Reverse Mortgage Industry Poised for New Product in 2012?

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).

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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

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  • >> the home value has to be substantial for a jumbo to make sense

    I’m not so sure about that … remember the “simple 60” from BYN?  It was a  “bridge” Reverse Mortgage, designed to hold you over until you could get a real Reverse Mortgage two years later.  It worked well for lower valued properties too, because it provided a niche solution that made sense in the right situation.

  • >> the home value has to be substantial for a jumbo to make sense

    I’m not so sure about that … remember the “simple 60” from BYN?  It was a  “bridge” Reverse Mortgage, designed to hold you over until you could get a real Reverse Mortgage two years later.  It worked well for lower valued properties too, because it provided a niche solution that made sense in the right situation.

    • Raymond,

      If the Simple 60 was so good, why didn’t other lenders offer them?  The focus of the article is what works for lenders, not what will work for borrowers.  We can all come up with programs borrowers will love but no lender would touch. 

  • I don’t understand why every time there is talk of a non-HECM product, it moves toward “jumbo”. While I think that would be terrific for our industry, I think it would be far, far better if someone came up with a standard non-HECM, privately insured, reverse mortgage.

    What keeps me up at night is what will the “new” HUD do with the HECM, and what will the CFPB do with the HECM? Every year we wonder if MIP is going up, or will principal limits be reduced, or if the HECM cap will be eliminated. Even further, what will GNMA do, or how will we resolve the loan sale with the HMBS program?

    Our entire world is controlled by the Federal government and until we figure out anyway to move away from them being in that position, we will forever be this small niche market hoping upon hope that the Feds won’t pull the rug out from under us.

  • “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. ” I think it will take months to see this product and I agree that there are products that did not make it to the market I hope this one will make be out this 2012.

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