The Financial Assessment may not be the change the reverse mortgage industry wants right now from a process standpoint, but it’s the one that it needs to clean its reputation and attract a different pool of borrowers in the long-run, industry participants say.
Not only can a change in perception lead to a greater acceptance from both potential borrowers and the general public, but it can also translate into a wealth of opportunities from a reverse mortgage sales standpoint, according to several industry experts during an RMD webinar Wednesday.
Even though there is the potential of losing business from prospective borrowers who might not qualify under the Financial Assessment Guidelines, there is still an opportunity for salespeople to expand their businesses even after the rule takes effect April 27th, said Paul Fiore, executive vice president of retail lending at American Advisors Group (AAG).
“There is an opportunity to grow this market, and on a long-term basis, this could be a positive change for the industry,” he said. “Through the Financial Assessment, you can actually solidify your sale by showing a potential borrower the value of a reverse mortgage.”
In terms of changing public perceptions of reverse mortgages, the FA can help facilitate this perspective shift since the rule requires credit and income underwriting of potential borrowers rather than simple age and equity qualifications.
“[The reverse mortgage] becomes more of a long-term plan,” Fiore said.
The Financial Assessment boils down to creating a solution aimed at longevity, rather than a short-term fix or a needs-based product, as reverse mortgages have been perceived in the past.
But to get this message across to a prospective borrower, loan originators will have to do something they’ve never been required to do before: build rapport and trust, said Shannon Hicks, president of Reverse Focus.
“This Assessment is going to necessitate that we look at how we approach our borrowers, and we’re going to have to give some thought to how we actually flow through that conversation,” Hicks said. “Rapport will be more important than ever.”
The additional credibility that FA brings to the reverse mortgage product in the eyes of the public will also extend to others in the retirement planning space such as financial advisors and planners, said Sherry Apanay, chief sales officer at Urban Financial of America.
“On the B2B [business-to-business] side, we’re seeing more doors open not only with credit unions, but also community and national banks, as well as trusted advisors,” Apanay said. “One of the biggest challenges has been getting in the door, but with the changes we’ve had recently, that has made the door a little easier to open.”
The changes brought on by the FA legitimizes the reverse mortgage product, which in turn helps broaden communication across all channels, from financial advisors and the mainstream media to even investors, said Josh Shein, senior director at Home Point Financial, formerly Maverick Funding.
Though lenders will wrestle with declining volume in the months following April 27, the setback will only be temporary as the industry perseveres through the changes, like it has done so time and time again in the past.
“History definitely gives us lessons for the future,” said Shein. “In the long-term, we’re going to be looking much better and brighter than we are today.