The reverse mortgage industry has struggled to adapt to the changes to the Home Equity Conversion Mortgage (HECM) program passed by the FHA two years ago. In 2019, the industry recorded a volume loss of 32.3% in the January-July period compared to the same period last year. Hence, in such a difficult business climate, it can often be difficult to find great success stories. Difficult but not impossible.
While much of the industry is adapting to a climate of reduced HECM volume, there are some reverse mortgage companies that have managed to not only keep the business going but grow it by leaning on the key elements they identified. One such company that has seen growth in HECM volume is Fairway Independent Mortgage Corporation, based in Madison, Wisconsin.
The company currently has a 3.29% market share between January and August 2019, up from 2.17% for the same period last year, its performance outperforming the industry’s decline, according to Reverse Market Insight (RMI) data. Fairway confirmations are also up 3.7% over the same period in 2018, compared to the market as a whole, which is down over 30%.
But success stories are not always success stories, and Fairway’s business success is not achieved in any one way. Instead, a company representative describes adopting the reverse mortgage product from its primary position as a futures company as critical to its current growth position.
Hug the back
Many stories of the overlap between forward and reverse mortgage business have usually resulted in a company expanding into the forward space to strengthen its business as opposed to the other way around. Fairway’s story is based on the opposite scenario: It sees itself primarily as a forward mortgage company and has achieved greater success by expanding into – and borrowing from – reverse mortgage origination.
Based on 2017 End of Year endorsement data, Fairway’s origins weren’t enough to make it a top 10 lender. They became one the following year and based on the latest September 2019 data, Fairway is the only top 10 lender to see a 9% volume increase compared to endorsements at the same point in time last year.
While the company sees itself primarily as a forward mortgage company, Fairway quickly attributes its success in reverse mortgages to the company’s willingness to take on the downside of the business in very comprehensive and demonstrable ways.
“Fairway has a unique culture. The leadership, branch managers, and many loan officers have embraced the product and it is slowly spreading across the company, which is difficult to find with a forward mortgage company, ”said Jared Gibbons, National Reverse Mortgage Sales Manager at Fairway. “[Our] The culture of doing what’s right for the customer helps reverse mortgages. “
The key to Fairways reverse mortgage approach and its overall success is educating the borrower, specifically positioning the reverse mortgage as part of a comprehensive retirement solution, as opposed to something a borrower may seek out of financial desperation.
“Also point out that this is not a last resort loan but part of a general retirement plan [is important to remain successful]”Says Gibbons.
Another possible avenue for Fairway’s reverse business is to offer proprietary products, but the company has yet to adopt these in full. However, she recognizes that proprietary reverse mortgages offer another growth path as she continues to capitalize on the opportunities that come from the entire reverse mortgage business.
“We’re just getting started with proprietary, and it hasn’t had much of an impact [on us] yes, ”says Gibbons. “But we believe that will be the case in the future.”
Outlook for 2020
In terms of looking ahead and maintaining its business momentum through 2020, Fairway, on the other hand, intends to strengthen its position by training and recruiting more traditional loan officers who work in the reverse space, Gibbons said.
“Fairway is growing forward dramatically, closing over $ 4 billion each month,” says Gibbons. “Of course, as more loan officers and broker referral partners come in, that will increase [on] also the back. We will continue to train and infiltrate the top ranks to get the news out to the public. “
This belief in the overall goal of the reverse mortgage product appears to be present at all levels of the company. Fairway National Director Harlan Accola, in an interview with Financial Advisor Magazine, describes the role he believes reverse mortgages play in the ongoing retirement funding problems facing American seniors.
“There is more than $ 7.1 trillion in home equity owned by seniors over 62,” says Accola. Put the size of this potential solution into context – we currently have over $ 1 trillion in auto loans, over $ 1 trillion in student loans, and over $ 800 billion in credit card balances. The truth is that it is using the $ 7 trillion in home equity [leveraged] to give the baby boomers the retirement they need and want. “