HECM declines: A new approach needed

Shannon Hicks July 8, 2018 8

ePath 100K RM leads

Fees, lending ratios (PLFs), and market growth

The following commentary does not represent the official position of Reverse Focus, Inc.

perspectiveYou don’t have to the read industry blogs to know that reverse mortgage volumes are in retreat, not only from the historic levels, but even from the previous year. Recent data shows current 2018  HECM endorsements  are down 13% from the previous year. As reported here, last month Reverse Market Insight saw signs of a potential leveling off of market volume with May HECM endorsements nearly identical to April. However many originators in the field remain challenged in the post-October 2nd world of originating HECMs. HECM professionals are finding that many interested homeowners no longer qualify due to the last round of lending ratio or principal limit factor reductions enacted last Fall.

However, some HECM lenders and originators have bucked the attrition in loan volume posting gains in 2018. They key? Specialization

Download the video transcript here

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  1. kevin vasquez July 9, 2018 at 7:09 am - Reply

    I have been selling HECM’s for 10 years and you INDUSTRY guys never cease to amaze me with your constant touting of the benefits of educating financial planners? In all of my 10 years the only thing financial planners have done for me is KILL my deal…..a few years back I had a partner who was lifelong friends with an individual who owned a financial planning firm and we met with all of his planners and just about every single one of them disliked the HECM and we didn’t get even one deal from meeting with over 20 financial planners…and the owner of the firm was friends with my partner?…..Having said that, I have an idea on a new COMMON SENSE approach that may help increase HECM volume. Since only a very small % of seniors even have the resources to warrant having a financial planner (and if they do then they are clearly less likely to NEED $ from a HECM) and since 90% of financial planners will NEVER change their negative attitude of the HECM no matter what you say or do, then how about not putting much focus on them anymore. Why not focus on the 80% of the population of seniors who actually NEED the product because they don’t have enough money to enjoy retirement? WOW, there is a thought! oh by the way, id be shocked to see that you actually posted this comment.

  2. Robin Faison July 9, 2018 at 8:01 am - Reply

    Nice try Shannon. I agree with the financial planning professionals aspect. Now that there is NO more monies to pay costs, the CFP is definitely off the table. Thank you HUD.
    Again, ethically, to be true blue, to the age old reverse mortgage adages, the client comes first, save the senior, etc. the margin has to be at it’s ;lowest level to maximize monies to the borrower, which leaves very little monies for the originator to make a living.
    Less than minimum wage in the Trump economy, thanks to the industry knowing what is best for the government loan.
    Ben Carson is out to lunch no just out telling everyone that the reverse mortgage “is doing just fine”.Where is Montgomery? I do not see any manuever of a business plan that will adjust these problems. My underwriter said she wished HUD would back off and /or rescind some of their changes. I have been in the business since 2004, none have been rescinded in all of that time. The only positive change given this last go round, was the monthly MIP. Does not make up for the reductions of PL. and margin calamity.
    My production has never been lower. We shall see, I am glad I practiced what I preach to my clients. I hope that the industry makes a comeback, I really do. But, my days are numbered in this environment.

  3. John A. Smaldone July 9, 2018 at 10:01 am - Reply


    I feel your presentation was right on target. I can’t say I agree with the two comments prior to mine!

    In order for anyone to survive in this changing HECM world they need to follow your advise and change course.

    Going after the realtor, financial planner, home health care provider, recreational dealerships and more is the way to to go!

    Also, those out there reading my comment may agree or may no but in order to make it today, you must target a different buyer demographic!

    Start doing a lot of research, find those seniors with little to no debt on their home, go after the higher value property. In short, to reap the rewards, one must work hard and smart in today’s environment!

    There are a lot of senior homeowners out in the market place and a lot of equity in the hands of the right senior homeowners!

    Thanks again for your commentary Shannon, it was a good one!

    John A. Smaldone

  4. Kevin vasquez July 10, 2018 at 6:28 am - Reply

    Here is another suggestion. I’ve been in the mortgage industry for 25 years and for the first 15 of those years I focused on traditional re-financing. I have always implemented marketing campaigns and I continued to do so when I began selling HECM’s 10 years ago ..Buy internet leads, go on the radio or do a direct mail campaign. The best most cost effective source for leads of course is setting up a Tele marketing department for live transfers. Yes I said telemarketing. I’ve done all of those things and more. What I’m saying is spend some money on marketing for goodness sake. Bottom line is that I’d rather spend money on marketing and guarantee my metrics for incoming leads versus closed loans by having a steady stream of daily prospects then sitting around twiddling my thumbs hoping that someone refers me a deal. No decent business model can be based on the hope of getting referrals so go out and spend some money to generate some leads!

  5. Robin Faison July 10, 2018 at 12:14 pm - Reply

    Hello, I have spent my huge share of marketing dollars. And been very successful.
    But on the monies that are made available now with lower margins, there is not any monies for a MAJOR marketing mail or telemarketing (which I never believed in with seniors) campaign. I live on referrals from all my client database and professional pipeline. I do not need anyone telling me how to market to live in this business. Just like a shark. I have done it all. The monies are not there anymore. Have you looked at pricing at lower margins? Are you charging higher margins to benefit yourself to the detriment of your borrower/s? I am not twiddling my thumbs. I am ripping my hair out thanks to HUD. thanks.

  6. Marc Gertz July 10, 2018 at 6:48 pm - Reply

    The question should be, Why are the numbers declining? It has nothing to do with the market nor marketing. It has to do with the fact that the product has been decimated by the FHA and HUD. Financial Assessment was a terrible idea that didnt address the real issue which is that the HECM industry doesn’t offer impound accounts. Lowering the LTV’s is a terrible idea that hurts the public. Decisions made in the last ten years by the government with the tacit approval of the big investors that basically run the reverse mortgage business have eliminated the neediest people that the program was designed to help and protect in the first place. Loan officers and brokers who designed their entire business around this product have been given short shrift. I have spoken with presidents and VP’s pf many of the top twenty companies and the truth they have shared with me is simply this; “we dont care”. They simply want their bottom lines to be black and to heck with the people that this piece of social legislation is supposed to help. HECM’s are just another government program that was designed to help the little guy and got taken over by Wall Street fims. Just like IRA’s. Until we on the front lines write to our legislature sand demand that the program by fixed and that the little guy be allowed to qualify again, the business will continue to declien until only the most fortunate of retires will bea bale to qualify and the progrmas have no risk to the lendersthat

    • The_Cynic July 11, 2018 at 12:24 pm - Reply

      Hey Marc,

      I am still hanging onto that new word — “lendersthat.” Is that where you intended to end your comment. If not, please correct it.

  7. James E. Veale, CPA, MBT July 11, 2018 at 12:40 pm - Reply

    Both in the vlog and John Smaldone’s comment is that we work harder in Red Ocean. I remember a time when realtors, builders, financial advisers, and yes, even boat dealers were Blue Ocean. BUT this is today not 10 years ago.

    It is still strange that when in the midst of secular stagnation (whether caused by FHA changes or just the senior negative attitudes about reverse mortgages), not even NRMLA is recommending that lenders once again search for new sources of demand in Blue Ocean which is nothing more than the cure that both 1) Dr. Alvin Hansen, economic advisor to FDR and Harvard economics professor and 2) Dr. Larry Summers, former US Secretary of the Treasury under WJC and Harvard economics professor recommended for secular stagnation. Isn’t five plus years long enough to cover up the fact that secular stagnation is where the reverse mortgage industry is at? The economics professors are both renown Democrats if that is what is so worrisome about the recommendation.

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