RFS Shares Blueprint for HECM for Purchase Success

Lenders face a wide variety of obstacles when attempting to market Home Equity Conversion Mortgage for Purchase loans, from continued confusion among borrowers and real-estate professionals to HUD rules that require buyers to have Certificates of Occupancy in hand before they can even apply for the loanBut the team at Retirement Funding Solutions has managed to make H4Ps a cornerstone of their business with a combination of education and speed, grabbing the largest market share for the segment in 2016 and closing most builder transactions within 14 days.

Alex Pistone, the San Diego-based firm’s president, said his company has taken a fairly standard approach to marketing the HECM for Purchase product, focusing on educating builders and real estate professionals about the ins and outs of the program and the special requirements that borrowers must meet. RFS often touts the relatively easier path toward getting an H4P as opposed to a traditional “forward” mortgage: Borrowers must only pass the Financial Assessment process, Pistone noted, and are not required to meet a credit-score threshold or other benchmarks — which could be prohibitive to retired homebuyers on fixed incomes with limited liquid assets.

Todd Barry, RFS’s Orlando, Fla.-based director of sales for the eastern U.S., said he generally frames the HECM for Purchase to builders and real estate agents in terms of opportunity cost. Most older homebuyers have one of three options for funding a home purchase: traditional mortgages, cash, or a HECM for Purchase.


The former two generally don’t work, since a 30-year mortgage is either impractical or impossible to obtain for people who may not live for 30 more years, and buyers may not have the cash on hand to purchase their desired home outright. How many potential buyers, Barry asks real estate professionals, do you think you lost because the people who walked through the model home or the open house couldn’t get a forward mortgage and didn’t have the cash?

“That’s where you see the light go on, for the builders especially,” Barry said.

But educating buyers, builders, and agents is only half the battle, Pistone pointed out. Shepherding the agent, the buyer, and the mortgage company through the closing process is just as important. “With real estate agents and with builders, you really get one opportunity,” Pistone said. “You screw up their closing, and you’re dead to them.”

With that in mind, when dealing with new construction, RFS typically attempts to wrap up all the loose ends as soon as possible even before the Certificate of Occupancy is issued, ensuring that the application process will be swift once the buyer can officially submit the paperwork. “We can basically fully underwrite that file ahead of time without the collateral, without the appraisal in hand, so when we do get that appraisal, we’re ready to go,” Pistone said.

This strategy requires close contact with the potential borrower and homebuilder over a construction period that can last upwards of six months. Barry said he typically tries to remind borrowers to keep track of any major money movements during that period, as unexplained transactions — such as tax refunds or withdrawals from brokerage accounts — will need to be clarified before the transaction can be completed.

So far, RFS’s two-pronged approach has worked. According to data compiled by Reverse Market Insight, Inc., RFS led the way in H4P endorsements in 2016, compiling 275 to capture 11.9% of the market share. Reverse Mortgage Funding, the number-two HECM for Purchase endorser, finished last year with 158, or a 6.9% share.

In addition to closing HECM for Purchase loans for builders within two weeks, Pistone said the team averages a three-week completion rate for all H4P transactions. HECM for purchase loans account for about 15% to 20% of the company’s overall business each month.

“It definitely takes time, like anything else,” Pistone said of his company’s H4P plan to educate builders and agents. “Getting past that education gap, and getting them to understand how the product works, and then being top of mind when they have someone in front of them that fits.”

Written by Alex Spanko

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  • For the calendar year 2016, RFS had 2,107 endorsements per RMI. Total endorsements for the fiscal year 2016, RFS only had 2,009 endorsements per HUD.

    So whether the 275 H4P endorsements are the total endorsements for the fiscal year 2016 or calendar year 2016, the percentage of H4P to total endorsements are only 13.7% and 13.1% respectively at RFS. So where is Alex getting 15% to 20% of RFS’s overall monthly business as coming from H4P?

    Since the industry average of H4P to total endorsements is still less than 5% for both fiscal and calendar year 2016, 13.7% or even 13.1% is doing very well. I am not sure why senior management feels as if they must dazzle us with expedient exaggerations but there you are. But nonetheless can other lenders come close to duplicating these results?

    Remember these are total H4P endorsements, not just those for builders. Based on prior information there is little doubt that the vast majority of the RFS H4P endorsement production does NOT come from the resale home market but rather builders and the real estate salespeople who support new build sales.

    Overall industry wide H4P endorsement production fell for fiscal 2016. So far industry wide fiscal 2017 H4P endorsement production shows no sign of improvement. It seems all segments of the industry are now continuing in stagnation. It is doubtful if fiscal year 2018 will be the LA LA Land for endorsements some claimed in 2012 and 2013. Even 100,000 endorsements (let alone 300,000 endorsements) for next fiscal year seems more dream than founded in reality.

    Remember the word corroboration? This is the first meaningful attempt seen by the industry since that word was extensively used by many in the industry in connection to the Extreme Summit. Perhaps endorsement numbers will improve with the kind of unselfish information RFS has shared with the industry in this article.

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