Education And Problem Solving Are Keys To Reverse For Purchase Business, Agents Say

The Home Equity Conversion Mortgage (HECM) for Purchase (H4P) program has long been positioned by reverse mortgage professionals as a viable path for expanding the base of reverse mortgage business. It would allow older homeowners to use a reverse mortgage to purchase a new home.

While the required down payment on a home purchased with H4P is much higher when compared to a traditional mortgage, it comes with more flexible repayment options, and the large down payment is typically financed with the sale proceeds of the previous home.

But reverse mortgage professionals have offered split opinions on HECM for Purchase in the past, and the program has very low penetration rates among total HECM endorsements, which themselves are only a fraction of traditional mortgage originations.

But for real estate agents who have engaged with the H4P program, there is a true opportunity to cultivate strong business, according to two agents who spoke with HousingWire’s Reverse Mortgage Daily (RMD).

Getting the word out

For Lisa Di Pasquale, who works with Silvercreek Realty Group in Idaho, she first became aware of HECM for Purchase by attending a class taught by Curtis Mangus, branch manager with Premier Mortgage Resources. Di Pasquale explained that the class was informative and indicated a potential opportunity among people who might be relocating to Idaho.

“This was a huge opportunity for people moving here from places like California that could utilize their equity to buy a home,” she said in an interview with RMD.

She gravitated in particular to seniors who moved to Idaho from California — a move that she also made, and which she estimates makes up an overwhelming majority of her business. When an opportunity presents itself, she offers these clients educational materials from Mangus. This inform them of the HECM for Purchase product option to see if it might be an appropriate fit.

“It’s just been a very good tool for my business as far as being able to sell more homes,” Di Pasquale said. “And I have clients that are even happier than they would have been had they not been aware of this particular loan program.”

When it comes to informing more real estate agents about H4P, many demonstrate receptivity but need the potential solution mapped out, according to Ronnie Hale, managing broker at Century21 North Homes Realty in Oregon.

“The biggest piece that I find is a lack of actual understanding of the process, [in terms of] what this can do and what it means for a real estate agent or broker,” Hale said. “Understanding what’s in it for you and how you can serve your client better, if you understand the process, is a big piece of the puzzle.”

Framing it around having the potential to solve a problem, particularly for clients who are no longer working full time and need a way to finance the purchase of a home, helps to contextualize how the program might be able to work on an individual basis, Hale explained.

“When you’re working with people on a [HECM] for Purchase, [you need to ask] what it is you want to accomplish and how — in a time frame where you don’t have income coming in, how do you make that work?” he said. ”And so, I’m into solving problems. I like puzzles.”

Details are key

When asked to estimate her success rate with clients after introducing them to the HECM for Purchase concept, Di Pasquale said it floated between 50% and 70%. Part of that, she said, stems from higher home values in California. When a client sells their home in that state and chooses to relocate to a less expensive state like Idaho, there is more equity to deploy in a HECM for Purchase transaction.

“I’ve sold lots of great homes to people that couldn’t otherwise afford them,” she said. “Plus, they have a little extra cash left over.”

But not all collaborative partners are created equal, and she said she hopes to continue working with Mangus after a less-than-optimal experience with another professional on a different transaction.

This also comes back to an inherent need for all parties to the transaction — clients, agents and originators — to fully understand the tool that will be deployed, Hale added.

“You’ve got to learn the game and to learn what seniors need,” he said. “You’ve got to be able to educate; you need a good team and a good mortgage person who knows how to put the deal together. You’ve got to understand how to structure a deal so that it works for them.”

Hale said these are the basics that need to be understood, but agents can sometimes lack the educational mindset to move forward with such a deal. Hale said this piece cannot be overlooked.

“Sometimes, agents feel like we just have to sell a house,” he said. “They say, ‘Give me a house to sell,’ but you’ve got to educate yourself.”