As HELOC Volume Rises, Reverse Mortgage Professionals See New Opportunities
Home equity lines of credit (HELOCs) continue to gain momentum in 2022, with higher volume levels as previously explored as well as a clearer picture of greater dollar volume in the space.
According to a report by the Housing Finance Policy Center (HFPC) of the Urban Institute as reported per Bill Conroy of HousingWire, HELOC volume has increased precipitously in 2022.
“According to Equifax, HELOC and home equity loans grew sharply in 2022,” the HFPC report says in part. “$68.6 billion in HELOC credit limits and $26.6 billion in home equity loans were issued from January to May 2021. In the first five months of 2022, $100.8 billion in HELOC and $38.1 billion in home equity loans were originated, representing
increases of nearly 50% over last year. These levels are also the highest since at least 2011.”
Due to these increases, RMD reached out to reverse mortgage professionals to see if this new home equity lending business could present an opportunity for their reverse mortgage business.
East coast: originator positioning remains key
For Laurie MacNaughton, reverse mortgage professional at Atlantic Coast Mortgage in the Washington, D.C. area, the added interest in home equity lending, represented by increased HELOC activity, translates into a continued need for mortgage professionals. industry to refine their messaging for clients and their referral partners, especially financial planners.
“I had lunch with three guys recently who are all leaders at the intersection of reverse mortgages and financial planning, and all three are currently in wealth management or have been paying from the upper echelons of wealth management before to switch to inverted space,” MacNaughton explained. . “As we all sat down to lunch, I asked them why they thought adoption by financial planners was so lukewarm. The former said that many reverse mortgage specialists seem intensely ‘selling’.”
A financial planner, as a fiduciary, also has a responsibility to protect clients from people who may be aggressively sales-oriented, MacNaughton said of their discussion.
“Advisors want to hear new ways to improve their clients’ portfolios and don’t want to be told how they can refer more business to a mortgage specialist,” she says.
As for how these conversations relate to the heightened level of interest in HELOCs, MacNaughton said this lends itself to a good time to engage in reverse mortgage conversations, particularly if the home loan he himself has more eyes.
“The time has come,” she said. “We can see that from the HELOC profit, the inverse product is correct. Borrowers’ needs are right. Home values are still correct. But now those of us who are at the origin have to s ensuring that our efforts are headed in the right direction, and we have the right skills to deliver the knowledge our funding partners need to hear.
West Coast: Age is still the name of the game
For Jeff Markell, reverse mortgage professional at Empire Home Loans in Southern California, additional HELOC interest underscores that the right product can be there for the right borrower depending on where they are in their life.
“I look at it from an age perspective and I’m 65 myself,” he says. “For people who are younger and still working, I think a HELOC can be a good solution for that. ‘borrow against it if necessary, or want to do renovations or pay off credit card debt, whatever the case’.
HELOCs are understandably more visible right now, but there are also enough downsides for people in the reverse mortgage demographic that a reverse mortgage professional can have a reasonable, fact-based discussion about the type product that might work better for them.
” On another side [heightened HELOC activity], for a senior or someone approaching retirement, a HELOC has for the first 10 years an interest-only component,” says Markell. “Someone who works may find they can make that payment with no problem. But if they’re looking at themselves 10 years from now and they’re retired or their income is based on Social Security and maybe a pension, they might not be earning as much. How are they going to make that principal and interest payment once Grade 11 begins? »
When having conversations with senior clients, Markell aims to present the two products side-by-side and weigh the pros and cons against a client’s individual financial situation. This could be a boon for a discussion that compares the two due to the mechanics of a Reverse Mortgage Line of Credit versus a traditional HELOC, and the ability to avoid making payments against it versus to the interest-only aspect of a HELOC.
Comparing products invites those more robust conversations, he says, but talking more broadly about home equity is good for both the HELOC business and the business of reverse mortgage, says Markell.
“A HELOC can be reduced, called, or frozen, whereas with the reverse home equity line of credit, none of that can happen,” he says. “So it’s really situational. And again, it goes back to what I said about being a consultant. Let’s look at the two and figure out which one may be a better fit for the client. But I’m glad that this part of the business has grown so much because it gives us all more opportunities to help more people.
Read it HFPC report detailing the increase in HELOC activity.