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Thursday, December 13, 2018

Don't Forget the Boomers

By Wendy Peel
August 20, 2018

Topics:
HECM
Baby Boomers
Reverse Vision


Wendy Peel is vice president of sales and marketing for ReverseVision, San Diego, a reverse-mortgage software provider. She joined ReverseVision in 2015. Earlier this year, MBA Insights recognized Peel as one of its 2018 Tech All-Stars; she has also been honored by HousingWire and Mortgage Professional America.

It's no surprise that mortgage professionals invest time and money into attracting Millennials. But situated at the opposite end of the consumer lifecycle from Millennials are the Baby Boomers, and they are an attractive prospect for mortgage lenders who understand their unique needs.

U.S. Census Bureau data show that homeownership rates are highest for householders ages 65 years and over (79.2 percent) and lowest for the under-35 age group (36 percent). In fact, a recent study by mortgage advisory firm the STRATMOR Group found an estimated 1.26 million traditional loans were originated last year for U.S. borrowers over 65. But in many of those cases, a Home Equity Conversion Mortgage may have been a better option than a HELOC or refi for lender and borrower alike.

It's time for mortgage lenders to get familiar with the HECM loan product, including its many uses, flexible payments options and, crucially, how to talk to the Baby Boomers that stand to benefit from HECMs.

Being a trusted advisor for senior customers often helps lenders build relationships with those customers' children--and their children's children, most of whom are Millennials. This strategy is called "generational lending," and major lenders are beginning to adopt it to grow volume in today's market.

Here are six things every mortgage banker and lender should know about Baby Boomer borrowers to set themselves on the business path of generational lending and keep customers for life.

First, Three in 10 Mortgage Prospects are Baby Boomers
Born between 1946 and 1964, Baby Boomers are the largest living adult generation. There are more than 76 million Baby Boomers in the United States, representing 29 percent of the population. And nearly 80 percent of them own a home that has equity.

Second, They Are Getting Ready to Retire
Baby Boomers are currently aged between 54 and 72 and have more disposable income than other age cohorts, but experts predict Boomers' income may dwindle as they stop earning paychecks and enter retirement in record numbers.

A HECM, which offers flexible payments (or no payments), can be used to supplement other sources of retirement income--which may be a sounder wealth management decision than tapping into savings.

Third, Their Savings are Looking Slim
Like most Americans, Baby Boomers don't have much in the way of savings. In fact, a Federal Reserve Board survey predicted 30 to 40 percent of Boomers will have insufficient income at age 70 to replace their pre-retirement earnings.

Fourth, Their Wealth is in Their Homes
One thing Boomers do have is home equity. Because four in five Boomers own their own homes, they possess enormous home equity totaling well over $6 trillion for those 62-plus years old.

The typical Boomer takes great pride in homeownership and may be hesitant to consider a HECM at first. The challenge for lenders is to overcome that bias and accurately describe the pros and cons of a HECM alongside other loan options. For instance, the HECM offers flexible payments and several ways to tap into home equity, including a lump sum, fixed monthly payments, line of credit or combination of monthly payments and a line of credit.

Fifth, They Have a Lot on their Plates
Some Baby Boomers are just finding their footing after losing everything in the housing market crash. Many are spending money on the care of their children, their parents or both. On top of it all, most are worried about the cost of their own health care as they age.

Lenders that understand these concerns can talk to Boomers about tapping into a HECM line of credit to pay for long-term care or other unexpected expenses.

Sixth, You Can Help Them Think Outside the Box
When it comes to Baby Boomers, the best advice is to take your sales hat off. Don't be a salesperson; be a provider of info and partner in creative thinking.

Perhaps your Boomer client would like to purchase a new home but no longer brings in much income. You could ask them to spend a big chunk of their retirement savings on a down payment, or you could ask if they've considered tapping into their home equity.

The Boomer Generation is savvy and does not like being "sold to." The HECM loan product simply needs to be presented as an option alongside a HELOC or a refi so that the borrower may make the best decision for them.
Loan programs specifically designed for older homeowners such as the HECM and HECM for Purchase can open a whole new world of financial options for Boomers. When presented alongside other loan options, often the HECM loan is the most beneficial for borrowers 62 and above. As these Baby Boomers enter retirement years, it's important for lenders to be a trusted and knowledgeable advisor that shows them all loan options. This relationship can help you win generations of customers--and keep them for life.

(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)

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