Jesse Yamagata 00:09
So we’re gonna wait a few more minutes to get started so we can let everyone get in here. We’ll get started at 10am. So thank you
Jesse Yamagata 00:42
For our webinar today, Busting Reverse Mortgage Myths, How Loan Officers Can Make Sense of the Reverse Mortgage Industry in 2022. We’d like to just introduce Todd, and Jordan, they’ll be speaking with us. Before we get started, I’d like to thank you for joining us if any questions too are to be answered, so we can have those at the top of the list at the end of this conversation. And then all of the slides and recordings for today will be sent out within 24 hours. So just keep an eye out. And I will send this over to Todd to get us started.
Todd Ausherman 01:34
Thank you, everybody, for joining us for today’s webinar. And thank you, Jesse, for kicking us off here. I’d like to introduce my co host here. My co panelists today. Jordan Connell Jordan, I go way back. Geez, Jordan, I guess it’s we’re gonna be pretty close to 10 years here. Yeah, exactly of working together in the reverse mortgage space. Both of us have some familiarity with the traditional or forward space as well. That was my background prior to getting into reverse mortgages. In 2008. Jordan, I met each other in 2013 established a very fast rapport. And, you know, I can tell you that Jordan is one of the most ethical, knowledgeable, best loan officers that I’ve had the privilege of working with his understanding of the program, and specifically, understanding the demographic of the senior borrower, or the, I guess, baby boomer borrower, in a lot of cases, people over the age of 62, is really second to none. And I think that’s one of the things that we wanted to talk about. Today were, you know, mortgages and mortgage. But when we discuss the reverse mortgage product, there’s a lot of nuance to it. And really, the idea, and the focus of this webinar is going to be to talk a little bit about, you know, what are the real facts behind reverse mortgages? I think, you know, one of the things that those of us that are in the reverse mortgage origination business, one thing that we know, happens pretty commonly when we’re speaking with clients and potential borrowers is that we have to debunk a lot of the myths. There’s a lot of misinformation out there. And that’s sort of the first step. Isn’t that right, Jordan? I mean, one of the things that, you know, if somebody is reaching out to you, or, you know, if they’re, they’re responding to an ad, or if they’re going online and doing a, you know, a calculator or whatever to find out, you know, a little bit more information about the reverse mortgage, how often do you see borrowers coming to the table with correct information? And how is that addressed?
Jordan Connell 03:45
Yeah, that’s really the initial point that comes up in the conversation, Todd. And really, what we see in the industry is that the myths that we are dealing with, have been created over the last several decades. And so when we’re addressing these myths, we need to really understand that the reverse mortgage is simply a mortgage that allows seniors to access their home equity without the pressure of a mandatory monthly principal and interest mortgage payment. So breaking it down to something that your client understands, as a very easy comparison to another mortgage program that they’re used to having is going to be a great way to enter into the conversation with your clients and be able to immediately drop down the barriers that are there, maybe in the clients mind from all of the bad PR that the program has received over the over the last few decades. So some of the issues that have come up have been as a result of myths. And some have come out of facts that have happened, unfortunately, throughout the industry as well. So some of the myths, maybe that come to mind for myself and Todd, you might have some ability to speak to this as well, would be that, you know, reverse mortgages were really lumped into the time in the mortgage industry where you’re dealing with other programs such as no doc loans, or other predatory loan products. The reverse mortgage a lot of times was blamed for the reason that seniors lost their homes, even though the reason for a lot of those defaults were because borrowers were falling behind on their taxes and insurance payments. So there’s some myths there that really the reverse mortgage program ends up getting blamed for that. In reality, the reverse mortgage was not the main cause of this, so I think those are some of the big myths that come to my mind when I’m talking to these borrowers. And I really like to explain to borrowers that if you have a situation where you don’t pay your property taxes, or your homeowners insurance on even if you don’t have a mortgage, you’re going to be in trouble with your home. So dividing out what’s actually an issue with a reverse mortgage, and what’s actually an issue more of just other items that come up as homeowners, I think that’s key to differentiate what’s really going on with the reverse mortgage. Yeah, a
Todd Ausherman 06:08
couple, a couple of good points that you made there, Jordan, and that’s, you know, it’s the misinformation piece. I know, the big one, when I was originating, the the thing that we always heard, like, right out of the gates with, with someone who might might be misinformed is I know, to reverse mortgages, you just want my home, that’s where the bank takes my home for me, and then I, you know, have to pay you at the very end of it. And it’s, you know, it’s, it’s kind of a jump to conclusion in a lot of ways. And kind of your point when we’re talking about, you know, what is a reverse mortgage, and the difference between a reverse mortgage and a traditional mortgage, it’s like a, you know, the easiest way that that I’d like to explain it, or was explaining it back in my origination days is a reverse mortgage is simply a mortgage on steroids. Just like a regular mortgage, right, you have principal and you have interest and you take out a mortgage, you borrow a lump of money, you pay back that sum, and you also pay back interest. That’s exactly how a reverse mortgage works, the only difference is that you have the option not to pay. So if you don’t pay the interest payment, if you’re not writing that check every month, or it’s not being automatically deducted from your account. Well, where’s the interest coming from? So what ends up happening in reverse is if you opt not to make the payment, you just forego that payment, or posit that gets added on to the loan balance gets added to the principal. And then you would pay that interest when you would either sell the house or move out of the home for whatever reason. So really kind of trying to put the scary term of reverse mortgage into its simplest form of this is just a loan with principal and interest like air like a car loan, not as predatory as a credit card loan. But it’s funny because people seem to have no problem signing up for 25% interest. That’s not scary, but because the word reverse is thrown in there, it suddenly becomes scary. And then also to your point, Jordan on on. Okay, so where did all this come from? Where did all this bad PR, originating? You know, back in pre of the the housing crisis, there were a lot of people that were really selling predatory annuity type programs where there would be, you know, annuities, that, you know, somebody who was able to sell insurance might be able to make a very big, you know, 25% commission on the policy, if that deferred annuity pays out on the, you know, person that’s using the annuity, if it pays them their 120/5 birthday, or, you know, crazy things like that, where the, you wouldn’t have access to the capital for a really long time. And they were using, in some cases, the reverse mortgage to fund some of these adverse insurance products. And so they all got kind of lumped together. And because everybody is familiar with annuity, and nobody’s familiar with reverse mortgage, it seemed like that reverse mortgages, were taking a lot of the blame there, when in fact, it was just sort of a means to an end. And then also to your point, you know, even if you’re not making if you’re making a mortgage payment, or if you’re not making a mortgage payment, every borrower is responsible for taxes and insurance. So whether you don’t pay your taxes and insurance with a reverse mortgage, or if you don’t pay your taxes and insurance with a Ford mortgage, the result is the same, whether the word reverse is in there or not. So I think that one of the earliest things that we can do, and we’re talking to the public and everybody in the reverse mortgage space is really sort of an ambassador for the industry, is to sort of debunk some of the misinformation that’s out there with trying to say that, hey, nobody understands what a reverse mortgage is. It’s too complicated. Well, I would, you know, like to ask anybody to explain to me the intricacies of exactly how compound interest works on a Ford mortgage. Most people don’t understand that either, but because it’s more familiar, it doesn’t have the same barriers of entry when it comes to just breaking down a simple conversation on what might be the most helpful.
