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Academic study links consumer knowledge to HECM demand
Misinformation, fear, a biased media? Are these the factors stopping older homeowners from utilizing a reverse mortgage?
A recent report entitled “Reverse Mortgages: What Homeowners Know and How it Matters” states that knowledge of the HECM product is strongly associated with consumer demand. Today the knowledge of reverse mortgages in the general public is fairly low. The report is co-authored by Dr. Thomas Davidoff, associate professor for the Strategy & Business Economics Division at the University of British Columbia Sauder School of Business. Davidoff focused on the level of financial literacy amongst homeowners 58 and older and how their knowledge of the reverse mortgage influences the overall demand for the product.
Surprisingly 97% of survey respondents have heard about reverse mortgages with only 2% having any practical experience with the loan…
Download a transcript of this episode here.
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3 Comments
More education, really? To some degree.
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Yet, we are seeing applicants whose applications have received CNAs (case number assignments) dropping out of the closing process at a rate greater than 40%. If our education is OK and we are reaching out to more professionals with influence on financial decision making, why are a growing number of applicants falling out AFTER case number assignment? Why doesn’t this critic address this situation?
Is the author aware of the drop in principal limit factors since September 29, 2013? Is he aware that borrowers CAN voluntarily make payments of interest?
The conclusions deal in the obvious, not in the troubles we are experiencing despite our education. His suggestions seem to ignore what is true of the HECM program especially after September 29, 2013.
Ahh yes, education. After all, it’s at least part of the answer to every problem imaginable, isn’t it? And better communications too… wouldn’t the world be a better place if we could all just get along?
If the HECM industry is waiting for 40+ million people to become better educated in order to see market share markedly increase… well, it’s gonna be a long wait.
I’m 55 and I’m pretty sure that even if I started today, by the time my next door neighbor becomes more educated about a mortgage product, I’m almost positive that I’ll be dead and buried.
There’s a lot I could offer on this subject… but for the moment consider that no one wants to learn about a mortgage. In fact, consider that no one has ever wanted a mortgage in the history of the world, and if you have no interest in having something, why would you want to learn about it?
No one wants a mortgage… ever. They want a house and the mortgage becomes the way to get the house they want. No one wants a car loan. They want a car.
I was once invited to listen to a HECM LO talk to a room full of retirees… he brought slides and everything. He was obviously informed as to the inner workings of the HECM… maybe he had read HUD’s website or whatever.
He started out saying something like… “How the HECM Reverse Mortgage Works for Retirees.” After that I remember some flow charts followed by a photo of some older couple holding hards, if I recall correctly.
It’s hard for me to remember exactly what came next because I, along with everyone else in that room had either started checking their iPhones, gone to the rest room, or simply nodded off.
It’s not about what it is or how it works. Those things don’t matter until someone is already interested in using one. And for what can you use a HECM, HECM LOC or HECM for Purchase? Well, about a million things, I’d say.
What’s a HELOC for? Is it for replacing a roof? I guess so. Is it for paying for college? If that’s what you want to do, sure. What if I want to pay it off in three years? I don’t see why not.
Is it a good idea for me to get a HELOC? Oh, who the heck knows?
Unless you know a whole lot more about my situation and how the HELOC might be applied to my situation, in comparison with the alternatives available, no one can say whether it’s a good idea for me to get a HELOC or not.
A HECM in whatever variation is merely a multi-purpose tool. It can be used for all sorts of reasons. It’s not a good or bad idea, no more so than a hammer could be considered a good or bad tool.
A hammer is a great tool for hammering nails, or maybe breaking glass… but if you try to use it as a screwdriver… well, that probably makes it a bad tool.
The industry is its own worst enemy here. It’s an industry that’s addicted to “generating leads” by advertising, and the only things you can say in 60 seconds to make someone call your 800 number basically is:
“If you need money in retirement, call us and hock your house.” (I’m paraphrasing, of course.)
So, if I don’t NEED money today, I guess I don’t need to call, right? I certainly don’t think I need a mortgage, so why would I take the time to learn about one?
Stop trying to show people how smart you can be and start learning about what questions to ask so you can gain a through understanding and offer the best possible advice.
Show people how it can be used to facilitate whatever it is that they want or need to do… not how it works. If it’s truly the optimal way for them to go, they’ll see that and so will their trusted advisors, their children, et al. Stop with all the selling, and start treating everyone like you’d handle your own mother.
If you do that, you’ll help a lot more people in much more meaningful ways, and not only will they become more educated fast, but they’ll tell their friends too… and soon you’ll be talking to them about what their situation is…
You want people more educated, become more relevant to their lives. We’ve got 95 year-old grandmas using email and Facebook… a few years ago they were all complaining that they couldn’t use a computer.
Isn’t it amazing what a little relevancy can do to a learning curve…
Martin,
Pragmatically insightful.