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Brokers get ready to dominate reverse mortgage lending

Why some say they have a better shot at success

There’s been a lot of buzz lately in the forward mortgage world about the return of the mortgage broker.

It’s a tough time in mortgage lending right now, and although most lenders saw volume decline or increase marginally in the past year, broker shops appear to be thriving despite the downturn, which some credit to their flexibility and personal touch.

Could the same be true for reverse mortgage brokers?

The HECM space is certainly struggling just as much – if not more – than the traditional forward mortgage business, with recent data showing endorsement volume has fallen to a low the industry hasn’t seen in 14 years.

Some reverse mortgage professionals say brokers have a better shot at weathering the downturn.

“We’re seeing a resurgence,” said Darius Aram of California-based Aramco. “We’re seeing the guys who went branch wanting control back over their operations.”

Aram said his company has talked to a number of brokers who are looking to leave larger lenders and return to being broker.

“They went W2 for the longest time, and they lost their ability to run their business and they felt like they were hurting,” said Aram. “They want to come back and be brokers again.”

Beth Paterson, with Reverse Mortgages SIDAC in Minnesota, has been a broker for 13 years. She said she believes the broker’s ability to offer a personal touch gives them a leg up in a tough market.

“The benefit to being a broker is being able to have a personal touch,” Paterson said. “We offer more than just, ‘Here, sign the application.’ We work with them so that we can understand if there are other issues, bigger picture-problems. We’re available to help even after the loan has closed.”

James King, a broker for McGowin-King Mortgage in Alabama, said he thinks it’s this personal touch that helps brokers better navigate the underwriting process, ensuring the loan makes it to closing.

“The underwriting process is just getting harder and harder for HECMs,” King said. “Typically, we are able to spend more time with each of our borrowers than somebody who’s in a call center or cubicle who has got to churn them, and in this current underwriting climate, I think that’s a big advantage for us.”

King also pointed out that brokers can place a loan with the lender who is more likely to close it, as some lenders may be more willing to accept manufactured homes or other unique property types. And if a loan is denied, they can shop it to another lender.

“In this climate, it’s even more important that you never lose anybody, because the deals are harder to come by,” he said. “Being light on our feet, being able to jump to another lily pad, is beneficial when we run into some resistance from a lender.”

Because of the flexibility and control the role affords, King said he thinks the industry will see a rise in brokers.

“I hear of nobody going in the other direction,” he said. “I know that there’s flow toward brokers.”

Aram echoed this idea.

“I believe wholeheartedly that the industry is going back to a simpler model. Brokers are recognizing the control that they have, they’re recognizing that by being in a broker shop and going away from call centers, they can make more,” Aram said. “To ignore this is to ignore a massive movement in the mortgage industry.”

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