Jordan Connell 09:49
Sure, sure. Absolutely. And, you know, I think adding into that there are some factual rebuttals that do come up. And there are some factual historic notes as well to the program and how, if you look back 10 years ago, or prior to that, you had a lot of loan officers that were not selling the reverse mortgage in a responsible way. And so I think addressing the fact that, factually, there were some things that were going on in the industry, prior to the last decade, I think it’s good to talk about that with your clients to let them know, Hey, we understand that maybe there were some legitimate issues in the past that we need to address. And we are as an industry addressing. And so speaking to the fact that some ellos did not sell the reverse mortgage in a responsible way in the past, I think it’s important to know that not only do the clients need to be educated about how the reverse mortgage works, but the loan officers and the lenders, and anybody who’s involved on the transaction side of that mortgage needs to be educated to know how to properly present the reverse mortgage as a solution to their client. If you’re not doing that, you’re resulting in this ongoing narrative of negative PR around the program. So you know, talking about the mortgage, reverse mortgage as a last ditch mortgage program, I think that sentiment has come up as a result of that. And it’s just been viewed in the past as a subpar program, because I think there was a lot of subpar education available, not only for the borrowers, but for the loan officers as well. So I think addressing that, on top of the myths that exist out there, I think is also a key part to addressing some of the barriers to entry.
Todd Ausherman 11:30
Yeah, it’s like one of the biggest problems I think that the reverse mortgage industry faces is headline risk. It’s, it there’s a lot of it’s an easy article to write. But when if somebody has a tax and insurance default and is removed from their home, there’s not a single person, certainly on this webinar, but you know, I would argue that I’ve ever come across in my life that would like to kick grandparents or the elderly out of their house, it’s simply not the case, there’s, there’s nobody that has the desire to do that, in fact, it’s quite the opposite. The real designation of the reverse mortgage is to allow seniors to age in place for the rest of their lives with dignity. So as long as taxes and insurance are paid, and the the terms alone are being held up, which the you know, another big one is you have to it has to be an owner occupied home, which I think is an important one, because the fact that it has to be owner occupied speaks to the intent of the program, and the intent of the program is aging in place. So not only does nobody want your home, but in a lot of cases, it’s the exact opposite, we want to make sure that nobody can take your home, let’s shore this up for the rest of your life. So that’s a big myth that, you know, I think, could use a little bit of understanding and for the general public, and certainly for people that are dabbling in the reverse mortgage world or for loan officers, or forward signing agents that that might be interested in this demographic, and, you know, really expanding their ability to to sell different products, that’s a really important one is to make sure that the people that are that we’re speaking with, understand the intent behind the program, and intent behind the program is aging in place. Now, Jordan, one of the things when we begin to and we don’t, we’re not going to get too much into the nuts and bolts of the individual program here, we can save that for another discussion. But, you know, I think when one of the things that you and I used to talk about way back in the day, when we’re discussing these things, one of the first things when you properly explain a reverse mortgage to a borrower that may have come in and with some misinformation and with some, some, some thoughts that that are misguided. One of the first things that once that we hear, once we’ve explained it properly is Jordan, this sounds too good to be true. What you just said, sounds too good to be true. I can borrow this money, I don’t have to pay it back. All I have to do is pay my taxes and insurance and use the home as my primary residence. And then I stay here forever. What’s the catch?
Jordan Connell 13:50
Right? Yeah, and I think, you know, that comes up a lot for me, you know, I was on a call with a borrower actually this morning, she she had the same sort of reaction was that I’ve never heard of something that allows me to have this much freedom within my home, right, it’s going to be taking care of a lot of the main stress points that that she encounters on a daily basis. And so I think it’s important as loan officers that we address the fact that, hey, there are still qualifications that you have to meet for the program. So there are some things that you do, you know, have to meet financially as far as income qualifications, credit qualifications, there are some guidelines that we still have to stick to here. However, this program was designed to allow, like you said before, seniors to age in their home, and to be able to not just not just survive, but to really thrive in the future. So what I’m passionate about as a loan officer, and helping others who are loan officers wanting to get into this is really allow them to understand what does it mean to be a responsible homeowner? And how do we help these people in their senior years to be able to continue on that path. And so the reaction is, this sounds too good to be true. But it’s really not. You know, we’re talking about something that was designed for this specific need of allowing seniors, and many of which are on fixed income, or living off retirement assets, to be able to actually live in their home and enjoy living in their home throughout their senior years. So I think walking them through how it works, and educating them on it really allows them to see okay, it’s not too good to be true. This is a legitimate program. It’s not some kind of gotcha program or boogey man program, like a lot of the industry wants us to believe. It’s designed, though, solely for the senior population to really be able to age with dignity. And I think it’s important to address that and what our commitment is as a loan officer, when we’re talking to our clients about the program.
