If you have been looking around lately, you’ve no doubt seen an increasing amount of press and other media coverage about one of the most innovative l mortgage products to ever hit the market. You see articles in newspapers, television commercials, radio ads and interviews, the list goes on. Maybe you’ve even had a client ask you about this product and wondered to yourself if you need to learn about the real impact it’s going to have. Of course I am referring to the reverse mortgage. Are you aware of the important role this product is going to play in your overall business in the very near future? And why you need to embrace this profitable product ….now?

Every originator in the business should have a basic understanding of what a reverse mortgage is. Just like the many other “niche” products on the market today, whether you are going to originate reverse mortgages or not, you need at least be aware of them. This mortgage product has been called, “The Next Big Thing” in our industry. In fact, another record has been set again this year, as over 76, FHA HECMs (Home Equity Conversion Mortgages) were originated in FY 2006, ending September 30. This staggering figure represents a 77% increase over the number of HECMs that were insured in FY 2005. So just what does this product hold for the future? Let’s take a look at some background to see where we’ve been and find out where we are going.

As you probably know, a reverse mortgage allows homeowners age 62 and over the ability to tap a portion of the equity in their primary residence without having to take on a new mortgage payment or sell the home. Sound like a nice little program, doesn’t it? Well this nice little program has possibilities that we are only just beginning to see. Do not underestimate what this can do for our senior homeowners, and for your business. I have seen first hand just how profitable a product this is as well as the incredible impact it can have on the lives of senior citizen homeowners. As this innovative product continues to evolve, more options and programs are becoming available.

To fully understand the potential of the reverse mortgage, let’s take a look at the demographics. Marketing firms everywhere are urging their clients to target the senior citizen. Look at the virtual explosion of products that cater to the needs and wants of seniors. There is even a special designation for Realtors who want to work with this age group. Why? In the United States, we have a rapidly growing older population. That is certainly good news, we are living longer and we are living more active lives in our older years. However, in many cases due to these active lifestyles, travel, as well as increased expenses, we are outliving our savings and retirement funds.

Over 5500 Americans turn 65 years old every day, according to census bureau estimates. Almost 90% of seniors rely to some extent on Social Security to meet their monthly financial obligations. In fact, those seniors over age 85 represent the fastest growing group in financial trouble. For many of these folks, the vast majority of their net worth is tied up in the home. The combination of these factors, coupled with the Baby Boomers entering their retirement years, yes, that’s right…the first of the “Boomers” (those born between 1946 and 1964) are turning 60, have provided a backdrop for the reverse mortgage to really hit the mainstream. Even though the first reverse mortgage was done in the U.S. in 1961, the program has never enjoyed the kind of popularity seen today.

What can a reverse mortgage do for a senior homeowner and why should you consider adding this to your product mix? Let’s take a look at a retired couple who own their home free and clear. He draws a small pension and they both receive social security. It has always been a dream of theirs to travel. But of course, raising three children did not allow for a lot of extra money for things like that. Now, in their golden years, while they are both in good health, they want to travel. On a fixed income, and little savings, how can they make that dream a reality? Enter the reverse mortgage. By tapping a portion of their equity and receiving tax free funds (YES, tax free, it’s just equity) they can have the necessary means to travel, or do whatever they want, and never have to worry about making a mortgage payment.

Let’s take another example. A senior homeowner who lives alone and is having trouble just making ends meet. Unlike our previous couple, travel for this man is not an option due to illness. However, he wants to remain living in his home as long as possible but he requires in home nursing care a couple of times a week. This expense has made it difficult to pay the rest of his monthly bills. Once again, enter the reverse mortgage. For this individual the additional monthly income will enable him to remain at home, and pay for the nursing care he needs. And again, because there are no income or credit criteria for a reverse mortgage, it is easy for this man to qualify.

A completely different take involves a senior couple that resides in a home valued at $2 million. Did you know that there are reverse mortgage products that target higher value homes? Let’s say these folks have met with a real estate professional and have their eyes on a beautiful vacation home at the lake, but due to their depleted portfolio, they don’t have the ready cash to pay for it. A regular mortgage is not an option, because of their limited retirement income. Their residence truly is their biggest asset. In this case, a reverse mortgage can help them access a portion of the equity in that residence and combined with some of their savings, that lake house becomes a reality. These folks have increased their real estate portfolio using tax free funds, and you brought the solution to the table. And do you think the real estate agent is happy with you? You have just cemented that relationship! By the way, did you know you can buy a home with a reverse mortgage? Imagine showing that concept to your real estate agents. I do it all the time!

These examples show just a few of the ways that a reverse mortgage can make a considerable difference in the life of a senior. This is a product that’s available nation-wide but still there are so few who offer it that in many areas of the country there is no competition. What if you were the only loan originator in your area to offer such an in-demand product? It would be like having the first McDonald’s restaurant. While this product grows in popularity you can reap the benefits of helping seniors as well as adding to your bottom line. As the forward mortgage market changes, if refis are drying up or interest rates are on the rise, why not educate yourself on this exciting product, and position yourself as the “go to” loan originator in your area for the senior citizen market? You’ll be viewed as a problem solver, a consultant, an advisor, and consequently, the expert.

Once again this year, the number of reverse mortgages originated has set another all time record. And this number is only going to climb as new products are introduced, the senior population continues to grow, and more seniors become educated about the benefits. Consider the possibilities of a product that is adding over 5500 new prospects every day, and a profitable product whose volume of loans has increased almost 500% over the last several years. Embrace this product….now…for the future.

Sue Haviland, CSA
Reverse Mortgage Success