ABC’s of a Reverse Mortgage Program for Credit Unions

by: Andy Hardin, EVP Operations, AnyHour Solutions

You have probably heard and seen the reverse mortgage ads on TV and radio, and reverse mortgages have been getting more attention by the media as well.  But are you sure about what a reverse mortgage really is and, more importantly, how it can benefit your members?  Reverse Mortgages are very different than a conventional mortgage loan and can be very beneficial for the older homeowner.

So what do you need to know about reverse mortgages?  First of all, the most popular type of reverse mortgage program is administered by the government.  They call this a home equity conversion mortgage (HECM) and they are administered by the FHA.  FHA issued HECM’s account for 90 percent of all reverse mortgage loans originated in the United States.
There are six major areas where reverse mortgages differentiate from conventional mortgages:

1. Instead of making interest and principal payments, reverse mortgages allow homeowners to borrow against the equity in their home.
2. Reverse mortgages have different requirements including: borrowers must be 62 or older, live in their house, and must have good equity in their homes.
3. Borrowers must complete counseling before completing the loan.
4. The loan only needs to be repaid when the borrowers sell the house due to moving out or when all of the borrowers die.
5. The FHA insures that any shortfall when the house sells is paid by them, not the borrower’s heirs.
6. There is flexibility on how the borrowers can get the cash out of their house based on their needs.

So how can a reverse mortgage help your members?  A reverse mortgage allows seniors to not only eliminate their monthly mortgage payment, but they can use the equity that has built up in their house to pay living expenses, bills, increase savings, etc., and they get to stay in the house.   This creates a more comfortable and lower stress lifestyle for seniors on a fixed income who may be struggling to pay their monthly bills.  It also creates a safety net of available funds should something unexpected arise, a luxury fewer and fewer seniors have in today’s economy.

Starting a reverse mortgage program in your credit union can be difficult and time consuming, even if you have a sophisticated conventional mortgage department.  The product is very different than a conventional mortgage, has unique underwriting and compliance requirements, and needs a very different marketing and sales approach.  Depending on the size and resources of your institution, partnering with a third party provider to provide these types of loans to your borrowers may prove to be the most profitable approach.

However you approach it, offering reverse mortgages to your members not only opens up a new and beneficial product to them, but allows your institution to earn more fee based revenue when the loans are closed.

Andy Hardin has 15 years of experience in bank and credit union operations, marketing, and systems integrations.  He has been the Executive Vice President of AnyHour Solutions since 2004.  

With a strong knowledge of customer delivery systems and customer experience management, Andy has helped Credit Unions streamline their operations and maximize their member’s experience in both phone and online environments.  Andy has launched AnyHour’s mortgage, Online, Member Service, and new Reverse Mortgage offerings.

Andy Holds an M.B.A. from South Carolina and serves as the Club Reporter of his community’s Optimist Club.

AnyHour Solutions provides a comprehensive third party reverse mortgage program solution for credit unions.  For more information contact Steven Holmes, VP Strategic Development, at sholmes@anyhoursolutions.com. www.anyhoursolutions.com