All About the Home Equity Conversion Mortgage (HECM), with Shannon Hicks of HECMWorld.com

0:00 Record. Hey, welcome to the Reverse Mortgage Podcast and where we get together and have new episode every week usually with mortgage originators, often times management, vendors. We're excited to have today to have one of the experts of the Reverse Mortgage industry. He's a pundit, he's a talking head, he's a he has a face for video unlike me where I have a voice for audio maybe. I'm really excited to have Shannon Hicks of HECMWorld to join us and he has one of the great podcasts on Reverse Mortgage. I'm glad to have him on my podcast. Shannon, thank you for crossing over and joining us today. Thank you, Bill. It's a good spend some time with you and your viewers and listeners. So, thanks so much. So, talk about what's the mission of HECMWorld. What's the goal? What are you trying to accomplish by I mean, it is very complete offering with a lot of different videos and content on your website. What's the goal? What's the mission of it? That's a great question. You know, HECMWorld's it's real focus is to equip mortgage professionals, those who do reverse mortgages, maybe that's their sole business or mortgage professionals who are looking to get into reverse mortgage lending and what we do is we're not so much a news reporting firm but we're more someone who provides commentary and analysis to let you know, what does this mean to me? What does this news mean? How does this impact my bottom line? What's it going to do in market conditions? So, we have a series of content each week. We have a Monday video which is more gets into the nuts and bolts of what's going on whether it's in the housing market or reverse mortgage lending or you know, even the tariffs that are going on believe it or not. And then we have also weekly columns and articles.

1:39 We have an audio and video podcast as well. And so, we have a lot of content just to try to keep people up to date because you know, these mortgage professionals they're busy Bill as you know. They don't have time to sit there and search all this out. So, that's what I'm there for. You know, when I launched this podcast I did what I thought was research of the top podcast and because I didn't use the word HECM and I used the word reverse mortgage only, didn't come across your site until I'd already kind of jumped in and had I think five or six episodes recorded or eight or 10 of them recorded or whatever. I discovered your site, I'm like, "Oh my gosh, why didn't I see this? I might not have done I might have picked another vertical because you do I think a really complete job and I have to say I've learned a lot about the industry I think more than anything else on your variety of formats. So, talk a little bit I think one of the things is that you offer, you know, audio and video and written. Is that because different people consume your content? Do you find the same people hit you three ways or you hitting different people and one of the three ways gets to them? Yeah, it's just more of a preference. You know, for myself personally, I'm a avid user of YouTube and subscribed to many channels and some of them I'll just turn on in my truck and listen to the audio, you know, so but I know that people want to see things as well. So, we provide both contents. The audio podcast by the way has been going since 2008.

3:00 Wow. Wow, okay. Now, I know that you do a video weekly it's kind of like a more of a news market update and I see statistics on top reverse mortgage originators both retail and wholesale. So, talk a bit about why is that data important to an individual originator or you orienting that towards management? You know, for both. I know we have you know, leaders within the industry that are executives of top reverse mortgage lenders watching but we also have the independent brokers, the men and women out there in the trenches and those that are maybe working as a retail loan officer whether it's in a call center or consumer direct model or something of that type. So, we want to appeal and we do appeal to both the management but my heart because I was a reverse mortgage originator is always going to be with those men and women in the trenches doing reverse mortgage lending. What do you see as the key changes in the market right now? What do you see happening? I know I'm a real estate broker and so for me I try to tell people they need that what they're missing is the real estate sales industry has been depression for 5 years. We have 3% less sales than we had 5 years ago. That doesn't mean your business has to be down 30%. It means you're surrounded with that and you need to figure that out somehow.

