Chris Clow on reverse mortgage lending opportunities in 2025

Welcome, everyone. My guest today is editor Chris Cloud to talk about opportunities for reverse mortgage lending in twenty twenty five and what the landscape looks like with a new administration coming in. Chris, welcome back to the podcast. Happy New Year, Sarah. Thanks for having me. Happy New Year. Here we are in twenty twenty five, and I'm excited to talk to you about the opportunities for reverse in this new year, because we've been saying it for a long time that that there's so much opportunity here. And I'd love to dive into like, is this the tipping point year for for reverse? It's so hard to say because there are a lot of different, broader elements that are taking place in the housing landscape, you know, not the least of which being the impending political transition that's taking place in a couple of weeks time now. You know, the reverse mortgage business is a pretty unique element in the broader mortgage ecosystem because it is such a public private partnership. You know, you have IMB's in most cases being the ones who are originating reverse mortgage loans, but it's under the guidelines of an FHA lending program. Of course, the reverse mortgage industry wants to try to make a bit of a larger name for itself with its proprietary product offerings. And for based on a lot of the things that I've seen, it looks like those offerings at some of the bigger lenders in particular are having an impact on on those companies bottom lines. But the the proprietary product landscape is not reaching, I guess, the same level of ubiquity in the in the reverse mortgage ecosystem as the HECM is. So the companies themselves are certainly gearing up for a period of change. When I spoke to a series of reverse mortgage industry professionals about just what some of the biggest challenges have been for 2024. Unsurprisingly, rates were the thing that were discussed at the at the top of the conversation. And in most cases, I spoke to Peter Chandra, who's the EVP of reverse lending and secondary marketing at Fairway Independent Mortgage. And he immediately identified rates as a as a key issue, as did Shannon Robinson, who leads the reverse division at New American Funding. Jim Corey at Guild Mortgage, who's also a co-chair of the National Reverse Mortgage Lenders Association, said that rates were a challenge, but that they might have been an overblown challenge, that maybe things didn't shake out quite as badly as certain people may have predicted. And he said that the reverse division at Guild did manage to grow in 2024. But no one wants to see rates where they are on either the forward or reverse mortgage sides. But some of the more longstanding problems that the reverse industry has had were also problems last year, including product education and just sort of the distribution mechanism for getting reverse mortgages out there. Those have been longtime issues that the industry has had. And there have been, you know, lots and lots of conversations about how to expand distribution, how to better educate potential borrowers. But it's also not just the borrowers. It's also their referral partners, particularly adult children or other trusted advisors that might be friends or family members. There's still a big hill to climb when it comes to, I guess, stigma that reverse mortgage products have. And the industry is constantly trying to figure out the best ways to try and overcome that based on the the assistance that it says is provided to reverse mortgage borrowers. It's got to be so frustrating because, you know, the bad stories about reverse mortgage are what, more than a decade in the in the rearview mirror at this point? I mean, when did when did we have all of that reform come into the space? It was like between 2014 and 2017, you know, in 2014, HUD addressed kind of a big issue when it comes to non-borrowing spouses and the issues that would be created for a spouse whose name was not on the loan when it was initially taken out, when the borrowing spouse passed away. A lot of those issues have been remedied. It's not perfect, but it's certainly a lot better than it was 10 or 11 years ago. There were also some pretty disruptive changes to the program that came with the first Trump administration, including a reduction in principal limit factors that made the loans less favorable for lenders. And it also introduced additional requirements with an eye towards stabilizing the heckum book inside the mutual mortgage insurance fund. Brian Montgomery, when I spoke to him during the first Trump administration, when he was both the deputy assistant secretary at HUD as well as FHA commissioner the first time around, talked a lot about claims backlogs and the need to sort of clean those up. And and that was something that he definitely focused a lot of time and attention on when he was overseeing the heckum program. But yeah, I mean, there are also other things that have come up in the intervening time during the Biden administration. You know, there have been some regulatory actions levied at reverse mortgage operators, the most significant of which last year being for reverse mortgage assignments to the Department of Housing and Urban Development. They had a contractor that was handling those assignments. And I think we actually spoke about it at the time that it took place. But when stuff like that comes up, the industry naturally takes notice of any potential difficulty or challenge that could come up on the reputational side. So the fact that education and distribution continues to be a bit of a challenge for the industry is not surprising, but