Can you imagine all that was received was an interest free loan in exchange for half of the future appreciation in the value of the home? Of course, if the loan was substantial enough, it might be an excellent deal but how much was paid to most optioners, 10%-15%? That is cheap consideration in almost any economy. Rather than “equity release” this product should have been named “the true option of last resort”.

Since no HECM originator can offer the Rex Agreement in California (and I assume in many other states) because only real estate licensees by law can offer them, for most FHA (including HECM) originators this is not a huge loss. For most of us, the loss of the Rex Agreement is no real harm; in fact all this product seemed to have added was more confusion in the marketplace. Since entities that employ HECM originators were not restricted by HUD or FHA from offering this product through other employees, it may hurt their bottom lines.

Equity Key is a much better product for the optioner since the initial consideration is potentially much greater, but for most seniors, it is hard if not impossible to qualify. Why is the consideration to the optioner so much better? Because for almost the same amount of money received, after the requisite period the optionor keeps all of the consideration no matter what happens to the value of the underlying real estate.

Equity Key enters into option agreements not only on principal residences but also on almost all other types of real estate except unimproved real estate. Thus seniors can have reverse mortgages on their residence and Equity Key on all of their other investment and commercial properties. One problem with Equity Key is that it is offered in very few states and although generous, like the Rex Agreement minimum loan to value ratios must be met.

In California Equity Key is a product that requires a real estate license to sell. Thus employers can have other employees who can offer it, but HECM originators cannot.