Repost from the Reverse Mortgage Daily Blog:

Fairway Independent Mortgage Corporation and financial software developer MoneyTrax have teamed up for a new initiative designed to allow for easier communication between reverse mortgage loan originators, financial advisors and clients to more efficiently communicate how home equity can be incorporated into a retirement planning strategy.

Through new software, called “EquityTrax,” Fairway and MoneyTrax have created a new offering designed to build on concepts established by MoneyTrax’s existing “Circle of Wealth” program by showing how certain retirement plans can be affected by different levels of saving, investing and incorporating a home’s equity into financial strategies.

“Up to this point, it’s been really difficult to explain reverse mortgages,” said Harlan Accola, national reverse mortgage director at Fairway in a webinar introducing the software. “But if we properly explain how these things give a solution to many of the retirement problems that are out there, we change the world and we change the way retirement is done in this country.”

How the software works

The premise of EquityTrax is based primarily on two core concepts: financial advisors need to know a lot about the potential solutions that they’re offering, and they need to be able to communicate what they know in a short period of time even if the nature of the products or advice is inherently complex. This is according to Mark Guthrie, CEO of MoneyTrax.

“[Human beings are] visual learning and retention creature[s],” Guthrie said on the webinar. “You can go look up all these statistics, but just in essence we all know that our brains function best in taking in information. Not by listening to somebody talk or by reading a book, but by looking with our eyes and seeing concepts and images and pictures.”

A screenshot of EquityTrax comparing a traditional mortgage to a Home Equity Conversion Mortgage (HECM).

Circle of Wealth takes the concept of wealth planning by using an analogy related to plumbing: different pipes and filters lead water to collect in different places, and for the purposes of the software, the “water” is the amount of money coming into the accounts of a particular client. By applying the same visual concepts to the incorporation of home equity into a person’s retirement plan, they and their financial planners can more easily see and understand the difference that can be made by incorporating the equity in their homes using the new “EquityTrax” software.

By taking this visual approach, EquityTrax can assist in demonstrating to clients and advisors alike the value of a Home Equity Conversion Mortgage (HECM) as a tool which can help to increase liquidity and to maintain or sustain existing investments, Guthrie said.

Guiding philosophies

Broadly speaking about the reverse mortgage product category, there are a few key realities that industry players have to contend with on a regular basis, says Paul Donohue, retirement and reverse mortgage specialist at Fairway. One of these is that there is a perfect storm creating a barrier of understanding about the product category, as reverse mortgages are an abstract idea wrapped in a layer of stigma, he says.

“It takes some time for the consumer, who has got to invest some time to understand the concept [behind the reverse mortgage],” Donohue explains. “The MoneyTrax idea, which really plays into the design of the EquityTrax program is about creating a visual experience so that the consumer can understand it more clearly, and quicker.

Simplifying the “counterintuitive” nature of the HECM product, Donohue says, can go hand-in-hand with the efforts which are guided by the idea of building trust among potential clients, their families and financial advisors.

“It really does speed up the understanding, and the decision process that the homeowner’s got to go through,” Donohue says. “[EquityTrax] was designed to help homeowners understand the counter intuitive nature of the reverse mortgage.”

Driving principles behind the development of EquityTrax were focused on clarity and ease of accessing information, Donohue says.

“We want to clarify, simplify and demystify the HECM concepts to speed up and support the consumers understanding and decision process,” he says. “We also want to create a common language between the mortgage planner and the financial advisor, so we can serve the client from both sides of the table.”

The hope is that this streamlining of language and technology will help to serve the larger goal of building trust and confidence from both sides, strengthening a client referral process that can often be marred by confusion, risks and uncertainties, Donohue explains.

Sales role and 2021 plans

On the sales side, the incorporation of EquityTrax is invaluable since it allows a potential client and financial advisor to see how a reverse mortgage can interact with an abundance of financial strategies, both before and after the implementation of home equity. This is according to Peter Sciandra, national reverse mortgage sales manager at Fairway.

“How all the parts of a reverse mortgage will work in terms of what the balance on the loan will grow, to how [a borrower] can utilize the line of credit, or how they can take what their previous mortgage payment was and put that into savings can all be illustrated with EquityTrax,” Sciandra says. “You can do all sorts of scenarios for the borrower to show them the great flexibility they can have within their retirement going forward, to better manage their money and how it can work.”

This is also true in terms of seeing how home equity can interact with other investments for a holistic illustration of a person’s entire financial situation, and how it could potentially be affected by the incorporation of home equity, Sciandra says.

That being said, for a financial planner who may see the illustrations of EquityTrax, a strong “firewall” is in place between the loan origination professionals and the financial planner professionals, Sciandra says.

“A financial planner is not selling a mortgage,” he says. “What’s happening is they’re handing off the mortgage aspect of it to us. Our LOs to talk to their client about how they can use reverse as part of the financial plan, and then the financial planner brings it back in and can take [that information] to show the [impacts on the financial plan].”

In terms of larger plans, Fairway sees this new tool as a key component in the sales repertoire of its loan officers, while also serving as a new component to the critical mission that Fairway’s reverse mortgage division sees for itself, Donohue says.

“Along with the financial, estate and insurance planning communities to help the baby boom generation succeed in retirement, this tool and Fairway’s reverse division’s mission is to have an important seat at the table to help baby boomers retire successfully,” he says.

The plan for the reverse division is to incorporate EquityTrax wherever possible, Sciandra adds.

“The best way I can put it is [that EquityTrax] is a very big part of our plans as we put them together for the coming year,” he says. “Our goal would be to have as many of our loan officers using EquityTrax as possible.”