Todd Ausherman 15:55
Yeah, and it’s, I mean, it’s an easy one for the it’s, it sounds too good to be true. And typically, when we were taught from a very young age, you know, from literally as toddlers, if it sounds too good to be true, then it’s not true, that the easiest way that I was always able to sort of overcome that objection, which seems seems to always pop up, is basically, this is expensive. There, it exists because the government is backing it. Essentially, the Home Equity Conversion Mortgage is by far the most popular version. And that’s the FHA version of FHA. And it exists because there’s an upfront mortgage insurance premium, right? There’s an ongoing mortgage insurance premium. So yes, there’s all these great benefits. But the reason the sort of counterbalance to it is it’s, it’s not, it’s not super cheap. And let’s be real, the government, the FHA product is the biggest game in town. So if we don’t have the government backing this program, willing to take the loss, right, because for a long time, this program was a loser for the government, we’re back on a positive subsidy. But if we don’t have the government stepping in there, for this specific purpose of allowing seniors to age in place, the reverse mortgage simply would not exist. So one of the things that I would, you know, certainly that’s not the case now, because the fund is on the positive, and seems to be on the men. But one of the things that, you know, used to be the case to that I was able to explain to seniors is look, the government’s willing to take the risk. So that’s why it’s expensive. But that’s also why this awesome program exists. So it’s really important to make sure that all of the reasons are out there. So people can make informed decisions as to whether or not this program is right for them. But another thing that’s really interesting about the reverse mortgage is its adaptability. It’s, you can take out your money in so many different ways you can make a mortgage payment, you can pay $25 a month, if you want, if that’s all you can afford. Some people like the psychological feeling of contributing to their mortgage, they don’t just want to see it negatively amortize or you know, have that compounded interest added up over time they want to pay something, that’s certainly an option if you want to do that to begin to protect your heirs. But you touched on something here that I want to kind of transition us a little bit to focus on and and you talked about the word passion. And I think that one thing that drives our little niche part of the industry here in the reverse mortgage space is passion. And it’s it’s people always like to say and I’m sure there are a lot of folks out there that are you know, sort of in that more commoditized Ford mortgage world where they say I just love having people realize their financial dreams and the dream of homeownership. And I believe that I believe that a I certainly do. But there’s nothing quite like the success stories of setting up a senior that that is a little concerned about what’s going to happen to them in the future. It feels great to set that person up for life. And a properly qualified and properly originated reverse mortgage should do just that. So it’s a long, it’s a longer process. You have to fight really some some pretty tough headwinds in terms of perceptions and barriers. And you have to explain, you know, the complication, and the reverse mortgage product is more in terms of how you decide to take advantage of it, then it is in the program itself, because there’s almost an infinite amount of options with how an individual borrower can apply the loan. So that’s the part that takes it’s not a one size fits all program. I mean, typically, when we talk about the differences from afford mortgage, the interest rate is the interest rate, you can sell a four and a half percent, I can sell a four and a half percent, you might be able to do it for 20 bucks less than me, you’re going to get the business with a reverse mortgage. It’s what’s the person’s scenario, right? What do they have going for them and where are their holes? And how can I as an advisor as a loan officer for this person, how can I direct them and create the best possible financial outcome for them? And that’s not as simple as rates tick down an eight Let’s go. Hey, you know, Mrs. Borrow, I need to know your situation, you really have to get to know the person at a much more intimate level. If you recall, Jordan, we used to always talk about, you know, what’s that intimate detail? Now what when you’re discussing something with a person, what is it that you’re able to uncover, that creates a bond that you know about them that that isn’t free information, it’s not publicly made information. That’s the basis, that’s the bond that forms when you’re originating a reverse mortgage, and you can’t get there without passion. If you don’t, if you don’t feel very passionate, if you haven’t had the warm and fuzzies that you get from setting somebody up and making them feel financially secure for the rest of their life, you’re never going to get it, because it doesn’t make sense to face these massive headwinds, and to take all this time to get to know somebody, when you know, there are other options out there, if you don’t, if you’re not passionate about that, you can go and you know, make money doing many, many different things. To be successful in this space, you really have to care and not just about the demographic, which is important one, but also about the individual that you’re actually speaking with.
Jordan Connell 21:10
Absolutely, yeah. And I think that that’s, you know, a great transitional point to talk about, you know, how can an MLO get into reverse mortgages, right, and who should and who should not consider this as a program that they would like to offer to their clients? And I think, you know, initially right there, Todd, understanding that this is much more of a life conversation than it is a transaction. This is about the pain points that exist in someone’s life. And can we solve for those pain points with the reverse mortgage program, and it does require an extra layer of support. And it requires getting into more of those intimate details and understanding who this person is, and what they’re trying to accomplish. And so it is a longer cycle, as far as talking about the sales side of things. It’s a longer sales cycle, than other products out there. And, you know, we like to talk about this as a program, not a product, right, because I think product conveys that transactional mentality that we might see on a traditional mortgage side. But this really is a program that allows somebody to age in place, give them the dignity back in their life, and provide them with something that’s going to solve for those pain points. So I think when we’re talking about which LOs should consider this, if an LO is out there saying, you know, hey, I’m looking to not only have another product, quote, unquote, to sell, but I’m looking for a program that can make a difference in my clients lives. I think that’s a perfect LOs who should consider this program, and talking about what the reality is for seniors today, I think there’s a big misconception, Todd about what an average senior is actually dealing with, I think we are kind of told growing up that, you know, seniors, an average senior can take care of themselves and, and have the ability to be able to thrive within their their own financial assets that they’ve built up over their lifetime. But what reality is, from what I’ve encountered in talking with many clients over the years, is that a lot of seniors simply don’t have enough to be able to do what they need to do, and actually enjoy their lives, in my experience is much more common to see seniors that are barely making it and actually need some additional assistance. And their largest asset is sitting there in their home, we’re simply giving them the key to be able to unlock that asset. So I think understanding what reality is for our seniors versus what we might think as a preconceived notion, that’s important as well, for the fellows that are considering this as an option as a program.
