With New Private Reverse Mortgage, RMF Targets Seniors with Forward Debt

The summer of new proprietary reverse mortgage products continued apace this week with the introduction of Reverse Mortgage Funding’s “Equity Edge Zero,” a no-closing-costs loan aimed at older homeowners with ongoing forward mortgage payments.

The release coincides with the third-party debut of its existing Equity Edge product, which the Bloomfield, N.J.-based RMF introduced on a retail basis back in June.

That loan was specifically aimed at filling gaps in the Home Equity Conversion Mortgage marketplace, with a goal of moving away from the idea of a private reverse mortgage as strictly a jumbo product. While the Equity Edge is targeted at homeowners with properties valued at $700,000 or more, it’s also positioned as a solution for seniors who live in non-Federal Housing Administration-approved condominium units. The Equity Edge also allows for seller concessions in purchase transactions, and generally features lower closing costs than a traditional HECM.

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By offering the “Zero” version with no closing costs, company president David Peskin told Reverse Mortgage Daily, RMF plans to tap into the approximately 17 million homeowners 62 and older with some kind of first-lien mortgage debt — thus further expanding its reach beyond the typical HECM consumer.

“Unfortunately, everyone’s fighting for the same customer in that same demographic, when I really think we should be fighting for the bigger market,” Peskin said, noting that traditional HECM marketing typically targets homeowners looking to secure a line of credit or cash out as much money as possible to weather a financial storm.

Instead, RMF wants to attract borrowers who are less “proceeds-sensitive” and more concerned about closing costs, which are frequently cited as potential downsides for HECMs. For a 65-year-old homeowner with about $130,000 remaining on a forward mortgage balance, the idea of a way to retire that debt without assuming more regular payments — or incurring upfront costs — can be attractive, Peskin said.

“Not every client out there … is in a proceeds-sensitive market,” he said. “They’re out there looking to lower their monthly payments, but they don’t need maximum proceeds — they need to improve their cash flow.”

The Equity Edge Zero, available through both retail and third-party channels, thus allows these potential borrowers to secure a private reverse mortgage without paying appraisal, origination, or title insurance fees. Instead, they’d only be on the hook for counseling costs and any taxes that individual states may levy on the transactions.

Summer of jumbo love

The last few months have been a particularly active time in the proprietary reverse mortgage marketplace, with multiple companies announcing new products in a wave driven, at least in part, by the decline in HECM volumes seen after the introduction of lower principal limit factors last fall. In addition to RMF, Finance of America Reverse rolled out a “Flex” version of its existing HomeSafe product, while Longbridge Financial announced its intention to begin offering multiple proprietary options this year.

“The idea that nearly our entire industry relies on the federal government for what it does, in addition to all of the state rules … it’s really hard to run a business that’s so heavily dependent on Washington,” Longbridge CEO Chris Mayer said in a statement earlier this year.  “It is important to offer non-FHA reverse mortgages so the industry is insulated from policy changes and can serve a wider variety of customers.”

With its proprietary products, RMF aims to compete less in the traditional HECM space and focus more on offering solutions to consumers that may in the past have elected to use a forward-mortgage product.

“What does a traditional mortgage have? Typically, low costs and a lower rate. So what we decided to do was lower cost, lower rate,” Peskin said.

Written by Alex Spanko

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  • My question has been ignored on two recent calls, so I’ll take it here. I would be really excited about Equity Edge Zero if I worked for RMF and was compensated a flat fee per loan. As a broker, didn’t this product just become another alternative that I have to sell against? With the average size of the UPB on this loan, how in the world can brokers originate these loans and not lose money? I haven’t seen the comp in writing, but I know the ballpark amount and it’s not workable.

    If RMF wants this product to succeed in wholesale, doesn’t there need to be an origination fee, thereby allowing for higher broker compensation?

  • Just to be clear, I’m a big fan of what RMF is doing in the proprietary reverse mortgage space (and of their company). They should be commended for trying something new, and I realize that the comp will be hashed out over time. I think Equity Edge is great as is, but Equity Edge Zero has to be segmented off as it’s own product with it’s own comp, or it will likely be retail only, solely due to the low UPBs. I don’t think anyone has a cost per closed loan in this business under $2K (excluding LO comp & profit), but maybe I’m wrong about that? I often read about $6K-$7K per closed loan as a mortgage industry average, but I’m not sure what that’s inclusive of.

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