File this one under: why didn’t we (they) think of this sooner. While it might seem like a no-brainer in hindsight, top reverse mortgage lender American Advisors Group (AAG) will now start serving up forward mortgages to its customers.
Reverse vs. Forward Mortgage
A forward mortgage is just a fancy way of calling a home loan a mortgage if the context is reverse mortgages.
A reverse mortgage, on the other hand, is a home loan where the borrower doesn’t have to make monthly payments but receives cash via the home equity they have accrued.
They are popular among seniors who need dough, want to keep their homes, but might be on fixed income and unable to afford monthly payments that come with a mortgage. Or unable to qualify for a typical mortgage refinance.
Anyway, AAG, which bills itself as the “nation’s leader in reverse mortgage lending,” realized a reverse mortgage wasn’t the “right fit” for all homeowners.
But they were getting in contact with to a ton of homeowners with a massive amount of combined home equity. At some point a lightbulb went off and they realized a lot of potential leads were going out the door.
Apparently, AAG interacts with 400,000+ “older Americans” each year, thanks in part to their TV advertisements featuring Magnum P.I. aka Tom Selleck. By the way, he’s 73!
Instead of letting all those people slip through their fingers, they finally decided to capitalize on the large segment of senior homeowners who may not want or qualify for a reverse mortgage, but could possibly be interested in a traditional mortgage.
A Mortgage Lender for Senior Citizens?
It’s actually not only a good idea to retain all those leads, but also carve out a nice little niche as a specialty mortgage lender that focuses on mortgages for senior citizens, or at least the older segment of the population.
There are certainly different challenges for senior citizens than there are for young first-time home buyers, or move-up home buyers.
One being income and/or employment, assuming the borrower in question is retired.
AAG will likely understand these hurdles and perhaps be better equipped to deal with this cohort relative to typical mortgage lenders.
Their goal is to help seniors utilize their home equity “to achieve a better retirement,” which could mean offering cash-out refinances alongside reverse mortgages.
That ability to choose a loan option also seems to be core to the new venture. Instead of simply offering one home loan product, which may or may not work for an individual borrower, their loan officers will have more tools at their disposal to engage the customer.
AAG has already built out office space in Folsom, CA, with plans to hire some 70 to 80 loan officers this year.
They began tinkering and testing the idea last year after realizing that older Americans had a collective $6.5 trillion in home equity. That’s a lot of opportunity.