Saver Could Bridge the Gap Between HECMs and Retirement Planning

While there is still little data to show the relative success of the HECM Saver since its launch in October, a panel of lenders at the National Association of Reverse Mortgage Lenders conference in Newport Beach, Calif. provided insight as to the Saver’s strengths—and challenges.

The timing for the saver, said Generation Mortgage Chairman Jeff Lewis, couldn’t be better. “Everyone is missing the boat here on the urgency of this value proposition,” he said. “What is available right now is unbelievable. The amount of money available is more than has been in the life of this industry.”

With Saver endorsements hovering around 4.3% of all HECM endorsements according to the most recent data from the Department of Housing and Urban Development (HUD), application data is lagging, so it is uncertain exactly how much the Saver is catching on. Reverse Market Insight estimates Saver applications may comprise as many as 10% of all applications, and some lenders have estimated their proportion is closer to 20%.

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The typical Saver borrower, however, has a different makeup from the Standard borrowing population. “It’s definitely not a need-based borrower,” said Jeff Garcia, of Carlsbad, Calif.-based LibertyStreet Financial Group. “The Saver borrower has a lot less urgency…They want more information and they’re going to do more analysis, which creates a longer selling cycle. It’s definitely a longer cycle before they make up their mind.”

They may also be using the Saver for a different objective, including a single use purpose. “It’s usually not an issue of cash flow over time,” Garcia said. “Several have just wanted to do a remodel.”

The hope, across the panel, is for the Saver to broaden the market with these new, “less needy” borrowers, and perhaps incorporate reverse mortgages into the conversation about retirement planning.

“We look at this program as an opportunity to integrate this into what we already do… More often than not, we are integrating the benefits of the Saver into the HECM program as a whole,” said John Mlekush, of Wells Fargo Home Mortgage. “There is an opportunity to postiion this program as that true bridge we’ve always been trying to create between a reverse mortgage and retirement tool.”

“We’re dicussing the industry game changer with the HECM saver,” said MetLife’s Greg Laks. “We’re not longer one-size-fits-all.”

For all the positive feedback from those doing Saver loans, however, there is caution when it comes to the secondary market for the loans. Lewis noted the importance of gathering data on the Saver to give an accurate picture of the investment pool, and thus, reassure those who are investing in the product. Despite that challenge, he agreed the Saver has the potential to make a difference in the way reverse mortgages are viewed overall.

The term “last resort” has been a misnomer for reverse mortgages, said Lewis. “The Saver makes that more obvious. We need to get people for whom it is not a last resort. Eradicating this myth of last resort is the most important thing we can do for this industry and i think the Saver is going to be a big part of that.”

Written by Elizabeth Ecker

 

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  • Several years ago the industry asked HUD to consider changing the Traditional HECM by simply increasing the ongoing MIP from 0.50% to about 1% and eliminate upfront MIP. It was believed that the change in structure would address the high upfront cost issue senior advocates raised and perhaps would attract more affluent seniors.

    Although it took time, HUD listened. While the timing of the restructuring required a different solution, it seems the idea of reducing upfront costs will have its desired effect. There was little thought back then about the secondary market. The only purchaser of HECMs at the time was Fannie Mae.

    While it is clear that some are being successful presenting the Saver to more affluent seniors, it is not clear that the industry is making a concerted effort to introduce the product to professional gatekeepers. Some believe that the gatekeepers can be bypassed but that could be an opportunity lost. If gatekeepers can gain an appreciation of the product for the tool it can be, it seems as if market penetration would not just grow but would grow far more rapidly.

    After nearly 22 years, it is clear that the gatekeeping community has not found a reason to explore reverse mortgages. Without their support, it will take much longer to turn around the current view about reverse mortgages then it will with it. It is not a product which will bridge our two communities but rather the few who have experience in both communities.

    In a decade we will either be discussing our successes with the Saver because of its acceptance by gatekeepers or we will still be talking about how the gatekeeping community still fails to understand our products. Simply being able to describe the product and how it differs from the Standard falls far too short. Discussing the ability of seniors to take more vacations hardly seems the kind of thing which will drive gatekeepers to look at Savers or other reverse mortgages. We have the product; it is up to us to find the bridge into the gatekeeping community.

  • I don’t know how Jeff Lewis could make such a statement:
    “What is available right now is unbelievable. The amount of money available is more than has been in the life of this industry.”
    It seems to me the expected rate has been going up and less money is available than there was just two month’s ago.

    Furthermore, one major lender is losing over $7,000.00 on every Saver. How long can they keep that up?

    • treverse,

      Jeff makes many statements that are stated as fact but have little foundation in actual numbers. For example, his remark about the budget in May 2009 ad his statement in November at the NRMLA convention that endorsements for the fiscal year will exceed 100K,

      I like Jeff, but….

    • treverse,

      Jeff makes many statements that are stated as fact but have little foundation in actual numbers. For example, his remark about the budget in May 2009 ad his statement in November at the NRMLA convention that endorsements for the fiscal year will exceed 100K,

      I like Jeff, but….

    • treverse,

      I am not so sure they are “losing” $7,000 per deal. It is probably in the nature of an investment. Even if it is a loss what is its true after tax loss for these lenders? Maybe $4,200?

      Then there is the withdrawn Fed rule on cross-selling. If the CFPB buys off on it, MetLife, GenWorth, and even, Wells are in a great position to exploit it. With funding in place….

    • treverse,

      I am not so sure they are “losing” $7,000 per deal. It is probably in the nature of an investment. Even if it is a loss what is its true after tax loss for these lenders? Maybe $4,200?

      Then there is the withdrawn Fed rule on cross-selling. If the CFPB buys off on it, MetLife, GenWorth, and even, Wells are in a great position to exploit it. With funding in place….

  • I’m generally not the skeptic on this site, but I have a hard time seeing how any lender can say that a fifth of their applications are Savers. I would more readily accept this number if the outfits making these claims have marketing in place to specifically target this different type of borrower. Am I missing something? Is this a case trying to reach a lofty goal by way of publicly stating a Positive Affirmation as a statement of fact?

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