Instead of waiting for seniors or their families to learn about reverse mortgages on their own, top lenders are reaching out to financial advisers, insurance agents, and other trusted intermediaries.
On March 2, Financial Freedom Senior Funding Corp. announced a seven-employee division focused solely on assisting nonlender financial intermediaries and developing affinity relationships.
The Irvine, Calif., lender is a subsidiary of Lehman Brothers Bank, a unit of Lehman Brothers Holdings Inc.
Craig Corn, an executive vice president at Financial Freedom, said reverse mortgages are an appealing option for seniors short on cash but long on home equity, and one that many advisers want to offer their clients.
"To purchase the kinds of things" senior citizens need, like medical services, "they have to have access to these funds," Mr. Corn said. Advisers like the product because they earn commissions when equity is moved into staple investments like life insurance or long-term annuities, he said.
In a typical reverse mortgage, a homeowner who is 62 or older removes equity in monthly scheduled draws, a line of credit, or a lump sum. Unless the home ceases to be the borrower's primary residence, the loan does not have to repaid until a borrower dies.
Though production of the loans is growing fast, the industry's biggest challenge is still spreading the word. Lenders do so by calling on financial planners, in-home health-care firms, churches, and senior associations, and even advertising in newspapers' obituary sections.
Darryl Hicks, an associate director at the National Reverse Mortgage Lenders Association in Washington, said a wide range of "people who provide some sort of service to seniors" are targets. The group's membership has doubled in the past year, he said, to about 200.
"A lot of reverse-mortgage lenders spend a lot of time out on the road," Mr. Hicks said. "There's no silver bullet in how you market reverse mortgages … there are a lot of little things."
Top players - which also include Seattle Financial Group and EverBank Financial Corp. in Jacksonville - increasingly get business through banks and other lenders: correspondent or broker relationships, affinity programs, or simple referrals. But they say nonlender intermediaries may be the best of all channels.
Jeffrey Taylor, the vice president of senior products for Wells Fargo & Co.'s mortgage unit, said that "the new and emerging group" is made up of clients who take the loans because of "the trust factor."
Financial Freedom had at least 10 formal affinity programs offering reverse mortgages through professional advisers, Mr. Corn said, then set up a dedicated call center for them and their clients. (It also has about 500 correspondents.)
Four call-center employees field questions before arranging for outside counseling, which is required for loans insured by the Federal Housing Administration. (The FHA insures more than 90% of the loans; Fannie Mae also has a reverse-mortgage product, called Home Keeper.) The center then sets up a loan officer's visit to the borrower, Mr. Corn said.
Three salespeople in the same division make calls to sign up firms for affinity relationships, he said.
Financial Freedom also has arrangements in which the lender trains salespeople for affinity groups - as it has for the wholesale insurance agency Bisys Group Inc. of Little Falls, N.J.
Wells has been reaching out to financial planners and other intermediaries for two years, according to Mr. Taylor. Seniors and adult children who are banking customers or correspondents are also important sources for reverse-mortgage business, he said. Though most advisers' perceptions are slowly changing, some still think, "Oh, that's the program where you give your house to the bank," he said.
Wells will soon give away a CD-ROM with information on the loan's uses - such as wealth transference in estate planning - and "will be attending no less than eight annual conferences with financial planning associations" this year, Mr. Taylor said.
Financial Freedom and Wells both claim to be the top reverse-mortgage lender. Last year Financial Freedom's volume of such loans jumped 93%, to 13,800. Wells' surged 137%, to 9,974, but it does less business through correspondents. (Volumes are measured by the number of loans because the final amount is unknown.)
Robert M. Clements, Everbank's chairman and chief executive, said reverse mortgages are "one of the most attractive tools we have to offer through the financial adviser channel."
His company got into the business in 1998 through its joint venture with Bank of New York Co. Inc. It also offers other private-label or cobranded products to the clients of more than 10,000 advisers through 65 formal partnerships, including joint ventures and joint marketing agreements.
Advisers are careful about whom they rely on, said Blake Wilson, EverBank's chief financial officer. The risk of losing their core investment account is the greatest when their clients deal with outside parties, he said.
Advisers are concerned that outside providers will try to poach their customers, and they do not like not being able to control service quality, Mr. Wilson said. But Everbank's agreements are "nonthreatening," he said.
Financial Freedom, which makes only reverse mortgages, does not share information with Lehman, which has little interest in retail customers, Mr. Corn said.
Mr. Taylor said Wells also keeps its operations separate and is not after these customers "to cross-sell them anything else."
