When HUD released changes to the HECM program last fall, it incited a wave of headlines as news outlets across the country attempted to explain how the revisions could impact senior consumers. On the whole, the media coverage has been notably positive, as financial experts and FHA representatives touted the changes as a step in the right direction, further regulating the industry and making the loan safer for consumers.
In effect, the new guidelines presented an opportunity for the industry to launch a fresh conversation with the public about how a reverse mortgage can benefit retirees looking to achieve financial security. The question now is: How can the industry sustain this momentum and propel it even further? Everyone agrees that in order to raise the product’s penetration rate, we must improve the public’s perception of reverse mortgages. Positive headlines are a major step in the right direction, but in order to create real change, professionals in the industry need to step up to ensure the conversation doesn’t die.
Tracking the Coverage
As part of the industry’s Extreme Summit PR campaign, NRMLA has been diligently tracking the HECM’s press coverage in an effort to better gauge the public’s evolving perception of the program. Although the association has been monitoring press coverage for the past four years—assuming what it calls a “war room” approach by aggressively responding to media inaccuracies—it is now tracking each article’s number of impressions, meaning the estimated number of people who read the piece based on circulation statistics.
The Extreme Summit’s goal is to promote a 3:1 ratio of positive coverage in the press. But as NRMLA’s Marty Bell reported at the association’s New York meeting in March, the numbers have exceeded that goal and the product has been generating more positive press than perhaps ever before, with the positive reports considerably outweighing the negative.
Liberty Home Equity Solutions CEO Otto Kumbar, who is spearheading the Extreme Summit campaign, says the uptick in positive press is a result of both the changes and of the campaign’s media outreach efforts. “The industry, working through NRMLA, has helped FHA make the product significantly better for consumers and safer for the government to insure,” he says. “NRMLA and the Extreme Summit have been proactively engaging the press on the changes and the positive implications for consumers and the government.”
Generation Mortgage Company CEO Colin Cushman says the program changes have helped the media see the product in a different light. “The new HECM regulations have required the industry and the media to rethink the role the product should play in the overall economy. Before last October, most lenders relied on the lump-sum disbursement of cash as their primary sales strategy,” he says. “Since the regulations essentially eliminated that sales driver, the media now has the ability to report more on the value offered by the HECM program rather than on the downside risk of suboptimal use of equity… Another motivation for the positive coverage is the overall shift toward positioning HECMs as a financial planning tool, which is resonating with the media.”
Experts Weigh In
Part of the campaign’s effort to push for positive media attention includes the funding and promotion of academic research about the HECM. In the past several months, two reports were published in the Journal of Financial Planning that detailed the HECM’s utility in retirement planning. These reports led to impactful headlines in the Journal—an important publication targeting a key professional demographic for the industry—and provided credible, unbiased information for those reporting on the product for mainstream media outlets.
In December, the Journal published an article titled “The 6% Rule,” by Gerald Wagner of Ibis Software. In the piece, Wagner plays off what financial planners refer to as the 4% Rule, which dictates that a retiree can withdraw 4 percent from their portfolio in the first year, increasing subsequent annual withdraws to accommodate cost-of-living changes, and not deplete the portfolio throughout a 30-year retirement. Wagner creates what he calls the 6% Rule, which demonstrates how a retiree can utilize a reverse mortgage in order to make an initial draw of 6 percent and still maintain a high rate of spending success for 37 years.
In another recent Journal article, financial experts David W. Johnson, Ph.D., and Zamira S. Simkins, Ph.D., explain how HECMs are likely to play a pivotal role in retirement planning in the coming years because of the recession’s impact on traditional retirement assets. Outlining the details of the loan, the authors claim that while the program has had a negative reputation in the past, this may change as more people turn to it. “Current and future retirees need to re-examine their views and consider including a reverse mortgage as a part of their retirement plan,” their report concludes.
According to Kumbar, studies like these are essential to getting financial advisors to understand the benefits of the HECM. “They help the financial planning community decide under which consumer circumstances a reverse mortgage helps,” he says. “They also drive a broader understanding that reverse mortgages should always be considered in everybody’s retirement planning.”
Reza Jahangiri, CEO of AAG and The Reverse Review’s senior publisher, says research is an important part of changing the public’s perception as well. “Research studies are one of the key ingredients to educating the public on the HECM program. The more research that is done on the efficacy of the product, the better we can shift the mindset of finance professionals and seniors at large,” he says. “We all know the facts cut in our favor and how useful a tool the HECM can be, so I think it’s hugely important to have as many studies conducted as possible on the impact of the product.”
Cushman agrees that academic research is essential, and says it plays an important role in grabbing the media’s attention. “Research reports raise the profile of HECMs in the minds of the media and provide an automatic news hook upon which writers can build their own stories. It is very common for the media to discuss new or alternative uses for an existing product, so the ‘new idea’ that HECMs can benefit a wider audience than just needs-based borrowers has really struck a chord with writers and will likely lead to additional coverage in mainstream publications.”
