 8 a.m. brainstorming session at NRMLA’s annual conference in San Antonio in the fall of 2012. Much to my surprise, we had a packed house with 60 people not only attending, but vocalizing their views on our problems and presenting creative solutions. We brainstormed for more than 90 minutes on two simple questions: “Why is volume decreasing?” and “How can we fix it?”
The perception/reputation issue quickly bubbled up as a main issue. There were many other issues indentified, including lack of distribution, no remaining household names and product complexity. But as the participants
debated, it appeared that many of those issues also had a root in the perception issue. We were later able to quantify this perception issue with the surveys of customers and non-customers.
We then moved on to solutions and ended up with literally dozens of great ideas. It became clear that there were multiple solutions to the problem, so we reached out to industry participants with surveys to get a sense of which ones had the greatest support.
Some of the top industry CEOs got together to see if there was an appetite to fund an industry initiative focused on growth. We laid out the data, the proposed initiative and ground rules for the Extreme Summit. One of the ground rules was “vote with your dollars.” In other words, we would only go forward if the CEOs thought the investment was worth it. Near the end, we conducted a secret ballot of how much the CEOs would invest and ended up with a five-year initiative with funding between $30 million and $150 million.
From the surveys, we plucked nine topics and recruited project teams to develop each idea in detail. A plan was developed for each, including cost and expected payback. In many cases, they needed to tap outside experts and develop new materials. Specifically for the “rewrap” effort, the team issued a request for proposal to 10 ad agencies, PR firms and image turnaround experts.
We then ranked every idea on a classic “four-block” matrix. On the x-axis was the return on investment, and on the y-axis was the cost. The investment took into account not only the dollar spend required, but also whether or not the initiative could leverage the assets we have in the industry (local brokers/lenders, fabulous consumer reviews, etc.). We let the best ideas float to the top.
In June 2013, the CEOs did a pulse check on the ideas and asked the teams to develop detailed plans. They also reviewed presentations from four ad agencies on how to turn around the product’s reputation. And as always, we pulsed to make sure we were still willing to make the size investment.
The teams were asked to keep going for a September “go/no-go” decision.
The team ultimately chose RadarWorks to develop the rebranding campaign. RadarWorks is famous in the tech space for working with Microsoft, Acer Computer, Star Trek Into Darkness and others. They brought “product turnaround” technical expertise and a deep passion to help more seniors.
The moment of truth came just before NRMLA when AAG, Generation, Liberty, OneReverse, RMS, and Urban decided to fund the initiative. They each made a $200,000 commitment to the rewrap pilot and an $8,000 monthly commitment to the intensified PR effort. Since NRMLA’s annual meeting in New Orleans, other firms have expressed interest in joining, and Nationstar has already made a commitment.
RadarWorks will be developing the TV ads, marketing campaigns and sample materials for all industry participants. We’ll finalize our pilot markets over the next couple of months and plan to have a rollout of the rebranding campaign at the end of the first quarter of 2014.
NRMLA and the industry firms that funded the initial effort will be communicating the geo-targeting and other pilot information to their industry partners. While we want everyone to be involved, a brand must have a consistent message and feel. Anyone using the campaign will need to follow rules necessary to maintain campaign integrity.
The Extreme Summit will monitor progress and adjust the program in real time as needed. We anticipate some things won’t work as expected and will adjust accordingly. This is all data-based; our efforts must show up in applications and loans.
Please let us know if you’d like to be involved in the effort, we’ll have mailing lists to get you information in real time. We will also have public updates in various industry news outlets, and will continue to solicit broad input. Thanks in advance for your help on this important effort.