Supreme Lending’s John Luddy says reverse mortgages are better positioned than ever

Longtime reverse mortgage professional John Luddy says that despite the noise around high interest rates and equity-locked borrowers, the reverse market is in its strongest position yet.

In a conversation with HousingWire‘s Reverse Mortgage Daily, the senior vice president of reverse lending at Supreme Lending cited high home values, expanding product options and growing demand from older homeowners who want to age in place as indicators of a healthy market. But for loan officers to succeed in the reverse space, more knowledge development is needed.

Editor’s note: This interview has been lightly edited for length and clarity.

Sarah Wolak: You’ve had a long career in reverse mortgages, which makes you unique in the space. How long have you been working in reverse and how did you get started?

John Luddy: I come from a background of funeral directing; my family owned a funeral home. I’ve been doing reverse mortgages exclusively for well over 25 years and have been in the business for over 40 years. I stopped doing forward loans after originating about 500 loans a year.

My own mother took out a reverse mortgage before I was in the business and I saw firsthand how it helped her. There are many reasons people may choose to use money from one source rather than another. I fell in love with the product, and once I started originating reverse mortgages, I realized that was what I wanted to do.

Wolak: How has your role evolved as a reverse mortgage professional? You now spend a lot of time training and working with LOs across the country. When did that become your focus?

Luddy: The transition happened gradually. At Campbell Mortgage, I supervised a couple of people. Then I went to Norcom Mortgage, where I started its reverse mortgage division.

At Supreme Lending, it was similar. The company was not actively originating reverse mortgages. It had brokered a few and had completed maybe 18 loans during the year. There was no real emphasis on the business or a defined reverse mortgage division.

Today, I have a wonderful team behind me. They have taken me out of the day-to-day work of entering loans, so I spend most of my time training our loan officers. Some are experienced reverse mortgage professionals who want a second opinion. Most are forward loan officers entering the reverse mortgage business.

They are dual citizens, doing both forward and reverse mortgages, but they need a lot of help. We allow them to participate fully in the reverse mortgage space. Many companies say, “Pass the loan to us. We’ll handle it, and you’ll get a small portion.” That can become a way for someone else to take most of the business.

At Supreme, we take a different approach. I help loan officers learn the business. We hold Zoom meetings with the loan officer and the client so the loan officer can hear me explain the product. I also participate in presentations with their referral sources.

I tell loan officers there are many differences between reverse and forward mortgages. I’m asking them to take on a major responsibility by learning a new product and developing new referral sources. I tell them not to be an annual. An annual produces a big burst of color and chases leads, but it does not build a strong root system. When the weather changes, it does not survive. Instead, be a perennial. Build an organic root system of referral partners. Don’t chase leads; develop lead sources.

In the first year, a perennial sleeps. In the second year, it creeps. In the third year, it leaps. It takes time to transition, and I help loan officers develop new lead sources.

As an industry, we may be helping only 2% to 5% of the people who could benefit from a reverse mortgage. Why? Because people with a need go to trusted advisers, and those advisers often do not know that a reverse mortgage could be the solution.

Loan officers need to go into their communities and meet with referral sources to explain that they have a product that can help. For example, in-home health care agencies provide services that many people cannot afford indefinitely. A family may go to an attorney and say, “We promised our mother we wouldn’t put her in a nursing home, but we’re running out of money; we can’t afford her care anymore.” The attorney may say, “What do you want from me? Sell the house and put her in a nursing home.” But if we teach the attorney that a reverse mortgage could be a solution, that changes the conversation.

We also see opportunities involving silver divorces. We had a 93-year-old borrower going through a silver divorce. We previously closed a loan for an 89-year-old in Rhode Island and thought that was a record.

You have to think about the world around you. Climate patterns are changing, and we are seeing more severe storms. Insurance companies are using drones to inspect homes and telling homeowners they need new roofs. Homeowners insurance agents across the country receive calls from clients saying their premiums have increased dramatically; their insurer wants them to replace their roof or their coverage will be canceled. A reverse mortgage could be a solution.

Home values have increased, which is good news, but property taxes have also risen. Seniors may say they cannot afford the taxes, even though there is nowhere less expensive for them to live. We are always looking for opportunities. Twenty-five years ago, I never talked about using a reverse mortgage to put a new roof on a house.