we'll just have to see how 2025 shakes out, particularly once the new administration is installed and we'll get a better idea of what their outlook is going to be on heckum policy for the next few years. So interesting, you and I were both at the normal annual conference this year, and one of the things that they talked about, which we had already seen in our conferences, our events and in your coverage, was that the forward mortgage space was very interested in how they could expand into reverse. Right. You know, volumes down over other years, different products are more interesting, but some people shy away from reverse because it is a different animal. It is not an easy plug and play or hasn't been in the past. What do you see going into 2025 when it comes to interest on the forward mortgage side expanding into reverse? This is a source of a lot of optimism within the reverse industry. And it was actually as as much as it was talked about at the reverse specific conference that you and I went to in San Diego last year, it was also pretty visible at the NBA annual convention in Denver. And that was actually the the focus of a report that I did just before we broke for the holidays about what the industry was doing to try to connect with people at that event, because NBA annual, unsurprisingly, is a much larger event than the normal annual convention is. And you had for really the first time, at least I was it was suggested to me the first time in a while that a reverse mortgage lender had a sponsorship presence at NBA annual. There was another reversal mortgage lender that actually did have a booth presence and was trying to speak with people on site at the event on the expo floor. But I got to talk to several reverse mortgage industry professionals who were on site at that event. And they talked about, you know, the the need to try to connect with more players in the forward mortgage space and try to communicate what the potential opportunities are, considering population demographics and the way those are trending, but also just having a product offering there to potentially help forward lenders through a challenging rate environment. And most of the folks that I spoke to seem to express that there was a fair amount of receptivity to what the reverse mortgage industry had to say. One lender that I spoke with said that it's really a competitive process to get the meetings that they want to get. And and that always creates a challenge. But when those meetings were able to take place, there was openness to what the reverse mortgage industry could bring to the table. Whether or not that makes a material impact on what the industry's volume or what its actual partnerships are going to be this year is anybody's guess. But having those conversations is infinitely more preferable for the industry than not having them. And I can't imagine that the reverse industry is going to be, you know, sitting on its hands when it comes to trying to forge those additional partnerships in the new year. So that's definitely going to be something that we're going to be paying pretty close attention to. It was suggested to me that the Reverse Mortgage Industry Trade Association is gearing up to announce its 2025 events pretty soon. So those usually encompass like a couple of regional conferences in addition to a national conference. And that'll be a pretty big indicator of what the sentiment is like once RMD is actually on site and speaking to people to get updates on what those conversations are like. I think one of the things that surprised me so much when I first learned about the reverse space is how willing and open and really it's an objective of reverse mortgage lenders to expand their product to people who otherwise might be considered their competitors on the forward side. And maybe you can explain that, because I think it's still really surprising. You know, when you talk about people wanting to talk to their counterparts, you're not just talking about people who like they would do the reverse for them. Right. I mean, they would they would be the conduit to that. I mean, there is sort of the idea that, you know, a rising tide lifts all boats when it comes to reverse. Absolutely. I mean, it's something that really permeates the reverse industry itself in isolation, but it's also something that is absolutely present in these conversations with forward lending partners within the reverse industry. That rising tide lifts all boats is an adage that I hear very often in interviews with people, because there is this kind of collegial quality to conversations among the lenders. And even though they're competing on the reverse mortgage industry leaderboard very intensely and intense, intensively, I should say, the idea of just trying to expand the distribution footprint and trying to get the word out is it's it's a universal issue that all of these lenders face and brokers as well. So, you know, on the forward side, since there is since forward volume dwarfs reverse volume so much, it's really seen as kind of an expansive field that the reverse industry can try to try to break into. And a lot of these forward companies, you know, in some cases, some of them got out of reverse mortgage lending in previous years or just never offered it in the first place. So having these conversations about adding an additional loan product to the pretty extensive catalogs of products that they already have, that might be a source of that receptivity. So, you know, whether or not that's actually going to lead into the establishment of more solid reverse mortgage industry partnerships is anybody's guess. But the