There’s no denying that the reverse mortgage industry has recently taken a bit of a hit. Data from Reverse Market Insight shows the half-year endorsement total to be 24,634, suggesting that 2016 is set to be one of the lowest years for endorsements in recent history. Consistent policy change has forced industry players to continually adjust processes, and for some, profits have suffered.
Despite this, several lenders are revving up their presence in the space. Undeterred by the market’s current slump, these companies are convinced of the product’s future demand and eager to work with America’s seniors to help them find financial stability in retirement.
Their actions highlight a strong belief in the value reverse mortgages can offer to this country’s aging population. Americans are living longer, and the majority express an overwhelming desire to stay in their homes. With rising health care costs, diminishing pensions and little in the way of savings, reverse mortgages are uniquely positioned to provide seniors with a sound solution to help them enjoy financial stability in their golden years.
GSF Mortgage
Confident in the HECM’s potential, GSF Mortgage Corporation launched its first branch dedicated solely to reverse mortgages. GSF, which has been offering consumer-direct mortgage loans since 1995, was recently named one of Inc. magazine’s 5,000 fastest-growing private companies, an honor it earned after posting 144 percent revenue growth in the last three years. Looking to expand its reach, GSF saw promise in the HECM.
“There are thousands upon thousands of people who are hitting this age bracket every day. We think there is going to be a big draw for this product coming up,” says GSF Regional Manager Frank Papaleo. “We believe in the product. We think it’s a viable one, we think that it’s really an untapped one, and if you have people who know how to structure them and know how to do the upfront work to make sure that it works, there’s certainly something there.”
To get the right team of people in place, Papaleo and GSF President Chad Jampedro hired longtime reverse professional Brad Bennett. “We talked with Brad and made the decision to put some time, energy and money into building this out,” says Papaleo. “We were very eager to do that.”
Bennett launched his York, Pennsylvania-based operation in March with a team of six telemarketers. He says 75 percent of their business is self-generated, with his team making a mandatory 250 outbound calls per day.
Policy changes like Financial Assessment may have altered the landscape, Bennett says, but he’s studied up on the guidelines and says GSF is right to see promise in the product.
“I am one of those guys who reads the rule book at night in bed instead of watching The Walking Dead. So I prepared myself for the curve. I’m not going to say it didn’t affect me, but it didn’t affect me as badly as some people,” Bennett says. “Nothing has really changed about the product; you just have to work a little bit harder to get the same number of loans.”
He says he’s looking to expand his branch with loan officers who can work remotely and that his team places a strong focus on personal communication with prospective clients.
“You’re dealing with people who grew up in the WWII era, maybe the Great Depression in some cases, where the typical form of communication was a handwritten letter. Our clients appreciate the personal touch of receiving something like that in the mail.”
Bennett says joining GSF presented a great opportunity to build something from the ground up, and that he intends to expand his operation down the road.
“It’s all about how hard you are willing to work to build something. The more work you put into something, the more fruit it will bear. That’s what we’re going to do—we’re going to work hard and become a major player in the industry.”
Alpha Mortgage
North Carolina-based Alpha Mortgage also opened its first-ever reverse mortgage branch last March. Headed by Greg Gianoplus, Alpha’s HECM division places a special emphasis on the HECM for Purchase.
“Someday I’d like the H4P to be two-thirds of our business mix,” Gianoplus says. “The market in North Carolina is so undereducated about the H4P, mostly because the North Carolina Commissioner of Banks does not allow mortgage brokers to participate in the reverse mortgage space, so there are not nearly as many mortgage professionals in North Carolina educating the local markets as there are in competing states.”
Gianoplus, whose growing operation consists of five people with licenses in North Carolina, South Carolina and Virginia, says connecting with referral partners is key and that effort requires persistence.
“It doesn’t just take one meeting when you’re trying to educate other professionals like Realtors; it’s a slow drip. You’ve got to do the intro and you’ve got to offer workshops, you’ve got to do one-on-one. People don’t get it right away, even smart people,” he says. “There are so many misconceptions.’
Gianoplus says the reverse-only focus allows his team to be specialists in their field, which provides real value to their clients. “I like being the ear, nose and throat guy in a field full of general practitioners,” he says. “My goal is to become the most trusted and most reputable reverse mortgage lender, providing unparalleled value to all who touch our business and to always be relentless in the pursuit of customer education.”
Gianoplus says success in this field requires commitment. “To any professional who makes the decision to get into the space: Go all in. Be committed and be patient. Have a plan and then work that plan,” he says. “This is not a get-in, get-out, make-it-quick type of business—it takes years of tenacious commitment, of service to potential referral partners and to your clients, in order to build a successful business.”
Banc of California
A $10 billion publicly traded company on the New York Stock Exchange, Banc of California was recently named one of the best banks of the country by Forbes. The lender has offered reverse mortgages for several years now, but has committed to expanding its operation in the last six months.
Its reverse division is run by Mark Erskine, a former stockbroker who joined the bank three years ago. Erskine, a CRMP, says that unlike others in the space, his division hasn’t seen volume dive lately, but that business hasn’t grown in this environment as much as he expected when be expanded his team. He says this is because of recent policy changes, but he believes things will even out and remains convinced of the product’s potential growth.
“I believe that, regardless of all the changes that have happened in this industry, the demographics indicate that there is a tremendous amount of need,” he says. “We’ve got a retirement planning crisis on our hands.”
There are roadblocks to expansion though, which Erskine says are twofold. First, the product’s name doesn’t do the industry any favors. “The HECM is confusing to seniors. It sounds like something you catch, and nobody wants to go in reverse,” he says. “I think we should have renamed this a long time ago. We could have named it the retirement mortgage, so it would simply be the natural thing to do. People would have a traditional mortgage during working years, and then a retirement mortgage when they retire.”
The second challenge, which Erskine says is his biggest problem, is finding quality loan officers. “I think we have to create a new breed of loan officers, ones with more of a financial planning background. We need a credentialed sales force,” he says.
The key to growth, says Erskine, is changing the way we market the product. “We have to look at this as more of a financial planning tool as opposed to a loan.”
Endeavor America Loan Services
The wholesale side is also seeing new entrants. Endeavor America Loan Services launched its first HECM division last spring with a Walnut Creek, Calfornia-based wholesale division. Run by Matt Klaus, Endeavor’s team of 15 locks in a few hundred wholesale loans a month.
Klaus says the wholesale side of the business is certainly more challenging in the current market slump, but that he expects things to turn around as the industry gets a handle on the change.
“You’ve got more competition for the same number of loans,” he says. “But I think that the market will progress, I think it’s going to get better. FA is changing a little bit and HUD has offered more clarification. I think lenders are starting to feel a little bit more comfortable with how they are underwriting these files. I think we’re going to see origination volume increase in the near future.”
Klaus says he expects his division to continue to grow as the market expands. “We’re going to continue to slowly scale up. By first quarter of next year, we want to double where we are right now, and we’re looking at bringing on a retail division.”
Looking Ahead
Recent months have been a challenge for many reverse mortgage companies as they work to gain a handle on policy change and struggle to remain profitable under new regulation.
Still, dedicated professionals remain exceedingly confident in the HECM’s potential. HUD officials have pledged their commitment to the product, academics and financial experts have extolled the benefits of home equity use, and the demographics paint a convincing picture of future demand.
Each of these factors has helped make a compelling case for the success of the reverse mortgage program. Fueled by this promise, lenders across the country are looking ahead with anticipation, channeling their efforts toward growth.
