Home-equity-conversion mortgages, also known as reverse mortgages, jumped to a peak in 2009 then declined to less than half that volume.
The Business Journal interviewed Ron Kamler, CEO and president of Santa Rosa-based Alliance Reverse Mortgage. He explains what they are, how they work and how the sentiment about them has changed.
You started the company?
KAMLER: Yes, in 2001.
Has it always been aligned with Redwood Credit Union?
For our first five years, we weren’t a reverse-mortgage company. We were a traditional mortgage company. I had a client who wanted a reverse mortgage. I suggested a home-equity line of credit. Her husband passed away. His pension went. She had a $1 million home in Santa Barbara and not enough cash to live monthly. She was 73, did not want to leave her home.
You had never sold a reverse mortgage?
Right. I thought they were bad.
Bad in what sense?
Reverse mortgages had a negative connotation for years. She agreed to do a home-equity line of credit. I began the process. She called me, crying on the phone. I didn’t know what to do. She wanted a reverse mortgage.
She investigated it and understood the difference?
She knew what she needed. The home-equity line of credit would not work. She would run out of money and the bank would foreclose on her home. She could not make the payments. We gave her a reverse mortgage. We dug in further and realized that it’s a great product.
With a reverse mortgage, if the house sells for less than the amount due, the company that sold the reverse mortgage cannot collect the difference (nonrecourse loans)?
Was that what sold her?
No. What sold her was that she didn’t have to make a payment and she could live in the home until she passed.
She had no cash?
She did not care what the value of the home would be when she passed. It did not matter to her. What mattered was being able to stay in her neighborhood with her friends.
She had no heirs she was concerned about?
She had heirs, adult children. Most people don’t worry much about their heirs. Kids are more concerned with their parents living comfortably.
What was her house worth?
How much equity did she have?
It was only equity. She had paid it off.
At that point you decided to add reverse mortgages to your product inventory?
It was the first time I had done something that was really gratifying. Wholeheartedly changed that woman’s life.
How long had you been selling mortgages?
You shut down the lines of credit and other products you offered?
Shortly afterward, yes. I had no idea that a mortgage meltdown was coming. I just wanted to live differently.
Before the financial crisis?
It was 10 years ago (2006). I’m glad I did what I did. We weren’t huge producers, but we provided high customer service. It snowballed from referral to referral.
How many reverse mortgages do you do a month?
We’re a privately held company. Everybody wants to know that. We don’t disclose.
You sell all over the state?
Yes. The whole state.
Do more referrals come from credit unions or from banks?
All banks cared about was how much money they would make. Then we met with Redwood Credit Union. All they wanted to know was how this product could serve their members.