Todd Ausherman 23:49
And you can’t ascertain that information without asking a lot of questions. And the questions often have to move into a much more personal nature than would be done on just you know, what are the facts, you know, here’s, here’s your income, here’s what we can do for you, you know, very transactional with the reverse mortgage, you have to ask some of those more uncomfortable questions to make sure that that you’re doing everything right. So that’s a big one in terms of identifying, you know, that the differences and the type of borrower is, is, you know, being able to connect with somebody that’s, that’s willing to, to look at you as, you know, as a trusted adviser as somebody that has their best interests at heart. And if you don’t have their best interests at heart, this is not the space for you. Another thing that I’ve found that makes the reverse mortgage program especially unique is this idea of the differences in sophistication when it comes to technology. depending on you know, another hurdle for you know, what we will consider traditional loan officers getting into the reverse space is that technological gap a lot of times sometimes you have certain boomers, seniors whatever the case may be who are very technical logically savvy, they, you know, can do everything from their phone, they’re probably they can probably sit down and master a software program faster than me. And that’s one side of the coin, and you have it all the way to the other end of the spectrum of, I don’t, I don’t even want to use email, I would like to have everything done on paper, I want to see the the person that I’m working with face to face, you know, I don’t, I’m not going to be I need to mail in all of my documents, you know, it’s not going to be as simple as me scanning them and sending them in. So that type of that, that can be a disruption to a workflow, especially if you’re not used to that, if you’re used to, you know, hey, I’m going to shoot you out a DocuSign, you know, bang that sucker out and skim scan all your stuff in and send it to me, so I can get you an underwriting lock your rate, that, you know, that can happen. But just as often it’s gonna, there’s gonna be some hurdles there. So one of the things that’s important to uncover, as we’re, you know, beginning to identify our relationships with reverse borrowers in particular, is after we understand their particular situation, and we say, Okay, wait a minute, this is actually worthwhile, let’s get this information over to you. So you can actually see, you know, how this may or may not be able to help you. Or in our case, we’re not going to move forward, if we don’t believe truly, that we’re going to be able to help, we now have to ascertain, okay, what is the technological sophistication of this borrower? What do they prefer? And again, this goes back to the good old fashioned question asking that, you know, in a lot of sales oriented types of roles is a dying art, it’s very alive in the reverse space. Because, again, the idea is trying to create a borrower experience as reverse professionals, we’re ambassadors to the program. So we want to make sure that we’re creating a smooth of a borrower experience as we possibly can. So those questions are important to ask, you know, Hey, mister borrower, do you use email? Are you comfortable using email? Would you prefer that we use Mail? Would you? Would you like to have some of the application signed online? Do you mind using, you know, an automatic signing service? Or, you know, do you want to have everything done by paper, understanding those different gaps allows you to kind of create and form not just what’s going to be the best looking program for this borrower. But once you can also formulate what’s going to be the best borrower experience for this borrower. So when they walk away as a reverse mortgage borrower, they’re also an ambassador for the program, because they feel like they’ve been handheld and that their needs have been met throughout the entire process have you had, and I know you’re still active out there. And I’d imagine that this is something that you’ve come across,
Jordan Connell 27:30
absolutely every day. So it’s very true that this population, I would say, at this point, I would say it’s about 60% of folks that are still preferring to be able to do things by paper applications, maybe with having a signing agent present at their house, for for the application signing, if I’m not able to be there in person. So about 60%, I would say, are still preferring that method. 40% are kind of in that adoption phase of technology and allowing that to be part of this transaction. But I really think like you said, Todd, it all comes down to asking the right questions initially to determine how is this process going to go for this specific client? What do they feel comfortable with, and meeting them where they are not forcing them into something that is going to be a process that they don’t feel comfortable with? Because once again, we’re dealing with a program that we’re making up for decades of misinformation and myths that we’re trying to make up for now, with being honest ellos, making sure that we’re giving them a really good experience as well throughout the process. So my main goal is a loan officers to understand what are they comfortable with? And how can I meet them at that level, and give them the highest level of service as possible. And understanding those details is huge. And it allows me to be able to speak exactly, to what they are going to find as a good process for themselves. Because each person has a different definition of what they expect in that process.
Todd Ausherman 29:04
Yeah, and you know, this, we’re gonna go a little off our script here, Jordan, I’m gonna put you on the spot. So, okay, hope you’re ready for this. Because, you know, I love stories. I love telling stories. I love hearing stories. So if you could kind of speaking to this topic on, you know, somebody that might have been a little bit challenging to deal with because of technological sophistication, I think this is an important one for us to jump into a little bit, because it is important, and it’s something that’s, that’s, as you pointed out changing. I mean, you said 6040 When I was originating, you know, you know, seven years ago, it was 9010 the other way so, yeah, but if you could, can you kind of let us know, you know, maybe give us a story. You don’t have to use the person’s name, but you know, kind of tell us a story about how you uncovered this particular challenge. You know, what you did to sort of solve it and get us all the way to resolution?
