Dan Hultquist On Hecm Reforms, Proprietary Loans And Getting More ‘young Blood’ In Sales

Editor’s note: Welcome to the first installment of the Monday Morning Q&A from HousingWire’s Reverse Mortgage Daily (RMD). Each Monday morning, the RMD newsletter will feature an in-depth interview with a reverse mortgage industry figure on a wide range of topics including loan origination and servicing, product development and technology.

Dan Hultquist has no shortage of knowledge or opinions when it comes to reverse mortgages. That’s evident in the fact that he’s written two books on the subject and is planning to publish a third in the near future.

Hultquist has his fingers on the industry’s pulse through his roles as co-founder of software firm REVERSE plus and as the director of reverse mortgage communications at Movement Mortgage. He recently sat down with HousingWire’s Reverse Mortgage Daily to discuss a range of key topics — including federal agency discussions about potential improvements to the Home Equity Conversion Mortgage (HECM) and HECM Mortgage-Backed Securities (HMBS) programs.

This interview has been edited for length and clarity.

Neil Pierson: Let’s start by talking about the future of HECM and HMBS, because that seems to be the hot topic of conversation for the industry. There have been a lot of public comments about it already. What would you change about the programs if it was up to you?

Dan Hultquist: I actually submitted a response to the U.S. Department of Housing and Urban Development (HUD)’s request for information. First and foremost, we have to restructure the HECM mortgage insurance premiums. HECMs are not expensive, if you look at it over the life of the loan. But the premiums are poorly structured because they’re very front loaded.

If you charge nothing, the Federal Housing Administration (FHA) is not going to collect much in the way of fees. But if you charge too much, nobody’s going to buy it. So where is that sweet spot? Well, it’s not 2%. It’s less than that. They’ve created a system where if interest rates are higher, you get less money, but you still pay the same upfront mortgage insurance premium. It’s terribly inappropriate to pay 2% and then get very little money. My proposal has it dropping from 2% to 1%, but we have to make it clear we do not want this to increase the risk to the Mutual Mortgage Insurance Fund.

The second issue is the principal limit factors. They’re too low for many of our clients to qualify. We know that those were structured at a time when there was a perceived risk. Property values have increased dramatically over the last 10 years and yet we’ve never really adjusted the principal limit factors. It was my understanding HUD didn’t have an appetite to do that.

When you consider the Mutual Mortgage Insurance Fund is very stout right now, I think the time is right to reduce the upfront premium, increase it on back end and also increase the principal limit factors.

The next thing on my list is that collateral risk assessment is poor policy. It requires us, as lenders, to order a second appraisal on approximately 20% to 25% of all HECM loans. A lot of our clients don’t have enough money to pay for the counseling. How are they going to pay for a second appraisal, much less a first appraisal?

When this first rolled out, my response was, if FHA’s algorithm is the most accurate way to value a home, then why do we order any appraisal? We absolutely need a physical appraisal. But if the algorithm is the authority, then why are we not relying on it? Instead, we have cases where a client pays $1,000 for an appraisal, then we turn around and ask for a second one when the first one came in at $2 million. But the HECM limit is only $1.25 million, so you’d have to be off by a lot before it would ever cause any risk to HUD.

Those are extremely low-risk loans, and yet we’re ordering a second appraisal and asking the client to pay $1,000. It doubles the likelihood of appraisal bias, and we know that HUD is very concerned about that. So why not just use a desk appraisal? And let’s save the client money. There are perfectly acceptable models that would prevent the borrower from having to pay that.

NP: Proprietary loans are now about 45% of the reverse mortgage market. What are your thoughts on these products, how quickly they’ve evolved and the function they’re serving? They seem to underscore the need to revamp HECMs to be more competitive.

DH: There are a bunch of reasons for the increase in proprietary business. And kudos to the lenders and their investors who have changed the products to make them more acceptable.

There’s strong demand for reverse mortgages right now. The demographics show the youngest baby boomers are turning 62 this year. Proprietary reverse mortgages have sidestepped some of the HECM guidelines, since they’re not an FHA-insured product, so they’ve done things like non-FHA-approved condos. That’s a significant market. And there’s also the lower age eligibility.

If you look at the life span of the loan, the HECM product is a superior product, because of the line-of-credit growth and lower interest rates, generally speaking. But proprietary products have come a long way. We’re seeing lower interest rates with higher loan-to-value ratios cutting into that HECM business. You’re getting more state approvals now.

The HECM limit for 2026 is $1.25 million, but we’re seeing demand for proprietary all the way down to a couple hundred thousand dollars. That’s pretty fascinating to me, because we always called them jumbo loans. We’re finding that approximately 50% of the demand is for jumbo, but the other 50% is condos, expanded age eligibility or paying off unsecured debt at closing — which is also something that HUD absolutely needs to consider.

There are so many good reasons to go down the proprietary path, but I don’t want people to be blinded by the additional money you can get with proprietary. You have to look at the long-term comparison between the two products.

NP: It’s been a few months since REVERSE plus launched some new tools. What’s been the reaction? And are the folks at Movement Mortgage utilizing them for their own benefit?

DH: We’re making enhancements literally every week. First of all, REVERSE plus was built because there’s a lot of us in the industry who recognize we need to explain the reverse mortgage differently — graphically, verbally. We need a place where loan originators can go and understand how the product works.

Our first product was ANALYZER Pro. It’s really our flagship product and was built to model the reverse mortgage over a long period of time, then incorporate draws and voluntary prepayments. You can model the life expectancy set-aside and see how long it’s going to last based on inflation rates.

You can do LOC conversion. You have a growing line of credit and at any given time in the future, do you want to flip the switch and convert that to a 10-year term? You can put together a plan for someone: Let’s get a reverse mortgage today and in 10, 15, 20 years, you can see how that’s going to be able to pay for your long-term care.

Movement has what are called retirement mortgage professionals who only do reverse. And all of them are using REVERSE plus software. We’re seeing a lot of traction with that. We’re seeing higher conversion rates, winning deals over our competition that maybe we normally wouldn’t, because we’re modeling and presenting a plan instead of just, ‘Here’s how much money you can get.’

NP: There’s a need for better sales training in the industry, so I want to ask about the Reverse Mastermind Summit that was recently announced. What are you expecting from it?

DH: You’re going to get a lot of good content from people who really want to share what they’re doing well. I think people don’t realize that the reverse mortgage community is not overly competitive — they’re collaborative. Everybody wants to help everybody else succeed, even though technically we’re competitors.

That’s something unique about the reverse space, because if we have 2% market penetration, we’re not fighting each other over the next deal. We’re fighting public perception. We have a common enemy and we tend to unite. So what I’m excited about with this Mastermind Summit is you’ve got a bunch of like-minded individuals who want to help more people get into the industry.

It’s unpopular for me to say this, but if we had a ‘40 Under 40’ list for reverse mortgages, there would only be five people on it. You can’t find 40 people under 40 who have excelled in this industry. We need more young blood and that’s part of what we’re trying to accomplish.