Thinking In Reverse: Transitioning From Conventional Mortgages to Reverse Mortgages

If your career as a mortgage loan officer has focused primarily on originating conventional mortgages, and you are now transitioning to reverse mortgages, there are several things to consider as you meet with prospective clients.

Your marketing and social skills need to reflect the critical differences that exist between the users of reverse mortgages and conventional mortgages. Here are some important issues.

Take “Selling” Out of Your Vocabulary. Do not aggressively sell the reverse mortgage as you would a refinance or home equity loan. Listen to the client. Explain how the reverse mortgage can help them with whatever needs they may have, whether it is paying off an existing mortgage, or paying for in-home care so your client can stay in the home longer. By doing that, you are providing a solution to specific issues facing the client.

Create Sense of Stability. Seniors can be very reticent, cautious, and sometimes frightened by what they do not understand. To help a client feel more at ease, explain how the reverse mortgage is a government-insured loan program, tightly controlled by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development. This creates a sense of stability and security.

Be Patient. If you are entering the reverse mortgage business and looking for a quick sell, this is NOT the market for you. You may be educating a clients today about a product that they may not take advantage of for six months, a year, maybe longer.

In some cases, seniors may call or schedule an appointment but their attitude is “I’m not ready for it yet, I don’t need it, I may want it in the future, and don’t pressure me to sign on the dotted line today.” If you pressure clients, you’ll lose them forever. That particular scenario may frustrate a loan officer accustomed to earning a weekly commission check, but pressuring a client is not tolerated.

Find Out How Much Client Already Knows. A lot of information exists about reverse mortgages, especially on NRMLA’s consumer web site, www.reversemortgage.org. As a result, more seniors are conducting research prior to counseling or contacting a lender. A client may be coming to you because they have additional questions that need to be explained in plain English. If you can help them understand how the program works, and what the benefits can be, that can be invaluable.

Send Follow-up Package. After the initial consultation, it is important to send a follow-up package of materials outlining the items discussed on the phone. That way, they don’t have to feverishly take notes and worry about getting everything down on paper.

Debunking Misconceptions. There are still a lot of seniors who think the reverse mortgage is a loan where “the bank takes your house and you get a little bit of money.” It’s a good idea to say to them that some of the things they may have heard which are negative and bad about reverse mortgages are not true.

Reassure them that this is a program that’s carefully controlled by the government and lenders can’t do whatever they want. You have to keep repeating that, and you have to do it patiently and slowly.

Lack of Understanding About Finance. You will encounter seniors who never wrote a check or paid a bill because their spouse handled those transactions. Suddenly they are thrust into the world of finance. Try to gauge how much your client already knows and be patient with them as you explain how the reverse mortgage works. Treat your client as you would a parent or grandparent.

Making House Calls. You may already be accustomed to working on the weekends and evenings. The same is true for the reverse mortgage business. You will encounter clients who are homebound. You’ll need to drive to their home upon request, especially on the weekends or evenings, because they often want their children or a financial advisor present.

Don’t Be Afraid of Adult Children. Adult children can be your greatest ally, especially when clients are still not comfortable putting a mortgage on their home. If there is an objection it is usually because children do not understand the program, or they think it is a scam. Once they know how it works, they normally tell the parent this is something you should do.

Cultivating Lead Generation Sources. Any person who touches a senior is a potential lead generation source, including elder law attorneys, estate planners, home-care providers, long-term care insurance specialists, CPAs, senior centers, church groups, and other non-profit community-based organizations.

Every person you talk to, whether it’s a group of Realtors, CPAs or financial planners, yes, they all have clients, but they also have parents, grandparents, aunts and uncles, people they know who may need a reverse mortgage.

You may want to distribute an announcement to your existing network of contacts from the mortgage business, letting them know, “this is what I’m doing now.” Reverse mortgages aren’t quite the buzz word yet, but they have received a lot of attention. Somebody may respond saying I’ve heard of these, tell me more.

Explaining the Costs. The costs to obtain a reverse mortgage may alarm some of your clients, which is why you need to discuss the issue up front. Explain to them that one of the primary upfront costs is a mortgage insurance premium that is remitted directly to the government. Tell them that the insurance is very important to you…this is the security and stability of the program. If the provider of the money ever fails to provide, FHA and HUD will step in and provide whatever the contract calls for.

That means you don’t have to worry if you are signing up with XYZ Mortgage Company, which may not be around five to 10 years from now. And the FHA insurance guarantees borrowers that they will never owe more than the value of their home. 

The FHA mortgage insurance guarantees your client will not be leaving a debt for their heirs to contend with. Reverse mortgages are long-term financial vehicles. If borrowers only need money for six months or a year, then you may want to advise them to get a home equity line of credit. You want to show them early on how the cost as a percentage of the loan does go down over time, which is why I say it’s a long-term loan.