Proprietary Reverse Mortgage Product Returns

NewImage.jpgGeneration Mortgage announced the release of the Generation Plus on Tuesday, a new fixed rate jumbo reverse mortgage program for homes valued up to $6 million.

The product is tailored specifically for seniors whose homes appraise higher than than $1,000,000 said the company.

“Many owners of higher-valued homes find themselves in the position of being house rich and cash poor,” said Jeff Lewis, Chairman of Generation Mortgage. “With our Plus loan, these owners can receive the liquidity they require without having to sell their home or other assets. And, with an improving real estate market, this offering becomes even more attractive.”

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According to the company, the minimum home value eligible is $500,000.  Borrowers are required to receive a HECM counseling certificate in order to obtain the loan and the product includes a $25 servicing fee (not a set aside).  Additionally, seniors can use the Prime to purchase a home.

“Generation Mortgage is in the business of helping clients to enjoy their homes for as long as possible,” commented Lewis. “We will continue to introduce innovative products like Generation Plus to fulfill that goal for the full spectrum of the senior community.”

Generation is the first non-bank lender to come out with a proprietary product in the last two years, which signals investor interest is back.  Bank of America has offered a jumbo reverse mortgage to retail customers on a limited basis but it was never very competitive according to our sources.  Bank of America clearly has a balance sheet to put the loans, while Generation, not being a bank does not.  Lewis wouldn’t comment on which or how many investors are purchasing the product.

The Plus product is open to both retail and wholesale customers said Sherry Apanay, Executive VP of Generation Mortgage in an email to RMD.
– Note:  We have asked Generation for a link to a calculator or an example scenario, once received we will update the story.

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  • Jeff and the GM staff,

    What great news. Very refreshing. Congratulations!!!

    I hope this product will stay with us for a good long time and will encourage other lenders to bring back or create their own proprietary reverse mortgages.

  • From the investors point of view, it sounds great. Fixed Rate, full lump sum distribution at funding, two appraisals, principal limit reductions for higher value homes, and interestingly, a minimum FICO requirement of 700 as a hedge against defaults, technical or otherwise.

    We've all heard that FICO qualifications were coming, so I guess GMC decided the best way to predict the future was to set a precedent and take a hand in shaping it.

    I'll play around with the software soon to see what kind of comparative principal limits we get from Gen Plus vs a HECM loan. Used to be (2007 and before) that the property had to be worth about $650k before a proprietary reverse yielded more principal than a HECM loan, but since then HECM lending limits increased, margins and expected rates increased, and principal limits decreased on top of the overall property value decreases.

  • After some tinkering in Generation's GEMS software, it looks as if the prospective Gen Plus borrower would need approximately twice the home value of the current $625,500 HECM Lending Limit before the Gen Plus loan would potentially yield more Net Principal Limit than the 5.56% Fixed Rate HECM loan. I compared Net Principal Limits instead of Principal Limits to eliminate the effect of the HUD MIP on the calculations.

    At age 65, a HECM Fixed Rate of 5.56%, and a value of $625,500, the HECM loan would leave a net lump sum of $347k for the borrowers. The Gen Plus borrower of the same age would need a home value of $1.385m for the 7.875% Fixed Rate and $1.14m for the 8.875% rate to exceed the HECM Net Prinicpal Limit.

    An 80-yr old borrower would have a HECM NPL of $419k. The Gen Plus prospect would need home values of $1.67m @ 7.875%, and $1.3997m @8.875% to receive more cash than the HECM program.

    The Gen Plus home value threshold “breakpoints” will decrease when we face another HECM Principal Limit reduction.

  • After some tinkering in Generation’s GEMS software, it looks as if the prospective Gen Plus borrower would need approximately twice the home value of the current $625,500 HECM Lending Limit before the Gen Plus loan would potentially yield more Net Principal Limit than the 5.56% Fixed Rate HECM loan. I compared Net Principal Limits instead of Principal Limits to eliminate the effect of the HUD MIP on the calculations.rnrnAt age 65, a HECM Fixed Rate of 5.56%, and a value of $625,500, the HECM loan would leave a net lump sum of $347k for the borrowers. The Gen Plus borrower of the same age would need a home value of $1.385m for the 7.875% Fixed Rate and $1.14m for the 8.875% rate to exceed the HECM Net Prinicpal Limit.rnrnAn 80-yr old borrower would have a HECM NPL of $419k. The Gen Plus prospect would need home values of $1.67m @ 7.875%, and $1.3997m @8.875% to receive more cash than the HECM program.rnrnThe Gen Plus home value threshold “breakpoints” will decrease when we face another HECM Principal Limit reduction.rnrnrnrn

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