reverse industry is absolutely working in that direction. We've seen more open collaborations or at least, you know, like on a limited basis, but they're still there of partnerships between the Reverse Trade Association, Normola and the Mortgage Bankers Association. And, you know, MBA has in the past has spoken to me about wanting to increase its involvement in the reverse space. So I think people there certainly see a potential opportunity for the wider mortgage ecosystem. But there are also still, you know, old habits die hard and old perceptions die hard. And that's where those broader conversations about what the potential shortcomings have been for the product from the perspective of these other mortgage companies. I can't imagine that that's going to slow down at all, but at least the pace of those conversations is going to slow down at all in 2025. So, you know, stay tuned to what's going on because we're going to try to stay on top of it as much as we can. And you do a great job at that. You had a recent interview with Steve Irwin, of course, who is the president of Normola. And I thought he had some really interesting things to say. And it harkens back to what you said just a few minutes ago about the fact that some of the things I think people in housing tend to think, thought before the election, think now that having Trump in office will mean less regulation. And so I think they might be surprised to learn that that wasn't the case for for this sliver of the housing market, which was reverse. So maybe you could talk about what Steve Irwin saw as some of the priorities going into this year with the new administration and what he's thinking about. Yeah, well, one of the things that Steve and I spoke about in that conversation was just the nature of political change in Washington, D.C., because, I mean, it happens reasonably frequently, you know, especially if you're sort of in the beltway and you're observing those things more more up close. But Steve related to me that he has already had productive conversations with people on Capitol Hill about the HECM program. And he said that people there are aware of of the program and the things that it might be able to accomplish for for certain folks. And, you know, there's a lot of potential optimism there when it comes to Ginnie May's new HECM back securities program that they released a final term sheet for back in November. The implementation timeline, I think, is a little bit cloudy just because of the impending change in administrations. But one of the things that Steve also related that I think is I think is absolutely worth keeping in mind is that in most cases, when it comes to the nitty gritty of housing policy, the mission is a bipartisan one. It's it's something that he actually explained to me back in the summer. He attended an event at FHA marking 90 years of the agency. And there was a panel at that event with various former FHA commissioners, as well as Julia Gordon, who's the current FHA commissioner. And he said that one of the more telling points of that conversation is that housing issues just run deep. And despite the the immense amount of change that we're likely to see coming to Washington, D.C. over the next few weeks and months, there is no reason to think that the the depth at which housing issues run is going away. And a lot of the priorities that that are overseen at HUD and at FHA are going to be maintained going into a new administration. So he seemed optimistic about what that could mean for the HECM program because of the broader goal that the program has in serving older Americans. And he said that normal has always remained close and developed relationships on Capitol Hill on both sides of the aisle and that he's that the association will continue to do so as the administration changes. And he's going to try to ensure continued support for the HECM program, which he said is, by all accounts, they're based on those early conversations he's had. So pretty optimistic, I think. Pretty optimistic. And I think one thing that you pointed out in that story, which lines up with your coverage and the beat coverage that you have, is that, you know, the Senate Banking Committee, the House Financial Services Committee, these are very important relationships for everybody in housing. So we see all of the trade orgs from, you know, the National Association of Realtors, the NBA, to Nirmala, to whoever it is. They have to have those relationships because that's where a lot of things get decided. A lot of things get passed or not passed. And so I think it was interesting that he brought that up, that he's closely watching that. And I know that all of the trade orgs right now, it's that transition time where they are looking to the new people who are going to be on leading those committees, going to be on those committees. And how do they get their agenda in front of them? Absolutely. But that's also, you know, that that's not to say that there are no sources of maybe concern is too much of a of a charged word. But there is an observable record with the first Trump administration's handling of the HECM program. And there were certain proposals that were floated during the first Trump administration that Nirmala would would certainly take positions on, including regional loan limits for the HECM program. This is something that Nirmala successfully advocated against in the mid 2000s. But subsequent administrations, including Trump and even the Biden administration, floated a proposal to return the HECM program to a regional loan limit structure. And Nirmala would not be able to support that. One of the things that Steve