What a tech entrepreneur has discovered about reverse mortgages

Anna Frankowska was recognized in 2017 as one of Forbes’ “30 Under 30” in Europe, having studied economics in London before moving to work in investment banking.

A passion for technology led her to work in the fintech and blockchain spaces, and she has now turned her attention to the senior finance space by founding a company called Graceful Finance.

To gauge what caught her attention about this space and how reverse mortgages intersect with her work, RMD sat down with Frankowska to discuss how and why she is choosing to become involved in the senior finance space.

Personal ties

Frankowska explained that her journey into the reverse mortgage sphere was primarily motivated by what she observed her parents going through as they got older.

“My parents are retired, and putting my entrepreneurial and finance hats on, I just got to see challenges they face and conversations they’ve had,” she said. “What occurred to me is that they’re classic examples of demographics that we are seeing right now, which is [being] incredibly asset rich.

”Everyone has been programmed to buy a home and they’ve accumulated so much real estate wealth, which is amazing. But the problem is they’re cash-flow poor in relative terms.”

Anna Frankowska, founder and CEO of Graceful Finance.
Anna Frankowska

As retirements become longer and there is additional pressure to find adequate retirement financing tools, Frankowska discovered the reverse mortgage product concept and found it to be a potential solution. But she quickly realized it is facing real challenges, and she began asking why it has not grown and developed to a place it could be.

“I started with that ‘why’ question, and then dug deeper to understand the history, how it works and the opportunities, which then led me to my research and different findings about what’s possible in the retirement financing benefits and disadvantages of reverse, and what can be done to improve the sector for existing stakeholders as a whole,“ she said.

Frankowska is originally from Poland and her parents still live in Warsaw. But she has a lot of family living in the U.S., naturally exposing her more closely to the American reverse mortgage industry. That, coupled with her interest in the demographic by seeing what her parents had gone through, made her want to understand why reverse mortgages have such unrealized market potential.

“The U.S. has the biggest growth potential, the biggest needs,” she explained. “And it was really surprising to me to see that actually in Europe or Australia, you have more variety of products, whereas in the U.S. they’re a little bit more limited. So, as an entrepreneur, I feel this is an opportunity to bring blueprints that exist somewhere else to the U.S. market, and lessons learned to improve and work alongside existing companies.”

Reverse mortgage findings

When asked about how European and U.S. reverse mortgage programs compare, Frankowska has noticed that American customers are asking for more solutions. When it comes to government-backed reverse mortgages, there are certain product features that customers wish could be different, she said.

“At a high level, customers wish they could unlock more money than they can get now with a reverse mortgage,” she said. “And part of it is because of compounding interest rates and where the rates are, and part of it is because of life expectancy set-aside or origination fees, etc. Which leads me to the second point: Many existing reverse customers said that high fees really bother them, and they primarily referred to the mortgage insurance premium and the ongoing costs they had to pay.”

Some customers she spoke to explained that after looking at the origination fee structure and the mortgage insurance premium, a home equity line of credit seemed more beneficial to them.

Certain customers also reported a prolonged origination process, which is partially driven by underwriting guidelines and counseling. But Frankowska believes that the counseling requirement itself is a “fantastic improvement” in the U.S. reverse mortgage space.

Where to go from here?

When asked about her methodology for gathering product information, Frankowska explained that existing reverse mortgage lenders and industry leaders were critical in expanding her understanding of the space. Wendy Peel, chief operating officer of Mortgage Advisor Tools, assisted with introductions to various players in the space, Frankowska said.

“She introduced me to different companies in the space, and it was really surprising how welcoming they were,” Frankowska said. “I came to their offices to speak to their loan officers, processors and customers because they told me, ‘We would love to do more. We’re having so much inbound demand.’ They’re speaking to so many customers, and we can only serve a small proportion of the people they speak to, and those customers really have a need.”

While she is not ready to reveal which lenders she has worked with, Frankowska did explain her interactions with various lenders in their origination, capital markets, processing and underwriting divisions — as well as customers.

“I’ve analyzed over 12,000 data points, compiled a questionnaire for over 100 people, got on over 70 calls to speak directly to people, and interviewed numerous employees in the space,” she explained. “And, of course, I went to different conferences and spoke directly to attendees to just gather their feedback, which was an amazing exercise that took over six months.”

Look for more about Anna Frankowska’s reverse mortgage findings on RMD soon.

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