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As HELOC Volume Rises, Reverse Mortgage Pros See New Opportunities – ReverseMortgageDaily | Casual Expat

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 this space.

According to a report from the Urban Institute’s Housing Finance Policy Center (HFPC), reported by HousingWire’s Bill Conroy, HELOC volume has skyrocketed in 2022.

“According to Equifax, HELOC and home equity loan originations have surged in 2022,” reads part of the HFPC report. “From January through May 2021, $68.6 billion in HELOC credit limits and $26.6 billion in home equity loans were originated. In the first five months of 2022, $100.8 billion was issued in HELOC and $38.1 billion in home equity loans

Increases of almost 50 percent compared to the previous year. These levels are also the highest since at least 2011.”

Because of these increases, RMD reached out to reverse mortgage professionals to see if this new activity in home equity lending could represent an opportunity for their reverse mortgage business.

East Coast: Originator positioning remains critical

For Laurie MacNaughton, reverse mortgage specialist at Atlantic Coast Mortgage in the Washington, DC area, the additional interest in home equity loans, reflected through increased HELOC activity, means an ongoing need for industry professionals to take their messages to clients and their referral partners refine, especially financial planners.

Laurie MacNaughton

“I recently had lunch with three people who are all leaders at the intersection of reverse mortgages and financial planning, and all three are either currently in wealth management or are paying from the upper echelons of wealth management before moving into the reverse space ‘ MacNaughton explained. “As we all sat down for lunch, I asked her why she thought acceptance among financial planners was so lukewarm. The first said that many reverse mortgage specialists seem very “salesy.”

A financial planner fiduciary also has a responsibility to protect clients from people who may be aggressively selling, MacNaughton said of their discussion.

“Advisors want to hear about new ways to improve their clients’ portfolios, not how to refer more work to a mortgage specialist,” she says.

Regarding how these talks relate to increased interest in HELOCs, MacNaughton said that for now, the only viable option is to have reverse mortgage talks, especially when home equity lending itself has more eyes on it.

“The time is right,” she says. “We see from the HELOC gain that the inverse product is correct. The needs of the borrowers are right. The home values ​​are still correct. But now, as originators, we need to ensure that our efforts are being directed in the right direction and that we have the right skills to deliver the knowledge our financial partners need to hear.”

West Coast: Age is still the name of the game

For Jeff Markell, reverse mortgage pro at Empire Home Loans in Southern California, the added HELOC interest underscores that the right product can be there for the right borrower, depending on where they are in their lives.

“I’m looking at it from an age standpoint, and I’m 65 myself,” he says. “I think for younger and still working people a HELOC can be a good solution for that. We’ve all enjoyed the last few years building a tremendous amount of equity in our properties, which gave us the opportunity to borrow if needed, or do some home improvement, or pay off some credit card debt. Whatever the case may be.”

Jeff Markell, reverse mortgage specialist at Empire Home Loans in Southern California.
Jeff Markel

HELOCs are understandably more visible right now, but there are also enough downsides for people within the reverse mortgage demographic that a reverse mortgage professional can have a sensible, fact-based discussion about what type of product might work better for them.

“On the other side of [heightened HELOC activity], for a senior or someone nearing retirement, a HELOC has an interest-only component for the first 10 years,” says Markell. “Those who work may find that they can easily make that payment. But if you look 10 years later and you’re retired or your income is based on Social Security and maybe a pension, you might not be making as much. How will they make that principal and interest payment once Year 11 begins?”

When speaking to experienced customers, Markell tries to put both products side-by-side and weigh the pros and cons against a customer’s individual financial situation. That could be a boon to a discussion comparing the two to a traditional HELOC due to the mechanics of a reverse mortgage line of credit, and the ability to avoid payments against it versus the interest-only aspect of a HELOC.

Comparing products invites those more robust conversations, he says, but the fact that there’s more talk about home ownership is a good thing for both the HELOC and reverse mortgage businesses, Markell says.

“A HELOC can be reduced or canceled or frozen while none of that can happen with the reverse mortgage line of credit,” he says. “So it’s really situational. And again it goes back to what I said about being a consultant. Let’s look at both and see which one suits the customer better. But I am pleased that this part of the business has grown so much because it gives us all more opportunities to help more people.”

Read the HFPC report describing the increase in HELOC business.

Updated: September 19, 2022 — 5:38 pm

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