Jordan Connell 29:57
Absolutely. Yeah. So I have a very specific borrower that comes to mind. Her first name was Mary, I won’t use her last name. But she didn’t have a computer didn’t have any internet, didn’t care to have internet was very against it right from the first phone call. You know, one of my opening questions after we’ve gotten through some of the basics is, you know, when I woke up these proposal documents for you, how would you prefer that I send them out? And she said, Well, Jordan, I’m not doing anything on the computer, I’ll just tell you right now. And so I said, Okay, nope, no problem, Mary, we’re gonna go ahead, we’re gonna UPS these proposal documents out to you here today, they’re going to get to you by tomorrow. And I’m going to give you a follow up call, so that we can walk through those proposal documents and questions that you may have together, and make sure that you feel comfortable that this is the right fit for you. Right, so right from the very beginning, I determined that this was going to be somebody who wasn’t going to be able to get access to a computer, nor did she want to write she didn’t even want to go to a family member’s house or a friend’s house, because in some circumstances, I’ll ask them, Do you have any family members or friends, I have a computer that might be able to help you along with this transaction. So she was totally against it. So throughout the process, as we’re gathering her documents, we’re utilizing things that allow us to still be personal, and still have a very high level of quality touch, right. So at the time of application signing, we used a signing agent, at the time that the signing agent went out that not only are they collecting the application documents, they’re helping Mary gather up all the needs list items, they’re helping gather up the IDs, the income documents, so she feels like she’s getting a high level of service. And we’re getting all the items back that we can right at the beginning. And that pays off, right? And dividends, because now the borrower’s experience, which could have very well, Ben, I just feel like you’re calling me for all these items all the time, and I have to mail this item in and then you need something else. If you as a loan officer can determine what they would like to experience and what their level of sophistication is with the technology right from the beginning, then you can tailor that process to make sure that we still are offering a good level and quality of service while still getting all the items back in an efficient manner. So working with that signing agent really helped us and because it allowed all those documents to come back at the beginning. And then we’re just talking about a few conditions once we actually went into underwriting. And you know, we were able to handle those by using UPS or FedEx to be able to get those things back in a prior priority fashion. So at the end of the process, Mary felt like she was completely taken care of, she didn’t feel like she was just put off to the side because she couldn’t use a computer or wasn’t comfortable using one. And we were still able to make sure that it got done in a timely manner using the other tools that we have at our disposal. So I think it’s good to acknowledge there’s people there’s companies out there that allow you to be able to work with them. So that the experience is still on, there’s a good experience for your client. And I think that she left the table feeling like, Okay, this was a really good process still
Todd Ausherman 33:06
hoping that that was a notary, it was that you’re using All right, good. Yeah. And, you touched upon something there that is awesome. And that’s and you know, we used to always call it quarterbacking the process and for those unfamiliar with football, the quarterback is the person that you know, has to see everything that’s going on, and make decisions and move people around to make sure that the ball is moving down the field. And the same way where we’ve seen the best loan originators and where borrowers have the best experience is when the loan originator quarterbacks the process, just the way that you described there, Jordan, and you know what happens when when the quarterbacks driving the ball down the field, you know, sometimes you get, you get met at the line, sometimes you get sacked. At times you get intercepted all these different things happen. But you hit a wall and you find a way you hit a wall and you find a way but you the faster that you’re willing to take on these challenges and the more determination you have to help this person get to the finish line, then all they are is just temporary setbacks we can we can find a way to work with anything and and because of your ability to sort of quarterback that process, you were able to insert a signing agent as your proxy that I’m sure you had a rapport with that was representing you well to the borrower, and that you had confidence that they were going to take care of the borrower, the borrower had confidence that you were quarterback in the process. And the signing agent that you were working with had competent, that had confidence that they’re not going to be left on an island, they’re a partner in the transaction because they have the same goal that you do. So I think that’s a pretty big, a pretty big piece of the puzzle. And I think it’s one of the main differences between the reverse and the forward is, you know, the successful close for a reverse mortgage starts an application. And what’s meant by that is, yes, we need to know how we’re going to use the program or how this borrower can use the program to make their life better. But if the process is terrible, you’re not going to let that person enjoy the fruits of what the program could offer them. It’s a long process, it’s easy to get frustrated, you can hit a lot of walls. And if you’re not there to continue to see the vision and drive it forward, and you know where there’s a will, there’s a way to figure it out, then unfortunately, that borrower is not going to be serviced properly. And they may end up being the big loser and all of this. So that’s another important one is, you know, utilizing the resources that are at our disposal and creative ways, often allows us to really see this thing to the end.
Jordan Connell 35:35
Absolutely. And I think it’s key to understand that the world will continue to add more and more technology to this industry, right, that’s gonna, that’s going to continue that’s inevitable. But it doesn’t mean that it has to take away the personal element that you have with your client. And I think as a loan officer, it’s key to understand that you are the main point to be that personal touch throughout the process that they feel comfortable with. And like you mentioned, you’re quarterbacking the transaction from start to finish. So I think there’s a lot that we can do as loan officers to really step into that responsibility and deliver a great experience for our clients while using those additional resources that you’ve brought up there. Todd?
Todd Ausherman 36:18
Yeah, well, fantastic. And I think that we’ve I think we’ve touched on sort of the, you know, a lot of the main topics that we’re looking to, you know, jump out of the gates with, and that’s really focusing on what are these reverse mortgage myths that are out there? And how do we go about, you know, informing people that perhaps are misinformed for whatever reason, we discussed a little bit about, you know, what is it that’s specific about the reverse mortgage, that that might make it shine a little bit more than a forward mortgage, one thing we didn’t discuss, that I want to touch on here, which is kind of an obvious one, but it’s the waters have been muddied. And that is, it’s much easier to financially to qualify for a reverse mortgage than it is for a traditional mortgage. Because the primary financial concern is making sure that your taxes and insurance and you know you can stay in the home, and it’s not going to become something that you know, could cause a foreclosure down the line. So the income qualifications are much less, they’re still verm. But they’re much less strict in terms of the income that’s needed to qualify. So they get a little bit remiss not talking about that.