4:17 Yeah. What would you say are the one or two major macro trends in the reverse mortgage industry today for an originator facing the business? Right now it's I think there's plenty of opportunity and I'm not going to name names, Bill, but there's one gentleman I know who's consistently doing 15 reverse mortgages a month. You know, he's developed a system. He's built a network. But I would say the rank and file it is a struggle in today's market for them. A lot of the older homeowners, the baby boomers, I'm Gen X myself, but the baby boomer generation and even older have really gotten on that sugar high of extracting home equity repeatedly, right? And so that doesn't really leave much of a cushion of home equity where you could go out and get a HELOC or a reverse mortgage for that matter. So that's kind of the LTV as they say in traditional mortgage lending, that's a real challenge. I would say the other and one that continues to be a challenge despite the program having been in existence for over 30 years is just this misconception in the public. And I lay a lot of that at the feet of the media, the mainstream media and financial reporting that is quite frankly, I would say 90% of the time has just done a horrible job, you know, borderline journalistic malpractice when it comes to the reverse mortgages. So there's this, you know, stigma attached to the loan and there's reasons for that, but I think that's kind of the challenge that we're seeing in the work in the place right now. And then the bigger one, too, is the interest rates.

5:50 You know, we're not in a high interest rate environment by any means. You and I know that. Right. But in the in the terms of recent history, we certainly are because we came off, you know, a 10-year Treasury rates that were near zero during the pandemic. And so, those impact the amount of proceeds that a reverse mortgage borrower may get. So, since those are, you know, have gone up significantly, that's also impacting those how many would qualify for the loan. You know, I as a real estate broker, I look at the market for reverse mortgages. And just to me, it seems obvious the industry should be doing 10 times the business that it is. Meaning as a real estate broker, every client I have who has a house free and clear, million dollars or more, half a million dollars or more, should have a reverse mortgage or at least a line of credit they're accumulating. Yes, paying for the fees. Yes, you have to pay for the fees. Yep. And still, to protect your equity, I have clients whose houses are burned down they own free and clear in the Palisades with two million dollars. They're hoping the insurance will pay off someday or they'll sell it for one million. If they had a reverse, they could have written a check and pulled out three, four, five hundred thousand dollars. So, I look at that and say, you know, those people should all have one. People should have a line of credit if they don't have one.

7:08 They should they can get a second nowadays. And prepare and put them on your side, invest in something else in the meantime. There should be about 10 times. I mean, maybe it's five, maybe it's 15. But something like 10 times the business. And yet, when you talk to originators, and I get it's a struggle, it's hard work. What do you think it is that constrains the Am I First off, is my thesis wrong? Like, why do I see that opportunity? Not that I'm going to originate those loans. I'm not confident enough to go out and change my business cuz I'm busy and I'm doing well. Right. But I do see such an incredible opportunity, literally 10 times. Am I wrong? What am I missing? No, you're spot on. I think the opportunity is immense when it comes to reverse mortgage adoption. The sad fact is that our market penetration of eligible age eligible homeowners is about 2% and remains where it is where it's been for many years, which means actually we're losing ground. And you know, I don't want to sound negative about that, but this is the reality. And part of the main reason for that I began doing reverse mortgages in 2002. But we had a massive distribution channel in the reverse mortgage industry in the years of 2005 up to 2012 or so. And what consequently before the housing crash, we saw reverse mortgage volumes get about 120,000 loans endorsed or insured for the home equity conversion mortgage. And so that was that was the pinnacle. And the key to that was the distribution channel of brick and mortar lenders such as Wells Fargo, Bank of America, MetLife, trusted names, right?

8:48 Yes. The people go into the office and meet the person and sign the papers in their office and have them explain the papers in their office. I mean, makes sense. Absolutely. I mean, if I was to literally go across the street, there's a Wells Fargo across the street from my office and if I was age eligible back in the day, I could just walk in there and I had that sense of safety, right? My deposits are there. I've maybe done a few CDs and it seemed safe to do a reverse mortgage. So it kind of engendered a certain sense of gravitas for the homeowner felt like these guys are legit. They know what they're doing. And so a lot of those banks left and exited the space shortly after the housing crash. Most of them cited what they called reputational risk because they feared that some of these seniors were not going to be able to afford to remain in their home, that is to pay property taxes, right? And homeowners insurance. So, they didn't want that headline risk. And so, a lot of them exited. But, there's a few of them sniffing around Bill, just to let you know, they're looking at the industry. You know, I think that would be key in really boosting our loan production. Well, me as overall industry, but I mean personally, you know, Wells Fargo went bankrupt in 2008. The Wells Fargo we know is not Wells Fargo from the 1800s. They went bankrupt, a company bought the name, and put Wells Fargo on the front of the of the store. So, when you think you're safe, the last place you're safe is Wells Fargo, who's been fined numerous times for literally cheating their customers, right? We know that's a fact. JP Morgan Chase, same thing. We know they've been fined tens of millions of dollars for cheating customers. And yet, you're right, these customers feel like they can walk into that local branch and has that big logo on it. The same logo that's on some billboard or some building downtown LA, I'm safe. And so, to me, that seems like the opportunity though for the originator. And that's why I'm doing what I'm doing, and that's why I admire what you do, which is it seems that an originator should be able to, with good information, with good education, really repurposing some of your content or my content or their own with technology

