Can Golin Harris do for reverse mortgages what it did for hamburgers?
The Chicago public relations firm came up with the idea for golden arches to distinguish McDonald's Corp.'s then-obscure 10-cent burger. Later, 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 is hoping Golin Harris can raise the public image of its members' loan product.
Reverse mortgages, which are made to homeowners 62 or older, don't require any payments until the home is sold. The product has been the subject of what the lenders say is misleading press coverage.
The trade group has hired the Washington office of Golin Harris and another public relations firm to mount a national campaign, Bell told approximately 200 people gathered in Philadelphia last month at the group's conference. (Bell would not disclose the name of the second firm because it had not yet been told it had been assigned the job.)
The reverse mortgage sector is going through a difficult time. Originations have fallen "considerably," according to figures that the Department of Housing and Urban Development released at the Philadelphia conference.
The decline in originations could be attributed at least in part to the sagging economy, which has robbed individual owners of tens of thousands of dollars of equity that can no longer be banked on.
The co-chairman of the trade association, Joe DeMarkey of MetLife Bank in Bloomfield, N.J., said another possible factor was that many borrowers rushed to meet an Oct. 1 deadline before a change by HUD that effectively cut into how much money they could take out of their homes.
Bell, however, said a big factor in the origination decline is that the "local media has not portrayed reverse mortgages as an effective tool."
The result, he said, is a "march to legislate" in a number of states, including Maryland (which passed a new law last month), Florida, Arizona, California and Minnesota.
"A lot of that has been driven by adverse coverage that in some cases regurgitates information that is 15 years old," Bell told the conference.
Meanwhile, the costs of originating reverse mortgages are 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 are paying at least part of the up-front mortgage insurance premium that is required by Federal Housing Administration's Home Equity Conversion Mortgage.
Lower costs "fundamentally change" the target market for reverse loans, effectively opening it up to "needs-based" customers who until now have shunned the loan because it was too expensive and did not offer them enough money, said John Lunde, the president of Reverse Market Insight Inc., an advisory firm in Irvine, Calif.
Bell did not say how much the lender trade group planned to spend on the campaign, but he said 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 industry's message to the press, the two public relations firms will help the trade group deal with state and federal legislators.