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
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
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 [email protected]