Jordan Connell 37:20
Absolutely. And I think to provide some additional context there, what we’re able to do within the reverse mortgage side of things, compared to say a traditional mortgage is we’re able to work through scenarios where you’re not meeting the income threshold, by allowing us to work with additional assets that the borrower may have, or even using proceeds from the loan to be able to meet the income requirement. So things that may have gone by the wayside with a traditional mortgage industry, because most of our traditional mortgage programs have automated underwriting now, the reverse mortgage does not right, we’re still dealing with much more of a manual underwrite process, which leaves room for the underwriter and the the other operations folks that are involved, to be able to still make a deal work and be able to think outside the box of what we would normally get hung up on on a traditional mortgage side. So I think for an MLO, who’s used to doing traditional mortgages, I think the main thing that we should really talk about here is that you are probably sitting on a base of clients that you might have helped in the past, that would be good reverse mortgage candidates. Today, we’re dealing with a situation now everybody’s aware in the housing market, where home equity has gone up tremendously over the last couple of years. And so a situation even where you had a borrower who maybe only put 20%, down two years ago for their home, they could very well be sitting on a situation where they now have 50% equity in their home, and they would be qualified for reverse mortgage. So I think understanding that, yes, it is easier with qualifications on the reverse mortgage. And there are some opportunities within your own database of clients that you’ve helped in the past. I think those two things, it’s important for the yellows, to really understand that, once again, we’re bringing down the barrier of entry, just addressing those two things.
Todd Ausherman 39:12
Yeah, I love it, it’s brings in the sort of the last, the last significant trait there on what it takes to be a, you know, a good reverse mortgage loan officer, and that’s creativity. It’s, you know, the it’s, again, finding those walls and different ways to get around them. So often. Often I’m asked, you know, what is it that makes somebody a good reverse mortgage participant, be that somebody that’s a signing agent, loan officer title, escrow, whatever the case may be? And I think it really comes down to those three primary traits, you know, we need passion for the demographic, and, you know, really, really wanting to see that individual succeed. And not only that, but wanting that to sort of be that Ambassador for the program to see its high marks and be able to explain the high marks and debunk some of the myths that are out there. The second thing I think that’s needed is, you know, to really be successful is that ability in the desire to quarterback the entire process from beginning to end, to understand what’s going to happen down the to start seeing things down line downstream before they occur. So when things do pop up, we’re ready for him. It’s not a you know, it’s no big deal. Hey, that play didn’t work. Let’s try this play. And then the last thing was the one you just touched on. And that’s creativity. It’s, you know, not only can we find the right, right, the right person, right process care about it. But we also need to say, Okay, wait a minute, how can I go back and look at some of, you know, perhaps some of my clients that I’ve helped out in the past? Can I see how this might be an option for them? And can I present this to them in a meaningful way that, you know, might be a bit of an outside of the box, way for people to identify these things. So with that, I feel like we’ve, you know, pretty, pretty well covered what it takes to sort of debunk and move into the reverse mortgage piece of the of the pie here. And I think now would be a good time to, for us to take some questions. So I will now invite Jesse, back on to our panel here. And Jesse, do you have I know, You’ve been monitoring our q&a and wanted to see if you had anything for us?
Jesse Yamagata 41:19
So we have a few questions from the audience. First one is pretty quick, is do you have to own your home in order to be eligible for a reverse mortgage?
Jordan Connell 41:30
Yes, so great question. Yes, you do need to be a homeowner, the basic calculation that we use to kind of determine if this is going to be a benefit for your client would be if they have at least 50% equity in their home, then they should be in line to be able to not only qualify, but receive some some proceeds out as well. Okay. So you do need to be a homeowner, though. And it needs to be your primary residence. That’s the other big key can’t be a rental home or a second home and needs to be the residents that you spend the majority of the year living in.
Todd Ausherman 42:05
Yeah. And just to build on that. One other quick point is that the last qualification thing is you have to be over the age of 62. So the simple breakdown is own the home living it over the age of 60, to have enough equity to qualify.
Jesse Yamagata 42:21
And then before we keep going deeper into questions, Adam is going to send out a quick poll just to get the audit audience’s opinion on a few things. And we’ll leave that up here for a few moments. And then we’ll keep moving forward with questions as we get a couple more.
Jordan Connell 42:42
And I think while those polls are coming through here, I just saw a question, a follow up question on units amount of units. Question was from Glen grant, any success or tips on two to four units? So yes, we can do up to four unit properties, those are still considered residential. The main key there is going to be finding comparable homes, that the appraiser will need to find that match up with the same amount of units. And you know, same or similar condition. Those are the two main things. But yeah, four unit up to four unit properties are allowable with the reverse mortgage product and then follow up question. I think he said or made a statement. Now there’s products down to 55 years old. Yes, that is the case or some proprietary programs that exist. Todd was speaking to the Home Equity Conversion Mortgage, which is the FHA insured loan that is still 62 or older. And the proprietary products, you have to be careful because they’re not in all states yet. Okay. But the ones that are available? Yes, there are some that go down to 55 or older. So that’s it. That’s a great statement they’re going
Jesse Yamagata 43:52
And then a for an additional question, can you provide a scenario? Who would be eligible or if it would be suitable for senior and how long they would have to be living in their home to qualify for a reverse mortgage?
