Supreme Lending’s John Luddy on the ‘3 deadly sins’ of reverse mortgages

When it comes to the process of selling a reverse mortgage, John Luddy exemplifies the clichéd phrase, “been there, done that.” After 40 years in the mortgage industry, including more than 20 in the reverse channel, there’s not much that surprises the Connecticut-based senior vice president of Supreme Lending.

At last week’s Reverse Mastermind Summit in Tennessee, Luddy took the stage to offer in-depth advice for loan officers who are new to the segment or attempting to grow their business. His guidance comes at a time when American seniors have mounds of home equity but often lack the appetite or knowledge for tapping into it.

“If you want the horse to jump the hurdle, you have to do everything right. You slow at the last minute, that horse thinks you’re going to fall off and they stop,” Luddy told the audience during a presentation that was centered on the “three deadly sins” of reverse mortgages.

Deadly sin #1: The ghost

Even if a loan officer has immaculate preparation and presentation skills when meeting with prospective borrowers, there may be a psychological barrier to overcome.

“Before you got there, Jimmy said to Rita, ‘I don’t care what this silver devil says — don’t commit. Do not commit. Let’s just get the paperwork. We’ll look it over and we’ll get back to you,’” Luddy explained.

A proven technique to overcome this hurdle, he said, is for the LO to give the couple time alone. Tell them you forgot a brochure in your car and you’ll be back in a few minutes. While you’re gone, the spouse who’s ready to do business will convince their partner to proceed.

When the LO returns, they should assume the couple is ready to move forward. Start talking about counseling and other requirements of the loan process. The underlying principle is that people take the path of least resistance. Once you leave the room, acceptance becomes the preferred path versus scheduling another meeting.

Deadly sin #2: Closing costs

It’s no secret that consumers have many myths and misconceptions when it comes to the reverse mortgage product set. And while industry professionals have cited high upfront mortgage insurance costs as a problem when selling a federally insured Home Equity Conversion Mortgage (HECM) borrowers rarely know specific numbers and may overestimate expenses.

“How much does it cost?” is a loaded question when the LO hasn’t given the client a rational cost-to-benefit analysis. “When they ask at the beginning of the conversation, they’re a low-information borrower,” Luddy said. “I would propose that most anything they know about a reverse mortgage is negative. So how in the name of God do you expect them, knowing so little, to put those closing costs on the scale?”

Don’t answer the question directly or avoid it, he said, as this will lower your odds of closing the deal. Start by asking permission to take notes so you can answer all of their questions. Prompt them to ask questions that go deeper than cost and use these as a springboard for the rest of your presentation. Address the costs directly only after you’ve demonstrated the product’s “life-changing value.”

“By the time you circle back to the closing costs, you have already changed their life. You opened the door. You’ve painted the picture. They don’t care about the closing costs anymore,” Luddy said.

Deadly sin #3: Adult children

Luddy said that industry professionals often treat family members of the client as adversaries in the sales process, but he believes this is an outdated concept. A child or a grandchild is typically sincere and wants to protect their loved one. Still, the LO can face trouble when family dynamics — e.g., alpha personalities or sibling rivalries — enter the equation.

“Our clients today are not as concerned about leaving [their children] the house as they used to be,” Luddy said. “But you have to be skillful in dealing with the adult children, because you’re really walking into a landmine of competition between the siblings.”

Luddy offered a few techniques for specific situations:

• The alpha rule: Never start your presentation until all family members, especially the dominant sibling, are in the room.
• The mirror technique: When a child says, “I hear these loans are a ripoff,” repeat their words back to them in the form of a question. This shifts the burden of proof to them to validate their statement. Their beliefs are often grounded in misinformation.
• The separate meeting: If the client’s son or daughter calls you about the loan, meet with them privately to sort through the details. You can then present the information to their parent together.
• Protect the parent: Don’t let a hostile child grind through their objections in front of the parent as this creates unnecessary stress. The underlying principle is to respect sincere concern, outmaneuver insincere obstructions and avoid patronizing anyone at the table.