10:52 Today, to replace the reputation of these banks with themselves. And to me, that seems like the opportunity that's being missed. So, how do we help them do that? How do we help them accomplish that? I think part of it is one is losing the shame as a reverse mortgage originator. Too often, and I've seen this happen so many times, Bill, is you know, someone who's a reverse mortgage originator, that's all they do. They could be a broker or they could be working in the retail division. When someone asks them at a cocktail party, "What do you do?" "Oh, I just do reverse mortgages." You know, it's like, "Why are you ashamed of that? You are You're a financial Santa Claus. You turn bricks and mortar into cash. And you don't have the burden of a payment. So, there's you know, you get programmed enough by the financial media and the mainstream media about reverse mortgages you'll hang your hat. That's the word program because I you know, you I last slide a little bit. You're very polite. I'm not nearly as polite as you would comes to the media. I just call it propaganda. I feel like the mainstream propaganda and people battle about it in politics and that's politics but in real estate news, they support Zillow, Redfin, all these big major corporations that aren't American. And they're all international finance. They also don't pay any federal income taxes. They're destroying our industries and one by one we have, you know, real estate agents like me battling against them or in the loan business individual originators battling against the nowadays Rocket who bought Redfin and all that. So, I do think the financial news is so poor at educating customers and that's what creates the opportunity that I've I'm looking for and that you are as far as educating consumers. Now, I know most your content is directed towards the originators in the industry.

12:34 Where do you see good source of information for the originator to educate their prospective customers or is that something that you are empowering them to do with your tools? I think that's they can definitely find some information on HECMWorld.com that I do not want to be remiss in not mentioning an excellent source of accuracy and education. My friend my friend Dan Hultquist has a site called understandingreverse.com and Dan is probably one of the most the foremost experts on reverse mortgage lending in the nation. He gets questions even from regulators. So, Dan knows the FHA handbook. Yes. Yes. We got Dan. You know, I keep him here just like you keep your Bible by your nightstand, right? So, Dan's great but you know, even for adult children of a parent who may be considering a reverse mortgage or if you're a mortgage originator and you're kind of saying, "How do these work?" Understanding reverse is great and a good place to start those books I would highly recommend as well, but that's a good place to start. Do you Now, I know you have a software company affiliated with. So, talk a little bit about the power of technology and how that maybe creates opportunity for originators in the space to leverage their time and effort and energy cuz I know you know, in real estate we every company has their own marketing platform and then additionally real estate agents might buy a third-party platform to supplement or replace what they get if they find it not to be adequate.

