The reverse mortgage industry has seen a flood of new proprietary products this summer, and key software vendors have taken steps to upgrade their systems to keep pace with the changes.
ReverseVision last week announced a program that allows lenders to incorporate their products into the San Diego-based company’s software within eight to 10 weeks, while fellow vendor Bay Docs already has developers working to fold One Reverse Mortgage’s Home Equity Loan Optimizer (HELO) into its Reverse Express origination system.
“We have heard a lot of interest from people, definitely,” Bay Docs founder and CEO Megen Lawler told RMD. “I think at this point, everybody — at the major lenders — has some thought process of either working together with someone that’s already doing it, or coming up with their own proprietary product.”
One Reverse was just one of the many lenders to jump into the private reverse mortgage market this summer, with Reverse Mortgage Funding and Longbridge Financial entering the fray as well — and Finance of America Reverse introducing new features for its existing HomeSafe product. Finally, industry leader American Advisors Group partnered with FAR to offer the HomeSafe on a correspondent basis earlier in the spring, branding the product as AAG Advantage through the retail channel.
So far, ReverseVision counts AAG, Finance of America Reverse, and Longbridge among its proprietary partners.
In introducing the products, the new players cited the recent changes to the government-backed Home Equity Conversion Mortgage program, which saw lower principal limits and updated mortgage insurance premiums take effect last fall. As more borrowers find that they either don’t qualify or determine that the HECM isn’t as attractive as it was before, the lenders have positioned the new private loans as ways to fill the gaps: For instance, RMF’s Equity Edge product is targeted at homeowners with properties priced at $700,000 or more, as well as those in non-Federal Housing Administration-approved condos and seniors interested in paying off forward mortgage debt.
Compare and contrast
Wendy Peel, vice president of sales and marketing at ReverseVision, compared the push to the move toward non-QM lending in the forward space, with slight differences between the government-backed and private products that originators should familiarize themselves with.
“Things are a bit different, and it’s really about a learning curve on it,” Peel said. “Similarly to how when we’re pitching generational lending to the forward market, if I were somebody brokering a proprietary program, I’d probably want an expert internally.”
She encourages loan originators to play around with the different proprietary products in their software systems in order to note the differences. While ReverseVision incorporates all of the documents that lenders send along as part of the process — such as disclosures and margin information — it’s up to individual brokers and loan officers to get a feel for each new product.
“When it comes to documents, although it’s all in our software, all of them are responsible for their own documents,” Peel said of participating lenders. “We really are the carmaker, building the car. We’re not designing the car. They’re designing the product.”
Part of the differences include varying state-level rules regarding proprietary products, which could come as a surprise to brokers accustomed to the more uniform world of the HECM.
“The HECM product enjoys some exemptions from ceratain state and federal rules, and you need to give out disclosures for those states,” Lawler said. “People used to think you could take the HECM products, strip out the words ‘Housing and Urban Development,’ and call it a proprietary product, but that’s not how it works.”
That variability can also play into how long it takes for a software provider to fold a new product into its systems. Jeff Birdsell, vice president of professional services at ReverseVision, said that the process varies based on how many states a company plans to enter at launch.
“They typically go through and release state by state, as they go through their review and make sure their product is covered for state-specific documents,” Birdsell said.
Bright future ahead?
Since its founding in 1994, Bay Docs has supported more than 19 proprietary products that have hit the market over the years, according to Lawler. While many of those disappeared, particularly in the wake of the housing crisis, Lawler said the current private push is starting out on a much more stable footing. For instance, she praised lenders for starting in select groups of states and then building outwards.
“The companies that are getting into it now are going in slowly, doing all the right stuff … I think that’s a great thing,” she said.
Peel agreed that the current industry momentum represents a major leap forward for the reverse mortgage.
“When they rolled out the HECM back in the ’80s, I don’t think that they envisioned the HECM being 99.9% of the market,” Peel said. “I think they envisioned it as the launching pad for more types of proprietary products, and the latest regulatory changes just allowed that to happen. The demographics are there, no doubt.”
To that end, ReverseVision has worked to anticipate future innovations in the proprietary market, with the goal of seamlessly incorporating the new products once lenders decide to roll them out. For instance, Birdsell said his team has planned for the eventual introduction of private loans with line-of-credit options similar to the ones currently offered under the HECM.
“We don’t want to have to go back through a development cycle to implement some new idea, so we’re constantly thinking out of the box and creating flexilbites in our software that lenders haven’t even brought to us yet,” he said.
Written by Alex Spanko