Is the reverse mortgage industry gearing up for new products to come into the market? Some sources say yes, 2012 is the year.
The market for jumbo products has all but dried up entirely with the decline of home values in the past years. But if home prices do continue on the upswing, there may be some reason to believe a private product is coming back.
“I believe there may be a number of those products out before the end of the year if the capital markets express an interest,” says Marc Helm, president and CEO of Reverse Mortgage Solutions (RMS).
What the product will look like, and the time it will take to develop are two unknowns, but there are several clues that may indicate where a new product is likely.
It has long been talked about, and there have been products developed in the past that never went to market, Michael McCully, New View Advisors partner says. But this could likely be the year.
The process can take as little as a month or two of development, McCully says, but the testing of the product is another story.
“A proprietary product doesn’t have insurance, so it has to have a lower [loan-to-value ratio],” McCully says. “You have to have enough equity in the home so you know you’ll get your loan back.”
Because of that, the home value has to be substantial for a jumbo to make sense. Additionally, the sales training can be extensive.
“Where a proprietary product becomes more viable is when a lender has a certain tweak or niche or product design that a HECM just can’t do,” McCully says.
Getting the product to market is another challenge.
“The biggest change necessary for additional proprietary reverse mortgage product to be offered is someone with capital to hold the loans to maturity (investor and/or insurer) willing to risk that capital on the premise that home prices have bottomed,” says John Lunde, co-founder and president of Reverse Market Insight.
With two of the largest lenders having left the business in 2011, there aren’t too many reverse mortgage giants left that are backed by such substantial capital resources. But those in the industry who spoke with RMD indicate there is at least one with the potential to get a product off the ground in the coming months.
Written by Elizabeth Ecker