BNY Mellon Launches New Reverse Mortgage Business

After a longstanding period of very few new reverse mortgage entrants, BNY Mellon says it is getting back into the business.

The investment management and services bank announced this week it is planning to launch Home Equity Retirement Solutions, a reverse mortgage business that will purchase, securitize and services reverse mortgages, later this year. The company will also provide advisory services to brokers, financial advisors and asset managers on how the loans fit into retirement plans.

”Many retirees face a significant financial shortfall,” said Michael Gordon, managing director of non-traditional solutions and special situations for BNY Mellon Investment Management. “We view the funds generated by suitable reverse mortgages as an additional fixed income component of retirement portfolios, an important part of retirement planning that complements other aspects of the plan.”

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BNY Mellon currently works as an asset manager for 401K plans and defined benefit investments. It has $1.6 trillion assets under management and operates in more than 100 markets, according to its company website.

It previously owned a reverse mortgage channel, which was sold to EverBank in 2007. EverBank was later acquired by MetLife Bank.

Gordon, who formerly worked for New York Life also took part in the launch of reverse mortgage company Longbridge Investments in 2012. Longbridge continues to operate under the leadership of Chris Mayer, who now serves as company CEO.

BNY Mellon noted the recent changes that have taken place in the reverse mortgage market including the 2013 Reverse Mortgage Stabilization Act and following mortgagee letters spelling product modifications that are geared toward suitability standards for consumers.

“We believe in trying to structure this product to create sustainability in retirement,” Gordon told RMD. “The work that was done in 2013 and work that HUD has done subsequently are making the product sustainable both for the program and the user.”

The bank will offer reverse mortgages through various distribution channels including brokers and fee-based advisors. Currently its focused on the Home Equity Conversion Mortgage market, though Gordon says it would not “rule out” future product plans.

“It is extremely important that all parties take a socially responsible approach to these mortgages,” Gordon said. “Leveraging home equity for income can enhance both diversification and projected financial outcomes. With a top 10 position in the U.S. retirement market, and as one of the largest investment management companies, with a growing menu of alternative asset management offerings, BNY Mellon is able to offer Home Equity Retirement Solutions as a natural business extension while helping to improve U.S. retiree portfolio diversification overall.”

To ensure all loans meet the company’s standards, BNY Mellon will re-underwrite all loans from third-party channels, purchasing and securitizing those that are suitable, it says. So far, the response has been positive, Gordon told RMD.

“There’s a lot of excitement around this product. A people see using home equity as an important part of retirement planning. People see the inherent sense in it.”

Written by Elizaeth Ecker

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    • In fact, their careers page shows a position for someone with responsibility for pricing private label reverse mortgages. Head of Portfolio Management and Pricing

      Here is paragraph:

      Responsible
      for pricing and portfolio management for Home Equity Retirement Solutions, including Home Equity Conversion Mortgage (‘HECM’) pricing,
      as well as issuance of HECM Backed Securities (‘HMBS’).

      Responsibilities Include: Set pricing for Home Equity Conversion Mortgage (“HECM”) and private label reverse mortgage loans to be purchased from correspondent lenders, based upon market conditions, HECM Mortgage Back Security “HMBS”) prices in the market, and expectations about draw curves and pre-payment curves.
      Manage loans in warehouse facility and portfolio to maximize profitability and manage risk, including running interest rate hedging programs for loans in rate lock periods or in Real Estate Ownership
      (“REO”).Select loans from pools to create HMBS securities in conjunction with sub-servicer and based upon investor demand. Oversee current
      positions and exposures, based upon expected market conditions, and provide reporting and collaboration with risk, treasury, and other
      relevant BNY Mellon functional areas. Provide reporting and analysis on business, including forward looking profitability projections, based
      upon flow, including volume, type of loan, and other related factors.
      Oversee analysts and traders as business grows to scale.

  • The statement explaining its reentry into the reverse mortgage is helpful in reminding the financial community that the use of HECMs as a cash flow resource in retirement needs to be a first tier consideration not relegated to a last resort position.

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