Why the Time is Right for New Private Reverse Mortgages

On the same day that multiple reverse mortgage lenders unveiled new proprietary products, a group of industry leaders came together to explain why this particular moment is right for private loans.

“We believe there have been between $5 and $6 billion of proprietary non-agency reverse mortgages originated life-to-date,” roughly half of which are in securitizations, New View Advisors principal Michael McCully said during a panel discussion at the National Reverse Mortgage Lenders Association’s eastern regional meeting in New York City last month.

And that figure doesn’t seem so big when compared with the $1.7 trillion of forward mortgages originated in 2017 alone, he said.


In order to create volume that will in turn attract both borrowers investors, the panelists expressed a need for change within their community.

“We need to shift our focus on alternative messaging, alternative forms of distribution and heavier investments in technologies within our own space,” said American Advisors Group CEO Reza Jahangiri, whose company began offering Finance of America Reverse’s jumbo HomeSafe mortgage through its correspondent channel last year.

Why now?

The recently introduced proprietary products generally target niches that  the federally backed Home Equity Conversion Mortgage can’t currently serve, including borrowers younger than 62 and condominium owners.

For instance, when Reverse Mortgage Funding launched its Equity Edge reverse mortgage earlier this month, the company emphasized that it’s open to homeowners aged 60 and up in states with more lenient age requirements. Longbridge Financial also announced a new proprietary offering that’s expected to serve both the jumbo and non-FHA condo market.

But the panel also identified other ways jumbo products could help expand the concept of home equity release to more borrowers, including customers who require upfront costs and homeowners with good credit who don’t qualify for the HECM. For instance, RMF president David Peskin said his company’s proprietary offering could represent a cost differential of $10,000 to $15,000 as compared to the HECM.

Launching a product in a complex niche industry always involves risk, but shifting market conditions could lay the groundwork for successful launches of proprietary loans and investments.

“Even in recent months, with swaps continuing to rise and margins compressing, people are making more money on proprietaries than HECMs,” said panelist Jonathan Scarpati, a wholesale production lender from Finance of America Reverse who recently led the securitization of non-agency proprietary reverse mortgages.

“The competition is going to force innovation and yield more options for borrowers, and ultimately help grow the industry,” Scarpati said.

Written by Clare Curley

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  • Proprietary products will help the entire industry. Those that have come out with them and those who are going to be coming out with them will only aid and help the HECM in the long run!

    Every announcement made about a proprietary reverse mortgage creates more attention to our product ! In addition to what I just said, propitiatory products will definitely fill many gaps that the HECM has in it today!

    I see the proprietary reverse mortgage serving as an added saving grace for our industry!

    John A. Smaldone

  • While I agree with John Smaldone that the entry of proprietary reverse mortgage will be a help, it is the size of current demand that must be questioned. The last time that we saw an immediate and strong response in introducing proprietary products was in 2006, 2007, and early 2008.

    In the earlier time frame, not only did we have HECMs but we also had Home Keepers and Financial Freedom’s (/Lehman Brothers’) Cash Account. During time, mortgage securities were imploding and home values were beginning to fall nationwide. The demand for HECMs were at a peak while volume today is less than half of that experienced in that period.

    Will the impact of proprietary reverse mortgages be as strong today as in the earlier time period? Most likely not but that does not mean they will have little or no impact. In specific parts of the country proprietary reverse mortgages are more needed than in the earlier time period but today when demand is falling, to try to turn it around, is like trying to catch a falling knife. It can be done but a lot of experience, skill, and agility is required to keep doing it until demand on HECMs or reverse mortgages is generally increasing.

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