The question isnt, Who are we going to take the market
share from? Our questions are, How do we create a broader market?
How do we increase the existing marketplace for reverse mortgages?
We might take a percentage of the market share. But overall,
through our efforts, we really feel that we are taking a pie that
exists today and we are growing that pie.
Sarah Hulbert, Senior Vice President
BNY Mortgage Company
What a difference a price cut can make in an industry! Americas reverse mortgage business got a kick in the pants in January from BNY Mortgage Company LLC.
By slashing investor profit on the monthly adjusting Home Equity Conversion Mortgage (HECM) by 50 basis points, the EverBank-owned company dragged HECM and the industry into the 21st century.
The major originatorsFinancial Freedom, Wells Fargo and Reverse Mortgage of Americahave since introduced their versions of BNY Mortgage Companys HECM 100, as well as other margin-adjusted programs, giving customers unprecedented choice and value in HECM products. In March, BNY Mortgage Company launched an industry firsta fixed-rate HECM. Others will do the same soon. It is spring in reverse country. To put these developments in perspective, I spoke with Sarah Hulbert, senior vice president at BNY Mortgage Company and former four-term National Reserve Mortgage Lenders Association (NRMLA) board co-chair.
NRMLA President Peter Bell has described Sarah Hulbert as an essential leader for the industry. An industry veteran who has been in the business since 1992, Hulbert has experience in almost every aspect of the business. From 2000 to August 2006, Hulbert was senior vice president/national director at Reverse Mortgage of America, where she was part of a team which propelled the Seattle Mortgage Company division from a few loans a month to one of three major reverse mortgage lenders and servicers in America.
The following is a transcript of our conversation:
Atare E. Agbamu: As you [BNY Mortgage Company] expected,
the Big Three are matching your margins. How do you plan to sustain
your initial competitive advantage in HECM
Sarah Hulbert: Well, we consider ourselves true innovators in this industry. We have a team of people with tremendous experience in reverse mortgages from all different aspects of the business, from origination all the way through to secondary marketing and servicing. This team of industry leaders and experts combined under one umbrella creates almost a think tank unlike any that exists in the reverse mortgage industry today. We are very proud of that. We are not naÃ¯ve; we know the Big Three are right on our coattails and we would be naÃ¯ve not to be aware of this. But we look at ourselves as innovators in product development. In addition, there has to be more value added than just products in order to succeed in this industry. In addition to the products and expertise, we have the commitment, we have the people, we have the passion for the product and we have the technology. And going back to passion, the team here at BNY Mortgage Company, we all get it; we all understand and we all have the passion. We are all in the reverse mortgage business for the same reason, and that is what makes us a pretty phenomenal team. We are in this business because we have a passion for seniors and in helping seniors age in place. And again, that combined expertise and the support of a company such as BNY Mortgage Company is going to enable us to build relationships with others in the industry to create a successful distribution network and to continue creating products that meet the needs of seniors of today and in the future.
AA: Thats a powerful game plan you have. The way you are
going about it, you are going to become a part of a reverse
mortgage Big Four very soon, but I wonder who you are going to take
that market share from.
SH: The question isnt, Who are we going to take the market share from? Our questions are, How do we create a broader market? How do we increase the existing marketplace for reverse mortgages? We might take a percentage of the market share. But overall, through our efforts, we really feel that we are taking a pie that exists today and we are growing that pie.
AA: That is a positive way to competedefinitely a
holistic way to compete. Good. Your HECM products and others they
have spun industry-wide have reinforced HECMs role as the industrys
signature program. How can the industry move beyond HECM and the
U.S. Department of Housing and Urban Development (HUD)/Federal
Housing Administration (FHA)?
SH: Well, I dont think the industry necessarily needs to move beyond the HECM product. But what we need to do, and I am repeating myself again, is not look at reverse mortgages as a single product or even two or three products.
The concept of a reverse mortgage is the concept of a suite of products with an infinite number of possible variations. And they can range anywhere from the HECM 100 all the way up to the high-end jumbo products for homes valued over $2 million.
Every product is going to fit one borrowers needs. Every product is going to play a significant role in the industry. You are right; the HECM product, historically, has been the primary product. It will continue to be one of the main products. But we are also going to see these other proprietary products fitting needs where HECM just doesnt meet the needs of borrowers in the higher-end homes.
AA: I am reminded of NRMLA General Counsel James Brodskys comment in San Francisco last year. He was cautioning those who might not be giving the proper disclosures on the dangers of running afoul of HUD/FHA regulations. He said, If you are not in the HECM business, you are not in the reverse mortgage business.
With your products and the others, we are reinforcing HECMs extraordinary market position. At some point, we need to have a strong conventional alternative to FHA red tapesomething similar to a new and improved Home Keeper with a strong designer and a strong investor behind it. As you know, the perception of stability behind it is very important, especially with reverse mortgages. A reverse mortgage product is only as good as the insurance behind it.
The defining strength of HECM is Uncle Sam. When push comes to shove, Uncle Sam and his awesome taxing power will always be around; no mere lender, no matter its size, can match that sovereign clout. He has been around for over 200 years; he is still going to be around for the next 200 years. You cant say that of the big banks. No company can say that, because companies come and go, no matter how big they are. So the government connection is part of the value and power of HECM, as you well know.
Do you have any closing comments for our
SH: More than anything, for the readersfor those who are already in the reverse mortgage industryI think that all lenders in the industry have a responsibility to be educated on all available products and to focus on the borrowers needs and what best fits the borrowers needs.
I think we need to make sure lenders continue to maintain that focus. For those that are considering getting into the reverse mortgage business, it is a great time to get into the business. Like I said earlier, it takes a passion and a commitment. This is an industry that takes dedication and a lot of work and love, not only for our countrys elders, but also for the products designed or created to serve them.
AA: Amen! Sarah, thank you very much.
Authors note: Zero upfront closing costs exist in the proprietary jumbo reverse mortgage market today. Financial Freedom pioneered them in 2004 with its erstwhile Zero Point and Simply Zero Cash Account options.
Atare E. Agbamu, CRMS formed ThinkReverse LLC to help originators address demographic change via reverse mortgages. A specialist with Credo Mortgage and a member of the BusinessWeek Market Advisory Board, Atare is the first to propose reverse mortgages as risk-management tools for forward originators. Besides marketing, originating, and researching reverse mortgages since 2001, Atare has authored more than 80 articles and a book on reverse mortgages. He may be reached by phone at (612) 203-9434 or e-mail [email protected].