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Hello. This is Inflation Calling…

hello inflation is calling
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Reopening the conversation with old prospects

“Hey. Remember that time when we met and talked about a reverse mortgage 3 years ago and you said no? Do you want to talk again?”

 

That approach would be somewhat believable if it were from a Saturday Night Live skit. No reverse mortgage professional with a functioning cerebral cortex would ever utter such words. However, it’s easy to find oneself saying something that while less abrasive, pretty much reflects the same sentiment- ‘You said no and I can still help you!’.

 

While you typically ‘think in reverse’ 16 hours each day your previous potential borrowers do not. Count yourself fortunate if they even remember your name for the handful of you reading who kept in touch with newsletters, birthday cards, or phone calls- congratulations.

 

Our once-normal lives are much more expensive thanks to the aftereffects of the massive economic stimulus and money printing in the wake of the COVID-19 pandemic. Today many older homeowners could find themself facing a financial thanks to record-high gas prices and stubborn inflation for food, services, and durable goods. Would these unfortunate economic conditions cause them to think of you first, pick up the phone, and spill out their problems? In rare instances yes, but not likely.

 

Action is what’s required. And this is where a better approach gets you in front of an informed, motivated, and qualified prospective borrower. Here’s one example.

 

“Hello, Mrs. Hayes. This is Shannon. We met in August 2019 Yes, before the coronavirus. How are you? The reason for my call was to check in and see if anything has changed for you since we last spoke.” If you took good notes briefly mention any important facts they shared during your first meeting.

 

After that, it’s your turn to actively listen and take notes.

 

They may say ‘not much’ or ‘nothing’ in reply to your query. They may explain that they’re concerned they’ll run out of money due to inflation. Regardless, here are four suggested conversation starters.

 

First, interest rates are higher than they were a few years ago but we have no idea if or when they’ll go back down in the coming years.

 

Second,home values are likely still at their peak which increases their ultimate cash benefit. Hundreds of local market housing prices are still 30-40% above their pre-pandemic levels 

 

Third, ask how they feel about their accumulated home equity. Do they consider it to be safe? In an ideal world, what would they like to do with the equity that’s grown over the years?

 

Fourth, if they’re getting squeezed by inflation ask how they’ll generate the additional cash flow needed to absorb higher prices. 

 

You may have noticed that this ‘check-in’ call allows you to ask open-ended questions and listen to learn what financial pressures they face. Keep it casual and empathetic. Your two goals are to actively listen and then schedule a follow-up meeting (in-person or remote) to explore a reverse mortgage when suitable.

 

 

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2 Comments

  1. FHA/HUD changed the LTV making it harder.to get a reverse mortgage.

    • Which instance are you referring to? In the last five years, HUD/FHA has not lowered HECM PLFs (I guess that is what you mean by LTVs). Yet that is not all they did. HUD also lowered the floor for the expected rate used in determining PLFs from 5% to 3% which further eroded a higher PLF structure. (Since you do not mention the MIP structure that was changed at the same time as the PLFs and the expected rate floor, I do not address it either although perhaps it should be.)

      While HUD/FHA HECM PLF changes directly impact HECMs, they may or may not indirectly impact either proprietary or single purpose reverse mortgages as well, but HECM PLF changes have never impacted either of the other two types of reverse mortgages DIRECTLY.

      The important point is that HUD alone is not responsible for our loss in reverse mortgage originations. There is a lot of valid reasons for this loss such as marketing that misleads, noncompliant sales (pushy) tactics, industry generated myths, and a general failure on almost everyone’s part to quickly reemphasize first time HECM borrowers (rather than trying to get existing borrowers to refi) in the face of rising indexed ten year and annual CMTs. The amount of wasted time and dollars in marketing to existing borrowers in the face of rising indices was astounding.


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