Seeking business growth in the current rising rate environment, originators are contemplating the benefits of adding reverse mortgages to their product mix. HousingWire recently spoke with David Peskin, president of Reverse Mortgage Funding, who said entering the reverse mortgage business could allow originators to break into a growing market with significant demand that is largely untapped.
HousingWire: What are some potentially overlooked products that originators could add to their portfolios to grow their businesses in the rising rate environment?
David Peskin: As we all know, the housing market is booming right now. With mortgage interest rates steadily on the rise and refinance volume dropping, originators should immediately consider tapping into products that are less interest rate sensitive. Additionally, originators should be reaching out for products tailored to a growing demographic with a tremendous amount of housing wealth: older Americans.
Census records show older Americans, aged 65 plus, boast a homeownership rate of almost 80%. Recent double-digit increases in home appreciation have made reverse mortgages a strategic lifestyle product of choice for many older Americans. In fact, those in this age group are thinking less about mortgage interest rates and more about accessing the value in their homes in order to improve their retirement lifestyle.
Each year, one million homeowners over the age of 60 report having a monthly mortgage payment, and this demographic only continues to grow substantially. However, a reverse mortgage can allow them to eliminate monthly mortgage payments, increasing cash flow in turn.
Originators seeking to grow their business in this rising rate environment could effectively benefit by adding reverse mortgages as part of their product mix. Entering the reverse mortgage origination business allows you to step outside the world of rising rates and enter a growing market that is largely untapped with significant demand.
There are several types of reverse mortgages that originators should be aware of, starting with Reverse Mortgage Funding’s proprietary reverse mortgage product, Equity Elite. Available to clients aged 55 and older (in select states), this product allows eligible homeowners to tap into more of their home equity sooner rather than later with lower upfront costs. The program is available to a wide range of homeowners, with lending limits as high as $4 million*.
Then there is the HECM, which offers the most flexible terms for borrowers. Cash can be taken in a lump sum line of credit or monthly payments. Both programs can also be used as a home financing solution that allows older clients to purchase a new home that will better fit their lifestyle.
HW: What are some challenges lenders may face as they introduce reverse mortgage products?
DP: While the upcoming generation of retirees are likely to enjoy a retirement period of close to 30 years, a reverse mortgage can be a strategic tool for funding the retirement lifestyle they’ve always dreamed of. As an originator, delivering highly flexible reverse mortgage options will help ensure that you can help better address their financial needs.
Unfortunately, many clients aren’t always aware of all the benefits that a reverse mortgage has to offer. They may even have misconceptions about the product, so there’s an educational component involved in easing them into an informed introduction of the product.
Overall, the industry has come a long way in terms of promoting the many benefits of reverse mortgages. Clients, lenders, and financial advisors are just scratching the surface about how to use them strategically with home equity serving as an increasingly critical retirement asset. As such, reverse mortgages will continue to be a growing option as a valuable and effective tool to help meet the challenges of retirement financing.
For lenders unfamiliar with reverse mortgage products, RMF makes it easy to get into the business with its technology platform, training, marketing assistance and industry-leading support. We’ve helped many originators enter the business and turn reverses into a lucrative new line of business and we can help you, too.
HW: Are there any common misconceptions that originators have regarding reverse mortgages?
DP: Oftentimes, it seems the most common misconception about reverse mortgage comes from originators and borrowers alike: that a reverse mortgage is a loan of last resort. The truth is that many savvy homeowners have used a reverse mortgage strategically, and many owners of high-value homes elect to use a reverse mortgage to fund their retirement. Since its inception in 2012, RMF has originated over 1,300 reverse mortgages for homes valued over $1 million, including some homes valued as high as $5 million.
Savvy homeowners are using this product instead of conventional loans because of its greater flexibility. Whether it’s creating a safety net in case of emergencies, funding home improvements, covering healthcare costs, or simply freeing up cash in order to have financial peace of mind, a reverse mortgage delivers critical relief and greater financial flexibility for older homeowners and homebuyers.
With retirees becoming a growing demographic that is living longer and more concerned about outliving their retirement savings than ever, reverse mortgages are viable options to help bridge this potential financial gap. As an originator, assisting these clients in accessing their home equity, and increasing their peace of mind, can be incredibly rewarding and a strategic way to grow your business.
HW: How does Reverse Mortgage Funding aid its lenders as they look to expand their product offerings?
DP: At RMF, our relationship with our partners is one of our top priorities. We have developed a targeted platform designed to make it seamless for forward mortgage originators to easily enter the reverse mortgage space in a confident and compliant manner.
Under our robust system, each partner is provided with a dedicated internal support staff and an outside team that is here to assist our clients every step of the way. Our helpful team personally guides them through each phase of the process until they’re comfortable enough to do it on their own.
Of course, education is of utmost importance when offering a new product. That is why we offer private and group training sessions and a library of on-demand instructional videos. Along with this support comes our revolutionary line of proprietary products, cutting-edge technology and marketing resources that are fully complemented by our competitive pricing.
As the retirement needs of older Americans continue to evolve, so should their mortgage options. Reverse mortgages represent a future that offers flexibility, especially as rates rise. Expanding into this underserved market could give your business significant advantages over your competition. As a market leader, RMF understands this and is uniquely positioned to serve you and your customers to help make the transition as smooth and successful as possible.