14:07 Similarly, I know originators go to work for companies, but many times those companies restrict what they can do to what the company's providing. So, talk a little bit of what kind of tools does a originator need today what's available to them to leverage their time? I would say the minimum and these are both products that we offer. So, yes, this is self-serving, but it's helpful. We've helped thousands of reverse mortgage originators since 2007. Two things I would say you need is one, you need a reverse mortgage specific website if you're going to do reverse mortgages. So, I see a lot of traditional mortgage originators and pardon that term folks if you're wondering, "Why is he saying that?" cuz just to differentiate it from reverse mortgage lending, but those who do 30-year, 15-year, HELOCs the mortgage professionals that we're more familiar with. They may be saying, "Well, what do I need to get into reverse?" And first is, you know, you have to have an online presence specific to reverse mortgages, not just a tab on your website. So, you can tell that story, build credibility, educate, etc. And then the second is you need a client relationship manager that's specific to reverse mortgage lending because it's a different animal than doing a traditional residential loan. So, there's a lot of parts of that we built specifically. Bill, we out I started out as an originator myself. I was at the kitchen tables. I was doing seminars or workshops. And so, we grew these tools out of our experience as a top producing branch in the nation at the time. We were the number one branch and I'm kind of a systems guy as well as a salesman. So, I'm like, "Oh my gosh, how do I track all this? And what are we doing? What's our fallout rate?" I had no clue. And so, we developed these systems and tools which we eventually turned into reverse focus.

15:50 And what we found is that it was pretty bad in 2007. There was nothing for reverse mortgage technology. But, you know, Barry Habib had Loan Toolbox, which I thought was amazing for, you know, those that are doing traditional mortgage loans. And I thought, "This is great. It's education. It's motivation. It's technology. It's efficiency." So, that's what really prompted us to do that. One of the In real estate, I think it's very common for real estate agents to use video. Now, I'm not sure if they're using it properly or not. I think there's a proper way to do it and probably people get coached I think the wrong way. I think in reverse mortgage it's probably even more necessary because you both have to promote yourself, but then you have to educate the customer and then educate any advisers they have, family members or accountants and such. So, it seemed to me that if there was ever an area that really needs good instruction on how to communicate effectively using video, you're so good at it. Where would you recommend originators in reverse who want to develop their own library, their own tools, their own video specific, maybe their own podcast? Where do you recommend them to go besides watching you? And like I said, I watched your videos enough now. I'm not as good as you are, but I you know, I picked up on things and I really use that as a tool. Where would you recommend people go to up their game or to get started in doing their own video or podcasts?

17:10 You're very kind. Well, there's a couple things. There's I'm going to talk about two different types of videos. One would be the ones that promote like on social media. You know, we have a lot of age eligible, you know, reverse more potential reverse mortgage borrowers on Facebook. I think shorts are very powerful a way to communicate. And so I think video shorts are good way to expose people to you. But don't get into a 10-15 minute long video. No one's going to watch it. Even older homeowners who are more patient than the generation X or millennials, they're not going to watch it. So I would say video shorts are key. Also, anything you can do to educate whiteboard videos are really effective. And you can have a library of those that address misconceptions, how the loan works, you know, what to do to settle the loan. And then the other thing Bill that's really interesting is COVID changed the whole world for sales in reverse mortgage lending and across many other industries as well. If you're going to send a PDF to someone who's 72 years old, let's say, and it's 58 pages long and it has all these numbers and figures and they're like, "Oh my goodness, what do I do?" We have been teaching people to use Loom, which is a great service where you can screencast and kind of go through that PDF document and you're talking to them and it's engaging. And I have one gentleman who heads up a reverse mortgage lending company in Southern California who saw his closing ratio double where he had more conversions into a really hot lead because they weren't just overwhelmed.

18:46 So Loom is a great service to use. BombBomb is another way to do videos. And then just speaking of videos, what we're doing now, live, you know, video conferencing is powerful as well. I'm surprised that when I suggest to people, "Why don't you just call the people you do business with and do a short video interview with them?" That's how I started. It's you know, it's an easier way to get started. Doesn't require a lot of preparation. Yeah. People were resistant to it. So, the it's interesting I was actually at the National Reverse Mortgage Lenders Association regional meeting. And I know that you know you participate I think at the national event. I know you're involved with that organization regularly. You know, I've been in real estate for decades. It seems like every time I ever met somebody with letters behind their name, it was like a waste of time and they're trying to impress me with the three or four letters they had. But, without a doubt, the Certified Reverse Mortgage Professional, having interviewed a bunch of my podcast, are consistently a cut above any originators I've met, whether be forward or reverse. And they almost all universally brag about or are proud of the distinction it takes to get involved. So, talk about the role of NRMLA in the reverse mortgage world. It's not very often an industry. I think you have such a such a powerful subset of the group, yet seem to have an outside power or attention.

