Apm’s Michael Banner On Why Hecm For Purchase Has Failed To Take Off

A reverse mortgage product once hailed as a potential game-changer for retirement has largely failed to gain traction, not because of its design but due to shortcomings within the industry itself.

That’s according to Michael Banner, a national reverse mortgage educator and leader for American Pacific Mortgage (APM), who is preparing to address the HECM for Purchase program in a March 24 webinar for HECMWorld.com.

In an interview with HousingWire ahead of the webinar, Banner shed some light on the program. He emphasized the need for a shift in mentality, along with better recruitment and collaboration with forward mortgage professionals.

Editor’s note: This interview has been edited for length and clarity.

Sarah Wolak: Michael, tell me about what the webinar plans to cover?

Michael Banner: Well, the webinar that we’re planning to have is probably a little unusual because it is all reverse mortgage people. I wish it were Realtors and other people.

The reverse mortgage world is guilty of preaching to itself. I’ve been a little hard on the industry that I love so much, and my reverse mortgage brothers and sisters, but our industry tends to get on LinkedIn and tell everybody how great we are. I agree with how great we are, but nobody does reverse mortgages. Financial planners still don’t like them, long-term care people still don’t like reverse mortgages, and 90% of the world still thinks we take their house — which we don’t. The industry is our own worst enemy.

As far as HECM for Purchase, Nobel Prize winners in economics said when it came out in February 2009, as part of the Housing and Economic Recovery Act (HERA), that it would literally change the way America retires. But the truth is, it has ultimately failed. That’s not an opinion; that’s math. It represents less than 3% of the reverse mortgage world, so my premise on this is that this product hasn’t failed the industry, the industry failed the product.

It’s a great product, and hundreds of thousands of seniors should be using it, not dozens. The webinar will focus on how the industry fails the purchase reverse mortgage, how we fix it, and how we bring it to Realtors and educate them.

You know, quite frankly, the reverse mortgage industry has little to no experience in the purchase world, and that’s what’s hurting us the most. In the reverse mortgage world, the great majority of it is not in a sense of urgency.

SW: A lot of reverse professionals still bring up product stigmas. Why do you think that’s still prevailing?

MB: The purchase reverse mortgage has been around since 2009. Regular reverse mortgages have been around since 1964, and people still hate them. The reason people have a bad taste in their mouth about this is that until the 21st century, it was a needs-based, overpriced product of last resort.

Then, around 2009 to 2010, the U.S. Department of Housing and Urban Development (HUD) took the reverse mortgage, ripped it apart and put it back together — removed junk fees, capped origination fees. But for about 40 years, we were a rip-off industry.

I always use this analogy: If you have a good restaurant experience, you tell three or four people. If you have a bad one, you tell 10. That’s what happened here.

I have done big speeches for financial planners specifically. I tell them, “Reverse mortgages don’t take the house. Your children are not losing your inheritance.” I’ve had so many people stand up and go, “Mr. Banner, I know we’re paying you to be here, but I’m calling bull, because I’m 52 years old, and I remember when I was younger, my grandmother losing a house to her reverse mortgage.”

The horror stories are real. But the truth is, at least for the last 16 years, it’s been a great product. We protect the younger borrower, the surviving borrower, we protect the estates. Nobody can do what we do. But when was the last time you saw anybody say that, other than on a reverse mortgage group on LinkedIn?

Last year, Realtors sold 5 million homes. I think I don’t have it in front of me, but I believe 16% or 17% of those homes were sold to people above the age of 62, meaning 800,000 homes were sold to people above 62. I don’t remember how many reverse mortgage purchases we did. I think something like 300.

SW: What’s holding the industry back from promoting HECM for Purchase?

MB: I think it’s the industry practices of hiring, because there are some great companies out there doing reverse. But there are only a few big players left and they tried to start reverse mortgage divisions. And look at the HECM 50 lists — they have 5,000 loan officers, and last month they closed 22 reverse mortgages. And again, I think one of the problems is that we don’t speak the same language as the regular mortgage world.

The forward world has loan amounts; we have principal limits. They have LTVs; we have PLFs. Even the software can be intimidating if you only use it occasionally.

SW: For the typical LO who offers forward products, do you think it’s too hard for them to bridge over to reverse mortgages, or is there just little motivation to?

MB: It’s the lack of motivation; they have this bad image that the Realtor is going to get mad at [them], my financial planner is going to get mad at [them] if I do a reverse mortgage. But reverse is easier. The forward world should be wrapping their arms and their heart around reverse mortgages, but nobody’s convinced them to do that.

SW: What is the best way to educate professionals and combat misconceptions around reverse mortgages?

MB: This product is surrounded by more misinformation and half-truths than any other product in the history of the financial world. There’s only one way to do it: education.

It’s like annuities. Forty years ago, people didn’t trust them. Now they’re mainstream [because] you had the biggest insurance companies in the country with millions of agents, educating and pushing. It’s going to take us a while because we haven’t even started yet.

SW: What are the remedies?

MB: Our industry, like many other industries, is aging out. The industry itself has to recruit. Nobody in college says, “I can’t wait to be a reverse mortgage professional.”

Second, stop trying to convince [loan officers] that they can’t do it. Let’s convince them to take a reverse mortgage partner, because it is hard to teach that forward person a totally new part of the mortgage world. We have to change the structure of the industry, we have to marry the forward mortgage world — and we should be married, because every client turns 62 eventually.

Also, this is key, you have to speak to Realtors in their language. You have to show them why it is to their advantage to do that, and we’re going to talk about that a lot in my webinar. It’s not about leading with your heart. It’s “what’s in it for me?”