Reverse Mortgage - When New Reverse Mortgage Products Are A Bad Thing
New reverse mortgage products are popping up daily from lenders of all stripes. It's almost like reverse mortgages are the new sexy product category of the mortgage industry - like sub-prime loans were in the past decade. We know where that got us.
But is the market large enough to absorb all these new products? Despite being cool variations of the reverse mortgage theme - such as going to 60 year old (and younger!) borrowers, fixing rates, tying rates to any manner of indexes and making closing costs appear to be lower, the new reverse mortgage products appear to be driven more by a need for marketing than actual innovation. So, elders who are confused enough already about the prospect of taking out a reverse mortgage on their homes, now have to wrestle with the dozens of variations that the reverse mortgage originator can put on the table.
I am all for innovation in the reverse mortgage industry, but I really don't believe that the wholesale mortgage industry is on the right track with creating a myriad of new products. It seems that they are only sending out new product slicks to get the attention of reverse mortgage brokers. This will only invite reverse mortgage abuses. We have seen this pattern so many times before. Wholesalers just make new packaging for good core products - perverting the good with the ugly.
This is not going to work with reverse mortgages. If wholesalers want to increase market share they should do it through marketing support and education. They should make their brokers experts in selling reverse mortgages - not motivated strictly by mortgage sales commissions - but by providing great service to their clients and their communities.
Not every mortgage company should sell reverse mortgages. Reverse mortgages are a specialty product. Reverse mortgages require educated consultative sales people. Yes, they need to be well equipped, but the trend towards more and more aggressive underwriting and riskier variations on reverse mortgages will only backfire on the uninitiated. Our law firm is focused on the education and co-marketing of reverse mortgages to the elder community. We are not interested in selling reverse mortgages, only presenting them and helping elders decide if it is a good fit.
