AAG to Roll Out New Reverse Mortgage Product

American Advisors Group will offer a new reverse mortgage product in the next two months, Bloomberg Businessweek writes in a recent article.

The new product is being launched in addition to Urban Financial of America LLC’s “HomeSafe” product, which will be made available to borrowers Sept. 2.

American Advisors Group and Urban Financial of America are two of the five largest reverse-mortgage companies by volume. Both companies’ new loans for older borrowers will be for those whose homes are worth more than the $625,500 limit for debt backed by the Federal Housing Administration (FHA).

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The reverse mortgage market has, for several years, offered just a single proprietary reverse mortgage: Generation Mortgage’s Generation Plus jumbo loan, which was reintroduced in 2010.

Jumbo reverse mortgages, which unlike smaller loans aren’t insured by the FHA, virtually disappeared after the real estate crash as housing values tumbled and securitizations froze.

A proprietary reverse loan, or one without government backing, “has been like a unicorn,” Gregg Smith, chief operating officer of San Diego-based One Reverse Mortgage LLC, which is considering a jumbo program, tells Bloomberg. “Everyone was talking about it, but we hadn’t seen one. I would say within six months we’ll see at least two or three added.”

Bloomberg also discusses the negative impact the Great Recession had on reverse mortgages, and how FHA reforms are making the product more attractive to both borrowers and lenders.

The pace is likely to pick up in the coming years, Alicia Munnell, director of the center for retirement research at Boston College, says.

“Retirement needs have expanded and the retirement system has contracted, so more people will need to turn to their homes” for income,” Munnell says.

Read the full article here.

Written by Cassandra Dowell

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  • As of today there is just one proprietary reverse mortgage (PRM) being offered in the market. We should have a few soon but with the HECM lending limit at $625,500, where do these new products fit in?

    Yes, some talk about filling in where HECMs do not in the up to $625,500 market but proceeds wise when does it make sense to get the new PRMs over a HECM? $750,000? $1,000,000?

    The net available proceeds before existing lien payoff to value ratio on the new PRMs is hardly a compelling reason to get a PRM. Will the lenders come out with LTV tables? It is a brave new PRM world out there.

  • Raymond,

    Are the co-op values at Laguna Woods sufficient so that the proceeds from a low LTV proprietary reverse mortgage will be high enough to pay off their current liens?

    Remember all those HECM apps you once described that you took at Laguna Woods co-ops? You could end up with the same mess with these loans as well.

  • Awfully quite on Urban’s end for a product to be rolled out in a week or so? No updates, no training, no tables, no UW guides, zilch. My guess is they will delay this entry product. Any word on the September 2nd made available to the public per there announcement?

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