Lending in the Pandemic: These Are Unprecedented Times

"Yesterday I was clever, so I wanted to change the world. Today I am wise, so I am changing myself.” –Rumi

We Find Ourselves at the Crossroads of Opportunity

The coronavirus pandemic has thrown the world into a tailspin, and there’s no clear end in sight. It has affected nearly every industry and institution on the planet, including the reverse mortgage industry. Crisis and hardship are never pleasant but they always provide unique opportunities in niche markets, including reverse mortgages.

While originators are reporting a spike in borrower interest over the last 10 weeks, they’re also noticing a few other unexpected side effects due to the pandemic—and some positive surprises stemming from the crisis. That’s a win-win proposition in a world that is seeking solutions.

Would you like to talk about the financial impacts of the Coronarivus outbreak and if a reverse mortgage could be the right solution right now? 

Contact Cynthia to have a conversation. And please stay safe.

#1 BORROWER MOTIVATION INCREASE

One pleasant surprise, according to Scott Harmes, national manager of C2 Reverse Mortgage in San Diego, is the increased level of borrower motivation and speed to close some loans.

“I’ve been doing mortgages for 38 years — and reverses, specifically, for 10 of those years,” he says. “The decision-making cycle on a reverse mortgage tends to be very slow, but since the pandemic, that cycle has been shortened up significantly. There’s a sense of urgency to get your ducks in a row.”

Christina Harmes Hika, CRMP, C2 Reverse Mortgage, has also seen quicker closings as a result of COVID-19. “Over the years, I’ve done a ton of proposals and lots of people just never decide,” she says. “Then something like this happens and they realize their portfolio is shaken a bit, then they remember how great the product can be. A reverse mortgage often follows a big life event like this.”

#2 TECH SAVVY TOOLS 

Right now older homeowners are more highly-motivated than ever before to consider tapping into their homes value using a reverse mortgage.

It may also be wise to apply before a homeowner’s credit has late payments or deficiencies are recorded which could prove problematic under the Financial Assessment qualification guidelines. 

In addition, the base LIBOR index for federally-insured HECM loans remains low, central banks have slashed their benchmark interest rates to near zero and margins, though increasing- still afford eligible homeowners a significant source of cash flow.

#3 YOUNGER BORROW INTEREST

The time to close has not been reduced for all, and technical difficulties and no face-to-face time has slowed the process down significantly for some borrowers, says Laurie MacNaughton, reverse mortgage consultant with Atlantic Coast Mortgage in Fairfax, Virginia.

“I’ve been mailing out applications, and talking through each page over the phone,” she says. “It’s definitely slowed things down a lot.”

But MacNaughton says she’s been surprised by an uptick in one demographic: younger borrowers — most in their 60s — who are calling her with questions.

And their level of preparation and information may bode well for new originations in the near term.

“Not only are they younger, but they’re hyper-informed,” she says. “People of all ages are just worried and trying to safeguard against the unknown.”