AAG Launches Reverse Mortgage for Purchase Partnership

American Advisors Group recently entered into a partnership with a nationwide real estate firm in an attempt to bolster its presence in the Home Equity Conversion Mortgage for Purchase landscape.

The Orange, Calif.-based industry heavyweight became an “approved” reverse mortgage lender for United Real Estate, a nationwide real estate franchise. As part of the arrangement, AAG will send representatives to United’s offices to host educational presentations on how older homebuyers can use a reverse mortgage to fund the transactions.

“The real estate industry as a whole has limited experience with HECM or reverse products,” a United Real Estate spokesperson said in an e-mail to RMD. “The industry is beginning to think about the possibility of using HECM for purchase transactions to gain more business.”

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United pointed to the relative novelty of the reverse mortgage product in Texas as a particular area of growth; the Lone Star State was the last in the Union to legalize HECM products, a change that required an amendment to its state constitution back in 2000. To this end, AAG’s agents will start at United’s offices in the Dallas and Houston areas to educate agents about the HECM for purchase program.

“It’s also one of the top five states where baby boomers retire,” the United spokesperson said. “So while the climate may not have been right a few years ago, we believe it is now.”

In a release announcing the partnership, United president Peter Giese said boomers account for 43% of the firm’s total sellers, though he did not note the proportion of baby-boom purchasers.

“It’s critical to our growth, and to our ability to serve this large segment, that we are able to share the available tools to assist them through their real estate decision-making process,” Giese said in the statement.

Finding the secret sauce that makes the H4P transaction popular among both real estate agents and older buyers remains one of the most elusive quests in the reverse mortgage industry, and despite their tireless cheerleaders, they continue to only represent a small fraction of all HECM endorsements. Targeting agents and builders has been a common growth strategy, but progress has been slow.

While AAG consistently leads industrywide endorsement counts by a wide margin, the firm has lagged behind competitors in the HECM for Purchase space: According to data from Reverse Market Insight, AAG was in fourth place among all retail H4P lenders in 2016, closing 62 loans for a 2.7% market share. Retirement Funding Solutions was the runaway winner with 275, or an 11.9% share, followed by Reverse Mortgage Funding and Cherry Creek Mortgage.

In a statement e-mailed to RMD, AAG senior vice president of national field sales Jesse Allen said the firm will also seek to form partnerships with other decision-makers as part of the real estate outreach.

“We will share information around the important opportunity to collaborate with financial advisors/planners in working with customers who are evaluating choices around both existing home and new construction transactions,” Allen said.

Written by Alex Spanko

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  • To save face, the industry had better pick things up. Calendar year 2015 had 2,490 H4P endorsements but calendar year 2016, just 2,282 H4P endorsements. In early 2015 we were being told that H4P applicants would fly through financial assessment. Calendar year 2016 results show otherwise.

    It is interesting the discussion is focused on Baby Boomers and not Baby Boomers over 62 since about half of all Baby Boomers are still under 62. Although we read about the percentage of sellers who are boomers, there is no information about what percentage of that group are moving into housing that does not qualify for HECMs. We know most younger Boomers are moving into housing that will qualify but is that true of the older portion of that generation?

    Surely if AAG puts any emphasis on H4P, there is a strong possibility that it will improve its performance over last year. After all they were not endorsing just over 5 HECMs per day or even per week. They were originating just a little over 5 HECMs PER MONTH last year.

    Through the end of calendar year 2016, H4P endorsements since their introduction into the industry at the end of July 2008 has totaled less 14,380 endorsements. No year has seen over 2,500 H4P endorsements. No year has seen even 5% of the endorsements for that year being H4P endorsements.

    Let us hope AAG finds the way to lead H4P out of its doldrums.

    • Agreed, but the question is, does HUD want H4P to take off? I’d say by their restrictions on the program that they do not. I get their concern as we’d be right back to an uncomfortable percentage of fixed rate, full draw loans. Ideally, if H4P were ever to take off, there would be a greater utilization of the low MIP option.

      • Matt,

        The ideal must be hiding somewhere but it has yet to show itself.

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