3 minute read
FHA consistently uses the term “sustainability” in its discussions about the HECM. When we hear this word, we probably think about the longevity of the program itself. It conjures discussions about T&I default and the MMI Fund, and inspires conversation about how recent program changes might cement the HECM as a valuable financial tool for future generations of retirees.
But the term has also come to apply to the long-term value a reverse mortgage loan can offer a particular borrower. In this sense, we might see it used in the evaluation of a difficult file (i.e., is this a sustainable option for the borrower?). When we assist a borrower in securing a HECM loan, it is our duty to ensure that the loan is a solid option that the borrower can successfully maintain in the long haul.
Of course, the notion of sustainability has meaning for us originators on the other side of the table as well. We all need to continue to make loans, support our customers and generate a profit—that is what business is about. While it would be fun to grant loans for free and not worry about the bottom line, it is not reality. We must maintain a margin of profitability so that we can continue to put food on the table.
In this sense, this powerful word has three applicable and distinct meanings in the reverse mortgage business. We must ensure that the loan’s obligations are sustainable for our borrowers, that the business model generates enough profit to be sustainable for originators, and that the entire program produces enough revenue to make it a sustainable venture for our federal insurers.
Recent policy changes have been implemented to help secure the program’s longevity, and many appear to be optimistic about their success. Financial Assessment has been instituted to ensure that borrowers who enter into the loan are able to maintain the terms of the agreement and succeed in the program. Therefore, it would seem that two out of three sustainability factors have been addressed through recent regulatory change. Now, it’s in the hands of originators to make sure that the business is sustainable for them.
How do we do this? There’s no simple solution, and the specifics vary by company. But perhaps it will help to ask yourself: Are you a loan officer or a salesperson? I believe you need to be both.
Most of us who started out in this industry long ago believe that a reverse mortgage is not something you sell. While I still believe this to be true, my opinion has evolved somewhat. I think that in order to be successful in business, we always have to sell, even if we are only selling ourselves to a potential customer. Let’s face it, if a customer cannot relate to you, cannot understand you or doesn’t really care to talk to you, you will never close the deal. Call it what you like, but it is a sale when the customer moves forward to counseling, application and a successful closing.
But you could be a fantastic salesperson and still not be able to close a deal. This is where the loan officer shines. You must know every detail and nuance about the product you promote. You must be able to understand your client’s specific circumstances and show how the loan can work for them. If you cannot clearly explain a reverse mortgage and what the benefit to the borrower is in terms that make sense to them, you are only a salesman who is unworthy of a borrower’s trust.
In order to see the reverse mortgage product thrive, originators in the field must work hard every day to enhance their knowledge and spread the news about the services they offer. If we can collectively pursue this mission, we will not only advance our businesses, but also propel the product forward and ensure its place as a mainstream financial tool for generations to come.
