Reverse mortgage origination can be a far more complicated business than a lot of people give it credit for, especially considering all of the unique realities that dominate some specific areas of the country. Whether discussing individual laws that govern the use of the product or the sometimes wildly different way that specific localities are laid out, a reverse mortgage loan officer has to know his or her area extensively in order to be effective.

In no place can this be more true than in the state of Hawaii. A lot of individual factors set the state apart when compared with every other part of America: it’s the only state in the Oceania region of the world and is the only state that comprises a series of islands, but it’s still governed as if it is a connected part of North America.

So, the reach of the Federal Housing Administration (FHA) is given a longer arm, governing both the housing standards and the reverse mortgage business in the state.

Regional Stats:

• Total Hawaii Population: 1.4 million (U.S. Census)
• Senior Population (Ages 65 and up): Approximately 196,000 (14% of population)
• Average Home Value: $614,500 (Zillow)
• Year-over-year Home Price Appreciation: 0.3% (Zillow)

Different property types

Among some of the more unique factors that set Hawaii’s reverse mortgage business apart from its equivalent on the U.S. mainland is the multitude of different property types that aren’t shared by a lot of other American localities.

“There are a number of unique types of housing in Hawaii that other states may not have to deal with such as Ohana Dwelling Units, single-family homes in condominium property regimes, and lava zones on the Big Island,” says Wendy Oshiro, an originator with American Advisors Group (AAG) in Honolulu. “We also have a high number of multi-generational households, because living in paradise can be expensive.”

Also complicating things for reverse mortgages in the state is the sometimes wildly different property values that can sit within close proximity to each other.

“In Hawaii, especially the neighbor islands like where I am, we have $5 million houses next to $700,000 houses,” says Barbara Welsh, owner of Apex Mortgage in Kailua-Kona. “[This is] because some houses are on the ocean, and other houses are up the hill. We are [also] challenged with condos because of how many short-term rentals are here, and the ability to get a condo project approved is already a struggle with FHA anyway.”

Condos, infrastructure

Reverse mortgages on condos in Hawaii come with many of the same hurdles that are observed by originators on the mainland, but can be further complicated by factors like the generally higher property values throughout the state, along with some unique challenges related to infrastructure across the islands.

“Finding a condo project with FHA approval becomes a challenge,” Oshiro says. “Currently there are only 78 condo projects in Hawaii with FHA approval. With days on market averaging less than 30, it can be tough to find a seller who’d be willing to wait for a condo approval.”

Beyond the regulatory challenges, Hawaii also comes with some unique physical and topographical challenges.

“We run into the challenges of being in rural areas,” Welsh says. “Once you’re outside [of population centers], do you have a private road maintenance agreement? Is everything built to HUD standards? Things are a little more unforgiving, but each island does have its own challenges.”

A lot of properties are also passed between family members, since the state comes with high property costs especially in choice areas.

“With the median sales price for single-family homes in Hawaii around $800K and over $400K for a condominium, it can be difficult for younger generations to remain in Hawaii without their parents’ help,” Oshiro says. “It’s not uncommon to find three generations living under one roof so it’s important that we take time to discuss with homeowners how a reverse mortgage may impact their family’s future.”

Inter-island origination

Originators in Hawaii also have to make the unique choice compared with their mainland counterparts concerning whether they will seek business primarily on their own island of residence, or travel between islands to serve potential borrowers.

“I primarily work on the big island, the island of Hawaii,” Welsh says. “I’ve been doing reverse mortgage loans primarily on this island. If somebody’s living here, [seniors] still want to meet with the originator. […] they still want to talk, meet with and make sure that they’re making a good decision in knowing what their choices are.”

Part of the reason that Welsh keeps her reverse mortgage efforts focused on the island of Hawaii is because her business also originates forward mortgages, making repeated travel between the islands generally impractical for the purposes of her business.

Conversely, Oshiro’s base of business encompasses other islands beyond Oahu, where her office is situated.

“We serve kupuna (elders) and their families on every island from Kauai to the Big Island,” Oshiro says. “We believe it’s important to meet our customers in person so we fly out to hold face-to-face closing appointments.”

The same, but different

While originating in Hawaii absolutely comes with some unique issues, many of the challenges and opportunities reflect those of the mainland United States, Welsh says.

“I feel that every part of the country offers its unique perspective,” Welsh says. “Every area has its challenges. It’s just up to the originator to understand their community and the guidelines so that they can match the two together and help make it successful.”

Still, one aspect that could set Hawaii apart is how overridingly important it is to find a connection with a potential borrower, Oshiro says.

“We’ll go through our co-workers, moms, dads, aunts, uncles, cousins and everyone we know until we find a mutual connection,” she says. “Once we’ve established that, it’s much easier to build trust, which in turn, increases word-of-mouth referrals.”