20:13 Yeah, you know, our industry and our trade association, National Reverse Mortgage Lenders Association, or NRMLA as we call it in our business, was wise to create their own internal certification program. And it's very arduous. You have to really know your stuff. You have to know the mechanics of how the loan works on the backside, which the consumer will never see, so you can explain it properly. And so that program has been very helpful in I would say even more than having some letters after your name, it's produced more educated originators and much more professional, as you mentioned before. Yes. So, I think that certification's very important. They didn't make the mistake that the CSA did years ago, where they're some people were saying you got to take the CSA designation off, because you know, it just became like a mill, right? Where they're cranking them out. These are tough. You have to maintain, you have to do I think a hundred reverse mortgage loans before you can even qualify. So, there's experiential benchmarks you have to hit to even get into the program. It's total you know, in real estate we have you know, we give out certifications like Halloween candy I think and you'll see people have like five or six designations. I'm thinking what do you do with your day do you have that many? I know in my niche of probate there've been you know, probably four or five companies or took a class or program and they give you a certificate afterwards and people use it. And I don't use a designation. I learned something in the class that was a value. But I've never seen anything like this HECM designation in terms of the members valuing it themselves and treating it with dignity and respect and almost as an honor or complaining about how hard it was to get. So, that seems like a very important piece of the puzzle.

22:01 So, HECM world and your software, obviously you know, I see the market inevitably going to grow. I don't know who cracks the code or what it is that there's just there's just so many more opportunities there for it. Where do you see the future? Where's HECM world going to be five years from now? Where do you want to be in this industry five years from now? A good question, you know, the thing that's always puzzled me is that the reverse mortgage or the home equity conversion mortgage, let me be more specific, which is a federally insured reverse mortgage, I think it's one of the best engineered financial products that's ever been turned out. Just how powerful it is to help an older homeowner have a better quality of living in retirement. But despite that of course we're seeing very low adoption. I think we're on the on the bell curve even though we had big volumes, you know, peaking in 2007 and 8, I think we're still on the bottom because eventually this will become more commoditized just like traditional mortgages have. And so I see a day in the future, whether it's 5 years or 10 years from now, where reverse mortgages have less of a stigma and just become a normal course of mortgage lending. Seems to me should be there. And I also feel like once you break the ice with one, right? If you get a homeowner, maybe they're free and clear and then they get a you know, a line of credit, you know, to protect the equity or they get a second to protect some of the equity, then they're more likely to use it an HRP to purchase their next house in another area. Like once somebody gets through the process, it goes, "Wow, that was really powerful." And if they have a good originator that has a relationship with them, can walk them through the different product and steps and options along the way, it just seems to me that of all of real estate, I don't think I'm aware of any area that to me it seems to have as much promise and potential where the market's growing and should be growing faster than this.

23:51 And I really appreciate you being one of the leaders of there and helping all of us in the industry learn and pay attention and strategize and find the right tools and avoid the ones that are wrong. So, Shannon, I just want to thank you again for your time today. I know you're really busy. You got a lot going on. I tell you put in all the time. I don't know how you do it, but I do appreciate your time with us today. I appreciate what you guys do with HECM World and in regular. I thank you for all your support. Well, thank you, Bill. And I'm looking forward to learning more about what it is you do. You and I have spoken many times before, but thank you for having me on your show. And thank you to your listeners and viewers as well. Well, thanks. And Shannon Hicks is HECM World, hecmworld.com. And we'll have a link down below in the show notes. And again, Shannon, thank you for joining us. And for the rest of you, this is the Reverse Mortgage Podcast. We get together once a week with industry leaders, usually originators, but sometimes management or vendors. In this case, one of the industry leaders Shannon Hicks, HECM World. Fantastic. But feel free if you like this, like it. If you don't, tell me what you need about it, put a comment in, subscribe. If I can help in any way, I'm Bill Gross Probate on social media @BillGrossProbate. And if as always, make today your best day ever. Thanks so much.