told me in that interview is that the cost of durable goods and home repair and modifications so that an older homeowner can age in place is the same wherever you live. So variations in in regional loan limits would just simply not be appropriate for the HECM program. So if that was ever a an issue that came up, then they would they would certainly want to oppose something like that. Another potential proposal that the Trump administration had floated during the first term was the idea of of eliminating HECM to HECM refinances. And there's no real indication that something like that would come back. But that's also an example of a of a potential proposal that Nirmala wouldn't want to support. Steve told me that, you know, he rhetorically asked me, why should any administration oppose the choice of a consumer to take advantage of additional equity that might be available or lower interest rates that limits borrowing power? And I don't know if that's doable. That being said, I do think that there are opportunities to re-examine the initial mortgage insurance premium structure on refinance activity. And I look forward to having those conversations with HUD. So we're in a little bit of a holding pattern when it comes to housing policy broadly, but certainly HECM policy in particular. And once the the new administration is installed, there will probably be a little bit of a transitional period where there will be an acting HUD secretary. It could remain Adrienne Todman or there could be a new acting HUD secretary with the new administration. And until Scott Turner is actually confirmed by by the Senate. So that'll be a big deciding factor of what policies are going to actually get on the radar. And it probably won't take too long for HECM to enter the conversation. It might take a little bit, but, you know, it'll happen eventually. Well, and Scott Turner, as far as I can see, I think that you can have some homeless advocates. There are people who might not be excited about him taking this role, but I don't see any opposition to like we don't see a pathway where he's going to be blocked. So it seems like he we can sort of he's not that he's not been confirmed yet, but it seems like just a matter of time before he is confirmed. There's not a you know, there's no uprising against him like there is some of the other Trump candidates. So I think we can safely say Scott Turner is going to be the HUD secretary. And then we can look from that and go, OK, well, who does he who does he appoint underneath him? What is what are his most important, you know, his priorities? Everybody who's taken that post has different priorities. And you can see it as they as they sort of wield the budget, especially where they decide what to support and what policies to put in place. So it'll be interesting to see. And, you know, as you said, we're kind of in a holding pattern right now just for the next month or so. Yeah, yeah. And, you know, it'll be I think all of the associations are also certainly watching it. We've seen guidance not only from the likes of Norma, but also NBA and NAR about, you know, what they kind of expect to happen when it comes to policy and the market moves, of course. So either way, when Scott Turner's confirmation hearings take place, there's going to have to be some pretty dedicated conversations about how the U.S.'s housing policy posture is going to change going into the next few years, because there are there's an abundance of housing related issues that that Congress and the American people are going to expect the Department of Housing and Urban Development to substantively address, while also keeping in mind that, you know, there's likely going to be a bit of a of an ideological shift in the way that leaders of these departments want to allocate those resources. So there's just there's so many moving parts, but that doesn't negate or diminish the necessity to keep housing issues front and center. And that applies, you know, across the the mortgage lending ecosystem on the forward and the reverse sides, as well as just other broader policy implementation that kind of has a bit of a question mark over it at the moment. But the confirmation hearings in particular are going to be really insightful to the kind of HUD that Scott Turner wants to lead. And I can assure you that I will be watching them very closely. I was going to say, I look forward to your reporting on that, because I think that is going to be consequential to a lot of things for us. You know, sometimes housing, sometimes HUD is kind of, you know, a backwater in D.C. It's not always one of the most talked about agencies for us. It is so important, whatever they decide to do, their policies, what they're doing. So so appreciate that you're going to be on top of that and appreciate all this great coverage on on reverse, you know, especially you are dedicated to the reverse beat. But you also share that federal beat with Flavia and you guys just do a great job, you know, talking about all the things in housing that are that our audience needs to know. Well, much appreciated. And, you know, Flavia and I are going to certainly be pretty busy over the next month or two at minimum before things start to actually break out into full on policy documents and declarations and everything else that a new administration comes with. So, you know, appreciate your leadership in our newsroom, of course. And we'll be keeping a close eye on these developments as they move forward. We will. Thanks so much for being on today, Chris. We will talk to you again soon. Thanks for keeping us updated. Sounds great. Thank you for having me, Sarah.