PERSON OF THE WEEK: This year has been tumultuous for the reverse mortgage sector, and the road ahead appears to have more than its fair share of bumps. This week, MortgageOrb charts the near-term future of the reverse mortgage sector with Beth Paterson, executive vice president of Reverse Mortgages SIDAC, a St. Paul, Minn.-based division of Greenleaf Financial, and author of Beth's Reverse Mortgage Blog.
Q: The first half of this year saw the abrupt departure of several major companies from the reverse mortgage sector. Do you see this as a vote of no confidence?
Paterson: The departures were business decisions for the individual companies and not a reflection of the industry as a whole. Those that left chose to focus on internal issues and the traditional mortgage products that make up the bulk of their business. By exiting the reverse mortgage industry, they eliminated their smallest business segment so they could focus on their main areas of their businesses.
There are other lenders who offer and service reverse mortgages, and some of them only offer and specialize in reverse mortgages. The support and confidence in reverse mortgages remains strong among those companies.
While the reports about the lenders leaving may have had an initial impression of no confidence, it's a matter of perception. I believe those impressions have been minimized because those of us who specialize in reverse mortgages are speaking out and stating that the sky is not falling on the reverse mortgage world. In fact, I have received more inquiries since the big banks have left the industry.
Q: Reverse mortgages have been the subject of recent negative press coverage, with reports of arrests relating to fraud and financial writers, including Suze Orman, questioning the product's risks. How do you respond to this type of bad press?
Paterson: The negative press about reverse mortgages is not based on facts – it is based on the reporter's opinion, along with misinformation. Even some so-called reports – the National Consumer Law Center Report, for one – are not based on facts, and they don't have the documentation to support their statements. If the reporters would talk with those of us who have been in the industry for years and who specialize in reverse mortgages, they would see the positive elements in reverse mortgages.
Suze Orman does not specialize in reverse mortgages, and I doubt that she has discussed the risks with those who are actually taking the risks and investing in them, so her opinion carries little weight. I also doubt that she and the other reporters have read the actual loan application and closing documents to get the facts. I wish these reporters and so-called ‘financial experts’ would get the actual details and facts before spewing misinformation that feeds the negative impression of reverse mortgages.
As with any industry, there will be fraud or theft. With reverse mortgages, however, is it a very small percentage. Unfortunately, some of what is called reverse mortgage fraud is not really reverse mortgage fraud, but theft by family, power of attorney or other entities.
Q: Secondary market opportunities for reverse mortgages appear to be very limited. Is there hope for expanded opportunities in the near future?
Paterson: Unfortunately, the secondary market is currently limited. We hope that this market expands, but I am unable to predict how soon this will happen. Obviously, financial situations are currently very volatile in all areas. Consequently, investment opportunities for investors in the future appear to be quite unpredictable.
Q: What advice could you give to lenders that are considering the addition of reverse mortgages to their product line?
Paterson: If a lender is considering adding reverse mortgages to its product line, I would suggest it dedicate management and staff solely to reverse mortgages on a full-time basis. I do not recommend doing this as a part-time venture. Additionally, I would recommend hiring a staff that has experience in reverse mortgages – not just in conventional mortgages – because they are quite different than commercial products.
Offering reverse mortgage products takes a different mind-set and the process is different than with conventional loans. Because the industry is not as large as the conventional-loan industry, lenders adding reverse mortgages to their product line need to accept this fact.
Q: If we were to return to this conversation a year from today, where do you think the reverse mortgage sector would be?
Paterson: I believe that a year from now, the reverse mortgage industry will remain strong. However, the new financial assessment that is being implemented to assess whether borrowers will be able to pay property taxes and insurance, along with the reduction in the Federal Housing Administration's lending limit, will likely mean that some seniors will not qualify for a reverse mortgage.
Hopefully, a year from now, we will have seen the coverage of reverse mortgages to be factual and will be sharing the stories of how the reverse mortgage has made a difference in the lives of so many seniors.
