The Challenges of Transitioning Between Reverse and Forward Mortgages

A climate of generally reduced reverse mortgage volume has led to more companies expanding their offerings into the traditional mortgage space. Companies like iReverse Home Loans and Nationwide Equities have made their expansion efforts into the forward space clear, but reverse mortgage practitioners seem split on whether or not reverse mortgage products are generally more specialized than traditional products.

Making the transition from reverse mortgages to forward, or vice versa, can be a difficult task for anyone who wants to make his or her unique presence known in whichever space someone operates in. While the challenges for moving from one business into the other can be unique to each, either transition has its own set of difficulties.

Moving from reverse mortgages to forward

Though he initially started his work in the forward space before transitioning into reverse, Sprout Mortgage vice president Kenneth Peskin observed shifting realities in the reverse mortgage business that caused him to seek out a desire to move back into the forward space. This was easier said than done, however, because the reverse mortgage industry saw him develop a set of unique skills that aren’t necessarily everyday requirements in the forward mortgage business.

“I think tracking the HECM endorsements and looking at the regulations, I saw the direction everything was going. I feel like I got in early, and I left a little early,” Peskin tells RMD. “But, it’s not a matter of leaving, it’s a matter of adapting who you are and adapting your business. That’s the message I think we’re all struggling with in the reverse space: how do you adapt in a way that’s going to maintain who you are? That’s the challenge here, and going into the forward space, that’s something you could potentially lose from a cultural perspective.”

Other, more innate issues surround the difference between conducting forward and reverse mortgages, Peskin said. Forward mortgages are highly-commoditized and competitive, and forward customers are primarily used to a speed-based transactional relationship that eschews the more consultative nature often found in selling reverse mortgage products.

“I had to remind myself that [the forward mortgage industry] is a commoditized industry that doesn’t reward that kind of educational or consultative nature,” Peskin added. “In fact, it penalizes it.”

For Peskin, this meant finding an identity that would allow him to conduct forward mortgages while retaining the interpersonal and consultative skills he’d cultivated while originating reverse mortgages, and he found that in the non-qualified mortgage (non-QM) space.

“You don’t necessarily want to change who you are, but you want to expand on what you represent,” Peskin said. “I think that can best be done by focusing on the reverse mortgage mentality’s core strengths, which are to keep doing what you’re doing: education, culture and the uniqueness of your craft.”

This is what the non-QM space offers, which is why Peskin found a home that allows him to differentiate himself among others in the forward mortgage industry, he said.

“Your customer and company know who you are as a specialty lender, who provides this consultative process, and you own your craft and product,” he says. “All we’re doing right now is reacting to our customers’ needs, which is to expand on some of these specialty lines and products. And that’s a great way, I think, for someone to take that first step into the forward mortgage business, and provide a product to the customer that is more similar to their [former] product than not.”

Moving from forward mortgages to reverse

The transition in the other direction contains no shortage of its own difficulties, particularly because moving from a more transactional relationship into something that’s primarily more consultative and educational can be a notable disruption for a loan officer only used to forward lending. This is according to Scott Harmes, National Manager of the C2 Reverse Mortgage Division of C2 Financial Corp.

For Harmes, transitioning into the reverse mortgage space from his comfort zone in the forward business came with a lot of anxiety, which eventually led him to put an emphasis on training for loan officers moving into the reverse space at his own company.

“I definitely had high anxiety, and handled it well with the client,” Harmes tells RMD. “That’s part of what the inspiration is behind the C2 Reverse Training Origination and Certification Program: we’re trying to eliminate that anxiety, and give these loan officers a step-by-step process in getting confident in reverse.”

Key to a loan officer’s successful transition is a focus on the core differences inherent in the experience of originating a reverse mortgage, which can be far different than what a loan officer became accustomed to on the forward side, Harmes says.

“It is a longer sales cycle, and there are broader considerations because it’s typically the last transaction that happens on the senior homeowner’s house,” Harmes explains. “And, as part of that, there’s always trusted advisors involved in the decision. […] We spend a lot of time working with the amortization schedule, which in our training, we train that it’s one of the most powerful tools in working with that senior homeowner because they’re looking for that sustainable solution.”

Another facet that formerly forward loan officers would have to become accustomed to in a transition to reverse is that because of the focus on senior clientele, face-to-face interactions are generally more required to successfully originate loans than they currently are in the forward space.

“The forward business over the last 30 years that I’ve been in it has transitioned from a face-to-face business to mostly internet or telephone,” Harmes says. “I hardly ever see my forward clients. At C2, we really stress what we call the ‘C2 Reverse Face-to-Face Advantage.’ That’s an advantage to the borrower and to us, because we come face-to-face with most of our borrowers.”

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