Lenders, Builders See Mutual Reverse Mortgage Benefits

Many reverse mortgage lenders have identified the reverse mortgage for purchase loan as a potential opportunity for expansion, though few are capitalizing on that product segment. Marketing the HECM for purchase, lenders who have successfully made inroads into the market say, requires relationships with realtors, as well as those who develop and market to the 55-plus housing demographic.

That demographic is vast, said panelists at the National Reverse Mortgage Lenders Association conference in New Orleans last week.

“If we really understand the opportunity with the HECM for Purchase, this could be the most exciting time,” said Ron Fetcher, of Security One Lending. Security One has recently launched education efforts on the product to educate and build referral relationships with Realtors. 

Cherry Creek’s 1st Reverse Mortgage USA has also targeted the market segment, with an eye toward the growing demographic.

“The numbers of baby boomers, and [the fact they are] living longer mans they are going to need housing options more and more down the road,” said Tim Harder, vice president of business development for 1st Reverse Mortgage USA. 

The company has recorded success in the reverse mortgage for purchase market, both through connections with real estate agents and builders who are focused on the aging demographic. But while those opportunities have been identified, Harder said, the sale of the purchase product requires building relationships and ongoing education among affiliate partners.

“This product, in 2003 and still in 2013 is about eduction and the opportunity to be out in front of Real Estate agents and homebuilders,” Harder said. “There are no secrets. It’s still about getting out in front of people.” 

Offering continuing education credits is one mechanism that has proven success among lenders, as has attending open houses and association gatherings. 

Among a recent meeting of 1,100 Realtors in Southern California, only 12 had heard of the HECM for purchase, Fetcher said. 

“Let them know it exists,” he said. 

Homebuilders say the loan can improve sales potential by offering more buying power for consumers. 

“It caught us by surprise that many [consumers] were not doing [the HECM for purchase] for affordability reasons,” said Tim McCarthy, of homebuilder Traditions of America, who attributes 20% of his business to the niche reverse mortgage loan. “A lot were thinking about it as ‘I think I can now buy more.'”

The loan can benefit both the homeowner and the builder mutually because of the additional customization options owners can afford through the HECM for purchase, McCarthy said, noting a typical builder profit margin of 10% to 15%, with customization netting 35% instead. 

“Customization enhances profitability,” he said.

Written by Elizabeth Ecker

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