Faced with lower principal limit factors for the Home Equity Conversion Mortgage, brokers are enthusiastic about the potential of new proprietary reverse mortgages entering the market.
These possible products came up during a CEO panel at the National Reverse Mortgage Lenders Association’s annual conference in San Francisco last month, where executives challenged the industry to think beyond the HECM and come up with alternatives.
Tim Linger, broker and owner of HECM Senior Home Financing in Orlando, said he would welcome a new product similar to the pre-Oct. 2 HECM. Following those recent changes, he predicts that his HECM sales will reduce by half without more aggressive lead generation.
If a HECM-competitive product were to be introduced, it would have to address principal limit factors and closing costs, Linger said, with a lower initial mortgage insurance premium and a lower origination fee.
“That’s what most people want to know: How much can I get and what is the closing cost?” he said.
Beginning to test the waters for greater proprietary demand Finance of America Reverse recently revealed improvements, including a higher principal limit, to its HomeSafe jumbo product.
Laurie MacNaughton, a reverse mortgage specialist with Atlantic Coast Mortgage, LLC in the Washington, D.C. area, said FAR’s new product looks impressive. She works with many clients with high-value properties, but her clients typically opt for the HECM over proprietary mortgages.
“In almost every case people opt for the HECM mostly because they look at the interest rate [of the jumbo] and balance due on death or departure of the home, and go with the HECM,” she said. “The typical hesitancy is that high interest rate, and as it becomes less of factor, it will be more attractive.”
Aside from a product with a lower interest rate, MacNaughton said if the sky was the limit she would love to see a product on the market for properties valued at $700,000 to $950,000, in which the homeowner has 60% equity.
“This may not be feasible, but it would be my dream product,” MacNaughton said.
Even if new products make it to the market, Brett Kirkpatrick, a partner at Harbor Mortgage Solutions, Inc. in Braintree, Mass., said that he still thinks that the HECM will be the product of choice for the average borrower.
“While I think brokers would love to have alternatives, I don’t think any proprietary product is going to or ever will be able to compete with a government-sponsored program in the sweet spot that the government wants to fill,” he said.
Written by Maggie Callahan