This week, MortgageOrb sits down with H. Marc Helm, chief operating officer of Reverse Mortgage Solutions Inc. of Spring, Texas, to discuss the state of the reverse mortgage market.
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Q: How do you see the state of reverse mortgages in 2009? Do you see the market expanding – and, if so, which regions will see the greatest growth?
Helm: The reverse mortgage market has been solidly successful since its inception and will continue to expand at a measured pace this year, limited by fewer warehouse lines and investors. Even Fannie Mae may tighten its purchases of the product, from years past. Offsetting this, Ginnie Mae is becoming a bigger player on the securitization side of the transaction.
The growth regions reflect demographics – larger states with stable or enlarging senior populations will experience the most reverse mortgage growth; that's California, Texas and Florida, to name the top three. New, higher loan limits will serve to prime the pump in those states.
Q: What are the current secondary marketing potentials for reverse mortgages?
Helm: Beyond the new Ginnie Mae involvement, there is new interest in the sector coming from life insurance companies, which are typically cash-rich and now perceive the reverse mortgage product as a hedge against their traditional policy-customer model. For these companies, one investment (reverse mortgages/rising valuations) would earn as the other (life insurance) runs against aggregate assets.
So, an insurance company generates revenue (on its life insurance portfolio) and then can invest in appreciating assets that will later pay insurance beneficiaries when policyholders die. Additionally, they may sell seniors other long-term products, such as long-term medical care, which would be profitable for a young senior (i.e., 62 years old). Overall, the entry of these life companies spells more money for the reverse mortgage business and more players.
Q: During this time of economic uncertainty, how can lenders convince potential customers of the value in reverse mortgages?
Helm: In a word, the answer is: education. It's quite telling to see the statistic that came from an AARP study that found among respondents, a large chunk – 70% – said they knew about reverse mortgages, but only 1% of those eligible for them had taken one. Taking into account any number of people who know about products but don't necessarily have them, this still is an enormous divide. Most experts agree the reason for this sharp difference is not understanding, but misunderstanding
I have no doubt that we will make progress on this front, if for no other reason than with the current economic state of the country and the loss in value of many individuals' retirement accounts, prospects will be that much more interested and needy. The value proposition will be apparent.
Q: Are you aware of any significant fraud activities relating to reverse mortgages?
Helm: Aware, yes; significant, no. The history of reverse mortgages is one of government oversight, owing to the Federal Housing Administration insurance and government-sponsored enterprise securitizations. What's more, with a ‘protected class’ of seniors as the only customers, there is heightened sensitivity to such illicit activity.
If anything, companies like ours must exercise our own internal due diligence to ensure that customers do not commit errors related to aging or misrepresentations fostered by less-than-upstanding family members. It also should be noted that reverse mortgages carry with them, by law, mandated counseling. Originators have to make sure that borrowers have received this professional assistance and be vigilant of any circumvention of this process.
(Editor's note: The March edition of Secondary Marketing Executive will feature a special report on the state of the reverse mortgage sector.)
