Can Golin Harris do for reverse mortgages what it did for the ubiquitous hamburger?
The Chicago-based public relations firm came up with the idea for golden arches to distinguish what was then an obscure 10-cent burger. And later, it hit another home run when it came up with the idea for Ronald McDonald House, where parents of seriously ill children can stay while their kids are hospitalized.
Now the National Reverse Mortgage Lenders Association (NRMLA) is hoping Golin Harris can raise the public image of backwards home loans for senior owners which don't require any payments until the old folks move out.
Until earlier this month, when both The New York Times and The Wall Street Journal published positive pieces on reverse mortgages, the product has been the subject of what their lenders say is bad and misleading press. And even the Times story was only semi-favorable because it also repeated incorrect information, according to NRMLA president Peter Bell.
To hear Bell tell it, reverse loans suffer from "the three misses":
- Misunderstanding because it is erroneously believed that the loans come with no consumer protections when, among other defenses, borrowers are required by regulation to go through counseling with third-party specialists who have no stake in the transaction.
- Misperception because many people mistakenly think that lenders automatically take the house when the borrower passes away. Or that borrowers can outlive the money lenders send them every month. Or that they can end up owing more than the value of the property.
- Mischaracterization because the loans are often put in the same category by their detractors‹and there are many who talk down the product‹as subprime mortgages and predatory loans.
To counter this kind of misinformation, NRMLA has hired the Washington office of Golin Harris and another unnamed public relations firm to mount a national public affairs campaign, Bell told some 200 people gathered in Philadelphia at the group's Roadshow 2010. (Bell would not reveal the name of the second firm because it has yet to be told it got the job.) The crusade is coming at a difficult time for the reverse mortgage sector.
Although demographics seem to indicate there should be a veritable stampede of seniors wanting to unlock the equity they have in their homes‹only 2% of the nation's 23 million senior homeowner households currently have such a loan‹originations are down "considerably," according to figures released here by the Department of Housing and Urban Development (HUD).
That could be a result of the sagging economy, which has robbed individual owners of tens of thousands of dollars of equity that can no longer be banked on. Or, as NRMLA co-chair Joe DeMarkey of MetLife Bank, Bloomfield N.J., noted, it could be because many borrowers rushed to meet an Oct. 1 deadline that effectively cut into how much money they could take out of their homes.
But Bell said a great deal of the problem rests in the fact that "local media has not portrayed reverse mortgages as an effective tool."
The result is in what he called "the march to legislate" by many states, including Maryland, which passed a new law last month, as well as Florida, Arizona, California and Minnesota, among others.
"A lot of that," Bell told the three-day conference, "has been driven by adverse coverage that in some cases regurgitates information that is 15 years old."
At the same time, the effort to "stem the tide of adverse coverage" and promote the ways "reverse mortgages fit into financing longevity" also comes at an opportune moment for the business because the cost of originating the product is coming down.
With greater efficiencies in the secondary market, some lenders have dropped their origination fees altogether while others have done away with their much-debated servicing set-aside fees or paying at least part of the upfront mortgage insurance premium that is required on HECMs by the Federal of Housing Administration (FHA).
"Cost are coming down, and coming down pretty dramatically," Bell said. The cuts amount to "upwards of $10,000 that consumers don't have to pay any more."
Lower costs "fundamentally change" the target market for reverse loans, said John Lunde, president of Reverse Market Insight, Irvine, Calif., effectively opening it up to a "needs-based" customer who heretofore shunned the loan because it was too expensive and didn't offer them enough money.
"As we see upfront costs come down," Lunde told the meeting, "reverse mortgages will be able to compete more effectively with home equity lines of credit."
Lower costs were the topic of the recent Times and Journal articles. And now NRMLA wants to build on that coverage with a countrywide PR campaign.
Whether a big PR push can put reverse mortgages on the map like it did McDonald¹s, only time will tell. But reverse mortgage lenders are ponying up to find out. And MetLife's DeMarkey, for one, expects better coverage in the process as the industry hopes the positives outweigh the negatives.
Bell didn't say what the group planned to spend, but he did reveal that some members have made cash contributions to fund the effort and others have agreed to chip in $15 per loan as their share.
Besides taking the sector's positive message to the nation's press, the two public affairs firms will help NRMLA deal with legislators on the state level and open doors‹and eyes‹on Capitol Hill in Washington.
The association also is trying to enlist HUD's help in combating the negative perceptions that surround the reverse mortgage product.
"We're hoping HUD will partner with us in doing seminars," said Marty Bell, Peter Bell's brother, a former Broadway producer who now is NRMLA's director of communications and marketing.