As loan originators, our ability to overcome objection is the key to successful transaction completion. In the formative years of the reverse mortgage industry, it became very apparent that the reverse mortgage was a product which cannot be sold. It is a product which must be delivered with an educational component from loan origination professionals who also understand the concerns of a class of borrowers who have been targeted due to their lack of information and resources.
Despite significant consumer education and information efforts over the past years by industry professionals, U.S. Department of Housing & Urban Development (HUD) counseling resources and reverse mortgage media discussions, reverse mortgage loan acceptance by seniors continues to involve misconceptions in many cases. Two of the most common misconceptions are:
1. The bank owns my home
The bank does not own the home. A reverse mortgage is secured by a primary lien on the property, no different than a forward traditional mortgage, with one minor difference. Upon recordation of the lender’s interest, a second mortgage instrument (not a second mortgage facility) is recorded against the property subsequent to the lender’s first lien position. This second mortgage instrument is in favor the Secretary of HUD and allows for the seamless transition of loan control should the first lien holder lender become impaired and unable to be responsible for continuing to service and support the loan.
2. Reverse mortgages are expensive
In the past, the costs, expenses and fees associated with a Home Equity Conversion Mortgage (HECM) transaction were greater than the products being offered today, The more “expensive” years were, in part, due to decreased options, features and benefits; lesser volume restricting potential secondary and investment banker interest; and a scarcity of vendors and resources familiar with the product.
Today, the costs, fees and expenses associated with the reverse mortgage transaction have been reduced due to greater Wall Street investor opportunities recognizing the quality of the product, the offering of a “saver” product group alternative to those borrowers not seeking full proceeds access, and the offering of lender credits resulting in additional borrower proceeds.
The reverse mortgage product may not be the right fit for all senior borrowers. As the efforts of many resources continue to whittle away at product misconceptions, the commitment to preserve the product for use as a viable choice for a senior to remain in their home and maintain financial independence has not changed over the years since the introduction of the reverse mortgage in 1989.
If you are considering expanding your market share and adding the reverse mortgage product, now is the time to look at this growing opportunity. Your market entry will require a sales force committed to education with knowledge of this increasing class of borrowers. One of the most important aspects of your plan should be your ability to draw upon the strengths of a recognized Lender and staff for guidance and assistance to achieve your success.
Ralph E. Rosynek Jr. is senior vice president, national production manager for RMS, Reverse Mortgage Solutions Inc. RMS provides complete HECM program training, product availability and partnership access to mortgage professionals through the company RMPath wholesale and correspondent channels. He may be reached by phone at (281) 404-7970 or e-mail [email protected]
or [email protected]