Jordan Connell 44:08
Yeah, great, great. Couple questions there. So really, as far as ideal candidates here, the range of candidates and clients that I’ve been able to help have ranged from somebody who couldn’t pay their property taxes and homeowners insurance, all the way to somebody who had plenty of retirement assets. But they were looking to have additional funds as a just in case safety net, or to be able to leverage their home equity instead of drawing out early on their retirement assets. So really, as you can imagine, the amount of clients that we can help with this product, it runs the whole gamut between that range, you could be talking with somebody with millions of dollars in assets or somebody that barely has enough money to pay their bills. In both cases, we have an option to be able to make the reverse mortgage a fit for them, and as far as minimal time living in the home Speak with whatever lender that you’re currently working with if they do offer reverse mortgages, I think in most cases, we want to see at least six months of title seasoning is what that would be called. And I think a lot of companies are in that same, you know, kind of six month mark, but it’s always good to ask to make sure that there’s no overlays there.
Jesse Yamagata 45:22
A and then for an additional question or like point, the growth of line of credit.
Jordan Connell 45:30
Great, great question. So touching on some of how the proceeds can be accessed. And this is something when I’m talking about more of the folks that do have retirement assets, the line of credit is a huge selling point to the reverse. So any money that’s in the line of credit of the reverse mortgage does have a growth rate that matches the initial interest rate, plus the ongoing mortgage insurance premium. Okay, it’s basically a match. So any funds that remain in that line of credit, the homeowner receives additional access by that rate over time, okay, so any money that sits in that line of credit, and Todd, I think brought up in the past on the call here, they can make payments. And the other benefit to those payments that they make if they want to make a payment, is that the money that they pay, goes to reduce the principal balance and increase the line of credit that they can draw on the future. So that money is is still accessible for them to draw again, should they need it down the road?
Todd Ausherman 46:32
Yeah, and to build on that, Jordan. And that’s, that’s regardless of the equity in the home. So when Jordans talking about the line of credit and its growth rate, whenever a borrower takes out a reverse mortgage, that line of credit that they’re eligible for is locked in, doesn’t matter what happens if ever if the economy collapses, again, unlike what happened in 2008, with home equity lines of credit, where the bank said, Hey, anything that you haven’t used, we’re just gonna take back because your equity is now trashed. That’s why the FHA insurance premium is there, for the government not to do that. So let’s say crazy scenario, you have a $200,000. Home, you get $100,000 line of credit that you’re eligible for your home price tanks. Now your home is worth $50,000 Oh, my goodness, I guess that means all I can get is $50,000. Right? No, you can still get the 100,000. And the government takes the loss. So in for a lot of people that are as Jordan said, a little bit more sophisticated. That line of credit can be a very significant hedge against the insanity that can happen in the housing market. And it’s backed up by the full faith and credit of the United States government. So I always like to tell my borrowers and those sort of extreme examples, as long as the stars in the bars are flying, as long as you know, as long as we got the American flag up there, then you’re going to be just fine. It doesn’t matter what happens to your house at this point, you’re officially out of the game, if you want to be. So that’s an important factor too, is that that line of credit, while it grows at the same, and it’s also another thing to point out, by the time that happens, that that line of credit that 100,000 line of credit is has been compounding interest, much like it would be for the bank. So you’re actually that 100,000, after you know, five years might very well be 135,000. And if your home’s only worth 50,000, then you’re a double winner. So it’s a good, very good part of the program that is a little bit more complicated to understand that could probably take us a whole webinar. So to really, really jump into that. And maybe that’s the future. Yeah, but that’s very, very nuanced. But it’s important to discuss because that is a major, major piece of the program and what it offers.
Jesse Yamagata 48:39
Absolutely. So getting maybe a little bit more detailed. We have a question, can you tell the difference between the purchase and sale of a reverse mortgage? They were under the impression that reverse mortgages are only a refinance tool.
Jordan Connell 49:00
Great question. Yeah. And this is a common misconception across the board, all the way from loan officers to real estate agents. And so when I’m addressing this, I really think that it’s good to think about, okay, what other business partners do I have that I could actually help educate them about this as an option. So reverse mortgages do allow you to purchase a home, they do allow, folks, if it’s a reverse mortgage, that’s FHA insured to purchase the home, and do so really with about 50% of what they would normally need to put down in the circumstance where they were paying cash for the property, right. So thinking about folks and their, their buying power, it completely changes the game and especially now that folks are trying to right size in markets that are growing, they’re gonna have to have something that allows them to be able to move into a property that might be more expensive than they were used to seeing a couple years ago. So understanding that it can allow you to purchase It can allow you to refinance as well. And you can also there’s circumstances where if your home has appreciated enough, even if the client had a reverse mortgage before, there are possibilities where they could actually refinance their existing reverse mortgage, there are circumstances where that’s a benefit to the client. So right off the bat, you have three different products that you now have at your disposal. And you can go out and educate some of your business partners, such as real estate agents, that they could increase their book of business by simply having a product that specifies to the, to the senior population.
Todd Ausherman 50:35
Yeah, in the purchase product is awesome. And it’s almost, it’s almost never utilized, which is frustrating for those of us in the industry. Because Jordan, as you mentioned, this right sizing thing is the perfect scenario. I recall, this is, you know, easily 14 years ago, and I still remember it, because the loan officer I was working with Ken was very proud of the fact that we actually did a simultaneous closing purchase with a reverse mortgage, meaning the borrower had a home that was, you know, let’s call it worth 300,000, that they didn’t have a mortgage on, they were able to sell their house for 300,000. Pocket 150,000 spend the other 150,000 on the reverse mortgage basically get, you know, a bit more of a right size, a better home that was, you know, one story better equipped for them. And that was done simultaneously. So the close happened, the double simultaneous close occurred, they sold their property and purchased by a reverse mortgage and new property all in one fell swoop. So there’s, it’s we’re, well, we’ve been excited in the industry for those 14 years. It still has not caught on and a big reason is because not a lot of people know about it. So it’s a great question. And I’m glad we had a chance to touch on it here yes, you can absolutely do a what we call heckum for purchase. Now, I’ve been out of the the the origination side of reverse mortgages now for a few years. So I’m not as well versed on all the proprietary products that are out there, I know that more and more coming. So what that what that means for the future of the purchase market, I don’t know. But I think it’s good. In fact, I think it’s really good. And the fact that we’re starting to see more entrants and the proprietary part the the non FHA reverse mortgage side of it coming into the space, it just means that more and more people realize that, hey, wait a minute, this program can work, there are a lot of people that we we want to make sure that we have a program that can fit everybody, not just the pure cookie cutter HECM reverse mortgage. So the the future of this industry looks really strong. And it requires you know, somebody to be very up to date on what the individual proprietary products are that are out there, again, as part of our ability to be creative, and quarterback a process for somebody who are passionate about serving.
