More Proprietary Reverse Mortgages Expected to Enter Market

New proprietary reverse mortgage products are on the horizon as innovators look to fill remaining gaps left between the Home Equity Conversion Mortgage and other private products.

At a panel discussion Monday at the National Reverse Mortgage Lenders Association annual conference in San Diego, Longbridge Financial CEO Chris Mayer, Reverse Mortgage Funding president David Peskin, Finance of America Reverse vice president of wholesale Jonathan Scarpati, and EasyKnock CEO Jarred Kessler discussed their companies’ plans for the future.

Since November 2017 — when only one jumbo product was on the market — new proprietary reverse mortgages have been announced at a swift pace, with FAR introducing three new iterations of its ‘HomeSafe’ product, Longbridge introducing its ‘Platinum’ reverse mortgage, RMF announcing its ‘Equity Edge’ products, and One Reverse Mortgage launching the ‘HELO’.


And alternatives to reverse mortgages have also entered the space, such as EasyKnock’s equity tapping-sale-leaseback program.

Even with all the new products, the industry leaders made it clear that there is still room for more, and that a healthy private market can protect against changes in the HECM world. Mayer emphasized that he was not criticizing the FHA, which he said is managing some “legacy issues.”

“But it’s very hard to run a business, and an industry, and a company where there are changes that come down the pike. You end up looking at 30% to 40% hits to what you’re doing,” Mayer said, adding, “Any industry needs to have its own products that are not solely reliant on the government.”

Peskin agreed that product creation will be a boon to the industry, specifically products designed for the 95% of the market who still have a first-lien mortgage in place.

“I think it’s important that there’s constant product evolution that’s out there to help grow the market, and I think you’re going to continue to see more and more of that over the coming years,” Peskin said.

Just last week, FAR announced its ‘HomeSafe Select’, a jumbo reverse mortgage with a line of credit, and Peskin alluded to RMF’s work on its own line-of-credit product. Mayer also noted that Longbridge would be coming out with “interesting things”, and he provided some guesses as to what the industry might see enter the space.

”I think we’re going to see more crossover products that are targeted at the larger mainstream markets coming into play,” Mayer said. “I think that’s going to involve things with a line of credit, and it’s going to involve things that look somewhat like mortgages or are attractive to people taking out other products.”

Mayer said the industry needs to consider the many reverse mortgage-eligible candidates who are opening forward mortgages and HELOCs, noting that depending on the year, approximately 100,000 to 200,000 HELOCS are opened by people in the reverse mortgage target demographic.

“That’s a market where we need to figure out how to bring some of these folks to not use a HELOC and instead consider a reverse mortgage,” he said. “We’re going to need the ability to think and talk more broadly.”

This ability to talk more broadly and help the borrower understand why the reverse mortgage is an acceptable solution is crucial to the market’s success, Mayer said, referencing countries like Australia and England that have robust reverse mortgage industries.

“The good news is other countries have done it better than we have,” he said. “The bad news is we’ve been struggling with this for a long time. Products will help us, but they’re not going to be the only solutions. We have to figure out how to have the conversations that help people move the needle and have more acceptance.”

FAR’s newest creations have been the result of customer feedback, Scarpati said. With their employees “always in the lab,” FAR innovators are looking for new ways to grow their product suite and give borrowers the flexibility of choice with new options alongside the HECM.

“We don’t want HECM to go away,” he said. “HomeSafe has its place in the market, but this is in addition to [the existing market]. If you look at 100 [prospective] borrowers, maybe 25 are suited to a HECM product… we want to grow that pie, and now maybe you’ll be able to help 50 out of those 100 rather than 25 out of 100.”

Observing all of the proprietary products that have come on the market has offered a benefit to RMF as the company develops new strategies, Peskin said.

“For us it’s helpful, too, because we can understand how the product works in the market, gives us time to evaluate investor appetite, and then it allows the best way to roll out the products as well,” he said.

He also said the new products need to be introduced with the purpose of helping consumers and the market, not merely for the sake of competition.

“It’s important that they are introduced to grow the market and not necessarily go after the same customer,” Peskin said. “When we are all fighting for the same customer, that’s not helping anybody.”

Written by Maggie Callahan

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  • It is my impression that all the proprietary products are targeted at the Jumbo market. This is understandable from a potential revenue per loan standpoint and the fact that the Jumbo market is not well-served by the HECM program, but this focus ignores the vast majority of senior homeowners whose home values fall below the current $679,650 HECM limit.

    I would desperately like to see a proprietary product aimed at the mass affluent center of the bell curve. My experience tells me that there would be a strong appetite in that huge market segment for a growing LOC – even if starting with a much smaller initial PL – that did not carry with it the onerous IMIP charge of the HECM.

  • We all know that with the current low endorsement levels for HECMs, proprietary reverse mortgages at least in the current economic environment have a better and better chance of having more closings.

    Since June 6, 2018, we have not seen even one month of endorsements reach the level achieved during April 2018 (at 3,345). On that date in June in RMD, April 2018 was declared as the probable nadir for endorsements following the 10/2/2018 changes.

    At just 3,091 endorsements, the endorsements for October 2018 are 31.3% lower than endorsements for October 2017. The endorsements for October 2018 are 7.3% higher than those for September 2018. Last month was the worst total for monthly endorsements for any October since October 2004. It is the fourth worst month for endorsements since the 10/2/2017 changes.

    No doubt this will not be the worst month for endorsements during the current calendar quarter. What they will be for the next three calendar quarters is very much in question due to expected increases in interest rates.

  • Kind of overwhelming in one way, however, what other way is there to combat the gaps the HECM will not fill!

    The proprietary products are keeping the reverse mortgage business alive. In some ways, this takes me and many of you reading my comment, back to the pre-1989 days. Days before FHA/FNMA got involved during the Reagan years.

    The reverse mortgage back then were done through private sources, such as banks and mortgage bankers, these loans were not insured by FHA.

    This is when we had the “Shared Appreciation Clause” utilized and implemented! Don’t get me wrong, I am not saying we are going back to those days but I see similarities, other than the shared appreciation clause being utilized!

    Time will tell where we will wind up and what other changes we will see implemented by Mr. Montgomery and his staff in connection with the MMI fund on the HECM?

    John A. Smaldone

    John A. Smaldone

  • If even one of these proprietary loan offers would match the pre-changes terms of the HECM, that one proprietary offer might have a shot at a viable, volume business.

    But, as it is, they’re all targeting high-home-value senior citizens for “tricking them into” these products of remarkably poor terms for the borrowers; because there’s now “nowhere else to go” for borrowers . Not exactly a great business model.

    The proprietary reverse mortgage companies have an advantage in being able to offer loans with terms that the HECM program has priced out of plausibility, but they obviously aren’t going to do anything of the sort.

    They all think these things are a great, exciting innovation. Ya, for them.

    Hopefully, the government and HECM industry in general won’t let them get away with claiming that they’re “helping our senior citizens” in their pitch-ads.

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