Wolak: Do you still originate reverse mortgages, or do you focus solely on training and workshops?

Luddy: I do not originate as many loans as I once did, but I do it to keep my finger on the pulse. I do not want to be the person giving outdated recommendations. Everything I recommend to loan officers is something that has worked for me.

Our clients have changed over the past 25 years. I encourage people at my level to continue meeting with clients. Many do not, and I think that is a mistake. Modern seniors are less concerned about leaving their home and legacy to their children because their children are often doing better financially. Our industry does not always recognize that. The industry sometimes assumes adult children are acting in their own interests and trying to prevent their parents from getting a reverse mortgage. That is not necessarily true.

Wolak: Many conversations about reverse mortgages focus on borrowers’ misconceptions. What misconceptions do LOs have about the product and working in the space?

Luddy: One of the first things I teach loan officers is to prepare for pushback from clients, family members and even the professionals who referred the client. There is a lot of misinformation. We are not in the business of changing people’s minds. Our challenge is to give them better information so they can make a better decision on their own.

That is the essence of selling: asking the right questions, making sure the client understands and answers those questions, and helping the client understand the benefits. But clients will not move forward if they do not trust you or like you. If you are not genuinely interested in people, this is not the business for you.

Wolak: Working with older borrowers can involve sensitive conversations about death, legacy and family. How do you prepare loan officers for those discussions?

Luddy: Those conversations can be uncomfortable for loan officers, but they are not uncomfortable for me. One thing I have learned is to ask clients what they did for a living. People absorb information based on their life experiences. An engineer may want a completely different explanation than an art teacher who worked at an elementary school. You have to meet people where they are. Some want every detail to fit precisely.

People also tend to absorb information at the same rate they speak. If a client speaks slowly, slow down. They may be processing information at the same pace they are communicating it. Those are practical sales skills that I teach loan officers. The work is nuanced and you have to get the details right.

There are also small but important considerations, such as making sure clients can hear you. Many men who served in the military or worked in manufacturing and construction have hearing loss. If they hear every other word, they will never feel comfortable moving forward. Those are the things that need to be taught. I can teach practical sales techniques specific to reverse mortgages, but I cannot teach someone what they did not learn at their mother’s knee.

Wolak: You have seen many different mortgage markets. What are your thoughts on the current reverse mortgage environment?

Luddy: I think this is the best reverse mortgage climate we have ever had. I am more excited about the reverse mortgage space than ever. We have strong home values, fair interest rates and a wide range of new products.

That combination addresses an enormous need. People are living longer and they do not want to move from their homes. I think this is the perfect time to be in the reverse mortgage space. Any company that is not offering reverse mortgages is committing mortgage malfeasance.

You want to be a generational lender. You want to help a first-time homebuyer purchase a house, help that borrower move up, buy a second home or investment property, and then serve that customer at the end of the homebuying cycle when a reverse mortgage may be appropriate.

We are perfectly positioned. It has never been better. The need is greater than ever, but people’s ability to qualify has never been better. It is the best market I have ever seen and I cannot wait to get to work every day.

Wolak: It seems there are a lot of takes about how higher interest rates are affecting reverse mortgages. Some say borrowers are cash-poor and expect a challenging second half of the year, while others say they have never been busier. Why do you think these different experiences exist?

Luddy: I tell people during sales training to play the hand they were dealt. Do not fight with the dealer.
I use the example of an egg, a potato and coffee. If you put an egg and a potato in boiling water, the egg hardens and the potato softens. They are in the same pot of water, but they react differently. Coffee changes the color of the water. We cannot change the economy. We have to deal with it and play the cards we are dealt.

Everything I learned about selling, I learned on horseback. If you want a horse to jump a fence, you have to look beyond the obstacle. If you look down at the fence, the horse is going to stop. You have to look beyond objections. Ultimately, selling is the transfer of positive energy about your product and yourself from you to the client. You are transferring positive energy because you believe you can change the client’s life.

The last thing I worry about is interest rates. I cannot change interest rates. What I can do is change people’s lives by transferring that positive energy and helping them understand the product. This has never been a better time to sell reverse mortgages.