Jesse Yamagata 52:49
Absolutely. In regards to that question, is there a minimum amount that they need to have?
Jordan Connell 52:59
Sorry, Jesse, I think the connection broke up a little bit there
Jesse Yamagata 53:02
Is there is the amount that needs to be down for a borrower to use a reverse mortgage.
Jordan Connell 53:12
So the the down payment requirement is going to be based on the borrower’s age. And based on the interest rate that is selected, okay. And then of course, the home value. So, traditionally, I use 50% is kind of the the benchmark, right, that’s kind of the rough estimate, it’s going to vary, if they’re older, they actually get more buying power from the reverse mortgage, it covers more of the purchase price than if they’re younger. But we use 50%. So if you think about it in terms of round numbers, $400,000 is the sales price, you’re looking at roughly 200,000 that would need to be brought in by the borrower. Most cases like Todd reference that’s coming from a previous sale their other property, and then the other 200,000 is covered by the reverse mortgage. Okay, that’s kind of a just round number example. And then to take it a step further, a lot of even loan officers don’t realize this, and they’re the ones that actually do the reverse mortgage, you can do what’s called overfunding, your reverse mortgage purchase. So if somebody said, You know what, I’d actually like to have a line of credit as well, on this reverse mortgage, I can actually bring in an additional 1020 $30,000 On top of that required down payment, so that I have an available line of credit that I could draw from in the future should I need it. So that’s another great way to make your money work for you. So that you’re not just putting it in the bank with no growth rate, you’re actually putting it into a line of credit where it has a growth rate of over 4% you could you know, reach back out and need that money in 510 years and now you’ve got more funds to access in that in that future situation. So understanding that there’s a lot of flexibility I think, is also key when you’re when you’re getting to know the reverse mortgage program.
Todd Ausherman 55:00
On that, I mean, that’s awesome. I wasn’t even aware that you were able to do that. That’s pretty incredible. But I think that’s one of the things that that you know, kind of what we talked about earlier where the reverse mortgage is a mortgage on steroids, I mean, you can literally do anything. And to that growth rate piece that we didn’t get a chance to touch on we, that I think is important is that the the rates on, you know, 99% of reverse mortgages now are adjustable. So if rates when rates go up, that growth factor rate goes up. So let’s say we get hyperinflation, let’s say that you did, as Jordan said, and you buy a house, you put 100,000, into it, hyperinflation, we shoot up to 14%, however, there might be caps that, you know, I don’t want to if there’s a cat, there’s a cat, but whatever that cap is, for the extended rate that you would be paying to the bank, you also receive that benefit. So if all of a sudden rates spiked to 14, that growth factor, if there’s no cap is going to spike to 14, and so that your ability to access that 100,000 in equity is going to be compounded at 14% plus the FHA premium, because you get that as well, at the same rate that it would, were you to take that out against the bank. So and a lot of ways you get to be the bank. As far as that goes, you can hedge. If you’re very sophisticated. I’m not saying this is for everybody, but a more sophisticated borrower might see how they could use that as an inflationary hedge, especially as we move into a higher rate environment. And while that won’t do anything for your portfolio value, because technically the asset is the house, so you’ll you’ll never have more of an asset than the house itself. Your ability to draw from that and access that capital could fire out see could far exceed the value of the home as we discussed earlier in that area where hyperinflation 14% rates, the market tanks, someone who has a reverse mortgage line of credit is sitting in the catbird seat because they just want
Jesse Yamagata 56:47
Absolutely. Okay, and for our final question today. So what happens as a senior ages and has a keep the home are placed in an assisted living? Is there any examples of this?
Jordan Connell 56:59
Absolutely. So a couple different items to address on that question. If we’re talking about two different borrowers, a borrower and a co borrower, if one of them goes into assisted living as a permanent solution, but the other borrower continues to remain in the home as their primary residence, the reverse mortgage stays open and active. It’s not called doing payable. Okay? If it’s just a borrower, and they go into assisted living permanently, then it would be handled the same way that you would think of like another mortgage that were on the home, right, it would need to be paid off, it can be paid off by selling the property is usually the main thing, right? So they would sell the home pay off the balance of the reverse mortgage that’s owed at that time, pay whatever Commission’s for the real estate agent that listed and then the rest of that money, the rest of the equity that’s left in the home, would come back to whoever the borrower if they’re still living, or to the heirs that are selling the property. So that’s how that would work. But as long as they’re still a bar, we’re living in the home as their primary residence, the reverse mortgage stays open and active.
Jesse Yamagata 58:06
Well, y’all thank you so much for answering all of these questions today and sharing your experience and knowledge with everyone here. If you have any questions, you know, you can email us or scan this little QR code to learn more, and we’ll be sending out the recording shortly. I hope you all have a wonderful day. Thank you.
Todd Ausherman 58:27
Thanks, everyone. Thanks, everyone. Thank you, Jesse. Thanks, guys.