Getting out of the doldrums and into reversePhilip E. Lippbaby boomers, seniors, NRMLA, learning curve, FHA
Today, you may find yourself reading the headlines, hearing the
newscasts and wondering what in the world you are going to do to
replace lost business. Some will exit the business and others will
survive. If you have decided you will be one of the survivors,
congratulations! The question is: What will you do now? Doing the
same old thing that is not working or waiting for the phone to ring
will not put you into the survivor's camp. We faced a similar
situation a number of years ago, and here's my story. Six years
ago, we were looking for another mortgage program to get into. We
had been working with low- to moderate-income first-time
homebuyers. We specialized in financing programs that local
governments provided to people buying within their city limits.
While we had been successful in helping hundreds of families to get
into their first home on these programs, real estate values had
been climbing--making it more difficult to qualify low-income
households. Additionally, there was a lack of desire on the part of
our wholesale lenders to do these programs because they are time
consuming to underwrite.
We were always trying to be a niche player in the mortgage
business and thought it was time to review our options. We could
have gone into sub-prime, commercial, private investor, builder
business, super jumbo, etc., but these various choices did not
appeal to us. Truth be told, I had been collecting information on
the reverse mortgage business for years. It never seemed to be
quite ready for prime-time. Transamerica had a product
out for many years that was terrible. The Federal
Housing Administration (FHA) started experimenting with a
program, but you couldn't make any money originating them. Finally,
about six years ago, the stars had aligned and there were good
programs with decent origination fees.
I had taken the time to study the market for reverse mortgages,
and it appeared that this would be a great market both now and into
the future. We had a great, current group of seniors that could
qualify for the product, with a huge boom coming as baby boomers
begin to move into their senior years. I attended a National Reverse Mortgage
Lenders Association (NRMLA) conference, and I liked what I
saw.
There were a couple of problems we had to overcome. First of
all, we were new to the business and had a steep learning curve.
Second, we would need to get FHA approved in order to originate the
product on our own. We initially signed up to do an advisor program
with an FHA correspondent. This allowed us to get some experience
and, at the same time, we did not have the expense of FHA
approval.
Quickly, we felt this product was a good fit for us. We liked
the educational approach to mortgage lending and felt this product
was playing to our strengths of customer contact and sales. We
decided to take the next step and got our FHA approval along with
some training from the lender. We were set and ready to make our
fortune in the reverse mortgage business. Of course, nothing is
ever as easy as it appears.
To quote a luminary of the reverse mortgage world, John Lucas,
"What it takes to be successful in this business are three things:
patience, patience, patience." I had no idea just how much
education was going to be required and how many people were going
to be involved. The timeframe from first conversation to
application can be anywhere from a couple of days to a year or
more, and that's just the beginning. Add to that required
counseling and conversations with other family members and you can
have a rather long period of time before getting the loan closed,
let alone receiving your commission.
I point this out to you so that you have your eyes open when you
start to think about a career move into reverse mortgages. You will
have to weigh this against FHA approvals, which require audited
financials, incorporation, minimum equity standards as well as a
staggering application, all of which could cost about $10,000 in
direct fees and expenses to get approved. You could start with the
advisor program to get some experience under your belt and make
some money to boot.
Here's the important thing: No matter what you do, you need to
start moving and doing things differently than you are now. Pick a
path that is interesting to you and also plays to your strengths.
If you want to do some reverse mortgages, start collecting
information and start offering this product to your client base.
Don't have any seniors in your client base? Not to worry, your
clients have parents and grandparents who are looking into reverse
mortgages right now--why shouldn't they do these loans with
you?
So keep your chin up and use this time to improve your mortgage
offerings and marketing efforts. It will pay dividends to you for
years to come.
Philip E. Lipp is a reverse mortgage professional and
co-founder of North Hollywood, Calif.-based Allwest Mortgage Company.
He is an active California
Association of Mortgage Brokers member. He may be reached at
(818) 752-0999 or e-mail
[email protected].
