We ask our members to essentially forget about the Reverse Mortgage as a brand. It will be quickly commoditized as a product much like the 30 year fixed. What will differentiate you is your advice! I'd like you to think about Distribution strategies instead of any spedific product. Products are important to facilitate certain goals, but problems are what typically need solving, and the Reverse Mortgage is just a way to solve problems that some need fixed, and others want fixed.
The 'sandwich' generation, as they are often called, is the parent who is raising children who have yet to finish college while also caring for their parents. The financial advisor 'sandwich' generation, is the financial advisor who is helping younger clients 'accumulate' wealth while their older clients need to develop a plan to 'distribute' their wealth. What you want to consider if you are truly interested in Reverse Mortgage products, is becoming a 'distribution' expert. The Reverse Mortgage is an essential product to have in your arsenal, as are many others, if you want to seriously be an expert at helping clients utilize house related wealth in retirement.
Idea Alert! That doesn't mean you have to offer the product, you can merely partner with someone who does - many are reporting that Reverse Mortgage seminars are the best attended events they provide - even though they don't offer the product. Children attend to learn more about it for their parents, and this creates many new selling opportunities.
Many clients who now have a substantial portion of their wealth (25% - 65%) living in their house. The ability to scan multiple product offerings and identify the most efficient one for the client is of great value. I recently spoke with Ian Patrick at Sun West Mortgage. Ian and his team have an outstanding offering of Reverse Mortgage products. He shared with me that while reverse mortgages have little default risk, because borrowers don’t have to make monthly payments, the credit crunch is still affecting the reverse market.
From our conversation, Ian says the most popular reverse mortgage offers a rate of the one-year treasury plus 1% (“HECM 100”), which comes to about 5.27%. When reverse mortgage companies sell their loans to investment banks, the price is based on LIBOR, and 1-month LIBOR is at about 5.8%. Therefore, these lenders are losing over ½% when they sell the loan pools, not including the costs they incur to underwrite and process them. For this reason, many reverse mortgage lenders have eliminated the “HECM 100” completely. In addition, because investment banks are pulling back on warehouse lines - the lines of credit the lenders use to hold the loans until they’re sold – some of the smaller reverse mortgage companies are being forced out of business.
Ian said that Sun West is still offering the HECM 100 as of today, and that the company is looking forward to rolling out a new LIBOR-based HECM in the next few weeks. They feel this new LIBOR HECM will likely replace the HECM 100 as the new benchmark reverse mortgage nationally. If you’d like more information on reverses, or the Sun West offerings, Ian can be reached at firstname.lastname@example.org for more information.
Again, there will be many different opportunities to assist clients in the distribution game. Reverse Mortgages will be one of them, and many of us need to at least learn the basics to be able to speak to them when asked by a client or prospect. Here is a great link to download the history of the Reverse Mortgage - to better understand how it has evolved. Download reversehistory.pdf.
I've also uploaded a few articles on the Reverse Mortgage, as many advisors ask how they might learn more about it when speaking with their clients.
Will Reverse Mortgages Save Boomers: Download will_reverse_mortgage_save_boomers.pdf
Original Article Draft for Investment Advisor Magazine: Download reverse_mortgage_article_december.pdf