So how do you feel about the future of the reverse mortgage business? Maybe not so good, given that our compensation has been substantially
reduced. But let me share with you why you need an attitude adjustment.
It’s a matter of perspective. You’re looking at the glass as half empty, because you are comparing it to what we had a few months ago. Let me change your perspective.
Selling the adjustable product is something we did exclusively about four years ago. Back then, we had a lesser back-end compensation than we get today, and we made a decent living doing it. It’s also relevant to appreciate that there are peaks and valleys in every industry. That’s normal. A true professional committed to this industry takes the good with the bad and has a long-term view.
So let me make the case for
why the future is bright today for the reverse mortgage industry. Every single day, 11,000 people turn 62. The average net worth of a senior household excluding their home is just over $28,000. Those two facts tell us that the future of the industry is very bright. Today, the reverse mortgage industry has about a 2 percent penetration in the market. Down the road, 15 to 20 years from now, it’s likely to be 20 to 30 percent. It’s pure math.
Our market is growing by leaps and bounds because of demographics, coupled with the fact that folks are ill-prepared for retirement and their houses are their biggest asset. There is no way our industry doesn’t have a bright future. Also, have a little perspective on the product itself. We’re giving people money that they never have to pay back, as long as they stay in their home. And it’s got the blessing and the seal of approval of the U.S. government. Further, it doesn’t take a big out-of-pocket expenditure for a customer to do it. How good is that? If you were dreaming, and had no limitations, you couldn’t come up with a better product than that. Never lose sight of that fact. It’s the greatest product I’ve ever seen!
Some may be concerned about the looming changes coming from HUD. Consider this: The pure economics of our business from HUD’s standpoint have never been better. Home prices in the United States are now increasing 10 percent per year, after a historic fall over the last four or five years. Secondly, a while back HUD changed materially the mortgage insurance premium paid by borrowers on a monthly basis, increasing it substantially. That’s why today, the economics of the program to HUD have absolutely never been better. The book of business being written now is clearly cash positive for the government, and that won’t change in the near future.
But let’s also talk about the elephant in the room: the effect of HUD possibly limiting draws on the Standard adjustable-rate product. Will that change materially reduce the number of people who will take a reverse mortgage? The answer is a resounding no. Here’s why: Folks are taking reverse mortgages not only for the immediate benefit, but also to support them in the coming years. Limiting the draws helps them budget for the future. And it’s all in how you present it. So yes, we as originators will have to “up” our sales skills. We can’t do that? Sure we can! And in the end, it helps the customer be financially responsible regarding their future.
So here’s the big picture. Let’s have a little perspective. Today our compensation as originators is better than it was four years ago, selling the same adjustable-rate product. Let’s also have confidence in the great business we are in and accept the fact that we have to improve our sales skills and appreciate that HUD is making intelligent, long-term changes to the program that are good for everyone.
