When a reverse mortgage saved a client from bankruptcy

After initially entering the mortgage business in 2003 following a career change from accounting, Rick Rodriguez was reading a book about mortgages that included a chapter on the reverse mortgage product. He remembered thinking the chapter was intriguing and flagged it in his mind so he could look into the product further.

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After asking his colleagues if it was a product they offered, he was told that they doubted he’d ever be in a position to sell reverse mortgages. But after receiving a fateful call from a prospect who was seeking one, Rodriguez looked deeper. This led him to an experience that convinced him that the product had a place in the wider mortgage ecosystem.

Today, Rodriguez is one of the leading reverse mortgage producers at VIP Mortgage and operates primarily out of the Las Vegas area. He recounted his path into the business in an interview with HousingWire’s Reverse Mortgage Daily (RMD).

You never forget your first

At that time in the early 2000s, Rodriguez’s company did not offer reverse mortgages. But when a prospective client reached out directly to Rodriguez — who at this point was in his late 20s — he enlisted his company’s help in forging a partnership with then-ubiquitous reverse mortgage lender Financial Freedom. After informing the prospect that he would be able to do the loan, the client decided to move forward with Rodriguez as his originator.

“That transaction is still, to this day, perhaps the most impactful transaction I’ve ever had, and I’ve had thousands now over the past 20 years,” Rodriguez said. “Reverse is all I’ve been doing since then. This guy was in a Chapter 13 bankruptcy at the time, was behind on credit cards and on his mortgage, and was on the verge of losing his house.”

He also had mobility challenges, so Rodriguez assisted with filing court documents in conjunction with the reverse mortgage origination process in order to address the bankruptcy. Ultimately, after a roughly three- to four-month process, the loan closed, the bankruptcy was paid off early and the client’s debts were settled.

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This made a big impression on Rodriguez. It wound up setting him on a path toward reverse-only origination that he has now been on for 20 years.

“It was literally a life-changing transaction for this guy, and it was the very first reverse mortgage I had ever done,” he said. “After the dust settled, I took a step back and I asked myself, ‘What did I just do?’ And I realized this was pretty powerful. I quickly realized that this is what I’d like to do in the mortgage industry. This felt really good and I want to do more of these.”

Ultimately, Rodriguez attributes this first experience with his decision to pivot wholly to reverse mortgages in 2005 — and he hasn’t looked back since. He may have changed companies a few times since then, but his involvement in the reverse mortgage business remains consistent.

Virtues of a deep dive

Another byproduct of such an all-encompassing first experience in reverse, he said, was that it really helped to familiarize him with the dynamics of the product and how it could be applied to meet clients’ needs.

“There’s a lot of stigma around the product,” he said. “People are just ripping this product apart. I wanted to find out, was this just a coincidence, a one-off? Going deeper was also an opportunity to see firsthand what the longer-term impacts would be.”

Rodriguez kept tabs on his subsequent customers and their situations — sometimes years after closing, he said. Considering the reputational challenges that reverse mortgages have faced, he was initially concerned that he might start getting disgruntled phone calls or concerned borrowers, but these didn’t materialize in a meaningful way, he explained.

“I saw firsthand how this was impacting people,” he said. “I saw that it was doing what it was intended to do, and in the following years have put family members and close friends into the product. But that first loan was really what opened my eyes to the product, and along with the subsequent ones after that, really helped me get more confidence in the product to see that it truly is going to do what we needed it to do.”

Disruptive changes and looking ahead

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Over time, the reverse mortgage product has undergone a series of substantive changes, whether in the way companies offer it or through program changes handed down by the Federal Housing Administration (FHA). Rodriguez said that the changes with the most impact were probably the creation of the financial assessment and the principal limit factor (PLF) cuts from October 2017.

Working with these changes over time has made them less daunting and more normalized in how the product works, he explained. While the financial assessment was an arduous aspect to become accustomed to, Rodriguez said he’s now glad that it’s in place.

“I think there were probably some situations where people were put into the reverse mortgage that didn’t have the capacity to be placed in it, or didn’t have a sufficient income or demonstrated creditworthiness to have any type of mortgage,” he said. “So, it was certainly a good idea, but at the time, that was a big change for us.”

Like many of his colleagues, Rodriguez feels optimistic about the places the reverse mortgage product can go.

“I’m still a very, very strong believer in what this can do, No. 1,” he said. “No. 2, the educational outreach and awareness surrounding this product is more heightened than it’s ever been. We’ve got more and more wonderful educators out there who are raising awareness on not just this as a mortgage product but how this is a retirement tool.”

Whether it’s used for raising liquidity, tying into retirement plans or involving more referral partners, Rodriguez is pleased to see the trajectory of the product.

“I’m very excited about those pieces in terms of continuing to talk about the product, and getting more and more people to understand it for what it truly is.”

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