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Kellum's Korner ... Mediocrity: The Bleeding of American Progress

National Mortgage Professional
Jun 01, 2004

Forward on Reverse ... A Bountiful Harvest: Workers Needed in Cherry-domAtare E. Agbamu, CRMSreverse mortgages, Standard and Poors, home equity, Sarah Hulbert, Seattle Mortgage Company, NRMLA Imagine for a moment that we are traveling to a land called Plum-doma sprawling, rich-green field as vast as the eyes can see. This field is home to countless, growing plum trees, holding some of the juiciest and sweetest plums this side of the fabled Garden of Eden. On the opposite side of Plum-dom are cherry plum trees. We will call this side Cherry-dom. In Plum-dom, there are a great number of farmerssome would say too many for the prosperity of legions of smaller plum farmers. Plum farmers come and go, and the seasons are carefully monitored and managed by a wise overseeing committee. Whenever there is too much moisture in the soil, the committee issues a decree, water is sucked from the soil, and the price of plums increases. The opposite is true when there is too little soil moisture. Right now, in A.D. 2003, during the reign of Emperor HUBS II, there is an abundance of water in Plum-doms soil, and the moisture-control committee has yet to determine that the vast soil of Plum-dom is too wet for the botanical health of plum trees, so, the vast plum harvest continues, and most farmers are happy. By contrast, there are only three major farmers and a handful of assistant farmers in neighboring Cherry-dom, mostly comprised of migrant farmers from Plum-dom. In fact, two of the major Cherry-dom farmers are already neck-deep in farming in Plum-dom, but are farsighted and courageous enough to stake a leadership position in Cherry-dom as well. Although it takes twice as much effort to grow and harvest cherry plums, the farmers of Cherry-dom are pleased and excited about their work, with the unique strains of plums sprouting everywhere, growing each year. They believe that Cherry-dom holds considerable promise for the future of Plum-dom in general, and they are puzzled by the general lack of interest in the opportunities offered by their emerging crop. Now, let us look at the plum story in the context of our industry. Obviously, Plum-dom is the forward mortgage credit industry, and Cherry-dom is the reverse mortgage credit segment. If the reverse mortgage opportunities are so compelling, why is there a relative lack of interest in them by Mortgage Brokers? Census Bureau data tells us that households headed by those age 65 and over have increased by more than 5.6 million since 1980. In fact, the total number is estimated to jump to more than 25 million households by 2010. A study conducted by Standard & Poors, the credit-rating powerhouse, says elderly households have gathered $1.8 trillion in home equity, and that number will only grow as baby-boomers begin to hit 65. Here is what the S&P study has to say about the coming opportunity in reverse mortgages: "The strong demographic force, coupled with huge home equity just waiting to be tapped, forms a powerful base to generate a strong demand for reverse mortgages in the upcoming decade." In separate studies, Fannie Mae and Moody's Investors Services have reached similar conclusions about the coming reverse mortgage boom. So, with so many reverse mortgage cherry plums waiting to be harvested, the question remains: Why aren't Mortgage Brokers excited about reverse mortgages? There are several reasons, according to Sarah Hulbert, national director of Seattle Mortgage Company's reverse mortgage division and co-chair of the National Reverse Mortgage Lenders Association. The first reason Hulbert identifies is the low interest rate environment and the refinance boom that it subsequently created. She also mentioned lack of Mortgage Broker awareness of the reverse mortgage opportunity, the ease of forward mortgage origination relative to reverse mortgages, and the current low income potential in contrast to forward mortgages. Hulbert predicts that, with the coming silver-age-wave, increased awareness, knowledge and acceptance of reverse mortgages, Mortgage Brokers will be compelled by consumer demand to take reverse mortgages seriously. She also concludes that baby-boomers are more savvy about debt and have no inhibitions about using leverage; consequently, they will use reverse mortgages more aggressively than their Great Depression-era parents. Are you ready for the imminent reverse mortgage boom? Have you taken the time to understand this innovative mortgage product? Can you afford not to be ready when the boom hits? I will tell you this muchthe harvest is bountiful, and workers are needed in Cherry-dom. Get ready! Atare E. Agbamu, CRMS, is a reverse mortgage specialist and director of training at Inver Grove Heights, Minn.-based Credo Mortgage. Atare's reverse mortgage interviews have been webcast on Mortgage Mag Live!, and he currently serves on the boards of Little BrothersFriends of the Elderly in the Twin Cities and nationally. He can be reached by phone at (651) 389-1105 or e-mail atare@credomortgage.com.
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