The Media Takes Note
While NRMLA’s press audits review coverage in all media outlets across the country, it’s the larger, more popular outlets that garner the most impressions and therefore have the largest impact. In the past two months, a handful of articles have been published in major outlets that refute misconceptions about the product, outline the recent regulatory changes and explain how the HECM could be a viable solution for some seniors.
The New York Times is among them, publishing an article titled “Retiring on the House” in mid-February that refuted the misconception that reverse mortgage lenders take an equity share in the borrower’s house. The article pointed out that lenders like Generation Mortgage Company are working hard to demonstrate the product’s ability to help retirees meet long-term financial goals. “As baby boomers age, reverse mortgages are expected to gain popularity as a means of covering living expenses,” it stated.
A month later, Reuters published its own report, also noting that the HECM market will likely gain steam in the coming years. “Brokers and bankers say the 77 million retiring baby boomers will likely help fuel further growth in the loans in the coming years, making the business a growth spot in a home loan market where volumes have recently been declining,” it stated. Titled “U.S. Retirees Return to Reverse Mortgages, Big Banks Stay Away,” the piece explained how FHA’s program changes have made the loan safer for consumers, and that the product, now offered by specialized lenders instead of big banks, can be a viable option for select retirees. “For some homeowners, reverse mortgages can fill a real need.”
Finally, at the end of March, the Wall Street Journal published “A Kinder, Gentler Reverse Mortgage.” The piece outlined the details of the loan, also stating that HUD’s changes have made the product safer for consumers by preventing homeowners from spending the loans proceeds without reserving enough for property taxes and insurance. It includes input from financial experts who call the
changes positive and explain that the loan is a solid option for some seniors looking to age in place.
Articles like these are hugely important to the product’s growth. “The themes in these articles often get picked up by other news outlets and local papers that combine it with a consumer story in their area,” Kumbar says. “With all the myths about reverse mortgages still rattling around from decades ago, current news stories help consumers make the best choice for their particular circumstances based on today’s facts.”
Sustaining the Momentum
While this latest surge of press coverage is promising, not all of the reports are positive. Many spell out the pros and cons of the program, with some concluding that despite recent regulatory safeguards, the loan is still complicated and costly.
Such reports are unlikely to disappear entirely, even after HUD’s Financial Assessment introduces further consumer protections to help keep headline-grabbing foreclosure tales at bay. The non-borrowing spouse issue is one sticking point in particular that may continue to draw the ire of media pundits, and until HUD implements guidelines to curtail this problem—which the agency says it’s working on—there is little the industry can do.
Just before press time, an article appeared in The New York Times’ Dealbook section that discussed children of HECM borrowers who were facing foreclosure on their deceased parents’ homes just weeks after their passing, forcing them to muddle through a “bureaucratic maze” to keep the home. Articles like this one serve as a reminder that, while the needle has moved in a slightly more positive direction in the last six months, the industry still has a way to go before things turn around. Bell says that although the ratio of positive to negative press for March was approximately 3:1, the impressions could lean toward negative for the month, because the unfavorable stories appeared in highly visible outlets. So while things have taken a more positive turn in the past six months, the climb is slow and not without its setbacks.
Still, professionals can take some action to propel the positive momentum. According to Kumbar, originators can participate by spreading the word. “This can be as simple as sharing reprints of the national stories, or finding outlets that are interested in a local twist on a national story,” he says, adding that it’s also important to talk about the product with “influencers” in their areas, including financial planners, Realtors and community leaders.
Cushman agrees. “The most important thing we can do is create third-party advocates among consumers and financial planners, who can then also serve as sources for the media,” he says.
But revamping the product’s reputation will be a prolonged effort. “Changing public perception is almost always a marathon. We need to maintain a steady pace over a long period of time,” Kumbar says. “We also need to help everyone understand how the product has changed. It is literally a new reverse mortgage, and the ‘new’ designation is important to let people take another look at a product they may have only partly understood.”
Cushman says that to maintain this momentum, reverse professionals need to publicize the good work they do. “It is important that the industry be open with the media and take advantage of opportunities to communicate success as it occurs,” he says. “The recent positive coverage shows that writers are open to viewing HECMs in a new light, but the industry has a long way to go to overcome the negative press coverage garnered in the past.”
According to Jahangiri, in order to overcome the challenges and grow this market, reverse professionals need to focus in the future and continue to work in the best interest of the seniors they serve. “It’s important to think long term. We need to not look at today’s earnings, but at the longevity and future of our product. We know we are not hitting the product penetration levels that we should be reaching based on our demographic’s needs. That will change as long as we think several steps ahead and make sure we
do what is best for seniors, not profits,” he says.
Cushman says that the demographics will work in the industry’s favor. “I think we’ll see an increasing amount of media coverage around retirement issues as more baby boomers enter their 60s, and that translates into a greater number of opportunities to tout the benefits of HECMs.”
