Reverse mortgage lenders in Puerto Rico say they are only scratching the surface of the industry, as stable home values, high homeownership rates, and a significant number of senior homeowners contribute to ideal conditions for a ripe reverse market. While two companies, Senior Mortgage Bankers and Money House, currently dominate the reverse mortgage scene, others, including U.S.-based reverse lender Generation Mortgage, are eager to get in on the action.
Joseph Levis, president of top-20 lender Senior Mortgage Bankers, says his company is only scratching the surface of the industry and that there’s still a huge market to be gained. And both Levis and Generation Mortgage’s Luis Alberto De Jesús Solís, who manages Generation’s newly-opened Puerto Rican branch, cite a more stable home market as a key reason for thriving business.
“In the case of home values, I think that in comparison to most of the states, values here are a little more steady, especially in home prices that range from $75,000 to $250,000 that are the great majority of reverse mortgages in Puerto Rico,” says Levis.
Last month, Generation became the first Top-10 reverse mortgage lender to open a retail branch in Puerto Rico, and Solís says that so far, the response has been very positive. Solís, who came to Generation from a career with Senior Mortgage Bankers, says this is partly because Puerto Rican home values weren’t hit as hard as those in the States.
Another factor Levis believes plays a part in Puerto Rico’s reverse industry is its high homeownership rate, at 74%, compared to 67.8% as of 2008 for the U.S. Additionally, 2010 U.S. Census Data shows 27.5% of Puerto Rico’s homeowners are 65 and older; 2008 data shows households in Puerto Rico are more likely than those in the United States to contain at least one person 65 and older at 29.3%, compared with 23.2%.
While a growing proportion of reverse mortgage proceedings are done over the phone in the U.S., Solís says the Puerto Rican way of doing business is very different, as they almost always employ the “kitchen table” way of doing business.
“We use an old school system where people come into the office. We have an office on the most busy avenue in San Juan,” he says. “Probably 100% of our loans are face-to-face originated. That’s a big difference from the way we do business in the States. In Latin culture where family is very important, they like to talk to you directly.”
At first, Solís recounts, no one wanted to take on Puerto Rican loans, until it became evident that the market was stable.
“After they see what Puerto Rico has to give, everyone wants to give [loans]. Urban [Financial] is here, SunWest just came in,” says Solís. “It’s good and secure and safe to do business with Puerto Rican properties.”
While other U.S. companies have a wholesale presence in Puerto Rico, Generation funds its originations the same way it would any U.S. loans. Senior Mortgage Bankers also funds its own loans, and Levis says they rarely utilize their warehouse line of credit. He says the turn-time for closing on reverse mortgages is about three weeks, considerably less than the more typical 45-60 day timeframe that is more common in the U.S.
Solís says Generation Mortgage is on its way to close 20 loans this month, with a Puerto-Rico based staff of three reverse mortgage consultants.
“We are planning to grow month-to-month,” he says, making note of Generation’s launch of a local marketing campaign with newspaper, radio, and TV ads. “In a short time, we will be close to Senior Mortgage Banker and Money House.”
Levis, president of Senior Mortgage Banker, says he doesn’t really view Generation Mortgage as competition, since there is so much market potential in Puerto Rico. He says Senior Mortgage Banker is closing 50-60 loans per month and is looking to expand its team of 12 reverse loan officers.
However, Solís considers himself to have a big part in getting the reverse mortgage industry going in Puerto Rico, and he’s confident that Generation’s presence will grow there.
“What we are doing is being more aggressive, but at the same time, I was the one who had started this movement,” he said. “The thing is, I know exactly where we need to go to get our market working. We are a little bit more savvy in relation to our business, and that’s the reason we can do 20-25 loans with only three salespeople.”
Puerto Rico endorsed more than 1700 reverse mortgages in 2010, according to ReverseBase, and both Levis and Solís expect a growing market. And while there may be differences in home values and the way the process is carried out, there aren’t any technical differences between reverse mortgages in the U.S. and Puerto Rico, as the Department of Housing and Urban Development regulates them in both regions.
Written by Alyssa Gerace
