HECM Saver Performs, Investors are Less Convinced

There is agreement among lenders that the HECM Saver, as a product, has potential. Some are already reporting that the Saver may comprise as much as 20% of new reverse mortgage loans and others have said, hopefully, that it could help bridge the gap between reverse mortgages and retirement planning. FHA endorsements of HECM Savers rose from 19 in November to 75 in December to 165 in January and 296 last month. Just launched and ready for market in October of last year, however, the Saver has been less of a sure sale for the secondary market—at least pending some more data on the product.

“What investors like is not being surprised,” said Jeff Lewis, chairman of Generation Mortgage, while speaking on a panel at a National Reverse Mortgage Lenders Association conference in Newport Beach, Calif. on March 15. “They want high credit quality, and certainty as to when the money is going to be received.”

With just short of six months on the market, there is little data to convince investors of the Saver’s worth. While historical data shows consistent prepayment speeds for the HECM Standard, the lack of performance data on HECM Saver means it could take a few years before investors get on board.

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“No one knows what the behaviors of [Saver] loans will be when they are originated,” said Lewis. “…it takes the saver out of the nice realm where all our job is to sell how good it is. It takes us into speculation—variability, not predictability.”

The panel urged lenders of the importance of encouraging investors that the Saver is a worthwhile cause. In the meantime, the lack of data presents a chicken-or-egg scenario: Data is needed in order to predict what the cash flows will look like, however, cash flow is needed in order to provide that data.

“From an origination standpoint, we have made a lot of progress in the first six months,” Lewis said of the Saver. “From a capital markets standpoint, we are pretty much nowhere.”

Written by Elizabeth Ecker

 

 

 

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  • John Lunde is bullish on the Saver; I agree. The problem with the Saver is exactly what Jeff Lewis points out. It has real potential but will experience help its cause or harm it?

    The Saver could be a difference maker but it could take a few years before investors bring down the higher margin, i.e., IF investors like its performance.

    Like John, I do not see any reason why this product should not be “flying off the shelves.” But Jeff is exactly right. It is the investors’ call how quickly (if ever) that will occur.

    While the margins may discouraging some borrowers, it seems the adjustable rate Saver is doing well after only five months of availability. If properly marketed it could be a means to breaking down barriers into the more reluctant segments of the financial community.

  • John Lunde is bullish on the Saver; I agree. The problem with the Saver is exactly what Jeff Lewis points out. It has real potential but will experience help its cause or harm it?

    The Saver could be a difference maker but it could take a few years before investors bring down the higher margin, i.e., IF investors like its performance.

    Like John, I do not see any reason why this product should not be “flying off the shelves.” But Jeff is exactly right. It is the investors’ call how quickly (if ever) that will occur.

    While the margins may discouraging some borrowers, it seems the adjustable rate Saver is doing well after only five months of availability. If properly marketed it could be a means to breaking down barriers into the more reluctant segments of the financial community.

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