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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 38 June 2023 F E A T U R E RETHINKING REVERSE MORTGAGE LENDING Rather than viewing the reverse mortgage lending business as a completely new line of business, lenders today are looking at reverse mortgages as another loan product to add to their menu of offerings. B y J O E C A M E R I E R I A s the real estate market contin- ues to cool, lenders are working harder to find new borrowers. Competition is heating up, and every loan the lender wins is getting more expensive because they're having to expend more time, effort, and marketing budget to win that business. Some lenders, however, are looking at the mortgage business in a slightly different way, and it's making a big difference in their ability to compete. A subtle shift in approach to their existing businesses is yielding unex- pectedly good results. Instead of looking at the reverse mortgage lending business as a completely new line of business, these lenders are just looking at reverse mortgages as another loan product to add to their existing menu. Instead of building an entirely new busi- ness with its own infrastructure, staff, and siloes, these lenders are just making reverse mortgages available to their loan officers to sell. It's a better strategy in a down market. There are reasons this thinking is revo- lutionary, and why most lenders have not looked at the business this way, but it can bring big benefits to the lenders who can. Thinking About Reverse as a Product, Not a Business? I n the early days of reverse mortgage lend- ing, there was confusion as to the rules, both on the part of the lender community and consumers. This led to the rise of spe- cialized lending firms that sold only these products. As a result, their technology was also specialized. In the beginning, everyone thought of re- verse mortgage lending as an entirely differ- ent business, rather like auto lending or small business financing. Because compliance was just coming into focus, this made some sense from a risk management perspective. Today, reverse mortgage loans are a mature product set with easy-to-understand compliance rules that any lender can learn and apply to their institution. Borrowers are also more aware of these products, how they can be used during retirement, and the risks and rewards for doing so. We have been advising lenders for some time now to diversify their product set and, in fact, we see more lenders originating broader menus lately. Going with a broad strategy with a larger menu of loan products that can serve more borrowers is better than focusing on a particular set of products when volumes are down, and the costs are high for attract- ing new customers. In addition, settlement services providers that previously may have focused solely on either the forward or reverse lending market are now broadening their services to cover any mortgage-related product. This is making it easier for lenders who have not offered re- verse mortgages in the past to do so without going to the trouble of seeking out a new set of partners. Given all of this, why aren't more lenders thinking about reverse mortgages as a prod- uct and not a separate business? Traditional Hurdles That Kept Forward From Reverse T he first significant hurdle that kept forward lenders from moving into the reverse mortgage market was compliance. It took some time for the rules to come fully into focus, and for the specific actions taken by reverse mortgage lenders to make it past regulators. No one wanted to become the first reverse mortgage lender to suffer regulation by enforcement for a new mortgage product. The second hurdle largely grew out of the first. Because reverse was treated as a sepa- rate business, technology for reverse lending was developed for that specific process. Unless a forward lender wanted to invest in an entirely new tech stack, it became very dif- ficult to get into the reverse business. That new LOS would have to include all the compliance infrastructure to keep the lender safe as it ventured into the new line of J O E C A M E R I E R I is EVP of Sales and Strategy at Mortgage Cadence. He can be reached by email at joseph.c.camerieri@ mortgagecadence.com.